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I think it's just bad money management. For instance, a futures trader who is on the /ES only needs $500 at most boutique brokers for intraday margin. To bring an account to zero from that balance while having on contract on the table, your position would have to go against you by 10 points. So I think at that point, you are being self-sabotaging. If you aren't cutting your losses well before that 10 point mark, you better be trading longer term positions, because that would take a while to come back from for an undercapitalised day trader. Anyone with a large account that blows it up is probably stretching an account just as thin as the undercapitalised guy.
I have blown my account twice, both times trading forex. The amounts were $500 and $300.
I have also lost some money trading a cryptocurrency called Nxt. I bought around $1500 worth of Nxt and saw my investment go up to $4500 but did not sell out greed. I fell for all the hype that the price was going to sky rocket (think bitcoin). Of course there was a huge dump and the prices tanked. My initial investment was down to $600 when i sold.
Recently i opened up a futures account with $2000. I started to scalp, by the 3rd day i was up $280. Last Friday i screwed up, i experienced the same thing @Malthus mentioned. I had no control over myself and i kept making losing trades. I had told myself i would limit loses to $100/day, i ended up losing $900 in 20 minutes (trading CL).
I didn't take any trades this week and i won't be scalping anymore.
Yes many successful traders and investors that I know have never blown an account, these aren't full-time intra-day futures traders. To me it really comes down to money management, diversify risk across different asset classes, and most of all defining risk before a trade.
The equities and options market is complex with many different players with many different agendas. The percentage of retail traders trading the equities market daily is minuscule so I think the advantage is not from anticipating or predicting novice or rookies traders but more from trading a plan, finding value and longer term context for the equity. Besides that the amount of computer and brain power with gazillion PhD's at these institutional firms do I really think that I have advantage trading from my retail platform in my underwear, no not at all
Thanks @Big Mike, I appreciate your comments. The three things you pointed are basic things that every trader should follow but it didn't seem to register in my head until it was clearly laid out in front of me.
For someone who's starting out i feel this experience gives me an clear indication of what assets to steer away from and that scalping does not suit my personality.
i hope my post will deter other beginners like me from making mistakes like these.
You can ask and I will try to answer to the best of my recollection.
On the days or times that I blew my trading account or suffered huge losses, I have no risk control as I lost control.
Basically I am a day trader who scalps the futures markets with no hard stops.
On the days or times that I blew my trading account or suffered huge losses, my position size increased to the maximum limit that I am allowed to trade, with the available capital in my account.
On 15 Feb 2007, the day I lost S$191K trading SGX MSCI Singapore Index futures, I remembered I started shorting that contract after lunch when it started to move upwards one way, way beyond its normal range. I added to my small losing short position as prices moved higher and added more and more as I see bigger floating losses, until it hit my maximum limit. After the cash market closes in the afternoon, futures continue to move higher and my losses ballooned to more than I can stomach and I surrendered all my shorts in the T+1 (after cash market close, futures trading session) market which has not enough liquidity to absorb all my shorts, so I paid more for my losses which wiped out my trading account and made me a net loser after 2 years of hard work.
15 Feb 2007 was the day the Singapore budget was announced in the afternoon, and I was not aware of it. It caused the MSCI Singapore Index futures to move one way up, without meaningful pullback. My shorts that day would have given me S$2,000,000 profits about 2 weeks later, had I been able to hold on to them for that long.
On 30 Apr 2009, the day I lost S$224K trading SGX MSCI Taiwan Index futures, I remembered I started shorting that contract the previous night when I saw it moving so much higher than the cash market close. I carried my losing shorts to the next morning open on 30 Apr 2009 and had about US$10K floating profits which I did not take right after the cash market opens. When my floating profits turned into losses, I added more and more shorts until I ran out of bullets. I surrendered all my shorts as the cash market closes and lost S$224K. I revenge traded the next trading day and lost another S$116K and my trading account has a small negative balance.
On 16 Nov 2012, the day I lost S$570K trading SGX Nikkei 225 Index futures, I remembered the range for the OSE Nikkei 225 large futures contract was only 12 ticks, low 8910, high 9030. SGX Nikkei 225 futures contract which I traded that day had twice as many ticks (24) after the Japanese stock market opens at 8 am Singapore time. How could I have lost S$570K that day? Well, I traded about 10K lots (bought & sold) that day. I had about S$1.3M in my trading account and I have 1,200 lots limit for SGX Nikkei 225 contract on my X-Trader trading platform. I remembered holding 1,172 lots short at one time. I remembered seeing around S$100K loss in the beginning, and then around $200K loss later in the day and S$570K loss as I liquidated all my shorts at the close of the day trading session.
I remembered how I traded that day but I have no explanation why I traded the way I did. I find it extremely hard to accept that the person who traded that day was my true self.
My stomach starts aching when i read this....with all respect, but this sounds like self destruction. I know this, too, but never in that dimension. I donīt think that this is the question of using a hard stop or not. Itīs obviously more the question to admit to be wrong in that special moment. But finding oneself in a "bubble" stops acting adequatly...
Is this solvable?? Have you find a way already?
For the 2 "Near Miss" situations where my floating loss exceeded my trading capital before the market recovered, I was long.
I am more comfortable being short than long when I trade.
I do not track what percentage of my trades and overall profit is from shorts or longs.
I started trading futures in mid 2004 as a retail trader and became an SGX local around end 2004. I started tracking my daily profits from 2005 but I do not keep records of each trade.
Waiting, Discipline and Patience Pays!