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Nial Fuller

NIAL FULLER
Professional Trader, Author & Trading Coach

How To NOT Blow Up Your Trading Account

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By in Forex Trading Tutorials Last updated on | 63 Comments

laptopSo, you’ve been studying the markets for two years now, you’ve read all the books, taken numerous home-study courses and even attended a trading seminar, your demo trading results seemed pretty good, then you went live and lost 50% of your account in two weeks. You decided to go back to the drawing board and learn a different system, because you figured it must be your trading system’s fault that you lost all that money so fast; you just need to find the ‘perfect’ trading system…

Sound familiar? For many traders, this story is all too familiar. The majority of the people who come into the markets end up blowing up their trading account at some point, and many traders blow it up multiple times. Trading can almost seem “rigged” at times, because it seems so easy and effortless when your demo trading or when you’re not in the market and you’re just observing. But, the minute you enter the market with real money it seems like the whole game changes and someone changes all the rules to keep you from making money. I know it seems that way, I’ve felt like this before too, every trader goes through the same trials and tribulations while learning how to trade successfully. Some give up, some never change and just continue losing money without trying to make a real change in their trading habits, and some traders push through to the other side and become consistently profitable. In today’s lesson, we are going to discuss how you can become one of the profitable traders and how you can stop blowing up your trading account.

The typical journey of a Forex trader…

There are different stages in the journey of learning how to trade the markets. The stages consist of approximately the same elements and traders tend to progress through these stages in a similar sequence. Some traders progress through each stage quickly whilst some get stuck in one stage for months or even years. Let’s take a look at the 6 general stages of a Forex trader…

Stage 1:

Problem – You hear about Forex trading from a family member, a friend, a colleague, a T.V. commercial, the internet etc. It seems like a legitimate and exciting way to make money. You get dollar signs in your eyes and dreams in your head. You can’t wait to learn all about trading so that you can tell your boss to “shove it” and live the life you’ve always wanted. Case in point, you’re interest switch has been turned on and your gas tank is full of rocket fuel…you are chomping at the bit to absorb everything you can about trading, open an account and watch the money pile up.

Solution – While there’s nothing wrong with being excited and interested in the potential lifestyle to be lived by being a full-time Forex trader. You should be cautiously optimistic at this stage rather than planning to put all your eggs in the Forex trading basket and dreaming of life styles of the rich and famous. Trading is anything but a ‘get rich quick scheme’; it takes discipline, dedication, organization, logic, and patience, if you think it’s a way to some ‘fast and easy’ money, then you’d better think again. If you want to build a sustainable Forex trading career you’ve got to be realistic and understand from the beginning that developing the proper trading habits is what determines whether you become a successful Forex trader or fall to the wayside like most traders.

Stage 2:

Problem – You start doing some research on the internet, Googling everything you can think of regarding Forex trading. There are a lot of different options for trading systems, trading strategies, trading software, trading courses, seminars, and the like. You decide to learn the basics of Forex by taking a good free forex beginners course like mine or another. After this, everything is making sense to you, you are excited about the opportunity in Forex and now you just need to decide on what trading strategy you will use. After a lot of research and thought, you finally decide on a trading method that you feel confident will help you trade the market successfully. The problem with this stage is that many traders start out by learning a trading system or strategy that’s far too complicated. They’ve got Elliot Waves, MACD’s, Stochastics, expert advisors, and other indicators plastered all over their charts. These things are not conducive to developing and trading from a relaxed and confident Forex trading mindset.

Solution – Instead of learning about a million different indicators or purchasing expensive trading software, you should begin by learning how to trade off the raw price action of the market. I’m not only saying this because I teach price action trading, but also because you really do need to know how to read the raw price action of a market, no matter what trading method you eventually end up using. I suggest you stick with pure price action trading strategies, like the ones I teach and trade, but whatever method you end up using, you will trade it better by understanding the price dynamics occurring on the chart below it.

Stage 3:

Problem – Whilst the first two stages discussed above are pretty consistent amongst most traders, stage 3 is where traders’ paths might diverge. At this point, most traders are trying to learn a trading system, a trading strategy, they’ve purchased a Forex trading robot or they are trying to trade with a bunch of different indicators. Most traders tend to demo trade for very little time, if any, on their first attempt at learning to trade. It seems to be human nature to want to jump into the markets as soon as possible and start risking our hard-earned money.

