There was a time when a forex broker offering 1:100 leverage would have seemed too little. Offshore brokers have seen a race to the top in the past few years, mainly due to retail clients’ risk appetite. However, a growing number of traders today are actively choosing lower leverage.
From screening 26 onshore brokers with public data on their retail clients, we found that an average of 83% traders are in the red in the first quarter of 2026.
There’s a real shift in how serious market participants think about risk these days and what it actually means to trade well. In this article, we’ll cover:
- What happened to the high-leverage culture
- How traders have become smarter
- How lower leverage helps with long-term profitability
Painful lessons of high leverage
Let’s be honest, a lot of traders learned about leverage the hard way. When you’re running at 1:500, an asset only needs to move 0.2% to wipe you out. For anyone running thin or cent accounts with no real risk framework, it wasn’t a question of if they’d blow up, it was when.
The most dramatic wake-up call came in January 2015, when the Swiss National Bank pulled the rug on EURCHF. The pair collapsed 30% in minutes. Traders holding leveraged short franc positions didn’t just lose their accounts, many were left with negative balances, owing money to their brokers.
Traders who’d previously bragged about their leverage ratios went quiet. And slowly, the idea that ‘maximum leverage equals maximum opportunity’ started to look more like a story the forex industry had been happy to let traders believe.
Regulation entered the game
Regulators had been watching the retail bloodbath for years, and eventually acted. In Europe, the European Securities and Markets Authority (ESMA) introduced leverage caps for retail clients in 2018. The UK’s FCA followed suit, and similar restrictions rolled out across developed financial centres.
Yet, many traders complained and migrated to offshore brokers where over 1:500 was still on the menu. However, there was a curious pattern among those who stayed onshore: their performance stabilised, and drawdowns became manageable. These traders were still active six months later, rather than funding their third blown account.
The major perk of the regulation was transparency as brokers are required to disclose the percentage of retail clients who lose money on their websites. Suddenly, ’74–89% of retail traders lose money’ came into plain sight, and savvy traders now know exactly what they’re getting into.
Rise of risk-aware culture
Traders also have learned and grown up with better information, as well as a healthy scepticism of the industry’s promises.
For anyone paying attention, offshore brokers’ marketing playbook was never subtle, just like their onshore counterparts ten years ago:
- Flashy adverts featuring Lamborghinis and ‘six-figure months’.
- Social media posting of winning trades, funny how the losing ones never made the feed.
- Webinars hosted by ‘coaches’ whose only qualification seemed to be owning a ring light.
The pitch was consistent: high leverage, high reward, easy lifestyle. What it conveniently left out was that 99 out of 100 didn’t make it.
Smarter traders started asking uncomfortable questions, like why brokers were so eager about high leverage. The incentive structure, once you see it, is hard to unsee. A highly leveraged client trades more often, more emotionally and churns through capital faster. That’s great for broker revenue.
Meanwhile, the quality of trading education from content creators and brokers has drastically improved. Early YouTube content was awash with ‘turn $500 into $50,000’ fantasy scenarios. More recent material from educators with verifiable track records emphasises the boring things such as risk-to-reward ratios, position sizing and consistency. The traders who built real audiences weren’t the ones promising the moon, they were the ones being honest about how difficult and slow the process actually is.
Lower leverage leads to better performance
Here’s the real deal. If you risk 1% of your account per trade, a losing streak of ten positions brings your account down by less than 10%. You survive and can trade another day.
A 2023 study of 25,000 retail traders found that 65% had win rates above 50%, yet 82% of those traders still lost money overall. The reason? Asymmetric sizing. Their average winning trade gained around 1.2%, while their average losing trade was 2.8%. High leverage makes this asymmetry catastrophic as it turns losing trades even larger.
At last, the psychological impact should not be neglected. When leverage is lower and positions are smaller, each individual trade carries less emotional weight, allowing traders to make rational decisions. For instance, they’re less likely to move their stop-loss, revenge-trade or give up a decent strategy because of a big loss.
The research on trading psychology is consistent: emotional interference is one of the primary reasons traders underperform their own systems, and excessive leverage is the main trigger of this.
Conclusion
The drift away from extreme leverage is a sign of maturity for traders and the industry as a whole. While regulation pushed things in the right direction, many traders had already moved forward, driven by experience and a better view of how retail forex actually works.
Leverage remains a useful tool as it allows traders to take positions without tying up much capital. Thankfully, more traders are treating it that way today, as a tool for sizing rather than for maximum gains.
You may want to know: