Can I ask has your DD represented your county and competed for them or just came third in a county level competition? As these are two very different things!
My DD does gym and my experience would say that the very best girls do not tend to do county level competitions - county comps would be below their level, and they would instead do regionals / nationals / compulsories instead.
Whilst 12 hours a week seems a lot of hours The very best 8 year old gymnasts I know are training well in excess of 12 hours a week - 16, 20 hours plus. I even know one gymnast year old who was training over 30 hours a week at the age of 9! That's top flight gymnastics. My daughter (11) trains just under 20 hours, and she's been Doing that for a few years now. She took her nationals last year, but she's between regional and national grades level. She doesn't do county level competitions - girls who train at a lower level than her (and fewer hours per week) do those comps. And my DD is nowhere near a top flight gymnast. She's good, but she's not amazing.
I'm not saying this to put your daughter down, but to give a bit of perspective. 12 hours in the world of gymnastics is not a lot of training. So if she training for county grade competitions, she's not a top flight gymnast - even if she comes first, simply because the top flight gymnasts tend not to be at county level competitions (in my experience).
So bearing that in mind, the next question is to ask is how neat your daughter is. Obviously, your daughter will have the skills beyond anyone else at the school, but that won't be what they're looking for. They will be looking for the perfect execution of the moves. Again, I've seen gymnasts who can perform moves much more complex than my daughter can but they're not neat, and so when it comes to comps they don't necessarily win, and I've seen parents at comps saying their daughters were better because they could do harder stuff, but that's not what wins - perfection does. So if you're going to challenge the teacher you need to be sure that she performed the moves perfectly.
Finally, don't forget that they do lose skills as they progress onto harder stuff. My DD passed her national grade with distinction last year, but this year is doing her regional grade - some of the moves on there are really simple compared to what she had to do last year, but she's really struggling with a couple of moves that she learnt years ago, but has since gone beyond them, and is now finding it hard having to go back and having to relearn those easier moves.
Could this be something that perhaps has affected your daughter...?
Again, I'm not saying any of this to put your daughter down, but perhaps to give a different perspective before you confront the teacher. I'm sure your daughter's gymnastics skills will be beyond those of anyone else in the school, but it may genuinely be that she wasn't the neatest at performing the simpler skills. Of course, it may also be that the teacher is out of order, I don't know - I'm just giving you a different view to consider before speaking to the teacher.
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