Let's be honest. The majority of us probably blew our first trading account. The majority of us probably blew their second account too. The majority of traders will lose their first deposit or at least part of it. But why? What do they do to lose almost all of their balance? There are many reasons for this, each of them different depending on the trades in question, but we are going to look at some of the common reasons why traders end up blowing their initial deposit.
Trading without a plan
Your trading plan should be the first thing you create, yet so many people don't. They come into trading with the idea that it's easy, and all they have to do is plan the move and they'll be rich, so they don't need that plan. These kind of people come from the thousands of advertisements that show you the promising high returns that just aren't real. And then there are those who know what to do, but are just too lazy traders. to do it. These people also don't care about this plan and would rather lazily guess where the markets will go, or simply copy what others are doing. Either way, these two people will end up losing money, simply because they don't understand what they're doing right, a recipe for disaster no matter what you do.
Lack of trading education
Lack of trading education is another account killer. There is a lot to learn about currency trading, too much for one person to do. However, there are some things you need to learn before you start trading. If you don't, you risk incurring losses. You need to learn the basic terminology, the different types of orders , and also things like risk managementwhich will allow you to protect your account and your capital on this account. If you don't even learn the basics, you'll make assumptions and make mistakes. Mistakes that will cost you money. You don't need to learn the world, you don't need to know what an expert does, but you do need to know what you're doing, why you're doing it, and how you can protect yourself from loss.
Gambling, which is best left to bookmakers, is nevertheless an activity that many people practice in trading. People gamble for a number of reasons, for fun, because they don't quite understand what they are trading, because they are lazy or just because they want more easy money. Whatever their reason for playing, it doesn't change the fact that what they are doing is dangerous and will result in a loss of money or the entire account. It may sound simple, markets will either go up or down, so there's a 50/50 chance that we're right. Unfortunately, markets don't work that way and it's a bit more complicated. In fact, there are hundreds of things that affect the markets, and just guessing will get you wrong most of the time. If you want to bet, do it away from forex, there are much better things to bet on, but we can assure you that if you decide to do so here, you will simply end up with a zero account.
Too large position sizes
Many people get into trading hoping to make a lot of money. While that's true, there are things you need to do to protect yourself in the first place. One of those things is not to do too big a deal. The idea of making a lot of money can be seductive, it can cause people to place trades that are way too big for their account, causing them to lose a lot of money on their trades. If you trade with too large a position sizefor your account, a single operation could derail your plan. A lot of people do this because they don't know how large their trades should be, they go into it blindly, and then guessing is never a good strategy. So make sure you understand the size of each trade for your account. This should be stated in your trading plan.
The more transactions you make, the more risk your account is exposed to. There is also a margin, which is a number that tells you how much you can trade. The more trades you make, the lower the margin, and when it reaches a certain level, your broker closes all your trades at a loss. If you don't understand this, you will continue to trade until your margin is exhausted, and the slightest move in the wrong direction could result in your account being closed and everything in it lost. Your strategy should provide for a maximum number of open trades, try not to exceed it and try not to place trades just for the sake of placing trades.
emotions are strong. Emotions have the ability to take over and emotions have the ability to blow your accounts. Don't let that happen. On the contrary, you must remain in control. If you feel things like greed, overconfidence, doubt, or any other emotion starting to creep in, it's time to take a step back. If you trade with greed or overconfidence, which many traders do (especially new ones), you are putting your account at risk. You'll be making larger and larger trades, trades you probably shouldn't be making, putting your account at risk. If you are emotional, try not to trade. Get out for a bit, take some time to relax, and then come back with a calmer, clearer mind.</