How I Made $1,900,336.

82
Trading Commodities
by
Chicago Mercantile Exchange Trader

Larry Levin

DEDICATION

his book is dedicated to my friend and mentor,

Kevin O'Doherty. He taught me the most important

secret in all of trading: How to get out of the market!

DAYTRADING involves high risks, and YOU

can LOSE a lot of money. Hypothetical or
simulated performance results have certain
inherent limitations. Unlike an actual
performance record, simulated results do not
represent actual trading. Also, because the
trades actually have not been executed, the
results may have under- or over-compensated
for the impact, if any, of certain market
factors, such as lack of liquidity. Simulated
trading programs in general also are designed
with the benefit of hindsight. No representation
is being made that any account will or is likely
to achieve profits or losses similar to those
talked about in our site.
The information contained herein is
specifically for the limited personal use of the
individual who purchased this course. Any
reproduction, dissemination or retransmission
of the information contained in this course is
strictly prohibited without the express written
permission of Secrets of Traders LLC.

1999, 2006 Secrets of Traders LLC

All rights reserved.

Introduction
Do you think youre learning the right way to trade the futures
markets?
Ive got some news that might surprise you: Youre most likely
learning it wrong. Ive found that most people are taught the
wrong way to trade. However, its important that you understand
its not your fault that youre learning to trade the wrong way.
Most people learn from unqualified sources. And I will prove it to
you. In fact, Im a firm believer in proof. If I could give you some
advice it would be this: Dont let someone teach you about trading
the futures markets unless they can prove that theyre qualified to
do it.
How do you know when someone is qualified to teach you how to
trade? In my opinion, theyre only qualified if theyve actually
done it themselves, successfully. What difference does it make if
they wrote a book or came up with a trading system, yet have
never made real money trading the markets?
Unfortunately, thats what happens all too often in the futures
industry; there a lot of unqualified people teaching trading ideas,
and most of them have never made any real trading profits. And
again, if they arent profitable traders, how are they going to make
you profitable?
My name is Larry Levin, and Im a floor trader at the Chicago
Mercantile Exchange (CME). In fact, thats where Ive spent the
last 18 years of my lifeactually the only place Ive ever worked.
For the last four years Ive been one of the largest traders in the
S&P market as far as overall volume.
You may have seen me on CNBC, Bloomberg TV, or
Rob TV, being interviewed on the trading floor about my opinion
on market direction. I have been the Trader of the Month in
Futures Magazine. I was the feature interview in the January 2007
issue of Stocks & Commodities Magazine. My trading ideas have
been published in newspapers throughout the country.
3

But none of that means anything. Heres what does mean

something: In the last four years Ive generated just under two
million dollars in trading profits at the Chicago Mercantile
Exchange. And to prove it, I post my personal trading statements
on my website for anyone to see (see Appendix for some samples).
Just go to www.tradingadvantage.com--theyre right there on the
homepage.
Im not telling you this to impress you, but to impress upon you the
fact that Im the real thing, and I practice on a daily basis what I
teach, every day. Im the only educator that I know of who posts
his own personal trading statements.
Unfortunately, thats not true for most people who teach trading
methods and techniques. Most of them have never traded
successfully in their lives, and make their money simply selling
products to others who genuinely want to learn how to trade. Very
few make money actually trading for a living. Thats why theyre
not the best people to teach you to trade. To teach someone to be a
successful trader, it helps to be one yourself. I have that important
track record, and I can use it to help you on the road to trading
success.

Chapter 1
HOW I BECAME A SUCCESSFUL TRADER
Every day people ask me the same questions: How did you
become such a successful trader? What is the secret to your
success?
When I tell them the answer, theyre usually surprised and a little
confused. This is because the secret to my success is not a magic,
complex technique or anything like that. Dont get me wrong, it
isnt as simple as saying I want to be a profitable trader and
make a lot of money. That would have made things a lot easier!
So what is the secret to my becoming a successful trader?
I Saw Myself as a Successful Trader Long
Before I Became a Successful Trader!
Thats the main reason I was able to get through the less than
stellar times during my trading career. To be honest, I wasnt
always a successful trader. In fact, early my career, I was a very
unsuccessful trader. I actually busted out, or in other words, lost
all the money in my trading account four separate times before I
finally became successful. I even lost as much as $62,000 in a
single trading day (luckily, that only happened once)!
Heres the key that kept me coming back and eventually led to my
overall success in the trading world: During all the bad and
unsuccessful times, I always exercised the same attitude, regardless
of how badly things were going. No matter what, I believed I
would eventually become a successful trader. This was especially
important to get me through the times when I was not making any
money and every day was a struggle.
Ive always been a firm believer in visualization techniques and
seeing yourself in your imagination as the kind of person you
want to become.

Early in my trading career, thats exactly what I did; I visualized

myself becoming the trader I wanted to become. Even when I was
losing money and trying (without success) on a daily basis to
become a profitable trader, I would consistently use my
imagination to see myself as successful.
Its not as easy as simply saying I want to be a successful
trader, but its not that difficult either. It takes a few simple steps
and a lot of consistency. The best part? It works!
In this book, Ill actually share the steps I took to becoming a
better trader. And youll see, as I did, that if you use the
techniques I spell out in the book, and see yourself as a successful
trader even before you become one, it will go a long way in
shaping you into the kind of trader you want to be.
At least thats how it worked for me!

Chapter 2
SETTING AND ACCOMPLISHING
REALISTIC GOALS
I realized early in my trading career that one of the most common
characteristics in nearly all successful traders is that theyre
extremely goal oriented.
In fact, Im not sure if you realize this or not, but people perform
best when they have a goal clearly in mind. When we do this, our
subconscious minds work hard at achieving those goals
automatically, without our having to use willpower. This is
something youll discover when you begin to learn more about
Psycho-Cybernetics.
However, theres one major catch to all of this. Whatever your
goal, it must have three important characteristics:

1. Your goal must be realistic. This means that it has to be

something that is within your capabilities. Sure, it may be
possible to make a million dollars your first year trading, but
this is not realistic because it probably is not within your (or
most peoples) capabilities.
2. Your goal must be attainable. This is similar to being
realistic. Again, your goal must be within your capabilities.
Say youre trying to average $200 a day with your electronic
trading. You have a much better chance of being able to reach
that goal versus that of making a million dollars this year.
Dont get me wrong. If youre doing well with your current
goal, theres no reason why you cant increase it. But you must
remember to start with an attainable goal that you can build on-begin with a small goal and move up from there.
3. Your goal must be measurable. I see people making mistakes
with this all the time. Everyone wants to get rich or make a
fortune in the market. But that isnt really a goal. A goal must

be measurable. You must know when youre far away, close,

and when youve actually achieved your particular goal. If its
not measurable, then you wont know when youve achieved it,
or even worse, you wont know how close you are to achieving
it.
When I first started trading, I spent a lot of time talking to different
traders about how they were able to make money in the markets. It
seemed the more I talked to different traders, the more their
answers all began to sound the same. Realistic, measurable goal
setting is extremely important to being successful. If youre
simply trying to make money every day, without a goal in mind,
this will surely set you on the road to failure.
The most successful traders will stress how important goal setting
was to their success. But you need to take it a step further. Not
only do you need realistic, measurable goals, but you also need to
visualize yourself reaching those goals on a daily basis.
I remember some advice I received from a very successful trader
who has since passed away: Just as important as setting specific
goals, you must visualize yourself successfully reaching those
goals each and every day. If you cannot see yourself in your
minds eye as a success, there is no chance you will become
successful. It just wont happen!
Well talk more about seeing yourself as a success a little later.
But I hope you understand how important it is to have specific
goals in mind so you can see how your progress is going and
quickly determine if things need to be reevaluated and changed.
I will tell you from experience that when Im trading well and
making money, its definitely because Im completely focused on
my specific goals. On the other hand, when Im trading poorly,
its because Ive lost sight of my goals and am no longer seeing
them as clearly as I should. And it shows in my trading results.
The more you practice realistic goal setting, the easier it will
become to do on a consistent basis.
As a side note, I know someone who teaches people to day trade
on the trading floor. One of the lessons he teaches his students is

to make $250 a day for 20 straight days in a row. You might say
$250 is not a lot of money to make in a single day in S&P futures,
but the point is for these students to learn to have realistic,
attainable goals that are reachable. Once theyve reached these
goals, they can strive to have somewhat larger ones. Just like
anything, you want to start small and slowly expand your goals.
By the way, most of this mentors students are successful at getting
through the 20 days of making $250 each day. Once theyve
reached that goal, theyre ready to move up to a slightly larger
goal, as long as it remains measurable and realistic. Similar to
anything else in life, it gets easier with repetition.

