How to Avoid Blowing Up Your Trading Account? What to Do If It Happens?

All forex traders are aware that the currency market is one of the most unpredictable and violent of all market systems. So in trading, losing money is sometimes unavoidable and many traders end up blowing one or more trading accounts. Blowing up an account is more common than you might think for traders. 

In this article, we will give you some ways not to blow up your forex trading account and tell you what you can do once you have a blown account, how you can get past it and then back on track to becoming a profitable and successful trader.

What Does Blow A Forex Account Mean

To blow forex account means when you lose 100% of the money in your forex trading account. No trader wants to think about blowing an account. If it's happened to you, you may have felt sick to your stomach, frustrated, or helpless. Perhaps you were even ready to give up.

The truth is that most newbie forex traders and even many experienced traders face this situation when they don’t take forex as a business and start trading like gambling. Lack of discipline, cowboy trading, not following the game plan and revenge trading are common reasons as to how traders end up seeing the dreaded margin call. Making money in the market, particularly with day trading, is going to require accepting a few losses.

How to Avoid Blowing Up Your Trading Account

Here are five ways to not blow up your account in an unpredictable market:

1. Always have a Stop loss

Many traders simply enter a trade with only one objective in mind, take profit. They don’t consider their downside, which is how much they can lose. Stop losses are a mechanism by which traders can reduce their loss if the prices dip against their favored trades. If a decline is seen, a stop loss will make sure that no trades go through beyond that point.

There are many traders who don’t use stop losses while trading forex, it is probably the biggest mistake they make. This is also the reason why most newbie forex traders blow up their forex accounts. You should remember: do not risk more than you should!

2. Be educated about your trades

Do research and learn about important indicators and market trends. They are the most crucial part of the forex market. If you want to become a successful forex trader, make sure your research part is strong. Many traders start trading without understanding the market sentiments and conditions, which leads to blow up of their account.

3. Set realistic goals for yourself

You are not at all likely to become rich overnight. Instead, set weekly, monthly and yearly goals that you can accomplish. Be humble and don’t expect something that is not reasonable. Ultimately, doing so means you’re taking too much risk for your own good.

4. Check your emotions

If you have been trading, you will gradually notice how important it is to keep your emotions in check. Trading with emotions is the biggest recipe for disaster. Decisions should never be based on fear, anxiety, exaggerated perception of danger, or market hype. These types of decisions lead to impulsive actions, overtrading, or avoidance of trading.

5. Keep a trade journal

Many traders that continuously suffer big losses do so because they never learn what is going wrong. They routinely make the same errors over and over again and take their account value right to zero. That’s why keeping a trading journal is so important.

Through writing down and analyzing your prior trades, you will be able to look back and see trends of what is working for you and what isn’t.

How to Recover from a Blown Trading Account

The four ways below will help you navigate a blown account should it happen to you:

1. Accept the loss

The only way to really get over something bad happening, in this case, the loss of an account is to simply accept it. 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.

Forex trading account blown up has been more common than you think. Instead of taking so much stress, you should learn from your mistakes. So the very first step is to accept your losses.

2. Check your mistake

After accepting your loss, you’ll need to look into the problem to find out what actually happened. The best traders actually use the opportunity to learn from their mistakes, so you’ll want to take a detailed look at each trade you’ve taken.

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.

3. Going Back to Demo

Demo trading can help you work on fixing the issues that previously blew your account without having to risk any more money while doing so. If you’re hesitant to get back into real trading, this step can also help ease you back into it while increasing your confidence if you get good results.

4. Open a New Trading Account

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. Learn from your mistakes, practice, and implement them without allowing the emotions of the most money to take over are key. Do this and you will be on your way to becoming far more profitable and consistent in the future.

Conclusion

Traders end up blowing up their accounts due to so many reasons. Do not despair simply because you blew up an account. Instead of feeling discouraged, think of it as a new beginning where you can get off to a better start. But instead of beating yourself up over what was lost, try to view it as money spent on your trading education.