So, at stage 3 most traders have spent a little (too little) time learning some trading method and then after they see one or two instances of it working out they open a  live account and begin trading with real money. Typically, traders make stupid trading mistakes like entering the wrong lot size or buying when they wanted to sell, etc. These are mistakes that are the result of not taking the time to properly learn about your trading platform and how it works. In stage 3, traders typically blow out their first trading account, or lose such a large portion of it that they take a break from trading for a while, at least until they learn another trading system. (Note, some traders do avoid ever blowing out a trading account, and it’s typically because at this stage they begin trading with proper trading habits and they never waver, they stay on track and don’t give into the temptations of trading like a gambler).

Solution – Whatever system or strategy you decide to start learning how to trade from, BE SURE TO DEMO TRADE IT FIRST. Many traders seem to think they don’t need to demo trade, or they don’t do it for long enough. You need at least one or two months of demo trading the exact same strategy or system you are planning on trading live with, if you don’t do this you’re a fool. Remember, this is your hard-earned money you’re risking, waiting two or three months to start trading with it is not going to hurt you, especially if you consider that doing so will allow you to become more familiar and confident with your trading method, which will ultimately cause you to trade much more effectively.  Demo trading your trading strategy and the trading plan you’ve built from it, will increase your odds of not blowing out your trading account dramatically.

sharkMost of the time, traders blow out their first account by getting too excited and too anxious; they skip demo trading, they have a mediocre grasp on their trading method, and let’s face it, they really just want to get in the markets and throw some money around because it’s fun at first. Well, I assure you that blowing out your trading account that you worked 6 months or a year to save up for will not take you 6 months or a year to blow out, and the fun and thrills you felt when first starting to trade live will end very quickly once you realize you have no idea what you’re doing and the market is eating your money like a hungry Great White Shark. So, make sure you have MASTERED your trading strategy and that you have demo traded it for at least two months or more before you even think about risking your real money in the markets.

Stage 4:

Problem – In this stage, most traders begin a frantic search for a ‘better’ trading method than the one they were using. There are so many options for trading systems and strategies on the internet these days that it can be nearly impossible to not get tempted into buying one of the ‘too good to be true’ sounding ones… and there are plenty of those. This is the stage where traders really try to find that “Holy-Grail” trading method that they ‘know’ must be out there…after all, someone is making money in the markets so there must be some ‘ultimate’ trading system out there (or so they think). In this stage, traders end up dropping some serious money on some Forex trading systems or other trading products that they feel will help them correct their previous trading mistakes.

Solution – This solution is pretty straight forward; if it sounds too good to be true…it probably is. The Forex industry is FILLED with trading systems, strategies, courses, books, and you name it that sound really great; they make trading seem easy. Truth is, trading is not easy, and it’s a battle against your own emotions that only you can overcome. Yes, the strategy that you use matters, a lot, but it is not true that more expensive trading systems or more complicated and fancy sounding ones work better than plain old price action trading strategies. In fact, I can tell you from experience that they don’t. I’ve tried them all, in my early trading days I too set out on the “Holy-Grail” trading system quest. Eventually, through trial and error, logic and commonsense, I realized the markets were best traded by just analyzing the naked price action of the charts that had been staring me in the face the whole time.

Stage 5:

Problem – This is the stage where traders feel they have found the ‘perfect’ trading system or strategy and they are ‘finally’ ready to start making money in the markets. Typically, in this stage, a trader will either develop good or bad trading habits and this is also the first stage where some traders have a real shot at going on to make consistent money in the markets. However, what happens to most of them is that they aren’t properly prepared with a Forex trading plan, trading journal, and a concrete trading routine. Instead, they are all hopped up over their new trading system and they start trading with it without any sort of organized structure or plan behind them. This typically leads to over-trading, risking too much, and for most traders it starts them down another path to blowing out their trading account, again.

