Leverage and liquidation
Leverage scales both gains and losses. Brokers can close your positions automatically when equity falls below requirements.
Leverage risk. Futures losses can exceed your margin deposit. Contract specs, margins, sessions and funded-account rules here are illustrative; verify current specifications with the exchange, your broker or the provider.
Effective leverage
Effective leverage = total notional ÷ account equity. It tells you how a percentage move in the underlying translates into a percentage move in your account.
When equity falls below maintenance requirements, brokers may issue a margin call or liquidate immediately, often at poor prices in fast markets. You remain liable for any negative balance.
Worked example
Three micros on a $5,000 account (illustrative specs)
- 3 MES at 5,000 = 3 × $25,000 = $75,000 notional → 15× effective leverage.
- A 2% adverse move = 100 points × $5 × 3 = $1,500 = 30% of the account.
- A 1% move against you in a day is not unusual for equity indices; at 15× leverage it costs 15% of equity.
Know your effective leverage and what a normal-sized move does to your account.
Common misconceptions
“Leverage is just a feature of futures.”
It is the main source of futures risk for beginners. Micros and small size reduce it.
“Liquidation protects me from losing more.”
It may happen after a gap or at a much worse price; deficits are still owed.
Checkpoint