“All truly wise thoughts have been thought already thousands of times; but to truly make them ours we must think them over again honestly, till they take root in our personal experience.” – Goethe
Iron clad belief not only in the system you are trading but also in your discipline to execute both entry and exits flawlessly are essential to your success in trading.
The top traders know it is the discipline displayed in following their rules that is the important thing in trading, and the money rewards are secondary. For if you cannot execute your signals, on both entry and exit, without question it takes just one mistake to give all those hard earned profits back to the market.
Positive self-belief is built from repetition after repetition of following your rules. Extensive back-testing of your system and constant self-analysis.
You’ll never be able to follow a system if you have a doubt in your mind. That’s why so many people who buy other peoples systems fail. When that system goes through a losing period the person who purchased it will throw it away and search for the next system. Yet the trader who has rock solid belief will be aware that the system does display periods of losses. He’s seen it all before and sits it out waiting for the conditions to become more favorable. When they do he gets back in and makes a ton more cash. The person who purchased the system in the meanwhile is now losing more money with the new system because that too has just come into a losing streak.
Only by doing the groundwork in section four will a trader have confidence in a system. You must strive to work through as much market data as is possible with any system so as to know what is normal and what isn’t. This is why even the top famous traders have losing streaks and they never batter an eyelid. Everyone seems to be aware that George soros is the greatest trader alive. The guy made billions in the 1980’s and 1990’s, yet he also had some amazing losing periods. His fund has also lost billions and posted big negative returns. Did it bother him? He knew that his style of trading will go through losing periods. Just as dawn follows dusk, a losing period is usually followed by a winning period and vise -versa. Yet too many traders throw in the towel after taking a couple of successive losers. They are never around when the system kicks into a big winning period.
What you believe is what you get. If you look at your problem areas you’ll find they are rooted in faulty and limited beliefs. So if you are having problems with your trading results examine your beliefs about trading. If deep down you have negative feelings about trading, or making money or you lack complete confidence in either the system you are following or yourself then you have to stop trading and go back and find out why.
A person who is a compulsive gambler will never make it trading the markets. I’m sure when they lose a substantial amount of their capital then every-one else will be to blame, but deep down if they analyzed their beliefs about trading they would probably admit they see it as a big casino. If your beliefs about making money are negative then how can you expect to make money in stocks? I have heard of traders running accounts up to a ceiling figure, say $1 million and then losing it all. They have repeated this several times before seeking help. Usually, it is found that some deep seated, negative belief about making a lot of money has caused them to push the self-destruct button. As Ed Seykota (very successful professional trader) says, every-one gets what they want from life. You’ll find in trading you’ll get what you want.
You have to ask yourself what are your beliefs about trading? Are you told continuously that trading is a no win game? It’s a gamble? You can’t win? Trend following doesn’t work? etc… Do you believe any of it? Write down what you believe about trading. What kind of returns do you think are possible? How much time and effort do you believe you must put into a day’s work to obtain a day’s pay? When I first started trading I felt I needed to work hour after hour every day. I checked on the quotes continuously, phoned my broker, read reports, listened to the news, etc.. Why? Because I believed I had to put in hard work to receive pay. It took a long time to shake that belief out.
If you believe just working ten minutes per day for a wage is a lazy way to success and you feel uncomfortable with this then you will have to resolve this conflict before you can obtain these results. Choose your beliefs wisely. In all problems with your trading you are both the problem and solution. The top traders know this. If they go through an extensive period of losers they’ll start analyzing their beliefs. Looking inside and not out-side for the answers.
How do you develop positive self-belief?
Foremost it has to be said it takes a lot of work. You will have to start with accepting total responsibility for your trading, be willing to put a lot of work into finding and testing a trading system. The rest is built from experience. It takes years of experience for you to develop the belief. A bit of a catch-22 but how do you gain experience in trading? By staying in the game. Trade with such a small risk early on that it hardly seems worth your while. View trading as a several-year venture and not a “get rich quick scheme.”
It is only when you have total confidence will you be able to view your trading in terms of points rather than money. Once you are on this level the rewards can be staggering. Which brings me on to the next chapter.