Leverage

In one sentence: leverage lets you open a position worth more than the money you put up – at 10x, $100 of your own funds controls a $1,000 position. It does not make the market move more; it makes every move worth more to you, in both directions.

ZMO offers up to 100x Leverage on its futures products. 100x leverage is offered for Bitcoin and Ethereum, while most altcoins can be leveraged up to 20x. Note that while leverage enables you to maximize trading power and profits, it can also amplify your losses and risk of liquidation.

Below, we discuss how leverage affects initial margin and maintenance margin requirements by providing illustrative examples.

What is Initial Margin?

Initial Margin is the minimum amount of funds you need in your margin trading wallets (either Cross Wallet or Isolated Wallets) to open a new trading position or to maintain an active order. This amount is specified in USDT or an equivalent value in another currency.

How is Initial Margin Calculated?

The Initial Margin required depends on the amount of leverage you use for your trade. Higher leverage means that you can control a larger position with a smaller amount of capital, which in turn lowers the percentage of Initial Margin required. Here's the formula to calculate it:

Initial Margin = Notional Value × (Initial Margin Percentage + (Taker Fee Percentage × 2))

• Notional Value is calculated by multiplying the price at which your trade is filled (Fill Price) by the size of your position in the respective futures contract (Position Size).

• Initial Margin Percentage is determined by your leverage, calculated as 1 divided by the leverage amount.

• For example, using 100x leverage means the Initial Margin Percentage is 1/100, or 1%.

Example Calculation:

Let’s break down an example where you want to place a limit order in the BTC-PERP (Bitcoin Perpetual Futures) market under the following conditions:

• Limit Price: $30,000 (the price you want to buy/sell 1 BTC)

• Position Crypto Size: 1 BTC

• Leverage: 100x

• Taker Fee Percentage: 0.05%

Using the formula:

• Notional Value = $30,000 (Fill Price) × 1 BTC (Position Crypto Size) = $30,000

• Initial Margin = $30,000 × (1/100 + 0.05% × 2) = $30,000 × (0.01 + 0.001) = $30,000 × 0.011 = $330

Therefore, the Initial Margin required to open this position would be 330 USDT.

This calculation shows how leveraging your trade affects the Initial Margin required, allowing you to trade larger positions with a relatively small amount of capital. Remember, while higher leverage can amplify profits, it also increases the risk of losses.

What leverage does to your profit and loss

Your profit or loss is always calculated on the full position size, never on the margin. That is the whole point – and the whole risk. Here is a $1,000 long position with a 5% price rise at different leverage levels:

The dollar profit is identical in every row; what changes is how much of your own money you risked to earn it. Reverse the direction and a 5% fall costs $50 in every row too – which at 20x is 100% of your margin, so that position would be liquidated before the market even reached –5%.

How far away is liquidation?

Roughly, the market has to move 1 ÷ leverage against you, less the maintenance margin ZMO keeps as a buffer:

• 2x → about 50%

• 5x → about 20%

• 10x → about 10%

• 20x → about 5%

• 50x → about 2%

Crypto routinely moves 2–5% in a day, so at 20x or more normal volatility alone can liquidate a position with no change in the trend. Liquidation is triggered by the mark price, not the last traded price. The exact calculation, including partial liquidation, is in the liquidations guide.

What is Maintenance Margin?

Maintenance Margin is the minimum balance you need to maintain in your futures trading wallets in order to keep your trading positions open. This balance is required to be in USDT or its equivalent value in another currency.

How is Maintenance Margin Calculated?

The amount of Maintenance Margin required is impacted by the risk limit level you select. Opting for a higher risk limit increases the Maintenance Margin percentage. If you decide to adjust your risk limit level at any point, the new Maintenance Margin percentage will apply to the entire size of your position.

