The ’20 Trade Challenge’ Only 5% of Traders Can Complete (Can You?)
The '20 Trade Challenge'
Do you ever feel like you’ve tried every trading strategy in existence but nothing seems to work? Here’s the truth: The trading strategy you’re currently using is likely irrelevant!
Let me repeat that for emphasis.
For 95 out of 100 people reading this article, the strategy you’re using is irrelevant, and the simple ’20 Trade Challenge’ I break down in this article will prove it!
This challenge or test is designed to highlight YOUR ability as a trader, NOT the strategy you’re trading!
Specifically, the ’20 Trade Challenge’ or 20TC as you’ll see it labeled, will test your ability to handle the emotional stresses of trading.
The 20TC will also highlight the biggest obstacles that are holding you back from becoming a profitable trader, and more importantly, exactly what you need to do to improve your results and take your trading to the next level!
Lets get to it!
Are you part of the 5%?
Years ago I came up with what I call the ’20 trade challenge.’
While the test is extremely simple it is also, extremely revealing. You will see like never before, in very simple and direct terms, exactly what you need to do to turn your trading around today!
For this to work you really only need 2 things.
1.) You need to actually be trading.
2.) There needs to be a specific strategy that you’re trying to implement.
If you’re just placing random trades that “look good,” then you already know your problem!
The only other requirement I would mention is that you must be honest with yourself which is often the hardest part of getting people to benefit from this challenge.
If you lie or point to anything other than YOU being the cause of your trades then this exercise will not help. Only if you accept full responsibility for your results can you improve them!
After all, if everyone or everything else is responsible for you losing, then how the hell is that going to change?? How are you going to change everyone else to get the results you want.
If you’re going to accept and take credit for you profit trades, then you must do the same for your losses.
Let the challenge begin...
Step #1 – Pull up your last couple months worth of trades. To pull up your record of trades in MT4 you do the following…
After opening your MT4 platform click ‘View’ in the upper left-hand menu and then select ‘Terminal’ from the drop down menu.
When the terminal pops up you’ll click ‘Account History’ in the bottom tabs. This will bring up your recent history. To pull past trades simply right click among the past orders and then click view ‘Last 3 Months.’
After the past 3 months have loaded you will again right click among all the trades and click ‘Save as Report.’ This will allow you to save the report so you can print it later.
Note: Printing the report will make the next 2 steps much easier, although it is not necessary for those without a printer.
Step #2 – Go through those trades individually and put a check-mark next to every trade where you perfectly executed your trading plan. If you did ANYTHING outside of your trading plan or list of pre-determined acceptable actions, it should NOT get a check-mark.
It is important to apply this rule with some common sense as sometimes the market requires some small deviations from the plan. That said, a revenge trade where you double down is not an acceptable deviation lol.
IMPORTANT: To reiterate, this only works if you’re honest. If you lie to yourself during this step please close the computer and go to the casino; you’ll have a better chance of success.
Step #3 – Put an X next to every trade that DID NOT follow your trading plan perfectly. This would include things like revenge trading, over-trading, boredom trades, over-leveraging, etc…
Again, use some common sense. You know when you broke your rule-set and you know when you did not.
The Ugly Truth About Trading Losses
Here’s the ugly truth that the 20TC reveals; 95% of traders will not have a single chunk of 20 perfectly executed trades in a row (the majority won’t even have 10!!).
No matter how profitable the strategy is, an inability to consistently follow a plan will always result in losses.
Main Point: Until you can follow your trading plan for 20 consecutive trades, the strategy you trade will not matter as your losses aren’t the fault of the trading strategy you’re using, but rather, your actions!
Your mouse did not click buy or sell on its own and your broker slipping you a pip or two here and there is not the reason you’re losing money.
In my nearly 15 years of trading, traders never blow up because they followed their trading plan perfectly, they blow up from the emotional response that typically follows a losing trade (over-trading, over-leveraging, revenge trades, etc).
The example day I’ve illustrated below illustrates what this might look like.
Trade #1 – You get your coffee, you read over your trading plan (having taught forex for close to a decade, 90% of traders don’t even have a written trading plan but that’s another rant for another day), and then you place a trade.
The trade goes your direction, hitting your take profit according to plan.
