[Dinerotrader]

I often read about a trader blowing up their account and I haven't seen a dedicated thread which could collect some experiences of this to help us all avoid it or embrace it if its occurrence is simply part of the path to success.

I would say blowing up an account normally means that you account lost enough value that you couldn’t trade because of insufficient funds. It also, could mean your account going to zero. I wish I had a good story to start things off but I am new enough at this that I haven't yet earned my account depletion star. My hope would be to avoid this part of the path to success however, that seems highly unlikely given how many good traders have had to pay this price for their education.

Please indicate if you believe your experience was necessary to progress or if you think you could have avoided it and still made the same progress. If it could have been avoided, please note how.

Let’s see if we can accumulate a few reminiscences of account explosions before the debate and personal theories take over. This could easily become a great “sticky” thread for new traders and experienced traders to learn from.

Don't hold back or be ashamed. These experiences are like Rambo’s scars, a badge of honor, the trader’s diploma……

When did it happen
What led to it happening
Could it have been avoided (without the 20/20 vision of hindsight through which you now see)

[brownsfan019]

As a daytrader, if you keep your risk parameters in check, I don't think a 'blow up' is necessary. You might bleed by a thousand cuts, but not a 'blow up'.

I think you'll find blow ups occur:

1) Trading w/ too much leverage
2) Trading w/ over confidence
3) Long-term trades / trades that turn into 'investments'
4) Making huge concentrated trades (bets)

From what I've read, the big blows up are some combo of those items and I can easily see it apply to the retail trader. When you can open a futures account for $5000 or less, trade with $500 margins or less, that is the recipe for a 'blow up' IF put into the wrong hands. Take that same scenario but give it to someone that understands the risks involved and how to manage those and I think the likelihood of a blow up decreases substantially.

[Dinerotrader]

Originally Posted by brownsfan019 »

bleed by a thousand cuts, but not a 'blow up'.

That counts as a "blow up" also. Please share your story.

I agree with your comments. The thing surprising to me is that I have heard these stories from very good traders that don't appear to be your average retail traders.

[brownsfan019]

Originally Posted by Dinerotrader »

That counts as a "blow up" also. Please share your story.

I agree with your comments. The thing surprising to me is that I have heard these stories from very good traders that don't appear to be your average retail traders.

Maybe you should get the party started w/ some stories that you've heard. Best way to get a thread going is to start it yourself.

[BrianNC]

I first started day trading the emini nasdaq in in about 2000. I only had a $1200 account and didn't know much. That was back in the .com boom and all the markets moved a lot every day.

I was dumb and didn't know much, and my 'wipe out' trade was one that went against me and I didn't have a stop. So as the trade went against me and was wiping out my account, I kept hoping it would turn, and finally got out when it got close to me not having any money left in the account. Of course, right after I did that it turned around and I would have ended up getting getting about half my account back.

[Soultrader]

First year of trading, I aimed for a homerun trade over leveraging my size up to 5 times the norm. Didnt take the quick loss as I was out trying to beat the markets with an inflated ego. Lost about 30% on one trade... couldnt get my mind straight after that and eventually blew up another 30% within the next 6 months.

Remaining as calm as possible once in a trade has been one of the biggest turning points. Having a plan and trading it ensures your targets and risks, making each trade comfortable. I recall being glued to the charts and this was one of the downfalls for me early on which led to overtrading. I keep it simple now, just watching for price levels with alerts to notify me in advance. No point trying to look for trades... good trades just popup in your face screaming at you. Also the more knowledge you have about the markets not just locally but on a global level... the more info you have that could help confirm your trade ideas.

[thalestrader]

Originally Posted by Soultrader »

No point trying to look for trades... good trades just pop up in your face screaming at you.

Great post, James.

Any new trader (or struggling old-timer, for that matter) would serve him or herself well by writing James's observation on an index card and taping somewhere highly visible in the trader's workspace.

I remember the palpable feeling of change that came over me as I evolved from "looking for a trade" to "waiting for the trade to come to me." When I do make a mistake, I can almost always attribute it to an impatience on my part to trade and thus forcing myself to take a position rather than simply waiting to hear from the market itself.

Best Wishes,

Thales

[Tasker_182]

Good thread, thanks!