Developmental cycle of traders: Burn, learn, earn.

There is an inevitable cycle that happens with traders.  The cycle consists of the burn, learn, and earn periods. This cycle can be in time or in dollars.


This is a period of time or amount of money that would have been more useful to actually light your money on fire.   Not only are you losing money but you are creating bad habits and even worse bad memories.  You lose all sense of direction and confidence.

The burn cycle can happen to a new trader and an experience trader.  In a new trader it is usually a combination of not knowing what they want or how to get there.  In an experience it happens because of ego or a loss out of their control that they do not address immediately.

You can learn from the situation as a whole but not individual trades or about the market.  I always say that you should remember what happen not how you felt.  In the the case of the burn period, remember how you felt not what happened.


This is a period of time or money that you are constantly learning.  You can call it tuition.  The important thing about this period is that some graduate early and the best never graduate.  Some graduate early, this means that you can learn the most with the least amount of time and money.  In my experience these traders do not do much outside of their “system”.  There is a fine line between burn and learn, intraday.

The best never graduate, you have to love to learn to be a trader.  Change is a constant.  The market doesn’t care what you did yesterday, last week, or last month.  It just wants its money back.  It will take it back and it gets it back by you not being sharp.

The best is to learn while earning but hard to learn when you are doing spreadsheet math.  Learn intraday.


This is the period of time or amount of money that you are making money that you get to keep as long as you are learning and not burning.  Earning happens after you find direction, get comfortable with learning, and finally sick and tired of being in the burn period.

Being in the burn period makes it easier to understand the importance of learning that enables the earning period. How much time or money you spend or have to re-spend in each period is up to the trader.

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