Solution – Don’t fall off track. Many traders get excited about doing the right things in the market. They have a trading plan, they have a trading journal, and they know what they are looking for in the markets. Then after a few losing trades they seem to forget about their trading plan and they start ‘winging it’ a little more, they’ve also stopped filling out their trading journal, etc. You see, it’s REALLY REALLY easy to stop being discipline and to get out of control in the markets. In fact, it’s far easier to trade in an undisciplined manner than it is to remain disciplined and patient and develop the proper trading habits. The trick is that the longer you remain disciplined, organized, and patient, the easier it will become, and eventually you will enjoy trading the right way because you will have forged these things into positive habits. You’ve got to stick it out long enough and endure some ‘pain’ to see the long-term reward. Nothing worth doing in life is easy, trading is no different. If you give in to what you ‘feel’ like you want to do in your trading, rather than what you know you should do, it will only be a matter of time before you blow out your trading account.

Stage 6:

Problem – At this stage, you’re either on the right track because you’re remaining disciplined, organized and patient, or you blew out your account in stage 5 because you got too excited and emotional. Having blown out two or more accounts at this point, you are really starting to feel depressed about your trading, you think it’s ‘impossible’ to trade successfully and that you just don’t ‘have it’. You fall into a ‘downward spiral’ of losing money because you feel like you’ve lost so much to this point that you start to feel like you don’t care if you lose anymore, so you start taking bigger risks and trading more frequently, in other words, you’re gambling in the markets now.

Solution – Time to take some time off. Stop trading real money, and if you need to, stop demo trading and forget about the markets for a month or two. They will be here when you return. The best medicine for ending a period of emotional trading is to simply remove yourself from the markets for a while. If you feel like you’ve reached this stage, and you really need some help, then I suggest you simply stop trading for a while. Come back later after you’ve got some trading education and you’ve demo traded for a while. There’s no rush. In fact, the more you rush and try to ‘force’ money out of the markets, the more the money you so badly desire will elude you.

In closing,

I hope today’s lesson has helped to open your eyes to the fact that you are NOT ALONE as a trader who has committed emotional trading mistakes or who has blown out a trading account or two (or three or four). It happens to all of us, it’s part of the game. You either figure out that what you were doing before wasn’t working and try to fix it in a logical and straight-forward manner like we’ve discussed here today, or you continue on in your old gambling ways, or you give up trading all together. Those are really the only 3 things that can happen to you from here.

I trust that because you’re on my website and you’ve read this whole article, you’re committed to righting your trading wrongs in a logical and no-nonsense manner. If that’s the case, I suggest you check out my Forex trading course and members’ community for further training and fellowship with like-minded traders who are committed to learning how to trade with simple, logical and effective price action trading strategies. If you have any questions or feedback, please feel free to contact me.

I’d really love to hear your feedback today, so please remember to leave your comments below & click the ‘like button’.

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About Nial Fuller

is a Professional Trader & Author who is considered ‘The Authority’ on Price Action Trading. He has a monthly readership of 250,000+ traders and has taught 20,000+ students since 2008. In 2016, Nial won the Million Dollar Trader Competition. Checkout Nial's Professional Trading Course here.
  1. MUNGE August 13, 2019 at 4:36 pm

    Some points to be highlight patience is key ,not interfering with trades

    Reply
  2. Tom May 4, 2012 at 7:54 pm

    Thanks Nial.
    Am really encourage, though am new to FX!
    Great stuff, God Bless You.

    Reply
  3. Dillon May 4, 2012 at 12:12 am

    This is my first time here, and a lot of the information on your site fits me exactly! I have every single one of these problems…

    This article may have changed the way I look at the market, excellent stuff!

    Reply
  4. Sonja May 1, 2012 at 6:51 am

    You rock Nial, you are THE BEST mentor in the world!
    Keep it going!

    Reply
  5. slivester May 1, 2012 at 1:47 am

    thanks very2 much sir

    Reply
  6. Todor May 1, 2012 at 1:17 am

    You have my bow again, Nial! Everything you teach i find a piece of genius. I should only learn and apply. Thank you very much indeed!

    Reply
  7. julius April 30, 2012 at 9:02 pm

    Nial, All that you listed were the things that choked me.Thank you for always being there. May God bless you.

    Reply
  8. eileen khoo April 30, 2012 at 2:42 pm

    Thank Nial! You had just hit on my obsession and over-analyzing so much so that more often than not I just missed th trade. Will take note and work on that, thanks once again!

    Reply
  9. Kevin(Zach)Harper April 30, 2012 at 9:19 am

    Great Stuff Nial
    Have to totally agree….Be Patient…Be Patient….and then finally ask yourself …Is this really a quality trade setup ???