The formula for calculating Maintenance Margin is as follows:

Maintenance Margin = Notional Value × (Maintenance Margin Percentage + Taker Fee Percentage + Funding Rate Percentage)

• Notional Value is calculated by multiplying the current market price (Mark Price) by the size of your position in the futures contract (Position Size).

• Funding Rate Percentage is adjusted based on the position's direction: assign 0% for negative percentages in long positions and for positive percentages in short positions to simplify calculations.

A simple way to choose a leverage level

Decide the loss first, not the leverage.

1. Decide how much of your futures wallet you are willing to lose on this one trade – say $100.

2. Decide the price at which the trade is wrong and you will exit – say 4% below entry.

3. Position size = acceptable loss ÷ stop distance = $100 ÷ 4% = $2,500.

4. Leverage = position size ÷ the margin you want to commit. If you commit $500, that is 5x.

The leverage is the last number you calculate, not the first. Place a stop-loss at the exit price you chose and the trade cannot lose more than you planned, whatever the multiplier says. In isolated margin mode that planned loss is also the most the position can take from your wallet; in cross margin the whole futures balance backs the position. The maximum leverage you can select depends on the contract and on your position size – larger positions fall into higher risk-limit tiers with a lower leverage cap.

Common mistakes with leverage

• Choosing the maximum because it is offered. A slider that goes to the top is not a recommendation.

• Judging a trade by return-on-margin. A 50% return on a 10x trade was a 5% market move; the next 5% move is just as likely to go the other way.

• Ignoring funding on positions held for days. Funding fees are charged on the full position size, so a 10x position pays 10x the funding of the same margin held unleveraged.

• Using cross margin without meaning to. Check the margin mode on every new market; it is not always the same as the last one you traded.

• Adding margin to a losing position instead of closing it. It moves liquidation further away, but it also puts more of your wallet behind a trade that is already wrong.

When Do You Risk Liquidation?

Your positions may be at risk of liquidation—either full or partial liquidation, or triggering a forced market buy/sell—when the market price (Mark Price) hits the Liquidation Price. This happens if the value of your margin wallet drops to or below the Maintenance Margin requirement.

Example Calculation:

Let's illustrate with an example in the BTC-PERP (Bitcoin Perpetual Futures) market, assuming you hold a long position under these conditions:

• Mark Price: $30,000

• Position Crypto Size: 1 BTC

• Maintenance Margin Percentage: 0.5%

• Taker Fee Percentage: 0.05%

• Funding Rate Percentage: 0.001%

Using the formula:

• Notional Value = $30,000 (Mark Price) × 1 BTC (Position Crypto Size) = $30,000

Maintenance Margin = $30,000 × (0.5% + 0.05% + 0.001%) = $30,000 × 0.551% = $165.3

Therefore, to keep this position open, you would need a Maintenance Margin of 165.3 USDT.

This example demonstrates the importance of understanding and managing your Maintenance Margin to avoid the risk of liquidation, especially in volatile market conditions.

FAQ

Can I lose more than my margin?

In isolated mode your loss is capped at the margin on that position. In cross mode a losing position can draw on your entire futures wallet. ZMO’s liquidation engine and insurance fund are designed to close positions before they go below zero – see auto-deleveraging and the insurance fund.

Does leverage change the fees I pay?

Trading fees and funding are both charged on the position size, not your margin, so higher leverage on the same margin means larger fees. See futures trading fees.

What leverage should a beginner use?

2x–3x for the first several trades, in isolated margin mode, with a stop-loss. Increase only after you have seen how mark price, funding and liquidation behave in a live position.

Why can’t I select the maximum leverage on a large order?

The order size has moved you into a higher risk-limit tier, which caps leverage and raises the maintenance margin. Reduce the size or accept the lower cap. Details: futures risk limits.

Does leverage work the same in 1-Click Futures?

The mechanics are identical; the interface sets the position size from your amount and multiplier for you. See how leverage works in 1-Click Futures.

This guide is for education only and is not investment advice. Leveraged trading carries a high risk of loss.