Reviewing your trading beliefs and rules

I had an interesting conversation the other day with another trader about their own beliefs in the markets, and how following these can help or even hinder you as a trader.

My own opinion (or belief!) is that whatever rules you have created are an attempt to formulate your own beliefs into a viable trading strategy. Those basic beliefs give you a framework, or an outline of the overall concept about your approach to the markets, and the specific rules you use add the meat to the bone of your basic idea.

It is important that you periodically check to see if what you actually end up doing in the markets adhere to those basic beliefs. It is possible that, over time, your beliefs and ideas may end up changing. If that is the case, then you need to ensure that your rules are amended as required to reflect any change in your beliefs.

Alternatively, you may find yourself deviating from your beliefs, and essentially overriding your carefully constructed rules when caught in the heat of the battle. When the markets are open, with your own money on the line, and you need to make decisions, the pressure can make you do things that directly contradict either your beliefs or rules, or maybe both. This is where the concept of self sabotage can come into play.

Occasionally, you will come across traders like Joe Public, who will be chopping and changing from one method to another, one timeframe to another.  Maybe they have seen other traders who successfully trade in a certain manner. They are looking at the results achieved by others, and decide they want a piece of the action. They are looking at the results without giving consideration to the process, and whether it is compatible with their own beliefs.

If they do not follow that initial step, then they will be setting themselves up for a lot of frustration, second guessing and self sabotage.

Regularly reviewing your own beliefs and rules and ensuring they remain compatible with each other, all forms part of your overall review process, and can help you formulate a program of improvement going forward.