Why do so many people think they can do something with confidence, courage and competence when they cannot? The so-called overconfidence bias and other heuristic biases are topics for another day. Today, I would like to focus on the Learning Ladder of Trading.
One day, you get up and realize that you are in a dead-end job and just sick and tired of being sick and tired. Your buddy has been trading the markets for a few years and doing OK...not great...but getting by. Your buddy's buddy just set up a trading account, paid thousands for software, books and courses, but is not making any money. In fact, he has lost half of his initial stake. Yet, you hear others touting returns of 100% to 1,000% gains a year, and the siren call of greed--coupled with the idea that if they can do it, you can do it better--is too tempting to resist. I mean, how difficult can it be? You just buy the right books, get the best software, go to the right seminars, subscribe to the hottest newsletter, and--with the click, click of your mouse--buy low and sell high, buy high and sell higher, or sell high and buy lower. No problem. Piece of cake.
So, you announce to your family that you are going to quit your job, become a full-time trader, monies will flow effortlessly into your account, and everything is going to change. It all seems so easy, and the seminar people are doing it, so why can't you? You are just as intelligent as the next guy.
This type of thinking borders on the delusional. Just as you cannot wake up one day and, without any formal education or training, start practicing law or medicine, you cannot become a proficient trader overnight. Get over yourself, because it just isn't going to happen.
No matter how many bells, whistles, indicators, seminars and books you surround yourself with, you have to pay your dues. You must learn that that piece of cake needs to be converted into humble pie, and that the most successful traders got that way by first getting a Ph.D. in losses at the School of Hard Knocks!
Trading is simple, but it is not easy. Successful trading and investing are skills that combine both art and science and take time, patience, perseverance and courage. In order to achieve and master these skills, one must progress on a path that is mental, emotional, physical and spiritual. For many, this is the most difficult journey ever taken. Start where you are, and understand that it is about the process, that time takes time, and that the rewards are worth it if you just keep going with passion. Without passion, why bother?
Every trader must climb the four rungs of the Ladder of Learning, and must do this one step at a time. You cannot skip a step, but if you let your guard down and do not continue to study and practice, you can and will fall down a step or two.
What do I mean by the Ladder of Learning and the four steps necessary to achieve trading mastery? In this case (and putting all learning theories and the neuroanatomical bases for them aside for now), I am referring specifically to the four stages of trading competence: unconscious incompetence, conscious incompetence, conscious competence and unconscious competence.
Somewhere in your make-up, there lies sleeping, the seed of achievement which, if aroused and put into action, would carry you to heights such as you may never have hoped to attain...Napoleon Hill
At this first stage of your trading, you are not aware of the existence of, or need for, specific trading skills. You don't know what you don't know, including that you have any deficiencies (since you don't know that there are any specific trading skills). Denial may come into play here as well, as you may think that such skills are unnecessary or not useful, and all you have to do is to subscribe to a service or hotline, or jump on the next "hot" pick, and money will come rolling into your account. In order to move to the second stage, you most overcome your denial and become consciously aware of your incompetence. Without taking this next step, you will not progress, no new skill will be acquired, and there will be no learning.
At this stage, you become aware that trading is a skill that exists, is practiced by many, and is relevant to your success. You also become aware of your deficiencies in this area by attempting to trade or practicing how to trade. This is the stage in which you begin to figure out how much you don't know. Successful traders will, at some point during this stage of the learning process, make a commitment to learn. They will make a commitment to study, to be teachable and to practice, practice and practice until they know what they didn't know before. Once you have done the same, you will be ready to progress to the third stage.
(3) Conscious Competence: You know what you know, and you can trade, but you have to think about it.
During this stage, the skill of trading can be performed reliably, consistently and at will. However, you have to concentrate a lot, and think a lot, in order to do it. It is not second nature, nor is it automatic. At this stage, you are totally open to more learning, but you are not able to teach anyone else how to do it. The only way to proceed from this stage to the final stage is to practice more and more until...eureka...one day you have reached the fourth stage.
