Trading is a difficult endeavor. Some people are able to learn from their mistakes and become successful traders, while others end up losing all of their trading capital. Trading losses can be extremely discouraging, but they’re not the end of the world. If you’ve been trading for awhile and find yourself with an account balance under zero, here are some ways to recover from a blown trading account.
I’ve seen a few forum questions from newbies who have blown up their first forex trading accounts, so I’ve decided to write a post about how to recover.
But instead of bawling in the corner, remember that blowing up an account is far more common than you might think.
You’ve probably heard the statistic that 90% of traders lose money in their first year. Now, I’m not sure how accurate that is, but I’m inclined to believe 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 common reasons why traders receive the dreaded margin call. On the plus side, even the best traders have hit rock bottom and returned to become consistently profitable traders.
Believe me when I say that it is possible.
So, before you curse the forex gods and ruin your karma for good, let me share four steps with you that will help you get back on track.
1. Accept your losses
Accepting that you blew up an account is the first step toward recovery. Some traders let their fears take hold, believing that they will never be good enough to be consistently profitable.
Successful traders keep on going due to the fact that they are aware of the risks involved in trading. They also understand that, while blowing up an account is not ideal, it is a possibility for any trader.
Instead of indulging in personality, you should see it as an opportunity to learn, grow, and improve as a trader.
2. Find out what went wrong
Now that you’ve accepted the fact that you’ve lost your hard-earned cash, you must ask yourself, “Where did I go wrong?”
Your trading journal is most likely where you’ll find the answer. That is, assuming you have one and were disciplined enough to record the details of each and every trade you made.
Were you taking too many chances? Did you follow your trading plan when you made your trades? Do you still think your trading system is right for you? Examine what you were doing, look for any changes in your trading style, and think about what you could have done differently.
3. Go back to demo trading
Don’t get too worked up just yet. Going back to a demo account isn’t the best way to boost your ego. It’s like fielding in the major leagues only to be relegated to the AAA minor leagues. What’s the point of that?
It’s important to remember that there’s no shame in safely practicing your trading and recovering 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 unforgiving world of forex trading again, a smart and sensible trader understands that he will need to build his confidence.
4. Open another account
There is no time to stay in a demo (you’d know when you’re ready), so call a broker when you feel ready to go live again. Open another account, you are willing to lose the amount of money. I repeat – you’re willing to lose only commercial money.
Make sure you keep to your rice trading plan this time around, like white! You may not instantly see your profits grow, but being a disciplined trader is a big victory. Over time, the bottom line will speak for itself and you will find yourself improving.