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I finally blew up an account


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I finally blew up an account

  #131 (permalink)
 ranger824 
Long Beach, CA
 
Experience: Intermediate
Platform: NinjaTrader, TradeStation
Trading: Futures
Posts: 6 since Aug 2012
Thanks Given: 1
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First, congratulations. What you did is commendable in that few people will ever take an account from $7k to $70k. In contrast, many will take an account from $70k to $10k. It sounds like you have the skills to regroup and take another stab at it—in 3 months or a year or more. Additionally, you are still up 50%, so you are better off than when you started, which a great place to start again. It’s even more difficult to start again with a clear head when you are in the hole.

You asked what happened? In reality, no one can answer your question because we don’t know how you made the money. $7k to $70k? That’s impressive. Have you read Fooled by Randomness? In short, most people lose the money the same way they made the money. They were skilled and lucky and then they were unlucky and foolish.

I’ll pose a couple of ideas and questions:

You Lost Your Mind: From what I gather, you fall into this category. You made decent size profits and took lots of small losses. Then, unfortunately, you lost your mind when things didn’t go your way. The market was doing one thing when you made your money. Then, the market stopped doing what it was doing, and you lost your money. Ex. I made the money in a trend. Then I started losing money, and I bet bigger and bigger. Now, I look at the chart, and I see I lost all of the money in a trading range. I kept thinking it was breaking out and it wasn’t!!

You were a Plunger: Did you make the money by plunging? If you make the money by plunging, you will certainly lose the money by plunging. Just ask Jesse Livermore.

Question: Were there at least 5-10 times as you made the money that you got in over your head, but each time things turned around? Well, each of those times was a time that you could have started the eventual process of blowing up your account, but each time, LUCK bailed you out.

You asked, “Why didn’t I stop?” By definition, a skilled trader does stop. You either stop or you don’t stop. If you don’t stop, you are still learning. Did you learn? I assure you, you would have had to learn what you learned eventually. To be clear, you could have just as easily and just as quickly blown up your account at $700k. Better to do it at $70k and learn from the mistake.

Anyone who doesn’t know that they can blow up their account will blow up their account. There are stories of people who went to Vegas and won modestly every time for 20 years and then lost everything they owned in a single night.

You asked, “Why didn’t I stop?” It was probably both thrilling and nauseating at the same time. We have to learn to never want to feel like that again. Watch Al Pacino explain it here:


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  #132 (permalink)
 
Sandpaddict's Avatar
 Sandpaddict 
Vancouver, Canada
 
Experience: Advanced
Platform: Ninjatrader, MT4
Broker: IB, Global Prime
Trading: Futures CFDs
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sbogatin View Post
Blew, I just received an email with your post because of a long term follower of the site although I rarely drop in to see what's going on. I am not even sure if this message will be transmitted to you. I know you have received some supportive responses, and that many individuals will be supportive of you, and will empathize with you with words of encouragement. If you want empathy, I'm not your guy. I have been trading for over 40 years, and I'm a retired medical doctor. I can tell that you are frustrated with circumstances, and I can tell that you are an articulate guy. I'm going to assume that your sincere and that you have accurately represented an accurate accounting with poor results, and that this is not a spoof. There are so many things that are wrong with this story if it is true, it is a red flag and you should immediately stop trading... For a multitude of reasons. I am inferring that you trade penny stocks (possibly digital currencies) since you started with a $7000 account. That's a tell that you are an experienced trader and may be under financed. And while this may not be true, and that my assumptions are not correct, everything about taking $7000 account to a $70,000 account and impulsive trading with disaster occurring over a few days... and what I assume is a net gain of $3000 in a very active year of trading means that you could have a part-time job at a Seven-11 and make more money without risking your capital. The vast majority of under capitalized traders, and traders who have no significant level of training will lose money in the markets. My general recommendations are that you find a mentor, and this will cost you at least a few thousand dollars. The problem when you start trading is that you don't know what you don't know, and you don't know what you need. I know that this forum has featured well-known traders as guests. I believe that Al Brooks was a guest a few years ago. He has a very inexpensive video series which will require a tremendous amount of your time, but is generally good. However, it may not be good for you for various reasons. Andrew Menaker is a PhD clinical psychologist who mentors some of the best traders in the United States, but he is not there to teach you the fundamentals of trading. I have had many mentors including Larry Pesavento who is an excellent mentor, but like every other recommendation, he may not be good for you. You sound like a young, smart guy who doesn't understand the first thing about trading, and if you in a serious way are under financed the probability of ROR is high for you. Trading is a business, it requires an education and the help from people who know more than you do. It's ironic to me because you love trading, I don't love trading, but I treat it like a business and I know that I can make money. You spend a lot of time taking risks, and I spent a lot of time avoiding risk. If I see low probability for whatever reason, including my inability to assess probability, I simply walk away from the trade because I know I don't lose money if I don't take a trade that I have no sense of probability working to my favor. My guess is that you have no idea what that means, but you can learn about it if you treat trading like a business. I am reluctant to post my point of view, but if you get this I must've pushed the send button. ( please excuse the Typos )


sbogatin View Post
You spend a lot of time taking risks, and I spent a lot of time avoiding risk. If I see low probability for whatever reason, including my inability to assess probability, I simply walk away from the trade because I know I don't lose money if I don't take a trade that I have no sense of probability working to my favor.

