Like learning basketball or learning to drive a car, the 5 stages of a trader is the process you will go through before becoming a professional trader. These 5 stages are written elsewhere if I recall, but it closely reassembles the stages I’ve gone through, hence this article in my own interpretation and language.
Stage 1: Unconscious Incompetence
This is where most beginners start off. You heard many good things about trading and seen many “millionaires” on social media. You start thinking to yourself “what can be so hard?”, “price is either up or down, I can do this but I don’t know how”. It’s a stage where you want to learn trading but you have zero knowledge about trading.
Stage 2: Conscious Incompetence
Same as learning how to drive, you realized that there is some hard work involved in trading. You realize you are incompetent and start digging in on the forums, trading books, attending trading seminars, heck even enrolling in $99 Forex courses.
You are not aware you are learning bad habits along the way because you have no mentors or guidance to tell you that you are doing things the wrong way. You know there is something you don’t know about trading and constantly swayed by emotions and frustration. This results in multiple blown accounts and inconsistent profits.
Stage 3: The “Aha” moment – Awakening
After years of trading inconsistently and taking losses you figured out what’s wrong from trial and error. You realized that probably system hopping is a bad idea. You start learning about back-testing a strategy and learn how to fix a discretionary method in trading. When you look back at your previous techniques and trades, things start to make sense and your conscious mind starts seeing things clearly.
A big blow of “Aha!” hits you. You realized in trading the most important factors are “consistency” and “efficiency”. You accept that you cannot predict the market start focusing on your trading system, your execution and your psychology instead of having attachments to money.
Stage 4: Conscious Competence
After your “Aha” moment, you start learning more about yourself. You start being more aware of your emotions and open a whole new perspective towards money. You know that money and gains are just by-results of you executing your trades flawlessly.
You start gaining consistency in your results and start being respected in the trading community. Your trading system is now finalized but you know there are endless back-test and hypothesis validation left to do. Trading has become your way of life.
Stage 5: Unconscious Competence – Mastery
Just like driving a car, you now do everything on autopilot. You go through your set routines and trading rules every single day. Your trading system has become one with you and it almost seems natural or sometimes trading starts to become boring and mundane.
Trading is no longer exciting. You have developed mastery and able to trade intuitively with absolute confidence, without fear or greed in your way. When you look back you are the 5% that everyone longs to be.
Now what stage are you in this process and where are you standing at right now?
If you don’t see results now, remember – do not focus on the destination, learn to trust the process.
Everything takes time, use these 5 stages to develop your goals and milestones and know where you are at. Trade safe.