There are many lessons you’re going to learn in your trading career which come after a proper trading plan. One of the biggest lessons is a forex blown account. Having a blown trading account is nothing that anyone wants to witness. Every trader tries to avoid it at all costs. If you’re new to trading, chances are you have no idea what is a blown forex account. Lucky for you, this guide should tell you all about it!
What is a Forex Blown Account?
Have you ever opened your forex account just to realize that the entire account has stopped working? By stopped working we mean that all your positions have suddenly closed, most likely in losses. You will also notice that your account balance is now at shiny number zero.
So what happened? You’ve just blown your forex account. What this means is that your open positions were going into so much loss that the broker had to close your account to prevent you from having a negative balance. Another popular term for this entire scenario is getting a margin call.
How Does a Forex Account Get Blown?
So how exactly do you get a margin call that blows your account? Carelessness is what comes to mind. If you’re not careful and you’re placing way too many positions without complete certainty, you may blow your forex account. Forex is not gambling so don’t treat it as it is one.
You may have noticed a tiny word on the top of your MetaTrader page called margin. The higher the margin, the safer your account. The more bad trades you place, the lower your margin drops. If all your trades go in losses, the margin drops too low and closes your account.
How to Avoid Blowing Forex Account?
Now that we’ve understood how a forex account gets blown, it’s not that hard to figure out how to prevent this from happening. As we already know, the main reason this happens is carelessness. We are not studying the markets properly. Before placing any trade, we should analyze chart patterns and look for indications that the market is currently acting positive.
If we notice a pattern that we are familiar with, we can take advantage of the situation by placing a position according to the market pattern we recognized. This can ensure that we have the best shot at profitable trades. As long as we stick to what we’re good at and stop being careless with our trading account, we should be one step closer to avoiding a margin call.
That brings us to the end of this guide on what exactly is a forex blown account. As a beginner, you are bound to face a margin call of your own while you’re testing out new strategies. The best advice we can give is to always first test things out in demo account. This way you can avoid risking real money while still learning what you’re good at doing.