We all feel down at some point in our trading career. Just like a heartbreak, a devastating big loss or series of losses will make you feel miserable and more often, you are looking to quit. This is the time you are already conscious that you are still incompetent in the craft of trading. You know, deep inside, that you do not know anything yet.

If you have come to a point that you are aware and conscious that the craft of trading is not as easy as you think, then congratulations, you levelled up from the Infancy Stage. This is where most traders realize that the promised quick money, passive income, and life by the beach is not aligned with what they have been expecting.

Conscious Incompetence Stage is where most traders quit, get stuck, or worst is that they revert to the Unconscious Incompetence stage and have that never ending cycle of non-profitability.

Common Characteristics of Traders in the Conscious Incompetence Stage:

Finding the Holy Grail

With a recent heartbreak with Ms. Market, traders embark in a quest to find the perfect strategy, THE HOLY GRAIL. They begin increasing their knowledge by going to trading groups, applying for seminars, reading books, watching YouTube videos and finding mentors/gurus that might help them in their search of that holy grail. They are the most active in finding ways to perfect their trading and investing style.

Risk Averse and Fearful

Since that traumatic losses, trader become Risk Averse. Unlike in the infancy stage when they are just buying in FOMO (Fear of Missing Out), this time they have this biased mindset that the price might go down if they buy. Traders will be unable to execute their setup quickly resulting to missed opportunities and more heartbreak for them.

Heartbroken

From being one of the happiest and loudest in social media, traders become quiet at this stage. Some traders might come to the point of depression. If you experience depression, I highly suggest you seek professional help to get you through this phase. Talk to your loved ones or to fellow traders so that you can release the burden of what you are feeling during this phase.

How will the Conscious Incompetence Stage end?

This is the stage where you will truly know yourself and find out if you still want to continue this path. Just like in any romantic movies, the leading couple always have their ME time or soul searching to find what is wrong with them that might have caused the break-up of their relationship. If you are AWARE what you need to improve, ACKNOWLEDGE it, put an ACTION to it, then this might be the start of the ending of this Conscious Incompetence Stage.

How to Overcome the Unconscious Incompetence Stage?

Quit searching for the holy grail. It is important that you increase your knowledge in trading but to fasten your learning curve, you must know the deeper purpose on why you pursue the craft of trading. It will always fall in your commitment to re-assess.

Re-assess yourself. Maybe you are trading against your personality or availability. Maybe there are habits that you need to change for you to be more productive. To accelerate your learning curve, first, work on the things where you can focus.

Focus. Know what you really want to achieve and grind for it. Focus on mastering one strategy at a time to start earning from the market consistently earlier than others. Know why you are using it and how it will help you in attaining your goal, in achieving mastery.

Mastery of the basics and self-mastery. These two things must come hand in hand. Grasping both will give you a good understanding on how your system works with confluence to your goals as a trader or investor.

Only traders that can find that Aha! Moment in their trading career will be able escape this stage. To find it, you must search this within yourself. Remember this quote from a famous movie; “Everyone fails at who they are supposed to be, Thor. The measure of a person, of a hero…is how well they succeed at being who they are.” (Frigga, Avengers: Endgame).

Contributor:

Full Name: Jan-Angel Echano
Investagrams username: @Soral

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About the Contributor:
A passionate trader who aims to share the reality, the HOWs and the WHYs in trading. My goal is to help traders and investors like me to continuously improve and refine our skills to the path of mastery.

Everybody takes a trip to Chinatown at least once in their trading journey. It is painful to see red numbers in your portfolio, signifying a loss, which can oftentimes really take the fun out of trading in the stock market.

If it makes you feel better, even the top traders in the world experience losing a significant amount of money if not all, before getting to where they are right now. Bouncing back from a loss isn’t an easy feat, but with hard work and dedication, it could be easy as ABCDE.

1. ACCEPT

The first step to recover from a loss is to ACCEPT that the loss is your own doing. No one else is to blame for the loss besides you. If you still blame others for the loss that you have incurred, then you are still a long way from recovering the money that you lost. This can be very hard for most people since blaming others is easier than taking responsibility for your own actions, but as they say, the first step is always the hardest.

