Hello Rookie Traders!

Did you check out the techniques for adjusting your positions?  Did you practice them?  Do you believe that these techniques can increase your profits in the longer term?  These techniques have been proven through extensive backtesting to help increase the profit potential for traders, but that means very little if you don’t believe that they work.  In this week’s blog, we are going to talk about beliefs.  The reason we are going to talk about beliefs is that they are the key to unlocking the potential of the trader inside us.  The reality is that no matter how good the techniques or the systems you have if you don’t believe they will work then there will always be something that comes along and messes up a perfectly good trade or a perfectly good system.  I see this a lot with rookie traders.  You show them a tried and true technique and instead of implementing as we practiced they will tweak it when the first sign of distress comes.  Veteran traders are not immune to this practice either.  My mentor showed me a system once that he had been using for decades and has proven itself to have a trading edge and if followed over a long enough timeframe would produce a certain result and yet somehow I found myself trying to tweak or better the system, why?  The reason is my belief in the system and myself in executing the system had not fully developed.  I realized that even though my mentor had assured me that this system was sound and I had seen him use it and do very well with it somehow I didn’t believe that I could either use the system effectively or that it wouldn’t work for me as it had him even though the system was mathematically sound.  Have you ever found yourself in a similar position?  If you have you are not alone, this happens to everyone.  So the question begs, what do we do about it?  How do we increase our belief in ourselves and perhaps in a new system that we are using?  This is where the real work in trading begins.   Working on ourselves and our confidence can be an arduous task but it is the one with the most reward at the end.  To gain confidence in ourselves we need to do several things.  First, we need to comb through our beliefs to see how we really think and feel about our world around us.   A good exercise is to grab a pen and notepad and write down all the things we believe about ourselves, our trading and our view of the world.  Once you have done that then you need to examine each of those beliefs to see if they are serving you or hurting you.  After we know what serves us and what doesn’t then we can choose to do two things, we can either drop the things that don’t serve us if we can, this is sometimes easier said than done, or we can go about proving to ourselves that those beliefs are false.  The second thing we can do to gain confidence in ourselves is to fail and realize that failure is not permanent or fatal.  This will help us deal with any situation with more confidence because we then realize that life doesn’t end if things don’t work out the way we expect.  How does this relate to trading?  We are going to do exactly the same things to increase our beliefs in a new system or our beliefs about trading as we do to increase our confidence in ourselves and that is we are going to examine our beliefs about our trading by writing down all our beliefs about trading and reviewing them to see if they are helpful or hurtful.  We then need to fail in the system so that we understand that it is not fatal or permanent.  The way we do that is by backtesting the new system and entering the trades into a practice account where there is no risk.  To actually gain confidence in the new system we need to practice as if it were completely real.  This means we need to keep track of the wins and losses so that we can see the system in action.  This means we must journal our trades and write down the rules to the system.  If you do this you will feel you belief increasing and then it will become easier to follow the rules of the system and then over time the mathematical edge will take over and produce the results that are expected from the system.

If you were able to believe in the techniques that we reviewed last week and used them then you will see that our trade is working to perfection.  Take a look at the video below to see what happened.

Happy Trading!