Leverage In Futures Trading: How It Works + 8 Mistakes To Avoid

Leverage is one of the most powerful tools in futures trading—but it’s also one of the biggest reasons traders blow up their accounts.

In this article, we are going to take a closer look at what leverage is in futures trading, how it works, and how to use it safely. We’ll cover:

• How much leverage can you use in futures trading?
• 8 critical mistakes that could wipe out your account
• Leverage in crypto futures vs traditional markets
• The biggest risks most traders overlook
• The key benefits of using leverage correctly

If you do not yet understand how crypto futures work, read our guide on how crypto futures trading works before you touch leverage. It is much easier to learn the structure first than to repair a blown account later.

What is leverage in futures trading?

Leverage in futures trading allows traders to control large contracts with a relatively small amount of their own capital, known as margin. Unlike stocks, where you pay the full price upfront, futures trading lets you borrow capital from your broker. This increases the size of both your winning trades and your losing trades, so every decision matters more.

For example, let’s say you want to trade S&P 500 futures. Normally, buying one full contract would cost hundreds of thousands of dollars, but with leverage, you only need to put up a fraction of that—called margin.

If the market moves in your favor, the return on the small margin you put down can look large. That same leverage will hit just as hard when the market turns against you. If the market moves against you, losses can add up quickly. In some cases, you may even lose more than your initial margin, which can trigger a margin call—where your broker requires you to deposit more funds or closes your trade automatically.

Different futures contracts have different leverage limits, but they typically range from 10x to 50x, meaning you can control a position 10 to 50 times larger than your margin deposit.

Futures contracts allow traders to control large positions with limited capital through leverage.
To understand how leverage fundamentally works across all markets, see our full guide to what leverage means in trading.

How leverage works in futures trading

Leverage is at the core of why futures markets feel intense. It is also the main reason traders lose money faster than they expect. Instead of needing the full amount to trade a contract, you only need to deposit a small percentage of its value, known as margin. The rest? Your broker covers it, allowing you to control a much larger position than your actual capital.

Let’s break it down. Say you want to trade a crude oil futures contract worth $75,000. Instead of putting up the full amount, you might only need $5,000 in initial margin. That’s 15x leverage, meaning a 1% price move changes your account balance by 15%—whether for better or worse.

If your position moves against you and your account balance falls below the maintenance margin level, your broker will issue a margin call, requiring you to deposit more funds. If you don’t, your position will be liquidated automatically to prevent further losses.

See our definition of margin in trading to get a better picture of the mechanics of the driving force of leveraged markets.

8 leverage mistakes that blow up futures traders

Leverage is where a lot of futures traders get into trouble, especially early in their learning curve.

When you first start using size, a few small errors can wipe you out before you even understand what happened.

Below I walk through eight mistakes traders make with leverage, how to spot them early, and how to reduce the damage when they show up.

1. Using too much leverage too soon

The mistake:

On paper, high leverage looks attractive. You see a small move and imagine a big payout. In practice, 20x or 50x mostly multiplies how fast you can empty an account when the trade is slightly off.

The problem is that over-leveraging multiplies your losses just as fast. A tiny market move in the wrong direction can liquidate your account before you even have a chance to react. (Want to see how close you are to liquidation? Use Leverage.Trading’s liquidation price calculator to find out before it’s too late.)

How to spot it early:

• Your balance is swinging wildly on small price moves.
• You keep getting margin calls or liquidations.
• Trading feels like a gamble rather than a strategy.

The solution:

Start with modest leverage, something like 2x to 5x, while you build real risk control. Most professional traders avoid extreme leverage. Staying solvent for years matters more than any one fast trade.

2. Ignoring initial and maintenance margin requirements

The mistake:

Many retail traders open futures positions without really understanding the margin requirements behind them. But here’s the thing—just because you can open a trade doesn’t mean you can keep it open. If your balance falls below the maintenance margin, your broker will issue a margin call or even liquidate your position automatically.

How to spot it early:

• You notice your available margin shrinking quickly.
• Your broker sends margin warnings.
• A trade suddenly closes without warning, and you don’t know why.

The solution:

Before entering a trade, check the initial margin (what you need to open the position) and maintenance margin (the minimum required to keep it open). Always leave extra funds in your account to avoid unnecessary liquidations.

Want to know when a margin call could hit? Try our margin call calculator to check how much cushion you need.

3. Holding onto losing trades for too long

The mistake:

No one likes taking a loss. It’s tempting to hold onto a bad trade, thinking it’ll turn around. But hope is not a real trading strategy. The longer you hold a losing trade, the bigger the damage to your account.

