The stages of a true trader

[amanfree]

that must be a typo..

its not possible for a day trader to close everyday with a profit..

it is very much possible my dear friend

 

[4xpipcounter]

Prst, you're right! It is not possible to make profits everyday. But a daytrader will be profitable most days. I know I'm human, and it feels good to be human, so I make mistakes and do have a losing day here and there.

that must be a typo..

its not possible for a day trader to close everyday with a profit..

 

[4xpipcounter]

Amanfree, I respectfully disagree with you. Key word is "everyday".

it is very much possible my dear friend

 

[ketanss]

Amazing post. Hats off to the author for capturing the mindset at every stage.

I would put myself today at Stage 4.

Going through these I could literally visualize my journey over the past 2 years.

I started thinking that trading would be a good way to boost my income. Tried all sorts of strategies, postional, day trading, etc and lost a great deal of money.

Fundamental vs Technical is also something that one needs to choose. I am strongly in favour of technicals and work well for me to estimate which side of the trade I should be.

After nearly 2 lose years of consistently losing money, I learnt how to avoid losing money.

Then one month, I made up for all all my losses in the past 2 years. Subsequent month was able to generate enough money as per estimates and targets set at the beginning of the month.

What made the change?

Complete change of strategy

Had never ventured into future and options before, but entered after 6 months of rigourous study and paper trading when I was confident enough to do so.

This is not to say that this is the best. From day trading to positional trading, each one can find what suits him best and then stick to it.

Still on a learning curve hoping to do better with each month.

 

[desiwarrenbuffet]

Iam at the 3rd stage Developing Trader.I have learned my lesson during initial stages,lost lots of money.First I was day trading on instinct. I was thinking I know everything. My first trades went very well,I became overconfident. market taught me a very important lesson.Then I started reading books,joined forums & slowly slowly I started improving.
Still I think I have lot to learn

 

[AncientLion]

i am at 1st stage, the clueless trader
markets are ever evolving and it keeps teaching new lessons even after more than a decade in markets

 

[jay.m]

I'm in the first stage.Thank you for the info.

 

[Loss_Lover]

THE STAGES OF A TRUE TRADER


Stage One: The Clueless Trader
1) Heard of a day trader making millions, or buying options is safe and can make you rich quickly
2) Got lucky in an earlier stock investment.
3) After all, how hard can it be? The money sounds appealing and the freedom to be independent sounds attractive
4) Every trader is optimistic
5) 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
6) You will buy just to see the market reverse and you will short just as the market starts to rally.
7) Most of your trades are done emotionally. You buy just because the markets feel strong without any logical reason
8) You have no clue how the mechanics and psychology of trading works. What's worse? You are not aware that you don't know
9) Most traders will blow their entire account at this stage.
10) Mostly you start your trading in a bull market
11) You will spend more time finding a broker charging least brokerage, how to save tax, and like companies paying dividend and issuing splits and bonuses and less time in learning what trading actually is.
12) A big majority of people will leave trading and blame the randomness of markets, or say markets are always manipulated
13) Generally you start with fundamental analysis and put money in "good" companies and dont forget to watch CNBC
14) You dont know what is short selling or have never tried it, no idea of stop loss as well
15) You are in the unconscious incompetence stage, in this stage your capital is at maximum risk

Stage Two: The Rookie Trader
1) 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.
2) You will then devour every trading book available.
3) Your search for magic indicator and the holy grail starts here
4) 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
5) You will go through the "help" tab on your data vendor to read about every single technical indicator available
6) You will plot them on your charts and spend hours looking for an indicator that works
7) You will be extra confident now, thinking you have found the magical technical indicator
8) 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.
9) You realize that you are the sucker
10) You are in the conscious incompetence stage

Stage Three: The Developing Trader
1) You start to realize the amount of work required and the immense learning curve that you must overcome to understand the markets, maximum pessimism is experienced here
2) 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
3) Hunger and passion is needed to clear this stage
4) You will ask a thousand questions and bug every professional trader you meet. You will read a thousand day trading articles
5) You will start paper trading, develop strategies and setups, and define risk parameters for every trade
6) You will go on a hunt for self-understanding to master your psychological game
7) You will visualize every possibility on a trade before you take it.
8) This is the true learning phase. You are trying hard to develop your edge in trading.

Stage Four: The Determined Trader
1) This is the stage in which you learn to specialize in certain markets and trading methods
2) 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
3) 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
4) You test your methods and they seem to work. You gain tremendous market knowledge.
5) You reflect back on yourself and you can't help but laugh at your foolishness.
6) Although you have not made enough money to call yourself successful you are proud of your journey and accomplishments
7) You realize that the Holy Grail is not about technical indicators or price patterns
8) You calculate risk before profits and place strict money management on all your trades.
9) You cut losses short and learn to scale out on your winners.
10) You start accept losing as a natural part of the game
11) 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
12) Your psychological makeup has changed from an amateur mindset to a professional one.

Stage Five: The Consistent Trader
1) You rely on your trading method and start taking trades systematically. You try to aim for consistency and are meeting your daily goals often.
2) You are fully aware of your strengths and weaknesses as a trader.
3) 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.
4) You are now able to trade for a living
5) You have reached the conscious competence stage

Stage Six: The Expert Trader
1) 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
2) You understand market concept and are able to predict the direction of the markets a fairly good amount of time.
3) 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.
4) You talk to other traders and realize the development stage they are in
5) People start asking you for trading advice, you publish a book, and you have a specific trading methodology that represents you!
6) Taking trades come naturally and you are able to get in and out at the precise price levels based on tape
7) Instead of having the markets take your stop out, you exit when you know you are wrong.
8) You keep your head high but remain humble on the inside. You have now officially graduated the school of the hard knocks
9) You have reached the unconscious competence stage.

I took a print-out of this three years back and pasted it in-front my study desk after finding myself clueless. Thank you very much for sharing this!

Today I was surfing and found this article about a successful trader - Madan Kumar. He is the same Madan.

Thought of sharing! Who knows there might be someone who has just started trading after watching YouTube on the differences between a trading and a demat account, tutorials on how to transfer funds, how to buy and sell from kPatang or UthaStocks, Supertrend indicator, MACD, RSI, Mint money with this or that strategy and what not!

More significantly than Madan's inspiring interview, clear emphasize was laid on Trading Discipline. And the Sultan of Discipline R.I.P. Mark Douglas is seldom discussed. Truly his books has the power to turn the table for every aspiring trader.

Thank you for reading!