Chapter 3
SELF-EVALUATION AFTER A LOSS
Youre going along, trading, and making a profit. Youve set your
goals, and youre on the way to achieving them. This stuff is really
pretty easy, right? Then comes that losing tradethe wake-up call.
Now what?
After a losing trade, its very important to do a self-evaluation
before your next trade. In my opinion, you must be completely
honest with yourself. There are two reasons for losing trades:
1) You followed your rules, but the market did not go in
your direction.
2) You didnt follow your rules.
After a losing trade, you need to decide which of the above reasons
caused it. If you followed your rules and the market simply didnt
move in your direction, then its alright to get back in the market
when another trading opportunity presents itself.
On the other hand, if you lost money on a position because you
didnt follow your rules, then you need to take a step back and
reevaluate. This is when its most important for you to be honest
with yourself. You need to make a commitment to learn from the
mistake and get back on the right track to following your trading
rules.
This is a difficult thing for a trader to do. Most people have a hard
time admitting theyre wrong. But the best, most profitable traders
are able to do it. And if you want to be a profitable trader, YOU
will need to it. As Ive said before, it is definitely OK to be wrong
about market directionits part of trading. But you must also be
objective, not only in your trading decisions, but also in your selfevaluations.
To repeat, I strongly suggest that, after any losing trade, you get
into the habit of self-evaluation. If the cause of the losing trade
was that the market simply moved in the wrong direction, then
10

move on to the next opportunity. But if the cause of the losing

trade was because you broke your rules, then you need to make a
promise to yourself that you will improve your objective thinking
and act in your own best interest as much as possible.
All of this is easier said than done, but it does not change the fact
that it needs to be done. You will only become a profitable trader
once you have learned to be an objective trader. That comes from
trial and error.
It starts by being objective. The next step is learning from your
mistakes and attempting to improve them. Every successful trader
has learned this. First they did it wrong, and then they used the
negative feedback to correct their actions. Thats the only way to
learn to be a disciplined, emotion-free trader. It takes time; it
definitely doesnt happen overnight.

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Chapter 4
REMAINING FLEXIBLE
Years ago I got some advice from a fellow trader in the S&P pit.
He told me never to get married to a trade. In the movie Wall
Street, Michael Douglas told Charlie Sheen never to get emotional
about a stock. Those statements are much more than just pieces of
advice picked up along the way. If you dont remain flexible and
stay detached from your trades, youll never be a profitable trader.
Essentially, this idea is simple. No matter how strongly you feel
about a trade, you need to be willing to give up on it at a moments
notice. Its very common for a trader to get caught up in a
particular trade and put much more weight on that trade than it
deserves.
For instance, Ive talked to traders whove experienced this when
in a trade, and Ive definitely been there myself. You feel as
though you must be right about the trade. Many times when this
happens, you may start to feel as if this is the last trade youll ever
do. This causes you to be inflexible about getting out of it. Even
if the market is showing you signs that it is not going to continue in
your direction, many traders get so attached to their trades that they
cannot be flexible enough to act in their own best interests.
Inflexibility will kill your trading in a heartbeat. To become a
successful trader, you must be willing to change your mind
quickly and easily. You certainly cannot be fighting with yourself
when you have an open position in the marketits guaranteed to
be a disaster.
In the world outside of the futures markets, having a large ego can
sometimes be helpful. People with large egos have the ability to
convince others that they are always right. People with large egos
do not need to be as flexible in the real world.
But in the trading world, being inflexible and unwilling to admit
you are wrong will do nothing but drain your trading account. Of

12

course, nobody wants to admit that they are wrong. Who wants to
be wrong?
I try to think of it differently. I dont see it as being wrong in a
losing trade. I shift my thinking and instead think about it this
way: If I dont get out of this trade that has very little profit
potential, it will eat away at my past and future winning trades.
Obviously, I dont want anything to jeopardize my ultimate goal.
This helps me be more flexible and not afraid to cover my losing
trades, or trades where profit is deteriorating. The less flexible I
am about my bad trades, the more theyll eat away at my good
trades. Im always trying to protect the winning trades because
those are the ones that pay my bills every month.
Always remember that the more flexible you can be, the more
successful your trading will be. In fact, the amount of money you
make trading will be in direct proportion to your flexibility. If
thats not reason enough to learn how to become more flexible,
then I dont know what is.

13

Chapter 5
FLAWLESS EXECUTION
Many people get confused and think that flawless execution in
the futures market means always selling near the high and
buying near the low. It doesnt mean that at all. In my opinion,
it would be extremely rare for you to buy at the low and sell at
the high in the majority of your trades. In fact, you dont need
to buy the low and sell the high at all to make money in this
business.
Flawless execution means acting on an opportunity (getting either
in or out of a trade without hesitation) the moment you recognize
it. Sadly, this is a lot easier said than done. But that doesnt
mean you cant learn to do it.
There are many good trading methods, systems, and techniques
out there. Unfortunately, many people using these methods and
systems still end up losing money. The reason is very simple:
Lack of flawless execution.
Again, flawless execution doesnt mean always having the perfect
trade. It means being able to act immediately on the opportunities
that you see in the market. Most people think of themselves as risk
takers, but what they really want are guaranteed outcomes. But the
two are totally opposite. You cant be a risk taker and still have
guaranteed outcomes. They just dont work together.
And thats the very reason many people hesitate when it comes
time to put on a trade or cover an open position. They want the
guaranteed outcome, but they realize there isnt a guarantee, so
they fail to put the trade on and to act in their own best interest.
In trading, there are NO guaranteed outcomes. It just doesnt
work like that. With every trade, youll be putting yourself, as
well as your money, at risk. Thats something youll have to
learn to live with in order prosper in the trading environment.
There are no other options. You must learn to feel comfortable

14

with taking risks and to forget about guaranteed outcomes.

Mark Douglas, author of The Disciplined Trader, makes this
comparison between gambling and trading: As a comparison to
trading, it is much easier to take risks and participate in a gambling
event with a purely random outcome based on statistical
probabilities simply because its random. What I mean is if you
risk your money on a gambling event that you know has a random
outcome, then theres no rational way you could have predicted
what that outcome would be. Therefore, you dont have to take
responsibility for the outcome if it isnt positive.
Trading is different. The future is not random. Various traders
acting on their beliefs about the future determine the movement of
the market. Therefore the results of their actions are not random.
Douglas goes on to say, This adds an element of responsibility to
trading that doesnt exist with a purely random event and that is
difficult to avoid. This higher degree of responsibility means that
more of your self-esteem is at stake, making it more difficult to
participate. Trading gives you all kinds of ways to beat yourself
up for all the things you should have or could have considered that
would have resulted in a more satisfying outcome.
This beating yourself up for what you could have done
differently contributes to a lack of flawless execution of your
trading methods or technique. Its easy to tell yourself you
should have done this or that differently, no matter what the
outcome.
The problem? Its a fight you cant win. In the trading game, you
will not be perfect. So beating yourself up doesnt make sense
because youre doing it over something you really cant change.
Now dont get me wrong. Im not talking about being upset with
yourself for making trading mistakes such as chasing the market,
not using a stop order, taking too much risk, etc. Im talking
about covering a position and then having the market continue
your way after youre already out of the market. It doesnt make
sense to be upset about things like that. You dont have to be

15

perfect to make money in this market. Always remember that.

Basically, the only way you can become proficient at flawless
execution is practice, practice, practice. Just as with any skill, it
needs to become a habit. The only way for it to become a habit is
to do it a lot.
This means you have basically two choices. The first is that you
can set aside a certain amount of money for your education.
Remember, this is an exercise. You really cant worry about
losing the money. You must follow your rules faithfully and
flawlessly. The more you do, the easier it will be.
I suggest trading a smaller market (like the CME E-Mini S&Ps).
This way, less of your capital will be at risk. Of course, everyone
wants to make money, but you really shouldnt worry about that
right now. The money-making is secondary. You need to be
thinking strictly about executing your trades immediately when
you see an opportunity. That is the only result you are striving
for--flawless execution. It doesnt really matter whether the trade
is good or bad.
This exercise is not going to be easy, so you must be easy on
yourself. The more accepting you are of your mistakes, the
easier it will be for you to make the next attempt. If you make a
mistake, dont beat yourself up. Encourage yourself to try again.
I truly believe that is one of the biggest problems with traders.
They beat themselves up so much for their mistakes that its a
wonder most dont have bumps and bruises after each trading day.
You must take it easy on yourself. Most people are harsher on
themselves than they would be on their worst enemies. All this
leads to poor trading results.
Remember, the more you get upset with yourself for your past
mistakes, the more youll relive those mistakes, and this will show
in your trading results--in short, history does indeed repeat itself.
The old saying about forgiving yourself for your mistakes and
moving on is an important part of learning to trade successfully.

