- Unconscious Incompetence
- Conscious Incompetence
- Conscious Competence
- Unconscious Competence
Stage 1 - Unconscious Incompetence
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- You know that trading is a good way of making money because you’ve heard so many things about it and heard of so many millionaires
- How hard can it be? Price either moves up or down – what’s the big secret to that then – let’s get cracking! buy low and sell high
- Unfortunately, as you take your place in front of the screen you quickly realize that you have no clue about what you’re trying to do
- You take lots of trades and lots of risks – you enter a trade, it turns against you, so you reverse
- You may have initial success and that’s even worse because you start to risk more – sometimes you’ll get away with it but more often not
Stage 2 - Conscious Incompetence
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- Now you consciously realize that you are an incompetent trader and don’t have the skills or the knowledge to turn a regular profit
- You start buying trading systems and e-books galore, reading various websites trying to search for the holy grail
- You will be a system nomad, jumping from one method to another without sticking with one long enough to see if it actually works
- The issue when you start searching the internet is that – you will find so much conflicting information – you will not know what to use
- Every time you come upon a new indicator you’ll be ecstatic that this is the one that will make all the difference
- Trying to become a top and bottom picker, you’ll find yourself chasing losing trades and even adding to them
- You’ll reach the point where you think all the traders who say they are making profits are liars, you know as much as they do but still losing
- Successful traders will freely give you advice but you refuse to listen because you’re stubborn and think that you know better
- This stage can last ages and ages, it can easily last well over a year and more nearer to three years
- This is also the stage when traders are most likely to give up through sheer frustration.
Stage 3 - Conscious Competence
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- Towards the end of stage two you realize that it is possible to make money only if you can get your head and money management right
- When the trade turns bad you don’t get angry – because you know it isn’t your fault – as soon as you realize that the trade is bad you close it
- You stop looking at trading results from a trade-to-trade perspective and start to look at weekly figures
- Now you are aware that the trading game is about one thing: consistency of your ‘edge’ and your discipline
- Proper money management, leverage and risk of account is what you focus on at this stage
- You are making trades whenever your system tells you to and you take losses just as easily as you take wins
- You now let your winners run to their conclusion and when you’re on a loser you close it swiftly with little pain to your account
- Day in day out you breakeven at a minimum now but overall you are not losing money anymore
- You are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders
- Towards the end of this stage, you will slowly begin to make consistent profits week in and week out
What is Leverage
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Stage 4 - Unconscious Competence
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- You start to read books on psychology of trading and identify with the characters portrayed and finally reach the eureka moment
- The eureka moment came the moment that you realized that you cant accurately predict what the market will do
- No one can be 100% accurate
- This eureka moment causes a new connection to be made in your brain
- Because of this revelation, you stop taking notice of what anyone thinks, what this news will do or how will it affect the market
- You become an individual with your own method of trading – You are starting to get happy and you define your risk threshold
- Just like driving a car, every day you get in your seat and trade. You do everything now on an unconscious level
- You start to pick the really big trades and getting big profits in a day doesn’t make you more excited that getting none
- This is trading utopia – you have mastered your emotions and you are now a trader with a rapidly growing account
- All the time you are sharpening your method trying to extract the maximum profit from the market without increasing risk
- Trading is no longer exciting – like everything in life when you get good at it, or do it for your job, it gets boring
Stages statistics
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- Around 60% of new traders quit in the first 3 months – they give up and this is good – if trading was easy we would all be millionaires
- Another 20% keep going for a year and then in desperation take risks guaranteed to blow their account which of course it does
- The remaining 20% will last around 3 years and they will think they are safe but only a further 5-10% will actually make money consistently
- These are real figures, so when you get to 3 years in the game don’t think it is plain sailing from there!
- Ask yourself the question “How many years would you go to college if you knew that there was a million dollars a year job at the end of it?”
Successful Trader Characteristics
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- Do you think it was good looks?
- Do you think it was their education level?
- Do you think it was their physical health?
- Do you think it was their EQ – their social abilities?
- Do you think it was their IQ?
But first, have you heard of?
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- Many people would say “Talent”
- That’s partially true. That’s only a fraction of it
- What all those people actually have in common
- They spent way more hours practicing, researching, learning about that thing they wanted to achieve
- They did this more than all average people
Did you Know that
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- Michael Jordan was cut from his high school basketball team?
- Einstein was called the dummy of the family when he was young
- George Soros once worked as a railway porter and as a waiter, and once received £40 from a Quaker charity before amassing his Billion fortune
- Warren Buffett: Getting Rejected By Harvard Was The Most Pivotal Moment Of My Life
Successful Trader Characteristics
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- It was their GRIT – Their passion and perseverance
- Grit is passion and perseverance for very long-term goals
- Grit is having stamina
- Grit is sticking with your future
- Grit is living life like it’s a marathon, not a sprint
Successful Thinking
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- Alex Garden says, There’s no magic; it’s practice, practice, practice. “To be successful, put your nose down in it and get damn good at it”
- And it’s FOCUS. Norman Jewison said, “I think it all has to do with focusing yourself on one thing”
- And PUSH! David Gallo says, “Push yourself. Physically, mentally, you push, push, push.” You’ve got to push through shyness and self-doubt
- Goldie Hawn says, “I always had self-doubts. I wasn’t good enough; I wasn’t smart enough. I didn’t think I’d make it”
- Frank Gehry said to me, “My mother pushed me”
Building GRIT
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- “How do I build grit in traders? How do I keep them motivated for the long run?”
- Having a growth mindset an idea developed at Stanford University by Carol Dweck
- it is the belief that the ability to learn and thus succeed in trading is not fixed, but it can change with your effort
- If the traders understand and have clear in their mind the belief that failure is not a permanent condition
- They’re much more likely to persevere when they fail and become successful traders
Fixed Mindset vs Growth Mindset
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NOT YET
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- “Not Yet”
- Just the words “yet” or “not yet,” creates greater persistence
- “Not Yet”, makes you understand that you’re on a learning curve – It gives you a path into the future
Growth Mindset Means
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- No matter where a trader is now
- They can always improve
- With effort
- Good strategies
- And help
How to get to Stage Four
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Watch our video guides and read our eBook available in XM members area very soon
Attend all the webinars we do with XM – more than once
Learn our tools and use their signals
Join our trading room – Tradepedia.com
Give me 20% of your profits J
The Marshmallow Experiment
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- You give the kids a marshmallow now and tell them, they can eat the marshmallow now
- or wait an hour and receive two marshmallow after an hour
- The kids that wanted the quick kill, that didn’t want to wait, they grabbed the marshmallow and ate it
- The other kids that could delay gratification, and wait to receive 2 marshmallows later on
- when tracked after years, where found to have been more successful later on in life