Leverage is a tempting mechanism that allows traders to multiply their potential profits but also their potential losses if the trade does not go as planned.

Overleveraging is a frequent problem among many beginner traders who aim for a "get rich quick" scenario. They often decide to open large trading positions with high leverage recklessly, without considering the risk of losing everything, or in our case hitting the drawdown limits, if the trade goes awry.

At Fintokei, we are looking for systematic traders. If someone is placing random large trades, without having a pattern or strategy behind them, or without being able to explain it to us, it will be flagged.

A single overleveraged position does not necessarily make someone a gambler. But if we detect cases that might indicate overleveraging, we will first notify the trader, allowing them some leeway to explain their strategy and approach, or correct their trading style. If the random overleveraging continues, we might need to impose the so-called consistency rules or restrictions, as described below, on the trader’s account to limit this kind of behavior.

You can read more about Consistency rules in our FAQ.