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Four Stages Of Awareness in Trading
By Price Headley | Published  11/1/2005 | Currency , Futures , Options , Stocks | Unrated
Four Stages Of Awareness in Trading

Have you ever noticed that awareness is the first step toward future growth? If you want to improve in any area, read on below to understand the four stages of awareness as they relate to good trading.

The learning curve in any endeavor involves four stages:

  1. Unconscious incompetence (where the trader has no idea how much he doesn't know about trading)
  2. Conscious incompetence (where the traders realizes after initial losses that he has a lot to learn)
  3. Conscious competence (where the trader has developed and is now doing well as long as he works his system and its rules)
  4. Unconscious competence (where the trader has mastered the rules and also knows when to break the rules as conditions change, in a complete flow with the markets based on great experience)

One of the biggest problems beginning traders face is not having a defined method or system to tell them when to get in and out.  This leads to ego-based decisions which ultimately make it harder for the trader to pull the trigger due to increased uncertainty and overthinking the position.  The way you avoid thinking too much during the trade itself is to practice consistent execution of your system's trades.  This takes you from the conscious incompetence stage where the trader has not learned how to execute, to the conscious competence stage where you know that if you just focus on consistent execution of your plan, you can expect to win more consistently over time.  It also is less stressful on your emotional state, since a systematic trader takes his ego out of the game and focuses on execution.

Every trader who wishes to improve his bottom-line results must decide what area most needs attention right now.  The trader must start by taking an honest self-assessment of strengths and weaknesses, prioritize the highest impact areas and then focus on changing one behavior at a time.  Most ambitious traders (myself included) have at one time tried to tackle too many issues at once, only to not produce the desired change in any of those areas.  Change takes time.  Just as a golfer hitting a drive or a basketball player shooting free throws has developed a certain "muscle memory" for success by repeated practice, so too have you created a muscle memory for your mindset, both in trading and in all areas of your life.  The hardest part of the process is changing that memory from one that hasn't worked to one that will produce consistent results.  But once your mind starts to recognize and get comfortable with these new procedures, maintenance of the change will be much easier.

You must commit to one objective and focus on it. Give yourself a month to work on a given issue, focusing on it each day in your trading journal.  Set up potential solutions and then try them out to see if they fit your personality.  Create a method to measure your progress.  Do you have trouble taking a loss at your pre-defined stop objective?  Trade very small for a month, and just work on following your system and taking each loss.  The financial impact will be small for a month, but the discipline you instill will last you for years if done properly.  You can take this approach with any issue you face.  Just remember to stay focused on one habit at a time until you are confident you have mastered it.

Price Headley is the founder and chief analyst of