How I Lost $400,000 in 30 Seconds and What I Learned From It

I looked at the screen and couldn’t believe what I saw. The Swiss franc had jumped up hundreds of pips.

I was short. I was getting creamed. I had lost so much I couldn’t really grasp how much I had lost.

I could start to feel sick to my stomach. Don’t let that happen I commanded myself. You’ve got to stay cool, calm and collected.

I did. Sort of.

I was out of the position so I couldn’t lose anymore.

My mind was blown.

So I got up and went for a walk.

I find it useful to just turn my back on reality for a short while when something like this happens. I need to take a short vacation from my problem.

So I went to a movie. An action movie. No talking. Just a lot of explosions and car chases.

You may like to go to Hawaii for a vacation but a stupid action flick will relax me more quickly and cheaply.

I came back and started to review what happened and what I could do to prevent it.

I didn’t wallow in self-pity though it was a great opportunity!

I’m pretty sure I would have if I didn’t take the mini-vacation.

The first thing I learned is to step back into the situation and start analyzing. What did I do wrong and what could I learn from it. This forces you to be more rational about the situation and less emotional. You get back in control.

I had a strong opinion on the Swiss franc and thought that it get stronger. I was totally convinced. I was so convinced that I put on a super large position.

I was going to hammer the market! I was going to be King Kong!

More like Minnie Mouse!

I had put the position on in the currency futures market rather than the spot market. That created a new problem.

Normally, it doesn’t really make much difference as to which market to trade. Liquidity is excellent in both.

But it turned out that the liquidity in the spot market was far greater than the futures market when there is a shock to the market.

I had planned that I could lose $200,000 if I was stopped out. That was a big enough problem. I think I would have lost that much if my stop loss had been placed in the spot market. But the gap up was twice that in the futures market before I got filled.

Lesson: trade Forex in size only in the spot market.

But the biggest problem was that I had let my ego get away from me. Look, I have a big and strong ego. And I’m OK with that. But not when trading.

Most trading problems come from getting your ego involved in the trade. I did here. I was thinking that I was super smart and that my analysis of the market was astounding. There was no way I could lose. It was a mortal lock.


The lesson: I’m not as smart as the market. It is bigger, smarter, and better looking than I am.

Don’t fight the market!

So I am now very humble when trading.

I had to have a $400,000 losing trade to learn these lessons. Save yourself some money and take my experiences to heart!

To me, one of the most important aspects of trading is the ability to NOT spend time trading! To live your life instead of having a job.

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