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The second way to learn flawless execution may be a little easier to

handle. It can be especially helpful for any new trader whos still
somewhat nervous about risking his money in the market.
As I said earlier, the only way to learn flawless execution is
practice. And, to carry that thought a step further, one of the
best ways I know to learn flawless execution without risking real
money is to use a practice account.
Basically, they all work the same way. You open a simulated
account (without real money) and place your trades just as you
would with a real account. You get simulated fills (according
to where the market is trading) and keep track of your profits
and losses.
This is by far the best way to learn and practice flawless execution
without risking the rent money. For newer traders or those having
big problems with execution, simulated brokerage accounts may be
just what they need to practice flawless execution.
One word of caution: Its OK to use a simulated account for a little
while. But the sooner you get your feet wet with real trading, the
sooner you can learn the necessary skills. When youre ready to
take that plunge, always use the smallest contract size on the
smallest electronically traded futures contract you can find.

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Chapter 6
BEING OBJECTIVE
Do you believe anything can happen in the market at any time? If
you do, good for you--this is what being objective is all about. A
profitable trader needs to be thinking constantly that the market
can do whatever it wants, whenever it wants. Many people get
into trouble by thinking the market cannot or will not do certain
things.
Many will put mental limits on where they think the market should
go, often yielding bad results. I remember a time a few years ago
when I was in the S&Ps, and there were about five minutes left
until the market closed. One trader told me he thought the market
was going to break another 5.00 points in the S&P futures. I said
there was no way this was going to happen with only a few
minutes left until the market closed. He said that it didnt matter if
there was only one minute left; for the S&Ps (or any market) to
move, all it had to do was be open. And he was right. In the next
four minutes, the market dropped 5.00 points, just as he had
predicted. If I hadnt limited my beliefs, I could have made money
on that trade. But unfortunately, I was not objective enough to
believe the market could really break that far in such a short
amount of time. My limited beliefs prevented me from making
money that day.
But in the end, that situation helped me to be more objective in
the future. It was definitely one of the stepping-stones for me
toward realizing that anything can happen at any time in the
market. All it has to do is be open.
If you believe this, then you release yourself from distorting
market information. When you distort market information, youre
NOT acting in your own best interest.
For example, lets say you usually look at a certain indicator to
help you find profitable positions. Lets say this indicator got you
into a short position a little while ago. Youve been sitting with

18

this position, and the indicator is still telling you the market looks
as if it should go down. But the problem is that the market isnt
going down.
And now some of the other tools you use are starting to show that
the market is going to start to rally (go up). But your indicator still
says down, so you ignore the things that are saying the market is
going higher. You have conflicting signals. As Im sure you
know, most people will not be objective. They will hope that the
down indicator is right and the other stuff is wrong. In fact, they
will probably try not to look at the stuff that says the market is
going higher, or they will dismiss it as not having as much weight
as the indicator because it doesnt conform to their expectations.
Normally, if they werent in a trade, they wouldnt even put
on a position with these conflicting signals. But because
theyre already in the trade, they distort the information right
in front of them, hoping and praying that the market moves in
their direction profitably.
Is that the objective thing to do? No, of course it isnt! The
objective thing to do is to get out of the position and reevaluate.
Or at the very least, move your stop order very close to where the
market is trading to take less risk. That would be acting in your
own best interest. But instead, most people ignore the information
and hope that the position will work out the way they think it
should.
This happens because most people are locked into their opinions of
the market and have a lot of trouble facing the fact that they could
be wrong. As Ive said earlier, its OK to be wrong about which
way the market is going. But its not OK to be wrong about the
market direction and ignore signs that it is time to get out and start
over. That lack of objectivity will kill your trading (not to mention
your account).
To be objective, you cant put your demands and expectations on
the market. First, youre cutting yourself off and distorting vital
information that the market offers to help you decide which way it
is going. Second, as an individual trader, you dont have enough

19

power to control the market and to make it live up to your

expectations. Thus, you must learn to be objective in your market
observations.
This doesnt mean that you cant have an opinion about the market.
It only means that your opinion just as easily can be wrong as it is
right. In other words, you need to be completely ready and
comfortable for it to be wrong. You need to release yourself from
having to be right about market direction. The more objective you
are, the less you will distort the information you receive.
Mark Douglas (see Chapter 5) states that there are seven
characteristics of an objective person:
1.
2.
3.
4.
5.
6.

You feel no pressure to do anything

You have no feeling of fear
You feel no sense of rejection
There is no (absolute) right or wrong
You recognize that this is what the market is telling you
You can observe the market from the perspective as if you
were not in a position
7. You are not focused on money but on the structure of the
market
Can you see any of the above qualities in yourself? Great! Youre
on the right track. Again, you need to release yourself from that
burning need to be right. If you constantly need to be right, this is
not the business for you. To be a successful trader, you will not
always be right, but you will always need to be objective.

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Chapter 7
SELF-IMPROVEMENT
If you want to develop into a successful trader, youll need to
engage in some self-improvement. If you dont already, its vital
that you realize the market is always right, and you can take
money out of the market as long as you dont impose a rigid
mental structure on its behavior.
In other words, dont allow yourself to get locked into an opinion
and refuse to admit that you could be wrong about the markets
direction. Every successful trader realizes that he could just as
easily be wrong as he could be right.
You must let go of the fear of being wrong so you can observe the
market from an objective, clear viewpoint. If you cant let go of
that fear, it will cause you to make mistakes and poor trading
decisions. If you concentrate on fear, it will cause your
subconscious to act out that fear and give you the very losses
youre trying to avoid. This will most likely happen every time,
because thats the way our subconscious works. What you think
about is usually what you get.
To improve as a trader, youll also need to establish defined
trading rules to guide your trading behavior. You must learn how
to adhere to these rules no matter how tempting it will be to break
them--and trust me, it will be tempting. Often. The fear of
missing out on a trade will make you want to break your rules
(especially in the beginning). But you must avoid doing so, no
matter how tempting. Your rules are what will keep you acting in
your own best interest. Breaking your rules is NOT acting in your
best interest. Its that simple.
The most important thing about self-improvement is to learn to
be objective and to avoid indulging in illusions. If you refuse to
acknowledge your mistakes by blaming the market or some other
factor, then youre obviously indulging in illusions. If thats the
case, improving yourself will be difficult, if not impossible.

21

To improve yourself, you must be honest with yourself. Only

YOU are responsible for your results. For instance, blaming the
market or the floor traders is only going to delay your selfimprovement. The fewer illusions we have, the clearer we can
see what is really going on in the market and inside ourselves.
The clearer things are, the more we can learn and grow. It will
then become much easier to make good market decisions,
regardless of the circumstances, as you get in the habit of acting
in your own best interest. Just like bad habits, good habits are
equally as strong and as powerful. However, it takes time and
effort.
Nobody likes to admit their mistakes, but this is exactly what
we need to do to improve ourselves. If we dont confront our
mistakes, well simply keep repeating them as they become
stronger and stronger habits. We obviously want to avoid that
situation.
Taking responsibility for our actions is the first step toward selfimprovement. We need to realize that the results we get are
because of the decisions we made. No one else is responsible for
our actions. Blaming others only slows the learning process. If
you trade poorly and lose money, it is because of your actions. But
on the other hand, if you trade well and make money, it is also
(thankfully) because of your actions.
You will improve yourself a lot when you simply admit that you
are the only one responsible for your results. You must confront
the conditions that exist in reality (not the illusions). Identify what
you need to learn or change to be more effective, and then initiate
the daily task of improving yourself. Its not as hard as you think
and, most importantly, learning to improve yourself is always
acting in your own best interest.

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Chapter 8
THE WORST MISTAKE YOU CAN MAKE
OK, you have your trading rules. You have every intention of
sticking to them. But then theres that one time.
Ive lost count of how many traders Ive seen this happen to. To
be honest, it has probably happened to almost every trader out
there at some time or another. Unfortunately, for many traders, it
could be the beginning of the end.
As we all know, to be successful at trading, we need to have
certain sets of rules to follow every day. These rules are extremely
important because they give structure to our trading and help us
decide what to do and, more importantly, what not to do.
If you have good solid trading rules and follow them
consistently, making profits and avoiding large losses should
be an attainable goal. But on the other hand, if you do not
follow your rules, youll end up with many more losses than
you would otherwise. And heres where the big mistakes
begin to happen. Again, Ive seen it happen to countless
traders.
If you dont follow your rules and your trade ends up being a
winner, youll most likely breathe a sigh of relief. But in reality,
you should not be relieved. Youve just made an error that could
cause you to fail faster than any other trading mistake.
You see, if this trade (where you didnt follow your rules) works
out, then youll be more likely not to follow your rules the next
time. Again, this is the worst mistake you can make. This will
cause more damage to your trading account than any other error.
The worst part? Its tempting not to follow your rules just this one
time. But you must learn that there cannot be a just this one
time. You must follow your rules every time, without exception,
if you want to be successful.