(4) Unconscious Competence: You know how to do it, and don't have to think about it. You just do it.
At this stage, the act and process of trading consolidates within the memory and pattern recognition areas of your brain--it becomes second nature. If you are really good at it, you can trade and do other things at the same time. (I do not recommend this, however.) Certain people at this stage are capable of teaching others, but this is not universal.
In fact, it may be more difficult to teach at this stage since the skill has become largely instinctual. It is at this stage when, if someone asks you how you knew to do that, you have to pause, think and say, "I don't really know. I just did it." This is trading mastery.
Yet there is another, final and seldom discussed stage that goes beyond this. That stage is called conscious-unconscious competence. Those who have reached this stage are the best teachers, and they are rare and difficult to find. Find one of these people to guide and support you if you really want to learn how to trade.
Champions execute the fundamentals with unconscious competence. That means they've practiced the moves so many times in the past that they can do them almost perfectly without thinking about it. When you can perform brilliantly without thinking, you can perform at a very high level...June Jones (head football coach, University of Hawaii Warriors)
Janice Dorn, MD, PhD
Market Psychiatrist
Financial Neurobehaviorist
Trading Mentor and Trading Coach
One Of Our Trading Days This Day In The T123 Trading Room
11:19:09 {jossam} Let me try. JL calls out the buy and sell. If you can't follow that, please concentrate on breathing so you don't accidentally pass out.
14:36:33 {YoZoneTrader} i've eaten so much tuna, cats now attack me!
General
07:29:51 {steveu} JL this is great with all these short term trades ...and thanks for bringing spooky on!!!
08:23:09 {Mmellow} THIS IS GREAT JL
08:23:17 {Mmellow} REALLY NICE
08:24:04 {Smo} JL - Looks Great! Thanks!
08:24:05 {Rose} Thanks JL, looks great!
08:33:52 {ME} FOR DAY TRADING THIS IS GREAT. IT COULDN'T BE ANY EASIER THX
Regarding MTL short
08:35:57 {Donald-L} nice call!
08:36:07 {Paul} up $4 already
08:36:15 {Paul} nice
08:37:01 {craig5
08:37:29 {trending123} Thank You
08:40:52 {ME} SWEET
08:42:48 {dwg} raking it in
08:42:50 {beeji} fine
08:43:19 {Rose} You are doing great John!
09:39:02 {Paul} look at MTL, nice
09:43:39 {BOBST} Thank You ! jl
Regarding CSIQ
08:48:45 {yole} csiq in 18.59 out 19.62
08:54:25 {pricey} JL, thanks for csiq & edu!
09:49:43 {Roger} CSIQ is running again!
09:59:40 {jim} Thks JL good trade
10:00:01 {Timothy} Thanks JL, out +.94
10:00:04 {bdave} Thanks JL
10:00:27 {Mmellow} THANKS
10:00:33 {Mmellow} great stuff
10:00:43 {Mmellow} FANTASTIC!?
10:00:49 {jim} This is how I like to trade fwiw
11:49:37 {Roger} 3rd CSIQ!
EOG
10:30:06 {Brick} first ever short trade...sweet
10:38:01 {Parv} eog puts i'm up 27%
10:43:09 {Kato} Thanks JL, out
10:44:03 {Kato} Thanks JL out EOG
options +20%
10:44:13 {Parv} Thanks John, out
10:44:18 {Parv} eog
10:44:46 {Timothy} I did, but not booked yet
10:44:52 {Timothy} Booked half at 200%
10:44:57 {Timothy} letting the rest ride
10:51:30 {CJ} THANKS John for EOG play good profit
10:51:59 {Mike_in_Mn.} Out on EOG w/34%
10:53:02 {jas} thanks for the eog 1.89 profit
10:53:35 {Timothy} eog 10 contract +27%, thanks John!
