Learning curve
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  1. #1
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    Jun 2013
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    Learning curve

    Before starting making bunch of money trading Forex, it's very useful to honestly recognize your place on learning curve.

    Let me explain.

    It's very easy to think that "now you are ready to make it" after series of profits.

    But consistency is what makes professional trader (I mean, who made trading his occupation). How to recognize - are you ready or not?

    I would divide development of a trader on several phases (well, don't get offended if you recognized yourself :) )
    The more honest you are with yourself, the faster you can go through all that phases.

    1. Beginner.

    You have come to the market and try making your first trades. Something works, something doesn't, but you enjoy the process, and after getting good profit you blow up your account. You never suspect that risk you have taken was enormous. You think that your "method" what inperfect.

    This traumatic experience leads you to a level of "advanced beginner".

    2. Advanced beginner

    Now you understand that you don't have a method and start "learning".

    Well, many people are stuck in this level, because there are lots of books and websites out there, huh.

    You face tons of conflicting information, you try to structure it reading more. You begin absorbing information, the more you dive into that sea the more you lack understanding - how to trade to make money?

    Most novices search for a "solution" - they believe that solution exists "somewhere", that somebody has "foolproof trading method", this is really time of trial and error.

    When you finally understand that market itself has uncertainty and ambiguity in it's nature, you understand that analysis and trading theory is not as important as risk management and good trading habits.
    You recognize limitations of all theories.

    Once you've recognize it, you go to the next level - I call it "struggling trader"

    3. Struggling trader

    Struggling trader no longer searches for a holy grail, but he (she) drifts between one trading style to another.
    He doesn't know what to stop on, but he already keeps his losses short, he understands importance of capital management and no longer falls into deep drawdown.

    Lack of consistency leads to chaotic drift of equity - he earns money, than gives it back to the market, than again makes up his mind and finds good trades and earns money again.

    I would say, trader CAN already earn money in this phase, but he can't keep it. All that market understanding that he gained through the years, pushes him to overtrade.

    Struggling trader recognises that he lacks discipline.

    4. Average good trader.

    What average good trader really does - he knows how to learn trading and that makes him who he is.

    He accepted 100% responsibility for his trading and there is fundamental difference between struggling trader and average good trader. While struggling trader relies on the market, he follows the market, but he rarely thinks of his actions, attention of average good trader focuses more on his actions.

    He already knows limitation of all theories, he knows importance on money management, he recongnizes importance of consistency.

    He keeps a journal, re-evaluates - what he does well, what not, what to work on, what to keep as it is, real work starts in this point.

    Also, average good trader works on his psychology and self awareness that makes him more disciplined.
    He studies the market, collaborate with traders but already knows that his action and opinion is what matters.

    Right focus of this phase eliminates a lot of mistakes, bad trades and finally allows trader to earn and keep money.

    I would say, this is a transformational phase. A lot of work to do, but it's like planting a tree - in needs time to grow.
    This is sort of personal growth. When we choose our reaction, when we refocus our attention and take responsibility for our actions, we grow personally and professionally, especially in trading.

    5. Master trader

    I would say, there are not so many traders that reach this point.

    At this point, trader knows himself and the market. He executes trades intuitively and as he knows his strengths and weaknesses, he can be more aggressive with what he does well, and defensive in other situations. Of course, it ends up with increased profitabilty and equity curve of a master trader can contain many winning streaks.

    Master trader focuses his attention right, thanks to the work done on the previous phase.

    I would say, "the tree had grown".

    Bottom line:

    It's important to recognize your place on the learning curve. Some people can't take responsibilty for their actions and accept that trading is a hard work, that's why they never come to the "average good trader" point.

    So, decide for yourself - where are you on this curve?

    The more honest you are, the closer you get to the destination. Yes, it takes time to develop and can't be done overnight. Do that work or quit!

    Not allowed!
    Last edited by Value trader; 08-08-2013 at 08:03 PM.

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