How to recover after blowing up your account
It’s not unusual for beginner Forex traders to wind up completely wiping out an account through a series of losses or poor risk management. While this unfortunate scenario can be avoided with the right amount of trading knowledge and discipline, it would also help to have a battle plan to bounce back from blowing up your account.
Instead of dwelling on frustration and anger, you should take a more constructive approach in dealing with blowing up your forex account. Perhaps the first step you can take is acceptance, as this will put you in a better position to start recovering from the loss. There is no need to focus on the negative aspect though, take it as a lesson learned and an opportunity to bounce back.
After accepting the reality of losing your money, look back and try to figure out where you went wrong. Did you risk too much on each trade? Did you overtrade in an effort to recover money lost on a bad trade idea? Were you over-leveraged? Did you fail to conduct proper analysis before taking trades? These are just some of the questions you can think about when analyzing your decisions.
At this point, you should have a trade journal that you can review in order to pinpoint the mistakes you’ve made and how you can avoid them in the future. Without a proper trade journal, it might be difficult for you to recall your trades and figure out what you can improve.
Another factor that you can review is whether or not your trading system is working for you. Even if you have the proper discipline and risk management rules, if your trading system isn’t appropriate for the market environment, then you could still wind up with a terrible trading performance. You can opt to run another set of back tests on your mechanical system or take some time to review the rules of your trading system to see if any adjustments need to be made.
The next step after figuring out where you went wrong is to go back to demo trading. This can allow you to forward test the adjustments you are planning to make in order to have a more profitable performance and avoid wiping out your entire forex account again. Apart from that, this can be a helpful exercise in regaining your confidence in trading.
Of course, there are plenty of psychological differences in demo and live trading as discussed in a previous section, but this shouldn’t stop you from taking it easy and relearning the ropes. The important thing to remember is to take your time in recovering and that there is no need to rush when it comes to proving that you can trade better.
Once you have your trading confidence back and are able to see consistent results on demo, you can open a live trading account again and stick to the lessons you’ve learned.
Next Article: Developing good trading habits