5 Stages of Becoming a Trader
Level One: Unconscious Incompetence
This is the first step you take when you first start trading. You think that this is a good way to make money, because you read a lot of positive things and have heard more than once that a friend of a friend earns a lot of money by trading. You look at the charts: the price is moving up and down - what's so difficult - in the fight!
Unfortunately, when you open your first positions, you have no idea what you are trying to do. You open many orders and take disproportionate risks. When you open a position and the price goes against you, you open the opposite order, then again the opposite and again and again.
You can get lucky, and this only makes it worse - the brain begins to think that all this is very easy, and you begin to risk more and more in every transaction.
You try to cover your losses by doubling the lot in each new transaction. Sometimes it rolls, but most often leads to even greater losses. You absolutely lose your incompetence in trading.
This stage can last a week or two, but then you begin to realize that “something is missing” and go to the next level.
Level Two: Conscious Incompetence
At the second stage, you understand that for Forex trading you need more work and you need to learn something. You realize that you are an incompetent trader - you do not have the skills and knowledge to make a stable profit.
You are now obsessed with finding, and often buying, various systems, advisers, indicators, etc. You jump from one method to another, day after day, week after week, never using one system long enough to find out its ability to make a profit. Every time you come across a new indicator, you think that it will change everything.
You will test automated systems in the Metatrader tester, you will play with moving averages, fibonacci lines, support and resistance, pivots, fractals, divergence and a hundred other indicators in the hope that they will lead to a “magic system”. You will catch the bottom and top of the trend, trying to calculate the exact pivot point with the help of your indicators, but in the end you will find yourself holding unprofitable positions and even increasing them - you are right !!
You go to some chat or forum and see how others take point by point, and you want to know - why can't you? You ask a million questions, some of them so stupid that looking back, you yourself feel a little ashamed. By this time, you reach a point when you think that all these traders who take profit, deal after deal, are just liars - they cannot earn so much, because you have learned a lot of systems and you can’t. You know as much as they do, which means they all lie. But all these traders are still, day after day, sitting in this chat room and the balance on their accounts is growing while your account is only decreasing.
You are like a child - traders who make money freely give you advice, but you are too stubborn and think that you know better - you do not pay attention to their advice and trade with increased risk. Even when everyone tells you it's crazy - you know better than them. You try to follow the signals of others, but nothing happens and you start paying for signals from someone else - these signals also do not work for you.
You can even pay a certain “guru” who promises to make you a trader. Regardless of whether the guru is good or not, you still lose, because behind the monitor you are trading, not the guru. And you still think you know better.
This stage can last a very, very long time. In reality, a year or even three may pass. It was at this time that there was a great chance of giving up and completely disappointed in Forex.
About 60% of new traders leave in the first 3 months - they give up and this is good - yourself, think, if it was so easy to trade, we would all be millionaires. Another 20% continue trading for about a year, and then in desperation open huge positions and lose their deposit ...
What may surprise you is that the remaining 20% will stretch for about 3 years and only 5-10% of the remaining ones will continue to trade and start earning stably.
Gradually, you will begin to move on to the third stage. Perhaps you have already spent more money and time than you ever thought before you started trading. You already lost a few deposits, dropped your hands a couple of times, but still hold on.
One fine day - one second, you move on to the third stage.
Level Three: "Eureka!"
At the end of the second stage, you begin to realize that it is not the system that matters. You understand that you can make a profit using only one moving average and nothing more if you manage to control your emotions and carry out competent risk management. You start reading books on the psychology of trading, identify yourself with the characters described in these books, and finally the moment “Eureka!” Comes.
Psole of this moment, as if a new vision appears in your head and you suddenly realize that neither you nor anyone else can predict what will happen on the market in the next 10 seconds, not to mention 20 minutes.
Thanks to this revelation, you stop watching who thinks what - all sorts of analysts write, etc. You have become an individual with your own trading method.
You start to work only on one system that suits your style of trading. You obviously became happier and determined your risk threshold.
You open every position that in your opinion has a high probability of profit. If the market goes against your order, you don’t get angry or nervous, you just calmly close the position. The next deal, or after it, or after another one, will have a great chance of success, because you are sure that your system is working.
You stop looking at the results of trade from deal to deal, and evaluate the results of the week, month. Because you understand that one unsuccessful deal does not mean anything.
You realized that all trade depends on the constancy of your views and discipline in order to take all transactions in the system, because you know that the odds are on your side.
You thoroughly studied capital control and risk management, and now you feel how important this is, with a smile, recalling the advice of others that you brushed off a year ago. After all, they were right. The Eureka moment comes when you are fully aware that you cannot predict the market. You are about to move on to the next stage of becoming a trader.
Level Four: Informed Competence
You open deals, every time your system gives signals. You close unprofitable orders as easily as profitable ones. Now you let your profitable trades grow until you get a signal to exit, fully accepting the risk and knowing that your system brings more money than it loses.
Now you are at the point where you are most often at breakeven - day after day, you will have weeks when you earned 100 points and weeks when you lost 100 points - in general, you stopped losing money and understood the rules of the game. You have yet to ponder your deals and make a lot of observations, but you are already starting to consistently earn more money than you lose.
Your day can begin with a gain of 20 points, then you take 35 points of loss and do not feel that you gave 20 points back, because you know that they will come back to you. You start to receive a stable profit, week after week, sometimes more, sometimes less.
This stage lasts about six months.
Level Five: Unconscious Competence
You trade as if you are brushing your teeth or riding a bicycle - without thinking. You are as if on autopilot, you are making transactions on an unconscious level. You start to get really big profits and 200 points per day does not make you more excited than 1 point per day.
You look at newcomers to forums shouting "Drop the dollar, fall!" And remember yourself many years ago.
You have mastered your emotions and your score is growing steadily.
Trading turns into a routine - you just do the daily work.
You constantly put the finishing touches to your trading system in order to extract more profit from the market without increasing risk. Your trading method has not changed - it just got better, now you understand what they call trading intuition.
Now you can declare “I am a currency trader” with a proudly raised head, but honestly, you are in no hurry to shout about it at every corner, because for you this is a normal job, like any other.
Remember that only 5% become successful traders and reach the last level, but the reason is not in abilities, but in staying strong and being able to change your paradigms and views with the advent of new information.
Those who want to get rich quick and are not able to change their “I know better” are losing.
If now you are not successful and you are ready to give up, ask yourself one simple question: “How many years have you been ready to go to a university, knowing that at the end of your studies you will find work with a million dollar salary per year?«
Thank you for your attention, I wish you success in trading.