Trade #2 – You’re riding high from the first trade, and you spot another trade that perfectly matches your trading plan. You place the trade but instead of producing another tidy profit, it stops you out by 2 pips only to turn around and start heading in the expected direction! ERRRR!!
Can you feel your blood pressure rising? It’s at this very point that 95% of traders do a version of the following, once and for all illustrating that until you get YOU under control, the strategy you trade will NOT MATTER!
Trade #3 – This is where the train goes off the track and you chase the second trade, taking another entry on the trade that just stopped you out, but doing so with DOUBLE the position size to “make it back” faster.
Thee ol’ double down lol.
The market quickly pulls against you 5 pips so you flip and reverse again, only this time quadrupling down. Does this sound familiar?
Maybe you prefer the over-trade, the boredom trade, revenge trading, over-leveraging, not following your plan, trading without a plan, etc.
No matter what strategy a trader uses, they will continue to lose until they fix these mental errors and lack of dicipline.
My Wake Up Call...
A few years into my trading career I was still losing money. One day in particular stands out.
It was a Sunday afternoon and the market had just opened.
The week before I thought I had found the Holy Grail of trading strategies as I had turned a 2K account into over 15K!
Unfortunately, I hadn’t quite figured out that even a blind squirrel can find a nut every now and then, and likewise, even a losing trader can put together a few good days or weeks of trading.
That following Sunday when the market opened, I proceeded to not only lose the 13K I had made the week prior (All in about 4 hours mind you. This was back when FXCM had a micro account and allowed 400 to 1 leverage…the good ol’ days!), but I lost most of the 2K I had started with!
I had a problem, and regardless of the strategy I used, I kept making the same mistakes.
I could go through periods of time where I followed my plan, but after the first loss or two, the train would come off the tracks.
Sound familiar?
I felt like I literally couldn’t stop myself from trying to ‘make back’ the money that I felt the market had taken from me.
This inevitably led to me flipping the position back and forth (because I was pissed), and doing so with double the size, then triple, quadruple!
After enough pain and loss I would inevitably start searching for a new trading strategy because, after all, it couldn’t have been my fault…
After this loss though, something changed. I realized I was looking at the market like a big casino and hoping for profit. I knew something had to change if I wanted to change my results which leads us to the first step towards improving your trading by eliminating your 3 biggest mistakes.
Pro Tip #1 ~ Eliminate Your 3 Biggest Mistakes
To this point we’ve discussed the 20TC and likely you’ve identified some major obstacle to becoming a profitable forex trader that you might not have noticed before. In the last half of this article we’re now going to break down some precise steps you can use to improve your trading results and eliminate those errors.
Years ago I watched the movie series titled, ‘Floored.’ It was about a bunch of floor traders who told their stories of the ‘hay days of yesteryear’ in the pits. You can watch it free on Youtube if you haven’t had a chance.
There was a quote in that series that always stuck with me. They were interviewing a guy who had retired and he was speaking about why he had done so well while others failed around him, and he pointed to one thing.
He said, ‘The numbers for successful guys are fleeting, because you’re only as good as your last trade, its what you don’t lose….there have been guys who made more money than me, but for some reason or another they’ve…it was taken away. I think the more successful trader is the guy who can keep it to the 9th, 10th race. Good traders know when to make money and leave.’
He then goes on to say less than a minute later, ‘it’s not what you make, it’s what you don’t lose.’ That profound statement has ALWAYS stuck with me to this day, and I would encourage you to take it to heart as well.
If you have an hour, scroll to the beginning and enjoy!
If you’re going to eliminate the most costly mistakes you’re making then you need to go back and do some analysis.
This is where the trading record we discussed earlier comes into play.
Often the mistakes you find will be very closely related. If you have more than 3 it’s not a problem, just pick the largest most costly problems and come back for the rest once you get these under control. Things like revenge trading, boredom trading, over-leveraging, etc.
There is a certain power to writing a problem down. Something about writing it down allows you to finally face the issue head on, and more importantly it gives you a chance to fix it and improve.
Below I’m going to give an example of what this might look like for 1 common problem.
Example:
Problem #1 – Revenge Trading
Solution #1 – Leave the computer until the next day
Solution #2 – Back-testing with Forex Tester
Solution #3 – Review my compounding chart, goals, and/or Trading Plan (most important)
There is no such thing as an easy solution to developing and maintaining the proper trading psychology. No one likes losing money, and we all feel smarter than we really are after a win. Trying to get rid of the emotion is stupid and a waste of time. Are goal is not to get rid of the anger that caused you to revenge trade as this is just a natural response. Will it weaken and get easier to control with time, yes.
