Module 2
The Set Up
Trader’s Evolution (Stages)
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Stage 1 - Unconscious Incompetence
Stage 2 - Conscious Incompetence
Stage 3 - Conscious Competence
Stage 4 - Unconscious Competence
Stage 1 - Unconscious Incompetence
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You know that trading is a good way of making money because you’ve
heard so many things about it and heard of so many millionaires.
How hard can it be? Price either moves up or down – what’s the big secret
to that then – let’s get cracking! buy low and sell high.
You take lots of trades and lots of risks – you enter a trade, it turns against
you, so you reverse.
You take lots of trades and lots of risks – you enter a trade, it turns against
you, so you reverse.
Stage 2 - Conscious Incompetence
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Now you consciously realize that you are an incompetent trader and don’t have the skills or the knowledge
to turn a regular profit.
You start buying trading systems and e-books, reading various websites trying to search for the holy grail.
You will be a system nomad, jumping from one method to another without sticking with one long enough to
see if it actually works.
Every time you come upon a new indicator you’ll be ecstatic that this is the one that will make all the
difference.
You’ll reach the point where you think all the traders who say they are making profits are liars, you know as
much as they do but still losing.
This stage can last ages and ages, it can easily last well over a year and more nearer to three years.
This is also the stage when traders are most likely to give up through sheer frustration.
Stage 3 - Conscious Competence
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Towards the end of stage two you realize that it is possible to make money only
if you can get your head and money management right.
When the trade turns bad you don’t get angry – because you know it isn’t your
fault – as soon as you realize that the trade is bad you close it.
Now you are aware that the trading game is about one thing: consistency of your
‘edge’ and your discipline.
You are now conscious of the fact that you are making calls that are generally
good and you are getting respect from other traders.
Towards the end of this stage, you will slowly begin to make consistent profits
week in and week out.
Stage 4 - Unconscious Competence
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You start to read books on psychology of trading and identify with the characters
portrayed and finally reach the eureka moment.
The eureka moment came the moment that you realized that you can’t accurately
predict what the market will do.
No one can be 100% accurate.
Just like driving a car, every day you get in your seat and trade. You do everything now
on an unconscious level.
This is trading utopia – you have mastered your emotions and you are now a trader with
a rapidly growing account.
All the time you are sharpening your method trying to extract the maximum profit from
the market without increasing risk.
Traders Evolution (Stages) Worksheet
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What stage are you currently in?
How Long have you been in this stage?
Identify 3 possible reasons that may be keeping you from moving to the
next stage.
What can you do differently to move to the next stage?