As more people from around the world gain knowledge of the financial markets, the interest of trading is gaining steam. Today, traders from around the world are attempting to become the next big thing in the financial markets. They want to become the next George Soros or the next Steve Cohen.
Sadly, most traders fail within their first week of trading. In fact, at some point of their careers, all traders lose money. A few years ago, I published an article on the important stages that all successful traders go through. I believe that this is an article worth revisiting especially for people who are just getting started in the financial markets.
The first stage is the unconscious incompetence. This is a stage where people hear of the financial markets, develop interest, create an account, and start trading. Since they don’t know anything about trading, they make some money in their first few trades. Then, they double down, take more risks, and end up losing everything. They then get discouraged and consider quitting.
The second stage is the conscious incompetence. In this stage, the trader becomes aware that he can lose money. So, he starts reading about trading and how to develop a trading strategy and system. They go online, watch trading videos and buy books. They spend a lot of time in this. They then go back to the market with all the knowledge they have read. They apply the skills, reduce their risk, but still lose money. They mess up by applying too many indicators, trading on so many financial assets, and often changing their minds.
The third stage is the Aha moment. In this stage, the trader starts accepting the blame for the actions they make. This is a stage that comes after the trader makes several decisions that turn out as being wrong. It is the stage where they starts focusing on a few financial instruments, stocking to a strategy, and following a routine. Still, the trader is not at the best stage of the trading process at this stage.
The fourth stage is known as the conscious competence. It is a stage where the trader starts to realize what real trading is all about. They start to focus on a few assets, learn more about them, and then create a strategy around them. On indicators, they select a small number of trend and oscillator indicators and learn more about them. They then start applying tools like trading journals to document their trades and start applying the risk management strategies like the pro traders do.
The final stage is the unconscious competence stage where traders start adopting to the new life as a trader. This is a life which is not as fun as they expected it to be. They understand that trading is hard work. In the past, they expected that their trading life will be an easy process where they open trades, wait for a while, make money, and then live large. They understand that the reality of trading is where risks are taken and where trades can often go wrong.
All Successful Traders Go Through These Five Stages – UsefulTips
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