Razing your trading account: user manual

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A large majority of traders lose on the financial markets. The causes are diverse but we often find the same errors. Novice traders are like children, no matter how much you tell them not to do certain things, they do them anyway. They need to make mistakes, to learn. The problem with the financial markets is that mistakes cost money. That's why we keep telling novice traders to open a demo account before going live (which is often not the case). Most often, with all the mistakes made, one trade is enough to raze your trading account. In an effort to save you time, here is a user manual for how to lose all your capital on one trade. Let's get inside the novice trader's head.

Step 1 - Information



Ah, there's a nice uptrend on this asset! Plus I read in a financial journal that it was going to go up. I also remember that my friend Toto advised me to buy it the last time we were at the pub. It's a guaranteed winning trade! I absolutely have to buy to take advantage of this increase.

As soon as it corrects I will open a position. Ah gosh (I'm still polite for now...), it keeps going up! I'll miss everything if this keeps up! Here's a mini correction, a great opportunity to open a position!
Hey hey, I'm a winner. I’ll talk to my buddy Toto about it and tell him I'm making a profit too. I'll buy him a drink to thank him. Trading is really too easy!

Step 2 - Denial



That's the price going down now. It's perfect, a great opportunity to buy even lower and lower my cost. You'd have to be an idiot not to take advantage of it. Averages down, I don't see what the problem is.

It's still going down! At these prices, it's Christmas arrived early! I'll have some more. Oh, I'm going to eat out on this trade.

Step 3 - Anger and bargaining



Oh gosh, but it keeps going down!! I don't understand, they all said it was going to go up... I have to get out of here. As soon as it comes back to my cost price, I’ll cut all my positions and basta! Toto is going to hear about this to, with his stupid advice

Trading's over, it's really a scam! Anyway, everybody loses, it's not my fault. The market is really messing up! I'll never touch that again! To think that at one point I was winning. If I'd known, I would have cut everything!

Oh!!!! The indicators are oversold. That's not bad. And in addition we’ve come to a support. And if I make a new average at the low point, it doesn't need to come back all the way up to be profitable. But I'll buy some more. And who knows, it might go back to increasing.

Step 4 - Sadness and resignation



But that's not possible! It's still dropping. Luck is against me. Pfff, that's absolute rubbish. Go on, drop all the way to zero while you’re at it, you stupid asset!
Well, I’m not going to look at that class again, I lost anyway. I can't do anything now. It's rubbish! To think that with this money I could have bought myself a mini break. I’ll wait until it goes up a bit and then I’ll cut everything.
Here’s Toto calling me. "Did you see how crazy that was, it was off to a good start! You sold it, I hope? "Of course I did! You've seen the chart, it's all bearish signals! Even a six-year-old could have seen it”.

Step 5 - Acceptance



Of course, it's still going down. That asset’s really doing me no favours. I lost, I know, I was just hoping for a little rebound before cutting. I now understand why it is you shouldn’t use averages when it’s bearish.

It’s not stopping! That's crazy, how is that possible. It's a good asset, though, I would never have guessed it would fall so low. I’ve lost a good part of my capital. I’ll cut everything, anyway, it's useless and it seems to want to keep going down. There's no point in trying hard. I was such an idiot to buy more last time.

Come on, it's over, stop thinking about it, I lost, it happens to everybody. It will be a lesson to me.

Step 6 - Reconstruction



Hold on, it keeps going down. I'm glad I cut everything. To think that some are still in position, at least I cut everything before getting my account totally razed.

The asset price is now rebounding. I wouldn't get caught twice in a row! You’d have to be crazy to buy. The trend is bearish! It's just a correction. Some people are going to get wiped!

Oh no, what's going on?? Why is it going up all of a sudden?!!! It’s gone back to the price of the last position I opened. And it's still going up! I would have won at that price on my last position! I cut almost at the lowest!!!!!

Well, come on, I’ll buy, in the end, they were all right, it's a solid and promising asset. I was an idiot not to listen to them all the way. By buying now, I will be able to get some of my money back. I'm betting everything I have left (maximum leverage)! And my entry price is better than the first position I took at the highest last time. If it comes back to my first trade price, it's all good, I'll win.

P.S.: The price is going down again... because in fact it was simply a correction movement within a downward trend. That is how you get a razed trading account.

Conclusion



If you look closely at the names of the different stages that the trader goes through in a losing trade, you find the same for mourning (physical, social or professional). The famous 7 steps... that I condensed into just 6 steps. It makes you think!

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