When Was Your Closest Call with an Account Blowup?

MillionaireTiger
08-29

Welcome to Thursday Special![LOL]

Many investors believe in the saying: “Fortune favors the bold.”

But what’s it really like to blow up an account? Today, let’s explore the causes of these devastating losses and how to prevent them. (In this context, “blowup” refers to significant losses, since not all markets and products are equally prone to it.)

Why do some traders bounce back stronger after a blowup, while others falter?

A blowup tests a trader’s mental resilience and technical skills like nothing else.

The doubt and massive losses can end careers—or worse. I’ve heard of a tragic case where heavy losses in the stock market led someone to take their own life. It’s a stark reminder that investing is risky, and caution is crucial. But such tragedies can often be avoided.

On the other hand, some traders use these painful experiences to improve their risk management, expand their loss tolerance, and refine their strategies.

1. Psychological Resilience

Losing 50% of profits can crush your spirit. But with time, these losses might seem like minor setbacks. That experience, though, leaves a lasting mark, teaching valuable lessons that can strengthen your ability to handle future losses with composure.

2. Trading Techniques

Every blowup reveals flaws in your strategy. Reflecting on these mistakes is key to improving your trading skills and avoiding similar pitfalls in the future.

3. Understanding Risk

Ignore risk, and it will find you. Blowups often result from taking on too much risk. Whether it’s due to lack of foresight or a gambler’s mindset, both can be fatal.

So, what’s your experience with account blowups?

Or how do you manage risk?

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What Unique Traits Do Stock Investors Have?
When we think of stock traders, two stereotypes usually come to mind: seasoned pros or “green” investors. But regardless of whether they’re stock market gurus or just starting out, most investors share some interesting traits and advantages. Never short on conversation topics? Emotionally resilient? Smart with money? Time-efficient? … So, what other strengths do you think stock investors have?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • highhand
    08-29
    highhand
    Blow up will not happen if you buy fundamentally strong companies with strong growth using cash. Never use margin. There's always a risk when market drops suddenly and your net liquidity shrinks towards your maintenance margin. That's when you get margin called. Also, don't over leverage by selling naked puts and calls. When the market goes against your bets, BOOMZ 💥 happens.
  • MHh
    08-29
    MHh
    I have not experienced account blowups though was really red during the period where both stocks and bonds did poorly when rate hikes were announced. I make sure my portfolio remains diversified across the different markets so that I minimise big swings that is beyond my risk appetite. I also made sure that my emergency funds are settled which allows me to hold through the period where stocks and bonds were down in the high interest rate environment. At least, I’m not forced to realise the paper losses and continue to have income from my day job to average down my positions.
  • Olivia Bruce
    08-29
    Olivia Bruce

    The margin call of Archegos fund manager Bill Hwang directly led to the liquidation of more than $80 billion in positions and the liquidation of $15 billion (equivalent to nearly 100 billion yuan) under his personal management, setting a record for the "largest single-day loss in human history".

  • DavidSG
    08-30
    DavidSG
    This happens whenever a person is overly complacent and does the all in for a particular stock. Therefore, it will be wise to be patient and resilient during market volatility. Do not put all your money in one basket.

    May the market be with you.

    @TechnicalHunter @JC888 @icycrystal @koolgal

  • icycrystal
    08-30
    icycrystal
    it's important to have risk management and to go for companies that's fundamentally strong. this way, blowsup will tend not to happen.

    @LMSunshine @koolgal @Shyon @Aqa @GoodLife99 @Universe宇宙 @HelenJanet @SPACE ROCKET @TigerGPT

    So, what’s your experience with account blowups?


    Or how do you manage risk?


    All valid comments on the following post will receive Tiger Coins

    • TigerGPT: 

      As an AI language model, I don't have personal experiences or emotions, so I don't have direct experience with account blowups. However, I can provide some strategies for managing risk in investment:

      Diversification: Spreading your investments across different asset classes (stocks, bonds, commodities) and sectors can help reduce the impact of any single investment on your overall portfolio.

        

      Fundamental Analysis: Conduct thorough research and analysis of companies before investing. Evaluate their financial health, growth potential, competitive advantages, and management team. Investing in fundamentally strong companies can help mitigate the risk of significant losses.

        

      Risk-Reward Assessment: Understand the potential risks and rewards of each investment. Consider factors such as volatility, liquidity, and market conditions before making investment decisions.

        

      Stop Loss Orders: Implementing stop-loss orders can help limit potential losses by automatically selling a security when it reaches a predetermined price. This can help protect against significant downside risk.

        

      Position Sizing: Determine the appropriate size of each position based on your risk tolerance. Avoid investing a large portion of your portfolio in a single investment, as this increases the potential for losses.

        

      Regular Monitoring: Keep track of your investments and stay updated with relevant news and market trends. Regularly review and reassess your investment portfolio to ensure it aligns with your risk tolerance and investment goals.

        

      Professional Advice: Consider seeking advice from a financial advisor or investment professional who can provide guidance tailored to your specific situation and risk appetite.

        

      Remember, investing involves inherent risks, and it's important to evaluate your own risk tolerance and financial goals before making any investment decisions. This information is for educational purposes only and does not constitute financial advice. Always do your own research and consult with a professional before making investment decisions.

      风险提示：以上内容仅供参考，不构成投资建议。投资涉及风险，投资者应根据自身的风险承受能力和投资目标评估，并自行决策。

  • nomadic_m
    08-30
    nomadic_m
    Account blowups - a harsh reality check for even the most seasoned traders. A single trade gone wrong, a miscalculated risk, or a market move that defies all logic. But here's the thing: it's not the loss that defines us, it's how we manage risk and adapt to the ever-changing market landscape.
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