How Does Leverage in Futures Trading Amplify Both Gains and Losses?

Leverage allows a trader to control a large notional value of an asset with a relatively small amount of capital (margin). For example, 10x leverage means a $1,000 margin can control $10,000 worth of futures contracts.

If the asset moves 10% in the trader's favor, the gain is $1,000 (100% return on margin). However, if it moves 10% against the trader, the loss is also $1,000, wiping out the entire margin and triggering a liquidation.