That said, your goal should not be to control the emotion, but rather the actions the result because of the emotion. To begin with you might literally have to shut down the computer and walk away as nothing else will deter you from continuing to over-trade. Over time, though, a simple review of a compounding chart might be enough to get you focused and back on track.
Pro Tip #2 ~ Stop Trying to 'Get Rich Quick!'
There is no such thing as getting rich QUICK in trading. I’ve been trading for nearly 15 years and every wealthy trader I know built his or her account over multiple years.
I know that the vast majority of educators promise huge returns, but its a flat out lie. The ugly truth is that most of these educators need your subscription money to live and they say whatever they know people want to hear.
On the other hand I do not need your money to live and would rather tell the truth, novel concept, I know.
There are really only two major components to growing your account; Time & Consistency
With even small consistent profits over the course of time, you allow compounding to work its magic. There is a reason Albert Eintsein called compound interest the 8th wonder of the world, it’s powerful!!
You don’t have to have huge gains to grow an account but you do need consistency over time to allow the magic of compounding to do its job.
Let me illustrate this point:
Assume someone is trading a 10K account and they grow that account by 10% a month.
At the end of 3 years that 10K would have grown to over 300K, and just under a million after 4 years.
I think it goes without saying that this is just a hypothetical illustration to show the power of compounding. I would encourage you to do the math on your own with a pen and paper.
Write a reasonable starting balance at the top of the page and then compound it by a figure that is reasonable to you. Do so over the course of 2, 3, or more years, writing out the balance for each MONTH so you can see the growth over time.
This exercise immediately shifts your focus from the short-term, to a longer-term perspective that, in my opinion, is not only beneficial for trading, but required!
If growing an account over 2, 3, or more years seems like a long time to you then you know 1 thing is certain, you will continue to lose money until you change your mindset.
I’m always baffled by this…
Most people get excited and call it a great career choice to go to college for 4 years, and come out with 30K, 50K, or more in debt!!
Were talking about the exact same time horizon for both choices, but one path leaves you with debt and the prospect of a mediocre job you’ll likely hate. The other leaves you with no debt, and unlimited income potential.
Many of you are probably thinking that there is no guarantee of success, and I wish EVERYONE thought that. You’re right, there is no guarantee of success.
Let me ask you this though, is there a guarantee of a good job if you have a degree? This isn’t the 90’s, and the massive number of under and unemployed graduates would likely disagree with anyone who thinks there is!
Start treating your trading like a business and look at the long-term growth, not short-term swings. There is no exception to this rule, as fast/huge gains in trading will result, sooner or later in a massively spectacular blowup and I speak from experience.
Pro Tip #3 ~ Develop Your Trading Plan & Stick To IT!
The idea of getting rich quick often accompanies the final point we’re going to hit on which is the extremely common habit of trading without a plan.
It’s been said that those who fail to plan, plan to fail.
This couldn’t be more true than in the world of learning to trade forex. Think about this point for a second…
You’re competing against the largest banks, the most well funded, most proficient cut throat traders and institutions in the world. They live, eat, sleep and breathe trading, and you think you’re going to compete against them without a clear plan for every trade!?!? Seriously??
How many of you think that the best traders in the world don’t have a clear plan for EVERY SINGLE TRADE?
So why in the hell would any of us (retail traders) try to trade without a plan for every trade?
YOU SHOULDN’T!
A trading plan is vital as it allows you to make use of the two points we made above (and much more).
Take the first point we covered in this article; Eliminate Your Three Biggest Mistakes.
If you don’t have a plan you cannot judge each trade you’re placing against a set of rules. If there is nothing to judge a trade against, how can you really determine whether it is right or wrong?
A trading plan assists with the second point we made about the common mindset of trying to “get rich quick” as well.
In this section I illustrated the power of compounding over time. This exercise clearly shows that you don’t need massive monthly gains, but you do need to be consistent and you will NEVER do that without a clear plan!
Conclusion
At the beginning of this article we broke down the 20 Trade Challenge. Most people will not complete this as they subconsciously have no desire to accept responsibility for their trading results.
