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PSYCHOLOGY AND BELIEF SYSTEMS
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The first thing you must know is that the first psychologists were disenchanted priests who were already doing religious counseling and decided it would be more rewarding to do that in the secular world. They looked around for models on which to base their new programs. At that particular time in history (it's not that different now), science and medicine were the big kahunas—science because the scientific approach using controlled experiments was the growing rage, and medicine be­cause it used the scientific method and could get reliable controlled results.

Through the years, the similarities have been astounding. First-year medical students take a course called gross anatomy and are assigned to dissect a cadaver. This lab is usually either in the basement of the Medical School building or, more commonly, in the basement of the teaching hospital. All first-year graduate students in psychology take a course called animal behavior, and it is almost always conducted in the basement of the psychology building.

In this psychology course, students are first told that their subjects for study are white rats because of the similarity between the neurological system of a rat and that of a human. Dozens of animals are much closer to humans neurological ly than rats, but rats are cheap!

Students collect their school-issued white lab coats, which make them God in the land of rats. They are then given their little rat and their task: Motivate the rat, then educate him, and finally frustrate him. The purpose: to learn about how animals and, by inference, humans behave. Motivating the rat is simple: starve him. No food for a day or so, and he is motivated. Next, he is placed in a maze with some good-smelling cheese at the end of one of the maze tunnels. The rat is not stupid. He smells the cheese and takes off wildly down the various corridors. He pauses only long enough to try to determine where the tunnel is that holds that delicious and needed cheese.

After a spell of rather frantic rambling, the rat finds the cheese, gobbles it up, and returns to being an unmotivated rat. (Hunger was his motivation and he temporarily cured that problem.) Remotivation begins: he is placed back in solitary confinement for another three days or so.

The same process is repeated over and over. To educate the rat, the cheese is placed at the end of the same tunnel in each repetition of the experiment. The students must educate their rat before midterm, or else.

The rat soon learns that the cheese is at the end of the same tunnel every time he enters the maze. Before too long, he quits wandering up and down the halls of the maze and goes directly to where the cheese is. Once he has done that a required number of times, he is indeed an educated rat. By definition, an educated rat is a rat "who knows where the cheese is."

The students' next job is to frustrate the rat and examine his reactions closely. If the students can learn to handle a frustrated rat, they someday may be able to handle a frustrated human. Who knows, they may even be able to handle their own frustrations.

They let their hungry friend out, and he rushes to the tunnel where the cheese has always been. His education is demonstrated by the fact that he engages in no exploratory behavior. He knows where that cheese is. It has always been there and it should be there now. But it isn't.

(A trader, at this point in a comparable sequence, might say, "It is the end of the fourth wave and it should go up, but it isn't.") The students look very carefully at this little guy's face when he discovers that the cheese isn't where it isn't where it is supposed to be. His expression conveys that he is thinking, "I must have counted wrong." Every time the students educate a rat and then frustrate him, he starts repeating what he has always done. He goes all the way back to his starting gate in the maze and starts counting again.

But there is no cheese there now. After a brain-numbing number of tries, the exhausted rat, who by this time is dragging his tired nails over the floor of the maze, finally wanders down the hall and tries out another tunnel.

What can we learn from this exercise? This laboratory rat is a lot smarter than most humans. The rat will finally give up and get something that works better for him. Most humans will live and die in a "tunnel" where there is no cheese. A common definition of insanity is: doing the same thing over and over and expecting different results.

If you are living in a tunnel, which may be your world and/or your trading, how do you make peace with yourself if you're not getting the cheese? How do you then spend your life? If you are a scientist, you may spend your life studying two square inches of the tunnel wall. You may learn everything it is made of and get recognized for that knowledge. You may even receive a Nobel prize for knowing more about the tunnel wall than anyone in the world. But you are still in the tunnel.

If you are attracted to studying human behavior, you may become a counselor, psychologist, or psychiatrist. You are then taught that your main job is to make people's deviant behavior more "adaptable." I had a professor in graduate school who opened the class every Friday morning with, "Remember, guys, hams are cured, not people!" and laugh knowingly every time. Actually, we psychologists are in one of the few professions where the worse the job we do, the more we get paid. If it takes me three years to "cure" you, I get paid more than a better colleague who can do it in three months. I have often heard therapists at conventions talk about their ability to "hold" patients.

We must make peace with the tunnel we live in, when it does not contain enough nourishing substance—food, love, or profits. This tunnel is really our state of mind which was built by the person we see every day in our mirror. We all built our own individual tunnels. Are we really proud of them?

At Level Five, we are at the point of being able to choose our own tunnel. If we don't like it, we can build another bigger, better tunnel that is a lot more fun to live in. That is what this chapter is about: trading our states of mind.

In Chapter 11, you learned how to tell which of your three brain personalities is running your show at the moment. Nature has a beautiful way of balancing out all equations. In return for external effects' letting us see ourselves, we constantly tell the world which of our own software programs we are running at that moment. We are always running one of four different programs; our necktop computer can run only one at a time. However, we can switch them quickly enough to give an impression that more than one is running simultaneously.

If we choose to align our states of mind with the composite state of mind of the market, we need a different type of indicator. In the early 1980s, I realized that no indicator on the mar­ket really gave me what I needed to trade successfully. My conclusion, at that time and even more so now, was that no one trades the market; we all trade our own individual belief systems. But there was no way to measure the composite of belief systems of all the traders currently in the market. I was only interested in active traders. No matter what someone's belief system is, it has no effect on the market if that person isn't participating in the trading process.

In an effort to bridge this gap (a lack of indicators) and to further our understanding of the market in general, we started a research project to determine what percentage of traders were running each of the four basic psychological programs in trading. We recorded the percentages and then, a year later, repeated our study with almost identical results. The following section gives our findings and explains how they can be used to further your own trading success.

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