InvestorQ : What happens if I take trading positions more than I can afford?
Dawn Cherian made post

What happens if I take trading positions more than I can afford?

Answer
user profile image
Dilmini Mercia answered.
2 years ago


If you look at the history of trading disasters in the world, one common thing you will come across is the propensity to trade much beyond the risk that they could take on. Take the case of the Barings in 1995 or more recently in the case of man of UK. In the case of Barings, Nick Leeson had sold strangles on the Nikkei index to an extent he did not have the capital to support the trade. The disaster was compounded by some really lax back office discipline at Barings. The net result of taking positions beyond what they could afford was that Barings saw its entire capital being wiped out.