The four stages of competency is something that is used in almost every learning model. I am going to walk you through the four stages and how it connects with the stock market. It begins with not knowing anything about the stock market to becoming a master in the industry, meaning a confident trader who has an understanding of how to make money even if the market is moving up, down, or sideways. Each level and stage is important to the learning process.

Unconscious Incompetence

At this stage, you may not understand or recognize that you do not know how to do something and the benefits of learning it may not be clearly evident.  In fact, you may even be in denial about the benefits of learning this new skill and the value that it can provide.

With respect to the stock market, at this stage you are unaware that the stock market is an option to earn money from.  It has most likely never crossed your mind that you could handle your own investing or even make money from trading online in the stock market.

Things to watch out for:

At this level you have to watch out for cynicism.  You may doubt yourself and doubt that anything like this exist for so called “regular people.”  More importantly, you may be surrounded by people at this level who keep you from moving to the next level, thus never starting your search for new information.

Conscious Incompetence

At this stage you recognize that you do not know how to do something.  You are aware of the benefits of learning a new skill, but conscious that there is a gap in knowledge keeping you from learning.  You may make a lot of mistakes at this level – but mistakes are critical to the learning process.

In respects to the stock market, it is at this stage that you are aware that people make money from the stock market. You know that it could benefit you and your family, but you recognize that you do not fully understand how people are doing it and, more importantly, how to make it work for you.

Things to look out for:

Typically it is at this level where you begin your search, perhaps online or asking around friends and coworkers their thoughts and if they know anyone who is involved in the industry.  At this stage you can get information overload by the tons of information that is online as well as the conflicting answers and stories you may get from co-workers and friends.

It is important at this stage to not form an opinion too early and seek counsel from someone you understand and can learn to trust.  Once you obtain information, perhaps free and paid information, you need to form your own game plan and explore if this new found information can work for you.  Keep in mind mistakes are part of the learning process at this level and should be viewed as temporary – never permanent setbacks.

4 stages of stock market competenceConscious Competence

At this stage you understand or know how to do something, however, demonstrating the knowledge or the skill requires great attention and focus.  You must consciously concentrate on the task and perhaps break it down into steps to complete.  It is at this level that you know what you know but you have to think about it to execute.

With respect to the stock market you understand how the market works and you have a pretty good working knowledge of how to make it work for you.  However, you still need to refer back to notes and training and you must follow a step by step process to execute your trading skill.  You have to think before you buy or sell a stock or option and concentrate perhaps on one trade at time.

Things to look out for:

At this level things may be moving slower than you anticipated and you will be tempted to deviate from your plan.  In fact you may want to skip a few steps in the process you swore you would follow in the early stages and try to speed things up.  It is imperative that you do not deviate at this level and you do not try to speed up the process.  The process is important in order for you to get to the fourth and final level.  If you begin to skip steps or deviate from your plan, then making it to the fourth and final level can be more harmful than rewarding.

Unconscious Competence

At this stage you have had so much practice applying the skill or knowledge that it has become “second nature” and can be performed with little to no effort.  As a result you do not have to think, you just execute and can perform the skill even while executing another task.

With respect to the stock market, at this stage you have a trading routine and you know exactly what to look for and when to act upon it.  You cut losing trades quickly and you move into trades that look promising according to your chart analysis and fundamental research without hesitation.  You can calculate profit and loss levels as well as break even points without using a calculator.  Your eyes are trained to see trends in charts without even drawing lines. You have finally arrived.

Things to look for:

At this level it is easy to become cocky.  You may have a consistent winning streak and start to think you can’t lose.  It is important that you review your plan often to ensure you are on track and find accountability partners to ensure you are staying humble as well as continuing to grow by surrounding yourself with other like minded unconscious competent traders.  The true challenge at this level is staying at this level.

In conclusion, all of the four steps are necessary to attain a mastery over the stock market. The key is knowing when to move on to each stage, and how to stay in unconscious competence without getting cocky. What stage are you at? Are you not yet aware of the benefits of the stock market in the first stage of unconscious incompetence? Have you begun learning and may be a bit overwhelmed by the amount of information that there is in conscious incompetence? Or perhaps you are in conscious competence, where have the knowledge but still need a checklist to make trades. Or maybe you are rolling in the money and do not have to actively think about how to make trades in unconscious competence. Whatever stage you are on, let me know so I can help you attain the next one and help you become a master.

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