Leverage & Margin
Leverage allows you to control a larger position with a smaller amount of collateral. Higher leverage means higher potential returns — but also higher risk.
How Leverage Works
Position Size = Collateral × Leverage
| Collateral | Leverage | Position Size | Price Move for 2x Return |
|---|---|---|---|
| $10 | 2x | $20 | +50% |
| $10 | 5x | $50 | +20% |
| $10 | 10x | $100 | +10% |
With 10x leverage, a 10% price move in your favor doubles your collateral. But a 10% move against you wipes it out.
Leverage Limits
| Parameter | Value |
|---|---|
| Minimum leverage | 1.1x |
| Maximum leverage | Configurable globally; public testnet currently 50x |
| Precision | 0.01x (e.g., 2.5x is valid) |
Leverage is stored at 1e2 precision on-chain. A leverage of 500 means 5.00x.
Margin and Liquidation
Your collateral is your margin. The protocol calculates a liquidation price at position entry based on:
- Your collateral
- Your leverage
- The liquidation ratio (configurable protocol parameter)
Long Position Liquidation Price
liquidation_price = entry_price × (1 - (1 / leverage) × liquidation_ratio)
Short Position Liquidation Price
liquidation_price = entry_price × (1 + (1 / leverage) × liquidation_ratio)
Example
Opening a Long at entry price $0.50 with 5x leverage, assuming the current public-testnet liquidation ratio of 80%:
liquidation_price = 0.50 × (1 - (1/5) × 0.80)
= 0.50 × (1 - 0.16)
= 0.50 × 0.84
= $0.42
If ADA drops to $0.42, your position is liquidated.
The liquidation ratio used in this example is illustrative. Check the trading interface for the current value.
Higher leverage means a tighter liquidation price. Always check your liquidation price before confirming a trade.