Blowing Trading Account

Blowing trading accounts creates a feeling of self-doubt. Many questions arise in the trader’s mind, like what is happening to me, where I am wrong, or why me. Losing hard-earned money in the financial market is painful.

But every loss has a reason. And it is essential to know it. Here are the reasons that pave your way to forex account blowing:

Stop Loss Miss Management: Stop loss is the most important element to safeguard your account. Many traders see stop loss as their enemy, but it is the biggest savior.

In the trading world, you cannot save yourself from losing money. However, you can limit your trading losses by setting a stop loss level. It is a way to close a trade at a minimum loss if the market moves against your prediction.
Trading without a stopping loss is the first step towards account-blowing. In addition, setting too conservative or too aggressive stops loss results in significant losses.

Flexible Entry and Exit: A trader should know the exit even before entering a trade. Generally, traders adjust the trade exit based on market conditions.
Adjusting exit with the greed to earn more or to turn your losses into profit is not a good idea. It ultimately leads to bigger losses, and you will lose what you have earned instead of earning more. A trader should have strict entry and exit rules and should stick to them.

Excessive use of leverage: Leverage can maximize both your profit and losses. In the forex market, you can place a trade much bigger than your capital using a leverage facility.
Generally, the greed of earning more and becoming a millionaire in one night makes traders use excessive leverage. However, unrealistic leverage is the most common reason for blowing trading accounts.

Emotional Trading: Many people in the market compare trading with gambling. However, it is not if you are keeping your emotions out of it. Greed, anger, frustration, stress, anxiety, fear, and other emotions can destroy your trading journey.
Traders’ psychology can decide their future in the forex market. Generally, beginners feel that trading requires technical knowledge. But in reality, trading is more about emotion management.

Overtrading: Placing more trades with the aim of making more money is known as overtrading. A trader should know that high trade frequency is not a guarantee for profit.
So, instead of focusing on placing a high number of trades, aim to place quality trade. Overtrading will only burn your capital. Traders, especially beginners, should avoid overtrading to protect their capital.

Want to get rich quickly: The zeal of becoming a billionaire in one night is a step towards account destruction. The Forex market is not a money-making machine. It’s a place to earn good money with your knowledge and skills.
Don’t fall for instant money or huge profit scams. If you have come with the aim to earn quickly, then it’s time for you to stop. Profit comes with knowledge and experience; there is no other way.

Precaution is better than cure is a popular phrase and quite applicable to the trading world. Taking some precautions before realizing your mistakes after losing capital is better. So here are some ways to avoid trading losses:

Have clear and realistic goals: The first step to stop your trading account from blowing is goal setting. You should have clear expectations from the market. Further, make sure that your goal aligns with the capital, trading instruments, and risk-taking capacity. Remember, unrealistic goals can turn your profit into a loss.

Never trade without a plan: Having a blueprint of your trading journey is essential for saving yourself from big losses. Trading already involves a potential risk, and without a plan, the risk further increases. Your plan should consist of why, what, when, where, and how to trade. Also, make sure you stick to your trading plan even in the unfavorable circumstances.

Have a trading risk management plan: You may have seen the hype about risk management in the trading world. That is because how you deal with risk can make or destroy your trading journey. So, trade with a proper risk-to-reward ratio and position sizing.

Have a trading journal: A trading journal is a collection of all your trades with criteria. It includes profit or loss, risk per trade, leverage, strategy, and other details. Maintaining a journal will help you in analyzing your trade effectiveness. Also, you can identify your strengths and weaknesses and make changes in your plan accordingly.

Diversification: One of the key reasons many traders lose money is investing all in a single instrument. However, in such cases, if your trade goes in loss, the amount will be bigger, and it can blow your account.

So, diversify your trading capital into different currency pairs. You can also spread into different market commodities, cryptocurrencies, stocks, and indices. This way, you can manage your losing trades from the winning ones.