This is a very down-to-earth article that vividly portrays the growth stages of a novice trader entering the market. Can you find any reflections of yourself within it?
The profession of a trader is highly specialized. It is said that only 1% of people can complete all five stages of becoming a professional trader. Which stage are you at?
Stage One: Ignorance is Bliss
This is the first stage when you start trading. Inspired by numerous millionaire success stories, you know that "trading" is a lucrative venture. Unfortunately, it's like thinking driving is easy until you actually start and realize its complexity. Prices only go up or down—are there any secrets behind this?
"Let me crack it!"
Unfortunately, just like your first time behind the wheel, you quickly realize you have no idea how to start. You start trading repeatedly, taking on numerous risks. Sometimes, as soon as you enter the market, it moves in the opposite direction, so you reverse your trades. "Damn! It's wrong again!" You reverse and reverse...
At first, you might do well, which is worse because it makes your brain think, "Trading is too easy," and then you start trading recklessly.
When losses occur, you try to double down, like betting two bucks after losing one. Sometimes, you win back by chance, but more often, you end up with severe losses. At this point, you have completely forgotten that you are still a novice in trading. This stage usually lasts one to two weeks, and soon enough, you move on to the second stage.
Stage Two: Conscious Incompetence
In this stage, you realize there is more work to be done to trade profitably. "Hmm, I need to do some more homework." You acknowledge that you are still an unqualified trader.
“I still lack a truly profitable technique.” You start setting up various “trading systems” on charts, reading numerous e-books, and browsing websites extensively—from the US to Ukraine. At this point, you're searching for your own "Holy Grail."
You become a "systematic trading maniac"—constantly switching from one method to another, never spending enough time to truly test whether a system works. Every time you get a new indicator, you become ecstatic, “This indicator is completely different!”
You've tested all the automated trading systems in Trader, played with moving averages, Fibonacci lines, support and resistance lines, MACD, KDJ... hundreds of indicators, dreaming that your “magic system” will be born today.
You become a "master" at finding market reversal points with your indicators. Even though you keep losing money, you persist, convinced that your approach is right.
You start visiting chat rooms and forums, seeing other traders making money, and wondering, "Why not me?" You ask many questions, some of which later seem silly.
You quickly become a skeptic, thinking, "Those signal callers are all frauds." They can't make that much money because you've "learned" but still can't achieve it. "Hmm, they're frauds or shills." But they keep growing their accounts while you're still failing.
Just like a naive teenager, experienced traders offer you free advice, but you stubbornly believe you know best. You ignore others’ opinions and start overtrading, even though everyone else says you're crazy.
You consider following others' signals, but the results are terrible. So, you decide to buy some "trading signals" from websites or gurus, but they still don’t work for you.
You might even find a "guru" on forums to follow, someone who "guarantees" to transform you into a real trader (of course, such guarantees usually come with a fee). Regardless of whether the "guru" is genuinely good or not, you still can't make money, thinking your timing is off, believing you know best.
This stage may last several years. In fact, real-life conversations reveal that this stage typically lasts at least one year, usually around three years. After countless setbacks, most traders are likely to quit during this period.
About 60% of beginners quit within the first three months—they give up, which may actually be a good thing. Think about it, if trading were easy, we’d all be millionaires.
Another 20% surrender after a year, often due to inevitable margin calls. Surprisingly, the remaining 20% persist for up to three years, thinking, "I've learned to swim by swimming." Yet, even after three years, only 5-10% can truly stick it out and start making consistent profits.
By the way, these are real statistics, not just figures conjured up in my head. So, even if you play this game for three years, don’t assume it’ll be smooth sailing.
Many have argued with me about these “time windows”—interestingly, none of them have traded for more than three years. If you don’t believe me, find a trader who has been trading for over five years and ask how long it took to become proficient. I bet someone will exceed this “time window,” but I haven’t seen it yet.
Finally, you're ready to graduate from this stage. By now, you’ve likely spent more time and money than you imagined, endured 2-3 margin calls, and contemplated quitting 3-4 times. However, trading has now become deeply ingrained in your blood.
