One of the toughest thing a new trader will have to do is come back from their first blown up account. Losing 50% or more of an account or even the whole thing is very hard on the new trader’s psychology and nerves. Most never come back form this. There is a big difference between a financial blow up and a mental blow up. As long as the trader has perseverance, passion, goals, and is driven they can come back from losing capital. If they have lost their confidence, ability to management stress, and faith in themselves as traders they are done.
Usually the blow up happens because the new trader is not really a trader, they are a gambler. Most new traders do not realize it but their trading is so bad that they would have better odds in a casino betting on red or black than trading the markets based on their own opinions and bias. A REAL trader is trading like a business person and entrepreneur they are trading with an edge and with the odds in their favor. A gambler is trading with the odds against them. Amateur Gamblers are driven by pure hope and big bets, the more the gambler the greater their odds of ruin. A trader has an edge the longer the they trade the better their odds of a pay off by being on the right side of the market.
If you are down 50% or 100% in your trading account the best way to get back to even is to stop doing what you are doing and instead focus on consistent profits. Stop gambling with the odds against you and start trading with an edge. If you go from $100,000 in trading capital to $50,000 you will have a much better chance of getting back to even with four 20% return years than one 100% return year. Your blow up was probably caused by trading too big, trading too much, and trading with no real system or method. If you want to get back to even start trading the right way, step by step, and you will get there.
— Less-is-More (@TrendsWin) October 15, 2013