The 4 Stages of Competence

From Volatility.RED

It has been proven with a high degree of certainty that in any endeavour in which you as a human embark you will go through 4 stages of competence. You will only gain this high level of mental development if you see this skill through to proficiency which takes a lot of practice.

In this Wiki, we will explore those 4 stages and give you some ideas for how you know what stage of development you might be in right now.

The 4 Stages of Competence

Most traders desperately want to become profitable instantly and not have put in any of the work that is required to become a consistently profitable trader. We understand why this is. The human brain is designed in a way that it will do almost anything to avoid any kind of short-term pain. This is a self-defence mechanism that has been ingrained in our unconscious minds since the beginning of thought itself.

This reality is unfortunate because science tells us that it’s the process that you go through, the challenges that you face, and how you react to those challenges that will determine how successful you become as a trader or anything else in life for that matter. But this all comes down to if you are doing the correct things.

Without a proper base of education followed by extensive practice that can only come from practical trading experience, most traders will inevitably find themselves in situations where they don’t know how to react in a way that keeps them and their capital safe.

It has been proven with a high degree of certainty that in any endeavour in which you as a human embark you will go through 4 stages of competence. You will only gain this high level of mental development if you see this skill through to proficiency which takes a lot of practice. The 4 stages are:

  • Stage 1: Unconscious Incompetence
  • Stage 2: Conscious Incompetence
  • Stage 3: Conscious Competence
  • Stage 4: Unconscious Competence

These 4 stages of competence are true of anything that you see through to proficiency. It doesn’t matter if you are trying to be a great screenplay writer or a high-level hedge fund manager; the process is the same for everything we strive for in life.

Let’s look at each of these stages in a little more detail now.

Unconscious Incompetence

Unconscious incompetence happens when the trader doesn’t know what they don’t know! This is most likely because the wannabe trader has never really traded before but they really want to be a trader because they have heard some stories about people getting rich quickly in trading and they want in on the action.

The trader does not understand or even know how to be a successful trader, all he knows is that he wants to get rich or change his financial situation for the better.

He does not know that he actually has a deficit in what he needs to know to be a success. He will likely deny that there is any deficit in his tools, information, or awareness because he just does not know.

Before the trader is able to move on to the next stage of consciousness he will first need to recognize his own incompetence. He will also need to understand the value that the skill of trading will add to his life. A huge percentage of new traders never accept their own lack of skill and need for improvement and therefore, never move beyond stage 1. A lot of this has to do with ego and anything that involves lots of money can bring out a negative ego in some people.

The length of time that a person will spend in this stage will depend on the strength of their desire to learn how to become a professional trader. You need to have a passion for learning and the foresight to know that if you just push yourself you can achieve your goal of becoming a consistently profitable trader.

Conscious Incompetence

Conscious incompetence happens when the trader knows what the task is but he still can’t do it very well. This can produce states of stress or anxiety.

The trader realizes that by improving their skills and abilities as a trader their effectiveness and overall performance will improve. At this point, the trader has a newfound respect for the skills he needs to acquire and should start seeking out help and training to fill this knowledge gap. This is the point where a trader needs passion and commitment to keep them moving forward.

The trader will make many mistakes at this point but now understands that these mistakes can be a helpful tool in understanding the markets and himself better. There is a saying that "losses are just down payments on your future winners" but you need to learn the lessons held within those losses.

Ideally, the trader will make a commitment to learn and practice his new skills with the aim of becoming consistently profitable over a sustained period of time.

Conscious Competence

At this point, the trader knows and understands how to trade successfully but he still needs to exert a lot of effort and focus to execute what he knows in the way he knows he should execute it. Demonstrating their skills in the market requires very strict concentration but the positive results and passion for trading keep them pushing.

The trader will likely break down their methods into bite-size steps and have heavy conscious involvement in executing these steps.

The trader can trade on their own without any assistance or supervision from others but it's not yet second nature.

Generally, traders at this stage are in a state of calm because they know they can trade effectively.

The trader has gained great experience and has spent much quality time with the markets and it is starting to pay off. They can see a great future for them and this ignites their purpose to show up every day and work hard.

Unconscious Competence

In this stage, the trader now has so much practice and experience executing their skills with the markets that they can perform successful trading effortlessly without any conscious involvement. This is the stage that we all want to get to in our own personal development with the markets.

They don't need to make conscious decisions throughout the trading day as they execute their trading strategies. They do this without even thinking about it. They just see what they need to do and the execution happens automatically.

They can likely perform other tasks at the same time when they are trading. For example, they may train other new traders how to trade while they themselves are trading. The trader can easily convey their thoughts and beliefs about the markets to other people effortlessly and teach their methods to other people easily because they know how to trade so well.

Achieving this fourth level requires focused practice based on the correct training over a sustained period of time.

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