Leverage Is Not Your Friend: It's a Loan Shark with a Bat
Why retail traders keep getting demolished by leverage, and why your £500 account will never become £50,000 on a Friday night.
Leverage Is Not Your Friend: It’s a Loan Shark with a Bat
Listen, I’m going to tell you something that will either save your account or absolutely trigger you. Probably both.
Leverage isn’t a tool. It’s not an opportunity. It’s not even a trading feature, really. It’s a loan shark standing outside a Ladbrokes in Croydon, offering you 500 quid to turn into £25,000 by Tuesday. He’s wearing a tracksuit. He’s very friendly. And if you don’t pay him back? Well, let’s just say his mate Kevin has a bat.
I’ve been trading for nearly two decades. I’ve watched grown men—accountants, engineers, one bloke who worked at McKinsey—blow six figures because they thought leverage was the shortcut to Lamborghinis and Dubai. It never is. It’s always the shortcut to eating beans on toast and telling your missus the money “went to Africa.”
The Leverage Delusion
Here’s what happens. You open your first trading account. Maybe £500. You’re feeling confident because you read a Reddit thread where some anonymous guy claims he made £30k in a month. He probably didn’t, but let’s pretend.
Your broker—those absolutely lovable rogues—offers you 1:500 leverage. “Control £250,000 with just £500!” the ads scream. Your brain does a little firework display. You think: This is it. This is how normal people become rich.
Spoiler alert: This is how normal people become unemployed.
Leverage doesn’t create money. It creates magnified losses. That’s literally all it does. It’s financial amplification for people who haven’t yet learned that being right about direction is utterly useless if you’re wrong about timing, volatility, or economic data that drops at 8:30 AM GMT and sends everything pear-shaped in 47 seconds.
The Math Nobody Wants to Hear
Let me be clinical about this, because the numbers don’t lie (unlike 99% of trading educators on YouTube).
You have £500. You use 1:100 leverage. You’re now controlling £50,000 worth of currency pairs. The GBP/USD moves 100 pips against you. A pip for most pairs at standard lot sizes equals roughly £10 per pip.
100 pips × £10 = £1,000 loss.
You just lost double your entire account in a move that, by historical standards, isn’t even a yawn. The GBP/USD has moved 200+ pips in a single session more times than I’ve had average hangovers (and that’s a lot).
Now multiply that scenario by the absolute refusal of retail traders to use stop losses. They see a trade going against them and think: “I’ll just hold. The market will come back.”
Narrator voice: The market did not come back.
The Loan Shark Analogy, Explained
Why do I compare leverage to a loan shark? Because it’s exactly that.
A loan shark lends you money at ruinous rates, fully expecting you’ll fuck it up and lose it all. Same with your broker. They make money through your losses. They have zero incentive for you to succeed. They’re literally economically incentivized to watch you burn.
Leverage is the loan shark’s product. The bat is the margin call. That moment when your broker texts you at 3 AM saying: “Your account has gone negative. You now owe us £3,847.” That’s the bat. That’s the enforcement mechanism.
You thought you were playing poker. You were actually borrowing from a mafia operation.
The Illusion of Control
Here’s what kills me about retail traders: They use 1:500 leverage, make one 20-pip win, and genuinely believe they’re geniuses. One trade. Twenty pips. They made £100 on a £500 account. They’re already mentally spending it.
They’ve completely missed the point: They just got lucky. They weren’t right about direction and volatility and timing and geopolitical events and the Fed’s mood that morning. They just… happened to be in the right direction when the market moved.
The second trade? Usually a reality check served on a cold plate.
I’ve seen traders with 1:500 leverage turn £1,000 into £18,000 in six weeks, only to blow it all in a single NFP (Non-Farm Payroll) release. They watched their account evaporate faster than they could process what was happening. And then they did what they always do: blamed the market, blamed the broker, blamed their cat. Never themselves.
What Actually Works (Spoiler: It’s Boring)
The traders I know who actually make consistent money? They use 1:10 leverage. Sometimes 1:5. Some absolute units use 1:2.
They’re risking 1-2% of their account per trade. Not 10%. Not 50%. One to two percent.
This means they need to be right maybe 55% of the time to make money. It’s not sexy. It doesn’t generate TikTok content. But it means they’re still trading five years later instead of asking if you want fries with that.
They also have something retail traders refuse to develop: patience. They’ll wait for one setup a week. One. Sometimes zero. They’re not glued to the charts waiting for something—anything—to trade. They’re not fighting their own psychology every session.
The Hard Truth
If you’re using 1:100+ leverage on a retail account, you’re not trading. You’re gambling. And unlike actual gambling, where the house odds are published, with leverage, the odds are deliberately obscured behind “trading psychology” and “market analysis” and other bollocks.
Leverage is a tool designed to extract money from the poor and transfer it to the rich. It was designed that way. It functions that way. Full stop.
Your £500 account will never become £50,000 because of leverage. It’ll become £0 first, though. That I can guarantee.
Use leverage responsibly. Understand what you’re borrowing. Price in the loan shark with the bat. Or better yet, don’t use it at all until you’ve proven you can make money without it.
Because the loan shark never loses, mate.
Want to calculate your actual risk exposure with sensible leverage? That’s what we’re here for. The math will scare you into being honest with yourself.
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