TRADING WISDOM
February 4, 2007
Janice Dorn, M.D., Ph.D. trending123.comSO YOU THINK YOU CAN TRADE?
You can have anything you want if you want it desperately enough. You must want it with an exuberance that erupts through the skin and joins the energy that created the world…Sheilah Graham (U.S. columnist, 1904-1988)
OK, I fudged the title from the TV sensation "So You Think You Can Dance?" I am also responding to a request posted on the Trading Wisdom message board on www.trending123.com. Ask and ye shall receive, so keep those posts and questions coming!
Having been a dancer since age 5, I actually thought I could dance! That was before I watched these amazing young dancers battling it out week after week, one by one falling down, getting up, getting safe and getting booted. The field continues to narrow until, one day soon, the winner will be chosen. These people have talent, training and experience. So what separates the winners from the losers? Passion. Pure, unbridled passion. That is what separates the winners from the losers in dancing, life and trading.
Why do so many people think they can do something with confidence, courage and competence when they cannot? The so-called overconfidence bias and other heuristic biases are topics for another day. Today, I would like to focus on the Learning Ladder of Trading.
One day, you get up and realize that you are in a dead-end job and just sick and tired of being sick and tired. Your buddy has been trading the markets for a few years and doing OK…not great...but getting by. Your buddy's buddy just set up a trading account, paid thousands for software, books and courses, but is not making any money. In fact, he has lost half of his initial stake. Yet, you hear others touting returns of 100% to 1,000% gains a year, and the siren call of greed—coupled with the idea that if they can do it, you can do it better—is too tempting to resist. I mean, how difficult can it be? You just buy the right books, get the best software, go to the right seminars, subscribe to the hottest newsletter, and—with the click, click of your mouse—buy low and sell high, buy high and sell higher, or sell high and buy lower. No problem. Piece of cake.
So, you announce to your family that you are going to quit your job, become a full-time trader, monies will flow effortlessly into your account, and everything is going to change. It all seems so easy, and the seminar people are doing it, so why can't you? You are just as intelligent as the next guy.
This type of thinking borders on the delusional. Just as you cannot wake up one day and, without any formal education or training, start practicing law or medicine, you cannot become a proficient trader overnight. Get over yourself, because it just isn't going to happen.
No matter how many bells, whistles, indicators, seminars and books you surround yourself with, you have to pay your dues. You must learn that that piece of cake needs to be converted into humble pie, and that the most successful traders got that way by first getting a Ph.D. in losses at the School of Hard Knocks!
Trading is simple, but it is not easy. Successful trading and investing are skills that combine both art and science and take time, patience, perseverance and courage. In order to achieve and master these skills, one must progress on a path that is mental, emotional, physical and spiritual. For many, this is the most difficult journey ever taken. Start where you are, and understand that it is about the process, that time takes time, and that the rewards are worth it if you just keep going with passion. Without passion, why bother?
There are no secrets to success. It is the result of preparation, hard work, and learning from failure…Colin L. Powell
Every trader must climb the four rungs of the Ladder of Learning, and must do this one step at a time. You cannot skip a step, but if you let your guard down and do not continue to study and practice, you can and will fall down a step or two.
What do I mean by the Ladder of Learning and the four steps necessary to achieve trading mastery? In this case (and putting all learning theories and the neuroanatomical bases for them aside for now), I am referring specifically to the four stages of trading competence: unconscious incompetence, conscious incompetence, conscious competence and unconscious competence.
Somewhere in your make-up, there lies sleeping, the seed of achievement which, if aroused and put into action, would carry you to heights such as you may never have hoped to attain…Napoleon Hill
Stage (1) Unconscious Incompetence:
You don't know that you don't know, and you don't know what you don't know—aka "Ignorance is bliss."
At this first stage of your trading, you are not aware of the existence of, or need for, specific trading skills. You don’t know what you don’t know, including that you have any deficiencies (since you don't know that there are any specific trading skills). Denial may come into play here as well, as you may think that such skills are unnecessary or not useful, and all you have to do is to subscribe to a service or hotline, or jump on the next "hot" pick, and money will come rolling into your account. In order to move to the second stage, you most overcome your denial and become consciously aware of your incompetence. Without taking this next step, you will not progress, no new skill will be acquired, and there will be no learning.
Stage (2) Conscious Incompetence:
You know that you don't know, but you are not entirely sure what you don't know.
