Every forex trader busts their new accounts?

I’ve been trading for a few months on a demo account now and I’ve gotten a hang of trading. I trade on 15 minute charts and average at 100pips a week (although i do have negative weeks and happy happy weeks when i think i’m going to be a millionaire by next month)

However I’ve run into many threads where people firmly believe that [B]almost every[/B] forex trader will bust their first LIVE accounts no matter how well they trade on their demo accounts. How true is this?

Things to note though, I have been trading realistically, I intend to enter the market live with the same sum that I trade in the demo (> 10k definitely). I treat the demo account like real money too. I’ll be using Alpari UK, and I’ve read online that on average (non-news period) the live account order speed is 3-10 seconds, which is not a problem for me as I dont trade news periods.

But man, all this talk about people busting their first accounts is making me wonder whether all the preparation is really useful. Any advise?

I believe you used the demo to its full extent and are ready to start trading live so that you can learn something new: controlling your emotions.

For your own safety, I recommend opening your first account with half your trading capital. If you bust that account (which you don’t think you’ll do anyway), you’ll have a perfectly equal second chance. If you beat the odds and don’t bust your account, you could add your 2nd half into the account once you’ve doubled the 1st half.

You still have to make sure that you are going to be properly capitalized with only half your trading capital. If you are going to be using $10,000+ I think you’ll be fine, assuming you’ve have all the money management strategies laid out.

I am a Singaporean, and in order to get money over there, I have to TT the money and it has costs involved; moreover I am waiting just a little while more the the EURSGD to lower so that I also gain on the EURSGD rate when (in the future) it rises. (ie also when singapore goes into full blown recession sometime early next year).

Those are my reasons for wanting to use the full amount instead of splitting. I am open to correction though. Also, perhaps I could trade as if I had half the amount (ie half my positions).

However my account has never reached below half its amount. (except when I first started, where I used like 20 lots when I had 50,000USD in my demo account and was wondering why the broker closed my positions automatically)

I trade one lot per 5,000 EUR in my account, and I am opening an account with 20,000EUR. I fear that depositing half the amount may make me more susceptible to margin calls. Let me know what you think about this!

Many self-proclaimed trading gurus will tell you that blowing your first account is damaging to your confidence. They suggest that it can be so damaging that it can turn you off trading entirely. There is certainly some logic to this argument. However, I do not think it holds much water. A person would have to be pretty weak willed to give up after one failed attempt.

In my mind, blowing a trading account is beneficial. Take a look at people like Richard Branson, Donald Trump, Alan Sugar and Warren Buffet. These guys are all billionaires (or close enough to it) and each of them has failed many times. Richard Branson has spearheaded many failed ventures. Did those failures set him back though? Hell no! The man is going to start flying people to space at $200k per head, next year with Virgin Galactic.

If you want a Forex related example, I am one. I blew my first two accounts, yet 4 years later I am blogging for BabyPips, with an account that is nearing $1mill.

I think what is truly damaging is [B]the fear[/B] of blowing your account. The fact that you think about it, puts you at much greater risk of it actually happening. You should switch to live trading with a positive attitude. So get rid of those fears and worries, they will not do you any good.

If you end up blowing your account… so be it. As long as you pick yourself up and try again, you will be a better trader for it.

I know I haven�t exactly answered your question but I don�t believe your question needs to be answered.

Also, when you open your first account, start with a small amount of money i.e. $100. Slowly add money to your account as your confidence grows.

Oh and it�s time for a reality check. You have a long road ahead of you. Live trading, you will soon learn, is a whole new ball game. No matter how hard you try, you cannot replicate in a demo, the fear and greed that comes with trading real money. If you cannot control that fear and greed you will certainly fail. I do not sugar coat stuff, this is the reality of trading, accept it now or learn it the hard way.

Hey jawnlooi,

I’m a Singaporean too, serving my NS now…anyway Nick B, ou mentioned you had 1 mil dollars in ur account, care to tell if it’s virtual or real, cold hard electronic cash, if so, it’s amazing! :smiley:

Okay, I’m a newbie, so take what I have to say for whatever it’s worth.

I think the high number of blown accounts have everything to do with money management, and I think that most people start Forex with very little money management knowledge or discipline, compounded by unrealistic expectations. From the many posts I read all over many forums, money management (more than lack of skills or strategy) is the main culprit of blown accounts.

I’ve been playing in forex for about a year with two live accounts at two different brokers. (No disrespect for veterans who say you must trade on demo first. I like to practice with real money for the psychology, which I believe is half the battle. I play with tiny amounts of real money first, then steadily increase my size as my skills and confidence grows.) After a year of trying to find my edge, I’m still alive and kicking, with very little damage to either accounts. (I place an average of 1-2 trades a day, risking ~1% per trade.) If a newbie like me, who still haven’t mastered my edge yet, can keep a healthy account afloat, then someone who HAS found and mastered a strategy can certainly keep from blowing up.

You can play for a LONG time with proper money mangement. Know your risk and plan accordingly.

Thanks NickB and Dahlia. I do understand that live trading is alot more psychologically bearing than a ‘live account treated like real money’, but what I really meant was that I don’t frivolously click without properly thinking through my stuff.

And NickB, your reply has answered the root of my question, I will work on my part :slight_smile: Thanks a bunch!

The thread sound less interesting then what is found in it, I hope all newbies don�t bust there account but if you take your practice account seriously then you could almost be sure if you would bust your new account. I am just getting started and my demo account is already low!

OP - I am with Alpari UK, too, and with regards to execution speed I can say that Live didn’t really seem any slower than Demo at all. They were also extremely quick to credit my account with my deposit and have been easy to reach by e-mail.