    Excellent Nial

    Reply
  10. anton April 30, 2012 at 6:33 am

    A++ Article. If you cant grasp the above points then their is no saving you from ruin.

    Reply
  11. pecsen April 29, 2012 at 8:02 pm

    Very useful article again, thank you Nail for your effort!
    In many cases I tried to be patient, but I wasn’t strong enough, so I did some mistakes:
    I checked the charts during working hours, I checked it on mobile phone and modified stop, limit etc. Like others I also do try to reduce the number of my mistakes,
    so first of all I decided to remove the trader application from my phone (however it was perfect, I loved it, but don’t need it), and I started to use weekly charts and the daily. Nowdays I take pending entry (stop, limit) orders and I don’t check the charts for one or two days. I will try to not change the view of the charts to 4h candle, the daily is much stronger and contains everything I need.
    And I wait to close the daily candles. I already haven’t read articles about economy for x month, I’ve spent my time with much more useful things (want to improve my english).
    I’m sure If I’ll not violate these rules, I’ll be much more successful in trading (of course by Nail’s price action) with less effort and less stress and with better english :) Sometimes you have to be strict with yourself (others will not be) during the road to the main goal. Just my two cents! Good luck! :)

    Reply
  12. Yusuf Hammed April 29, 2012 at 5:53 pm

    Nial you are a FX GURU you know how unsuccessful fx traders feel.Every FX trader most learn how to be Patient and looks for Good set up before they enter the market.I like you, you just keep it simple and make it simple.

    Reply
  13. Jerry Snyder April 29, 2012 at 11:48 am

    Hi Nial,
    as always you are right on – I know that I have to keep reminding myself and your timing is remarkable – thanks -jerry

    Reply
  14. Amio April 29, 2012 at 6:33 am

    Very true.What are the antidotes?

    Reply
  15. DRS April 29, 2012 at 5:45 am

    2 years is what it takes to work out the markets.

    Reply
  16. sez elabor April 29, 2012 at 4:25 am

    what can i say Nial? you are the epitome of a professional trader.. this artcle is splendid and good for traders.. you are the best Forex Mentor i have ever known.. thank you a million times..

    Reply
  17. Robert Meinecke April 29, 2012 at 4:21 am

    Thank You Nial for a Block Buster Article. This is exacttly what has happened to me and it is a wake up call for me. You really know how to hit home in such an easy understanding way. I really liked your “Holy Grail” desription about patience. Thank you again.
    Robert

    Reply
  18. Bhupinder April 28, 2012 at 11:42 pm

    Just Brilliant. Thanks for making things easier Nial.

    Reply
  19. AMIN MALIK April 28, 2012 at 11:20 pm

    NIAL! Thank you for being pretty serious in your MISSION of helping Traders at large. For sure, many of us are improving/ developing the proper MINDSET to become a successful TRADER. Your ability to get to the MEAT of the subject is IMPRESSIVE. Please keep coming. THANKS & REGARDS. AMIN

    Reply
  20. Jude FX April 28, 2012 at 9:32 pm

    your articles are very factual for anyone who can follow them. keep it up because you are changing lives!

    Reply
  21. Tay Jui Chuan April 28, 2012 at 8:23 pm

    Hi Nial,
    Thank you very much for this timely article and a very timely reminder.
    Thank you very much

    Reply
  22. hamish April 28, 2012 at 6:34 pm

    todays lesson is bang on and a must for all wannabe successful traders. great insite and knowledge to be gained for all. thanks Nial

    Reply
  23. Ramli April 28, 2012 at 4:52 pm

    Thanks n Cheers

    Reply
  24. John April 28, 2012 at 11:20 am

    Banks and institutional traders sit on the side line, why shouldn’t we. Thank you Nial Cash is a position.

    Reply
  25. Colin April 28, 2012 at 7:54 am

    Thanks Nial thats the best lesson yet. It somes me up what I used to do, But slowly breaking all my bad habits. I am saving all these 5 lessons & will keep going over them just to help me through some rough patches Thanks Nial Great Lesson

    Reply
  26. Oztrades April 28, 2012 at 7:42 am

    Well said. Just topped up my account and am sitting. Missed the big pin bar on the AUD/USD 4 hrly yesterday….. waiting for the next bus to hop on.

