- Unconscious Incompetence
- Conscious Incompetence
- Conscious Competence
- Unconscious Competence
Stage 1 - Unconscious Incompetence
- 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
- 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
- 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
Stage 4 - Unconscious Competence
- 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
- 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
- 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?
- 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
- 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
- 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
- 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
- “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
NOT YET
- “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
- No matter where a trader is now
- They can always improve
- With effort
- Good strategies
- And help
How to get to Stage Four
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
- 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