23

As Ive said before, Ive seen this happen to many traders. For
example, I remember one trader who usually averaged about $500$1,000 a day in the S&P futures. He was going along just fine,
trying to make his goal every day, but he got greedy and said there
had to be a way he could make more profits (although Im not sure
what was wrong with $500-$1,000 a day). He decided his rules
were too restrictive, and he was missing many opportunities. This
trader decided that because he was doing so well, he would relax
his rules in order to get into more trades and make even more
profit.
Well, he ignored his rules for a couple of days. Because of that,
he ended up taking a lot more risk than he was used to. But he
thought it was no big deal because he was now averaging about
$2,000 a day for a week. Not following his rules was making him
more moneyat least for a while. But Im sure you already
realize what was about to happen.
Within the next month, he lost everything he made for the last four
months (almost $60,000) and was now down money for the year,
when he had initially been on track to make about $200,000 for the
year. This happened not only because he didnt follow his rules,
but also because not following his rules worked (for a while). It
gave him a false confidence that he no longer needed to follow his
rules.
Im sure youll go through a time in your trading career (if you
havent already) where youll be tempted not to follow your rules
just this one time. I cant caution you enough how big a mistake
this can be, especially if it works out and you make a profit.
Making money on this rule-breaking trade could very well be
the most expensive profit you ever make. It will always be
tempting, but avoiding the temptation and resisting making the
worst mistake you can make will be much more profitable in the
long run.
Following your rules consistently is the only way to be a
successful trader. If you decide not to follow your rules just this
one time, it wont be long before you are one of the 80-90% of
traders who are unsuccessful. Dont let yourself become a statistic.

24

Always follow your rules. Dont let there be a just this one time.

Chapter 9
GREED
Its so easy to be greedy in this business. Its also easy to
think that whatever you get, its still not enough. If you have
2.00 points profit in a trade, you want 3.00 points; if you have
3.00, you want 4.00; and so forth. This lack of satisfaction is
a big reason why many people have trouble succeeding in
trading.
The way to avoid being greedy in your trading is to find out
why its so easy to be greedy with the markets. Greed stems
from a belief that theres never enough, or there wont be
enough. When the market is continually moving, isnt it
always possible to get more out of a trade? A greedy person
will never be satisfied; he will always want more, no matter
how much he has.
People can be greedy when trading because they take non-market
factors (such as how badly they need the money, what they need it
for, whether they can afford to risk it, etc.) and apply them to the
market and to their trades. But it doesnt make sense to do this;
those non-market factors have nothing whatsoever to do with what
direction the market is going. Wanting to use the money to buy a
bigger house or to pay your bills has nothing to do with what
direction the market is taking. In other words, dont let those
things control your trading decisions and make you want more than
what the market may be offering.
You easily can be tempted into thinking there is a lot more in a
particular trade just because you want more money, and that
pushes you into wishing and hoping. And as we discussed a while
ago, that is not acting in your own best interest. Wishing and
hoping will not make you any money.

25

You may remember Michael Douglas saying in the movie Wall

Street, greed is good! Well, you know what? He was way off.
Maybe it sounds good in the movies, but its definitely not good in
trading. I believe strongly that being greedy will shorten your
trading career faster than any other mistake you can make.

26

Chapter 10
FEAR
We often can sabotage our own trading because of our fears. Fear
can be helpful in our lives, except when it comes to trading. Then
it really can be harmful.
Fear helps us avoid things in an environment that we perceive as
threatening. Its important to note that what we perceive as
threatening may not necessarily be threatening; we simply
perceive it that way. And as far as our minds are concerned, its
a real threat.
A good example is offered in The Disciplined Trader. A child
severely bitten by a dog will naturally associate all dogs with the
threat of pain, and consequently might feel an intense fear or even
terror whenever he encounters any dog in the future. The childs
fear of all dogs is real. He has no way of making a distinction
between a friendly and a dangerous dog because his personal
experience leads him to believe that all dogs are dangerous.
However, the reality is that not every dog is dangerous; quite the
contrary. Few would be considered threatening; most see a child
and want to play.
Still, in every encounter the child has with a dog in the future, he
will create an experience of terror, regardless of the disposition of
any dog he happens to run into. If a dog makes any movement
toward the child, the child will perceive that movement as an
attack, when the dog may only want to play. The child could
become so afraid of being attacked that he devotes most, if not all,
of his attention to scanning the surrounding environment for dogs.
Eventually, his senses will become attuned to picking up their
sights and sounds, reliving his negative past experience, and
avoiding what he has learned is threatening. The problem is what
was learned is erroneous. Not knowing that, he will naturally
believe that his terror is coming from outside instead of inside of
him.

27

Do you see how the fear of the young child could be similar to the
fear that we might experience trading? When we focus on our
losing trades, mistakes, etc., we give our subconscious mind
powerful directions. Then we can easily end up with those same
losses that we are trying so hard to avoid. In other words, what we
focus our attention on is usually what we get.
To be successful its not as easy as merely focusing our attention
on winning trades and proper trading mechanics. But its not that
far off, either. You see, if you continually focus intensely on your
mistakes and poor trading decisions, youre more likely to end up
with more mistakes. Your subconscious sees the mental pictures
and acts on the directions it receives from you.
As you may already realize, your subconscious does not care if
youre giving it directions that are not in your best interest. It
simply attempts to follow the information its given, regardless of
whether its helpful. Getting back to the dog-biting example, the
child sent directions to his subconscious that all dogs are
threatening to him. Two things are important here. The first thing
is that the information is not necessarily true; not all dogs are
threatening. The second thing is that this information is not helpful
to the child. The child would certainly be happier if he were able
to enjoy dogs rather than be afraid of them. But as far as the child
is concerned, the fear is very real.
There are still other ways in which our fears cause problems in our
trading. When we trade with fear, its easy to block things out.
Instead of clearly seeing all the different pieces of information that
help us make good trading decisions, we do the opposite. We
ignore important information that can be threatening to us. When
trading, this can be dangerous, and it will never help us act in our
own best interests.
For instance, if the market is offering information that would
indicate we are right or information that would indicate we are
wrong, what information do you think well focus on? Well
obviously put a lot of weight on the information that will prove us
right, many times ignoring the information telling us of other
possibilities. Eventually, the threatening information can become

28

so overwhelming that a trader simply may not be able to ignore it.

The only way to relieve the stress and anxiety will be to get out of
the trade.
A fearful trader will handle a winning trade in the opposite way.
His fear of losing causes him to focus on what the market can take
away from his current trade. Remember, in a losing trade, the
fearful trader will focus only on the information that supports his
current position and ignore other factors that may not agree with
his opinion.

But in a winning trade, the fearful trader will ignore any

information that states the market has potential to continue in a
profitable direction. Hell be so focused on information that
confirms his fears (of the market taking the profits away) that hell
exit the trade early, regardless of the profit potential left. And its
even worse if the market does go his way after he exits the trade!
He finds it very easy to agonize over why he didnt stay in the
trade a little longer. He certainly doesnt realize that it was his fear
of losing that caused him to get out of the trade and leave that
money on the table.
To summarize, in a winning trade, a fearful trader will focus his
attention on information that the market is going to take his profits
away. In a losing trade, hell focus his attention on anything other
than what would indicate this trade is a loser. These are the main
reasons most traders cut their profits short and let their losses run.
Obviously, this fear will sabotage trading because it causes us not
to act in our own best interests. To prevent it, we must learn to
trade without fear. To trade without fear, we need to trust
ourselves completely.
So to be successful, you need to focus on different things than the
majority of unsuccessful traders do. Letting your losses run and
cutting your profits is what most people do. You need to do the
opposite, and to do this, you need to change your thinking.

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Chapter 11
WHAT IS PSYCHO-CYBERNETICS?
(This chapter is an excerpt from the introduction of Zero
Resistance Living by the Psycho-Cybernetics Foundation, Inc.)
A science can be defined as a tested, proven system of knowledge
that can be used to produce predictable, accurate results. The
science of navigation allows us to calculate exactly where we are
anywhere on earth or in space, and to predict accurately where
our destination is, and when we will arrive at it. The science of
chemistry makes possible new compounds and products that
enhance our health, nutrition, safetyevery area of our lives.
With a single bone, the science of archaeology can reconstruct the
world and life of an animal that died millions and millions of
years ago. The sciences of aeronautics and computers make it
possible to maneuver an unmanned spacecraft millions of miles
away with pinpoint accuracy, as well as broadcast a detailed
photographic record of its journey. So a science can be
considered a system of information so dependable and true that it
can be used to make life better.
Psycho-Cybernetics is the first science of human developmenta
system of knowledge that will allow you to make accurate,
predictable changes in how you think, how you feel, what you do
and the amount of success and enjoyment you get out of life.
Psycho-Cybernetics moved human development out of the realm
of wishing, hoping, and undependable techniques into the realm
of predictable, positive results.
Youll find no wishing and no hoping in Psycho-Cybernetics.
Psycho-Cybernetics is based on scientific knowledge of how the
human brain and nervous system work together to produce
thinking, attitude, and behavior. The underlying principles have
been tested and proven in countless experiments in laboratories
and research institutions around the world. And the millions of
people who have used it to change their lives in remarkable ways
over the last thirty years have proved the practice of PsychoCybernetics successful.
30

The word cybernetics comes from a Greek word that means

helmsman, a person who steers a ship to port. The science of
cybernetics studies automatic guidance systems like those that
enable a guided missile to find its target, a computer to solve
complex problems, or robots to do complicated sequences of
tasks automatically.
Psycho-Cybernetics works at a fundamental level and the changes
it produces affects all areas of life. Some of the following items
will be beyond the scope of this book, but Psycho-Cybernetics has
many uses for improving life beyond the trading arena. The more
you learn how to master Psycho-Cybernetics, the more you can
expect to:
1) Build a strong, positive self-image that expresses the real
you, the best you.
2) Set clear goals and achieve them predictably.
3) Stop seeing your mistakes as failures and actually learn to
use your mistakes as valuable feedback that guides you to your
goals.
4) Be more productive and successful financially and in your
career.
5) Forgive others and yourself and wash away resentment that
takes the joy out of living.
6) Learn how to relax and stay relaxed.
7) Learn how to deal with anger, even how to use it creatively.
8) Learn how to think more clearly.
9) Feel good about your life and yourself continually.
10) Learn how to improve your relationships with everyone
in your life: your family, friends, coworkers, and especially
yourself.

