5 Stages Of A Trader / Investor

Stage One: You Don't Know, What You Don't Know

You heard it was a good way of making millionaires. You overtrade, take on too much risk, have initial success, but you are totally oblivious to your incompetence at trading.

Stage Two: You Realizing This Isn't A Quick Get Rich Scheme

You realize there is more work involved in trading. You consciously realize that you are an incompetent trader – you don’t have the skills to make money consistently. You search for the HOLY GRAIL. You keep trying different trading methods, never sticking with one long enough to actually see if it works. You get on forums and live chat rooms and see other traders making money and you want to know why it’s not you. You’ll consider following the calls that others make. This is also the step when you are most likely to give up through sheer frustration. Eventually you do begin to come out of this phase. You’ve probably committed more time and money than you ever thought you would.

Stage 3 – The Aha Moment

Towards the end of stage two you begin to realize that it’s not the system that is making the difference. You find out that the HOLY GRAIL is YOU. You realize it’s possible to make money with a simple moving average and nothing else if you can manage your capital and risks. You start to read books on the psychology of trading and start to identify with the characters portrayed in those books. You start to work just one system that you make your own and fits your personality. You start taking every trade according to your trading plan. When the trade turns against you, your stop loss is triggered, you don’t get angry, you look for the next opportunity. You stop looking at trading results from a trade-to-trade perspective and start to look at your results from a week-to-week perspective. You have realized in an instant that the trading game is about one thing – consistency of your ‘edge’ and your discipline to follow your trading plan. You learn about proper money management and leverage and realize you cannot predict the market and trading is all about probability.

Stage 4 – You Are Confident & Believe The Possibilities Now

You take losses just as easily as you take wins. You now let your winners run to their target because you know your system makes more money than it loses. 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 X amount of money and weeks where you lose X amount of money, generally you are breaking even, but began to make more money than you lose consistently.

Stage Five – It's Like Breathing Now

You start to pick the really big trades and making X amount of money each day doesn’t make you any more excited that getting X-Y amount of money. You have mastered your emotions and you are now a trader with a rapidly growing account. Trading is no longer exciting, it’s boring and lonely. However, you finally reached your destination of why you trade, it’s not about the money, but what it allows you the freedom do and start completing things on your bucket list.

Conclusion

Most traders should be able to identify at least with one of the stages. Having the right mindset, persistency and determination becomes increasingly important as you progress through the steps. I personally reached the point where I trust the process, enjoy the journey and surviving each day for an opportunity to push up tomorrow. Based on my equity curve over the last 3 years, which Stage do you think I’m at in my trading career currently?