Leverage lets an account control a larger position than its balance alone would support, using a multiple of the account size as buying power. A $10,000 account with 10x leverage can open positions worth up to $100,000. Prop firms set a maximum leverage limit as part of the same risk framework that governs drawdown and daily loss.
Higher leverage isn't automatically better. It changes how far a given price move affects your account, in both directions, which is exactly why firms cap it rather than leaving it unlimited.
In short:
- Leverage multiplies buying power relative to account size, not account risk limits directly.
- Prop firms set a maximum leverage cap, which varies by firm and sometimes by asset class.
- An account-level cap and an instrument-specific cap are different limits; the lower of the two applies.
- Higher leverage magnifies both gains and losses on a given price move.
- Leverage limits typically apply the same way during the evaluation and the funded stage.
What is leverage in prop trading?
Leverage is expressed as a ratio, like 10x or 25x, describing how large a position an account can open relative to its own size. A $50,000 account with 25x leverage can control positions worth up to $1,250,000. The account's own capital, the evaluation fee already paid, doesn't grow; what changes is how much market exposure that account can take on.
Leverage doesn't change the account's drawdown or daily loss limit. Those are set in dollar terms against the account size, independent of how much leverage is used to reach a given position size. A large, highly leveraged position that moves against you can hit a daily loss limit faster, but the limit itself doesn't move.
Why do prop firms cap leverage?
A firm's risk model depends on losses staying within a predictable range relative to account size. Uncapped leverage would let a single position size a loss far beyond what the drawdown limit is designed to catch before the firm can act. Setting a maximum leverage ratio keeps position sizes, and therefore potential losses on any single trade, within a range the rest of the risk framework can actually contain.
Leverage caps often vary by asset class within the same firm. Crypto and highly volatile instruments commonly carry lower maximum leverage than lower-volatility instruments, since a given percentage move translates into a larger dollar swing at the same leverage ratio.
How leverage limits compare across firms
“Leverage varies by firm” undersells how differently it's actually structured. Four named firms show four different models: FTMO publishes a fixed forex ratio that depends on account type, Breakout publishes a fixed crypto ratio that depends on the instrument, Topstep doesn't publish a ratio at all because futures leverage is set by exchange margin requirements rather than by the firm, and xato publishes a single account-level ratio that a lower instrument-specific limit can still tighten. Ratios like these change without much notice, so the table is a snapshot rather than a permanent reference.
| Firm | Market | Maximum leverage | How it's set |
|---|---|---|---|
| FTMO | Forex and CFDs | 1:100 on Standard accounts, 1:30 on Swing accounts | Fixed ratio, set by account type |
| Breakout | Crypto | 5:1 on BTC and ETH, 2:1 on other altcoins | Fixed ratio, set by instrument volatility |
| Topstep | Futures | No fixed ratio published | Set by exchange margin requirements per contract, not a firm-published multiple |
| xato | Stocks, commodities, and crypto | 25x account-level cap | Fixed account-level ratio, capped further per instrument by the liquidity provider where it sets a lower limit |
The Topstep row is the one worth pausing on: a firm not stating a leverage ratio doesn't mean futures are unleveraged, it means the leverage is embedded in the exchange's margin requirement for each contract rather than expressed as a multiple the firm sets. A single E-mini S&P 500 contract's notional value against its exchange margin requirement works out to leverage in roughly the same range that forex and crypto firms publish directly, it's just arrived at differently.
Does leverage change during the funded stage?
Generally not. The leverage cap that applies during the evaluation typically carries over to the funded account unchanged, consistent with how drawdown and daily loss limits carry over too. Where leverage does change, it's usually tied to account type rather than the evaluation-to-funded transition, FTMO's lower cap on its Swing accounts applies at both stages of that account type, for instance, rather than kicking in only once funded. What is a funded trading account?
How xato does this
The usable maximum for a given instrument is the lower of the 25x account-level cap and whatever limit the relevant liquidity provider sets for that specific instrument, so a lower-liquidity instrument can carry a tighter effective cap even though the account itself is set to 25x. Traders can also select a lower leverage setting than the cap allows. The cap applies the same way during the evaluation and the funded stage, alongside the account's drawdown and daily loss limits.
On a $50,000 account, the 25x account-level cap works out to $1,250,000 of notional exposure at the account's ceiling, well above Breakout's crypto caps but below FTMO's 1:100 forex cap, in the same range that a futures account reaches through exchange margin on liquid contracts rather than through a firm-published ratio. How prop firm evaluations & challenges work
Frequently asked questions
There's no universal answer. It depends on the firm's cap, the asset class being traded, and how much of the account's risk budget you want a single position to use.