How I Blew Up My Forex Account

I suppose the story of how I blew up my forex trading account is nothing unique. In fact, it's quite similar to all the news that's been coming out of Wall Street for the past year or so: people holding onto leveraged losing positions until the losses move so far against you that there's basically no way back.

My forex trading account is a mini account and my forex broker extends 200:1 leverage to me. In return for this leverage, they have the right to liquidate my positions should my account fall below the minimum margin requirements. The consensus seems to be that retail forex brokerages take the opposite side of their clients' trades. This means that if you go long EUR/USD for one mini-lot, they are short EUR/USD for that same mini-lot. So, your profit is their loss and vice versa.

During my first month of trading, I literally grew my account by about 600%. Most of the trades I did were on GBP/USD and I was totally trading on the right side of the trend. Had I stayed in that one trade, I could have made a good five digit gain (as in $26,000) on that one trade as GBP/USD soared past 2.11. However, I took an early profit and entered other positions.

This amount of gain is only possible because the lot size I was trading was enormous.

And in hindsight, this was what killed my account. Because I was trading such large lot sizes, when it was my turn to get into a bad trade, the losses quickly piled up. This, and I was too stubborn to get out of the trade.

Had I stopped when I was up 600% and taken the time to really learn the ins and outs of forex trading at that time, I would not have blown up my account. However, in blowing up my account, I learned a very important lesson about trading.

And this is rather than only looking at the gains, we need to ask ourselves what are the risks? And how can we limit those risks?

I am now in my first full year of trading forex. I've been speaking to other traders, attending the webinars provided by my broker, and reading up on books and blogs.

While I have not been able to recover my account yet, I recently had a moment of clarity. And this is that I haven't been letting myself take enough profit. The trend is your friend, right?

Let the trend be your friend once in a while.

Disclaimer: Do your own homework. Do not in any way take this to be investment advice. You are responsible for your own portfolio.