    Reply
  27. Isaac April 28, 2012 at 6:18 am

    Great write up, thanks

    Reply
  28. wilson April 28, 2012 at 4:06 am

    Nial excellent theme, the simple is better, thanks.

    Reply
  29. Russ April 28, 2012 at 4:04 am

    Nail on the head Nial!!!! You are a truth bringer!

    Reply
  30. dcsneeden April 28, 2012 at 3:19 am

    Excellent article Nial! If feels like you know all my struggles or maybe you have experienced all of these challenges. I definately need more patience! Thanks.

    Reply
  31. inder sachdev April 28, 2012 at 2:18 am

    Simply amazing!

    Reply
  32. Zahid April 28, 2012 at 1:58 am

    Great article as usual. Scanned the brain, thinking and psychology of the newbi. I have learned a lot through it. Thank you Nial.

    Zahid Malik

    Reply
  33. flash April 28, 2012 at 1:36 am

    I dont often post comments, but it is warranted this time. This one is a duizzie! 10/10! Well done Nial.

    Reply
  34. Pham April 28, 2012 at 12:59 am

    Great article, very useful, I like it a lot, thanks Nial for that!

    Reply
  35. Jeevan April 28, 2012 at 12:33 am

    well said, a lesson to be followed and applied for each traders on their trade, as you always say keep it simple and short – is the key to success i always believe, nice work again,, may this lesson awakes someone

    Reply
  36. Kimbo4x April 28, 2012 at 12:32 am

    Great article. I believe overtrading is part of our “work ethic.”

    Many of us think that if we don’t trade today, we didn’t put in an honest days work. It goes against our “work ethic.” Deciding NOT to take a trade is WORK, too. Work smarter, not harder.

    Looking at Andy’s post, I would greatly appreciate feedback from Nial.

    Personally, I believe in setting pending entry orders. You must be careful, though. I reduce my position size, and I only choose trades where the risk reward ratio is quite high — in fact a set my entry level to increase that RRR (like using a 62% retrace instead of 50% retrace). Also, I only do this in early to mid Tokyo session so the limit order trade has a chance to grow throughout London and NY.

    Kim

    Reply
  37. AndyH April 27, 2012 at 11:57 pm

    Great article. Trying to internalize all these lessons. I often feel compelled to trade because I have a narrow window in which I can. 6PM to 1AM EST when things can be a bit slow. Nial, since we are most clear minded when we are out of the market, would it make sense for us to set up pending orders?

    ~ Andy

    Reply
  38. YangL April 27, 2012 at 11:42 pm

    Technique, patience and discipline are key to win, thank you for your sharing!

    Reply
  39. ed April 27, 2012 at 11:39 pm

    #1 hits the nail on the head! thx

    Reply
  40. cheetu April 27, 2012 at 10:59 pm

    Hi,

    Essentially it says get off the GRQ brain!

    -Cheeti

    Reply
  41. Wes April 27, 2012 at 10:51 pm

    Yea Man! Didn’t start being profitable until I learned patience.

    Reply
  42. onesi John April 27, 2012 at 10:18 pm

    nice article, thanks for all ur service to the trading community

    Reply
  43. samuel April 27, 2012 at 10:04 pm

    What an article! Thanks Nail,prof of price action.This is too good.

    Reply
  44. Kenny R April 27, 2012 at 10:04 pm

    Great Great post Nial. I used to do all that before I learned Price Action trading on a naked chart. I’m making a killing using just one Price Action setup that I can call all mine now. Trading can get pre-school easy when you have a well defined strategy and plan with strict money management. Mix in some patience and discipline and BINGO!!! There’s your holy grail right there. Account is up 40% in 120 days taking a few trades a month of just pin bars! Love it!

    Reply
  45. Chris H April 27, 2012 at 9:51 pm

    Good stuff Niall and I recognise some of thse. You deserve encouragement – there are some dreadful so called mentors out there. Keep it going m8!

    Reply
  46. Chris April 27, 2012 at 9:33 pm

    An amazingly intuitive piece of work Nial. You really hit home. recently I was thinking about what the most powerful weapon in the forex asrenal is and maybe illogically came to the concusion that “you do not have to trade”. No-one is holding a gun to your head and forcing you to trade. So patience, waiting for best opportunity to come along is everything.

    Reply

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