How Not To Blow Out Your Account In A Week

Sorry for the title name, I just wanted to catch some attention

I love forex and have since my father first introduced it to me 2 years ago. I started off w/ the Peter Bain system package, which was a very good basis to gain some knowledge of how the market trends and certain things to look out for, along with just general forex info. I then went through a live mini account that i put only 500 dollars in... took me less than a month to blow that all. This was probably the best thing that could of happened to me tho because it made me take a break from forex and concentrate on school. I then started to research more and more, reading books online, articles, lots of forum posts, books, etc. Just to see what really counts towards being CONSISTENTLY profitable in forex.
In all my research (which i continue to do since the market is always changing) many things "clicked" for me and i realized how many things i was doing wrong which explained exactly why i blew out my 500 dollar account in a couple weeks.
Main reasons why i was trading completely the wrong way:

1) $500 ISN'T EVEN ENOUGH CAPITAL FOR A MICRO ACCOUNT. For a mini account ($1 a pip) you will need about $6,000 to $10,000 in capital to make sure you have room to be able to withstand your losses. For a standard account ($10 a pip) you will need about 10 times that amount (its alot of money lol, i dont plan to be trading a standard account for a long time).

2) You should only ever trade less than 3% of [/font]ur[font=&quot] full account size on every trade (I heard this 100's of times but never paid attention to it). When i was using my live $500 account, i would lose over 100 bucks in a single trade (thats 20% of my account in 1 trade!! meaning i could only withstand 5 losses for my account to be gone!!)

3) MONEY MANAGEMENT- calculate your risk-to-return ratio, your real leverage (never want to use more than 20:1 (as apposed to 400:1 i used on my live account lol)), your win loss ratio is also important. Basically this was the biggest lesson i ever IGNORED in my forex research. The reason why it is so important is because it makes u stop looking for a holy grail system and start thinking in probabilities! Thinking in probabilities is something you can control, knowing where the market will go next is something you CANNOT control (biggest mistake of most traders, including myself). The market is UNIQUE at every moment - Mark Douglass (Trading In The Zone).

4) Stop looking for systems!!!!!!!! Find one that works for you, SET RULES WITH IT THAT ARE CONSISTENT WITH EVERY TRADE and GET SUCCESS OUT OF IT! Adjust it accordingly to the market, but STICK TO THE RULES always. The system i have been using has found me success but it wont work for everyone because of the psychological factor which comes in that makes ppl bend the rules
STICK TO YOUR RULES AND MONEY MANAGEMENT and in the LONG RUN YOUR PROFITS WILL SHOW (because in the short run you will lose trades and you will win trades, the key is to keep the losses lower and let the profitable trades run)

5) TRAILING STOPS! they are gods gift to forex traders. First off, one of the greatest things ive learnt is using multiple lots to capture my profits, then when i have the amount of profits im looking for i will move my stoplosses to breakeven- this is amazing what it will do for u psychologically because now half of the battle (fear of losing money) is gone and your only worry is finding the best time to exit the trade. NOTE: Only use multiple lots when u first open the trade just like i do in my trades in my journal (this is the reason why you will need a good amount of startup capital), do not open the trade with 1 lot then if u feel like the markets going ur way open another one (search for "Tail of Two Blinks" on this forum you will find a guy's ("Twoblink") thread that is his e-book and on the second page it explains averaging up/down this will give u the reasoning on why i added this NOTE.

There are other factors involved in finding success and believe me i am no guru at forex. But i just wanted to share my experience with you.

If you are new to forex, then this is something you would definitely benefit from learning EARLY, u can learn from my mistakes
Even if you feel like you have experience in the forex world, if you do not have this knowledge, it could take your trading to the next level.

I want to be able to live by the philosophy of "do something you love doing and you will never work a day in your life".
Forex is my passion and my goal is to become a professional trader. While my roommates play video games, i stare at charts all day lol... theyve gotten used to it.