I hate to say it but I agree with a sbogatin.

This is fantastic and gets right to the why trading so hard.

"...Including my inability to assess probability, I simply walk away..."

Assessing probably is usually the biggest problem to begin with and knowing what you don't know takes years to figure out.

Its not just the absence of certainty it's the certainty of absence.

Once you know your not certain you can adjust.

Im not sure what you trade either but no one goes from 7k to 70k in that short of time without EXCESSIVE risk.

Just MHO

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  #133 (permalink)
 striveforwisdom 
Washington D.C., United States of America
 
Experience: Intermediate
Platform: Tradovate
Broker: Tradovate
Trading: CL, MCL
Posts: 21 since Apr 2021
Thanks Given: 42
Thanks Received: 31


Hi blew,

I guess my first question is what does your system look like (not the methodology - as that would be giving your edge away) but the metrics? What is the win rate? What is the reward to risk ratio? I am asking because I think most blowups occur due to these metrics being forgotten, not having/sticking to your system, and not following the general rules fo successful trading that curb against your human nature - greed, fear, impulse, and revenge.

I think this because of my own experience blowing up an account. I blew up an account because I had a high win rate system that had a relatively bad reward to risk ratio for myself. Sometimes I would have a 1:1 reward to risk ratio and sometimes a .75:1. The reason I am bringing this up is because I think high win rate systems, at least for me, are detrimental for most people in the long-haul. Eventually there will be a day like you described. Where your emotions are uncontrolled and you have a bad day. In response to this 'bad day' some people, because they are so used to 'winning' from their high win rate systems will take this personally and start the following: revenge trading, taking more size than normal to recoup losses, creating more losses, then they are taking more impulsive bad trades resulting in them decimating an account. This happened to me.

From your post, it seems like you had a winning system for a short amount of time, were used to winning, and then had a bad day that got the best of you. My advice would be to go back to the drawing board. Reflect, analyze the experience, and redraw a new system that you will have to test with experience. Also, read on this forum, books, and/or ask people what rules they have in place to help them block against their destructive human nature - impulse, greed, fear, and revenge.

After my blowup, I realized a high win rate system with a low reward to risk strategy requires so much work/stress day-to-day and keeps me from inviting risk. Risk is great as long as you manage it, like what most others are saying on this post.

My current system has roughly a 50% win rate. I lose around 50% of the time, but I lose 2-3 times LESS than my profits. I only trade NQ. If my bearish conditions for NQ are met, I trade short and my system tends to get a reward to risk ratio of 3:1. If my bullish conditions for NQ are met, I go long and my system tends to have a reward to risk ratio of 2:1. So, I take great advantage of bearish conditions and a good red day. I am more cautious in bullish conditions because I know that I, myself, and my system are more profitable in/from bearish conditions and nice red days.

I illustrated some aspects of my current system above because, from my own experience, account blowups while initially unpleasant can be great. My blowup made me realize I was a shit trader without a clear system. I also didn't have rules in place to guard me against myself. Pre-blowup I was also way TOO risk adverse - which I personally think is a terrible way to go about trading. I believe it is essential to manage risk but to also not be afraid of it.

Another key lesson I have learned is that learning how to be comfortable losing is one of the key skills a trader must acquire and this is MUCH easier said than done. This is has been the hardest lesson for me and many other people. Get used to it and know that losing trades, with well defined and managed risk, are GREAT trades. Just because you take a loss doesn't mean it is a bad trade. Our human nature wants to trick us into thinking that a loss is BAD and a win is GOOD and, in my humble opinion, high win rate systems can easily push someone into this box of thinking.

Growing an account from 7k to 70k is commendable mate. Remind yourself that you can trade and do this. Just keep those emotions in check, take a break, and go back to the drawing board. Im telling you, you won't regret reflecting on this experience. Journal down what went wrong. Journal down what went right when you took your account from 7k to 70k.

Ask yourself: Is the system I am currently running really sustainable? Do I have rules to curb against my own human nature? Am I treating the market like an annuity - causing me to trade every day when there isn't necessarily good opportunities? I feel like these general questions, with honest answers about yourself, can really tell you a lot about yourself as a trader. Then, with this information, go to the drawing board and try something more concrete.

