Step Two – Conscious Incompetence
Step two is where you realize that there is more work involved in trading and that you might actually have to work a few things out. You consciously realize that you are an incompetent trader – you don’t have the skills or the insight to turn a regular profit.
You now set about buying trading systems and e-books galore, read websites based everywhere from USA to the Ukraine and begin your search for the holy grail. During this time you will be a system nomad – you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. Every time you come upon a new indicator you’ll be ecstatic that this is the one that will make all the difference.
You will test out automated systems, you’ll play with moving averages, Fibonacci lines, support & resistance, pivots, fractals, divergences, DMI, ADX, and a hundred other things all in the vein hope that your ‘magic system’ starts today. You will also become a top and bottom picker, trying to find the exact point of reversal with your indicators and you’ll find yourself chasing losing trades and even adding to them because you are so sure you are right.
You’ll go into the live chat room and see other traders making profits and you want to know why it’s not you – you’ll ask a million questions, some of which are so dumb that looking back you feel a bit silly. You’ll then reach the point where you think all the ones who say they are making profits are all liars – they can’t be making that amount because you’ve studied and you don’t make that, you know as much as they do and they must be lying. But they’re in there day after day and their account just grows whilst yours falls.
You will be like a teenager – the traders that make money will freely give you advice but, you’re stubborn and think that you know best – you take no notice and over trade your account even though everyone says you are mad to but you know better. You’ll consider following the calls that others make but even then it won’t work so you try paying for signals from someone else – they don’t work for you either.
You might even approach a guru or someone on a chat board who promises to make you into a trader (usually for a fee of course). Whether the guru is good or not you won’t win because there is no replacement for screen time and you still think you know best.
This step can last ages and ages – in fact in reality talking with other traders as well as personal experience confirms that it can easily last well over a year and more nearer to three years.
This is also the step when you are most likely to give up through sheer frustration. Around 60% of new traders quit in the first 3 months – they give up and this is good – think about it – if trading was easy we would all be millionaires. Another 20% keep going for a year and then in desperation take risks guaranteed to blow their account which of course it does.
What may surprise you is that of the remaining 20% all of them will last around 3 years and they will think they are safe in the water but even at 3 years only a further 5-10% will continue and go on to actually make money consistently.
By the way – these are real figures, not just some I’ve picked out of my head – so when you get to 3 years in the game don’t think it is plain sailing from there!
I’ve had many people argue with me about these timescales – funny enough none of them have been trading for more than 3 years – if you think you know better – then ask on a board for someone who’s been trading 5 years and ask them how long it takes to become fully 100% proficient. Sure I guess there will be exceptions to the rule – but I haven’t met any yet.
Eventually you do begin to come out of this phase. You’ve probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times but now it is in your blood. One day – in a split second moment you will enter stage 3.