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Account blown up
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Account blown up

  #141 (permalink)
Market Wizard
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JacLau View Post
it would help me avoid blowing my account as the other trader in me, for which I have no control, could take over and go all in, if I don't go all in first.

That sentence scares the hell out of me. The idea that somebody is consciously aware of the fact that they have no control over certain parts of themselves and at the same time they trade an account with significant size is downright scary for me.


JacLau View Post
the other trader in me, for which I have no control, could take over

I consider myself still fairly 'green' when it comes to trading - been trading real money less than a year now. But even I would consider the thought of not having that kind of control extremely dangerous. I hope the poster is going to seriously consider a way to gain control over that part of themselves.

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  #142 (permalink)
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peteM View Post
lol ......

actual the 38% with "NO" are something between liar or ignorant........

It is a matter of definition. If you loose more than ca. 30% of your trading capital in one or some trades, YOU HAVE blown up your account.

Why?

Btw. .....the understanding from instiutional investors.

If so, if you have a DD with 30%, something has happened what was not planned, .....means you ignored your own plan, means your investor will loose his trust in you. He will ask you why and you have to answer reasonable. If not sufficient he will draw his money.

If so, it is a important question if it could happen again, ......means you will ignore your plan again, means your investor will loose his trust in you. .....investor draw his money

If so, how much gain you need to get back in track? It drives you to increase your risk and leave your plan again. ...Investor donīt want to bear this risk and draw his money.

If so, it will last a long time, to much long, that you as a CTA will get again a performance fee, it is likely that you will loose your interest in working for nothing!...... your investors know this, and draw his money.


So.............. ahhhh you are not an institutional investor? It doesnīt belong to you? BULLSHIT!!!

TREAT YOURSELF, YOUR OWN MONEY LIKE YOU ARE AN INSTITUTIONAL INVESTOR!
...................otherwise donīt give yourself money to trade.

@Mike......
ask this question again with the add, that everything more than 30% loss is equal to have blown up your account :-)

The answer divides the one who are traders and the one who are not!

Traders = 100% otherwise they are still on the way on experiencing and trying.

I like peteM's 'tough love' post . His recommendation about thinking like an institutional investor is something worth considering in my opinion.

I also like his point that says basically if you lost 1/3 of your capital in a relatively little time (e.g. in 1 trade) you have blown out, regardless.

In a way, it should provide people with alarm bells signalling that something's wrong.

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  #143 (permalink)
Market Wizard
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So to add my own experience... I blew out once, less than 3 months after I opened my first futures account.

It was, you guessed it, on one trade

I was trading Bund, which up to that point had kept going lower and lower for several days, so I went short with 2 contracts at a place where I thought I was getting in on a pullback........... unfortunately it was the day when the Bund reversed course..............

I experienced what I called the 'Frozen rabbit syndrome', i.e. a part of me believed (or wanted to believe) the price would eventually come back down to test the low and another part of me simply could not take the loss, which became bigger, and bigger.... until I could not take it anymore.... classic.

So I closed the position when in fact I had not gone to zero but I was below the day trading margin so I could not trade anymore... I think that fits with the 'blowing out' definition, as I had to post more margin into the account.

Thankfully I had gone down the route of opening an account with the minimum possible margin I could initially post, so it wasn't a devastating loss.

What I learnt from it was that cutting the losses means you can always come back to the market another day. I also changed (albeit gradually) my downside risk limit to a smaller and smaller one.

In a way, when I was into that losing trade, something inside me was telling me to let it blow out anyway. Was it self-sabotage? Perhaps. Was it the knowledge that if I did, I would learn something more valuable from it? I hope so.

I have read all of this thread with interest, although I have not been able to address the fundamental question:

Do the majority of people think that blowing out 1 or more accounts is a necessary part to the path to consistent profits? Did that change your perspective?

N.B.: I am not suggesting that everyone must necessarily blow out an account at least once in order to become successful. I know everyone's different and there will always be exceptions to the rule. What I am wondering is what the vast majority of traders who consider themselves consistently profitable think about the subject.

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  #144 (permalink)
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xplorer View Post
So to add my own experience... I blew out once, less than 3 months after I opened my first futures account.

It was, you guessed it, on one trade

I was trading Bund, which up to that point had kept going lower and lower for several days, so I went short with 2 contracts at a place where I thought I was getting in on a pullback........... unfortunately it was the day when the Bund reversed course..............