For reference, out of all the books and articles i have read, the ones that benefited me that most and will teach you everything i have just explained are:
1) {link removed, see rule #2} - amazing website, make sure u concentrate on the money management part and leverage (they explain why its the number #1 killer in forex)
2)Trading in the Zone, by Mark Douglass - i recently read this book and it was really nice to read because it showed me that just about everything i was doing in my new strategy (technically and emotionally) was on target! The book talks about the physchology of trading which for most ppl is the deciding factor of being able to do it or not (i was mentally all over the place letting my emotions get to me in my 500 dollar account and that turned out to be my downfall). Mark Douglass gathered his information from analyzing extremely consistently profitable traders and not so profitable traders (the other 95% lol).
3)Tail of two blinks as i explained before, i cant believe this information is free!


Here is my Trading journal on forexfactory, definitely worth taking a look at it to see how the risk/money management works especially. It is not perfect by any means, but I have been able to achieve consistent profits, which was my initial goal in starting the journal:
http://www.forexfactory.com/showthre...178#post251178

What an interesting post - and I like your philosophy. Wish I had read this 20 years ago.

Hi BRXXT,

Where did you get those numbers from ($6,000 to $10,000 needed for a mini account)???

In real life, you only need to have the equivalent of the MAXIMUM DRAWDOWN of your system!

For example if you backtest your system and after 1,000 hypothetical trades you notice that the maximum drawdown is 1,000 pips (and I strongly believe that the maximum drawdown of a solid FX trading system should never exceed 1,000 pips!) then you need to have $1,000 in your mini-account.

HOVEVER, you do NOT need to put the whole $1,000 in your forex account immediately, $100 at a time is enough. Chances are you won't even need to put more than $500 total because your system will start winning and adding money to your trading balance. So you see, we are far far from the $10,000 you suggest.

Yes I know, some traders here are still going to jump to the ceiling and say: "This guy is totally nuts, $100 with 100:1 leverage and "only" $100 trading balance that's crazy, he is betting/trading 100% of his account per trade".

Oh well, don't get me started again

If some people cannot understand that opening a 100:1 leverage trade with $100 margin money (with "only" $100 in your account, but with the intent to wire many times $100, as needed) is the same exact thing than putting $10,000 all at once and opening 100:1 leverage trade with $100 margin money, then they need to take a pen and a calculator and do the math.

well i say you need that much because of this concept:
{link removed, see rule #2}

in ur case, you are assuming that you will basically put in $100 almost everytime you trade, unless you are winning almost everytime you trade.. to me that just seems very sloppy and seems to me like you will be EXPECTING wins almost everytime. You have to be able to cover your risk every trade.
Also, i believe you need to use multiple lots to capture some profits and let the rest of the profits run.. when using multiple lots your risk is being doubled or tripled accordingly...

Oh and by the way, i dont know about your broker, but when i had to wire money to my account or withdraw from it.. it was 25 dollars to do that, these fees will add up very fast if u are continuously putting money in or taking money out of the account.. not a good idea.

Basically I, along with most professional traders, will tell u that u need a good amount of startup capital, because it gives u the freedom to use multiple lots which are necessary for capturing profits consistently, while keeping ur risk at a minimum. In my journal you can see exactly what was happening when i wasnt using multiple lots, then the difference when i was... almost all of the first few trades (where i wasnt using mult. lots) i would come very close to my target of say 80pips profit and it would just retrace all the way down to my trailing stop at breakeven. Now i know i could have used a trailing stop at say 50, but in this case what if it went to say 60, retraced to 40 then went up to 80... using mult. lots as profit capturers you are able to keep more profits while letting the profits still run. My journal is a great example of this.

Also i dont see ur point so much if your saying that putting $100 dollars in the account repeatedly is the same exact thing as putting $10,000. Either way you will need the 10k

I just want to say that im not trying to tell you the way i do these things are the correct and only way to do them, but through my experience they are what efficiently work for me to remain consistently profitable even through many losing trades... if i am not correct, this would put me in the top 5%

Also one more note.. it is psychologically easier on a trader to see themselves lose 2% of their full account size in one trade rather than say 20-100%
And in my personal opinion, next to leverage, the psychological side of trading is the number 2 killer.

I know all about that already BRXXT, please see my comments in the thread "Is high leverage really bad for you".

