Stage 1: Unconscious Incompetence
At the initial stage you start observing trading.
You are aware that it is a good way to make money, since you
hear about it and many millionaires. Unfortunately, like at the first desire to
drive a car, you think that it will be easy to do it — indeed, what
difficulties can be encountered in it?! Price moves up and down — what secrets
may there be? Just start!
Unfortunately, in quite the same way as if you have just got
behind the wheel, you can not imagine what you are going to do. You take many
lots and risks. As soon as you open a position, the price starts behaving
against you, you reverse, and it behaves against you again and again. You try
compensating your losses by doubling your bargains — sometimes it works, but
more frequently it fails, and you escape with hurts and bruises.
But this is the first step — it is entirely obvious that you
do not understand anything in trading. This stage lasts for a week or two, but
the market moves rapidly and you come to the second stage.
Stage 2: Conscious Incompetence
Stage 2 – at this stage you realize that you have plenty of
work to do.
You have realized your incompetence – you have no skill or
no shrewdness enough to make regular income. At this stage you buy a great
amount of systems and books, read sites from America and Australia and begin
searching for the Holy Grail.
At this stage you will be “a system whore” - you will jump
from one method to another day after day, week after week, never keeping to a
certain method for the time needed to notice whether the system really works.
Each time a new indicator appears you will be delighted, because “it will
change everything”!
You will test automatic systems in MetaTrader, gamble with
MA, Fibonacci, resistance and support, pivot points, fractals, divergence, DMI,
ADX and hundreds of other things, with inner hope that your “magic system” will
start working today! You will catch price ups and downs with your indicators,
trying to find the precise reversing point. You will stick to loss-making
positions opened and even add on them, because you will be sure that you are
right.
You will communicate in forum and see that other traders
make money, and you will not know why it is not you who succeeds in it. You
will ask million questions, some of them will be quite stupid, later you will
feel a little silly while looking back. You will reach the point when you will
think that all those who make money regularly are liars. They cannot earn so
much! Because you learned but cannot do in such way. You know as much as they
do, it means that they lie! But their accounts grow every day, while yours
falls.
You will behave as a teenager — those traders who do make
money will advise you, but you will be obstinate and think that you know
better. You will not listen to advice and take an enormous shoulder for your
account, all will say that you are crazy, but you know better! You will try
adopting indicators used by others, but it will not work. You will attempt to
buy signals — they will not work either.
This stage may last for very long. More than a year. For me
it lasted for 18 months. You will gradually leaving this stage. You will spend
more time and money (more than you expected). You have already failed two or
three accounts, and may have dropped this business three or four times. And now
the third stage comes.
Stage 3: Eureka!
As you are approaching the end of the second stage, you
start realizing that the main point is something different than a system.
You realize that, generally speaking, one can make money
with simple MA, if only you control yourself and have the right money
management.
You begin reading books about trading psychology and
recognize yourself in the characters described.
And, finally, you are enlightened!
At this moment, there emerges new connection in your brain.
You suddenly understand that neither you nor anyone else can
foretell what the market will do in ten seconds, let alone ten minutes.
You start working by one system, which you adjust to
yourself, you become happier and know your “risk threshold”.
You begin trading, if your system shows high possibility of
winning.
If your position turns out to be loss-making, you do not get
angry, because now you are aware that you cannot predict whether it is your
mistake or not. As soon as you understand that the position is not favorable
for you, you close it. The next position will have higher possibility of profit
gaining, because your simple system works.
You have understood that the main point is a system
following and concluding bargains regularly.
You have learned the right money management and shoulder –
and only now you have realized the rightness of those who used to advise you in
past.
You were unprepared, but now it is not so.
Eureka comes in the moment when you admit honestly that you
cannot foretell the market.
Then the fourth stage comes.
Stage 4: Conscious Competence
Ok, now you make bargains when your system tells you to do
it.
You take losses as easy as winnings.
You allow your “winners” running up to the end (with taking
risk) and you know that your system makes more money than it losses. If you
have a loss-making position, you close it quickly with a small damage to your
account.
Now you are at the stage when your account is fluctuating at
a constant level, day after day. There are weeks when you have won 100 points
and weeks when you lost 100 points. In general, you balance and do not lose
money.
Now you are aware that you are giving good advice
(forecasts) and accumulating respect of other traders, who you speak in the
forum.
You still have to work and think about trading, but as time
passes you start making more than you lose.
Your day begins with 20 point gaining, then loss of 35
points follows, and you do not have any feelings for it. You have given the
points away, but you know that they will come back.
You start making more and more points a week: 25, then 50,
then more. It lasts for six months.
Then the fifth stage comes.
Stage 5: Unconscious Competence
Only now, like driving a car, you are trading for the whole
day, doing everything unconsciously.
You work with autopilot. You begin working over large
bargains and make 100 points a week. And this is normal for you.
This is trade utopia. You control your emotions and you are
a trader with a vigorously growing account. You are an idol of the forum.
People listen to your opinion. You recognize yourself two years ago in their
questions.
You advise, but you know that it is rather in vain, because
they behave like teenagers. Some of them will reach your level, someone will do
it quickly, someone will come to it more slowly. Most of them will never
overcome the second level. But some of them will reach.
Trading does not excite you any more. It has become awfully
boring, like everything in your life which you have mastered well. It is just
work.
Now you may proudly say, “I am a trader”.
I hope that you like the text and you recognize yourself and
the stage you have come to by this moment. I am at the fourth stage and
gradually increasing the number of points gained. I have been trading for three
years, the first two were like hell for me.
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