4 Steps to Bounce Back After Blowing Up Your Account

Updated from its original posting on 2011-09-09

So you blew up your account? Instead of crying in the corner, you should know 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!

  • Philip Jones

    Have to agree. Sadly we are still seeing a lot of publicity that suggests that trading is easy. It aint! I studied nearly six years to get in to the work I normally do and it pays very well thank you very much. But it didn’t stop there: I had to continue my studies just to keep pace with changes in my domain.

    If you think trading is easy: Quick glance at the chart, bull trend, buy, go sit on beach and forget about it…..Stop dreaming now!

    Ive noticed the biggest obstacle to solving a problem is accepting you have a problem. If your account is heading toward baseline then you have a problem, red flag, bury the ego and sit up.

    If you don’t keep a journal then you will never know what the problem is. You can create a spreadsheet with columns: Currency pair, date, time and explanation why you think the trade is good. I find it helpful to list why the trade might not be good as well. A ‘why not?’ column if you like.

    When the trade is finished then go back and review why it worked or didn’t work. Remember: You can be right for the wrong reasons. If they make a surprise hike in US interest rates starting now then your EUR/USD sell trade is likely to benefit. But you didn’t see it coming so got lucky, not skillful.

    Where did your trade go after you got stopped out? Did it pick back up again and head where you expected it to go in the first place? Could it be then you set the stop too tight?

    ‘I did everything right’ : no you didn’t and that is why you are broke. If you cant find the reason why your trades work or don’t work then stop throwing your money away.

    Id love to see a ‘Forex Traders Anonymous’ : ‘I am a trader and I have a problem, I don’t keep a journal.’ Its the difference between getting lucky and getting good.

    • If you thought trading is difficult, now trading has been made easy by Market Trading Institute MTI. They got a really cool trading platform that tells you exactly when to buy and sell trades by just using a blue line. If your candlesticks are above the blue line you will sell and if below you sell.

      • *above blue line buy, below blue line selll

      • Dr. Pipslow

        Ehh. It can’t be just THAT simple, otherwise we’d all be gazillionaires by now!

    • Dr. Pipslow

      Ha! Forex Traders Anonymous sounds like an interesting idea. “Hi, my name is ____ and I need to work on my trading.” Thanks for sharing your insights and the usual thought process that one usually goes through when refusing to own up to trading mistakes.

  • Abioye Peter

    When do you think is the best time of the day to enter a day trade please.

    • Dr. Pipslow

      Personally I like taking day trades during the session overlaps since there’s a lot of volatility and it’s enough time to process how the market could react to freshly released data. Of course ‘best’ is subjective depends on your trading style and preferences.