# A New Trader's Journey to Success



## lesm (1 October 2006)

An article from digg.com.

http://digg.com/business_finance/A_...rney_to_Success

Here is the article:

*A New Traders Journey to Success*

In this thread I am going to take you through the different development stages of a new trader. Most of this comes from my own experience. Like any other profession, trading takes years of practice to reach the ultimate level. While doctors and lawyers have gone through higher education to obtain their license to practice, traders are required to obtain knowledge on their own. If you are in it for the quick buck, think again. The challenge is tough but the achievements are rewarding.

*Stage One: The Clueless Trader*

This is the first stage when you enter trading. You may have picked up a book on technical analysis somewhere, heard of a day trader making millions, or got lucky in an earlier stock investment. After all, how hard can it be? The money sounds appealing and the freedom to be independent sounds attractive.

I don't mean to shatter anybody's dream but those who succeed in trading are the minority! Approximately 90-95% traders lose money. This is the cold hard facts. In the first stage, every trader is optimistic. You open a direct access brokerage account and the sound of Level II, ask/bid, and market makers make trading sound like hi-tech video game. In reality you have no clue. You will buy just to see the market reverse and you will short just as the market starts to rally. Most of your trades are done emotionally. You buy just because the markets feel strong without any logical reason. You are in the unconscious incompetence stage. You have no clue how the mechanics and psychology of trading works. What's worse? You are not aware that you don't know. Most traders will blow their entire account at this stage.

*Stage Two: The Rookie Trader*

In 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. You will then devour every trading book available. You will study and purchase Technical Analysis of Stock Trends by Edwards and Magee believing price patterns are the Holy Grail. 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, etc... You will go through the "help" tab on your data vendor to read about every single technical indicator available. You will plot them on your charts and spend hours looking for an indicator that works. You will be extra confident now because think you have found the magical technical indicator.

Yet, you still continue to lose money everyday. You realize that your indicators are lagging and that every other new trader is probably looking at the same thing. You realize that you are the sucker.

*Stage Three: The Developing Trader*

You start to realize the amount of work required and the immense learning curve that you must overcome to understand the markets. At this point, traders may find it overwhelming and quit. Stronger minded traders will push their motivation harder to start their second spurt for knowledge. Hunger and passion is needed to clear this stage. You will look for reference online, join mentor programs, chat rooms, and seminars. You realize the necessary elements needed to develop as a trader. You will ask a thousand questions and bug every professional trader you meet. You will read a thousand day trading articles. You will start paper trading, develop strategies and setups, and define risk parameters for every trade. You will go on a hunt for self-understanding to master your psychological game. You will visualize every possibility on a trade before you take it. This is the true learning phase. You are trying hard to develop your edge in trading.

*Stage Four: The Determined Trader*

This is the stage in which you learn to specialize in certain markets and trading methods. Without realizing it, you have finally found your style of trading after hours of hard work and research. You stick to your method and you improve it. You realize that you need an edge whether its tape reading or being a Fibonacci expert. The important thing is you are slowly transforming yourself into a specialized trader. You test your methods and they seem to work. You gain tremendous market knowledge. You reflect back on yourself and you can't help but laugh at your foolishness. Although you have not made enough money to call yourself successful you are proud of your journey and accomplishments. You realize that the Holy Grail is not about technical indicators or price patterns. You calculate risk before profits and place strict money management on all your trades. You cut losses short and learn to scale out on your winners. You start accept losing as a natural part of the game. You take high probability trades that you have tested and feel confident about your setups because you understand that trading is a game of probabilities. Your psychological makeup has changed from an amateur mindset to a professional one.

*Step Five: The Consistent Trader*

You rely on your trading method and start taking trades systematically. You try to aim for consistency and are meeting your daily goals often. You have reached the conscious competence stage. You are fully aware of your strengths and weaknesses as a trader. At times you feel euphoric and at times you feel pain. But you are able to understand your own psychological makeup to control your emotional swings. You are now able to trade for a living.

