Futures broker leverage

The futures markets typically use high leverage. Leverage means that the trader does not need to put up 100% of the contract’s value amount when entering into a trade. Instead, the broker would require an initial margin amount, which consists of a fraction of the total contract value.

For example, if you had an account balance of $500 and leverage of 1:5, you would be able to take a position size of $2,500 ($500 x 5 = $2,500).

Whilst this does mean that you can control a position size larger than you would have been able to without leverage, it also means the risk is significantly greater. It is imperative that you have a clear understanding of leverage and how it works before trading with leveraged positions.