<p>Overleveraged is a term used in trading to describe a scenario where a trader has used more borrowed funds than their account equity can comfortably handle. This situation significantly increases the risk of incurring substantial losses and potentially losing the entire trading account.</p>

<h2>How It Works</h2>
<p>Leverage in trading allows traders to control larger positions than their account equity would otherwise permit. While this can amplify potential profits, it also magnifies potential losses. When a trader's losses exceed their account equity, they are said to be overleveraged. At this point, the broker may issue a margin call, requiring the trader to deposit more funds or close open positions to meet the margin requirement.</p>
<p>Here's a simple example to illustrate overleveraging:</p>
<p><strong>Leverage</strong>: 1:100<br>
<strong>Account Equity</strong>: $1,000<br>
<strong>Maximum Trade Size</strong>: $100,000 (1,000 units of the instrument at $100 per unit)<br>
<strong>Stop Loss</strong>: $5,000 (50 units)<br>
<strong>Loss Incurred</strong>: $6,000 (60 units)<br>
In this case, the trader is overleveraged because their losses ($6,000) exceed their account equity ($1,000).</p>

<h2>Why It Matters for Traders</h2>
<p>Being overleveraged can have severe consequences for traders:</p>
<ul>
  <li><strong>Substantial Losses</strong>: Overleveraging can lead to rapid and significant losses, which may exceed the initial investment.</li>
  <li><strong>Account Closure</strong>: If a trader cannot meet a margin call, the broker may close their open positions, resulting in further losses.</li>
  <li><strong>Emotional Strain</strong>: The stress of managing an overleveraged account can negatively impact a trader's mental well-being and decision-making abilities.</li>
</ul>

<h2>Key Takeaways</h2>
<ul>
  <li>Overleveraging increases the risk of substantial losses and account closure.</li>
  <li>Using too much leverage can lead to emotional stress and poor decision-making.</li>
  <li>Traders should monitor their leverage levels and ensure they have sufficient equity to cover potential losses.</li>
  <li>On STB Provider's MetaTrader 5 platform, traders can set their desired leverage level and monitor their margin usage to avoid overleveraging.</li>
</ul>