This is the first article I will be writing in a series of 5 articles outlining the typical stages that a trader goes through. I personally have gone through these steps and have found through coaching other traders that they are experienced by 95% of traders as they progress and evolve in their trading.

Stage 1) The Drunk Driver Stage of Trading
Many people often ask me why I refer to this stage of trading as the "Drunk Driver" stage of trading. All of us have had an encounter with a friend or family member who has had just a bit too much to drink but still insists they are 100% okay to drive home. Well, this is much like new traders. New traders approach trading in a very simplistic manner--which while trading can be simple it is not quite as easy as they think it will be. They think they will be fine once behind the wheel, only to find out they really aren't prepared or in the proper mental state.

New traders often view the market as having two directions--up and down--and after all, how hard can it be to pick the right position if there are only two options in the first place? New traders view the market as a way to make money--a freedom from the structure of a boring 9-5 job. They set out to reach financial freedom and more often then not end up losing everything. This stage is much like the drunk driver--after all in driving we can only go 4 directions--forward, backwards, left, and right--so how hard can it be to drive while not in the proper state?

Now, much like the drunk driver, once we get behind the "wheel" of our trading platform and dive into trading, we begin to doubt ourselves and wonder if we really are "sober" enough to drive this vehicle. We start out slowly, and an interesting statistic I have personally observed is many of us initially make money trading. I know I had an excellent first few months trading and made a killing. I then thought I was a trader. Turns out this was the worst thing that could happen to me as a new trader.

As we progress through this stage, which in my experiences lasts anywhere from 1-3 months, we begin breaking even or losing money. We realize that while we can make money sometimes, we are not consistently profitable, which we all know is the key to becoming a full-time trader. We become fearful and hesitant in taking our positions. We double down on positions we shouldn't be in at all--and the worst part is we know we shouldn't be doing this but we do it anyway. We associate risk with trading during this stage, and our trading psychology is damaged at best.

Unfortunately, during this stage, there is not much that can be done. This is a normal occurrence for new traders and needs to be worked through. I know my trading mentor helped me get through this stage, although I resisted at first and questioned his knowledge about markets--after all he made things seem extremely simple (which I learned after all they are very simple, just not easy.). My best recommendation during this stage of trading is for new traders to set out and find their mentor during this stage, limit their selves to losing no more than 5% of their capital so they still are able to trade once coming out of this stage, and be prepared for the next stage which I will outline in the next article in this series. Much like the drunk driver, we need to limit our risk as much as possible during this stage to ensure we will be around to progress to the next stage of trading.