At this stage, you become aware that trading is a skill that exists, is practiced by many, and is relevant to your success. You also become aware of your deficiencies in this area by attempting to trade or practicing how to trade. This is the stage in which you begin to figure out how much you don't know. Successful traders will, at some point during this stage of the learning process, make a commitment to learn. They will make a commitment to study, to be teachable and to practice, practice and practice until they know what they didn’t know before. Once you have done the same, you will be ready to progress to the third stage.
Stage (3) Conscious Competence:
You know what you know, and you can trade, but you have to think about it.
During this stage, the skill of trading can be performed reliably, consistently and at will. However, you have to concentrate a lot, and think a lot, in order to do it. It is not second nature, nor is it automatic. At this stage, you are totally open to more learning, but you are not able to teach anyone else how to do it. The only way to proceed from this stage to the final stage is to practice more and more until…eureka...one day you have reached the fourth stage.
Stage (4) Unconscious Competence:
You know how to do it, and don't have to think about it. You just do it.
At this stage, the act and process of trading consolidates within the memory and pattern recognition areas of your brain—it becomes second nature. If you are really good at it, you can trade and do other things at the same time. (I do not recommend this, however.) Certain people at this stage are capable of teaching others, but this is not universal.
In fact, it may be more difficult to teach at this stage since the skill has become largely instinctual. It is at this stage when, if someone asks you how you knew to do that, you have to pause, think and say, "I don't really know. I just did it." This is trading mastery.
Yet there is another, final and seldom discussed stage that goes beyond this. That stage is called conscious-unconscious competence. Those who have reached this stage are the best teachers, and they are rare and difficult to find. Find one of these people to guide and support you if you really want to learn how to trade.
Champions execute the fundamentals with unconscious competence. That means they've practiced the moves so many times in the past that they can do them almost perfectly without thinking about it. When you can perform brilliantly without thinking, you can perform at a very high level…June Jones (head football coach, University of Hawaii Warriors)
Until next time,
Good Trading and Brain On!
janice@thetradingdoctor.comJanice Dorn, MD, PhD
Neuropsychological Trading Coach trending123.comDr. Janice Dorn is a graduate of the Albert Einstein College of Medicine, where she received her Ph.D. in Neuroanatomy. She did her postdoctoral work in Neurophysiology at the New York Medical College. She received her M.D. from La Universidad Autonoma de Ciudad Juarez, did one year of clinical clerkships in Phoenix, Arizona. and then completed a Neurology Internship at The University of New Mexico in Albuquerque.
She trained in Anesthesiology at UCLA, where she also did a Fellowship in Cancer Pain Management. She completed a Psychiatric Residency at the Maricopa Medical Center in Phoenix. She has been a faculty member to the rank of Associate Professor at the University of Texas Southwestern Medical Center in Dallas, The University of Missouri Medical Center at Columbia and the Chicago Medical School, where she won numerous awards for outstanding teaching. She also held the position of Director, International Clinical Research for a major pharmaceutical company, in which capacity she traveled internationally for nine years, and has visited almost every country in the world, including living in Scotland, Germany and South Africa. Dr. Dorn began a private boutique practice of Biological Psychiatry, Addiction Psychiatry and Psychoneuroendocrinolgy in Phoenix in 1987.
Dr. Dorn holds the following Board Certifications:
Diplomate, General Psychiatry, American Board of Psychiatry and Neurology
Diplomate, Addiction Psychiatry, American Board of Psychiatry and Neurology
Diplomate, American Society of Addiction Medicine
For the past twelve years, Dr. Dorn has focused her attention on trading, mentoring and commentary in the financial markets, with emphasis on Behavioral NeuroFinance, Mass Psychology and Trading Neuropsychology. A graduate of Coach University, she is an active trader, trading coach, and the author of 300 publications, relating to trading and investing neuropsychology, market mass psychology, psychoneuroeconomics, behavioral neurofinance and holistic wellness. Dr. Dorn is a sought-after media personality, lecturer and trading mentor who has provided real-time, web-based personal coaching for more than 600 traders and investors.
:
Disclaimer - I am not a commodity trading advisor. The information on this site is for trading education only. There are no trading recommendations for any one individual made on this site and this information is paper trades for trading education. All trades are extemely risky and only risk capital should be used when trading.
U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.