Stage #4
As time has passed from stage #3 you start telling yourself that if you trade again you will do everything different and that you will not take trades against the trend and you will obey your stops this time. Since some time has passed from stage #3 you are starting to become positive on the markets again and the negative thoughts are starting to turn into thoughts of you can do it if you just had some rules. (this is where it gets dangerous)
You might go on some free education sites and you start to learn every method you can in hopes to find the one that is right for you. You are still looking for the magical indicators but you have a different view on the markets because you have told yourself you will follow the rules. It is important to know that most trading rules are not good and most methods are not good but you will most likely try to learn them all thinking the more you know the better off you will be.
In reality what is actually happening in this stage is you are building bad habits and you are building confidence in the “main stream” way of trading which does not work. You will learn a lot in this stage but most of it will end up to be things you should not do but when you are in this stage you are told these are things to do. This is where the danger lies.
Your charts will have too many things on them at once and you will most likely use too many time frames. In reality you are adding more confusion into the charts and into your thought process. One day you might use one method and the next day you use a completely different method. This is very dangerous because you might be over analyzing the markets thinking there is a perfect set up that works in all market conditions.
In this stage you eventually find out that standard indicators have very low value but you still use them because you have no other way to look at the markets. You are now trying to predict if the indicator will be right this time. Most likely you will have very low confidence and still feel like you are gambling.
The result:
You are too confident because of thoughts you tell yourself about how “this time I will do it right” but you are still learning things that do not work because you do not understand the condition of the market or even the direction at this point. You are thinking that in using 3 standard indicators on your chart you have a edge but in reality everyone has those indicators and for the most part standard indicators will harm you more than help you.
Putting too much value on things that have low value is dangerous for your long term education because you are building bad habits that in later stages will have to be broken. Usually this stage is longer than stage 1-3 combined because you are constantly searching for new things to add into your current methods. In flip-flopping thoughts and methods you will actually add more confusion at the end of the day. At this point there is still nothing consistent with the way you look at the markets.
Stage #5
After being in stage #4 for an extended period of time (2-4 years) you might see someone predict the markets on a bigger level or you join a live webinar where you see something that opens your mind to something new. This is where someone predicts the market on a bigger scale than you have ever seen. Maybe it is a 10 point move or maybe a 40 point move over four days. You see the predication come true and the light goes off that inside of that move all the indicators you are using told you to do the opposite of the prediction meaning; you would have actually went against the prediction and lost money using the standard indicators.
Along the way maybe someone says something in a different way than you have ever heard before and you start to realize that what you are doing is not really trading but more gambling on what the market will do for the next 2 points.
You will see the value but you will not buy into the fact that anyone can actually predict the markets or have a true trading edge because of your personal journey up to this point. Maybe the guy that predicted the market was lucky. Since you have bought education and indicators in the past you are not about to join another group because it is a waste of money but you will continue to lose money trading. You will always think back to the time when you saw the prediction come true and even though you will not buy into it, it will still be in your mind especially when you have losing days.
In all the stages up to this point you are most likely trading counter trend and trying to pick tops and bottoms on a small time frame. These methods are the “easy” systems all over the internet.
The result:
You are starting to see how others trade and look at the markets and you are starting to realize that what you are doing is not trading, it is gambling. You have learned a lot in this stage but the methods you are learning are methods that should not be used and they will not be used in later stages of your trading journey you just don’t know that yet.
In all the stages up to this point you are trying to manipulate the markets for your own risk and emotions but you will learn that you must trade the market for what it is. You are just a participant in the markets not the creator of the markets and you cannot manipulate it for what you want. It is better to flow with the markets and not try to fight it or over think it.
Stage #6
At this point you know you need to get a true market education but you are not ready to commit to something because you might fail and it might feel better to stick with what you are currently doing even though you know it is not working. You are taking trading more seriously but you still do not know the questions to ask yourself and you still do not have a method which leads to low confidence.
This stage is actually a good stage because now you are searching for different things with your education. You have most likely unsubscribed from all the BS email lists and you are now starting to see that not every website that teaches the markets are the same. You also understand that trading is not gambling because you have been humbled a few times. While you still might think that trading is very hard you now see it is not impossible if you really take took it seriously and dedicated money and time to learn how the market really works.
At this point you are most likely looking at three – four different more complex methods. It is hard at this stage to make the right decision on which group to join because you are advancing to a higher level than before and you are not sure which style is right for you. This is normal and there is no right answer and this is why at this stage you will still have to go through a few courses before you know what fits your emotions the best. You will most likely go with the course that promises the most but you are a smarter trader at this point so you will not just jump in. It is best to take your time and see multiple examples in video and text so you know it is right for you.
Side note: if the method looks even 10% counter trend skip it. It is important at this stage to not fall back into the methods of stage 1-5. It is best to continue forward with more complex methods that trade with the trend. By default if you understand how to trade with the trend you will understand how to trade counter trend.
The result:
You are now on the right path but you are new to this level of thinking so you will not be a changed trader over night it still takes time. It is very important to not fall back into the hype of the markets at this stage and push forward and remove all the standard indicators off your charts and learn the patterns of the markets. This stage is going to be important on so many levels but the main thing to walk away with is that in this stage your job is to break the bad habits from stages 1-5 and stay focused to the new level you achieved.
If you can stay with it you will be on your way to being a trader. Not only a trader but a better trader than the person teaching the courses you have bought up to this point. The things you have learned in the first courses now seem crazy to you and that is because they are!
We will continue with stage 7-10 on the next post.
Happy Trading,
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