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[Oluti]

Throughout my trading career, trading psychology has always been an interest. I believe that it’s the most important factor in trading. Strategies are everywhere, money management rules are everywhere, but most traders fail not because of lack of available information (or even misinformation–also a big problem), but because of lack of discipline, patience, or other traits which all fall under the broad spectrum of “trading psychology.”

In Mastery, Robert Greene describes in detail the path to mastering anything, and indicates that it takes about 7 years. You may be proficient (profitable) at something well before you master it, but to truly master something takes about 7 years. This aligns with the research pointed out by Malcolm Gladwell’s in Outliers that it takes 10,000 hours to attain mastery in a field (that’s about 5 to 6 year working full-time). There are of course exceptions, and even putting in this amount of time doesn’t guarantee mastership.

The point is that traders often make the mistake of thinking very early on that they know more, and are better traders, than they actually are. There are few quicker ways to lose money in the markets than by lacking humility.

There have, and continue to be, times where I believed I understand something only to find out I didn’t. By understanding the 4 stages of trader development it is possible–if you are honest with yourself–to slot yourself into a category and see how much further you have to go in your market studies. Simply by understanding the stage you are in, and accepting it, you may be able to speed up the mastership process by avoiding common pitfalls.

These four stages are based on general psychology and highlight how humans gradually learn, incorporate and master various mentally–challenging endeavors. Use the four steps to gauge your progress in other, non-trading endeavors, as well.

Stage 1. Unconscious Incompetence

This is the starting point. You know nothing, and are also unaware of your own ignorance. It’s a dangerous time. It’s a time where you’re driven by impulse and personal tendencies. You read an article on a trading strategy, and it looks awesome, so you read a few more and feel you have a good grasp of how to trade. You open a small trading account and proceed to lose the money. Usually a few lessons like this–if you are lucky you only lose ‘play money’ in a demo account–you realize there may be more to trading than first meets the eye, and you require more study (stage 2).

Stage 1 is also generally the perpetual state of the “trading voyeur.” This is the person who dabbles in trading, maybe makes a few trades (or lots) here and there, likes to read business news (see: Do I Need to Watch the News to Be a Good Trader?), talk about the market and monitor forums looking for quick trading tips, but never takes the intentioned steps of diligent research or market study. Trading signal providers thrive off those in this stage and stage 2.

Stage 2. Conscious Incompetence

Being able to admit you don’t know much, usually after some costly mistakes, means you have entered the second broad stage of your education. This is where a very large group of traders will sit, and where most traders spend a lot of time. They understand they are missing a piece(s) of the puzzle because they aren’t seeing results, but don’t know what to do about it.

You are aware of pitfalls, and to put it bluntly, you’re aware of your own incompetence. Harsh as it is, this is a very powerful step. Being able to admit incompetence opens the door to further knowledge.

It is then up to you to study, research and practice so you become aware of what it is that you don’t know. You must then be open and humble enough to accept what you learn, but also strong enough not just take everyone (book/article/video/course) at their word.

This stage is tricky. You may have periods of great returns, possibly even years in a row, but it is still very possible you haven’t left stage 2… or you may be moving back and forth between stage 2 and stage 3. After a period of success you’ll feel confident, so you may start making subtle (or drastic) changes to your strategies, lose interest in trading or face some other obstacle. Ultimately, the success you once thought would never leave does leave (regardless of reason), and now you need to find it again. This is a lesson as well, it just takes longer and it usually isn’t an education you get from a book–it is something you need to live through.

Stage 3. Conscious Competence

After a lot of study, work, testing and practice you finally have a solid trading plan (see: Learn How to Make a Trading Plan for a basic guide) , you’re well capitalized, you know how to manage your money and trades, you have verified and tested strategies, you are aware of personal tendencies and how to control them, you are no longer searching for a holy grail and instead just trust the method you have, you aren’t swayed by others opinions, don’t gamble and don’t risk too much on each trade.

At this stage, you have learned your lessons and are now simply focusing on implementing your trading plan as best you can. You may have people who help, such as a mentor, but ultimately you realize that successful trading is up to you. It’s you who needs to remain aware of what the market is doing so you can implement you trading plan in real-time.

