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    Thread: What are the disadvantages of poor Equity?

    1. #11
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      Default Re: What are the disadvantages of poor Equity?

      Quote Originally Posted by kashifrehman View Post
      What are the disadvantages of poor equity?
      and
      what are the hurdles which a trader face when he did not invest wisely?
      doing trade with a low equity account is a very dangerous and it is very risky because when you do trading you will always share the loss and you will not do trading with proper confidence and if you make a bad mistake and your trade goes in lost then you will lost your own money in just one trade because your trading then else will be very small try to increase your equity of your account in then you will be able to do trading in is and less tension and your risk will be also small


    2. #12
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      Default Re: What are the disadvantages of poor Equity?

      Poor equity in this sense means little capital compared to he lot size that the trader intends to make use of. This will automatically imply using very high percentage of the available capital or an abuse of the use of leverage.This goes with a lot of disadvantages such as;
      a. having margin call unnecessarily because the use of stop loss may not be relevant to the trader and if he does it may be a tight one
      b. it creates fear in the mind of the trader and this does not help in making profits in the business
      c.it portrays the trader as a novice not a professional
      d. In most cases it results in the loss of the account
      It is good to know that when a trader does not invest wisely there is every temptation to want to get profits quickly and this may result in his inability to control greed and his emotions and this will eventually result in total failure. All these can be taken care of with discipline and good knowledge of risk/ money management which is of utmost importance for every trader to learn and apply on daily basis


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    4. #13
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      Default Re: What are the disadvantages of poor Equity?

      What are the disadvantages of poor Equity? Equity is the result of your balance minus your profit or loss .For low equity ,it is the result of your losses minus your trading balance. So many factors/reasons could lead to poor equity. [a] Greed ,the use of high lot size which permit little or no resistance if the market should move against you .[[b] Disregarding the use of stop loss [c] Inadequate analysis resulting from lack of knowledge of the market . Some of the disadvantages of poor equity are ;[a] It could lead to margin call red alert ,especially if the market continues to move against you . [b] Total loss of trading account [c] Compulsory break from trading especially when there is nothing to trade with. However ,discipline could help to control greed and good knowledge of Forex market will identify good set up for correct market entry.


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    6. #14
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      Default Re: What are the disadvantages of poor Equity?

      What are the disadvantages of poor Equity?
      Poor equity breaks confidence. If you invest $100 capital then it will show equity $100. If it shows $20 equity that means you have floating loss of $80. At any time you will face margin call. It will automatically destroy your good confidence. You know everyday we learn from Forex trading. Nobody is perfect in this market. Good trade brings confidence and bad trading experience destroy confidence. This is the most important disadvantages of poor equity. Once your good confidence turns into negative, it will become so tough to bring it back. If you really want to avoid such bad experience then you must follow a strong money management. A good money management could help you to ensure healthy equity.


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    8. #15
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      Default Re: What are the disadvantages of poor Equity?

      It is depend on traders that how much they invest in Forex Business. I know that in this business skills and knowledge are more important than capital. If you have good knowledge and skills then you can make handsome profits even with small capital. It is also true that when we are trading with small capital then we need to be very careful and Good Money Management is necessary. With poor equity we can't take high risks because it can wash our account within some minutes.
      Some time traders hold their positions for long time when they are in floating loss just because they have some idea about reversal but if you have small capital and poor equity then you can't survive in market for long time and they result is Margin Call. To avoid this kind of situation we need to use proper capital or if this is not possible then at least take low risk with proper money management.


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    10. #16
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      Default Re: What are the disadvantages of poor Equity?

      Forex trading is one of the best professions where we do not need to invest any big amount. We can start forex trading with minimal amount. If somebody wants to earn good income through his/her trades then it is very important to start with good equity. However those who have very minimal amount into their account must try to understand that they can also grow their account to good level. If somebody is very good in trading then it is still possible that he/she can make very good equity after doing good trades. Anyhow I would like to discuss about the disadvantages of poor equity.

      First of all if somebody is trading with less equity then he/she must be try to trade with very minimal lot size. Obviously, when somebody try to trade with small lot size due to low equity the income would be very small, unless he/she try to increase the level of take profit for every single trade. So here we can consider low equity means low lot size order trades and thus low profit from every trade.

