Over my 13 years of trading I recognised that I went through a long development process, the journey if you wish. I recognise 3 main stages that a trader goes through. It’s important to name and characterize them so you can see what stage you are on so you can speed up your trader’s career.
Stage 1 – Invincible Novice trader
A person that recently discovered FX trading.
He is very attracted to how easy it is to open an account and trade. He is likely to be in a financial trouble and he is looking for a way to get a lot of money quickly. Forex looks like the way to go!
- Spends hours in front of the charts littered with indicators watching every tick of the price
- Trades often and typically takes a lot of risk. His losses are larger than gains as he cut his winners short
- Spends hours on FX forums talking to other novice traders looking for confirmation of his actions
- He doesn’t put much emphasis on fundamental market analysis. He believes he doesn’t need it
- He thinks brokers are pure evil trying to get him and his money
- He consistently loses money, but he doesn’t know why
- He thinks it must be the strategy he uses so he keeps searching
- Odds, statistics or human biases are not at the forefront of his mind
He will trade between 6 months to 2 years, losing on average $6K in the process. He will move from one system to another, looking for the perfect one but never explores any.
Most novice traders will eventually give up.
It’s important to all traders to experience this stage.
It’s also important to get past Stage 1 as fast as possible
Some novice traders will stand back and realize there is something wrong going on. They will try to find out what it is, so they start to learn:
economics, finance, statistics, risk, psychology.
After a while they start to put the puzzle together and they go back to trading a small demo account. They are now in stage 2
Stage 2 – Matured trader
This is like waking up after a bad dream
A Matured Trader made a few typical mistakes and lost a substantial amount of money, but he learnt from his mistakes and he is willing to keep going.
His dreams about independence and passive income are very strong. Sometimes, this is the only thing keeping him motivated.
He is committed and passionate.
He has some clue about markets and economics, but he struggles with consistency, risk management and managing his emotions. It’s possible he is a bit older, he can reason more and has a better understanding of odds and risk.
- He will read anything he can put his hands on about money, banking and financial markets. He studies successful traders as he is fascinated by them
- The Matured trader doesn’t spend much time on forums. It’s a distraction to his analysis and a pure waste of time, instead he spends time learning, reading and testing new strategies
- He narrowed down the pairs he trades to only a few – this maximises his learning curve
- He has a clear trading plan. Through testing and an empirical evidence, he knows what works for him and what doesn’t
- He is not afraid to spend money to build his knowledge and skills to speed up his development
- He studies his own behaviour to learn how to manage his own biases and emotions
- He understands the impact banking, finance and politics have on the currency markets
In general, this is the longest stage and it takes anything from 2 to 6 years, depending how much time you are able allocate into studying around your day job. It’s a pleasure to go through this stage. It’s exciting. A Mature trader is likely to have either a profitable demo account, which he traded in the last 2 years or a small live account with an above-industry average return.
Hint: Once you recognise you are a mature trader allocate as much time to learning and progressing as possible. The quicker you get through it, the more money you make during your career. You have enough evidence now to suggest that you will make it
The transition to the 3rd stage is often difficult to recognise. It could be that the mature trader is already in the 3rd stage.
3 – Proprietary trader
Last stage when experimentation and testing meet superb execution at scale
A Proprietary trader is a self-driven professional with an objective to build up a massive account, so he can retire early with his family.
- He has a daily trading routine which he executes with no failure
- He has 100% confidence in his approach and strategy
- He understands that trading is a business and he treats it as such
- Most likely he raised trading capital to invest in his strategy
- He has a superb approach to risk and his profit expectations are clear
- Capital preservation is his only objective
- He always expects his worst drawdown in his career and plans for it
- He has an entrepreneurial daily habit of reading, testing, learning and progressing
He has a substantial trading account funded either by himself or by bank loans which he pays off from his trading profits. He has a clear retirement plan. He is still likely to have a day job because his choses to. He likes his day job and he has no pressure to leave it. Trading profits double his income and he decides to re-invest it rather than draw a wage from it. He grows his capital quicker this way. He is a winner. He loves it and he wouldn’t swap it for anything else
We all must go through these stages. You can’t skip or avoid them
You need to get through stage 1 and 2 as quickly as possible.
You must do it through:
- Recognising where you are
- Where you want to be
- Being lean and efficient about your learning and developing.
My mission at Humble Traders is to get you through the first 2 stages as fast as possible.
(You will not need me in stage 3)
I will do it by providing you with most relevant information, top quality advice and content, so you don’t waste your time and money on bull sh*t that doesn’t work.
Unfortunately, only a small amount will go through the first 2 stages and still trade, most will drop off along the way…