Eight (8) Popular Mistakes Traders Make That Blows Off Their Accounts In Minutes

"One of my worst moments in Forex as a beginner was when i placed a trade unknowingly during the news release, and i experienced a spike, which went very fast against my trade. My new live account got blown off in one day".

"Most traders fail not necessarily because of what they didn't do correctly but simply because of what they did not know."  - C.E.O FXTradeCity

What a headline! I guess you had expected something different like; tips on how to increase your Forex account to mega figures. However topics like that has lesser impacts on your overall productivity compared to understanding what would make your account dry out after few trades.

One basic fact in Forex trading is that it takes several months, and possibly some years to grow a steady positive account. On the contrary it takes few minutes or few trades to blow off an account no matter its size. 

This article reveals the signs, and likely factors that causes traders to blow off their accounts within minutes or after few trades.

Abuse of Lot Size: Leveraging in Forex makes it very appealing but somewhat destructive if it is not used appropriately. If trade moves to your favour - great; but when it goes against you, it goes real bad. Unfortunately the high value of the spread on some currency pairs increases the effects of position sizing especially during volatile sessions. This increases the value of losses when the market goes against you due to wrong lot size orders. A major factor that makes traders abuse lot size is greed, impatience, poor knowledge on leveraging, and trying to get back at the market after series of losses.

Not Setting Stop Loss: Majority of traders often get too confident as they progress in Forex trading especially when they have been experiencing series of success, which gives them the feeling of having a "control" over the market. The obvious fact is that you may be able to achieve a 100% calculation on your forecast but you cannot predict the next unsuspecting event in the market. Moreover other factors like technical platform glitches, sudden breakdown on internet connection, price feed issues can occur at anytime without warning. During this period the account would be exposed to undesirable effects until the trader get across to the broker to place a stop loss or close the order which might be very late. 

Some traders leave out stop loss because of alleged broker manipulation (stop loss hunting). However it is much better to use trade management tools to place stop loss that the broker cannot see or manipulate rather using mental stop loss. 

Hurrying to take a trade, bad trade habits, and over confidence are some of the reasons why traders make this mistake.

Refusing To Take Your Loss: This happens when trade has gone sour, and should be closed immediately to protect the account from total margin call. Rather some traders would hold on to an imaginary "blind" hope that the the market would reverse to their favour, but unfortunately it continues to go bad. It is better to take the loss, and keep the account alive for more opportunities than to sacrifice your account on one stake of 50/50 probabilities. The ability to take the right decisions despite a bad turnout is what makes you a better trader. A major cause of this is ego, wrong hopes, and bad trading strategy.

Over Trading: When you always "feel" like trading irrespective of whether the market is set for trading then your account will get wiped out in no distant time. The urge to trade would not force the market to your terms. You could be ready to trade but the market isn't ready to move. Over trading also involves placing abnormal amount of orders especially without a trading plan either because of the fun of it, anxiety, urge, and the need to meet your targets very quick.This will put an account at the verge of crashing down.

Unbalanced Scaling of EAs & Trading Systems: Trading systems whether automatic or manual require certain balance on the account to trade effectively with minimal risks. Some are aggressive (high lots, orders, martingale, e.t.c.) while some are conservative (strict money management rules). Some are designed with the capability to hold a position to a near drawdown level then they spring up again. Some multiply their order placement or amount in successive trades, while others trade diverse lot sizes. 

If you have such combination of systems like this in one single account then you need to scale their lot sizes appropriately or use tight money management else your account could likely get wiped out to over margin exposure when the market goes haywire.

Trading With Unverified/Poor Trading Products: This includes poorly designed EAs, Indicators, unverified Managed Account Schemes, and Signal Services. This is one of the fastest way to get an account wiped off. A higher majority of traders are unfortunate victims of this. Some traders only got to know that the products they had been using to trade or trading for them was fake only when their account got wiped off. 

Over Leveraging: Its surprising that some traders request for high leverage like 1:500 from their brokers for a small account size. Some are wrongly advised to believe that the leverage would speed up their gains in Forex. Most inexperienced traders do this in a bid to achieve their illusinations of gaining thousands of dollars and millions in a short time. A leverage of 1:500 on a small account size with wrong lot sizing would definitely fry the account in few trade losses. 

Breaking Money Management Rules: This is the biggest mistake of them all. Every trader ought to have a trading plan, which ideally should include money management rules. 

Money management is the key to keeping your account alive after series of losses. When you break it, there's a penalty to pay even the worse penalty - which is a "blown account".

These are the Eight (8) major causes of trader's mishaps that cause their accounts to get blown off.

kindly share your worst or good moments here with us so everyone can learn. 

Also keep this in mind; in Forex there will always be a downtime, but successive traders are those who minimize them.