This is the tenth installment in this series, whose purpose is to examine the internal decision environment the trader faces within his mind. On the assumption that a better understanding of the mental conflicts we face will improve our trading results, the three modes of conflict are personified in separate "voices" inside of us. These are the Trader, the Accountant and the Analyst.

Chapter Nine
The Dirty Little Secrets of

It is hard to fight desire. Whatever it wants, it buys at the cost of soul. Heraclitus

The Analyst wants to control your impression of him. He defines himself in the reflection of your eyes. He needs affirmation. Without your acknowledgement of him being right, he isn't right. The making of predictions is, for him, like the casting of nets, fishing for a future audience. He makes lots of predictions. He only needs one to come true before running to tell you, "I told you that would happen." The others that don't work out are easily brushed aside. This is how he stays in the limelight. He doesn't even think of it as dishonest.

The Accountant doesn't like the limelight. The less exposure to others, the better. Nothing suits him more than a dark room and the absence of the business owners. The Accountant wants to control his environment. He exerts his will on things outside himself. He needs a roof, so he builds a house. He stores for the winter, so he opens a savings account. He's threatened by competition and conflicts at work, so he closes his door to shut out the office, or fires the offending employee, or if unable to do either, forms alliances to undermine his competition's authority and presence through ugly acts of gamesmanship.

In the marketplace, the Accountant will rely on exactly the same tools. He sees the road to success as exerting his will on the market as if it were simply an object. To him, a position is like a product. If a minimum profit is too small, he'll simply raise the selling price to demand more from it, refusing to liquidate until his price is met. If a risk is too big, he reduces the stop until it isn't.

Here, there are no thoughts of current market conditions with levels of resistance and support. "It's what I want," the Accountant seems to be saying, "not the market that will dictate the results."

This is why the Accountant favors the neatness of out-of-the-money option plans. He can know months in advance how much he is subject to lose, and furthermore, he doesn't need the Analyst to tell him when to get in.

Analyst? Who needs an Analyst. All the Accountant needs to do is scan the charts for a market whose 50% retracement to a previous year's high equals an amount of security the Accountant would like to acquire. Who needs an Analyst for that?

And, thus, the Accountant's dirty little secret is exposed. Left in charge to watch over the investment funds while the owners are away, the Accountant applies his own devices. The Accountant, you see, is a closet gambler.

Of course, the investment funds are eventually plundered. No option plan was ever destined to failure with more assurance. Some might even call it an options assurance plan. The Accountant has been left alone so long and become so comfortable in the slow pace of his quiet environment that he has nearly forgotten that the business owners will be back from vacation soon. Already, he can hear their footsteps coming down the hall.

Soon his door will fly open, and the bright lights thrown on overhead will expose all his devious activities.

It's just at this impending moment that the Accountant experiences his darkest hour. If only he can get the money back into the account before anyone arrives, no one will ever know it was gone. And, what's more, he'll have acquired enough security to establish himself in a much bigger office with carpet and paintings and a view of the park — if only this one market will retrace just half of what it most recently declined. After all, it has to do that eventually, doesn't it?

So, with the last sum of remaining investment funds, he calculates how many contracts it will take to make up for past losses and future hopes and chooses his contract specifications accordingly, just as if willing it could make it all come true. And, for one blissful moment, his hands behind his head, he relaxes, visualizing the security of his future in that most dangerous of all mind games — mental pictography.

*Reprinted (and modified) with permission from M. William Scheier and the publisher, valhallafutures.com