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 beginners overlook
• The key benefits of using leverage correctly

If you’re new to futures trading and want to understand how leverage affects your trades, keep reading—this could save you thousands.

Key takeaways

• Leverage gives you power, but without risk control, it will wreck your account. It lets you control large positions with a small deposit, but one wrong move can erase your account.
• Crypto futures offer extreme leverage. Unlike traditional markets, some platforms let you trade with up to 100x or more, making both profits and losses happen at lightning speed.
• Futures trading has different max leverage limits. While traditional markets cap it at around 20x, crypto futures trading platforms push it much higher, creating more opportunities—and dangers.
• Ignoring contract specifications is a costly mistake. Many traders jump into futures without checking contract size, expiration dates, or tick values, only to realize too late that their position is larger—or riskier—than expected.

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 need to pay the full price upfront, futures trading lets you borrow capital from your broker, which could boost both potential profits and losses.

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, you can make much larger profits compared to your initial investment. But 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.

To see how different ratios and levels affect your risk and potential returns, try this leverage calculator.

How leverage works in futures trading

Leverage in futures trading is what makes the market so appealing—but it’s also what makes it risky. 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.

To better understand the difference between initial margin and maintenance margin, check out this guide on margin requirements. Managing these correctly is critical to avoiding liquidation and staying in the game.

8 Mistakes to avoid as a beginner

Leverage is where most beginners get into trouble in futures trading. If you’re just starting out, there are some common mistakes that can wipe out your account before you even realize what went wrong. Below, I’ll walk you through eight mistakes new traders make, how to spot them early, and—most importantly—how to avoid them.

1. Using too much leverage too soon

The mistake:

Leverage sounds great in theory—why settle for small gains when you can multiply your profits with 20x or 50x leverage? 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 the 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 low leverage (2x–5x) while you learn how to manage risk. Professional traders rarely use extreme levels because surviving long-term is more important than chasing fast profits.

2. Ignoring initial and maintenance margin requirements

The mistake:

Many beginners open trades without fully understanding margin requirements. 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 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:

New traders often think that the more they trade, the more they’ll make. 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.

5. Not understanding the difference between cross and isolated margin

The mistake:

This is a silent account killer for beginners. 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 when starting out to limit risk per trade. 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—contract size, tick value, expiration dates—but many beginners jump into trades without checking 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.

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 can you use in futures trading? (My rule for staying profitable)

LLeverage rules aren’t the same everywhere. Some markets let you crank it up, while others have strict limits to keep traders from wiping out their accounts too fast. Here’s a breakdown of what you can expect globally and a simple rule to keep your trading account safe.

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.

My rule for staying profitable

Leverage truly works both ways. More power means more profit potential—but also more ways to get wrecked. Here’s how I keep things in check:

2x–5x leverage – Ideal for most traders. Gives you flexibility without risking everything.
5x–10x leverage – Works if you have solid risk management and experience.
10x+ leverage – Only for short-term trades in highly liquid markets, and only if you know exactly what you’re doing.

If you NEED high leverage to make a trade work, it’s probably not a good trade.

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

Leverage is a powerful tool in trading, but crypto futures take it to another level. If you’re used to traditional markets, you’ll notice some big differences—both in potential and risk.

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 profits with less capital – You can control large positions with a small deposit, meaning higher returns on successful trades.
• More trading flexibility – Instead of locking up all your funds in one position, leverage lets you diversify across multiple trades.
• Short-selling made easy – Leverage allows you to short-sell and profit from falling prices without needing to borrow assets, making it ideal for volatile markets.
• Hedging against risk – Traders use futures to offset losses in other investments, acting as a risk management tool.

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 in futures trading is a game-changer, but it can just as easily turn against you if you don’t know what you’re doing. Many traders get caught up in the excitement of big profits without realizing how quickly small mistakes can wipe out an account. The good news? You don’t have to be one of them.

By learning how futures leverage works, avoiding common beginner traps, and using risk management strategies, you can trade smarter and stay in the game longer. This guide breaks down everything you need to know, from leverage limits to critical mistakes to avoid—so if you’re serious about trading, keep reading. It could mean the difference between blowing up your account and actually making it work.