A lot of ETers say that you will have to blow out one or two accounts and pay your tuition to the market before you can begin to think of breaking even let alone generating profits. The question is there is always this talk of a couple or "several" accounts that must be blown out. There is no discussion on account size. Under the current definition, one could blow out a sub-$1000 account to meet the requirement instead of say, a $5000 account for the YM or $25,000 for equities. Thoughts?
The only guys saying that you need to blow out your account are guys that have done that and are still struggling to turn profitable. Don't believe that crap. And don't quote Market Wizards because that's an apples-to-oranges comparison to the type of trading we do.
i've never blown out my account. i came close once 10 years ago, and another time would have happened if i had been stubborn and not covered a bad short - but i've never blown out. there are plenty of good traders who have...but i know other traders who've never come close.
I think that when people say you need to blow out your account they really mean that there is a learning curve and that you need to learn A LOT and make mistakes. Sometimes people make mistakes more than they learn and lose capital... Look at it as paying your dues by making many of the mistakes that other new traders do. FWIW - I have about $1,000 of penny stocks that are now worth under $4 - but percentage wise I don't consider that a blow out, I consider it a learning experience because I had no buisness investing in those stocks in the first place.
I think you should have a mental stop loss in where you are done trading actively if you hit that number and then start virtual trading for a while. ie...that would be a stop loss on your total account value. This way you will totally avoid a blowout and also take a break and learn something. I hope this never happens to me, after the last two months it would be very tough for it to happen anytime soon
If you employ proper money management and adhere to proper position sizing, then "blowing out" an account to near $0 is extremely unlikely. Trouble is, most won't stick to their stops, trading plan and double down.
Granted the preferred progression would be to NOT blow out your account â but if you do/ must - then I think Ammo nailed it Because at that point the path of least resistance (psychologically speaking) would be to adopt strict money management rules, and stick to them - no matter what. Even if it meant reducing share size till you built up your account Redneck