Based on 10 years of teaching and nearly 15 years of trading, I know about 5% of people really have what it takes to succeed and therefore they are willing to put in the work. With that being said, ANYONE can join that group of traders, but you have to get serious and put in the time and effort.
Summary:
1.) Analyze your last couple months of trades. In doing so most of you will find that you DO NOT have a single chunk of 20 or even 10 trades in a row that perfectly follow your trading plan. This isn’t something to get discouraged about as you now see what needs to be fixed!
Main Point: In my nearly 15 years of trading, traders never blow up because they followed their trading plan perfectly, they blow up from the emotional response that typically follows a losing trade (over-trading, over-leveraging, revenge trades, random/boredom trades etc).
2.) Identify specifically the 3 biggest mistakes that you’re making.
3.) List 3 possible solutions to the problems identified in point 2.
4.) Adjust your mindset and growth expectations by writing out a compounding sheet.
By seeing the true power of compounding over time, this will help you handle the emotional stresses of a loss as it keeps you focused on the bigger picture. When you’re about to make one of the trading mistakes you identified in point #2, focusing on this and the growth potential that is possible will help you stay disciplined and stick to the plan!
5.) Develop your trading plan and then stick to it!! If you don’t have a clear trading strategy that you’re trying to implement then you’re going to fail.
The other factor is that you really need to be judging the trading strategy, not your results.
What I mean is that if you’re revenge trading, boredom trading, etc, that is not the fault of the strategy. When you have a series of valid trades according to the rule set you’re following, that is what you should use to judge the strategy. Additionally, like anything else in life, you will get better at trading with time.
Often if you’re break even now, it only takes a few small tweaks to get you over the hump. Therefore, I would encourage all of you, regardless of the strategy that you want to learn, to stick to it for AT LEAST 3 months, preferably 6!
There are things you will pick up and get better at over time, its just how the learning process is. Learning anything new starts off slow and then it begins to cascade as the different points start coming together. You’ll see things you didn’t see and start to develop a gut feel or intuition for the best setups and reading market momentum.
This in combination with the strategy is something that you develop over time. Not allowing that time to pass never truly allows you to make an honest examination of the system, setup, or trading strategy you were using.
If you’re interested in putting these points to work but you don’t have a trading strategy you really believe in, I would encourage you to look into the forex bank trading strategy a bit deeper.
If you’re looking for an education package then we might be a good fit. I don’t believe you can just give someone a course and say, “best of luck.”
I’m a private pilot and when I learned to fly a went through a great deal of ground training before ever getting into the plane. I also went through a few paid video courses that technically teach you to fly the plane.
With that being said, the only thing that actually qualifies you to solo the aircraft is 20+ hours of DUAL instruction (meaning the instructor is sitting in the passenger seat making sure you don’t kill him/her/yourself/others. 🙂
No matter how much ground schooling you go through, it alone will never qualify you to actually fly the plane. I believe the same is true in trading.
While a course is a great starting point in all types of education, you need to have someone showing you how to apply what is taught in the course to the live market in real-time.
This is why we do a daily market preview as part of the lifetime membership each night. This video preview breaks down the exact direction I’m looking to trade based on market cycle, as well as the exact manipulation points I will be using for the FOLLOWING DAY.
No Monday Morning Quarterback BS…Nam sayin??
We also run a live room twice per week where you see my screen as we break down different aspects of the strategy as well as recent and current trades setting up. This room is recorded and saved to the members area for those who cannot attend live, as is everything else.
Finally, you have the members forum. Regardless of who you choose to learn from (and you should pick someone it could save you years and time is FAR more valuable than money) I would highly encourage you to make sure they have some type of live education as I’ve described above, as well as the second point of having a community where you can chat with other traders who are trading the same strategy.
Trading is a boring business and having other traders who are trading the same strategy as you is a big help. Making sure you have these resources in going to be critical in the learning process, regardless of who you choose to learn to trade from.
-Sterling
P.S. – Sorry for my long hiatus in writing articles. To steal a line from George, “I’m Back Baby, I’m Back!!”
P.S.S – The new course revision is going to be finished April 2019, hell or high water. I would still recommend going through the original course as this revision is me breaking down each rule or idea of the strategy into small videos. This will allow a fast review of a specific point instead of having to search through an hour long video to get 1 point.