31

11) Feel a sense of overall satisfaction, fulfillment, and peace

as you are bringing out the best of yourself each day.
Psycho-Cybernetics will not produce these changes overnight. It
takes time to learn the new ways of thinking and acting so that
they become automatic in your life, but youll begin to
experience positive results almost immediately.
Psycho-Cybernetics is easy. Youll quickly realize that the
techniques do not involve willpower or difficult effort. The
exercises and methods of Psycho-Cybernetics utilize your
creative imagination in a relaxed, playful way. Theyre simple
to learn and fun to do, and like any skill, the skill of finding your
best self grows easier with practice.
The science of cybernetics gives us a very effective way to look
at the human brain and nervous system. Our subconscious mind
is actually a goal-seeking servomechanismin other words, an
automatic human guidance system. Psycho-Cybernetics is the
science of this human guidance system.
This servomechanism has access to everything youve ever
seen, done, tasted, smelled, felt, and learned. Its all recorded in
your brain. If you provide this servomechanism with a goal, it
will automatically produce the means to achieve that goal.
Human beings are naturally cybernetic or goal-seeking beings;
this is the way were created. Its the servomechanism that
allows you to tie your shoes, fix breakfast, and pilot your car
through a complicated journey to get to work, while all the time
youre thinking of other things.
This servomechanism is completely impersonal. It works entirely
with what is programmed into it. An incredibly powerful tool, its
totally under the direction of the conscious mind. If you give it
positive, successful goals, it will produce positive, successful
results. It will become a success mechanism. If you give it goals
of failure, it will just as automatically function as a failure
mechanism and produce failure.

32

The Importance of Mistakes

All automatic guidance systems reach their goals by constantly
correcting mistakes. A guided missile on its way to its target has
sensors that detect when its off course. The guidance mechanism
then makes the necessary adjustment and proceeds. This is done
thousands of times on its journey. The guided missile relies on this
negative feedback to get to its destination. Without this feedback,
a guided missile would actually not know where it was going and
would never reach its target. The same is true for the human
servomechanism. Its unfortunate that so many of us interpret
mistakes as failures and suffer feelings of frustration and
discouragement, when in reality our mistakes provide the exact
information our servomechanism needs to make the necessary
corrections to take us to our goals. Your servomechanism has no
opinion one way or the other about mistakes. It simply uses the
information to guide it to its objective. What we call mistakes are
actually valuable lessons for success. An important part of
Psycho-Cybernetics is learning to use mistakes creatively and to
remove the negative feelings that mistakes cause.
Self-Image
Self-image is the mental blueprint or mental picture a person has of
himself. We usually dont consciously pay attention to it, but its
there in detail outside the conscious awareness. Much as the
destination or goal of a guided missile is a set of coordinates
programmed into its computer, the goals that program a persons
creative servomechanism are mental images, voices, and feelings
created by using imagination.
This self-image is our view of the kind of person I am. We
construct self-images from our beliefs about ourselves--beliefs that
have been unconsciously formed from our past experiences, our
triumphs and failures, our successes and disappointments, and by
our observations of the way other people react to us. This is
particularly true in regard to our early childhood. Once an idea or
a belief about ourselves becomes part of self-image, we accept it as
being true. We dont think to question it; we act as if it is true.
Self-image determines our thinking, our feelings, our actions, even

33

the limitations of our abilities. It controls the degree of success,

excitement, joy, and satisfaction we have. The kind of life we
have and even the world we appear to live in are determined by our
self-image.
Self-image explains why positive thinking is so unreliable. It
explains why willpower is so ineffective and difficult to maintain.
Not all the willpower and positive thinking in the world can
produce change and success if they dont match an individuals
self-image.
Your self-image is constantly programming your creative
mechanism. If your self-image is that youre a failure, your
servomechanism will find a way to deliver that result to you. If
your self-image is that youre a victim of circumstances, it will be
reflected in your life. If, on the other hand, your self-image is that
youre capable and successful, your creative mechanism will
produce those results. The science of Psycho-Cybernetics teaches
you to change or to create a self-image that is strong, caring,
productive, and capable. This self-image is realistic, reasonable,
and expresses your best self--your true self.
Imaginationthe Tool of Change
Again, youve built your current self-image from the vivid and
detailed mental pictures and feelings youve experienced in
connection with the events of your life, especially in childhood.
And youll continue to use this same powerful tool, your creative
imagination, to construct the kind of self-image that expresses the
best of you. Youll use your imagination to create images and
feelings of success, satisfaction, accomplishment, and strength.
With these new positive images, you can reprogram your
servomechanism so that it begins to produce results in accordance
with your new self-image. In other words, youll learn to use your
imagination in a relaxed, playful way, never straining or trying too
hard.
This process will take time, because you didnt construct your
current self-image overnight. But soon the new programming
will begin to take hold. Youll feel yourself beginning to think, to

34

feel, and to act in accordance with your new successful image of

yourself. Eventually, this new self-image will become second
nature, completely natural and spontaneous, and it will bring you
success, satisfaction, enhanced relationships, and increased
happiness in the future.

35

Chapter 12
SOME BACKGROUND TO GET YOU
STARTED
I truly feel that in order for you to learn and understand an idea or
a set of ideas, its essential for you to know its background. If you
understand the foundation on which they are based, it makes
understanding the details much easier, as well as more meaningful.
Dr. Maxwell Maltz is the author of a book called PsychoCybernetics, first published in 1960. It became a huge bestseller
and often was considered one of the best self-help books ever
written.
Even today, Dr. Maltzs discoveries in the field of self-image
psychology continue to influence thousands of people worldwide.
Psycho-Cybernetics is still on the cutting edge of personal
development technology. It remains as timely today as the
personal computer. In fact, Psycho-Cybernetics often has been
called the first and only true science of personal development, and
many experts feel its the only way to alter your personality.
Dr. Maltz was one of the worlds most widely known and highly
regarded plastic surgeons. A professor of plastic surgery at the
University of Nicaragua and the University of El Salvador, he
operated on thousands of people. The plastic surgery (usually
facial) he performed on people not only changed their physical
appearance, but in many cases, amazing changes often occurred in
their personalities as well. Dr. Maltz realized that when you
change a mans face, you have the potential to change his psyche
too. Dr. Maltz knew this was an awesome responsibility and was
determined to learn as much as possible about this phenomenon.
He believed he owed it to his patients and himself to understand
everything about what he was doing and the dramatic changes
that he was bringing about in peoples lives.
The strange thing was that some patients showed no personality

36

change whatsoever after dramatic changes in appearance. On the

other hand, other patients showed huge changes in attitude and
personality less than a month after surgery. Dr. Maltz needed to
find out why some peoples personalities changed for the better,
and others simply acted as if there was no change at all, as if there
had been no surgery.
This told Dr. Maltz that the changes in appearance were not the
key to the changes in personality. Something else was influenced
by the facial surgery in some cases, and in others, it was not.
When this something else was reconstructed, the person himself
changed. When it was not reconstructed, the person himself
remained the same, although the physical features might be
radically different.
It was as if personality itself had a face. This non-physical
face of personality seemed to be the real key to
personality change. If it remained scarred, distorted, ugly,
or inferior, the person himself acted out this role in his
behavior, regardless of the changes in physical appearance.
If this face of personality could be reconstructed and if
old emotional scars could be removed, then the person
himself changed, even without plastic surgery.
Once he began to explore this area, Dr. Maltz found more
and more phenomena that confirmed the fact that the selfimage, the individuals mental picture of himself, was the
real key to personality and behavior.

