5 STAGES OF BECOMING A TRADER
A professional advance implies that anyone goes through several stages. A career on Forex is no exception as traders evolve step by step, mastering practical skills. There is no precedent when a rookie trader has been able to leap to the top, passing through several evolution stages. Well, it could be an exception rather than a common case. If you are still under illusions that you will avoid disappointment, losses, and failure, we are going to destroy your illusions and bring you down to earth. A situation on Forex can develop in a flash. Even experienced traders find it difficult to predict further developments.
As a newcomer on Forex, just take this concept for granted. This way you will increase your chance for success. Any trader should be ready for a complicated but rewarding path ahead. Let’s look at the road map of the stepping-stones and find out what pitfalls traders can encounter in their forex career.
At the starting point, a beginner makes the first steps in trading, having vague knowledge of the subject. Your trading decisions are driven by intuition and greedy purposes. You have read a few articles on trading strategies and found them rather easy. So, you are ready for a new venture.
You deposit a small sum to your trading account and lose your money. If you are smart enough to practice on a demo account, you lose just virtual money. However, you are obsessed by the idea to grab a fortune with real money. Then the situation comes to the boil: you take too high risks, open an opposite order to close a losing position, then another opposite order follows. Afterwards, you double a lot in every new deal in an effort to offset losses. Sometimes, it saves your money, but in most cases it entails even heavier losses.
What are traders like at the beginning of their forex career?
*They open and close deals at random without a particular trading system.
*They do not care about risk management.
*They abruptly change a direction of a deal, following a price.
*They keep afloat thanks to small winning trades and neglect losses.
*Their motivation is immediately exhausted as soon as a deposit is lost.
Rookie traders can replay the same scenario during a few weeks or a month until they realize their complete ignorance in trading. At this point, a trader moves on to the next stage.
Traders realize that a gut feeling is not enough and they cannot survive on Forex without knowledge. Inspired by modest success, traders rush to read about Forex avidly and at random. They try to digest advice on forums, articles on the Internet, books written by professional traders, etc. They apply moving averages, the Fibonacci numbers, play with support and resistance, fractals, and a great deal of other indicators. Every time, they pin hopes on a new trading system, which should make a big difference. Nevertheless, it is difficult to avoid financial failure. This stage of conscious ignorance is the longest of all. Some traders will not be able to proceed to a higher level even after several years of forex trading.
Here are the questions which will help you judge whether you are stuck without any progress.
*Do you change your trading system a few times every 6 months without testing none of the systems to the fullest?
*Do you analyze your trading history in an effort to find out what exactly went wrong?
*Do you still make reckless mistakes which inflict hefty losses?
*Do you make the same trading mistakes over and over again?
Make sure you answer these questions. Try to be honest with yourself even if you do not like the truth. A lie keeps you trapped and derails your evolution as a trader. According to the statistics, almost 60% of frustrated traders leave the market within the first three months. If trading were so simple and transparent, we all would have been millionaires. Other 20% quit trading within a year as they are eager to win back losses and lose their deposits on large deals in despair . You will be surprised to find out that 10-15% of traders stay in the market for about a year. Only 5-10% decide to pursue a trading career and gain steady profits.
Are you still in the market? Are you still interested despite having lost more than expected? It is too early to give up. You are on the way to the third stepping-stone. You will not realize how you will enter it. Sooner or later, you will reach the stage called eureka.
At this stage, a trader takes responsibility for his/her actions and understands that mistakes do not disappear. After years of learning, testing various indicators, and trading practice, you eventually create your own efficient trading plan. You know how to manage your funds, reckon risks in advance, and tame your emotions. You do not search for the Holy Grail because you are aware that it does not exist. Instead, you trust your own trading method and follow it carefully. You take advice on forums with a pinch of salt. You used to consider trading to be gambling, but not any more. Therefore, you do not take a risk in every deal.
One happy day, you exclaim Eureka! You grasp the point that no one is capable of predicting what will happen in mere 10 seconds. You certainly may seek advice from a mentor. Finally, you realize that successful trading depends entirely on you. You should gain deep insight into the market to implement your trading plan.
Well done! You have evolved into a professional with one’s own method of trading.
You are still at the stage of learning. The difference is that you learn to implement this knowledge here and now, trading real money with minor deviation from a trading plan.
To sum up, a trader can be described in a few sentences at this stage:
*A trader does not skip from one trading system to another. He/she has picked the right one and sticks to it.
*A trader composes a trading plan and keeps track of all positions.
*A trader realizes that speculating is daily routine work.
*A trader understands that all components of a trading system should work jointly, thus yielding profits.
Eventually, your endeavors bear fruit. You are confident in your trading system and open positions following technical signals. You allow your profitable deals to grow until you get a signal to exit the market.
Strict discipline, the ability to rein in emotions, efficient risk management enable you to trade at a profit and minimize losses.
A mature trader works as follows:
*He/she understands rules of the game and stops losing money.
*He/she gains steady profits.
Within half a year, a trader still ponders over his/her deals. The most important at this stage is that you earn more than you lose. Now you are ready to advance to a new level.
You have mastered the art of trading. You follow your trading plan on autopilot. You do not have to rack your brains whether to open a deal or not. As a professional golf player who has sharpened a skill of shooting a ball into a hole, you have got muscle memory thanks to hard training.
However, it does not mean that the time is right to rest on your laurels. You can develop new strategies and test them as well as experiment with new trading systems. You remember everything you have learnt. That is why you invent new ideas easily and fine-tune your trading routine.
Answering one simple question, you can judge whether you have achieved trading proficiency or not. Are you under stress when you trade on your own or by means of expert advisers? If yes, you are still on the way to mastery.
Having entered this stage, you assert yourself as a forex trader. However, you do not boast about your proficiency as trading has already become your full-time job.
Earlier, we told you that 5-10% of traders reach the highest level and belong to successful speculators. The main driving force is not a talent but perseverance and ability to adjust once’s views to new information.
Those who are greedy for easy money tend to lose.
Perhaps, you are ready to give up in despair. It would be a good idea to ask yourself a question, "How long are you ready to go to university on condition that after graduation your income will measure a few thousand dollars per month?"
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