*Step Six: The Expert Trader*

In this final stage, you completely understand the markets you are trading. Being involved in it everyday you are aware of every key price level. You understand market concept and are able to predict the direction of the markets a fairly good amount of time. You pat yourself on your back and take profits as soon as you feel euphoric. You do this because you understand euphoria is the same as emotional trading. You talk to other traders and realize the development stage they are in. People start asking you for trading advice, you publish a book, and you have a specific trading methodology that represents you!

Taking trades come naturally and you are able to get in and out at the precise price levels based on tape. Instead of having the markets take your stop out, you exit when you know you are wrong. You keep your head high but remain humble on the inside. You have now officially graduated the school of the hard knocks.

Entering the trading profession can be a tough journey for many people. Trading is one of the toughest careers that you can choose. If you enjoy the challenge, you will definitely enjoy the feeling of accomplishment. Trading is 30% mechanical and 170% psychological. 200% is required to become a successful trader. Good luck and best of trading.
__________________
James Lee
Trader & Founder of Traders Laboratory
www.TradersLaboratory.com


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## doctorj (1 October 2006)

*Re: A New Traders Journey to Success*

An excellent read, thanks!


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## Sean K (1 October 2006)

*Re: A New Traders Journey to Success*

  I think I'm still between 3 and 4....   Long way to go.


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## Magdoran (1 October 2006)

*Re: A New Traders Journey to Success*



			
				lesm said:
			
		

> An article from digg.com.
> 
> http://digg.com/business_finance/A_...rney_to_Success
> 
> ...



Interesting perspective Les,


One point screams out at the end, and that is the emphasis on psychology.

Totally agree with this.  The conclusion that I have come to is that out of all the different aspects of trading, without the right psychology it is almost impossible to succeed.


Regards


Magdoran


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## swingstar (1 October 2006)

*Re: A New Traders Journey to Success*

I would say I'm just beginning stage 4.


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## nizar (1 October 2006)

*Re: A New Traders Journey to Success*

Thanks for the article lesm, a good read...

Im probably still at stage 1..!   

Does any1 believe the statement below (quoted from the article) is valid?
Is anybody even pro enough to trade this way and is it even worth it for that extra few % ?



			
				lesm said:
			
		

> Instead of having the markets take your stop out, you exit when you know you are wrong.


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## happytrader (1 October 2006)

*Re: A New Traders Journey to Success*

Hi Nizar

Quote:
Originally Posted by lesm
Instead of having the markets take your stop out, you exit when you know you are wrong.  

This is a defining characteristic. Traders hate being dominated so they don't hang around.

Cheers
Happytrader


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## lesm (1 October 2006)

*Re: A New Traders Journey to Success*



			
				nizar said:
			
		

> Does any1 believe the statement below (quoted from the article) is valid?
> Is anybody even pro enough to trade this way and is it even worth it for that extra few % ?
> 
> 
> ...



Nizar,

You picked a good question.

In practical terms a stage 5/6 trader should know the answer. 
What it means is that once you have sufficient information that a trade is starting to go against you that you close the trade out rather than wait for the 'stop' or 'exit' to be hit. Whether it is a small % or larger % depends on how far the exit/stop is from the current price.

This is an element covered in the "Phantom of the Pits" and Douglas's 'Disciplined Trader', a concept that a number of pure mechanical traders will have trouble understanding or coming to grips with.

Another question is, is it a technical or psychological topic?

Cheers


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## It's Snake Pliskin (1 October 2006)

*Re: A New Traders Journey to Success*

It's nice to read some sense.


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## hypnotic (1 October 2006)

*Re: A New Traders Journey to Success*

Thanks for the post Lesm,

Excellent read!   

I can definitely relate to it ^__^.. No i can see how much work i can put in to become a better trader/investor.

Hypnotic


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## Magdoran (2 October 2006)

*Re: A New Traders Journey to Success*



			
				lesm said:
			
		

> Nizar,
> 
> You picked a good question.
> 
> ...



