Convictions, beliefs, and trading
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Why at all think, talk, and write about things like convictions or beliefs in terms of trading? After all, trading is about making money, not psychology or some esoteric stuff.
Is it really so? Isn’t it the trader that makes money? Or loses money, since according to statistics provided by brokers, around 70-90% of traders lose money. Traders are humans with their human flaws, traumas, and other psychological or emotional baggage that may influence trading. If we consider all this, a closer look at the trader’s mindset may lead to interesting discoveries and solutions to problems they encounter in their daily trading. Our convictions and beliefs may play a more important role than we’d believe they do. So, let’s take a closer look at the process of making money from trading and what it involves.
To make money in trading, you have to open a position at the right moment and close it at the right moment while properly managing risk. No matter what system, strategy, or position management you use, your decision-making process will depend on your current market perception. No matter if you use indicators as a filter or just look at a bare chart, watch the price action, or do anything else, it will all boil down to your current market perception. If this perception is disturbed or disrupted, then you will most probably make losses. And this is where convictions and beliefs come in.
Market perception disrupted by inner sabotage
Not long ago, I was tormented by stress and fear each time I opened a trade. And no matter in which direction the trade would go, stress and fear would be my companion until I closed the trade. I was trying various things like reducing lot size or working with the fear of losing money. But it simply did not help. One day, I realized that I was actually most afraid and stressed when I was EARNING money on a trade, and that relief came when I closed a trade with a loss!
After realizing that, I understood that something strange was going on here and that I needed professional help. I’m lucky to have a personal development coach at home, so I went to my wife and asked if she could have a look at this problem with me.
When I was lying on the sofa, Sophia smiled and asked me:
“Okay, so what are your intentions when it comes to trading?”
“I want to make money,” I answered.
She smiled again.
“Okay, so why do you get stressed and fear when you earn money?”
“I don’t know, it is stupid,” I replied. I really didn’t know. It was so illogical.
“It might seem stupid if you look at it on a rational level, but have a look at what your subconscious thinks about that and what intentions it has.”
I closed my eyes. I tried to look beyond my desire to earn money from trading.
“Look at your last winning trade. What do you feel?” I heard a question.
“Well, I feel reproaches, fear, and stress,” I answered.
“Here you go,” said my wife.
I opened my eyes and looked at her, puzzled.
“Convictions and believes,” she answered my question before I even asked it. “They cause internal sabotage. Look at your past trading days. You told me about stupid mistakes which led to losses or trades closing at break-even. Isn’t that the case?”
“I don’t know, I just want to earn,” I muttered. I didn’t like the direction we were heading right now. Everything in me protested.
“Okay. You surely do. But what does your subconscious want?” asked my coach. “What beliefs or convictions does it defend? Close your eyes, breathe deeply, and look,” she instructed me.
“I don’t have any…” I started. And then I froze. I saw a scene from my childhood. I’d often visit my dad at work after school. His boss was a nice and funny guy. I liked him a lot because he always joked with me. However, he used to repeat one thing that I right now heard in my head: “Money is a devil’s tool”. When the meaning of these words suddenly became clear to me, I literally stopped breathing. I’d heard those words so many times…
“What is it?” my wife was asking. When I told her what I just remembered she gave me a pen and a piece of paper and told me to go back to my childhood and write down all the opinions and beliefs about money I could recall. Except for my dad’s boss’s favorite saying quoted above, there were few from the Bible (although my family was not that religious) like “it is easier for a camel to go through the eye of a needle than for a rich man to get into heaven” or general praises of the poor but honest. There were also various opinions about capitalists and bankers repeated by my mother’s activist friends, as well as some general social beliefs, like “money doesn’t buy happiness”, or “health is more important than wealth”.
I was shocked to see how long the list was! Moreover, the vast majority of the beliefs I’d just undug and written down were not consistent with my current system of beliefs! And my subconscious had been functioning based on these old convictions and beliefs and sabotaging my actions! It took us another hour to reprogram me, that is to remove all those crap beliefs and replace them with a set of new ones. I was so relieved when we finished. I felt like a newborn.
How is such inner sabotage of trading even possible?
We discussed my case with my wife in detail afterward. She reminded me that the subconscious functions according to very simple rules. It often becomes our auto-pilot and, in certain situations, just takes over control. It operates according to the beliefs and convictions (my wife calls them programs) that we learned or otherwise acquired in our childhood and defends us against pain – in my case, against the pain of being judged by all these nice people I met in my childhood. If I earned money, I could be a bad person! In consequence, I was feeling greater fear and stress when I was in a winning trade than if I was losing. Closing a trade with a loss felt like a relief.
In early childhood, we are very open and thus can be very easily programmed but anyone, especially the people whom we like or find nice. And it is often enough for a child to hear, for example, a favorite uncle saying, in an emotional manner, that “all those guys trading stock are evil and greedy people”. The child’s subconscious stores that as a program and later on acts according to it. After all, a favorite uncle or your dad’s boss that was joking with you when you were a child could not be wrong?! They were nice to you! And they were adults, so they were right! And your parents? Parents are always right, isn’t it?!
Well, not quite. But this is how the subconscious functions. Simple programs, simple beliefs and convictions, and nearly instinctive reactions to prevent pain. Oh yes, the subconscious uses its own logic and will sabotage your actions. After all, it wants to avoid pain. As long as such faulty convictions or beliefs are somewhere inside, they will act and disrupt the perception of the market. They will trigger emotions that might ruin your trading. And this will keep going until you realize what programs you act upon and reprogram yourself.
Does this apply to everyone?
No. There are people who were raised in an environment that had instilled in them a set of beliefs and convictions that do not lead to subconscious sabotage of their trading efforts. If you are lucky to be in that club, you are more likely to succeed as a trader. The good news for everybody else is that it is possible to identify and remove disruptive convictions and beliefs and replace them with new ones. Ever since that session with my wife, I did not feel any stress or fear related to a winning trade. I’m not afraid anymore of what will happen when I succeed as a trader… There were a few more bumps on my road, but I will be describing them gradually in the “Coaching Notes” sections.
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