This is still a learning phase. You now know what you have to do, but you are learning to implement that knowledge in real-time, with real money and with very few deviations.

IF, you have gone through this process, created a trading plan and diligently follow it, simply by repetition you will reach stage 4. Following a plan isn’t as easy as it sounds though; it requires you handle your “personal demons” such as impatience, lack of discipline, as well as control your fear, hope and greed. A study of trading psychology, or simply psychology in general, and personal reflection will play a significant role in this stage of trader development.

Stage 4. Unconscious Competence

This is the mastery stage. You have incorporated all that you know (and discarded a lot of BS that you were also taught) into a trading plan, and can now execute that plan on “auto-pilot.” You no longer have to wrack your brain deciding on whether to take a trade or not, and you don’t need to refer to your trading plan for verification of anything. Like a professional golfer who has hit thousands upon thousands of golf balls to create muscle-memory, through loads of practice and making the same trades over and over again you too developed a type of “trading-memory.”

The path may not stop here though. You may choose to develop new strategies and test those, as well as experiment with new trading systems. For these new methods you will go through a learning process, usually starting at Stage 3 again, but that is only for that new strategy. You still retain all you have learned, and therefore have the ability to easily come up with new ideas and refine your processes

 

[lioralace]

Currency Devaluation: Bold Strategy or Just Playing with Fire?

Alright, let’s get real about currency devaluation. People toss the term around like it’s some magical economic hack—just slash the value of your currency and boom, your exports are flying off the shelves and everyone’s rolling in cash. Honestly, if only stuff worked out that neatly. Spoiler: it doesn’t.

### Devaluation = Inflation Headache

First thing that slaps you in the face after devaluing your currency? Inflation, baby. Your money buys less, so everything from iPhones to imported cheese gets pricier. Sure, a little inflation can make folks spend before money loses more value, but let that monster off the leash and suddenly people can’t afford basics. That’s not exactly a vibe anyone’s going for.

### Exporters Cheer, Everyone Else—Not So Much

Here’s the thing: yeah, exporters are probably stoked when a country’s currency drops. Suddenly their stuff looks like a bargain at global markets. Ask the Eurozone or Japan, circa 2011–2015—they went all-in on this. The yen tanked, the euro slid—brands like Sony or BMW probably sent thank you cards. But what about everyone else? Local businesses needing foreign parts get squeezed hard, and regular people foot the bill at the cash register.

Plus, and this is a big one, fiddling with currency rarely fixes the underlying issue. If people think your economy sucks, they’re still not gonna dump their money into your stock market. No matter how cheap your currency looks on paper.

### More Than Just Pushin’ Buttons

So what’s the plan with devaluation, anyway? Basically, make your stuff cheaper for foreigners. But it doesn’t exactly wave a magic wand and solve deeper problems. Remember "Abenomics?" Japan threw everything it could at the wall—easy money, public spending, reforms. The weaker yen helped exports, sure, but it didn’t get people at home spending or kick Japan out of its economic funk.

China’s play in August 2015? Letting the yuan float a bit more ended up spooking everyone. Nobody knew if it was a minor adjustment or the start of something wilder. Markets kinda freaked out—and for good reason.

### When Devaluation Gets Contagious: Currency Wars

Here's where it gets messy. One country drops its currency value, suddenly others wanna play too, just to keep up. Soon, it’s like a bunch of kids racing to the bottom of the pool to grab the same coin. Economists have a cute name for it—“currency war”—but it’s more like economic dodgeball, and nobody wins. What starts as a short-term export boost can just blow up into trade fights and market chaos.

### Lessons from the Last Five Years—or, Nobody’s Figured It Out

Last half-decade? It’s been a wild ride. Quantitative easing in Europe. Switzerland waving goodbye to its Franc peg and causing a global freakout. Japan hitting the devalue button over and over. Every strategy came with a mix of hope and headaches. No magic bullet, just new problems piled on old ones.

Bottom line? Devaluation isn’t a golden ticket. Use it with caution, maybe as part of a bigger playbook. But if a country’s whole plan is just to keep making its money worth less…well, good luck not digging yourself into an economic crater.