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Does the path to a successful trader require blowing up an account?
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Does the path to a successful trader require blowing up an account?

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Does the path to a successful trader require blowing up an account?

I say for most it is a requirement. The brain learns through pain. I think the only way for some to learn is to touch the fire get burned and learn firsthand the fire will burn you. After all most of us understand fire is hot for one reason only not because we were told it was hot but because we touched it.

The things required to be successful as a trader are opposite of human nature.

I don't think we have to learn through pain or blowing up an account. I think we can learn from others success and failure but it is very hard and unlikely for most. SIM trading will only take you so far and can help you develop a system but does not simulate the psychological rigors of the business of trading. At some point you have to step into the lions den and take some bites.

I think most just have to get blown up or at least mangled pick up the pieces hopefully get more capital come back better for the experience. Some it may even take multiple instances of this process depending how stubborn they are.

I really think new traders should come in and realize this may be necessary but does not mean cannot win if willing to learn.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #3 (permalink)
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I can't say from experience, but I don't think it requires one to blow up an account. I think that is just typically what will happen to most people on their way to figuring out how to extract money from the market. So it seems it's more a coincidence than cause.

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It's real bad for me

Not only did I blow out the account, I had to sell everything to stay in business. Please see the attached picture of my new office...........nice, huh? All kidding asside, I don't believe you have to blow out an account to be successful but I have trashed mine in the past. I finally figured out after my first year-and-a-half (i'm a little slow in the head) that there's this thing called a simulator that you can practice on w/ fake money......hmmmm. I have taken my share of lumps live though, I cannot disagree that when you are live it's a whole different ball of wax.

The photo below is me going long on the NQ in the middle of the night..........I hope what that mop-boy at McDonalds told me what he heard is right.

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I was lucky enough to have been able to blow out 20k of my brother in laws money

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No, it's no a requirement.

I guess it happens because people generally start out with a limited amount of capital.

I'm an expat, so my status in my home country (UK) is odd in terms of pensions - I'm not allowed to have any sort of UK based pension plan. So, I was using FAs that target expats and the options at the time were mostly to go into Mutual Funds. I started trading because people like Morgan Stanley & Blackrock, were losing money and charging me for the privilege. It was really only a Hedge Fund at Man that made me any money.

So - considering the amount of money at stake - my entire pension plan - I'd have do be dumb as a rock to blow up my account.

Now - if you start with a $5k account, then of course you may blow up. Still - it'd be a shame if you did.

There's a couple of issues. First - you can day trade the S&P E-mini with a $5k account but you can't day trade a $20 stock with a $5k account because of the $25k limit on daytrading stocks. Trading the ES is way more risky than trading a stock - for a start, with a stock you can cut your teeth on trades of 100 shares or less.

Second issue is forex - you are basically trading with a bucket shop plus you have no volume, order book or time & sales to help with the trading.

So - the pattern day trader rule in my opinion is why so many people blow accounts - you either end up trading something with too high a risk profile or you end up with a bucket shop taking the money off you.

I started ES trading by watching the ES but trading SPY. 1 tick on ES = 2.5 cents on SPY. 100 shares traded on SPY (with $1 commission) is about $10 per ES point. Much lower risk but you can only do it if you have $25k or more. So the people that really need this don't have access to it - it's madness.

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dutchbookmaker View Post
I was lucky enough to have been able to blow out 20k of my brother in laws money

Do you like your brother-in-law? If it were my brother-in-law I can almost garauntee I would blow it up.....that guy is a meathead.

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I agree guys I don't think you have to blow up. But most will because most learn the hard way. Hats off to the rare few who choose to learn from others instead of the hard way though.

I may have to try the brother in law thing. That is the Wall street model after all. Trade others peoples money not your own.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #9 (permalink)
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An interesting stat would be to know of the 5% or so of traders that ultimately succeed. How many blew up an account or came close to it before succeeding?

Started a poll

https://futures.io/psychology-money-management/11890-how-many-blew-up-account-before-becoming-successful-trader.html

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."

Last edited by liquidcci; July 2nd, 2011 at 02:59 PM.
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liquidcci View Post
I agree guys I don't think you have to blow up. But most will because most learn the hard way. Hats off to the rare few who choose to learn from others instead of the hard way though.

I may have to try the brother in law thing. That is the Wall street model after all. Trade others peoples money not your own.

Everything I learned about trading I learned from losers. I know a guy that was a loser last year, not sure how much, but I think it was rather large. This year, same thing: losing. Here's the thing, he was trading two contracts on the CL. My question was "If you're losing money why would you trade two contracts"? And better yet, does your system work in sim? He couldn't tell me.

If you can't win in sim, you REALLY can't win live, and if you lose trading one contract, what would make someone think two would be better? I don't get it. These mistakes are all based on greed and I believe that this sort of mentality is no different than going to Las Vegas and putting $10K down on black. At least with that bet you have a 50/50 chance; trading I feel is far less. Just my thoughts.

It's not the method that kills you, it's your own psycology (IMHO)

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