Many traders might be on the verge of giving up on their trading dream largely due to the loss of significant amount of money in the forex market. While some traders do not know how to move forward and overcome their failures, others are unable to recover from the emotional trauma associated with blowing their trading accounts.
What many traders are yet to come to terms with is the inevitably moments of failure in this market. Michael Jordan, one of the greatest athletes of all time said, “I’ve failed over and over and over again in my life and that is why I succeed.”
Similarly, Hoosain Harneker observed, “I’ve seen it with my people who have deposited money, lost it, deposited again, lost it again, deposited again, lost again, and then suddenly, by the fourth time, they are up and running and finally trading well.”
The concept of a blown trading account
When a trader loses all the funds in their trading account as a result of significant and/or consistent losses, it is referred to as a blown trading account. This can lead to a situation where the trader is unable to take any other trades until they refund their account.
The blowing of a trading account is regarded as a valuable learning experience for traders. This is because, it affords them the opportunity to learn very important lessons about trading strategy, risk management, discipline, etc.
What to do after blowing an account
Here are some tips to help you recover from a blown Forex account.
- Take a Break
Imagine a situation where a driver upon experiencing a flat tire refuses to stop and assess the situation before continuing with their journey. It’s an undeniable fact that the driver will waste time and even end up damaging their car. This is because they ignored the need to take a break and inspect their vehicle.
In like manner, if one blows their forex account, it is crucial to take a break from trading. Taking a break helps in decongesting one’s mind to afford the trader with the clarity needed for a proper review. Again, taking a break also reduces the emotional impact of the loss, enabling you to think more rationally about your next steps.
- Do a proper SWOT analysis
The next step after taking a break is to undergo a passionate SWOT analysis of your trading experience. SWOT analysis is a term which refers to assessing the Strengths, Weaknesses, Opportunities, and Threats associated with an entity. It involves breaking down, evaluating and understanding the various processes and actions that a trader involves in their day-to-day trading.
This helps the trader to identify specific issues in any of the processes and how to deal with them. SWOT analysis will aid the trader to Look at their trading history and try to identify the mistakes made.
The analysis will prompt important questions such as; Were you overleveraging? Did you ignore proper risk management or your emotions were controlling your decision making?
This essentially helps you to be honest and avoid blaming external factors like market volatility or brokers. Taking responsibility for your mistakes is a big step in becoming a better trader.
- Learn and seek mentorship
After reviewing your trading strategy, focus on increasing your knowledge on forex trading. You can realize this via reading books, taking online courses, or attending seminars.
The more you study, the better your trading decisions and accuracy. It is also advisable to seek advice from experienced traders or experts in this business to gain insights into probable recovery strategies.
The value in learning from others who have overcome similar challenges cannot be overemphasized.
- Develop a robust plan
A plan is a set of steps or goals that need to be achieved. To rebuild your trading career, you should create a well thought out strategy that outlines your goals, establishes a timeline, and specific actions needed for their achievement.
Your trading plan should include risk and money management strategies putting into consideration your account size, leverage, as well as stop-loss levels.
Furthermore, it should include a well-defined entry and exit strategy that takes into account technical analysis, fundamental analysis and market sentiment. Planning your work and working your plan is the way to go.
- Test your plan
Having developed a powerful plan, it is essential to test it. Testing your plan rebuilds your confidence and positive mindset. It is also necessary to start with a demo account or a small account, preferably a cent account when you are ready to resume trading.
This will afford you the chance to practice your new trading strategy without necessarily risking any significant amount of capital. However, some experts argue against the use of demo accounts but a real account. They believe that a real account helps you to stay disciplined and focused.
- Execute your plan effectively
Regarding the proper execution of your trading plan, one word stands tall: discipline. Discipline is one of the most essential ingredients that affords a successful trading journey. It helps you adhere to your trading plan without allowing emotional interference.
By having the discipline to follow your risk and money management strategies, setting stop-loss levels, and avoiding overtrading, you are on the right path to becoming a successful trader. Discipline will also help you to gradually increase your position sizes accordingly, as you become more confident and efficient with your new found strategy.
- Keep a Trading Journal
Keep a trading journal for logging in all your trades including the entry and exit points, as well as why you took each trade. It will help you to track your progress, recognize patterns and specific strategies within your trading plan that are most effective and those that are not.
Conclusion
Knowing how devastating the blowing of your accounts can be, guard against it by implementing this workable and proven tips. You are sure of recovering from your losses and enhancing your trading skills by religiously following these measures. Always remember that you have what it takes to be a successful trader just as others.
