I see many new traders entering futures but not fully understanding how to calculate leverage in futures, so I want to share some small experiences.

First is the choice of margin mode. When trading futures, you will encounter two options: Isolated and Cross. With Isolated Margin, the amount you deposit (for example, $1,000 USD) will be the maximum you can lose on that position. If the price moves against you too much, the position will be liquidated but the remaining balance in your account remains safe. With Cross Margin, the entire account balance (say, $3,000 USD) will be used, so if the price moves too strongly against you, the whole account could be wiped out. Therefore, I always recommend using Isolated Margin for better risk management.

Now, let's talk about the most important part: how to calculate futures leverage. Leverage allows you to trade with a larger amount than your actual capital. For example, if you have $100 USD, using 5x leverage means you can open a position worth $500 USD. With 10x, that’s $1,000 USD; with 20x, that’s $2,000 USD. The good thing here is you can earn higher profits, but the risk also increases proportionally.

The issue is: a small price movement can wipe you out. Calculating futures leverage to know at what point you will be liquidated is quite simple. If you use 5x, a 20% price drop will liquidate you. With 10x, a 10% drop will liquidate you. With 20x, a 5% drop will liquidate you. The quick formula is: the percentage price drop that causes liquidation equals 100 divided by the leverage level. So, if you want to calculate the futures leverage before entering a position, apply this formula to see if you can withstand that level of volatility.

Another note is that when using very high leverage (x30, x40 or more), exchanges may only allow you to use half or two-thirds of the total amount to hold the position, with the rest deducted as insurance fees. This increases the risk of liquidation and limits the chance to recover.

Based on my experience, if your capital is small, you should use x5 or x10, which offers moderate risk and easier management. Those who want to use x20 or higher should only do so for ultra-short scalping trades; otherwise, it’s very risky. And most importantly, always choose Isolated Margin so your account doesn’t get wiped out entirely. Carefully calculate the liquidation point based on the futures leverage calculation before entering a trade—that’s the key to surviving long-term in futures trading.