The 6 Tests You'll Face As A Trader
Insights and Strategies To Pass Them Successfully
Mastery is achieved under adverse conditions.
Passing these 6 trading tests is not only proof of your maturity as a trader but a vote for your confidence and abilities.
In working 1:1 with struggling traders, I noticed they’re often grouped in two categories:
Traders who equate setbacks to failure
Traders who see setbacks as challenges
Needless to say, the second group achieve higher levels of performance during the Peak Performance Trading Program.
It’s all about reframing your perception which requires you to alter your self-image. That’s when change happens.
But how can you do this?
In this article, we’ll explore the 6 tests you’ll be subjected to in your trading and how you can cope with them in the best way!
#1 Missed Trade
More painful than losing money is missing an opportunity to make it.
You might think at some point in the future you’ll finally stop missing trades.
Nothing could be further from the truth.
Even the best traders miss trades. And it’s fine as long as you recognize the reason why you missed the trade and work on it next time.
Sometimes you miss a trade because you were busy managing another one and there’s no way you could’ve been attentive to two things at the same time. You can choose to only manage one trade, not more than that, at any given moment. You need to deliver good performance to all the trades you’re in and if you can only do that for one trade at a time, it’s okay!
If you feel guilt, regret, and anger after missing a trade, these emotions will haunt you to the next trades until you’re able to let go and reframe your brain.
It's okay to feel pain, but it's not okay to let it affect your next trade.
Practice your ability to reset after each trade or you'll be trading in the past.
Quick Note:
Before assuming that you've missed a trade, confirm if it was under your criteria or if you're assuming that in hindsight.
Then, find out the why.
The reason why you missed the trade falls under one of these 4 possibilities:
Not on the charts
Distraction
Doubt - about the setup, price, market conditions….
Fear of pulling the trigger
Your doubt to take a trade can come from external factors: might be the first time you trade in certain market conditions; the price action isn’t favorable or you’re still new to the strategy and developing pattern recognition skills.
On the other hand, it can also come from internal factors. This is when fear of pulling the trigger comes into play. Realize that this fear doesn’t come from the present setup, it’s only a manifestation of something that happened before and your perception of it.
I see this fear present in traders very often after they’ve had a win. They don’t want to put their money at risk and spoil the profits they collected. This shows a lack of confidence in replicating winning trades.
It’s not okay to miss high-quality setups because of fear of pulling the trigger. If this is you, you need to work on your confidence. Finding a qualified performance coach that helps you overcome this fear in a one-on-one fashion will change your entire trading career!
#2 Making a Mistake
To assume pro traders don’t make mistakes is to set the wrong expectations for your own trading.
The markets are constantly changing and the appliance of your strategy too. So new mistakes can come from new information.
And guess what?
Making mistakes is not the opposite of being profitable.
The opposite of being profitable is unawareness: Letting yourself go from one mistake to the next one without questioning yourself.
Self-Critique
Some traders see a mistake as worse than a loss. They highly self-criticize themselves because, for them, a mistake says something about their abilities; their identity gets threatened. It’s not about the money lost, but about the shame that comes with that mistake.
Many times they rush to enter the next trade just to be able to redeem themselves and eliminate the guilt. This behavior often leads them to the next mistake which amplifies the problem.
If you find yourself saying things like:
“I knew this would happen, why are you so stupid?”
“Why can’t you stop doing the same thing?”
“What a basic mistake, it was so obvious how couldn’t I be able to see it coming?”
You likely suffer from self-criticism.
Think if, in the past, you had someone close saying similar things to you.
Many of my clients find this to be true. This discouraging talk got so ingrained in their heads from an early age that now they replicate it in the form of self-talk. It’s toxic!
There’s a lot of shame and guilt associated with it. Acceptance and allowance of your own flaws is the very first step to changing your self-image and self-talk, as a consequence.
There’s nothing wrong with making a mistake, what’s wrong is remaining unaware and letting your emotions drive you all the way to the next mistake.
Surrender to what happened, you cannot change the past but you can use it to mold a better future.
#3 Making a Mistake and Being Rewarded
In trading, sometimes you'll be punished for making a mistake and can easily be aware of it.
Other times, your mistake comes masked in a winning trade and it's difficult to see it or admit it.
This can reinforce all types of bad habits.
While a result-based analysis can be useful in the long term, it can give you the wrong feedback in the short term.
An execution-based analysis of your trades will help you judge your trading based on the quality of your execution.
At the end of each trade always ask yourself how satisfied you are with your execution, not with the result.
#4 Hitting Your Daily Loss Limit
The purpose of setting a daily loss limit is to protect you against your potential lousy behavior in the market and your trading account from a drawdown. Still, for some reason, traders set this limit and think it will never be hit.
These limits can be set automatically by some brokers. Or you can set it as a rule and be disciplined to respect it.
You are faced with 2 decisions when you hit your daily loss limit: close the charts or continue to trade.
It might be difficult to stop trading after you hit the loss limit. All you want to do is to come back thinking you still can turn things around. But at that point, you are not in the best mental shape to continue trading, and the chances of you making a mistake increase exponentially.
If you choose to break your rule and keep on trading to satisfy your emotional needs, you're not only putting money at risk but your confidence to be faithful to your rules and to yourself. This has much bigger damage to your trading than you think.
Follow your rules religiously, they are not in question here. Stepping away from the charts for that day is the smartest decision you can take.
#5 Slow Market
There are times when the market is extremely slow and the number of opportunities reduces. Right now, we are experiencing this type of market.
This might be the first time you experience this new environment with your strategy.
Different market conditions require different personal skills. Less volatile markets require you to be more patient and careful in your trades.
But are you able to adapt your performance?
A profitable trader applies the strategy according to what the market tells. He trades when it’s appropriate but also knows to sit on his hands when’s necessary.
The amateur fails to read the market and searches to fulfill his demand first. He sees patience as inaction.
This is why so many traders can perform extremely well in volatile conditions just to see their profits go away in slow market conditions. They cannot adapt to the market and place their own emotional needs first by taking setups that are not there. That makes them temporary traders.
Always come to the market as a white canvas: no judgments, no biases or opinions, ready to paint the picture the market gives you at the present moment.
#6 Drawdown
The toughest of all barriers: a drawdown.
If you wanna get better at dealing with drawdowns, you have to experience them.
Without tough market situations, you don’t have opportunities to practice new responses.
This can make you lose confidence in your abilities but it's just like any other test the market gives you for you to pass to the next level.
I wrote an entire article on Mastering the Art of Recovering from Trading Drawdowns. Give it a read!
Summary:
The 6 Tests You'll Inevitably Face As A Trader:
Missed Trade
Making a Mistake
Making a Mistake and Being Rewarded
Hitting Your Loss Limit
Slow Market
Drawdown
Facing these tests as a trader can be seen as a sign of weakness or an opportunity to develop yourself into the trader you want. You decide.
With love,
Sara
Live Class:
Next Saturday - March 11 - I’ll host a live class in the private community.
The topic: “How To Break Through a Trading Plateau”
This will be one of the most crucial classes we’ll ever have inside the community.
If you are stuck at breakeven or in a certain profit range and you want to get past it, this is for you!
Whenever you’re ready, there are two ways I can help you:
1- Spot and eradicate your worst trading mistakes with my E-Book here
2- Elevate your trading performance with The Peak Performance Trading Program (one-on-one). Fill out the qualification form here.
6. Is definitely the hardest!