10:54:33 {kenk} out, up $2.13/share
10:54:54 {rafa
10:55:54 {BOBST} in @7.3 out @ 8 EOG +700 in 63 minutes Thank You ! jl
10:57:53 {Torro} Thanks JL, just made 25% on EOG Feb 80 puts
10:58:28 {Chad} Bot EOG Feb 85 puts at 2.50 -- just sold for 3.20 -- .70 profit in hour and half - Thanks!
10:59:31 {Don_P.} 1/17/2008 (Private): THANK YOU ... WORTH The reup!!!!
**11:21:38 {M.A.T.T.} I was in EOG at 87.99, out at 86, and EOG puts in at 7.2, out at 8.1. Thanks, JL.
**11:34:51 {M.A.T.T.} Purvee, I was in EOG at 87.99, out at 86, and EOG puts in at 7.2, out at 8.1. Thanks, JL.
11:21:47 {BR_from_Seattle} Earlier I got in EOG @ 7.30 out at 7.80
14:32:44 {Money_Hunger} EOG in at 7.3 out
at 8.7
Others
10:45:01 {paris_hilton} out of apa 50% thanks
10:45:01 {Parv} booked 73% on Pot shorts
10:52:32 {atti2dok} I was in and out of RIMM for a profit
10:53:26 {atti2dok} 250 on RIMM
Regarding trades to this point in the morning
11:20:25 {DR_SEZ} nice
11:20:42 {tricks} luv u JL
11:20:56 {DR_SEZ} I luv it
11:20:59 {Donald-L} much fun!!
11:21:04 {ME} awesome im happy
11:21:04 {DR_SEZ} listen to JOHN
11:21:04 {Mmellow} ITS
11:21:07 {Mmellow} PEFECT
11:21:09 {Kris_K.} GREAT!
11:21:10 {bluejay} Having a blast
11:34:14 {bluejay} John Just got to say Luv You when you are rocking like this!!!!!!!
11:34:36 {Chuckwagon} I like this!
11:34:38 {pivot} goody goody!
11:34:39 {Mmellow} and twice on SUNDAY
11:34:45 {bluejay} Luv to do this everyday
11:24:12 {M.A.T.T.} JL, for the record, so those reading the log later today can see. I am following your trades and every one I closed out today has been profitable.
13:50:54 {snewel} congrats that's a great day
13:52:02 {Lazer} john, good job, thanks
13:52:07 {Larry} Thanks JL!
13:52:41 {er50} what a great start for the room in 08!!!.....exactly jossam
13:53:02 {colts} good day trading day John, thx
13:53:16 {bdave} Only made 10% of yesterdays haul, but very happy...Thanks again John
13:53:46 {Bigjake} Jl can we do this everyday please
13:54:55 {harry} John Thanks for the day trades Lots of fun and the money is not bad !!!!!
13:55:41 {CJ} I made money today and anyday I make money is a GOOD day, THANKS JL !!!
13:55:55 {Bigjake} JL today was the most fun day in a long time lets do this everyday !!!!
13:57:15 {Sam} on John's trades I netted $2100 so I for one am grateful
13:58:11 {Lazer} I was in for a short time only.made $289. thank you,
13:58:45 {Lazer} very happy
14:00:29 {Lazer} john- it should read short time only , still made $289 very happy.
14:34:19 {lg2004} 50 more points, one more day like today
??13:59:33 {Ed_Ryan} $289 x 250= $72,250. Not bad lunch money
15:01:58 {Mmellow} THANKS
15:02:02 {Mmellow} GREAT TRADES
15:02:00 {Mutzie} thanks John, good day
15:02:00 {Money_Hunger} thanks
15:02:01 {beeji} great for taking profits
15:02:06 {er50} good day !!
15:07:15 {er50} no doubt..best day this year...so far!!!
15:02:26 {Tomas} Thanks John - that was fun !
15:03:04 {BOBST} GN jl Thanks ! !
14:43:54 {eg} eg I have learned a valuable lesson about buying and holding- so thank you
14:21:38 {Quix} 1/17/2008 (Private): John , I didn't mention it in the room, but yesterday I
ought 10 17.50's of CSIQ @ stock price 16.25 and sold this am for $1704.00 profit. Thanks
