I just realized that many people are still confused when starting with futures trading. Most issues arise from not understanding how to calculate futures leverage and how margin mode works. Today, I will explain in detail to help you avoid mistakes I have made before.

First is the matter of choosing the margin mode. When you enter Futures, you will see two options: Isolated Margin and Cross Margin. The difference between them is quite important.

With Isolated Margin, the amount of money you deposit (for example, $1,000) will be the maximum you can lose. If your order gets liquidated, you only lose that exact amount, and the remaining funds in your account are still safe. This helps manage risk much better.

Conversely, Cross Margin uses the entire futures account balance to maintain the position. If the price moves strongly against you, you could wipe out the entire account. My experience is to choose Isolated Margin if you don’t have much experience.

Now, 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, using 5x leverage means you can open a position worth $500. Using 10x means you can trade $1,000.

But this is where caution is needed. When you understand how to calculate futures leverage, you will see that a small price movement can cause liquidation. With 5x leverage, a 20% price drop will liquidate your position. With 10x, a 10% drop will do it. With 20x, only a 5% decrease is enough. The quick formula is: the percentage price decrease that causes liquidation equals 100 divided by the leverage level.

There is another warning I want to give. When you use very high leverage (30x, 40x or more), the exchange will limit the actual amount used to maintain the position, only using half or two-thirds of the deposited margin. The rest is deducted as insurance fees. This makes you more prone to liquidation and leaves almost no chance to recover.

My conclusion is: always choose Isolated Margin to protect your account. Use moderate leverage, around 5x to 10x, to have a chance to hold positions while managing risk. Calculate the liquidation point carefully before entering a trade. Avoid very high leverage if you are not an experienced trader. If your capital is small, using 5x is a reasonable choice. Using 20x or more should only be reserved for ultra-short-term scalping, and you must be aware that the risk is very high.