I agree with Les on this notion.  I think as you develop you recognise the way markets trade, and accept that when the reason you entered a position has been invalidated, and that the current information and price action indicate a higher probability against your position, you wind out that position well before it hits the stop-loss.

I’m still reading Phantom of the Pits, but agree about Douglas’ perspective in “The Disciplined Trader” about the paramount importance of psychology and the more intuitive elements in assessing the market.

But this takes time to develop. I remember many times early on when I was trading in a mechanical mode that I would just see that the trade was done in the chart, but followed the trading rules and waited to be stopped out.  It was after this happened a few times that I woke up while reflecting on the whole approach that I started to add a “discretionary exit” as a criteria. This of course triggered a major rethinking of my whole trading style.

Many mechanical trading approaches require that you stay in a position until a stop criterion is hit, which is central to this kind of trading. The rationale being that you back test and find a probability based on finite criteria using specific indicators, that you enter all trades which conform to the criteria, and exit based on the system rules which have been generated. Since the capacity to make this kind of decision requires that you look outside the mechanistic paradigm, while you remain mechanistic in your approach tends to rule out the capacity to make discretionary exits, relying o established stop loss criteria in a system.

Where you are more of a chartist, you tend not to be looking for a moving average crossover, or other mechanical signals.  You can see a potential reversal in progress and can take early action to manage it.  Also, by exiting partial positions, even when you get the bigger picture wrong, you can still profit from a temporary move in your direction before the underlying continues against you.

Now, as for the question whether this is a psychological question, or a technical question, I think it is both, but primarily a question of perception at the strategic level of the individuals approach, but founded on their capacity to recognise the key psychological issues, and their ability to take effective action in this regard.


Regards


Magdoran


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## tech/a (3 October 2006)

*Re: A New Traders Journey to Success*



> Trading is 30% mechanical and 170% psychological. 200%




So just cut out the psychological element.
Why do so many have so much trouble with this?

Since treating trading like a business Ive never ever had an issue here.

Indecisiveness is the killer.
I'll make and do make decisions right or wrong instantly.
Procrastination/fear of loss---get used to it loss is more common in trading than winning.

*All of these can simply dissolve.*

The best single hint I can give to avoid psychological melt down is to trade well within your means.
Trading 5% of your nett worth is far less taxing on the grey matter than 90%.
*Next is HAVE A DAMNED TRADING BLUEPRINT*.

If you know how your trading is "Supposed" to pan out over 100s/1000s trades then you can see when it fails (If it ever does).
Pure discretionary trading your trading from comfort level to comfort level,you dont know wether those past 5 losses mean the way you trade is fatally flawed!!


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## MichaelD (3 October 2006)

*Re: A New Traders Journey to Success*



			
				Magdoran said:
			
		

> I remember many times early on when I was trading in a mechanical mode that I would just see that the trade was done in the chart, but followed the trading rules and waited to be stopped out.  It was after this happened a few times that I woke up while reflecting on the whole approach that I started to add a “discretionary exit” as a criteria.



A most interesting point and one which I can relate to with many of my trades. However, in my opinion, this is an essential stage to go through in one's development as a trader - developing the necessary discipline to trade a plan must come before any element of discretion, since beginner's discretion is usually wrong.

(For me, I view the trades in hindsight that reversed quite obviously on the chart before hitting their stop as essential tuition fees.)

and ps. if you ask me, this is precisely where you and Tech/A diverge in your views.


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## tech/a (3 October 2006)

*Re: A New Traders Journey to Success*



			
				MichaelD said:
			
		

> A most interesting point and one which I can relate to with many of my trades. However, in my opinion, this is an essential stage to go through in one's development as a trader - developing the necessary discipline to trade a plan must come before any element of discretion, since beginner's discretion is usually wrong.




The whole question of "when" to exit cannot be clear until well after an exit has been triggered wether that be Mechanically or Discretionary.
mechanical trading simply tells you if you give back X to trigger an exit and do it with all your trades then you'll have an expectancy of Y.Alter that and you alter both X & Y so your back to not knowing until many trades wether youve improved or not.
You can of course have any number of alternatives in a mechanical exit strategy.You could have any discretionary criteria and of course test it or any combination of criteria---which ever comes first.




