Before I get into my lesson I will have to show the background of this story. I am on a trip right now, lets call it a business trip, and things are pretty stressful, I am very tired and have many other excuses but I will stop there:( I have been following the EUR/USD down the slide and was doing very well even following my rules and everything. So I went from $50k to $96k in a few weeks, not being overly aggressive but just capitalizing on the decline of the Euro. So I went ahead and withdrew some money (bringing my balance to about $71k). At the same time I had a SHORT trade open using money management rules based on $100k (I rounded up).
Step 1 - I am now [B][U]over-leveraged[/U][/B]. I did not fix my trading to reflect the withdrawal.
Step 2 - I left the trade open with [B][U]NO STOP LOSS[/U][/B] and went about my day… can you see what is next?
Step 3 - Price rises abruptly to 1.25976 before making a sharp turn around to the south. [B][U]MARGIN CALL[/U][/B] at 1.25933. Compare those numbers and yes, that is exactly 4.3 pips before the turn that would have saved my ass. Its the little things in life…
New Balance: $210
The exciting part: Total loss = [U][B]$63,000[/B][/U]
Summary: Inappropriate trade size (over-leverage) and no stop loss. Had I paid proper attention to either of those then I would still be in the game, living to trade another day. This can happen to anyone!
This fun story is for both my benefit as well as everyone else. Watch the fundamentals and follow your rules or you will die! :mad:
Happy side note: At least I still have $25k to put back in and keep trading:o
Holy Fing ouch. My heart goes out to you. Been there, but not with that size of an account. One day you feel like a king, the next day a kick in the nads.
Try to take some comfort in that surviving bad mistakes and being able to learn from them, and go on, is often what seperates success from failure.
You have a very decent amount to start over again with. Great advise you give and many times that’s how we learn the lesson… the hard way (not that hard when you still have 25K left).
Your story is not the first I read about the topic, and I’m pretty sure you were well aware of what could happen with your trade way before you placed it and got a margin call.
I’ve always used stop losses, but I used to over leverage my trades a lot, which was killing my account.
My point is, even though we read this kind of advise all the time, we keep on ingnoring it, maybe thinking that we would never be in that position or that we do have things under control, why would that be?
I guess we don’t live by someone else’s experiences and have to have first hand experiences in order to learn.
Ouch. That really, really sucks. It’s too bad that we’ll never be able to completely abolish human error. With the number of trades we stand to make, it becomes much more likely that, somewhere down the road, one will have a brain fart and forget to put a stop loss or make a typo and add an extra 0 before the decimal point.
Can you really end up with a negative balance? And have to pay that much back to the broker? I thought they would close your positions before it went negative?
Sorry, I read the wrong number. I did get a negative back when I was demo trading. It happened after a large gap so my broker couldn’t stop the trade over the weekend. Other than that, yes it should not happen.
Placed a good trade with all the rules intact (indicators, trade size, stops, etc).
Made $9.90 with $210!
Like I said, Its the small things in life…
I just needed to get back in the saddle again. My confidence is definitely beat up but there is no reason that I cannot successfully trade still. I just need to learn my lesson and get back to it.
Sorry to hear about your losses romad but a good lesson for other new traders to take notice of.
I would always advise all new traders start with a $100 account first so the twists and turns of the forex game wont hurt them too much because the unexpected will happen when you are live trading and can do a lot of damage to an account balance so its best to make the mistakes and learn with a small amount of money first.
Thank you for the responses, this forum has become my support group in this lonely profession. It reminds me of a saying that I saw on a poster.
“It could be that the purpose of your life is only to serve as a warning to others”
While my life is not quite that bad, it is actually very good, sometimes it can be like that. When a mistake is bad enough sometimes the only thing to do is to maintain a good attitude and let my mistake be a warning sign to others. As it was mentioned, these things are talked about a lot but it can come across as unsubstantial warnings without big, current examples. It is my desire to give an example of not only how bad things can be but how to handle it and get back to work. It is time to put those bad things in the past by overcoming and making good. Life is more than money, it is about strength of character, integrity and my faith in God and all that is good.
To clarify, these warnings are usually made by very smart people who should be listened to and respected. I only wish to impart a bold font to those warnings to emphasize their relevance and importance.
Thank you, just remember not to trade with money that has the power to ruin you life. I lost a lot but I have reserves and a good full time job still, two things that I am doing right which is why I can still trade.
I remember something similar happening to me when I first started trading (without a SL) and I blew an account, it was around $130 and I was pissed. If I had lost $63k my heart would probably explode.
I commend you with getting back into trading, hopefully it’ll be a great lesson learned and you’ll be way more successful.
Holy cow. My heart goes out to you…that’s quite a loss. Glad to hear you’re back in the saddle again.
This is a good example of why you should not keep a large balance with a broker. Keep only what is needed to trade day-to-day, not a penny more.
For me, that’s $5-10K. I consider this the ultimate Stop Loss. If I really screw up, I’m out 5-10K and can re-capitalize and start again (after licking my wounds!!).
Yea, been there, done that. Lost 5 years of hard earned trading profits in a day. It’s best if this happens to you early in your career. It really stinks when it happens after 5 years. Talked to someone yesterday who lost $63,000 in a day. He needed that money for a new car for his wife.
Lesson #2, never promise your wife anything out of your trading profits. Just go out and buy it and give it to her. Once you hand her the keys, you can’t mess it up or jinx yourself. I’m not superstitious mind you. But I don’t see any point in testing my luck.
omg that has to be worst case scenario its bad enough losing so much money but right after promising a new car to his wife damn I would never hear the last of that I’d be 70 years old and still have to listen to her remind me about it lol
