Futures trading allows you to open positions of significantly larger value through the leverage feature. However, the higher the leverage used, the more important it is to manage margin wisely so that positions can survive in various market conditions. In this article, we will discuss everything from understanding leverage, the risks to watch out for, to strategies for using high leverage effectively. With better understanding, you’ll be able to make more measured and responsible trading decisions.
Article Summary
- 🔎 Understanding Leverage: One of the core concepts in futures trading that allows you to open positions with a higher value than your available capital.
- 💡 Understanding the risks: Knowing the risks in futures trading is an important step to make a wise decisions.
- 🛠️ Safe Strategies: Set risk limits, use margin wisely, set stop-losses, avoid overtrading, and conduct regular evaluations.
Understanding Leverage
Leverage is one of the features in futures trading that allows you to open positions with a higher value than your actual capital. This feature not only increases your position size, but also amplifies the impact of every price movement, whether in the form of potential gains or potential losses.
Leverage can be a powerful tool to boost your position size and potential returns if used alongside a solid understanding of strategy and risk management. However, be mindful that even small price movements can quickly lead to liquidation if your margin isn’t managed carefully. If you are still a beginner looking to try futures trading with high leverage, don’t worry. This article is designed to help you clearly understand the basics so you can take more informed and thoughtful steps going forward.
Risks of Futures Trading with High Leverage
Understanding the risks in futures trading is an essential step toward making wiser decisions. With sufficient knowledge, you can manage and limit potential losses. Here are several risks to consider when using high leverage in futures trading:
1. Liquidation Price Closer to Entry Price
High leverage significantly narrows the gap between your entry price and liquidation price. This means that even a slight price movement in the opposite direction can immediately trigger liquidation if you use your entire margin. The position will be closed automatically by the system because the margin is no longer sufficient to cover the loss. This risk is often overlooked by novice traders, especially in a volatile crypto market, where prices can swing several percent in just minutes.
2. Lack of Emotional Control
The amplified value of positions due to high leverage can trigger intense mental pressure. When the price is highly volatile, traders can easily feel panic, stress, or even become overly euphoric when in profit. This results in impulsive and irrational decisions. If you can’t manage your emotions, high leverage may increase losses due to broken strategies and poor decision-making.
3. Excessive Speculative Behavior
Large leverage often tempts traders to “spin” their capital repeatedly, opening positions impulsively just to chase quick profits. Without a clear plan and analysis, trading activity can turn into a habit of speculation, similar to gambling behavior. If left unchecked, this behavior can cause traders to lose control over their capital and even develop an addiction to excessive risk-taking.
4. Miscalculating Margin
Many beginners do not fully understand how to calculate margin when using high leverage. As a result, the open position is too large compared to their available capital, while the available margin is insufficient to buffer price movements. This miscalculating margin makes your position highly vulnerable to liquidation.
Example case:
| Description | Scenario 1: Full Margin | Skenario 2: Partial Margin (5%) |
| Initial balance | $500 | $500 |
| Margin used | $500 (100% dari saldo) | $25 (5% dari saldo) |
| Margin mode | Cross margin | Cross margin |
| Leverage | 25x | 25x |
| Position size | $12.500 ($500 x 25) | $625 ($25 x 25) |
| Maintenance margin | 1% | 1% |
| Estimated price drop | 4% | 4% |
| Loss | Margin fully depleted and position liquidated | -$25 |
| Conclusion | Very high risk since the entire balance is used as margin. | More measured risk since only part of the margin is used. |
Strategies for High-Leverage Futures Trading
Using high leverage indeed allows traders to open significantly larger position than their available capital. However, without proper strategy, using leverage can lead to major losses. Here are several strategies that can help you manage high leverage more responsibly:
1. Set Risk Limits Per Position
Avoid using too much margin in one position. For example, only risk 2% of your total margin per position so that a loss does not immediately wipe out your entire capital if your analysis turns out to be wrong.
Example case:
| Initial balance | $1.000 |
| Risk plan per position | 2% of balance = $20 |
| Open positions | 1. ETHUSDT-PERP 2. BTCUSDT-PERP |
| Total risk tolerance | $40 (2% x 2 positions) |
| Margin per position | $20 |
| Position size per asset (25x leverage) | $500 ($20 x 25) |
| Margin mode | Cross margin |
Since Pintu Futures uses a cross margin system, your entire account balance will be shared to support your open positions. If one of the positions experiences a large floating loss, the loss could exceed the $20 risk limit per position that you had planned.
So, this $20 figure should be seen as an initial reference point, not a fixed maximum loss limit. Make sure you always monitor your unrealized PnL regularly so all positions remain under control.
