Leverage

Leverage on VDEX allows traders to amplify position size by borrowing funds against collateral. This can increase exposure to potential profits, but higher leverage also heightens the risk of liquidation.

Choosing the right leverage level is essential for effective risk management. Lower leverage offers a greater buffer against market volatility, while higher leverage can boost returns but demands stricter control over risk.

VDEX provides full flexibility for traders to set leverage before opening a position and adjust it afterward, allowing for dynamic risk management without closing trades.

A clear understanding of how leverage affects margin requirements and liquidation thresholds is critical for successful trading on VDEX.

Understanding Leverage in Trading

Leverage enables traders to control larger positions with a smaller initial investment, amplifying both potential profits and potential losses.

Example Without Leverage:

• Investment Amount: $10,000

• Leverage Used: 0x (no leverage)

• Trade: The trader buys BTC worth $10,000, expecting the price to rise.

• Price Change: +10%

• Profit Calculation: 10% of $10,000 = $1,000

Example With 10x Leverage:

• Investment Amount: $10,000

• Leverage Used: 10x

• Trade: With leverage, the trader controls $100,000 worth of BTC ($10,000 × 10).

• Price Change: +10%

• Profit Calculation: 10% of $100,000 = $10,000

By using 10x Leverage: the profit increases from $1,000 to $10,000 without additional capital.

⚠️ Important: Leverage amplifies both gains and losses. Adverse price movements can quickly erode or even fully deplete the initial investment.

Mathematically:

• Return on Equity (ROE) = L × P, where L is leverage and P is the percent change.

• Profit/Loss (PnL) = S × ROE, where S is position size.

High leverage should be used cautiously and only by experienced traders who fully understand the risks of trading on margin.

Chart Example

Leverage	Initial Margin Requirement	Maintenance Margin Requirement
1x	100%	50%
10x	10%	5%
25x	4%	2%
50x	2%	1%