In this part five of our Trading Secrets series we look at how to supercharge your trading by recognising and identifying beliefs.

Beliefs are important in stock and financial trading. One of the best edges that we can have over our competition is to understand when market action is creating beliefs amongst other traders that are probably going to be false. If we can remain objective in situations like this and trade based upon probability rather assumed beliefs then we will have an advantage.

Additionally we need to create supporting beliefs about ourselves as traders, our abilities to follow our system and our abilities to achieve our objectives.

Beliefs are unconscious to us. Beliefs are one of our perceptual filters. We assume them. We act upon them automatically. They form rules for us and they are the truth in the world as long as we hold them. They colour our perception of ourselves and the world.

We can learn to understand when we are assuming beliefs, which beliefs we hold and we can alter them if they do not support us.

How to identify a belief

Whenever you say to yourself “I am….” This is a belief.

Whenever you say “I can” or “I am able”, “I cannot” or “I am not able” to do something, this is a belief.

Whenever you say to yourself “This happened therefore (something else) is going to happen” this is a belief.

Whenever you make a decision or form an opinion about the end result of something and it is not absolutely guaranteed, then this is a belief.

Whenever you could add in the phrase “I believe that…” this is a belief. EG “I believe that I can make a good living in trading.” “I believe that the market is going to peak and then go down” – a belief.

Some beliefs support us and others do not. “I can do (something).” is a supportive belief. “I can’t” or “I am not able to do (something).” is unsupportive.

As I mentioned before beliefs are unconscious to us most of the time. We gradually form a belief as we gather evidence for something. At some stage the process moves from conscious thought and decision making to an unconscious “knowing” this is when the belief has formed. Once made we rarely challenge beliefs until they are proved wrong, in trading this is normally after we have made a mistake and it cost us money.

The thing is that beliefs are not necessarily true. They may be true but they also may not be true.

We have beliefs about self and our own abilities, “I am”, “I can” and “I am able”.  Also we have beliefs about other people and other things, “they are”, “it is”, “such and such is going to happen.”

Two main things are important about beliefs in trading. 

  1. Your beliefs about yourself as a trader and your abilities.
  2. Beliefs about the future direction of a market are merely decisions based on probability, not fact. There is a probability that markets will go up and there is a different and related probability that they will go down at any one time.

Beliefs about self and our abilities

Let’s have a look first at our beliefs about self and our abilities:

As in any area of life if you believe you can do something then you give yourself a chance of doing it. If you believe that you can’t do something then you almost certainly won’t do it.

Successful people in any area of life create a feeling of certainty that they can be successful. This feeling is created within. It makes us feel confident. It is created by self belief, beliefs about our abilities.

Bear in mind how this all works internally. We create perceptions of reality based on our internal filters, our beliefs, decisions and memories.

One person can look at an obstacle and see one hundred ways of overcoming the obstacle. Someone else can look at the same obstacle and see no way past it. The only difference is the way that they are looking at it. This way of looking at things is a choice.

Our bodies, our subconscious brains respond automatically in the way that we condition them or programme them. We condition and programme our bodies and minds through our conscious thinking and language.

We love to be right. Our subconscious brain will seek ways to ensure that our desires are fulfilled and we are right.

If we become certain of our ability to overcome a problem then our subconscious will seek solutions, we will get thoughts as to what we could do to solve the problem. We will start taking action, learning from mistakes and we will get better and better at what we are doing until we achieve our objective. This will make us right, “I could do that thing”, “I could overcome that problem”, “I was right”. This makes us feel better about ourselves. The subconscious mind takes note of this and gives us more of what we want.

If we don’t think that we can overcome a problem then we may not even explore ways overcome it. Our brain switches off to the problem and starts focussing on other things. Doubts, worries, etc. When we attempt to do something that we think that we can’t do then subconsciously we are only proved right when we are unsuccessful. “I couldn’t do it, I was right.” This makes us feel better, the subconscious brain takes note of this and gives us more of the same. More doubt, more worry. “Here you go, this will make you feel better!”

The subconscious brain controls the body, it determines our heart rate, our breathing, whether we act in flowing motions or hesitantly. If we think that we can or can’t do something then our subconscious brain and our bodies will help us in being right about that thing.

If we think that we can be successful as a trader, then we can. If we think that we can’t be successful then we get doubts, worries and we will eventually be proved right.

I hear some trader trainers saying, “Don’t think that you can achieve more than 100% annual return from trading. You can’t.” They are wrong. You can. Lots of people do. If they assume that belief then they will be proved right about it for themselves though. “I achieved 99% return this year and this is the best that I could possibly do. See I was right!”

People who believe that their trading returns are potentially limitless will find ways to prove that they are right.

Which is the best belief for us to have? 

Some traders develop a belief that they cannot stick to their system. They sit at their desks and “hope” that they can stick to their system, but deep down they don’t believe that they can. What happens next? They take trades that are not part of their system and they lose money.

“See, I was right, I can’t stick to my system. If I had then I would have been profitable.” This creates a temporary feeling of positivity, soon to be replaced with regret and probably guilt.

Some traders believe that they will fail and go bust. Guess what? They will keep doing the same things and making the same mistakes until they are proved right.

Take a moment now to think about and write down some of the beliefs that you have about trading and about your abilities as a trader. Write a list. Be truthful. Be honest.

Trading beliefs exercise

Complete the following statements and answer the following questions:

“In terms of trading I am…” what are you?

“In my trading I believe that I am going to…” what?

“In terms of trading I can…” what?

“In terms of trading I can’t…” what?

“In terms of trading I believe…” what? Write a list of things that spring to mind.

Do you have a profitable system? How do you know that it is profitable?

Are you able to stick to your system? If not then why not?

What problems do you have in your trading?

What are your strengths and weaknesses in trading?

These are the rules by which you will live and thrive or struggle, shrivel up and die in your trading career.

When you have your list, have a look through it. Do your beliefs support you in where you want to go with your trading? Which beliefs work for you and which ones are working against you?

What things spring to mind immediately that you can do to improve your trading and your results? Write these things down now and formulate a plan to achieve them.

What if you have beliefs in your list that are unsupportive for you or that you don’t want? We are going to discuss how to change beliefs that you don’t want in upcoming modules.

If you are interested in learning to trade stocks and forex then we have a comprehensive online  training course for beginner traders. Join us inside your online trading course.