I used to be a ranking poker player. During that time I learned a lot of the same principles that apply to forex in terms of money management and risk analysis. As a result, while I did lose over 50% of my account during the course of my first year in forex, I didn’t blow it. I knew money management and as my account decreased so did my lot size.

Lack of money management is the sole reason one blows their account. I think noob traders have that fear of loss and start to bet erratically. They ignore stop losses, overtrade, and a large assortment of “do nots”.

I agree with mastergunner. With proper money management it is literally impossible to blow your account. If you start with $1000 and risk 2% per trade you would need to have 114 losing trades in a row to get your account below $100, and you’d have to be nuts to let it get that low. You should stop after about 10 losing trades and revamp your system.

This 2% rule is only good if you are only going to open no more than 2 concurrent trades. Newbies take this 1-2% rule and open up 10 trades at once. So it defeats the purpose of the intended money management. They should be taught what is the acceptable total risk, not just risk per trade. Ideally, it is best if people stay under 5% total risk. Much better if it is just 1% risk per trade.

I read a post somewhere months ago that said that the 1 to 1.5% MM risk was a bunch of you-know-what. That figure was for the professional trader risking millions of dollars on one transaction and he had a boss plus very wealthy clients that quizzed him unceasingly if he was down $500.00 much less the millions he had available to trade. I don’t know about that but I did some plain old arithmetic: starting out with $1,000.00 and having 10 losing trades in a row that risked 10% of available margin one would be broke, right? Wrong - after 10 losing trades the trader would still have $348.68 in the account. The opertative word is “available”. The 1st loss would leave $900, the 2nd $810, the 3rd $729 and so on. I keep an adding machine tape on my desk to remember this scenario. It’s not for everyone but certainly using 5% of available margin and a reasonable number of lots be they micro, mini, or standard along with a good probability strategy will make giving up the day job possible sooner. d.

[QUOTE=mastergunner99;74092]

Lack of money management is the sole reason one blows their account.QUOTE]

Yep!! :slight_smile:

Have a read of this very poweful piece of literature …

The Trading Game

Tymen, that is an interesting little article and so very true! If only new traders could read and believe in that article’s message, they could do in 5 minutes what will take them months, if not years to learn the “hard way”. But sometimes you really have to learn things that hard way, so I don’t want to push it too much!

I stand by the 1-2% risk per trade. If you want to risk 5% on a trade, how much are you looking to make in say, a month? It must be at least twice what you risk on one trade, and I assume you’ll be making a number of trades per month. So maybe you’re looking for 20-50% gains every month? Ridiculous! It can go the other way one month, and then you’ve got HUGE drawdowns, which as you know are more difficult to get out of than they were to get into. If you’re looking for 5-10% a month (which is a VERY healthy yearly return) then there’s absolutely no reason to be risking more than 1-2% per trade. Perhaps if you are only taking 1 or 2 trades a month, that would be an exception.

1-2% Ahhhhh!! :slight_smile: :slight_smile:

5% Yikes!! :eek: :eek:

I have had an account deposited $10 and now left 0.07 cent. I don’t know whether it was blown or not. But I do learn why I’d made a lot of losses, I don’t follow my system properly. I have another micro account, I hope I don’t repeat the same.

hey jawn,
hey everyone,

this is my first post on this forum just wanted to say hey before i just go busting out with my wild posting. Ive heard alot about babypips so i figured i would pop over.

so jawn your one month in congrats on takin the first step… im assuming your demo is still workin out well and your thinking of throwing some cash out there.

while im all about saying yeah dive in and make some cash… i want to say maybe you should hold back for a bit. yes having a live account is alot different and trading one whether you go bust or not would teach you valuable lessons…

but there are some things to think about initially, such as:

this isnt investing… this is trading

in trading you need to win with probability & statistics

trading systems give you this but if you test your strat for one month then your system is only as good as that one month of testing

while your trading system maybe be amazing 95% win rate yatta yatta that does not take away from the fact you could loose making 1 trade a day 70% of the time in one month…

but over the course of many month avrg itself out to its true probability of success…

the same is true with a bad system… low prob of success over short term may seem good but law of large numbers after a few months would turn that around and you would be shown your true rate of success.

so what am i saying…

hold off on your live account you need to check off things before you should feel ready

-have a trading system > 60% success rate with extensive testing
-well thought out entrance and exit for your trades
-well thought out money management system
- youll hear 1-2% or 5% or whatever from people but you need to assess your own risk level and carefully consider that level and how you should put that into action.
-you should trade this perfected system for so long that it should seem like a chore to trade it you should almost be mechanical yourself in how you approach, and put forth the trade from beginning to end.
-and YOU SHOULD ALWAYS TRADE YOUR SYSTEM AND STICK TO YOUR PLAN you trade the market the market does not trade you

  • look for certain deadly signs of piggishness
    - you chase the market moves in the demo
    - you have hard time sicking to exit strategy in demo chasing profits
    - you enter late when you missed the entrance due to walking away or whatever… and you chase

these will leave your account in demise

when you can look at all of those and say I do what I should do all the time whether i loose or not and i do not chase or do what i should not do all of the time

then open your account and experience emotional trading with very low amounts

build into your live trading comfort and after and extensive time increase account size and trade size and even leverage.

with the right money management and mentality you wont blow your account to hell.

remember test test test… when you think you got something good backtest… test test test… apply in live in low amount write down keep track of success rates and make sure your reward> risk

love pipynotstockings

cool guys, thanks for the info :slight_smile:

I like the tone of that topic. I am currently to the point where the available margin in my demo account is getting close to nil. The reason why ? I am a total newcomer in Forex. So I am still learning thinfs like stop loss and eurusd is killing em right now.
And yes, if my current demo account goes down, I’ll create another one :eek: