When I Lost 40% of My Account in Two Days

Let me tell you about one of my trading experiences, it will highlight just how dangerous trading can be at times - if you don’t approach it in the right way.

It was 2006 and I was starting to get heavy into the precious metals sector. I was financial spread betting at the time (if you don’t know what that is, it’s as leveraged just like FX but you can trade a whole load of markets).

I was big on the gold mining equities.

I’d just had my first great trade on Newmont mining, and thought for some reason I was master of the universe.

I was flying down to Phuket from my home in Chiang Mai, for a two-week holiday, meeting my folks there at the hotel.

They were coming from the UK and I hadn’t seen them in over a year.

At the time I had discovered this whole new way to trade, ‘spread trading’ (nothing to do with spread betting).

It seemed a great way to trade – you didn’t even have to call market direction.

Just trade one fundamentally strong asset against a weaker one.

I was heading off on the plane that morning and the night previous had put on my first spread trade.

I cannot remember what sort of crude analysis for choosing it – but I went long Barrick Gold and simultaneously shorted Placer Dome.

I think Placer was trading around $22 and Barrick was around $35.

I reached the hotel and for the rest of the day couldn’t be bothered looking at the markets, the beach seemed more appealing.

I was relaxed, pretty much thinking with a trade like this what possibly could go wrong?

Because it was a spread trade, and a fundamental play I didn’t even need a stop (lol).

I think it was Saturday morning before I finally logged into my account.

It was down 40%!

WTF?

No, that wasn’t a typo and no it wasn’t my broker playing funny buggers.

It was legit. I was a down nearly half my trading capital over say two days at most.

As it was weekend and I had to wait to Monday to close the trade.

What had happened?

You might think I’m using artistic licence here – but I swear this the truth.

I’d opened this spread trade on one day and the very next day, Barrick Gold had announced a takeover of Placer Dome.

Now if you don’t know what that means I’ll tell you – the takeover candidate (Placer Dome) rose about $13.00 and the acquirer (Barrick) fell about $10.

In FX that would be damage of 1300 pips on the first and 1000 pips on the second.

And just the opposite of my position. I’d gone long the acquirer and short the merger target.

I got totally creamed.

Killed on the Placer side and I killed on the Barrick side. And I hadn’t even used a stop!

What has’ this got to do with forex?

Well, trading is trading, regardless of the asset class. And where leveraged is concerned we’re all in the same boat.

It was a dumbass move of the highest order.

The thing I learned the most from this was just how good I was at deceiving those I love when it comes to covering up trading losses.

My dear Dad did ask me why I was so quiet at breakfast that morning. I replied I was fine, just a little tired.

Underneath I was in complete agony but I was able to put on one helluva poker face for the whole time we were there.

It wasn’t the best of holidays for me as you can guess.

Trading is the loneliest business in the world, few of us ever talk about our losses.

This is doubly true for beginners.

The moral of all this is:

New traders hear of trading styles that sound so wonderful and are in a rush to implement them; without doing the least bit of research, back testing or forward testing.

For a brief time when their trading accounts are full they’re confident in their ability – too confident.

OK, not every beginner is like this - BUT I was, which makes me think others are too.

When you do eventually suffer a big loss from being too brave it then sets you up the stage for a whole litany of trading problems.

Overtrading, searching for holy grail systems, and blind belief in trading Gurus who, you kid yourself can bring your account back into the black

In trading, you need a long-term mindset, by that I mean you must resist the impulse to take trades on the fly without any thought - you shouldn’t be in a rush to make money.

Trying to make the fast money will only result in the opposite.

Take your time, trade on a demo, back test systems, become an expert in one simple methodology first, and then bet small with real money.

I often wonder what would’ve happened if I’d not taken that one Barrick trade. It subsequently took another five years for me to find profitable consistency.

Being a newbie is like being a teenager. You ignore the advice of wise elders thinking that stuff cant happen to you.

But it can, and it will, if you don’t slow down and truly accept the possibility of financial loss before putting hard-earned cash to work.

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Great post mate. Haha, what made you think of this? Do you think you would’ve been profitable if you hadn’t gone through that?

The only reason I survived the learning was i was lucky enough to have deep pockets from selling property.

But the fact was I was a total numbskull in the markets for the first five years or so - I had some great technical ability with the trait of increasing position size massively after a good run.

I was also locked into a cycle of changing systems constantly - I challenge anyone to know more about being a losing trader than me

Which is why now I can talk about it with such authority.

I was also a pretty high risk teenager - I thought I was invincible. I never had any elders around me to have a quiet word in my ear - so I think there is a similarity with trading there.

At some point even the dumbest of us gets it in the end and I think I just ran out of mistskes.

Sounds really stressful. What happened to that account? Did you make that money back somehow? :open_mouth:

Also I feel like another lesson here is: do not have open trades before going on vacation :sweat_smile:

Thanks for this story! We need more of these!

@ponponwei

I did not blow up the account - it was more like the death of a thousand cuts - which took about 5 years.

I had some great runs after that big loss - but then somehow always give back more than I made.

As for stressful - after the holiday I just forgot about it and moved on.

I’m a very optimistic person by nature so always thought I could make it back - however optimism isn’t necessary a good trait in trading - it can be lethal actually

Aw man. But hey, I really appreciate the honesty. I feel like we always see both ends of the spectrum when it comes to trading, people who’ve made it big or people who’ve lost it all but not many of the in betweens where most people are.

It also says a lot about how okay it is to lose $$. It’s not the end of the world if you blow an account or end up with just 10% of what you put in.

I’m happy to hear you also didn’t take it too hard. Probably also speaks about how much you risked! :slight_smile: (Aside from the fact that you’re also an optimistic person)

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And you really weren’t lazy to write this long post, were you? In fact, I wouldn’t be able to write so much and in detail, you’ve done a great job here) I’m sorry about what happened to you, but it’s always important to remember that any trading involves risks. And in order to minimize the risks and not to lose money in the future, it’s very useful to use some of the risk management rules and stuff. It can be hard sometimes, but it really helps not to lose so much money in trading. It is especially useful for beginners, as they are just learning and make more mistakes in general.

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Loss is a common thing in this market. If you want to become successful in this risky market, you need to make a strategy to deal with those losses.

I think this is an inherent trait in traders and if not, then getting consecutive wins is bound to give you overconfidence. :sweat_smile:

I could write a book about the dumb crap I did for 8 yrs.

Starting with me selling my house, quitting my job and moving half way across the world to ‘trade’ full time

I really have committed every newbie mistake in the book.

So glad those days are behind me now.

It is not possible to get rich in trading overnight. Every trader should trade for a long time. And as far as I know, no business does not lose business. You have to manage the loss and do business. Risk rewards should be noticed at all times in trading. The better the risk-reward of a trader, the faster he can move towards his goal.

No half measures with you John :grinning:

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Yes that’s the reason most newbie do not bother about money management and risk management. They think I know better. I’ll prove them wrong. They ignore most of the advice related to psychological aspects of trading.

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your topic memorize me when i was new in Forex trading, i trade over and over when making a losses , trying to overcome from losses but ultimately became loser.

Thanks for sharing your experience here mate, might come in helpful to some new traders. Nothing ever can undermine the importance of sticking to a plan.

Lol

I wish I had had a plan - it was definitely a comedy of errors on my part for so long!!

Slowing down and understanding how a profession/business works are the two ultimate ways to become a professional. Now whatever one wants to be, it doesn’t matter. There are engineers who make 7 figure salaries but not all. This just never happens.

Trading online may return some money faster over the original investment than other professions doesn’t mean it will always do so. Trading markets have full potential to bring a trader down any moment.

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