Why Overleveraging destroy Most new Forex trader?
Overleveraging is a common pitfall that destroys many new forex traders. Here’s why overleveraging can be so detrimental: 1. Increased Risk Exposure Leverage allows traders to control a large position with a relatively small amount of capital. While this can amplify profits, it also magnifies losses. New traders, enticed by the prospect of large gains, often underestimate the risks involved. When trades go against them, the losses can quickly become substantial, wiping out their trading accounts. 2. Margin Calls Margin Call Leverage is essentially borrowed money. When the market moves unfavorably, the broker may issue a margin call, demanding additional funds to cover the losses. If the trader cannot meet the margin call, their positions may be automatically closed at a loss. Overleveraging increases the likelihood of margin calls, which can lead to significant financial damage. 3. Emotional Stress and Poor Decision Making Trading with high leverage can cause immense emotional stress.