      Low equity or poor equity may not help somebody to trade with proper money management. He/she may not able to decide where to put stop loss or how much lot size would be appropriate for him/her to trade. For example if somebody has $50 equity and he/she wants to trade with 0.01 lot size order. If he/she only want to risk 1% equity in every trade, at that situation he/she must try to put SL level within 50 pips and not more than that. In case he/she lose for 2 to 3 times in a row then itíll be difficult for him/her to put stop loss even in 50 pips. We can consider poor equity as a hurdle for proper money management.

      Low equity holder may go for frequent trading in order to gain the equity and which leads to over trading. So it could effect negatively if somebodyís mindset is not strong. Most of the time trader get frustrated when he/she do not able to add any significant equity due to low lot size order. And at the end they try to do risky trades and get margin call. So for adopting better trading system it is essential for a trader to trade with good equity.

      The most common problem of low equity trading is that we canít pay our own expenses with minimal profit. It is obvious that when we trade with low equity we canít trade with high lot size orders and thus weíll earn very limited money through it. In such situation we canít withdraw the profit to pay our day to day expenses. Low equity trading is only suitable for those who have alternative source of income and not for those who want to live life with forex trading profession. In other words we canít make a living with limited profit and thus with limited equity. So in order to become self-sufficient weíve to make more and it is only possible if we trade with good equity.

      Conclusion: It is still not a bad idea to start trading with small equity. But weíve to consider it to experience the real trading or to develop our skills. It is still possible for a trader to grow his/her trading account if he/she manage everything well by trading effectively. But for those who want to limit their trading to few, canít expect big profit from small equity in minimal period of time. If somebody expect 10% profit in a month from his/her trading then he/she canít expect good return from $100 equity. Because 10% of $100 is only $10. In short term we shouldnít expect good profit if we really want to trade with limited equity.


    11. #17
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      Default Re: What are the disadvantages of poor Equity?

      Disadvantages of poor Equity :

      Do not have endurance, the point is with poor equity then we cannot hold floating minus for a long time. This is the same as we trade by opening positions almost accurately to avoid floating minus.

      Can't calm down, having poor equity then traders must strive to avoid large losses. This will cause the trader to be unable to have calm thoughts during the trade, because traders will be overshadowed by losses.

      Always under pressure every time, with poor equity then trader does not have many opportunities for open position freely. Traders are also in depressed condition because equity is not possible to be able to make the trade run smoothly for a long time.
      don't use Luck in the trade but it would be better to use Greed
      hoping for something without hard work will not give anything

      dedy hari kurniawan's trading journal


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    13. #18
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      Default Re: What are the disadvantages of poor Equity?

      Here, I take it that "poor" equity means "low" or "small" equity/capital. This is one of the most overlooked aspect of forex trading and I think it is the cause for majority of failures in the forex business. Most traders do not consider how much they invest into this business, they feel that the only important thing is that they have sharp analytical skills in the market and with that they would be able to turn even $10 into $1000 in very little time.
      Having a low capital (being undercapitalized) has a direct effect on the results of a forex trader. A small capital can limit the trading options of a trader. First let's consider the stop loss and risk amount levels.
      With a small equity, a trader will have to use a small stop loss and this alone is already setting him up for failure. Because as we all know, trades need to have room to move before we can see price move in our favoured direction. Imagine a trader, limiting his stop loss to just 15-20 pips on a pair like EURUSD just because he has a small capital and does not want to lose too much. Just by doing this, that trader will most likely continue to lose money little by little because EURUSD can move 20 pips in seconds against him and still move his way at the end. This way, the already small capital keeps on reducing without the trader getting any positive results from trades.
      Also, as the equity reduces, risk amount per trade reduces which increases the number of trades the trader must make to recover his losses.
      That is why even though forex can be started with as low as $10-$25. I would never advise someone to begin that small.


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    15. #19
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      Default Re: What are the disadvantages of poor Equity?

      Invest is a big factor in forex market. Someone invest little but by good trading if he can make very good equity it will helps him lot to open good trade and various trade.if we have low equity then we will miss good trade. We can not open many trade. So we should make strong equity. In forex market who has more invest or more equity he can get more earning. But good trading must. With good equity if we trade well then we can make very good return from this trade. I suggest all give more emphasis on collection more equity and it will help u to be a good trader. poor equity can not help us to open good trade.so we all should care of it.


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      Default Re: What are the disadvantages of poor Equity?

      Must be need big capital invest, otherwise not possibly good trade start. Poor capital invest is very difficult for big money making, because any time closed your trading balance. Forex market all time enough ups and downs. Big capital invest and big money earning.


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