37

Chapter 13
MENTAL PICTURES
Since the beginning of time, successful men and women have used
mental pictures and rehearsal practice to achieve success.
Napoleon, for example, practiced soldiering in his imagination for
many years before he actually stepped onto a battlefield. He
vividly imagined himself as a commander and drew up maps
showing where he would place various defenses. He would make
all of his calculations with mathematical precision in mind.
Conrad Hilton, the owner of the famous Hilton hotel chain, said
he imagined himself being a successful hotel man long before he
became one.
A famous basketball coach once said, There is no way to put the
ball in the basket when the pressure is on, if you cant see the ball
going in the hoop clearly in your imagination first.
I would say the same is true for trading. If you cant clearly see
yourself in your imagination as a successful trader, theres no way
you can be a successful trader. The most successful traders have
been vividly picturing themselves as successful for many years.
And in many cases, these traders pictured themselves as successes
long before they actually were.
Again, each of us has what Dr. Maltz calls the servomechanism, an
automatic internal goal-seeking machine that steers its way to a
goal we want to reach. This servomechanism works much like a
guided missile and, in the same way, it, too, needs proper
programming to hit its target. That comes in the form of the
mental pictures we give it.
If we continually give the servomechanism clear, vivid pictures of
the goals were trying to achieve, our subconscious automatically
will do the necessary things to help us achieve our goals. On the
other hand, if we continually think and picture the things we do not
want to happen, our servomechanism will make those things

38

happen. Our servomechanism doesnt care if those mental pictures

are in our best interests or not. It simply reacts to what its given.
For example, suppose youre worried about presenting a speech to
a large number of people. If you vividly picture in your mind the
speech going well and the audience receiving you in a positive
way, this will go a long way to helping you give the speech with
the results you want. But on the other hand, if you continually
worry that the audience will laugh and that the words will likely
come out all wrong, then this is what will most likely happen. This
is precisely how the success and failure mechanisms inside us
work. (Well talk more about the success and failure mechanisms
a little later.)
However, the goal or picture in your mind must be within your
capabilities. For example, in trading, if you picture yourself
making a few hundred dollars a day or a week, then you can
probably achieve that goal as long as you see it clearly enough in
your imagination. On the other hand, if you picture yourself
making $5,000 every day, it will be nearly impossible to make
that goal become a reality, because its probably not within your
capabilities.
You can imagine yourself as a future success or failure. Its up to
you. All too often, people are not willing to exercise this control.
They allow their imaginations to destroy their potential by
picturing situations in the past in which they have failed. We all
carry mental scrapbooks, but instead of preserving the joyous
occasions of life, the moments of accomplishments, some people
save only their times of failure and frustration. These negative
things easily take control of their imaginations. All we need to
remember is that our brains have a hard time distinguishing
between real and imagined experiences, as long as they are
imagined vividly enough.
If we clearly picture ourselves functioning in specific situations,
its the same as the actual performance. Mental practice can help
you perform better in real life. Youll learn specific mental
exercises to help you improve your trading. These mental
exercises, if imagined vividly enough, will be almost the same as

39

the real situation. Theyll help you prepare for many different
situations youll come across while trading.
A well known psychologist, R.A. Vandell, demonstrated the power
of mental pictures. He found that mental practice could help
people throw darts more accurately. Dont get me wrong; Im not
suggesting that throwing darts is the same as trading. I just want to
give you an example to make the idea of mental pictures clearer.
First, the psychologist seated his subjects in front of the target and
told them to imagine that they were throwing darts at it. He did
this for several days and then tested their actual performance. The
mental practice improved each persons aim as much as actually
throwing the darts would have.
Golfers use this technique, too. When you next watch golf on
television, note how the pro rehearses his shot, imagining whats
going to happen before he physically hits the ball. The all-time
great golfer, Ben Hogan, once described for Time magazine how
he mentally rehearsed each shot before he attempted it, making the
shot perfectly in his imagination, feeling his back swing and follow
through, exactly as it needed to be.
Another example would be shadow boxing. Boxers regularly
use this technique to improve their performance in the ring.
You, too, can learn to apply this technique to improve your
trading, shadow boxing in areas of the trading arena where you
might be having trouble.
You may be asking yourself, is it actually true that you can exert
control over your behavior and outside events by using your
imagination? Well, its certainly not as easy as saying, Okay, I
will imagine my way to success. As with anything, in order to
become good at it, there are steps youll have to learn and regularly
practice.
Ultimately, if you can achieve a clear picture of yourself as a
successful trader, that will take you further than you can imagine in
taking the necessary steps to become (and remain) a successful,
profitable trader. Its the only way to achieve trading success.

40

Chapter 14
HOW TO USE VISUALIZATION
TECHNIQUES TO IMPROVE
YOUR TRADING
You may be tempted to think Psycho-Cybernetics and visualization
techniques are voodoo, magic, or witchcraft. When doing these
exercises for the first time, you may feel a little awkward. Dont
be deterred. Anything new usually feels somewhat awkward at
first, but with time and practice, it will get much easier. And make
no mistake about it. Millions of hugely successful people all over
the world have used visualization techniques. Theyve used
techniques very much like ones youre going to learn to achieve
incredible success in their lives. The key is that they see
themselves as successes long before they actually become
successful. Furthermore, they continue to see themselves as
successes in their given fields on a daily basis. They certainly
dont just sit back and think success is theirs forever. They know
they have to nurture it and continue to see themselves in their
minds eye as the success they want to be.
I had a mentor when I first started at the Exchange. He was
probably one of the 10 best floor traders in Chicago. He would
consistently make a seven-figure income trading in the pit. He had
one practice that always intrigued me. He would lie on his couch
for 30 minutes before the market opened each day and visualize his
trades. He would see himself in his minds eye buying and selling
from the different traders on the floor. He would picture in his
mind the bright colors of the other traders jackets. He would see
the quote boards as they displayed the ever-moving prices. He
would get into winning trades and get out of them at a profit. He
would get into losing trades and get out of them the second he
thought they would not be profitable. All in his minds eye, he
would remember the past winning trades hed had, and feel the
feelings that those trades produced. Everyday he would do this,
and in my opinion, it had a lot to do with how successful he was.

41

In the minds eye is a key term in using visualization

techniques. This is where you do your visualizing. Its very
much like when you read a book or someone tells you a story.
You use your imagination. You dont just listen to the words;
you see the pictures in your minds eye.
As children, we used our imaginations on a daily basis. But as
adults, most people use creative imagination less and less, which is
a shame because this is really when we need it most. When we
were kids, we used to pretend things. We would imagine that a
tree we were climbing was actually a huge army fort. We would
pretend a play fire truck at the park was a real, working fire truck;
we actually could drive it to fires (in our imagination) and put
those fires out. Because we practiced using our imaginations on a
daily basis, these things seemed very real to us. We could see all
the details very clearly.
But as adults, most of us have let our imagining skills
deteriorate. Thus, it takes time to relearn these skills and to
receive the benefits from them. Most people dont see things
in their minds as clearly as they probably could. Remember,
we said earlier that the mind cant tell the difference between
an imagined experience and an actual one, as long as the
images are vividly imagined. Unfortunately, most people dont
see the pictures clearly or vividly enough. Over time, their
imaginations havent been used enough to stay sharp and
focused. In other words, it will be extremely essential to
strengthen your imagination.
Instead of the minds eye, Dr. Maltz uses a different term: theater
of your mind. It works well because everyone is familiar with a
movie theater. Everyone has been in one and can easily picture the
screen, the projector, the seats. This is an excellent place to do
your visualizing. In fact, Dr. Maltz suggests you pick a
comfortable chair in the theater of your mind. Then the idea is to
watch the big screen in front of you (in your imagination) and
picture little movies starring yourself the way you want to be. In
trading, this can help you with things like pulling the trigger
without hesitation, getting out of losing trades, etc. Well talk
about exercises using this kind of mental practice later.

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The key to using the theater of your mind is to change your selfimage. As we discussed earlier, the self-image is the picture you
have of yourself. The self-image also is the product of your
experiences, failures, successes, humiliations, and other
programming. From these experiences, you create a picture of
yourself.
Maybe youve had some bad trading experiences, and after a while
you lost confidence to pull the trigger when you saw a trading
opportunity. Most likely, your self-image is that of a person who
cant pull the trigger. Remember, your self-image is a
subconscious thing. You probably dont even consciously think
about yourself that way.
The important thing to remember is that using visualization
techniques on a daily basis can change your self-image so that
youre the kind of person you want to be. It doesnt matter how
others see you; how you see yourself is most important. If your
image is that of a failure, youll act as if youre a failure. But on
the other hand, take comfort in the fact that the picture you have of
yourself can be changed, and youre the one who can change it.
Visualization techniques will work 100 times better than trying to
use willpower to force yourself to change. For instance, saying, I
will pull the trigger the next time there is a trading opportunity
will not do any good if it doesnt agree with your self-image. This
is why you need to use your imagination to change the image you
have of yourself. That is the only true way to change; willpower
alone wont work. Your self-image will always be stronger.
You may be tempted to think this wont work or that its silly. All
I can tell you is that Michael Jordan, Dennis Rodman, Bart Star,
Ben Hogan, as well as many successful traders I know, myself
included, believe in it and have used it to improve the way we
perform. If we can be successful from it, the least you can do is
see if it can be successful for you as well.
People from eight years old to senior citizens have benefited from
the use of Psycho-Cybernetics and the visualization techniques that
go along with it. Professional athletes, salesmen, traders, and

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people of all occupations have successfully used it to improve their

concentration and performance. Theres no reason to think you
cant do the same thing. We have a choice of either using our
success mechanism (by seeing positive, helpful pictures) or using
our failure mechanism (by seeing negative images of the past).
The choice is up to us. If we begin to trade with negative feelings,
well fail before we even start. On the other hand, if we start to
trade with positive feelings, these feelings will go a long way in
helping us to succeed.
You certainly can use Psycho-Cybernetics to change more than
just trading skills. It can change and improve almost any aspect
of your life.

