Is High Leverage Good or Bad? Hidden Risks Every Trader Must Know
My honest experience as an Indian intraday trader who once thought high leverage was the shortcut to fast profits… until the market proved me wrong.
If you’ve been trading for a while, or even if you’re just starting, you’ve definitely heard people say things like:
“Bro, use more leverage, profit zyada hoga!”
Or
“Market ka tension mat le, leverage se game ban jayega.”
Well, I used to believe that too. But that’s a mistake!
For a long time, I genuinely thought high leverage = easy money. But after a few painful lessons (and a couple of margin calls), I finally understood the truth:
TL;DR – High leverage isn’t “bad”… but it becomes dangerous when you don’t understand how quickly it can destroy your capital.
So let me break this down in a simple, beginner-friendly, real-trader way.
So, What Is Leverage Really?
Leverage is your broker allowing you to trade with a multiple of the money you actually have.
Example:
If I have Rs. 10,000 and the broker gives 10x leverage,
I can trade positions worth Rs. 1,00,000.
When making such trading decisions, it is important to know what the right leverage is for you? The right ratio can be the difference between bankruptcy and financial freedom.
Here at Paisowala, we are a team of experienced traders and professionals who are well-versed in the market. Even though this is not financial advice, I’d like to share the decision factors when evaluating available ratios.
High leverage is good only when you:
- Have a proven strategy
- Maintain a strict stop-loss
- Understand position sizing
- Are emotionally stable during volatility
High leverage is bad when you:
- Are new to trading
- Don’t use stop-loss
- Trade based on gut feeling
- Panic when the stock goes 0.5% against you
- Try to “recover losses” quickly
And guess what?
95% of beginners fall in the second category (including me when I started).
One of the things I learned with my years of experience is that when you feel it’s “getting a bit risky”, you’re already “too risky”. To better evaluate your decisions, and ensure you are getting best leverage per your needs, you should choose from the top brokers in the market. My personal recommendation to you is Zerodha, it’s an industry leader, with incredible scale, reputation, reliability, and tools. Sign up for FREE at Zerodha!
The Hidden Risks of High Leverage (Nobody Warned Me About These)
Let me explain the risks I personally faced, and trust me, these hit harder than expected.
Losses Multiply Faster Than Profits
Everyone talks about multiplied profits.
Nobody talks about multiplied losses.
Example:
You take a 10x leveraged trade with Rs. 10,000.
Position value = Rs. 1,00,000.
If the stock moves –1%,
your loss = Rs. 1,000 (that’s 10% of your actual capital!)
Just two bad trades and half the account is gone.
Emotional Stress Shoots Up
High leverage = high stakes
High stakes = high tension
I remember constantly refreshing charts, my heart beating fast, sweating even in AC rooms.
That’s not trading – that’s torture.
The “Recover Fast” Trap
After a big loss from high leverage, I used to think:
“Let me increase leverage and recover everything in one trade.”
Worst thought ever.
It doubles the disaster.
My Simple Rule of Thumb for Beginners
If you’re still learning how markets behave, stick to 3x–5x leverage.
This gives:
- Enough exposure
- Enough control
- Enough breathing room
- Enough chance to learn without blowing up your account
Expert Advice: Ask Yourself This Before Using High Leverage
I now ask myself this question before every trade:
“If the trade goes wrong, can I emotionally and financially handle the loss?”
If the answer is no, I reduce leverage immediately.
Trade smart.
Stay disciplined.