> (For me, I view the trades in hindsight that reversed quite obviously on the chart before hitting their stop as essential tuition fees.)




You end up like a Kid in a candy store.Of course you'll find a "Better" exit in hindsite.The fact of the matter is the exit selected ALLOWS you to expect X gain.



> and ps. if you ask me, this is precisely where you and Tech/A diverge in your views.





I'm way past the perfect entry and exit. There isnt one.


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## It's Snake Pliskin (3 October 2006)

*Re: A New Traders Journey to Success*



			
				tech/a said:
			
		

> If you know how your trading is "Supposed" to pan out over 100s/1000s trades then you can see when it fails (If it ever does).
> Pure discretionary trading your trading from comfort level to comfort level,you dont know wether those past 5 losses mean the way you trade is fatally flawed!!




Tech,
The elite few follow fact.

Here inlies the fallacy of the markets. Discretionary trading based on comfort rather than fact? Fact determines everthing. 

"Fatally flawed" implies right or wrong thinking: analysis. 
This is all in the discretionary context.


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## tech/a (3 October 2006)

*Re: A New Traders Journey to Success*

When is fact "Fact"?

Its my veiw that all we can do as traders is research and determine what we believe to be fact in each case.

Then its a matter of proving or disproving that which we accept as FACT.


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## MichaelD (3 October 2006)

*Re: A New Traders Journey to Success*



			
				tech/a said:
			
		

> You end up like a Kid in a candy store.Of course you'll find a "Better" exit in hindsite.The fact of the matter is the exit selected ALLOWS you to expect X gain.



Agreed, but a BETTER multipronged exit strategy within the basic structure of a mechanical exit plan will allow you to expect X + additional % gain. As a typical example consider the late bullmarket blow-off, where a long term moving average (or a wide ATR stop for that matter) is often 50% below the wildly bullish price action, a huge give-back.

I take points from both your and Magdoran's views - I believe there IS a better way to trade than mechanical, that being discretionary, BUT I believe this can only be attained by first going through the required process of developing your own robust system and then improving on it.

The most survivable way for someone to develop a robust system, which then becomes a building block for future improvement, is to develop a mechanical system and trade it faithfully for some time.

However, rather than ignoring the lessons this mechanical system is trying to teach you, you must observe and accept the lessons it provides. At least whilst you're being taught you're making money.

Note - this is TOTALLY different to the beginner's approach to trading of trying one thing for a few trades and then changing it on a whimsy. This model allows changes, but only ones that are provably more profitable. These iterations take much time and effort.



			
				tech/a said:
			
		

> I'm way past the perfect entry and exit. There isnt one.



This reeks to me of "I've got what I've got and I'm happy. Now I'll switch off my brain". 

I believe that trading the markets is a perpetually evolving skill, building upon all that has gone before. Sure you can reach a point and then say "that'll do" and be satisfied and keep trading perfectly profitably. Many never even reach this point. I think there's more to be had.


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## It's Snake Pliskin (3 October 2006)

*Re: A New Traders Journey to Success*



			
				tech/a said:
			
		

> When is fact "Fact"?
> 
> Its my veiw that all we can do as traders is research and determine what we believe to be fact in each case.
> 
> Then its a matter of proving or disproving that which we accept as FACT.




Hello Tech,

Think of it this way: when price is going up that is FACT. When price is going down that is also FACT. That is all we really need to know (excluding some other variables) Fact is Fact!

Snake


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## tech/a (3 October 2006)

*Re: A New Traders Journey to Success*



			
				MichaelD said:
			
		

> Agreed, but a BETTER multipronged exit strategy within the basic structure of a mechanical exit plan will allow you to expect X + additional % gain. As a typical example consider the late bullmarket blow-off, where a long term moving average (or a wide ATR stop for that matter) is often 50% below the wildly bullish price action, a huge give-back.




If that is the case then you should be able to quantify the benifit.

