Learning Stages in Trading

23 may 2022

In my opinion learning in any field is connected to the "Four stages of Competence" and trading is no different. This post also answers why most traders lose in the stock market.

Following are the four stages which every trader has to pass before attaining success.

Unconscious Incompetence
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This stage belongs to the newbie traders who ignore all the knowledge part. They don't think that they need any kind of knowledge to make money. Their greatest desire is to make money in shortest possible duration so they rely on tips/news for trading. Ultimately they lose and i think more than 50% traders quit at this stage only.

Conscious Incompetence
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At this stage the trader realizes that ignorance is not a bliss. He has already lost in the markets so he thinks that may be he lacks knowledge. He starts reading books; attends online webinars; and attend courses/classes.

Although he is gaining knowledge yet he confused with tons of indicators and strategies etc. He still loses because due to these confusions their is no solidarity in his plans. He has got a poor risk appetite. His ego of being right and urge to win every trade widens his losses. I think less than 30% traders survive up to this stage.

Conscious Competence
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Finally after so many losses the confusion leads to simplicity. The reader gets more systematic with setups and all, but still struggling with psychological issues like fear, greed, lack of discipline, insufficient capital etc.
At this stage, I suppose 85% traders would lose their entire capital and give up scolding themselves for choosing a wrong career. Left with less than 15% traders.

Unconscious Competence
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A very few who reach at this stage and still left with funds make money from money. Trading selective setups becomes an involuntary action for them. They have realized the hardest truths of trading so psychological hurdles disappear from them. They belong to that <10% successful traders.

Which stage do you belong? Do write in the comment section.
Keep liking for more interesting stuff in the coming days.

24 may 2022

Nota

From the comment section I can figure out that most traders consider themselves at stage 3. This is the most difficult stage to deal with. As here you know what to do but you still lose. This breaks your courage and demotivates you.

In this short update I can only suggest that you should develop a habit of maintaining a daily trading journal. At the end of day, you write the psychological part of your trades. You can write entry, exit and SL levels but the more important is to note down the
Reason for the entry
Did you buy at limit price or market price and why
Did you exit early? Why?
Did you trailed as per your plan
etc. etc.

After few weeks you will notice that you are repeating same mistakes again and again. You can try to eliminate those mistakes one by one every week.

I am sure this would work. All the best.