Understanding What It Takes : 4 Stages of Day Trading Competence

Being a day trader for over 10 years, I have seen a countless amount of people fail, win, and stay in a middle-of-the-road state.  One of the reasons that my training program is so effective is because I have been in each one of those stages.  In order to teach somebody how to day trade it’s important to know what it takes.

The idea of the LTD Project is to publicize and chronicle the learning process to become a professional day trader, to show you what it takes.

I have already started talking about the people that I have selected and now it’s time to start thinking about the education process and the different levels of expertise.  I think it is very important to understand the different stages of competence because if you find yourself in one, the first step to solving the problem is to identify it.

As I write this at my office in Brazil

In psychology, there are four different stages of competence:

• Unconscious competence
• Conscious incompetence
• Conscious competence
• Unconscious competence

This is for any skill and especially day trading. In learning a new skill, the idea is that everyone goes from knowing nothing (unconscious competence) to knowing something about the new skill and making a concerted effort at learning it (conscious incompetence). This part of the process is making mistakes and learning from them.  I started day trading eminis almost 10 years ago and it took me almost 2 or three years to become profitable.

Once you start to understand the new skill (conscious competence), skill development ensues and knowledge is built. While this skill is understood in this phase, the concept of day trading is understood and you are actually practicing, the ability to effectively use the new skill is still not there. Ergo, sim trading to build consistency.  Ninja Trader is the best platform to practice with.

My very first Day Trading Office

Once you have built enough skill development, this is where the new skill becomes second nature (unconscious competence). This is where 3% of day traders that actually make money in the markets are at.

In reality, only 3% of traders actually make money and make a living in this industry

Only 10% of traders make money and those 10% are in the conscious competence and the unconscious competence phase. In other words, these are the trader that are making some money are making a killing. 7% of all day traders that make money are not making a living doing it, these are the guys that are making some money but are not consistently profitable.

These are the guys that we all look up; they don’t have many losing days, drive around for Ferraris, and moved to places like Brazil and Colombia.

Ferrari’s are so overrated.

I am writing this post after I have already started training a lot of the members of the LTD Project and I can tell you already that some of them have gotten caught in the process. The idea is to make sure that you have a solid foundation and there were some members what I had to go back and explain things to because they didn’t review it in detail at the beginning.  I have had many of them go back and redo exercises in the curriculum to make sure that they have a clear understanding of the indicators.

Once a clear understanding is met, the only thing holding us back from making a living day trading is ourselves. you don’t have to rely on anything else and you can even make money in a recession.  Day trading is an emotional activity because there’s no one else to rely to and it is your money on the line.  The positives definitely outweigh the negatives but it is important to hold a level of accountability to yourself and a very high level of discipline.

The idea is to make sure that you learn things the right way from the beginning;  it takes a lot more work, it is more boring, and you won’t have instant noodle results.  You will however, see results in the end.