Account Blow Out

By S. Wade Hansen

I blew up my first account when I started trading in the forex market, and I’m extremely grateful that I did. I learned invaluable lessons as I panicked, raged and wept. Those lessons have helped me tremendously as I’ve weathered the storm during the past two weeks of market mayhem.

I spent the first part of the week talking to many aspiring and current forex investors, and I heard a common theme from many of them: tales of woe. They had lost money, become discouraged and thought about giving up their forex endeavors all together. They were coming to me for some glimmer of hope and a few bits of advice. I’m glad they did. Here’s what I told them—or at least something similar to it.

If I had stopped investing in the forex market after I blew up my first account, my life would be very different. First of all, you wouldn’t be reading this blog post because I wouldn’t have written it. I would probably be watching TV right now instead of hovering over my charts and trading station.

Sure, it would have been easy to give up—to have walked away. My first account wasn’t huge, and I could recover from the losses. I recognize this isn’t the case for everyone who has blown up their first, second or third account, but I hope it is/was for most of you. Fortunately for me, I had caught the forex fever. I knew I could do it, but it was obviously going to take a lot more work and discipline than I had first envisioned.

I buckled down, analyzed what I had done wrong, evaluated myself as an investor and made some wholesale changes in my trading. I made the following five adjustments that changed my trading career:

1. I switched from trying to be a day trader to becoming a longer-term investor.

2. I lowered my leverage down to 50:1.

3. I determined never to risk more than 2% of my account in any one trade.

4. I started analysing the fundamentals of each currency.

5. I developed and stuck to a set of trading rules.

Seems pretty simple, doesn’t it. Regardless of how simple it was though, those changes have made all the difference in the world. I’m making great profits, I’m much more relaxed and I’m smiling a lot more.

I’m not planning on blowing up any of my accounts in the future.