4 Forex Trader Development stages every trader must pass

Almost every trader finds himself going through certain development stages while trading the Forex market. I have highlighted the 4 Forex Trader Development Stages that every novice should pass.

AtoZ Markets  Learning Forex trading is a psychological process. While a novice learns to trade, in the same way every single trader progresses through development stages. Additionally, in my last article, I outlined tips on how to make profits like a pro trader. Today, we will discuss 4 Forex trader development stages that every trader passes in his/her trading career.

4 Forex Trader Development Stages

consciousunconsciouscompetence2As per most of the successful traders and educators, the well-known learning model for trading is the “4 Forex Trader Development Stages of Competence.” This model illustrates the stages through which a Forex trader transit while developing a new skill or learning a new behavior. Moreover, it also describes how novice progress from unconscious incompetence to unconscious competence in 4 easy steps.

#1: Unconscious Incompetence (“I don’t even know what I don’t know”)

In this first stage, the traders do not know that they lack in trading knowledge. They are also unaware of their own ignorance. This is the stage where the novice trader will take first few steps by downloading a trading platform.

Then, open up a small trading account and begin to place trades and proceed to lose the money. Ultimately, the trader will either move to the next stage or may stop trading altogether due to the losses (see how to return back after a big trading loss).


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#2: Conscious Incompetence (“I know what I don’t know and I still cannot do it”)

Moving onto conscious incompetence stage, traders believe that in order to trade better, they need to gain more trading knowledge. This stage is the most dangerous for any novice trader. To know if you fall under this stage, ask these questions to yourself;

  • Am I using a trading journal?
  • Have I stuck to a system?
  • Do I know the reason behind entering or exiting a trade?
  • Do I look over previous trades?
  • Am I taking the responsibility for my losing trades?

If any of the above questions answer “NO” then it shows that you are stuck in this stage. For being a trader, the development from this stage to the next stage (Conscious Competence) is straightforward.

#3: Conscious Competence (“I know how doing it and it takes focus and energy”)

Upon reaching conscious competence stage, the trader excels understanding to avoid running after winning trades. During this stage, you still need to be disciplined. However, it will become easy to manage the losing trades as you will realize that it is part of the system.

Over the course, the trader gets an edge over the market. He has developed his own protocols and system to work on. Many times, he is able to control his emotions as he is much more aware of them and he realizes how they will impact on his bottom line. By progressing on gaining trading experience, a trader moves to the final stage.

#4: Unconscious Competence (“I have embodied the skill and I can do it effortlessly”)

In the next progression, from Stage 3 to Stage 4, the trader has learned trading strategies and understood the trading psychology well. He knows how he can perform complex trading tactics and very well manage risk. Moreover, he can understand different market conditions and adapt his trading style accordingly. Additionally, he has confidence in his skills and can apply when required.

Once the trader trades with so much practice that he can easily trade in an almost automatic mindset, this signals him to have attained this stage of unconscious competence. Moreover, a disciplined approach entails very little effort and this becomes second nature.

A golden rule to excel is that it is not possible to jump stages. Every trader has to progress through all 4 Forex Trader Development stages. No alternatives or shortcuts.

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