High leverage can be harmful to traders if not utilised carefully. While leverage magnifies potential profits, it also magnifies potential losses, raising the possibility of large drawdowns or even account wipeouts. Traders that use excessive leverage may be exposed to increased market volatility, resulting in emotional stress and rash decision-making.
Furthermore, high leverage might encourage irresponsible trading behaviour, such as overtrading or taking positions that are too large for one's risk tolerance. A lack of risk management can have serious financial ramifications.
However, when utilised wisely and with suitable risk management measures, large leverage can improve trading possibilities and potentially increase returns. It is ultimately determined by the trader's skill level, risk tolerance, and ability to manage leverage successfully.
