What is a process?
Process can be defined as “a series or steps taken in order to achieve a particular end.” In trading, to achieve the end result you desire, the market demands discipline and patience from you. In order to achieve consistency, a process must be present in your trading. Among experienced traders processes differ from person to person, but it is my view that they are built upon three components. First, their own personal beliefs about trading, opportunity, risk, and life in general. Their beliefs shape how they interpret market information and therefore determine how they execute on trades. The next component is a traders technical approach, or edge. Edge is what allows traders to identify opportunity in markets. The last ingredient in a successful trading process is risk and trade management. How are you going to determine your risk? When will you cut losses? When will you take profit? These are all important questions that must be answered by your trading process. A trader without a process is left with nothing but emotions and in the moment thinking to make their trading decisions for them. It is for this reason that a trading process is essential to establish for the developing trader.
Personal beliefs
It's not the events of our lives that shape us, but our beliefs as to what those events mean.
What is a belief anyway?
Whether you are aware of it or not, beliefs guide us in every decision we make. It is no different in trading. Allow me to further explain. What does it mean to believe in something, or to hold a belief? It is only when you truly believe in something with a feeling of absolute certainty, only then can it be transmuted into a belief. What causes us to truly believe in something, therefore shaping our personal beliefs? Our experiences. Through our past experiences we have derived all the beliefs we currently hold. All the beliefs we form as we progress throughout life and trading will be formed by future experiences, whether it is today, tomorrow, or in a year from now. Experiences charged with emotions are what shape our beliefs.
how belief systems affect our trading.
If it is the case that our beliefs are the guiding forces of our decisions we make, then it is certainly apparent that our beliefs we hold about trading are sure to impact our trading decisions. For example, if I hold the belief that the market is a constant stream of opportunity, then I am surely going to find opportunity where my edge makes an opportunity obvious. On the other hand, if I hold the belief that the market is against me, the market is S**T, and every other excuse in the book, then these beliefs are going to seek outward expression in my trading. In my estimation, trading requires you to have a positive- but realistic approach. We will call this approach the ideal mindset.
If I were to ask you what determines your current state of mind (mindset), would your answer not be determined by whatever it is your are expericenly currently in this moment? Surely if you were having positive experiences you would have a positive mindset. Then it is the case that our personal beliefs determine our experiences, and our experiences determine or mindset.
Beliefs
Experiences
mindset
Beliefs are a form of structured energy that are dormant in your subconscious mind. These beliefs seek outward expression constantly through our decision making and what we focus on. So, in trading it is critical to your development as a trader that you form beliefs about the market that are meant to reinforce the ideal mindset. The belief “the market is a wonderful stream of constantly flowing opportunities” allows you to recognize the trades that you have an edge in and thus a higher probability of success. I hope this blog post shed some light on how your personal beliefs impact your trading decisions. Originally, I was going to dissect personal beliefs, edge, as well as risk and trade management, but did not want to overload the post with information. The remaining two topics will be covered in a separate blog post. Have a great week, trade well!