Imagine this scenario:

A year ago you discovered the exciting world of binary options trading. You’d had an interest in trading before, but it was something you never pursued, because you thought you could not afford it. But binary options trading was something you could start with $100. You took trading seriously from day one. You found a trading strategy, came up with a money management plan, did some testing, and only went live when you felt confident you could succeed.

But then things started going wrong. You started losing trades, and a lot more of them than you expected. You could not understand what was going wrong. You had done your testing, and should have been achieving an 82% win percentage. Instead, your percentage was closer to 72%. Then you hit a major unexpected losing streak, and before you knew it, you had blown your small account and found yourself out of the game. You have not traded live since. In fact, you have felt so paralyzed by your defeat that you are terrified to start trading again, even though you have been testing and doing better again on paper.

Scenarios like this are common. That does not make them any less traumatizing when they happen. It can be helpful to remember that most successful traders have been through something like this at some point or other during the course of their careers. While it commonly happens to novices, it can happen to intermediate and expert traders too later down the line. Sadly, many would-be traders with a great deal of professional potential wash out after going through an experience like this.

What you need to ask yourself is, “What is holding me back?” You may start naming problems with your trading system or other aspects of your plan, but odds are that you are being held back by shattered confidence as much as anything. In fact, it could be that all that is holding you back now is you.

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In the past, I have written about 5 steps to get back on the trading horse:

1. Update yourself on whatever you have missed
2. Figure out why you failed
3. Realize you are not alone
4. Make your adjustments and get back to testing
5. Fund your account halfway and start trading again

Naturally these are all things you are going to want to do along the way. If you have taken a complete break from trading, you are going to want to check on updates from your broker and the trading world. You will have to figure out what went wrong, fix it, and reach out to other traders for help (even if it makes you uncomfortable, it can be hugely worth it!). Finally, you should only fund your account with half the money you plan on trading with until you are comfortable and profitable.

But how do you know when it is actually time to fund your account? After all, you felt confident the first time too. What is to stop the whole disaster from happening all over again?

I think a lot of this comes back to #2, “Figure out why you failed.” If you really know why you failed, and you make the right adjustments, you should not end up repeating the past. That does not mean you will not make new mistakes. Sometimes it does take a few attempts before you actually are trading profitably with real money.

Codify Your Adjustments Into a Checklist

In that previous article, I did not go in-depth into steps 2 or 4. I would like to delve a little more deeply into these steps now, and connect this topic to another I have written about, which is the use of checklists.

If you do not use checklists in your trading, you should. A checklist allows you to codify all your procedures and remain focused. Oftentimes, failures happen not because we do not have the right ingredients for a recipe, but because we forget to add something critical to the pot before we put it on the stovetop. A checklist will save you from making those types of errors. I firmly believe a lot of traders have what it takes to succeed, but their procedural failures stop them from making the best use of their skills, tools and techniques. This is a subject I did not even touch on in the previous article.

With a checklist (or several), you can not only correct problems with your money management plan, trading system, and psychology, but also with your trading procedures. One of the most frustrating things that can happen (and often does) to traders is when they fix something they have been doing wrong in theory but fail to translate it into practice. This is usually the fault of faulty procedures.

As recommended in my in-depth article on checklists, I suggest the following three checklists before you consider going live again:

  • A schedule of daily, weekly, and monthly task reminders
  • A to-do list which covers short-term goals for the upcoming days and weeks
  • A trading checklist which lists everything you will do before, during and after a trade.

The trading checklist is arguably the most important of the bunch. This checklist will incorporate everything you have learned during your time off from live trading, and integrate it with everything that worked in the past. It will tell you exactly what to do and when to do it, and include plans for what you will do when things go wrong. Your checklist does not have to be confined to just steps you take with your charts or in your trading platform either! It can even include remainders like, “Stay calm, don’t panic, and do not go on tilt.”

It is hard to come up with an exact reliable gauge for when you are ready to trade again, but there again I think the checklist is helpful. You should not only be measuring profits in your demo account with your newly adjusted strategies or money management rules, but also with your newly-adapted trading checklist. You should follow the same checklist procedures during testing that you will follow live. Once you are recording strong results following the checklist, there is really no reason you should not feel confident going live. You will be using the exact same list and following the exact same procedures. There is no reason for you to deviate from it in any way.

Of course, that means that on a psychological level, you need at least one thing to be solid, and that is your self-discipline. You can codify many aspects of your psychology as part of your trading checklists—like reminders not to go on tilt. But ultimately your checklist is only as good as your ability to follow it. So that too is an absolute must before you put real money on the line again. You need to be able to follow that plan even with the increased amount of pressure.

Does that mean you have to feel 100% confident? No, and in fact I am guessing you will never feel quite that confident again after one trading disaster. And that is not a bad thing—it is actually a good thing. But you need to get to the place psychologically where you can accept that you are not invincible—but that does not mean you are likely to fail. You do not need to replace conceit with paranoia. And that is where the checklist comes back into play. It gives you something solid you can lean on as you embark back on your trading journey.

Every year, traders fail, and the majority of them give up forever. You may have heard it said that “failure is simply the state of not having succeeded yet.” That is something that I hold to and that I try to remind readers of again and again. But that is only true for you if you do not give up. Failure becomes a permanent state for the majority of traders over time. You do not have to be one of them. Follow the steps, rebuild your confidence through testing, and support yourself with a rock-solid checklist that will keep you on target. Build the discipline you need to follow through, and you will do great.