Your sentence is very clear, but here is a slightly improved version: In karate, belt colors show how skilled you are. I changed 'colours' to 'colors' to match American English spelling; if you prefer British English, 'colours' is correct.
Here’s a simple explanation for you: In karate, different belt colors represent how much someone has learned. When you first start karate, you usually wear a white belt. As you practice and learn new moves, you get new colored belts, showing that you are getting better and better!