Above all, account blowups are a learning experience and usually, for the people that stick around and put in the effort, are a necessary step to make them the best trader they can be.

Cheers!

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  #134 (permalink)
feinbern
London
 
Posts: 7 since Jan 2021
Thanks Given: 3
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Sandpaddict View Post
I hate to say it but I agree with a sbogatin.

This is fantastic and gets right to the why trading so hard.

"...Including my inability to assess probability, I simply walk away..."

Assessing probably is usually the biggest problem to begin with and knowing what you don't know takes years to figure out.

Its not just the absence of certainty it's the certainty of absence.

Once you know your not certain you can adjust.

Im not sure what you trade either but no one goes from 7k to 70k in that short of time without EXCESSIVE risk.

Just MHO

Sent using the NexusFi mobile app

I think this is right and is without a doubt what I got wrong when I started trading. Unfortunately, when you start out you tend to look at trading like a "job" or a "paycheck" like somehow you can extract a certain amount of money every day/week/month by doing certain things (probably because most people had real jobs before they started ). I just dont think that's true. Trading is a very opportunistic thing and you kind of need to know what you are looking for before you do it. One of the main ways to do this is have someone show you but I get that its not always easy to do if you're trading from home/by yourself etc (I struggled with it too). Even using a forum is tough to replicate that as you dont really build those interpersonal relationships though I guess it can help. The point is that most of the time your instincts are wrong when you start out. You're taking trades and you dont really know why. Risking capital for no reason because every trade seems "pretty good" and that's exactly the problem. Every trade that you take that seems "pretty good" means that you dont have the probabilities in your favor. All you're thinking about is what you might win if it "goes right". As the guys above say, you need to know the probabilities first and if they dont make sense, then you walk. This is often very hard to do and why I say its good to have a guy sitting next to you to say "nahhh" most of the time I set myself up in a co-working space and was lucky enough to have someone with experience sit near me to tell me just that when I ran things by him. Its frustrating when someone says "nahhh" but most of the time you'll find out they're right. In the end, you'll only take the highest probability trades with the lowest risk which dont come around very often (I also tend to use options for this as its much easier to get this result ie asymmetric risk reward where you've got very little on the line for an outsize reward). Its pretty boring trading this way but unfortunately the only way (IMO) to make money...

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  #135 (permalink)
goodoboy
Houston
 
Posts: 380 since Dec 2016
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sbogatin View Post
If I see low probability for whatever reason, including my inability to assess probability, I simply walk away from the trade because I know I don't lose money if I don't take a trade that I have no sense of probability working to my favor. My guess is that you have no idea what that means, but you can learn about it if you treat trading like a business. I am reluctant to post my point of view, but if you get this I must've pushed the send button. ( please excuse the Typos )


Lovely stated sbogatin,

How do you mental deal with seeking high probability trades when high probability trades require more risk?

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  #136 (permalink)
 SLMacKellar 
Rio Vista + CA/USA
 
Experience: Beginner
Platform: TradeStation, NinjaTrader
Trading: CL, NQ
Posts: 5 since May 2016
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I think one thing that goes unremarked too often is that day trading is very mentally demanding.

Seems to me that revenge trading is partially anger but also an exhaustion of the control you need to brush the anger off, or the control to properly analyse trades. Maybe working on that would help. Maybe you need a week off after working for x number of weeks? Recharge, rest your brain. Build back the control you need. I think there may be science behind this, that control (willpower for instance) is a limited rescource in the brain and needs to be recharged.

This is something I am working on right now.

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  #137 (permalink)
peesqueezy
Los Angeles
 
Posts: 2 since Mar 2018
Thanks Given: 0
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SLMacKellar View Post
I think one thing that goes unremarked too often is that day trading is very mentally demanding.

This is something a lot of people don't realize, even WHILE losing $. It doesn't even have to be a "revenge" trading scenario or 'tilt', but even just boredom or trying to force trades, or trading past when you should stop. I think having spreadsheets and trade analysis software helps a lot with this, if you can see after 11amEST you have a negative EV from your trades, at least you can now easily see this feedback.

That was one of a few things that helped bigly in my trading results.

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  #138 (permalink)
 martinhunting 
melbourne victoria australia
 
Experience: Advanced
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Hi
here is a book that you may wish to read Dick Diamond has been a successful trader and the book is very practical and shows how he traded 40 years of trading insights
Untitled

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  #139 (permalink)
 JBWTrader 
Murrays Bay
 
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so guys 14 pages later and blew blew through...what now ?

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  #140 (permalink)
 
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 AllSeeker 
Mumbai, India
Legendary Pratik_4Clover
 
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JBWTrader View Post
so guys 14 pages later and blew blew through...what now ?

Similar threads appear in good frequency and their creator "usually" follows the same pattern. Its fairly routine.

We take a sip of our favorite beverage and get on with our own lives, I guess?

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