VES LEGASPI was featured in CONQUER 2017 Planner put together by Krissy Domingo and it was very important what he shared to anybody who’s seeking clarity when it comes to trading.
He had set 7 learning stages into which a trader transforms based on the knowledge it holds and the risks it chooses to take. He considered sensitive angles and included these for determining factors: personality, skills and priorities.
Let’s start with:
LEVEL 0: THE STARTING POINT
This stage is where most traders start having very limited knowledge on stock market or investing. Looking at a stock chart brings back the dreaded subject, Calculus. A person in this stage does not take any risk at all.
Metaphorically speaking, it’s a man who never have driven ever but knows the concept of what a car is for.
LEVEL 1: THE CURIOUS TRADER
Traders at this particular stage want to know what they do not know. Usually by word of mouth or by social media, a curious trader is someone who intends to enter the world of stock market. He starts to join forums and ask various (sensible and insensible) things about trading or the stock market. And because of this, he gains connections who have the same interest as what he’s starting to obsess about. So this is when he gets hold of forums, seminars and alike.
LEVEL 2: THE IMPULSIVE TRADER
The impulsive trader thinks he got it all and that he already knows everything about the stocks…. but then you’re wrong.
As he tests the waters. and still not fully knowledgeable, he buys/sells based on hype and recommendations. He is eager to make a profit but is too lazy to make his own analysis. He usually ends up losing a lot of his capital. In his thoughts: “It’s a scam!”.
Traders at this stage tend to get very emotional and egoistic.
Most traders at this stage, when they lose and take a fall, no longer come back or develop a negative bias towards trading.
LEVEL 3: THE CHOSEN FEW
Education starts after accepting the fact that you need to know what you do not know to be successful in trading. Even after losing, the chosen few choose to reflect on their trades to identify what went wrong and how it could have been done better. They start to commit towards learning what should be learned such as trends, market behaviours and expectations. They read books or attend seminars to increase their understanding. And as they do that, their circle widens, getting hold much information more rapidly than before.
LEVEL 4: THE NOVICE TRADER
The novice trader selects stocks and analyzess strongly depending on the crowd (herd following) even if he is already knowledgeable on basic fundamental and technical analysis. Sometimes he is profitable but most of the time suffers losses due to switching of stocks without having strong knowledge on its business and a good base.
The trading plan is not well defined and established no matter how he tries to apply what he has learned because there is no mentorship or guidance. He breaks his own rules when greed or fear steps in.
The novice traders end up overtrading because they can still be easily swayed by market movements. He buys high and sells low.
LEVEL 5: THE EXPERIENCED TRADER
About a year or two (or earlier), the newbie trader evolved into an experience trader who has developed his own trading strategies and techniques. Through his previous mistakes and failures, he is able to refine his trading strategy.
In addition, an experienced trader can mentor others by sharing his learnings and insights. He is already able to identify which stocks are volatile, illiquid and attractive (technically/fundamentally). He is familiar with various stock patterns and has developed an instinct to assess whether a stock has a high probability setup.
Building a strong portfolio is one of the most important things to an experienced trader. He has more control over his emotions and understands market psychology. He has a more disciplined understanding of the market including cycles and seasonality.
LEVEL 6: THE SKILLED TRADER
Skilled traders have mastered one of more trading techniques. They have been consistently winning in his trades since he is strict in applying the rules. He has also mastered his emotions and does not like chasing stocks. He knows that preparation for a big price movement takes time. Overtrading is not his thing. He can be a stock trading mentor because makes money in a bull or bear market. Strong risk management skills define a skilled trader.
Now, in which stage are you? Are you a risk taker, a herd follower or the safe kind? Either way, congratulations as you read this. Because you actually care for your hard-earned money. and whether you admit it or not, you are in one of these stages if you’re reading this so go forth and multiply….. your funds!