Stage Three: Enlightenment
Towards the end of the second stage, you begin to see that trading results do not depend on the "trading system." You realize that even a simple moving average can make money, as long as your mindset and risk management are right. You start reading books on trading psychology, identifying with the characters described. Then, enlightenment occurs.
"Enlightenment" feels like connecting two neurons in your brain. You suddenly realize that not only you, but no one, can precisely predict the market's next move in the next 10 seconds, let alone the next 20 minutes.
With this new understanding, you stop caring about what others think—what the "big players" will do after certain data releases, or what changes an event will bring... You become an "independent trader" following your own methods.
You start working in a way that fits your own trading style and methods. Now you trade happily, with risks under your control.
You begin using your "sharp knife" to grasp every profitable opportunity. When your positions turn bad, you no longer get angry; instead, you think, "It's not my fault; I can't predict the market." When you feel your position is bad, you simply close it. "Next time, or the time after that, or the time after, will have a higher chance of success," because you know your trading system works.
You stop evaluating trades individually and start looking at your trading reports on a weekly basis. "Hmm, one bad trade doesn't mean the system is bad."
You finally realize that the "trading game" is about continuously using your "sharp knife" and adhering to your own trading discipline, regardless of your preferences.
You have learned proper money management and leverage use, and by now, they are part of you. You smile when you recall that someone had advised you about these things earlier, "I was young then; now I understand."
"Enlightenment" occurs the moment you truly accept that you cannot predict the market.
Stage Four: Conscious Competence
You obey your trading system. You accept losses just as you accept wins. You now let your winning trades run free.
Accepting losses and knowing your trading system will bring more profits than losses, you close losing positions easily, "This only gives my account a slight sting."
Most of the time, you experience a tug-of-war of breaking even. Winning today, losing tomorrow, sometimes winning 100 points this week and losing 100 points next week, usually maintaining a break-even state without major losses.
At this point, you know you should be considered a "good trader" overall, and you start earning respect from others in forums. You continue studying and contemplating trading, but throughout this process, your profits have consistently exceeded your losses.
One day, you make a 20-point win but later lose 35 points, yet such reversals no longer faze you because you know they will come back. You begin consistently profiting every week, earning 25 points this week, 50 points next week...
This stage will last for six months.
Stage Five: Mastery
You've "nailed it"—like driving, you take your seat and trade daily—you've reached a “flow” state akin to riding in a self-driving car. You start doing truly "big trades," earning 200 points in a day, but it doesn't excite you more than earning 1 point.
When you see a novice shouting in forums, "Money, come on! Money, come on!" as if they won the Grand Slam, you see your former self from years ago.
By now, you've entered the "utopia" of trading, controlling your emotions, and you are a true "trader"—a trader who makes a fortune daily.
You become a star in forums and chat rooms; everyone wants to hear what you have to say. Through their questions, you see your former self two years ago. You offer advice, but you know it might not help, "They are still kids"—though some will become like you, some faster, some slower—of course, we know most won't get past the second stage, but some certainly will.
"Trading" is no longer exciting for you. In fact, it even feels a bit boring. Just like anything else, even if you're good at it, you have to keep doing it. "It’s getting a bit boring, but this is working for yourself. Really, it's like that."
Finally, you find a few like-minded people in chat rooms to discuss the market, but it has become purely technical discussions, with everyone unaffected by each other.
You refine your trading system, ensuring it brings maximum profit without increased risk. Your trading methods remain unchanged—just better now, and you have achieved what others call "intuition"!
Now you can proudly say, "I am a trader!" However, the humble you feel no need to tell anyone, "This is just a job."
Postscript: I hope you enjoyed this article. I hope you read it with a trader's heart, and more so, I hope you gain something from it.
Remember, only 1% can truly reach the fifth stage, and it’s not due to "ability" but "persistence" and the ability to change old habits when new things arise.
Failures are those who dream of "getting rich overnight." There's nothing wrong with this thought, but they enter the market for only six months and put on a pair of tinted glasses, preventing them from seeing the essence of things. Their mantra is, "This is what I see; that is the pattern I found." They refuse to absorb new things, refusing to change their ignorance.
Let me tell you, I too entered the market wanting to "get rich overnight," but now I think, "Let’s get rich slowly."
For more knowledge about trading, please contact CWG customer manager Ah Hai.
