Leverage uses borrowed funds to increase position size, amplifying both gains and losses.
Traders post collateral to open positions larger than their equity. Exchanges enforce maintenance margins and liquidate positions that breach risk limits.
"With 5x leverage, a 10% adverse move wipes out the initial margin, triggering liquidation if not managed."
"Cross margin shares collateral across positions; isolated margin ring-fences risk per position."
Leverage increases volatility of P&L, requires disciplined risk management, and can cascade in stressed markets due to forced liquidations.
"Stop-loss orders and conservative position sizing help contain tail risk."
"Funding rates on perpetual swaps influence the cost of holding a leveraged position over time."
All terms and definitions may update as the Cryptionary improves.