We use market analysis to identify the patterns, define the risk, and determine when to take profits.

The trade either works or it doesn’t. In any case, we go on to the next trade.

Trading is hard because you have to operate in a state of not having to know, even though your
analysis may turn out at times to be “perfectly” correct. To operate in a state of not having to know,
you have to properly manage your expectations. To properly manage your expectations, you must
realign your mental environment so that you believe without a shadow of a doubt in the five
fundamental truths.

three stages of development of a trader.

The first stage is the mechanical stage. In this stage, you:

1.      Build the self-trust necessary to operate in an unlimited environment.

2.      Learn to flawlessly execute a trading system.

3.      Train your mind to think in probabilities (the five fundamental truths).

4.      Create a strong, unshakeable belief in your consistency as a trader.

Once you have completed this first stage, you can then advance to the subjective stage of trading.

In this stage, you use anything you have ever learned about the nature of market movement to do
whatever it is you want to do. There’s a lot of freedom in this stage, so you will have to learn how to
monitor your susceptibility to make the kind of trading errors that are the result of any unresolved
self-valuation issues I referred to in the last chapter.

The third stage is the intuitive stage. Trading intuitively is the most advanced stage of development.
The difference is that you can’t try to be intuitive, because intuition is spontaneous. It doesn’t come
from what we know at a rational level. The rational part of our mind seems to be inherently
mistrustful of information received from a source that it doesn’t understand. Sensing that something
is about to happen is a form of knowing that is very different from anything we know rationally. I’ve
worked with many traders who frequently had a very strong intuitive sense of what was going to
happen next, only to be confronted with the rational part of themselves that consistently, argued for
another course of action. Of course, if they had followed their intuition, they would have
experienced a very satisfying outcome. Instead, what they ended up with was usually very
unsatisfactory, especially when compared with what they otherwise perceived as possible. The only
way I know of that you can try to be intuitive is to work at setting up a state of mind most conducive
to receiving and acting on your intuitive impulses.