The Psychology of Trading. Life is a journey in which throughout we can take many wrong turns.
We can often find ourselves stuck or without direction.
Hello there, I’m James and I would like you to join me as we discover trading. Today I would like to discuss the different stages those who begin trading go through and the stage so many get stuck on so that they can never progress, with the hope that by the end of this video you will have a better understanding of the obstacles you may face and how you might be able to overcome them.
When you start your journey on the way to become a successful trader, you go through several stages.
These stages are as follows, Unconscious incompetence, Conscious Incompetence, the awaking moment, conscious competence and finally unconscious competence.
First stage a trade can go through is unconscious incompetence. This is where they are unaware that they have a lack of knowledge and are heavily influenced by emotion due to the desire to make a great deal of money in a short period of time. There are usually two outcomes, the trade goes against them reducing their trading capital. They may even close their trade and open another position in the opposite direction which then loses. They simple have no experience in dealing with the market. The other outcome is but luck they win and then with increased confidence they open a bigger trade which then wipes them out. Eventually the trader may move to the next stage of stop trading altogether.
The next stage the conscious incompetence, this where the trader now realizes they need to learn. Here they may seek advice from expensive experts or fall into the trap of “get rich quick” strategies.
But they continue to lose and they blame their losses on the strategies, poor information and even the broker or the trading platform. They do not take responsibility for their actions. This is the stage a lot of want to be traders get stuck on.
To see if you are still at the stage, ask yourself the following questions?
“Have a stuck to a system?”
“Am I using a trading journal?”
“Do I look over previous trades?”
“Do I know why I enter/exit a trade?”
“Do I take responsibility for my losing trades?”
If the answer is no to all them, then yes you are stuck at this stage.
However, if you are aware of this then you might be able to reach the most important stage that every successful trader reaches. The Awakening moment.
At this stage, the trader wakes up to the fact that successful trading comes down to the psychology of the trader and the approach they take to the markets. The understanding that you will never be able to completely predict what happens in the market, the realization that success is based on a series of trades that include both winners and losers and that it takes discipline and that it takes a system and it’s that system they follow to decide when to enter or exit the market not the emotions they are feeling.
This will lead to the final two stages, conscious competence and unconscious competence.
Conscious competence is where their system and their system only dictates what position should be open. Though they are still going through the emotions, they are disciplined and keep to the plan no matter what. Risk management is the key and the approach it to build the account not to get rich quick.
And finally they will reach the unconscious competence where their disciplined approach becomes second nature to them. An automatic mindset.
If you can complete this journey, then you find it will help you become the trader you deserve to be.
Join me next time, when we have a look at some key economic indicators and how and why they can affect the market, till then you trade safe.