Six Steps To Blow Up Your Forex Account
by Trader Rich
There are a lot of traders out there that have totally blown up their accounts. I'm one of them. Unfortunately, I never really knew how quickly this could happen until I actually did it. Here's a brief synopsis of the events:
- I'm trading normally, with what I think is sound money management, slowly trying to build on my capital.
- Win 1, loss 1; win 1, lose 2; win 3 lose 1; win 1 lose 3; this can go on for quite some time.
- Then a consecutive losing streak happens, 3 in a row, 5 in a row, 10 in a row, who's counting.
- Emotion get the best of me, I start over-leveraging to try to get back what I've lost.
- Things get worse and my balance is low. Let me ride the rest on this 1 trade. I can make it back.
- Kaboom! Margin call.
The last 4 steps can happen so quickly that before you know it, you've totally blown up your account. Fortunately, I've come back from this smarter. Instead of a blood gusher, I'm a slow bleeder. Colin over at Forex Spirit had a rough December. His 2007 equity graph alone shows how rough. Check it out, you may learn something. I think it was an important step for him to actually throw it all out in the open and write about it.
Dude, I wasn’t even that sophisticated, I just rocked on a couple of lots here and there, no stop loss or anything.
Ah, those were the days!
It all ended in tears of course
after losing 6% today after following what I thought was strict money management (max. 2% risk per trade), I’m adding a new rule to my trading – if I lose 2% in a day I’ll step back and shut down trading for the day no matter what – this will help prevent trying too hard to trade when I’m out of sync – even losing “only” 2% at a time will add up if you throw too many bad trades one after the other…