Four Steps to Recovering from Having Blown Up Your Account

So you blew up your account? Instead of crying in the corner, please realize that blowing up an account is a lot more common than you think.

You’ve probably heard of the saying that 90% of traders fail in their first year. Now, I don’t know how accurate that is, but sad to say, I’m inclined to believe that it’s true. I myself have blown up a fair share of accounts, committing all the mortal trading sins in the process.

Lack of discipline, cowboy trading, not following the game plan, revenge trading… These are all common reasons as to how traders end up seeing the dreaded 0.00.

The bright side is that even some of the best traders have hit rock bottom and come back to become consistently profitable traders.

Believe me, it is possible.

So before you curse the forex gods and ruin your karma forever, lemme share with you four steps that will help you get back on the right track.

Step 1: Acceptance

The first positive step towards recovery is accepting that you blew up an account. Some traders allow the negativity to sink in, causing them to believe that they will never be good enough to be consistently profitable. Successful traders push through and understand that there are risks involved in trading.

Furthermore, successful traders know that while blowing up an account is not ideal, it is certainly a reality that can happen to any trader. Instead of moping around and doubting yourself, you should look at it as an opportunity to learn, grow, and improve as a trader.

Step 2: Look Back

So now that you’ve already faced the reality that you’ve lost your hard earned money, it’s time for you to ask yourself, “Where did I go wrong?” You’ll most probably find the answer in your trading journal. That is, of course, assuming that you have one and you were disciplined enough to write the details of every single trade you took.

Were you risking way too much? Did you execute your trades according to your trading plan? Do you still think your trading system is right for you? Take a look at what you were doing, examine any change in your trading style, and see what you could’ve done differently.

Step 3: Go Back to Demo

Don’t cringe just yet. I know that going back to a demo account isn’t really the best ego-booster. It’s like becoming a major league baseball pitcher only to be sent down to the AAA minor leagues. Where’s the fun in that?

Just know that there’s no shame in safely practicing your trading and getting your rhythm back. So set your ego aside – it’ll pay off in the long run!

Remember that the market humbles everyone at some point in time, no matter who they are. Heck, even the pros don’t just dive head-first back into the markets. A smart and sensible trader knows that he will need to build his confidence before he starts risking his hard-earned money in the unforgiving world of forex trading again.

Step 4: Open an Account Again

There’s no specific time period for you to stay in demo (although I recommend at least six months), so when you feel that you’re ready to go live again, call up a broker. Open another account with the amount of money you are only willing to lose. I repeat – only trade money that you are willing to lose.

This time around, make sure that you stick to your trading plan – no matter what! You may not see your profits build up right away, but being a disciplined trader is a major victory. Over time, you will see yourself improving and the bottom line will speak for itself.

One last very important thing to keep in mind: Do not be easily discouraged. If you don’t believe in yourself, nobody else will. It is up to you to pick yourself up and keep going along your path. Always remember, what doesn’t kill you only makes you stronger!

  • Still Learning

    I didn’t get blown up but I certainly received an @ass:disqus 
     whooping a couple of months ago.  I saw my account drop overnight on the kiwi from $40,000 to $23,000.
    Ego and refusal to believe what the markets were telling me caused this.  I took a look at what happened – accepted, it was my doing, my fault entirely.  Nobody made the trades for me, I didn’t get out when I saw what was happening, I didn’t trade with discipline and when it blew through my stops I didn’t bail as the little voice inside my head kept reminding me was the proper thing to do.  Yes, I saw the writing on the wall but didn’t accept and turned what was a $2000 loss into a $13,000 loss.  Me bad – I spend the rest of the week observing but not trading – looking at what I could have done differently and then when I got back in using the lessons learned and moving forward.  My account is up to $33,000 now so I am heading in the right direction but I used what happened as a very expensive lesson and consider it both tuition in the expensive school of currency and  a offering to the currency gods.  

    I now regard losses that are properly stopped out or, if it has shot through my stop but I do close out as an offering to the currency gods and use it to learn whatever lessons I may.

  • Woodie

    I just started reading your “School”-Guide and I’m wondering, how an Account can be completely blown up with all the money lost.
    I’ve never seen a currency loosing 100% of it’s worth compared to another one- so why could one end up with 0.00 on the Account?
    Did I miss something?

    • Abdulkadir shehu

      yes, u miss a lot. If this is your perception please u better go and learn leverage and margin and how these two can make or mar your account. good luck 

    • Stox

      The way I see it is you put one currency against another, so that currency will either gain and make a profit, or lose and make a loss against your capital amount. When you open up a demo account and start your first trade, you will see that your entry position will be a minor loss (it could be 2 pips worth if you are trading like EUR/USD, or 10 pips on the minors – that is the spread that your broker will offer (that’s how they make money) and you need to make it up to become profitable). 

      So if you start a trade with a $1000, you’re initial reading will say -$100 (the spread), then it might pick up to a nice profit of +$11000, or continue for a loss of -$1000 and bottom out your trade (I think). I guess when you reach the lower limits of your account you might need to go ‘all in’ in order to make any decent profit and making a loss equal to your remaining capital investment will give you a fat 0.00.    

  • Jo

    Best lessons are learned in hardest ways.

  • wirabayu06

    I will take ur advice and everyone experience as my improvement.. thank u all ^.^

  • Sharad

    This is excellent lesson for me as I have twice blown off my acc. and spent lots of sleepless nights. Each and every points detailed here touches my style of trading. I have overcome with such bad habits. I don’t mind using demo trading for nearly 6 months but it helped me a lot improving my trading style. Now I realise that discipline is most important factor in forex trading.
    Thank you for the article.

  • Amster

    I thought I was lucky that I did not blow up any of my account, until the March Japan quake. Yen plunge so do my accounts. They got blow up. Everything can happen in Forex! Good Luck.

  • reno

    I haven’t blown up an account yet, although I’m guilty of revenge trading.  Yes, I was ticked, and should have ‘walked away’.

  • Sderfoldy

    I find with demo accounts, that they do not have the tools needs to do technical analysis

  • Sderfoldy

    I find with demo accounts, that they do not have the tools needs to do technical analysis

  • reno

    I haven’t blown up an account yet, although I’m guilty of revenge trading.  Yes, I was ticked, and should have ‘walked away’.

  • wirabayu06

    I will take ur advice and everyone experience as my improvement.. thank u all ^.^

  • Pingback: 4 Steps to Bounce Back After Blowing Up Your Account | Forex Blog: Pipsychology

  • jonathan1

    i have blown a few accounts up by overtrading, its a common problem and i found i was only considering how much i could win not what i would loose if it all went well. So now the first thing i look at is how much will i loose if this trade goes wrong

    • Dr. Pipslow

      Yikes! Thanks for sharing and sometimes lessons aren’t learned without deep pain. Fortunately, with pain comes growth and it looks like you’re a better trader for it!

  • Guest

    Yikes! Thanks for sharing and sometimes lessons aren’t learned without deep pain. Fortunately, with pain comes growth and it looks like you’re a better trader for it! Congrats on growing you’re account!