Here are some rules to remember when using visualization

techniques to improve your self-image:
1) You must be in a relaxed state when going into the theater of
your mind. Michael Jordan is obviously in a relaxed state when
hes working his magic on the basketball court. Without being in a
relaxed state of mind, its next to impossible to succeed. At the
end of this chapter is a relaxation technique that will get you in the
right frame of mind to visualize your success. It also helps to be
comfortable, such as seated in your favorite chair, without any
distractions (no music, TV, etc.).
2) You must pay close attention to the details of your mental
pictures. Remember, in our minds subconscious, we cant tell the
difference between an imagined experience and a real one if the
details are vividly portrayed. This is not daydreaming. You must
focus intensely on the details around you. The sights, sounds, and
smells are all very important for these exercises to benefit you in a
positive way.
3) You must act as if you are already the kind of person you want
to be. The real key to changing your self-image is to think
continually of yourself as already being the kind of person you
want to be. Continually keep that picture in your mind (for
instance, a disciplined, consistent trader) and keep acting as if

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youre already there. After not too long, your powerful

subconscious will begin to follow suit.
4) You should enter the theater of your mind at least once a day,
preferably the same time each day. Scientific experiments
have shown it takes about 21 days to change a habit or a
thought process. In the simplest terms, thats exactly what
were trying to do. Were trying to change a bad or unhelpful
habit into a good and helpful one. But doing this takes time.
You didnt form your bad habits in one day, so its impossible
to expect them to change in one day. But if you consistently
use these exercises for 21 days in a row, youll be pleasantly
surprised at how your habits have changed.
Relaxation Technique: Calm Body, Calm Mind

Its hugely beneficial to be physically and mentally relaxed

before doing the visualization exercises. Heres a simple
technique to use in the theater of your mind to bring on
relaxation.
1) Sit in a comfortable chair or lie on a bed. There should be
no other distractions. Turn off the TV, radio, and the
lights. Go into the comfortable theater of your mind. See
yourself getting ready to watch a movie about yourself.
2) Lie down and imagine your body is a series of rubber
balloons. There are two valves in your feet. They open
and air escapes from your legs. Your legs collapse until
theyre empty and lie flat against the bed. A valve now
opens in your chest and your whole body begins to
collapse limply against the bed. Continue this exercise
with the arms, the neck, and the head. You dont have
to do this in bed. If youre in the office, try to fix a
picture of yourself in your minds eye of yourself lying
in bed doing the exercise. Youll actually feel the relief
from being relaxed. Physical relaxation leads to mental
relaxation. When practiced daily, it gives us that
relaxed attitude that allows us to better control our

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actions.
3) Again, remember to pay attention to details. What is
your theater like? How does the seat feel? Is the screen
large or small? Are you sitting in the middle of the row
or in an aisle seat? Are there armrests on the chair?
How do they feel under your arms? The details are very
important.
Each time you practice this technique, when your body and mind
are feeling completely relaxed, be sure to say to yourself mentally,
calm body, calm mind. This deepens the programming of your
servomechanism. As you practice this technique, youll find the
time that it takes you to become relaxed grows shorter and shorter.
Eventually, youll be able to relax totally at any time, and in any
situation, simply by saying to yourself mentally calm body, calm
mind.

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Chapter 15
GOAL-SETTING EXERCISE
I cant stress enough how important goal setting is to being
successful in your trading. If you dont have daily, weekly,
monthly, and yearly goals for your trading, it will be very difficult
for you to visualize your success. This is because you wont have
something specific to strive for. To be at our best, we always need
clear, measurable goals in mind.
This exercise will teach you how to visualize reaching your set
goal of making a certain amount of money each day. That does not
mean youll reach that goal every day. But without having that
clear, set goal, you probably wont reach it most days.

EXERCISE
Get into a relaxed state with the calm body, calm mind
relaxation technique:
1) Enter the theater in your mind. Remember to make the
theater as comfortable as possible. Be sure youre sitting in
a soft, comfy chair. Remember, details are very important.
How do the armrests on the chair feel? Pay attention to
them. Is the screen large or small? Details, details, details!
At this point, youre trying to strengthen your imagination
and see the pictures in your minds eye very clearly. If you
cant see the pictures clearly yet, dont worry; it gets easier
with time and practice.
2) With this exercise, well visualize having reached our goal
at the end of the trading day. Remember, its vital that your
goal be realistic and measurable. The measurable part is
easy, because an amount of money is always measurable.
But also remember that your goal must be realistic. So if
youre an electronic day trader and visualize yourself
making $250 a day, that seems realistic. If youre an
electronic day trader and you try to visualize making
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$3,500, a day thats probably not so realistic. Making that

kind of money on a daily basis is probably beyond most
peoples capabilities.

3) First we want to visualize in our minds the days weve

been successful with our trading. We want to remember
those days where weve been able to make our goal (for
this exercise, we will use the daily goal of $250). If you
need to go back and look at your trading statements to find
days that you made money, then do it. The idea here is to
see those days in your mind and re-live the feelings you
had from being successful on those days. Play those days
back to yourself in your mind. Remember to notice the
details. Try to remember placing the orders that gave you
winning trades. Can you see yourself moving the mouse
on the computer to check the charts? Can you see yourself
placing your orders? How does the pen feel in your hand?
Details, details, details!
4) For those who have not had winning trading days, or cant
remember them, thats OK. As we said earlier, you can
simply make up an experience of being successful in your
minds eye. See yourself getting out of your winning
trades successfully. See yourself getting out of a losing
trade as soon as you realize the profit potential is no
longer there. Remember, if theres enough detail, your
mind cant tell the difference between an imagined
experience and a real one. The imagined experience
doesnt necessarily need to be in trading. Just remember
clearly a time when you were successful in anything and
feel those winning feelings. Thats the first step.
5) Now we want to move to the next scene in our theater of
the mind. We want to see ourselves reaching our goal of
$250 each day. One of the keys of successful visualization
is to see the final results and let the success mechanism do
the work for you. Picture yourself having made $250, or
whatever amount you choose, on the first day of the week
(Monday). See yourself in the theater of your mind after

48

the trading day is over. Do whatever you do when the day

is over. See yourself mark down that you made $250 on
Monday. Then turn off your computer or the light, or push
in your chair...whatever you do when the day is over.
6) Do the same thing on Tuesday. Remember the details you
see. I know its been said a hundred times, but if you dont
pay attention to the details, it wont work. To see the
details, this exercise will take longer than two minutes; if
its only taking two minutes, youre not doing it right. You
must see the pen touching the paper as you write down that
you made $250. How does that pen feel in your hand?
You must feel your hand turning off the computer and hear
the sound it makes. See the room go dark as you turn off
the light and leave for the day.
7) After youve seen, in your minds eye, reaching your goal
each day for a week (Monday through Friday), then go
back and look at your successful trades again, or at least
successful experiences from the past. This will build
confidence and help you to get used to the visualization
process.
This goal setting exercise is extremely important. Without
having clear-cut goals, its impossible to succeed in trading.
Every truly successful trader sets clear goals for himself.
Having these goals will help you program your success
mechanism for the other visualization exercises.
Remember to do these exercises for at least 30 minutes a day.
Its also helpful to try to do them at the same time each day.
And finally, you must be relaxed for these exercises to be
effective.

