| Neil A Costa |
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"The Development of a Market Master - Part 1"
Introduction
In educational terms, becoming a professional trader, be it a part-time or full-time professional trader, requires planning, preparation, knowledge and experience. This, of course, is consistent with becoming a true professional in any field.
Understanding the path ahead can allow a budding market master to plan his or her development path in a more realistic manner, while at the same time helping to reduce the risk of the trader developing unrealistic expectations.
There are many metaphors made about trading. 'Trading is war' is a common one, and traders who believe this constantly liken aspects of trading to the corresponding aspects of warfare.
I am constantly amazed at the similarities between the characteristics of market masters, and the characteristics of leading sales people. Tom Hopkins, a world-famous sales trainer, believes that there are four stages in the development of a sales person (which originated from the work of Maslow). These are:
- Unconscious Incompetence;
- Conscious Incompetence;
- Conscious Competence; and
- Unconscious Competence.
Having assisted in the development of literally thousands of traders, I believe that Hopkins' four stages are every bit as applicable to the development of a market master as they are to the development of his 'champion' sales people.
1. Unconscious Incompetence
Unconscious incompetents are people who do not know what they do not know.
This is the stage of a raw beginner. In trading terms, this represents a trader who wants to trade successfully, but does not have a proven trading system. People at this stage do not know the difference between fundamental analysis and technical analysis; or intra-day and position trading. They are at a stage where they believe that a trading software package containing 200 indicators must make them at least twice as profitable as a trading software package containing only 100 indicators.
Budding traders who are unconscious incompetents and who have a highly developed ego, will not accept how little they know. If they are also incapable of taking responsibility of their own actions, they are a real danger to themselves.
2. Conscious Incompetence
Conscious incompetents know that they do not know. According to Hopkins, this is where they think to themselves "this is nothing like I thought it would be".
This is arguably the most frustrating stage in the life of a trader. It is also one of the most important.
In the conscious incompetent stage, traders realise that there is more to trading than 'buy low, sell high', or following a series of 'hot tips'. Traders who put hard-earned money on the line will by now be feeling inadequate and withdrawn. They sense that trading can be very profitable, but experience frustration because they are not consistently profitable. In fact, those who are not following a proven trading system in a disciplined manner, the majority of traders in this stage, could well have paid dearly for their research and development activities (also know as unjustifiable losses).
3. Conscious Competence
Conscious competents know what to do, as long as they think. They trade strictly according to the rules of their system, and their profitability would normally closely mirror the profitability of their proven system. Most successful traders follow mechanical systems, and are conscious competents.
4. Unconscious Competence
Unconscious competents are highly trained and highly skilled traders. In trading terms they no longer need to follow, consciously, a mechanical trading system, but patiently wait for a setup, then automatically take the trade. No setup; no trade.
Some of the most successful traders, or market masters, are unconscious competents. They appear to trade using their so-called 'intuition', but are, in fact, applying their vast knowledge and skill to recognize low-risk, high-profit-potential, trades.
It's A Numbers Game
Another similarity between selling and trading is that both endeavors are numbers games. Just as a good salesperson knows how many sales he or she should make per 100 prospects approached, so does a professional trader know how many winning trades to expect, statistically, from 100 trades taken. If a market master wants to make more money, extra trades need to be taken - possibly in additional markets.
This 'numbers game' approach also benefits the champion salesperson and the market master psychologically. Just as too many 'knock backs' can result in a champion salesperson feeling depressed and rejected, so can a string of losses result in a market master feeling much the same way. By looking at selling and trading as numbers games, champion salespeople and market masters know that a certain percentage of knock backs and losses, respectively, are realities of the professions they have chosen. They know that a key to success in their endeavor is not to take the knock back or loss personally, but instead to look at it as the price of doing business. Accept it, and move on to the next sale or trade.
Reference
Hopkins, T., Management Video Tapes, Tom Hopkins International, Scotsdale, Arizona, 1994.
[This article is based on an article published in the Australian Technical Analysts' Association Journal, January 1999.]
DISCLAIMER:
Every effort has been made to ensure that the content and conclusions presented in The New W. D. Gann Technical Review are complete and accurate.
No part of The New W. D. Gann Technical Review contains trading advice - stated or implied, nor is an invitation to trade. The directors and associates of Lambert-Gann Educators, Inc. are NOT licensed trading or investment advisors. Lambert-Gann Educators, Inc. is an organization designed to assist traders and investors to become more knowledgeable and independent.
The giving of advice is therefore contrary to the very objectives of Lambert-Gann Educators, Inc.
Traders requiring trading or investment advice should contact a licensed advisor.
Stockbrokers and futures brokers are licensed advisors.
Neither Lambert-Gann Educators, Inc., nor anyone else involved in the production of The New W. D. Gann Technical Review, will be liable for any liability, loss or damage directly or indirectly caused, or believed to be caused, by The New W. D. Gann Technical Review.
Traders, to be successful, must take full responsibility for their own actions.
With respect to trading results, past performance is not necessarily an indication of future performance.
By maintaining your subscription to The New W. D. Gann Technical Review, you acknowledge that you understand and accept the contents of this disclaimer.
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