Forex Mistake #30 – Can I Get a Refill, Please? Adding Money to Your Account

Why Adding More Money to Your Account could Get you Broke?

Ok guys, its story time… that kind of story where I tell you how stupid I was so you can avoid doing the same mistakes. To be honest I don’t find extreme pleasure in remembering all this stuff but hey, if someone else can learn from it and keep away from losing money, I guess it’s for a noble cause, right? Well, today I’m gonna tell you about the time I blew my account; but that’s not the mistake I wanna talk about. Adding more money almost instantly was the bigger mistake.

 

How Adding More to Your Account could get you Broke? My Story

If I were to simply categorize the stages of a trader’s career, I’d split them into Infant, Teenager and Adult and at the time this story takes place I was an Infant, learning how to crawl and yet, there I was, standing with my finger just above the left mouse button, preparing to click “Confirm” on my card transaction to redeposit into my recently blown account. Let’s fast rewind to see what got me in that situation in the first place…

 

Meta Trader 4 was offered by just a few, select brokers while the rest were giving you crappy, Stone Age software to trade on. Spreads were huge and position sizing was all messed up. But I didn’t know that back then. I didn’t know Meta Trader 4 even existed, I didn’t know that a 5 pip spread for EUR/USD is huge – to say the least – and I didn’t know that a minimum transaction of 0.10 standard lots is way too high for a 500 dollars account. As I said, I was an infant and you can’t tell an infant not to put things in his mouth. He won’t listen because he doesn’t know any better. On top of bad trading conditions, my Forex education lacked almost completely and consisted mostly of a shallow .pdf file given to me by the broker I was trading with. If I were to sum up everything I knew, it wouldn’t take me long: if the Euro is strong, EUR/USD goes Up and if the US Dollar is strong, the pair goes Down. That’s about it… and even that wasn’t very clear to me. Armed with these “great” tools, I started trading and needless to say it didn’t take me long before I blew my account. This gets us to the moment when I added more money. I never stopped to think if I needed to change something with my trading or with my broker choice so basically I was in the same situation as when I started: I was still trading with a crappy broker and I still didn’t know anything about trading but I was blinded by my loss and I wanted to gain my money back. I believe it was Einstein who said that insanity is doing the same thing over and over again, expecting different results… so I was the very definition of insanity. My mistake was not taking a step back to reassess my options. The first stage in fixing something should be identifying the cause and if I wanted to fix my trading, I should have spent some time understanding why I am losing money. Is it because of the brokerage? If Yes, then change it! Is it because my thin knowledge? If Yes, then go learn! But nooo, all I could think of was “Redeposit Now”… just like a kid who wants Candy Now. And so, I clicked “Confirm”. But a week later I was in the same situation… fortunately the second time I remembered Einstein’s words and I stopped before it was too late. That was the time when I actually started to educate myself and to scratch the surface of the complexity of trading… and I also stopped throwing money out the window.

 

Tips on How to Avoid My Mistake

  • If something isn’t right, stop what you are doing and find the cause
  • Once you’ve identified the cause, start trading again only when you are sure you’ve eliminated the “bad apples”
  • Don’t think about the money you’ve lost and don’t try to make it back immediately. Don’t let greed take over
  • Learn to swim before jumping in the water. Learn to trade before investing money
  • If something isn’t right, stop what you are doing and find the cause – Yeah, I know I’ve said that before

 

Bottom Line: Don’t Hurry Things

Re-depositing is not a huge mistake by itself, but the circumstances must be right and the reasons for doing so must be carefully assessed. You want to be a trader, a businessman not a gambler who falls prey to his emotions or his lack of knowledge. Would you start a house building business if you didn’t know anything about construction? For the sake of the example, let’s say the answer is Yes… but would you keep building houses if they would fall down the next day? I bet you would stop what you are doing and ask yourself the most important question of all: Why are these houses falling? Treat your trading the same way and don’t get broke.

 

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