I experienced what I called the 'Frozen rabbit syndrome', i.e. a part of me believed (or wanted to believe) the price would eventually come back down to test the low and another part of me simply could not take the loss, which became bigger, and bigger.... until I could not take it anymore.... classic.

So I closed the position when in fact I had not gone to zero but I was below the day trading margin so I could not trade anymore... I think that fits with the 'blowing out' definition, as I had to post more margin into the account.

Thankfully I had gone down the route of opening an account with the minimum possible margin I could initially post, so it wasn't a devastating loss.

What I learnt from it was that cutting the losses means you can always come back to the market another day. I also changed (albeit gradually) my downside risk limit to a smaller and smaller one.

In a way, when I was into that losing trade, something inside me was telling me to let it blow out anyway. Was it self-sabotage? Perhaps. Was it the knowledge that if I did, I would learn something more valuable from it? I hope so.

I have read all of this thread with interest, although I have not been able to address the fundamental question:

Do the majority of people think that blowing out 1 or more accounts is a necessary part to the path to consistent profits? Did that change your perspective?

N.B.: I am not suggesting that everyone must necessarily blow out an account at least once in order to become successful. I know everyone's different and there will always be exceptions to the rule. What I am wondering is what the vast majority of traders who consider themselves consistently profitable think about the subject.

Quite often we enter into trading with preconceived notions of how the markets should work and we do not wish to change our notion of how things should work. Blowing up generally forces traders to take a good hard look at the assumptions they've made about trading. Does not mean anyone will become successful after blowing up, merely means someone may be more open to becoming profitable after blowing up. It also does not mean everyone needs to blow up in order to be profitable.

I see you quoted @JacLau. I also found his numbers quite scary and don't see how anyone can still make rational decisions subjecting their equity to such massive swings - it must be one wild, scary and exciting emotional and financial roller-coaster ride. Best way I can see to avoid this is to trade very small until individual trades stop to matter. Anyone who has read Mark Douglas should see the logic in that.

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  #145 (permalink)
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grausch View Post
Quite often we enter into trading with preconceived notions of how the markets should work and we do not wish to change our notion of how things should work. Blowing up generally forces traders to take a good hard look at the assumptions they've made about trading.

Yes, good point. I assume you're referring to humility, which I would concur with.


grausch View Post
Does not mean anyone will become successful after blowing up, merely means someone may be more open to becoming profitable after blowing up. It also does not mean everyone needs to blow up in order to be profitable.

Of course.


grausch View Post
I see you quoted @JacLau. I also found his numbers quite scary and don't see how anyone can still make rational decisions subjecting their equity to such massive swings - it must be one wild, scary and exciting emotional and financial roller-coaster ride. Best way I can see to avoid this is to trade very small until individual trades stop to matter. Anyone who has read Mark Douglas should see the logic in that.

Agreed. When I was very young I remember my father telling me about a friend of his being addicted to gambling (must have been poker) and losing his house to gambling debt... I thought to myself 'this guy is a loser, I would never do that'.

It's ironic in a way, not that I lost my house or anything, but even losing the smallest amount of control when in a trade gave me humility in my opinion, because it let me realize me and the guy who lost his house are not that different, we both lost control.... certainly the amount of control which was lost matters - perhaps there's a threshold which kicks in with me that the other guy does not have - but bottom line I am thankful because of this increased sense of humility...... I think I agree with whomever said that trading teaches you a lot about yourself.

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  #146 (permalink)
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xplorer View Post
Yes, good point. I assume you're referring to humility, which I would concur with.

Humility is a good trait to have when trading, but it should be balanced with self-confidence lest a trader find himself incapable of really "pushing" a trade that works in his favour. I was also thinking of letting go of the need to predict market moves, learning to stick to a winning system and not deviating and most importantly accepting that it takes time to build up capital. Most people view trading as a quick way to riches - IMO if you have that view any riches you get will be short-lived.


xplorer View Post
Agreed. When I was very young I remember my father telling me about a friend of his being addicted to gambling (must have been poker) and losing his house to gambling debt... I thought to myself 'this guy is a loser, I would never do that'.

It's ironic in a way, not that I lost my house or anything, but even losing the smallest amount of control when in a trade gave me humility in my opinion, because it let me realize me and the guy who lost his house are not that different, we both lost control.... certainly the amount of control which was lost matters - perhaps there's a threshold which kicks in with me that the other guy does not have - but bottom line I am thankful because of this increased sense of humility...... I think I agree with whomever said that trading teaches you a lot about yourself.