Width of stops can be an issue to those who feel they could have done better.As you know I am working on a "Switch" idea which can alert a time not to hold your portfolio open however when you bring in taxation issues with long term trading---simply sell it all then buy it back when the switch says time to buy again. At this time I havent been able to find any advantage but still looking.



> I take points from both your and Magdoran's views - I believe there IS a better way to trade than mechanical, that being discretionary, BUT I believe this can only be attained by first going through the required process of developing your own robust system and then improving on it.




Could be so but until I can prove that to myself then I will trade with what I know is most profitable for me.If you and others believe that they have improved their trading by moving in a "Moggie" type direction fine.
Im still looking dont think Ive turned out the light.



> The most survivable way for someone to develop a robust system, which then becomes a building block for future improvement, is to develop a mechanical system and trade it faithfully for some time.




Maybe,I guess you get yourself into a groove if you like,a mindset.



> However, rather than ignoring the lessons this mechanical system is trying to teach you, you must observe and accept the lessons it provides. At least whilst you're being taught you're making money.




Its only part of the picture Compounding and Leverage hold more profit potential than exits and entries---improvement yes there will always be room.



> Note - this is TOTALLY different to the beginner's approach to trading of trying one thing for a few trades and then changing it on a whimsy. This model allows changes, but only ones that are provably more profitable. These iterations take much time and effort.




Dont disagree but for me "Prove" is the word.



> This reeks to me of "I've got what I've got and I'm happy. Now I'll switch off my brain".
> 
> I believe that trading the markets is a perpetually evolving skill, building upon all that has gone before. Sure you can reach a point and then say "that'll do" and be satisfied and keep trading perfectly profitably. Many never even reach this point. I think there's more to be had.




No not so but I'm a long way from accepting that trading from a mechanical foundation then introducing a discretionary element can be long term more profitable.


Snake



> Think of it this way: when price is going up that is FACT. When price is going down that is also FACT. That is all we really need to know (excluding some other variables) Fact is Fact!




All very true but add time to it EG how long its moving up OR down relative to the way we trade will determine wether the FACT of improvement is there.
If a trade trades down 4 days in a row fact is its trading lower,is it within the parameters of how we trade?? if so then the fact is that we continue to hold if not then sell it.
If trading by the "Facts" as we know them become longterm un profitable then our facts have been Dis-proven.

I dont think all this is as clear cut as we would like.
It only becomes clear cut when we adopt something that we hold until disproven--if ever.

Can we improve on it---sure.
How good can it get?? dont know.


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## tech/a (3 October 2006)

*Re: A New Traders Journey to Success*

I'll be a bit scarce as my home computer is on the blink and will only be able to reply using my work one.

So enjoy my silence!!


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## MichaelD (3 October 2006)

*Re: A New Traders Journey to Success*



			
				tech/a said:
			
		

> If that is the case then you should be able to quantify the benefit.



Quite so. That is the difference between a beginner and a professional changing their trading plan. The pro has quantified that the change will improve their results first.

This quantification becomes MUCH harder to prove once you step outside of a plan that can be mechanically tested. At this time, I believe that this degree of effort is worthwhile putting in.



			
				tech/a said:
			
		

> Its only part of the picture Compounding and Leverage hold more profit potential than exits and entries.



Yes, true, but imagine if you compounded and leveraged a system that performed twice as well as your current system because of the time and effort expended in improving your trading of your current system.

A great system will compound better than a mediocre system.
Increasing leverage will also increase drawdown whilst increasing profits, a factor which needs to be considered in psychologically preparing to trade with leverage.


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## tech/a (4 October 2006)

*Re: A New Traders Journey to Success*



			
				MichaelD said:
			
		

> This quantification becomes MUCH harder to prove once you step outside of a plan that can be mechanically tested. At this time, I believe that this degree of effort is worthwhile putting in.




Yes.
However if you take the time to gain the skill required to code the "Improvements" or employ those who have (In my case this is what I do)
Then you can see pretty quickly if there is improvement at all.
Bear in mind that there is more to a great system than pure profitability.
A smooth equity curve takes a lot of beating!!




