Why do some traders use mechanical trading methods such as a moving average system, while others swear by more subjective methods such as rectangle patterns? Why do some traders rely on only technical studies, while others work exclusively with fundamental information? Either or all of these traders may be equally successful or unsuccessful, irrespective of the method employed. Each one of us has developed a unique outlook about trading and life that is ultimately based on our beliefs about the universe. Our belief structure is the core of who we are.

Assume trading method X was tested for 10 years and found to be profitable every year. Would you use it? Some would immediately reject it because they might feel the past has nothing to do with the future, but there are others who would still be interested. Assume method X was a technically based trading method. Some would reject it because they might only use fundamental analysis, but there are others who would still be intrigued. Now assume method X was based on astrological observations.

Many of the believers who have followed so far would now unequivocally reject it, because they would feel stars and the planets have nothing to do with the market. But there would still be some who are interested. Would you accept any type of trading method as long as historical results were impressive? The acceptance or rejection of any trading method is really a function of a person's philosophy, because no trading method can be proven to work in the future.

Many would prefer to use a method which makes logical sense such as fundamental analysis, even if the historical performance were not as good as a more mystical or abstract method. A moving average study that worked well in the past may never work well again, but many are willing to continue using it because they feel the past will repeat. They believe the probabilities are in their favor because of past performance. Markets trended in the past and will continue to trend in the future. This idea may seem grounded in logic, but it is not. The core idea is not that patterns repeat, but the belief that patterns repeat. Belief that the market follows certain rules or patterns is the heart of trading.

There is no trading strategy that is guaranteed to work. In fact, a method which one person may successfully trade may yield terrible results at the same time by someone else. How is this possible? Because one person believes in the method while the other person considers it a mechanical tool. Trading is not a science where laws and rules apply, but an abstract arena of emotion and ideas. Our beliefs and emotions about our self and the world ultimately determine what we want, how we approach, and what methods we use in trading.