The path to becoming a good trader!
When first learning how to trade, a person goes through a series of mental and emotional stages.
Most traders utilize a version of the "3-stages of competence" model as their primary learning framework.
1. Unprofitable trader
In this first stage, a trader's lack is blissfully unrecognized. It is at this stage that novice traders will take their first steps toward becoming successful investors by doing things like downloading a trading platform, opening an account, and making their first trades.
But they are swayed by their feelings, and they are easily enticed by the prospect of rapid financial gain.
Traders at this juncture are very likely to experience one of two outcomes:
Instantly, the trades start going against the trader. They haven't had enough exposure to the market to know how to handle it.
Young traders often wipe what they've made in the past and more by taking excessive risks without understanding the fundamentals of risk management.
2. Boom and bust traders
Successful trading ultimately comes down to the trader's mindset and approach, as witnessed by those who have traded during market booms and busts.
First, the realization that it's futile to try to predict the market's behavior sets in. You learn that making money involves a string of trades, some of which will be winners and some of which will be losers, and that it takes discipline to stick to a system, cut losses short, and let profits run.
At this stage, a trader will start following their system's instructions and entering and exiting the market without question or regard for their own feelings.
3. Profitable trader
When a trader has put in so many hours of practice that they can trade with an almost automatic mindset, they are said to have traded the stage of unconscious competence.
Maintaining self-discipline is now automatic and requires little thought.
Where exactly are you in your stage right now?