> Yes, true, but imagine if you compounded and leveraged a system that performed twice as well as your current system because of the time and effort expended in improving your trading of your current system.




That leads to the question of when is a method at its maximum.There are Quant maths that can determine this again beyond me but if you get to the point where your doing very well I'd have thought you could give a Graduate the exercise.Fortunatley I have one in the family who is just warming to the stock trading idea!



> A great system will compound better than a mediocre system.
> Increasing leverage will also increase drawdown whilst increasing profits, a factor which needs to be considered in psychologically preparing to trade with leverage.




Again true however if we have a method with a 6% drawdown and *WE KNOW IT* Then on margin at around 2.5 leverage thats 15% and on CFD's 60% so you can keep your leverage in a realistic area.I also look at string of losses as i dont want to get hit straight off with the maximum string whilst leveraged---rare but possible.

In summary as we all agree I feel its a matter of continually refining.
Fortunately we all will approach from different perspectives and the beauty of having a community is that at times we may find those willing to share that which they have found during their improvement search.


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## soultrader (15 October 2006)

*Re: A New Traders Journey to Success*

WOW... is that my article?  

I was browsing through the forum and saw a thread with the same exact title as my article.  Glad you guys enjoyed it!


Remember, trading is a game of probabilities. New traders are full of uncertainty because they do not have a proven setup. The more trading setups you have, the more hands you have to play with. The rest is just understanding the probability behind your setup and having belief in your strategy.

Combine market internals and you will know whether the odds favor you or not for every setup.

*A question regarding exits: exiting before being stopped out.*

If you are familiar with the underlying financial instrument you are trading you should know the personality of it 100%. Combine this with tape reading and you should automatically know if your trade is going to work or not. Similar to a batter hitting a ball. The moment the batter hits it... he knows whether its a hit or an out.  New traders hope. And there is no room for hope in the markets. When in doubt stay flat or get out! 

Good luck


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## Tech_king (30 April 2007)

*Re: A New Traders Journey to Success*

This was an interesting read!

Could see me in some of those statements made!...How far i have come since being in the begining, only took me 3 years to get it right!


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## aberfan (2 September 2007)

*Re: A New Traders Journey to Success*

kennas or any other helpful day trder, where do i start. aberfan.


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## So_Cynical (2 September 2007)

*Re: A New Traders Journey to Success*

The price goes up and down...u buy, u sell etc.

I fail to see how years of research and study etc
will help u buy "XYZ" 1 week before they announce 
something substantial....u either believe in what 
"XYZ" is doin or u don't.

Perhaps im missing something.


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## pavilion103 (27 October 2011)

*Re: A New Traders Journey to Success*

I read this which was interesting. No need to start a new thread. 


*Step One: Unconscious Incompetence.*
This is the first step you take when starting to look into trading. you know that its a good way of making money because you've heard so many things about it and heard of so many millionaires. Unfortunately, just like when you first desire to drive a car you think it will be easy - after all, how hard can it be? Price either moves up or down - what's the big secret to that then - lets get cracking!

Unfortunately, just as when you first take your place in front of a steering wheel you find very quickly that you haven't got the first clue about what you're trying to do. You take lots of trades and lots of risks. When you enter a trade it turns against you so you reverse and it turns again .. and again, and again.


You may have initial success, and thats even worse - cos it tells your brain that this really is simple and you start to risk more money.


You try to turn around your losses by doubling up every time you trade. Sometimes you'll get away with it but more often than not you will come away scathed and bruised You are totally oblivious to your incompetence at trading. 

This step can last for a week or two of trading but the market is usually swift and you move onth the next stage.

*Step Two - Conscious Incompetence*
Step two is where you realise that there is more work involved in trading and that you might actually have to work a few things out. You consciously realise that you are an incompetent trader - you don't have the skills or the insight to turn a regular profit.

