Tag Archives | novice trader

Traders: Beginners, Novices, Experts

I came across a very interesting post by Seth Godin.  For those of you who are not familiar with that name, Seth is a very successful entrepreneur, author and public speaker.  His blog is valuable reading for bloggers, among others.

A recent post discusses the myth of preparation. The point is that there are three stages in preparation: beginner, novice, expert.

"The first I'll call the beginner stage. This is where you make huge progress as a result of incremental effort.

The second is the novice stage. This is the stage in which incremental effort leads to not so much visible increase in quality.

And the third is the expert stage. Here's where races are won, conversations are started and sales are made.

If you're not prepared to put in the grinding work of the expert
stage, just do the beginner stuff and stop screwing around. Make it good
enough and ship it [whatever you are selling. MDW] and move on.
We diddle around in the novice stage because we're afraid."

Seth's premise is that the second stage is not useful.  There's not much progress, and it's easy to get trapped at that novice stage for a long time.

Does that apply to trading?  Surely we must all go through the beginner stage.  We learn what an option is, we learn some strategies and terminology.  We (hopefully) get some solid trading practice before making trades with real money.  We develop our understanding of how our strategies are supposed to work, grasp the importance of risk management, and begin to trade with real money. However, it does require much more than an 'incremental' effort.

At some point the beginner label is lost and we consider ourselves to be novices.  In this stage we continue the gradual expansion of our knowledge, confidence, and abilities.  Is this stage necessary? 

We continue to practice our craft, expanding knowledge and improving our skills. This is the usual procedure.  The question is: Do we reach a stage of complacency at which we are pleased with our results and don't want to bother working any harder or spending more time on education and practice?  In other words, do we choose to remain novices forever?

What if you do want to make the big effort? Is it possible to do so quickly and become an expert trader?  My emphasis is on the work 'quickly.'  If we move slowly, then we are indeed trading as novices who have a desire to move ahead, but can only move at a limited pace.  Seth's premise is that we can move directly to the expert phase of our business.  That may work for his marketing and sales businesses, but some skills take time to develop.  Trading is one of those.  So are medicine, the law, and athletics.

Bottom line:  I don't see how Seth's theory can apply to trading.  It requires a skill set that cannot be developed by simply putting in more effort.  More education is necessary.  We require practice so we can learn from mistakes and learn what works for us and what doesn't.  This is not simply a mind over matter decision.  More than that – one cannot just will oneself to be an expert. It's difficult and beyond the reach of most. 

Trading skills take time to develop. The experience to recognize when we must strictly adhere to our comfort zone boundaries and trading plans vs. the times when we can – and should – expand those zones, does not come easily.  There is no substitute for experience and practice.

I get Seth's point.  If you lack the skills and don't want to make a big effort to acquire them, if you can't be bothered with doing what's necessary, don't fool yourself into believing you are novice who is going to do better.  Run the business as a beginner and do the best you can.  But, if you are in a suitable business, and if you plan to learn and rise to the top of your field, don't waste time.  Move rapidly to do what must be done to be better than the competition.

As traders, we cannot do that.  However, there is plenty of room between beginner and expert.  If you keep learning, your skills will improve and you move through the novice stage.  You may never reach 'expert,' but being a profitable intermediate trader is a good thing.  You have no direct competition that is threatening to take away your business.  [Yes, we compete with other traders, but the playing field is gigantic and the number of trades is enormous, and most competition is imagined]

You can continue to function, operate your trading business (hobby, sideline, etc) and make money.  If you cannot become an expert, that's just fine.  After all, you probably have a job and family and several more important things to occupy your time.


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