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PRINCIPLES OF HUMAN COMMUNICATION
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When we evision the market as a composite of all the traders trading, we are acknowledging the market's important communication function. My training and experience in psychology have taught me that three principles of human communication that are true in the individual are also found in the market.

Principle 1: Ninety Percent of Everything We Hear Is Lies

What is going on in people's brain is not what comes out in their speech. Thoughts and feelings are modified by desires, fears, and anticipations. Suppose I am your employer and I ask you how you like working for my company. You actually hate both my company and me, but you need the income and have no idea where you might find another job. In this situation, you do not say, "Boss, I really hate your guts." You modify your wording into a response you think will be acceptable to me.

We disguise most of our communication, depending on present circumstances. We might look at someone of the opposite sex and say, "When I look into your eyes, time stands still." Paraphrased, the same message might be, "You have a face that would stop a clock," but the reaction to that statement would be quite different from the reaction to the first one. We constantly modify our communication to suit the immediate context and environment.

We also modify our communication by isolating various parts of our body and making them sites of behavior. We might say, "My head— it hurts" rather than the more accurate statement, "I am, for some reason, headaching myself." Or, "My throat— it is sore." Parallel statements in trading are subtle ways of not taking responsibility. For example, "My broker told me to go long, and I knew it was wrong." Or, "The stochastic— it said to buy and it was wrong again." These are typical ways of sidestepping responsibility and clarity.

Another way we cover up is by disguising our thoughts with words that seem to mean something else. Take the simple word understand. How often, when you use the word understand do you really mean control? Have you ever called a friend, a broker, or another trader, and commented, "I just don't understand this bond market, do you?" What you are really saying is, "I just don't control this bond market, do you?" Do you ever say to your kids, after some unacceptable behavior, "I just don't un­derstand why you would do that." Again, you are really saying, "I just don't control you." Have you ever said to a spouse or friend, "You just don't understand." The real issue—and message—is control.

If you doubt the statement that 90 percent of all verbal communication is a lie, in the sense that it does not report accurately the thinking that is going on in the brain of the speaker, monitor yourself and others to see how truly honest you are in communicating your thoughts.

Principle 2: You Cannot Tell a Lie on All Channels

We are talking now about the whole person. We normally think we are communicating on two channels: (1) light waves and (2) sound waves (Figure 11-1). If I am in a room with you and you have reasonable sight and hearing, you can see what I am doing and you can hear what I am saying. Communication scientists have found that we actually communicate on five other channels plus two minor intraperson channels. The polygraph or lie detector is based on monitoring three of

these nonverbal channels. The results are not admissible in court because the polygraph is fallible: it does not monitor all nine human communication channels. The best lie detector in the world is yourself when you listen without prejudice. Sometimes, this capacity is referred to as intuition, or even "women's intuition." If I tell you a lie verbally, I may have an eye twitch, a shoulder shrug, or a knee jerk; I may squirm, sweat, garble a sentence, or give some other physical signal that will indicate my lack of complete honesty.

Take an example that applies to males much more than females. When a man is listening to someone and he moves his hand to his jaw, scratches around the chin, or exhibits similar behavior—usually with his right hand if he is right-handed— that gesture means he believes what is being said or he is buying what is being sold, at that moment. If you are a broker attempting to sign up a new client by telling him the advan­tages of opening a commodity account, and he scratches his chin at the same time he is saying, "Well, I don't know if I really want to put that much money into commodities," your reply might well be, "Press hard; the third copy is yours."

Now let's take an example involving females. I am sure you have noticed that many females cross their legs while sitting down. Often, they will start swinging the crossed leg. This is usually a nonverbal way in which the female communicates her real feelings, which may or may not be spoken. Time is the crucial element here. If the female is swinging the crossed leg rapidly—about 60 times per minute or more—it communicates some sort of inner dissatisfaction. She may feel she is overdressed or underdressed for the occasion. She may just not feel well. She may not like the person she is with—or the person she is listening to.

If she has what research psychologists call "hip lateral mobility," which means she can move around as on a bar stool, the crossed foot will often point to the person or situation with which she is dissatisfied.

Interestingly, if the crossed leg is oscillating at much less than 60 times per minute, the female is expressing almost the opposite feelings. She is confident, she likes the people and the environment. Again, with "hip lateral mobility," she often points to whatever she finds satisfying.

We always tell the truth on some channel. Carl Jung once said, "If you want to understand human behavior, realize that we all have two tongues. One is in our shoe and the other is in our mouth and whether you understand [there is that word again] a person depends upon which one you listen to." In other words, what you do is more truthful than what you say.

Principle 3: People Can Only Talk about Themselves

If I say to you, "This room is a bit warm," I am not making a statement about the room. I am telling you about my nervous system. Even if I get very scientifically precise and say, "This room is exactly 21 degrees Centigrade," I am still telling you about myself and my approach to life. If I say, "That is a beautiful girl going by outside the window/' I am not making a statement about the girl; I am talking about my standards of beauty.

The Human Communication Principles and the Market

The market follows these same principles of human communication because the market is not a separate entity. It is a composite of thousands of humans. Let's look at the principles in that perspective.

•  Ninety -percent of everything you hear about the market is lies
in that the messages do not reflect the truth of what is really
going on. When you read the financial news or listen to CNBC-
FNN, remember that the commentators get paid to talk, and
talk they must. They have to say something about "why" the
bonds went up, and at least 90 percent of what they say does
not accurately portray what is happening in the market. They
do not know what is happening, so how can they accurately de­
scribe it.

•  The market itself cannot lie. The bonds went up because
they went up. There was more pressure to buy than to sell. To
say it was "short covering" or a "technical bounce" is not the
whole truth. We usually observe two channels in the market: (1)
price and (2) volume that happens at a certain time. Just as in
human communication, there are several more channels beyond
price and time. In our fractal research, we use five channels.

•  The market can only talk about itself, and the language of
the market is ticks. Ticks will always tell how the market feels.
The conclusion here might be summed up as: "Listen to the
music, not the words." The music is the real market and the
words are commentary and/or opinion.

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