You now set about buying systems and e-books galore, read websites based everywhere from USA to the Ukraine. and begin your search for the holy grail. During this time you will be a system nomad - you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. Every time you come upon a new indicator you'll be ecstatic that this is the one that will make all the difference.

You will test out automated systems on Metatrader, you'll play with moving averages, Fibonacci lines, support & resistance, Pivots, Fractals, Divergence, DMI, ADX, and a hundred other things all in the vein hope that your 'magic system' starts today. You'll be a top and bottom picker, trying to find the exact point of reversal with your indicators and you'll find yourself chasing losing trades and even adding to them because you are so sure you are right.

You'll go into the live chat room and see other traders making pips and you want to know why it's not you - you'll ask a million questions, some of which are so dumb that looking back you feel a bit silly. You'll then reach the point where you think all the ones who are calling pips after pips are liars - they cant be making that amount because you've studied and you don't make that, you know as much as they do and they must be lying. But they're in there day after day and their account just grows whilst yours falls.

You will be like a teenager - the traders that make money will freely give you advice but you're stubborn and think that you know best - you take no notice and overtrade your account even though everyone says you are mad to - but you know better. You'll consider following the calls that others make but even then it wont work so you try paying for signals from someone else - they don't work for you either.


You might even approach a 'guru' like Rob Booker or someone on a chat board who promises to make you into a trader(usually for a fee of course). Whether the guru is good or not you wont win because there is no replacement for screen time and you still think you know best.


This step can last ages and ages - in fact in reality talking with other traders as well as personal experience confirms that it can easily last well over a year and more nearer 3 years. This is also the step when you are most likely to give up through sheer frustration.

Around 60% of new traders die out in the first 3 months - they give up and this is good - think about it - 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.


What may suprise you is that of the remaining 20% all of them will last around 3 years - and they will think they are safe in the water - but even at 3 years only a further 5-10% will continue and go on to actually make money consistently.


By the way - they are real figures, not just some ive picked out of my head - so when you get to 3 years in the game dont think its plain sailing from there.


Iv had many people argue with me about these timescales - funny enough none of them have been trading for more that 3 years - if you think you know better then ask on a board for someone who's been trading 5 years and ask them how long it takes to become fully 100% proficient. Sure i guess there will be exceptions to the rle - but i havent met any yet.


Eventually you do begin to come out of this phase. You've probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times but now its in your blood

One day - im a split second moment you will enter stage 3.

*Step 3 - The Eureka Moment*Towards the end of stage two you begin to realise that it's not the system that is making the difference. You realise that its actually possible to make money with a simple moving average and nothing else IF you can get your head and money management right You start to read books on the psychology of trading and identify with the characters portrayed in those books and finally comes the eureka moment.

The eureka moment causes a new connection to be made in your brain. You suddenly realise that neither you, nor anyone else can accurately predict what the market will do in the next ten seconds, never mind the next 20 mins.


Because of this revelation you stop taking any notice of what anyone thinks - what this news item will do, and what that event will do to the markets. You become an individual with your own method of trading


You start to work just one system that you mould to your own way of trading, you're starting to get happy and you define your risk threshold.

You start to take every trade that your 'edge' shows has a good probability of winning with. When the trade turns bad you don't get angry or even because you know in your head that as you couldn't possibly predict it it isn't your fault - as soon as you realise that the trade is bad you close it . The next trade or the one after it or the one after that will have higher odds of success because you know your system works.


You stop looking at trading results from a trade-to-trade perspective and start to look at weekly figures knowing that one bad trade does not a poor system make.


You have realised in an instant that the trading game is about one thing - consistency of your 'edge' and your discipline to take all the trades no matter what as you know the probabilities stack in your favour.

You learn about proper money management and leverage - risk of account etc etc - and this time it actually soaks in and you think back to those who advised the same thing a year ago with a smile. You weren't ready then, but you are now. The eureka moment came the moment that you truly accepted that you cannot predict the market.


