In a nut shell, the exchanged life is Christ living His life through us, rather than us trying to make life work through our own efforts and resources. It is made possible by the believer's union with Christ in His death, burial and resurrection
(Romans 6-8). 

God created man with certain essential, or basic, needs. Among them are the need to be loved and accepted and to have value and worth. The moment you are born, you are driven to get these needs met. The unique ways in which you try to meet your basic God-given needs for love, acceptance, value and worth is your "flesh."
Your particular versions of flesh are the unique ways that you have lived by and depended on to meet your needs. Your flesh "patterns" were developed based on the messages that you received about yourself as you were growing up. These messages helped form your "identity."

It is you trying to meet your needs independent of Christ with the only resources you have available to you: your mind, will, emotions and your physical body. The flesh is the primary thing that hinders us from knowing and experiencing the victorious Christian life. Living in the flesh is also known as the self-life.

Because we are all born in Adam, born without the life or God in our spirits and thus spiritually dead to God, we are forced to live out of our resources. As a result of dealing with the impossibility of getting our needs met, we are driven to make up for this deficiency. The desire to have our needs met is so great that it consumes our energy; we become solely focused on that longing. We become thoroughly and intensely self-centered in our quest for love, acceptance, value and significance.

The final result of being born spiritually dead is the loss of identity. We were created to have the life of God within us, (in our human spirit) yet are brought into the world without it. Therefore, our very reason for existence is not apparent to us. We are born in a condition of not knowing who we are, but being driven to find out.

There are only 2 kinds of inner life, Adam-life or Christ-life (Romans 5:14-19). All of us are born with Adam-life; a spirit without the life of God. It was the life of God that Adam lost in the garden. Therefore, our sins are not our only problem, but rather the dead spirit within. The blood of Christ washes away our sin, but it does not wash away the Adam-life.

How can this inner life be changed? Our dead spirit is not to be patched up but put to death and exchanged for a new life. That inner dead spirit cannot be changed. It has been exchanged. Galatians 2:20 states, "I have been crucified with Christ; and it is no longer I who live, but Christ lives in me; and the life which I now live in the flesh I live by faith in the Son of God, who loved me, and delivered Himself up for me."

This is what happens when a person is born again; he receives the life of Christ. He is no longer the same type of human, possessing Adam-life, but is a child of God, acquiring the life of Christ, and thus a new creation, and one with a new identity.

We believe the Scriptures that Christ was crucified for us. Do we not also believe the same Scriptures that teach we were crucified with Christ? God has created something completely new inside of you. This is a spiritual reality, not just positional truth. That is your true identity.

"If anyone wishes to come after Me, let him deny himself, and take up his cross daily, and follow Me. For whoever wishes to save his life shall lose it, but whoever loses his life for My sake, he is the one who will save it." Jesus says the way to life is through death, and if anyone is to follow Him, they must deny self.