How to spot it early:

• You refuse to close a losing trade, even when it hits your risk limit.
• You tell yourself, “It’ll bounce back soon.”
• Your losses keep growing, but you hesitate to cut them.

The solution:

Set a maximum loss threshold before entering a trade—and stick to it. Taking a small, controlled loss is much better than letting it spiral out of control.

4. Overtrading and chasing the market

The mistake:

A lot of traders fall into the trap of thinking that more trades mean more profit. In reality, overtrading leads to emotional decisions, high fees, and bad trades. It’s a fast way to burn through your capital.

How to spot it early:

• You trade all day, even when there’s no clear setup.
• You jump into trades just because you don’t want to miss out (FOMO).
• Your win rate is dropping because you’re forcing trades.

The solution:

Trade less, but smarter. Have a clear strategy and wait for high-probability setups. Set a daily or weekly trade limit to prevent emotional decisions.

For crypto traders, in our crypto futures trading strategy guide, we’ve listed down four basic strategies and four advanced strategies, all focused on risk management.

5. Not understanding the difference between cross and isolated margin

The mistake:

This is a silent account killer for anyone who has not taken the time to understand how margin modes work. In cross margin mode, your entire account balance backs your trade—so if things go wrong, you could lose everything. Isolated margin contains the risk of a single position, which prevents one bad trade from wiping out your whole account.

How to spot it early:

• A single trade liquidates more of your balance than expected.
• You get liquidated on multiple positions at once.
• You don’t know which margin mode you’re using.

The solution:

Use isolated margin while you are still getting comfortable with the platform so that each position has a defined, limited chunk of risk. Switch to cross margin only if you fully understand how it works. Learn more in this guide: Cross margin vs isolated margin

6. Misunderstanding contract specifications (size, expiration, tick value)

The mistake:

Every futures contract has specific rules on contract size, tick value and expiration, yet many traders jump into trades without reading the details. That’s how you end up taking on way more risk than you expected or seeing your trade closed unexpectedly when the contract expires.

How to spot it early:

• Your trade size is much larger than expected.
• You get charged unexpected fees.
• Your trade closes automatically due to contract expiration.

The solution:

Always check the contract specifications on your broker’s platform before trading. Know the tick size, expiration date, margin requirements, and contract value so you don’t get caught off guard.

7. Using leverage without understanding implied costs (margin interest, funding rates)

The mistake:

Leverage isn’t free money—it comes with hidden costs like margin interest and funding rates. These fees can slowly drain your balance even if your trades aren’t losing. If you’re unsure how much you’ll pay or receive, try using Leverage.Trading’s funding rate calculator to break down the actual costs tied to your position size, leverage, and holding time.

How to spot it early:

• Your account balance shrinks overnight, even without active trades.
• You see small deductions on your account regularly but don’t know why.
• You hold trades long-term without checking funding costs.

The solution:

Before holding a trade overnight, check your broker’s funding rates and margin interest fees. If fees are high, consider closing the trade before the funding period or using lower leverage.

8. Not using stop-loss orders

The mistake:

Some traders avoid stop-loss orders because they don’t want to get stopped out too soon. But without one, a bad trade can spiral out of control, leading to massive losses or full liquidation.

How to spot it early:

• You manually exit losing trades, often later than you should.
• You hesitate to set a stop-loss because you think it’ll ruin your trade.
• Your losses keep running beyond what you planned for.

The solution:

Setting a stop-loss is the easiest way to control risk and prevent your account from getting wiped out. Not sure where to place it? Use our stop-loss calculator to find the right level based on your trade size and risk tolerance.

How much leverage is available in futures trading?

Leverage rules are not the same everywhere. Some markets give you room to use size, others enforce strict limits to slow down blowups. Here is a quick overview of leverage by region and a simple way to keep your own account from getting stretched too far.

Leverage limits by region

United States – Futures trading is regulated by the CFTC, and margin requirements are set by exchanges like CME. Leverage varies by asset:

• S&P 500 E-mini Futures → ~20x leverage
• Crude Oil Futures → ~10x–15x leverage
• Gold Futures → ~15x–20x leverage
  Retail forex traders, however, are capped at 50:1 on major currency pairs and 20:1 on others.

European Union (ESMA Rules) – Retail traders have strict limits:

• 30:1 for major forex pairs
• 20:1 for indices & gold
• 10:1 for other commodities
• 5:1 for stocks
• 2:1 for cryptocurrencies

United Kingdom – Same as ESMA rules post-Brexit.

Japan – Very conservative. 25:1 max leverage across all assets.

Australia – ASIC enforces ESMA-like rules, with a 30:1 cap for forex and lower limits for stocks and commodities.

