Reblog: The 6 Stages Of A Trader’s Development Part 1

1. Heard of a day trader making millions, or buying options is safe and can make you rich quickly
2. Beginner Luck in first few trades.
3. You will buy just to see the market reverse and you will short just as the market starts to rally. Someone is tracking my trades and making me lose money.
4. Most of your trades are done emotionally. You buy just because the markets feel strong without any logical reason
5. You have no clue how the mechanics and psychology of trading works. What’s worse? You are not aware that you don’t know.
6. Most traders will blow their entire account multiple at this stage.
7. Mostly you start your trading in fag end of bull market
8. You will spend more time finding a broker charging least brokerage.Tracking World Markets, Bitcoins instead of making a trading plan for next day.
9. A big majority of people will leave trading and blame the randomness of markets, or say markets are always manipulated
10. You don’t know what is short selling or have never tried it, no idea of stop loss as well
11. You are in the unconscious incompetence stage, at this stage, your capital is at maximum risk

Stage Two: The Rookie Trader

1. At this stage you have lost enough money to realize what you are doing is completely wrong. In other words, you start to realize that you don’t know.
2. You will then devour every trading book available.
3. Your search for magic indicator and the holy grail starts here
4. You will memorize every technical pattern known to man. You will read about the ADX, moving averages, Fibonacci lines, pivot points, MACD, Bollinger Bands, channels, GANN etc.
5. You will plot them on your charts and spend hours looking for an indicator that works
6. You will be extra confident now, thinking you have found the magical technical indicator
7. Yet, you still continue to lose money every day. You realize that your indicators are lagging and that every other new trader is probably looking at the same thing.
8. You realize that you are the loser and think about quitting trading. 50% traders leave trading at this point
9. You are in the conscious incompetence stage.

Stage Three: The Developing Trader

1. You start to realize the amount of work required and the immense learning curve that you must overcome to understand the markets, maximum pessimism is experienced here
2. At this point, traders may find it overwhelming and quit. Stronger minded traders will push their motivation harder to start their second spurt of knowledge
3. Hunger for Knowledge and passion is needed to clear this stage
4. You will ask a thousand questions and bug every professional trader you meet. You will read a thousand day trading articles
5. You will start paper trading, develop strategies and setups, and define risk parameters for every trade
6. You will go on a hunt for self-understanding to master your psychological game
7. You will visualize every possibility on a trade before you take it.
8. This is the true learning phase. You are trying hard to develop your edge in trading.
9. Everybody claims their ideas lead to profitability, but every time you take a trade, it’s a loser, even though the setups all worked perfectly before you played them.

This article appears in 2 parts and will be continued in the next post. It is authored by Mastermind, Bramesh Bhandari and is available here.