I also know a compulsive gambler. It is scary to see what they can put themselves through and quite scary to see how easily I find myself sometimes thinking "this is such a sure thing - I should be trading much larger!". The easiest way I know of not to lose control is to trade really small, increase size slowly and reduce size quickly if things don't work. Whenever I trade too large, individual trades become too important and then I usually get shaken out of positions just before they start working.

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  #147 (permalink)
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grausch View Post
It is scary to see what they can put themselves through and quite scary to see how easily I find myself sometimes thinking "this is such a sure thing - I should be trading much larger!".

On the position sizing I have found the following advice from Linda Raschke to be particularly meaningful....

It's just the first 40 seconds from the point the video starts that are relevant... good video nevertheless

https://youtu.be/g1hs6-mr6PU?t=20

But to avoid being smacked with the - back on the topic at hand!

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  #148 (permalink)
 R.I.P. 1969-2016 
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First experience. When I was a student finishing my master I though I know everything you can possibly know about options. I borrowed money with a friend and lost almost everything in less time than it takes to write it... (lost around 20K$)


Second one: what I have lived is not exactly an account blown up but I think it is the same process and feeling.

It started with with the collapse of Lehman. I had a portfolio of supposed "blue ship" managed by a financial adviser. I wake up one morning in panic. So I decided to take thinks in hands (and I know nothing about stocks). So I liquidated a large part of the portfolio between 2008 and 2009 and of course always at the wrong moment. I've decided to hold some positions and of course some of them took 3/4 years to reach their previous levels.

Realized losses around 2M$, opportunity costs around the same thing, psychological cost: invaluable.... If I had followed my adviser I would made money or at least lose nothing.
lesson: Today I everything in stocks I have is managed and put in a trust managed by people who know much more than me and in which I have no authority, I'm just a beneficiary.

same causes = same effects : panic, greed, fear, incompetence.

R.I.P. Olivier Terrier (aka "Okina"), 1969-2016.
Please visit this thread for more information.
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  #149 (permalink)
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I remember taking a short on the day the equities bottomed in March 2009.

It wasn't a big loss day, but to me I find it more memorable and humbling than any blowup.

Even if I had been long briefly at the very bottom that day, the emotional effects of 'missing out' would be still be significant in hindsight.

So from this and several years of life experience outside of trading, I see this is all about emotion.

Recognizing and controlling emotion as a defensive mechanism.

And using awareness of the emotional pitfalls of trading—as trading opportunities in themselves.

I think that's where the mantras of getting 'screen time' and 'trading live' apply heavily.

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  #150 (permalink)
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If most of the poeple think that it is necessary to blow up their account, I donīt know. I am quite sure that many of the experienced trader can say that it has happened to them.

in my opinion, it is not necessary, but you have to consider it quite likely, that it will happen.

So many interesting postings here, great to share :-).

Ok, so I have to add mine..... I had it also, and also more than one times. To be honest I havenīt counted. In about 15 years ..... 3-5 times I think so at least. The worst one caused a pause of nearly one year.

Some samples for reasons I suffered.

1. The one at the beginning, ..... a "classic", collecting small profits until a "big swan" draws it and draws in average more than the small profits added up. After several months the account was down.

2. The frozen rabbit phenomenon, sticking in the believe that until you go out, the market will run in your direction.

3. The "classic".... "if your are in trouble.........double", the martingale trap.

3. The ....only 1.000 than the 99 comes to the 100... setup. ....... with ending in a 80% loss.

There was many more I think, not alway leading into a blown up account but into a strong drawdown.

An advice would be, if you think you canīt trust yourself and at the beginning you shouldnīt trust yourself, let the broker take the last decision, put only a part of your money on your trading account, that you can "restart" lets say at least for three times. Consider that this money will be blown away and it is ok for you. If you are wrong and you freeze, your broker will flatten, it is his job, it is ok, sometimes you have to pay a fee, but anyway it is worth to pay. WAIT, after this happens, for at least 3 or 4 weeks and think about why it happened and how to avoid in the future.

Once you reached a profit, not one or two profitable trades, but if you are at the end of the month, the month was good and you are quite satisfied, always withdraw a sum and save it, always leave a little bit more at the trading account then the month before, but "pay yourself first". add up your "safety account", add up to another and higher next try.


NEVER TRADE FOR "MONEY"...... I know, it sounds something strange, but if you have in mind "I want to have this or that amount earned", you will fail.

PLAY THE GAME

IF YOU ARE GOOD AT THE GAME .....MONEY WILL FOLLOW

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