Types of Incompetence


November 23, 2006 in Psychology

Feedback from an old pro trader:

After over 30 years of being involved in the futures markets I have now
come to the conclusion that the old cliche about trading being 90% mental is
really true. As I have stated before Trend Following may not be
everyone’s cup of tea either because of emotional or perhaps financial issues,
but I can guarantee you one thing-trading AGAINST the trend in any time frame
will lead to a very short and painful trading career be it hourly or weekly. I
have been listening to some of my old "mental" tapes and here are the "Mental
Levels" of trading successfully.

Unconscious Incompetence: You don’t know it and you don’t
know you don’t know it.

Conscious Incompetence: You finally figure out you don’t
know it and are aware there is something you need to learn.

Conscious Competence: You now know it for the most part and
frankly this can be a difficult stage for some like me. I knew that I knew it
but if you still have to think about it "as in pulling the trigger" on a trade
things can still be difficult.

Unconscious Competence: Where I am now I don’t even think
about "it" I just do "it"! There are no parts of my brain screaming, "Is this
really a set up?" or "What if this does not work?” I have found myself in the
"flow" and have accepted that losing trades simply put me closer to winning
trades. I have also become more humble realizing what I had to go through to get
"here" and the funny thing is that I truly feel I have only scratched the
surface of what I have yet to know! Have a great trip to the Far East!

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What's been said:

Discussions found on the web:
  1. Louis commented on Mar 18

    I know what you just mentioned is a key, not just for a trading but in every bit in every corner of life, as long as human history goes. Being, not doing, therefore being with a flow withiout knowledge of it, is the way to mastery in everything. Absence of thought and yet being aware(senses) clears the fog of hesitance, fear & mental block.
    Yet, easier said than done, for we are cursed with original sin….thoughts…..

  2. brion commented on Mar 18

    True enough. Expectations lower on youthful Dreams of Flight while competance slowly comes over you like a Delta pilot nearing retirement….as long as you pay deep attention over the years, the fantastic can happen… as a matter of fact.

    A G E

  3. wally commented on Mar 18

    Your name wouldn’t happen to be Rumsfeld, would it?

  4. toddZ commented on Mar 18

    LOL Exactly what I was thinking!

    The former U.S. Secretary of Defense Donald Rumsfeld discussed unknown unknowns at the Defense Department Briefing on February 12, 2002:

    “Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don’t know we don’t know. ”

    These helpful definitions won the 2003 Foot in Mouth award from the Plain English Campaign, and are also hailed as an example of found poetry.

  5. Jim commented on Mar 18

    This reminds me of an interesting academic paper I’ve read before:


    It basically says that the most unskilled people are most likely to overestimate their abilities, and the most skilled are likely to underestimate their ability. There are some great summaries for the layman (read: people like me) on the web.

    Anecdotally, I think the paper spells out how there are people who think s/he is a great trader/singer/comedian/cook/etc, despite actually being a really bad trader/singer/comedian/cook/etc.

  6. greg0658 commented on Mar 18

    original sin….thoughts…..

    I’ve been considering … more like … graven words

    ain’t this a wonderful world tho

  7. louis commented on Mar 18

    Not to be an wiseass with lots of tungtwisting, rather I believe it literally, yes.
    C.S. Lewis’s theory of fall from grace points to similar conclusion, where we fell out of touch from devine is where we started weighting action as a concept instead of acting, therefore giving labels; good, bad, right, wrong, praise, condemn, …
    So we incredulously reverse project God as our own image limiting it to be jealous, judgemental, punishing & critical.
    And the fall from grace in it’s continous karmic fashion continues….think, think, think more…
    I am completely going off the subject here…sorry.

  8. Eric Blood Axe commented on Mar 18

    And John Campbell said,” It isn’t what you don’t know that hurts you, it’s what you know for sure, that’s wrong.

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