West Ham came away with nothing from Old Trafford on Sunday following their 1-0 defeat at Manchester United, with the result damaging their top four hopes.
But the Hammers are still fifth in the table, three points behind fourth-placed Chelsea, having played a game fewer than their London rivals.
With nine games left in the season, West Ham are very much in the race to qualify for the Champions League or at least play in the Europa League next season.
Hoddle believes even making it to the Europa League would be a brilliant campaign for West Ham, but he stressed the importance of them holding their nerve in the final leg of the season.
He insisted that West Ham need to mentally believe in themselves and their ability to stay the course as he feels if they do not qualify for Europe, it would be considered a disappointment.
Hoddle said on Premier League TV after the game at Old Trafford: “They have got to keep their nerve at the moment.
“They have got to keep believing that they are a good side, and they are a good side. In this league at the moment, they deserve to be where they are.
“Mentally they have got to really believe that they can stay in that fourth or fifth position.
“Europa would be a very good season for them as well.
“If they drop out of that and don’t get European football then maybe where they are at this stage at this moment in time, they would be disappointed.”
West Ham will feature in another big game next weekend when they host Arsenal at the London Stadium.