The problem with your logic is that you are AUTOMATICALLY assuming that I will lose my $100 if I open a 100:1 leverage trade.

You could initiate a GBP/JPY trade with $100 only (100:1 leverage) and win 1,500 pips almost immediately, right from the start. And from then you could theorically make a fortune if you trade 2 lots then 3 and so forth, assuming you have an excellent trading system.

So how much total money was needed in this example: a lousy $100 and again we far from the $10,000 you think traders need.

What??? You FX broker charges you $25 to deposit money to your forex account???

It costs me $0.00 to deposit money by credit/debit card but yes, I need to pay $25 for withdrawal.

It's easy to say "you could do this....", or "you could do that...." IF you had an excellent trading system. But an excellent mechanical system is very rare so we do other things to tilt the probability of success in our favor, such as opening a decent-sized account and not risking everything on one trade.

You could write a never-ending book on all the things you could do in the world, IF you had anything(i.e. an excellent trading system) but in the real world, you never do have everything so it's pointless to debate what you would do if you did.

I couldn't have said it better myself.. thank you Aicccia for that response.

Although i stay positive, i will assume there will be losses and those losses may be on the first 10 trades out of 50.
When i opened my live account w/ 500, i had 3 losses before my first win and since i traded more than 3% of the 500 in each of those trades i was put in a position where i was forced to risk way more than 3% of my account in order to withstand a small retrace, which usually will happen, before my trade would move into profit. Since i was in the position of losing my first 3 trades, i was discouraged to add anymore money into it. Its nice to have room for your trades to breathe

Also, on a side note, my broker doesnt charge me the 25, its the 25 dollar fee from Bank of America to wire it into my account.

I understand, but when you are saying that a mini forex trader needs $10,000 to trade you are saying that a 10,000 pip drawdown is possible!!

Sure it is possible, but my friend, if your trading system or any trading system ever experiences a 10,000 pip drawdown, then it was totally worthless from day one, trust me on this one.

In fact it's not even a system, it's just garbage.

Advocating wiring another several $100.00 every time a beginner blows it smacks of the school of hard knocks.

I’ve been there, and been dragged through a hedge backwards afterwards. Sounds like you have, terminator, as well.

Some of us need cautionary advice and I am sure, on the subject of initial risk, we are able to make our own, informed decisions.

Keep up with the great beginner thread, brxxt, thank you.

I totally agree with your theory of multiple entries and exits on the same trade. Averaging up when the trade goes your way and scaling down once certain levels are reached. Perfect

Talk about blowing an account. For me my mm skills were top-notch. Tight SL, good TP levels, great system, and you know what really lacks in traders? Emotional Intelligence. This is hard to learn, and I have learnt it the hard way.

Blow it a few more times.

Risk management is key to making money trading Forex

This is actually a very honest and important thread for beginners. I went through the same myself : I started with a micro account at $25. Learned the basics and realized this isn't a boy's game! Kept blewing $25 within 1 week. Then I reloaded. Its a small amount, but I figured that if I can't learn how to keep $25 intact, I won't be able to keep $250, $2500 or even $250,000 intact.

Yeah, good old days. When I stopped blowing the $25 account at least for 1 week, I knew I was doing something right. From there, its history.

I would say minimum size for trading account is $500 that is so you can have good risk management.

Decent post but let me clear up a few things for newbies.

1. Just because $500 dollars is not enough to trade a micro account (if you use relatively large stops) doesn't mean chuck more money in because you will just loose more. Most if not everyone will lose their first couple of accounts so start smaller than $500 if this is a lot of money to you and would be hard to stomach losing. Go with oanda, you can trade 1 unit ($1) as minimum instead of $1000 which is a micro lot.

2. 3% risk per trade and even 2% and 1% is a sure fire way to lose your account in no time if you are a newbie. I suggest 0.5% max. I trade a large account for a living and my usual risk is 0.3-0.5% per trade. Sometimes I will risk up to 1-1.5% but this is for exceptional circumstances only.

OP, your intensions are good and you make some good points but your suggestions could be harmful for full out newbie traders

Thanks will keep what you said in mind

I did blow my account in a week! LOL! Then I started learning how to trade better, and still learning. :-D