2. BENCHING

The next step isn’t necessary, but can be very helpful to get you back in shape before you start trading again. BENCHING yourself may suck because we feel the need to immediately get back our lost funds, however this urge is going to be the next reason for yet another loss.

Take a minute to assess what went wrong last time, what you can do about it, and what actions to avoid next time. No one likes to be benched, but even the greatest NBA stars need a break. Think of this as your personal consolidation phase, you’re just charging up before you rocket back up!

3. CREATE

Just because you’re on the bench doesn’t mean you’re out for good. Take this time to CREATE a new plan before you get back in the game. Don’t just create a new plan, but think critically and assess everything that happened in the previous plan in order to create a better one.

This is also the best time to spot entry opportunities in the market where your chances of winning are higher. If you do this step correctly, you wouldn’t just make up for the money that you lost, but you will also add more to your bank!

4. DIGEST

You’ve accepted your mistake, you’ve taken your break, and you’ve created a new plan, the next big step is to DIGEST everything and look things beyond trading. You may be the family man, the breadwinner of your home,  or even the superstar of your company’s basketball team.

There is a lot more going on in your life besides your journey in the stock market, and that is why you shouldn’t let this setback affect everything else in your life, especially the ones that you are good at. Digest everything in your life and know that you are worth way more than just a single loss.

5. EXECUTE

Lastly, EXECUTE your comeback. Get back into the ball game stronger and more prepared. Stay motivated and keep your eyes on the big bucks. Keep in mind not to get greedy when green numbers come in. Stick to the game plan and trust everything will fall into place. Remember, ang bida laging talo sa simula. Same goes in trading.

Have you ever experienced an emotional roller coaster ride when it comes to trading the markets? In most cases, most traders have experienced this otherwise. The most common experience for an aspiring market participant is feeling a plethora of emotions before executing a trade; afterward, the trader cannot enact their well-planned transaction.

There are also other occurrences that a trader both undergoes a plethora of emotions before executing an unplanned or impulsive trade while also being unable to perform the said transaction. It’s a double whammy, as they say. The said situations are called Analysis Paralysis. 

Despite all these similar events that transpire every day, many individuals still think that their system is their main problem. It seems that several traders do not value the aspect of Trading Psychology in their respective systems, thinking that it isn’t mechanical in the sense that it isn’t a buy and sell strategy towards financial assets. 

It is a non-negotiable for aspiring market participants to heed their mentality when performing their trades. Experiencing the Analysis Paralysis is a taxing occurrence, and the solution to the said problem is quite simple, yet many find it hard to do.

Traders should plan their trades during cold hours or outside market hours. Moreover, traders should accept that we won’t grasp every opportunity in the markets as it happens every day. Once you have embraced these facts, you can avoid solely using unnecessary emotions in trading.

Discipline and patience also play a significant role in this step. The trader must follow their trading plan with 100% accuracy and the patience to enact their trades once the opportunity presents itself. The thinking and planning part of this endeavor must be initiated while the said market sleeps. 

Besides mastering your strategy towards the markets, one must start from the premise that the solutions are in your head and not in the market itself. As the say, trading is 80% psychology and 20% methodology.

A market participant’s strategy is nothing if the end-user is perhaps afraid to execute their trades. One must see the financial markets from an objective perspective while eradicating unnecessary emotions that distort your trading methodology. 

Then again, this is easier said than done. It is impossible to learn and accept these concepts right away. Trading the financial markets is a lifelong endeavor that requires an individual to commit their so-called deliberate practice or 10,000+ hours to this craft.

Managing their emotions will take time, but the individual must put in their conscious effort to apply the change. Individuals who accept the inevitable aspects of trading, such as the risk involved and the occurrences that we don’t have control, such as price behavior, do not perceive anything about the markets as unpleasant. To function as a professional trader, the said market participant must align their mental environment this way.