How to Recover From A Blown Trading Account

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With all the crazy moves in the markets these days, I’m pretty sure some are staring at large drawdowns or even dealing with a completely blown trading account.

Instead of crying in the corner, keep in mind that blowing up an account is a lot more common than you think.

trading accountYou’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 margin call.

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.

1. Accept your losses

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. They also 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.

2. Find out what went wrong

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? You were probably overleveraged.

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.

3. Go back to demo trading

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.

4. Open another account

There’s no specific time period for you to stay on demo (you’ll know when you’re ready). 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, don’t overleverage and use proper risk management. 

And make sure that you stick to your trading plan like white on rice!

You may not see your profits build up right away, but being a disciplined trader is a major victory.

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’s up to you to pick yourself up and keep going along your path.

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