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## pavilion103 (27 October 2011)

*Re: A New Traders Journey to Success*

*Step 4 - Conscious Competence*You are making trades whenever your system tells you to. You take losses just as easily as you take wins You now let your winners run to their conclusion fully accepting the risk and knowing that your system makes more money than it looses and when you're on a loser you close it swiftly with little pain to your account

You are now at a point where you break even most of the time - day in day out, you will have weeks where you make 100 pips and weeks where you lose 100 pips - generally you are breaking even and not losing money. You are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders as you chat the day away. You still have to work at it and think about your trades but as this continues you begin to make more money than you lose consistently.

You'll start the day on a 20 pip win, take a 35 pip loss and have no feelings that you've given those pips back because you know that it will come back again. You will now begin to make consistent pips week in and week out 25 pips one week, 50 the next and so on.

This lasts about 6 months

*Step Five - Unconscious Competence*Now we’re cooking - just like driving a car, every day you get in your seat and trade - you do everything now on an unconscious level. You are running on autopilot. You start to pick the really big trades and getting 200 pips in a day doesnt make you any more excited that getting 1 pips.


You see the newbies in the forum shouting 'go dollar go' as if they are urging on a horse to win in the grand national and you see yourself - but many years ago now.

This is trading utopia - you have mastered your emotions and you are now a trader with a rapidly growing account.

You're a star in the trading chat room and people listen to what you say. You recognise yourself in their questions from about two years ago. You pass on your advice but you know most of it is futile because they're teenagers - some of them will get to where you are - some will do it fast and others will be slower - literally dozens and dozens will never get past stage two, but a few will.

Trading is no longer exciting - in fact it's probably boring you to bits - like everything in life when you get good at it or do it for your job - it gets boring - you're doing your job and that's that.


Finally you grow out of the chat rooms and find a few choice people who you converse with about the markets without being influenced at all.


All the time you are honing your methods to extract the maximum profit from the market without increasing risk. Your method of trading doesnt change - it just gets better - you now have what women call 'intuition'

You can now say with your head held high "I'm a currency trader" but to be honest you dont even bother telling anyone - it's a job like any other.


I hope youve enjoyed reading this journey into a traders mind and that hopefully youve identified with some points in here.


Remember that only 5% will actually make it - but the reason for that isnt ability, its staying power and the ability to change your perceptions and paradigms as new information comes available.


The losers are those who wanted to 'get rich quick' but approached the market and within 6 months put on a pair of blinkers so they couldnt see the obvious - a kind of "this is the way i see it and thats that" scenario - refusing to assimilate new information that changes that perception.


Im happy to tell you that the reason i started trading was because of the 'get rich quick' mindset. Just that now i see it as 'get rich slow'

If youre thinking about giving up i have one piece of advice for you ....

Ask yourself the question "how many years would you go to college if you knew for a fact that there was a million dollars a year job at the end of it?

Take care and good trading to you all.


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## Gringotts Bank (27 October 2011)

Pavillion, did you hack my account last week?


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## pavilion103 (27 October 2011)

haha, is that one you came across as well?


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## Gringotts Bank (27 October 2011)

No it was actually a serious question.  I logged in last week and someone had changed my avatar to the identical one you use.  I logged in and out a few times, and it was still there!  A total mystery!


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## pavilion103 (28 October 2011)

Gringotts Bank said:


> No it was actually a serious question.  I logged in last week and someone had changed my avatar to the identical one you use.  I logged in and out a few times, and it was still there!  A total mystery!




No mate. 

That does sound strange


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## tech/a (28 October 2011)

On the Competence issue.

Ive always held the view that we all rise to our level of *INCOMPETENCE*
Many of us reach this level once we leave school
a few raise this level through street smarts and further education.

If we cant increase our level then we remain at our level of incompetence.

Put me in an F1 or atop of Black Caviar/or a spelling comp and my level of incompetence shines.


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## pavilion103 (28 October 2011)

tech/a said:


> On the Competence issue.
> 
> Ive always held the view that we all rise to our level of *INCOMPETENCE*
> Many of us reach this level once we leave school
> ...




Couldn't imagine you doing too much worse than Webber this year!


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