Losing everything you deposited in a trading account is more common than most people believe. It’s actually part and parcel for most traders, especially at the beginning of their trading journey, before they find their bearings and a trading method they can rely on.
Whether it’s because they lack discipline, don’t have a trading diary and/or plan, or when their emotions get the best of them – traders lose their deposits and even more if they get a margin call.
But you can bounce back from this if you follow these steps.
1. Accept the loss of your trading account
The first necessary step is to accept defeat. But if you followed the most basic principles of trading, you would have lost only money that you could afford to lose. Not an amount that can impact your lifestyle.
So that’s why this is only a defeat in a single battle, not the overall “war” between you and the market.
Negativity will try to overtake you, to make you doubt yourself and your trading ability but like almost every complex task that we take up – we have to go through that to reach the other side where there’s a better version of ourselves.
2. Identify the problem
After the shock from the loss dissipates and even after the embers of rage/anger/doubt have died out, you can start to analyze the circumstances that led to losing your trading account.
If you kept a trading diary, then the clues will be in there. You’ll be able to find the exact point when things started going wrong. And probably when they really went down the drain.
Was it the risk management? Was it greed, or even maybe fear? Search through your own records and memory to pinpoint the reason you made either many consecutive losses or several big ones.
3. Ease back into trading
This is the tricky bit. You are now about to re-enter the markets and you’re clear about what caused the loss of your trading account.
Make a note of the reason(s), both in your trading diary and your mind. Don’t allow them to repeat.
Once you’re confident that you won’t get into the same situation, then you can slowly come back to trading.
We’d do it with smaller amounts than your previous account and we would also do it for less time than usual.
That way you won’t get your hopes high of quickly returning your losses (nothing is impossible but this is highly unlikely). Also, you’ll have that sense of a fresh start and exploration but with a bit of experience under your belt.