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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Comments
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".
May the market be with you.
@TechnicalHunter @JC888 @icycrystal @koolgal
@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