Embarking on a Trader's Journey: Navigating Development Stages
In the ever-evolving world of trading, each individual embarks on a unique journey filled with learning, challenges, and growth. Just as a ship sets sail, traders navigate through distinct phases of development, each contributing to the foundation of their trading career. This exploration takes us through the intricate stages of a trader's development, offering insights into what to expect and how to thrive in an ideal trading environment.
From the initial learning phase, where the emphasis is on building a solid knowledge base and gaining experience, to the pivotal development phase, marked by full-time trading and honing strategies, we delve into the gradual progression that defines a trader's path. The trader/scaling phase opens the door to profitability and scalability, propelling individuals toward self-sufficiency and the potential to make trading their profession. Lastly, the phase of "becoming you" signifies the culmination of expertise and autonomy, where traders take the helm, driving their trading destiny with confidence.
Below we will endeavor to explore the simplified blocks or phases of an individual's development from absolute beginner, to a trader looking to scale their already profitable trading and grow their trading business.
Trader Development
New Trader - Learning Phase.
Duration: Dependent on the trader, but I would recommend allowing 2 years. Account: Your account should primarily consist of demo trading or a very small amount of capital (around $5k).
Description: During this phase, your focus should be on engaging in the markets with either a demo account or a minimal amount of capital (like $5k). This isn't the time to aim for instant wealth; rather, it's an opportunity to build your knowledge base and gain experience. The foundations of your career will be formed here. Rushing and impulsively investing money may lead to losses and a cycle of frustration. Your account balance could decrease, emotions could cloud your experience, and lessons might not be learned effectively. The following areas are crucial to concentrate on:
- Macro: This includes understanding economic releases and their impacts on various markets, not limited to stocks but also encompassing base currency, bonds, gold, etc. Learning about central banks and related topics is essential.
- Stocks: Grasp quarterly reports, mining results, and all factors influencing stock movement. Embrace asking basic questions and embracing your newness. Adopt a learning mindset, asking questions more than speaking. Remember, learning never stops. This means being prepared to wake up for US economic data releases, observing live reactions to central bankers' speeches, and closely monitoring markets instead of catching up later in the day.
- Be prepared to learn from solid mentors who can elucidate market moves and help you develop a flexible mindset in response to market actions.
Warning: The quality of your learning during this phase is pivotal. If you spend this time learning from unreliable sources or misguided individuals who think they're in later trading phases, your journey might become challenging. Seek reputable mentors and reliable resources to truly understand market dynamics and actions rather than opinions.
Development Phase.
Duration: Depending on the trader and results, this phase typically spans 1 to 2 years.
Account: Transition out of demo trading, but maintain a relatively small account size in relation to your overall financial position.
Description: This phase marks full-time trading. You'll experiment with strategies while continuing to learn about the markets. You might experience fluctuations in your profit and loss (PnL), but this is the time to apply the knowledge gained during your learning phase. Gain insights into your risk management style and tendencies, whether you lean toward taking risks or keeping them conservative. These traits will become evident in your results. While not the phase to amass a fortune, progress in results is anticipated. Explore different trading approaches such as swing trading or scalping to identify what suits you best. Remember, the duration of this phase can vary as everyone learns at their own pace.
Trader/Scaling Phase.
Duration: The next two years and beyond.
Account: By this point, profitability should be established, and your account size can align with your comfort level.
Description: Entering this phase, you should have achieved profitability during the development phase. You possess a strong grasp of market movements, risk management, and trading mechanics. Your trades are consistently profitable, and your trading has reached a scalable level. Your PnL should be sufficient to support you financially, potentially becoming your primary career. Whether you have moderate living costs or higher, your trading has transformed into a profession. Congratulations on this achievement!
There you have it. The phases that almost every trader will need to get through in order to get toward the end goal - trading for a career.
Hopefully, this helped you understand and possibly help you even map out your own path to profitability. Most of all, I hope this helped new traders gain some perspective on the time it takes to become a consistently profitable trader.
It doesn't happen overnight, like people on social media would have you believe!
Happy trading everyone!