Avoid one of the Most Common Trading Mistakes : Being Undercapitalized

Do you want to know more about how to avoid the most common trading mistakes? Watch our latest video and learn to avoid being undercapitalized.

Common Trading Mistakes – Avoid the mistake of trading during wrong hours

One of the biggest mistakes that traders make is being undercapitalized. Just because you have the minimum margin to take a position, doesn’t mean that you should. After all, we all know that a position moving against you in a leveraged market works very quickly to drain your trading account. Unfortunately, most beginning traders are brought into the markets with promises of insane returns, some even saying as much as 500% a week! Unfortunately, traders will often bring more money into the market then they will common sense, not recognizing what the idea of doubling your money every week truly entails. After a few years, you essentially have all the money in the world. Does this seem possible?

The problem is you will eventually have a losing trade. Once you do, it will absolutely wipe out the account with no qualms. You cannot turn $1000 into $1 million anytime soon. You will eventually lose money, and the only way to get levered up enough to make that kind of money is to go overboard. Compound interest is not work in your favor when you are over levered, and by not having much in your trading account and trying to trade the large contracts, you are by definition over levered. There is a reason why large trading firms do not allow their traders to take on more than 10 to 1 leverage. Unfortunately, most Forex brokers will offer way beyond that, and sometimes even as much as 1000 to 1. It does not take much in the way of losses to wipe out your account if you are taking advantage of that leverage with very little in the way of trading capital.