3 ways to wipe off your trading account
If you fall into one of the ways described below, the balance in your trading account will soon go to zero.
- Keep changing your strategy
Most people often change strategy too quickly and too often and thus lead to an inconsistent return. They will either change the strategy after a few losing trades or they get too greedy and think that the current return does not satisfy them maybe they overheard some strategy generating a higher return than theirs. A well defines strategy must be tested with statistically proven it can generate a consistent return.
The overtrading here mainly describes the traders who do not follow their trading plan. Some strategies allow you to have many trades per day, but some do not. If you are following your trading plan is fine. The problem is most beginners often get too excited thinking it is too easy to make money in the market. With the help of promotion from the brokers to encourage trade more, beginner trader is easily falling into this trap.
- Risk too high in a trade
If you have sound money management, it is quite hard to have your account goes to zero. Imagine this if your account balance is $1,000 and every trade you risk only $1, you will have to lose 1,000 times to lose all your money. With the same amount and risk-adjusted to $500 per trade, you will need 2 losing trades to lose all your money. The numbers are just an example and it is deliberately put in an extreme situation to show it clearly how risk will affect your account.
If you are currently in one of the situations above, we encourage you to stop trading, step back, and do more research and reading before beginning to trade again.