I would like to thank the late William McRae for instilling this understanding in me early in my career. I enjoyed putting this together and hope it helps traders (at any level) better understand what it takes to make it.
Trading Development Phases: The Long Haul To Becoming A Successful Trader
In order to become a successful trader, one has to make it through each of the following trading development phases. It’s a tough profession with many hurdles to overcome within each phase.
The Novice Trader:
- Accumulates information: reading books, watching financial media, and researching.
- Is equipped with new knowledge and begins to trade a specific market.
- Consistently “donates” capital to other market participants, realizing the need for additional knowledge.
- Accumulates more knowledge.
- Armed with additional knowledge, begins to trade again in a different market.
- Consistently donates capital to other market participants; begins to feel despair.
- Trading decisions begin to be influenced by news headlines and other trader’s actions.
- Consistently donates capital to other market participants.
- Begins trading a different market.
- Searches for additional knowledge.
- Begins to have a minor amount of success.
- Gets overconfident and Mr. Market quickly humbles him/her.
- Starts to understand that trading successfully requires more time and knowledge than anticipated.
- Most novice traders give up at this point as they realize actual work is involved.
The Intermediate Trader:
- Begins learning a real methodology.
- Trades methodology with limited success but realizes “something” is missing.
- Understands the need for having rules to apply to methodology.
- Takes an extended leave of absence from trading to research and develop trading rules.
- Begins trading methodology again, armed with new trading rules.
- Finds limited success, but hesitates when executing trades.
- Adds, subtracts, and modifies trading rules in pursuit of trading proficiency.
- Feels very close to crossing threshold of successful trading.
- Starts to take responsibility for own trading results; begins to learn that success is within self-discipline, less-so the methodology.
- Continues to violate trading rules and hesitate when executing trades.
- Knows success is near; validates trading rules again and begins to rebuild confidence in them.
- Understands the importance of following trading rules, as reflected in trading results.
- Understands trading success is within self-discipline; understands importance of introspection.
The Master Trader:
- Continues to trade methodology, increasing discipline to follow trading rules.
- Continues process of introspection, as trading continues through multiple market environments.
- Masters trading methodology.
- Adheres to trading rules with no exceptions.
- Consistently profitable trading results.
- Gets overconfident, lose discipline in following trading rules, and Mr. Market quickly humbles.
- Allows methodology / rules to trade for him; trading becomes boring, but very successful.
Thanks for reading.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.