I’ve seen a few forex forum inquiries from rookies who have blown out their first forex trading accounts, therefore I’ve decided to write a post about how to recover.
Rather than sobbing in the corner, remember that blowing up an account is far more common than you may believe.
Account for trading
You’ve probably heard the statistic that 90% of traders lose money in their first year. Now, I’m not sure how accurate it is, but I’m inclined to assume it’s correct. I’ve blown up a few accounts myself, committing all of the deadly trading sins in the process.
Discipline issues, cowboy trading, failing to stick to the game plan, revenge trading… These are some of the most prevalent reasons why traders receive the dreaded margin call. On the plus side, even the finest traders have hit rock bottom and returned to become consistently winning traders.
Believe me when I say that it is feasible.
So, before you curse the forex gods and ruin your karma for good, let me share four actions with you that will help you get back on track.
1. Accept your defeats.
Accepting that you blew up an account is the first step toward healing. Some traders let their fears take hold, believing that they will never be good enough to be consistently profitable.
Successful traders persevere despite the fact that they are aware of the hazards involved in trading. They also understand that, while blowing up an account is not ideal, it is a possibility for each trader.
Instead of wallowing in self-doubt, you should see it as an opportunity to learn, grow, and improve as a trader.
2. Determine what went wrong.
Now that you’ve accepted the fact that you’ve lost your hard-earned cash, you should ask yourself, “Where did I go wrong?”
Your trade log is most likely where you’ll find the solution. That is, providing you had one and were diligent enough to record the facts of each and every deal you made.
Were you taking too many chances? You were most likely overextended.
Did you follow your trading plan when you made your trades? Do you believe your trading method is still appropriate for you?
Examine what you were doing, look for any changes in your trading approach, and think about what you may have done differently.
3. Return to the trading simulator.
Don’t get too worked up just yet. Going back to a demo account isn’t the best way to bolster your ego. It’s like pitching in the main leagues only to be demoted to the AAA lower levels. What’s the point of that?
It’s important to remember that there’s no shame in safely practicing your trade and regaining your rhythm. So put your ego aside — it’ll be worth it in the end!
Remember that everyone, no matter who they are, is humbled by the market at some point. Even the pros don’t jump back into the markets with both feet.
Before risking his hard-earned money in the merciless world of forex trading again, a savvy and reasonable trader understands that he will need to build his confidence.
4. Create a new account.
You don’t have to stay on demo for a set amount of time (you’ll know when you’re ready). Create a new account with the money you’re only willing to lose. Only trade money that you are willing to lose, I repeat.
- Don’t overleverage this time, and practice adequate risk management.
- And, like white on rice, make sure you stick to your trading strategy.
Although you may not see your earnings grow right immediately, being a disciplined trader is a significant achievement.
One more point to remember: don’t get disheartened quickly. Nobody else will believe in you if you don’t believe in yourself.
It’s up to you to get back on your feet and continue on your way. Take it from Kanye West: if you don’t kill me, you’re only going to strengthen me!