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Chapter 16
PULLING THE TRIGGER EXERCISE
People cant pull the trigger when they sense an opportunity
because of one reason and one reason only--theyre afraid! Not
of the market, but of themselves. Their fear comes from not
having complete trust in themselves to act in their own best
interests.
You fear your inability to do what you need to do, when you need
to do it, without hesitation. Being afraid causes us to freeze up and
makes us unable to pull the trigger to execute our trades. This
causes missed opportunities, which leads us right back to the real
problem of not being able to pull the triggerkind of a vicious
circle.
After we miss an opportunity (because we are afraid) we play the
scenario in our minds in a very unrealistic way. For example,
lets say we want to get long the market. The opportunity comes
up for us to get in the market, but our fear prevents us from
pulling the trigger, so we do nothing. Then, the worst possible
thing happens (in our minds). The market rallies and we start to
count the money were missing out on because we didnt pull the
trigger. If the market moves our way 5.00 points, we think that
we should have had those 5.00 points. We do this whether its
realistic or not. This is the failure mechanism hard at work.
This kind of thinking is most harmful to our trading. We mentally
beat ourselves up for missing the trade, and we feel as if we lost
the money we would have made had we gotten in on the trade.
Therefore, we get angry at ourselves. We call ourselves stupid.
We play the trade repeatedly in our minds, thinking about the
things we did wrong. This is just like the visualizing techniques
weve been talking about, with one crucial difference--were
visualizing ourselves doing the wrong thing. By continually
thinking of ourselves as unable to pull the trigger, were
reinforcing that idea in our subconscious. All of this is destructive

50

and makes things much worse.

Therefore, we need an exercise to help us pull the trigger when we
see a trading opportunity. We need to get past the fear that is
causing us to freeze up and not move when we should. And, we
definitely want to avoid visualizing or continually thinking about
the mistakes weve made and the opportunities weve missed. We
cant change the past, only the future.
EXERCISE
1) Get in a relaxed state with the relaxation technique calm
body, calm mind.
2) In this exercise, we want to visualize ourselves being able
to pull the trigger without hesitation when we see an
opportunity, or when its time to get out of a trade.
3) Enter the theater of your mind and first play back (in detail)
times when youve pulled the trigger as soon as youve
seen a trading opportunity. Remember to see the details.
See yourself watching the charts and discovering the
opportunity. You see the green light go off in your head
and you dont hesitate. You place your order. (Can you
feel how the mouse feels in your hand? Notice how you
feel sitting in your chair watching the screen.)
4) See the trade going your way. Re-live your feelings when
youve seen an opportunity and jumped on it. Feel how
you felt when you were able to pull the trigger without
hesitation.
5) If you havent had trades where you were comfortable
pulling the trigger, then try this: Remember a time when
you did something you were comfortable with, something
thats hard for most people to do. For instance, maybe
youre a good negotiator and youre not afraid to ask for a
lower price when others wouldnt be confident doing so.
Try to visualize that time vividly and feel those confident
feelings. Maybe youre a person who is good at fixing

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things and wouldnt hesitate tackling a big fix-it job. You

would obviously feel confident that you could get the job
done. Then switch the scene in your minds eye back to the
trading situation and see yourself pulling the trigger at the
right time. Its OK to make up the situation, as long as you
have the confident feeling first and are seeing the pictures
in your mind vividly and with detail.
6) See yourself liquidating this trade when you feel the
time is right. See the details clearly. Clearly see
yourself getting out of the trade. See yourself hitting the
correct keys to liquidate the trade. Feel the confident
feelings you get from having a successful trade.
Again, its important that you do these exercises on a daily
basis. They wont work after just one day. You didnt become
afraid to pull the trigger in just one day, so you cant expect to
turn it around in just one day, either. Also, these exercises
work better if you do them at the same time each day.
This mental practice will reprogram your self-image. After
several weeks of practice, if you feel the confident feelings,
your inability to pull the trigger will be a thing of the past.

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Important Note:
Attempting to do these exercises right after a losing trade or
a bad day will not work. Its very unlikely youll be able to get
relaxed enough for the visualization process to work if youre
upset or angry at yourself. I would suggest doing these exercises
only when youre in a relaxed statenot when youre aggravated
or upset. That wont get you anywhere and will simply turn you off
from continuing to do them in the future. The term time heals all
wounds is very true here. If you give yourself some time to calm
down (a day, an hour, whatever), youll be in a much better
position to relax and get some benefit from these exercises.

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Chapter 17
MORE RELAXATION EXERCISES
The following relaxation exercises, taken from PsychoCybernetics, can be used instead of the calm body, calm
mind exercise.
1) In your minds eye, see yourself lying stretched out upon
the bed. Form a picture of your legs as they would look if
made of concrete. See these heavy concrete legs sinking
far down into the mattress from their sheer weight. Now
picture your arms and hands as made of concrete. They
also are very heavy and sinking down into the bed, exerting
tremendous pressure against it. In your minds eye, see a
friend come into the room and attempt to lift your heavy
concrete legs. He takes hold of your feet and attempts to
lift them, but theyre too heavy for him. He cant do it.
Repeat with arms, neck, etc.
2) Your body is a big marionette doll. Your hands are tied
loosely to your wrists by strings. A string to your upper
arm connects your forearm loosely. A string to your
shoulder connects your upper arm very loosely. Your feet,
calves, and thighs are also connected together with a single
string. The strings that control your jaw and hold your lips
together have slackened and stretched to such an extent that
your chin has dropped down loosely against your chest.
All the various strings that connect the various parts of your
body are loose and limp, and your body is sprawled loosely
across the bed.
3) Many people will find this the most relaxing of all. Go back
in memory to some serene and pleasant place from your
past. Theres always a time in everyones life when they
felt relaxed, at ease, and at peace with the world. Pick out
your own relaxing picture from your past and call up
detailed memory images. Yours may be a peaceful scene at
a mountain lake where you went fishing. If so, pay

54

particular attention to the little incidental things in the

environment. Remember the quiet ripples on the water.
What sounds were there? Did you hear the quiet rustling of
the leaves? Maybe you remember sitting perfectly relaxed
and somewhat drowsy in front of a burning fireplace long
ago. Did the logs crackle and spark? What other sights
and sounds were there? Maybe you choose to remember
relaxing in the sun on a beach. How did the sand feel
against your body? Could you feel the warm, relaxing sun
touching your body, almost as a physical thing? Was there
a breeze blowing? Were there gulls on the beach? The
more of these incidental details you can remember and
visualize, the more successful youll be.
Daily practice will bring these mental pictures or memories into
focus. The effect of learning also will be cumulative. Practice will
strengthen the tie-in between mental image and physical sensation.
Youll become more and more proficient in relaxation and this will
be remembered in future practice sessions.

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Chapter 18
WHY VISUALIZATION TECHNIQUES
WORK
The question often arises as to why visualization techniques work
so well and why so many people use them daily. Its quite
simple, actually. Everyone has a self-image or, in other words, a
picture of the way they see themselves. This picture may not
necessarily be true, but it will still influence your behavior in
extreme ways.
For instance, lets say you think of yourself as a person who lacks
coordination. That alone will cause you to drop things easily,
possibly slip and fall, as well as other things that go along with a
lack of coordination. Your self-image will always control your
behavior. On the other hand, seeing yourself as a coordinated
person will go a long way in helping you be surefooted. The
power your self-image has over you is remarkable.
The key to acting the way you want is to first change your selfimage. Once you do that, your behavior will change quickly and
almost automatically, similar to the example of a person trying to
lose weight. Sure, he may be able to force himself to eat better
foods and get to the health club for a few days, but if he doesnt
change the picture he has of himself, relying on that rather than
willpower alone, he wont be able to sustain it.
What Does This Have to Do with Trading?
The same is true for trading. To a trader with a self-image of
someone being afraid to pull the trigger, being successful and
making money will be next to impossible even before he starts.
On the other hand, if he has the self-image of a disciplined trader
who acts in his own best interest, that alone will go a long way
to helping him make money consistently.
Dont simply say that you will now be a confident, disciplined
trader and then expect it to happen. Thats like trying to use

56

willpower to force yourself to go to the health club. Just saying it

is not enough. You need to use visualization on a daily basis to
change that picture of yourself.
The skills youve learned here can help you change that picture so
you can become the kind of trader you want to be. But make no
mistake about it: if the self-image is not changed first, the behavior
will not change! Its that simple.

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Chapter 19
THE CLOSE
How do you know that these techniques will work for you? Thats
the hardest part--you dont know for sure. One of the most
important things to remember when using the Psycho-Cybernetics
techniques is that you must have faith they will work, and practice
them on a regular and consistent basis.
People often become easily discouraged when they dont see
results immediately--understandable, but not realistic. You didnt
get the self-image you have right now in only one day, and so it
makes sense that it will take more than one day to change that self
image for the better. Again, the key is for you to have faith that it
will work, even when it hasnt worked yet.
I hope I have proven to you that the techniques behind PsychoCybernetics have worked for me as well as many other successful
people (traders, athletes, etc.) And, I believe it will work for you
too. So what are you waiting for?
Good Luck!

Larry Levin
Professional Floor Trader &
President, Tradingadvantage.com

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APPENDIX
PROOF

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60

61

62

63

BIBLIOGRAPHY
The following were used for research:
1) Psycho-Cybernetics by Maxwell Maltz Pocket Books / Simon
& Schuster, 1960.
2) The Disciplined Trader by Mark Douglas Prentice Hall, 1990.
3) Zero Resistance Living, presented by The Psycho-Cybernetics
Foundation, Inc., 1997.

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