2. Limit Margin Usage
Pintu Futures provides a fixed leverage option of 25x. However, you can still control your risk by adjusting how much margin you use. In other words, even if leverage is fixed, you can control your position size by limiting the margin.
Example case:
| Description | Skenario 1: Full Margin | Skenario 2: Partial Margin (10%) |
| Initial balance | $500 | $500 |
| Margin used | $500 (100% of balance) | $50 (10% of balance) |
| Margin mode | Cross margin | Cross margin |
| Leverage | 25x | 25x |
| Position size | $12.500 ($500 x 25) | $1.250 ($50 x 25) |
| Effective leverage vs balance | 25x | 2.5x ($1.250 : $500) |
| Maintenance margin | 1% | 1% |
| Estimated price drop | 4% | 4% |
| Loss | Margin fully depleted and position liquidated | -$50 |
3. Always Use Take-Profit and Stop-Loss
In high-leverage futures trading, setting a take-profit and stop-loss is a step that should never be ignored. By setting a stop-loss, you can automatically limit potential losses without having to react in panic when the price moves beyond expectations. Meanwhile, a take-profit helps secure gains according to the targets you have set. This habit supports discipline and keeps your trading strategy on track without being disrupted by momentary emotions.
In addition, you can also calculate take-profit and stop-loss levels based on a risk-to-reward ratio. This ratio is useful to ensure that potential gains are balanced with the possible losses. For example, with a 1:3 ratio, it means that for every potential $10 loss, the target profit should be at least $30.
Additionally, consider using limit orders to execute both take-profit and stop-loss, especially in highly volatile markets. Using limit orders can help reduce the risk of slippage, which often occurs when prices move rapidly. This way, you have better control over the exit price levels you have planned.
This approach helps maintain the consistency of your strategy over the long term, because even if not all positions go according to plan, you can still manage risk in a more disciplined way.
4. Manage Emotions and Avoid Overtrading
Trading with high leverage makes your balance fluctuate very rapidly, even within minutes. This situation often triggers emotional pressure, from fear of loss to an excessive desire for fast gains. Many traders end up opening positions repeatedly without careful consideration, simply to recover previous losses or chase profits impulsively.
This habit is known as overtrading and carries a very high risk because it can drain your capital quickly. To avoid it, stick to the trading plan you have made, limit the number of positions you open, and take breaks to clear your mind before making the next entry. This way, you will be able to control your emotions better and keep your trading decisions rational.
5. Choose Assets with the Right Considerations
Selecting the right asset is crucial when you use high leverage. It is best to prioritize assets with a relatively large market capitalization, for example above $1 billion, such as BTC or SOL. Large-cap assets generally have more stable price movements, making the risk of liquidation easier to manage. On the other hand, if you are a beginner trader, you should avoid assets with high volatility, as these conditions can trigger unpredictable price swings.
In addition, you can also take advantage of market momentum by paying attention to the funding rate. A significant funding rate, for example ranging from positive or negative 0.5% to 2%, can indicate that market sentiment for the asset is strongly leaning in one direction. When the funding rate is negative, it means that most traders are holding short positions, so traders who choose long positions will receive funding. Conversely, if the funding rate is positive, it indicates that most traders are in long positions, so traders who choose short positions will receive funding. By understanding this funding rate, you can better read market tendencies and adjust your entry or exit strategy accordingly.
6. Take a Break After Consecutive Losses
When facing a string of losses, it is natural to feel the urge to open a new position right away to recover the losses. However, decisions made under pressure often worsen the situation. Instead, pause your trading activity, take time to calm down, and reassess your strategy. This break helps restore your focus and objectivity, allowing for more rational and measured decisions when you re-enter the market. It’s a healthier approach than rushing in and potentially increasing both your losses and mental strain.
Disclaimer: All articles from Pintu Academy are intended for educational purposes only and do not constitute financial advice.
Conclusion
Futures trading with 25x leverage does offer the potential to manage larger positions than your available capital, but the risks cannot be taken lightly. Understanding how leverage works, how to calculate margin, and the risk of liquidation are essential skills before deciding to enter futures trading. With discipline in setting risk limits, using stop-losses, and avoiding rushing after losses, you can reduce the negative impacts of high leverage that often cause traders to lose their capital in a short time.
In the end, futures trading is not just about chasing big opportunities but also about maintaining the sustainability of your capital and your mental resilience for the long run. With a solid strategy, regular evaluation, and the courage to pause when conditions are unfavorable, you can use high leverage more responsibly. Always prioritize education, planning, and discipline so that every trading decision stays rational and well-measured.