India – SEBI has taken an ultra-cautious approach, raising margin requirements and restricting retail access to highly leveraged products.

Leverage in crypto futures trading: How it differs from traditional markets

Leverage is a powerful tool in any market. Crypto futures simply compress the same risk into a smaller price move. If you come from traditional markets, you will notice the differences in both payoff speed and drawdown speed.The most common products in the crypto futures arena are:

• COIN-M Futures – These contracts are margined and settled in the cryptocurrency itself—like BTC or ETH. That means your profits, losses, and margin all fluctuate with the price of the crypto you’re trading. They suit traders who want full exposure to crypto price movements and do not mind that their margin and PnL are tied to the same volatile asset. To learn more, see our full COIN-M Futures guide.
• USDT-M Futures – These contracts use USDT (Tether) as both collateral and settlement. That gives you a more stable margin base, making it easier to manage risk in volatile markets. They fit traders who want to speculate on crypto prices while keeping their margin in a relatively stable unit such as USDT, which can make risk tracking a bit more straightforward. To learn more, see our full USDT-M Futures guide.

Higher leverage, smaller margins

In traditional futures, leverage is typically 10x to 20x, depending on the asset. Crypto futures trading platforms, however, offer leverage up to 100x, 200x, or even 500x. That means you can control a huge position with just 1% of the contract’s value—but a tiny price move can liquidate your entire position in seconds.

Curious about how borrowed money impacts crypto futures trades? Use our crypto futures calculator to test different trade scenarios.

No centralized regulation

Traditional markets are tightly regulated by agencies like the CFTC (U.S.), ESMA (EU), and FCA (UK). They enforce margin requirements, leverage caps, and risk controls to prevent extreme losses. Crypto futures? Not so much. Crypto futures exchanges set their own rules, and risk management varies by exchange.

Funding fees instead of overnight costs

Traditional futures traders pay interest or rollover fees for holding contracts overnight. Crypto traders pay (or receive) funding rates based on market sentiment. If too many traders are on one side (long or short), they pay funding fees to balance the market. This can add up quickly, especially if you hold a position for days.

Liquidations happen faster

In stocks and commodities, brokers issue margin calls before closing your position. In crypto, there’s no warning—if your margin falls below the required level, your position is liquidated instantly. And because crypto is volatile, this can happen much faster than in traditional markets.

24/7 trading means no market resets

Stock and commodity futures follow exchange hours. Crypto futures never stop trading. This means price swings can happen at any time—day or night, weekend or holiday. If you’re over-leveraged and asleep, a sudden price move could wipe you out before you wake up.

The most popular crypto futures trading platforms, such as BYDFi and BTCC, give traders more flexibility, higher leverage, and 24/7 access. But that comes with higher liquidation risks, unpredictable funding costs, and zero safety nets. If you’re used to traditional markets, adjust your risk strategy before jumping in—because crypto doesn’t play by the same rules.

Benefits and risks: What most traders overlook

Benefits

• Bigger moves on less capital – With leverage you control a larger position from a smaller margin deposit. Returns on winning trades look bigger, and losses accelerate at the same speed when the trade is wrong.
• More flexibility in how you size trades – Leverage lets you avoid tying all of your cash into one contract so you can spread risk across several ideas, but it also makes it easier to end up overexposed without noticing.
• Short-selling – Leverage lets you short-sell without arranging a stock borrow. In volatile markets that cuts both ways, because sharp squeezes against your short are amplified as well.
• Hedging against risk – Traders use futures to offset risk in other positions, for example by shorting an index against a long portfolio. A hedge still carries its own margin, liquidation level and execution risk, so it needs the same discipline as any other trade.

Risks

• Much bigger losses – Just as leverage boosts profits, it multiplies losses, making even small price moves dangerous.
• Liquidation happens fast – If your margin runs too low, your position can be closed automatically—even before you have a chance to react.
• Hidden costs – Holding leveraged trades comes with funding fees and margin interest, which can eat into profits over time.
• Emotional trading – Higher stakes mean higher stress, leading to panic decisions and overtrading.

FAQ

Final thoughts

Leverage reshapes the risk profile of your futures trading. It does not care if you feel ready or not. Many traders get caught up in the idea of outsized returns and forget how fast small mistakes scale when size is involved. You do not have to repeat that pattern if you treat leverage as something to survive first and optimize later.

By learning how futures leverage actually works, avoiding the usual retail traps and building real risk rules, you give yourself a better chance to stay in the game. This guide walks through the structure, the limits and the mistakes that tend to hurt the most. If you treat it as a checklist instead of a highlight reel, it can be the difference between slowly compounding and restarting from zero.