Almost every trader has experienced a margin call, and I myself was once a big loser in that regard. Many friends have also told me about the fear that comes after a margin call, which takes a long time to heal.

Today, let's talk about myself. What was my feeling after the first margin call, what was my state after several consecutive margin calls, and finally, I'll share how newcomers can avoid margin calls, hoping to be of some help.

What was the feeling after the first margin call?

Although many years have passed since my first margin call, I still remember that feeling. After the first one, I felt as if all the blood in my body was rushing to my head, with a buzzing in my ears, and I was somewhat dazed. At that time, I had been making profits continuously for a long time, and I had never thought that a margin call could happen to me, not even knowing that such a thing existed.

Later, I took another look at the forcibly closed orders in my account history and then closed the trading software. It was then that the feeling of fear began to set in. I remember that the position was quite heavy, and a substantial amount of money suddenly vanished. It was really painful, regretful, and frustrating. I felt very unwilling to accept it, thinking that if I had stopped the loss and closed the position earlier, I could have at least saved a few thousand dollars, but now it was all gone.

Advertisement

I didn't know whether I should continue trading or not. If I stopped, the money lost was hard-earned from my business, which was really a pity, and I was unwilling to accept it; but if I continued trading, what if another margin call happened?

Later, I thought about my high moments, the days of early profits, when I made thousands or even tens of thousands of dollars a day, living a very exciting and fulfilling life. I really couldn't give up that feeling. So, I later faced consecutive margin calls.

What was my state after several margin calls?

The feeling after the first margin call was more of a shock, confusion, and regret. Each time I opened a new position, I would remind myself to control the stop loss and take profit well, not to be greedy, and never to be greedy. But every time after opening a position, it seemed as if my hands didn't belong to me anymore. I felt like I had to add to the position quickly when the market was good, wanted to make more profits when I was in profit, and when I was in a loss, I didn't want to stop the loss, thinking that the market could rebound if I held on.

Then came the second, third, and many more margin calls. My emotions gradually got out of control, like a soldier on the battlefield who had lost his mind in the heat of battle. After losing all, I continued to transfer money in, not believing that the market was just against me! So I went all-in against the market trend, adding positions against the trend and gambling on the market.Then various feelings of regret and anger kept surfacing within me, with every day being a cycle of excitement, regret, anger, reluctance, and back to excitement, until I had lost most of my savings. It was only then that I truly realized that everything was gone.

In fact, during that period, I was no different from a gambler. My view on money had changed significantly; the money in my account had become just a set of numbers to me, devoid of any real meaning, much like in-game currency. Moreover, the game of trading has its ups and downs, wins and losses, giving you a sense of achievement and then suddenly taking it away, making it impossible to quit.

So when I realized that I had lost everything, both emotionally and physically, it was as if I had fallen seriously ill. The recovery was slow and painful, leaving me feeling weak and listless, not knowing what to do next.

We seasoned traders often say that blowing up an account is a rite of passage for a mature trader, but the experience is indeed unpleasant, and not everyone can recover from it. Therefore, let me share some advice on how beginners can avoid blowing up their accounts.

How to avoid blowing up an account?

(1) Position size, position size, position size. If you are someone with weak self-control, you must strictly control your position size. When you start trading, always act within your means, test the waters with a small amount of capital, and only gradually increase your funds if your trading skills become more stable. Keep your overall position size within 30% of your assets, so that even if an unexpected loss occurs, your life will not be affected. Moreover, a smaller position size can help you maintain a more stable mindset, which is conducive to profitable trading.

(2) Have reasonable expectations of returns. The majority of people blow up their accounts due to emotional breakdowns, which stem from having unrealistic expectations of themselves and the market. For instance, wanting to double your account, or aiming to earn $10,000 from $1,000, or wanting to make $6,000 from $10,000; these expectations are too high for trading novices. Therefore, by lowering expectations, controlling position sizes, and managing emotions, you can at least avoid more than 80% of account blow-ups.

(3) Learn and have a complete set of trading rules. This includes a trading system and details of capital management. You may make money in the market due to temporary luck, but you cannot keep making money indefinitely, so having your own trading rules is crucial. Otherwise, you will end up with small profits and large losses, and the final outcome of your trading will still be a loss.

Regarding trading rules and systems, I have written extensively in my previous articles, so I won't elaborate further here. You can refer to my column articles for more information.

What to do after blowing up an account?

After an account blow-up, it's crucial to take a step back and reflect on what went wrong. Here are some steps to consider:

1. **Take a Break**: Give yourself time to recover emotionally and mentally. Trading can be stressful, and a break can help you regain perspective.

2. **Analyze Your Mistakes**: Look back at your trades and identify what led to the blow-up. Was it poor risk management, emotional trading, or a lack of a solid trading plan?

3. **Develop a New Strategy**: Based on your analysis, develop a new trading strategy that addresses the weaknesses you've identified.

4. **Start Small**: When you're ready to start trading again, do so with a small amount of capital. This will allow you to test your new strategy without risking significant funds.

5. **Seek Professional Help**: If you're struggling to get back on track, consider seeking advice from a financial advisor or a mentor with experience in trading.

6. **Continue Learning**: The financial markets are constantly changing, and continuous learning is key to staying ahead. Attend seminars, read books, and stay updated with market news.

7. **Practice Risk Management**: Always have a plan for managing your risk. This includes setting stop losses, using position sizing to manage exposure, and diversifying your portfolio.

8. **Maintain a Positive Mindset**: It's important to stay positive and not let past failures define your future. Remember, every successful trader has experienced setbacks.

Remember, blowing up an account is a learning experience. Use it as an opportunity to grow and improve your trading skills.(1) While a margin call is terrifying, the behavior of trading frantically and irrationally after a margin call is even more dreadful. Therefore, it is crucial to pause trading immediately after a margin call. Do not attempt to recover your losses by continuing to trade. Instead, consider closing your trading software and turning off your computer. Take a break from trading for a few days to allow yourself to cool down. The period following a margin call is often when emotions are at their worst. Continuing to trade when emotions are at their peak can lead to even more reckless trading behaviors, resulting in irreparable losses. Thus, taking a break is the best option. Allow yourself to collect your emotions and gradually calm down. Only when you return to a state of rationality should you proceed to the next step.

(2) Reflect on the issues that led to the margin call and avoid repeating the same mistakes. After regaining rationality, it is important to review and summarize. Analyze your previous trading actions to determine what caused the margin call. Record each of your trading actions and the mistakes you made. This way, each margin call has a purpose, rather than just bringing painful emotions without any benefit. After recording, try to avoid falling into the same pitfalls in the next trade. Continuously remind yourself. If you find that you are still unable to do so and keep repeating the same mistake, I suggest you stop trading for a while. Focus on learning and self-improvement, and only decide whether to continue trading when you are fully prepared. Lastly, for every trader, experiencing a margin call during their trading career is quite normal. Do not treat it as a major threat, nor should you be excessively frustrated. Everyone goes through these experiences. Be mentally prepared, understand where you went wrong, and make the necessary changes. As a result, your trading actions will become increasingly mature, and achieving profitable trading will not be difficult.