Leverage

Leverage on VDEX allows traders to amplify their position size by borrowing funds against their collateral. With leverage ranging from 1x to 50x, traders can scale their exposure to potential profits, but higher leverage also increases the risk of liquidation.

Choosing the appropriate leverage level is crucial for managing risk. Lower leverage provides a safer buffer against market swings, while higher leverage can maximize returns but requires tighter risk management.

VDEX gives traders full control over leverage selection before opening a position, with the flexibility to adjust leverage after a trade is live—enabling dynamic risk management without closing positions.

Understanding how leverage impacts margin requirements and liquidation thresholds is key to successful trading on VDEX.

Understanding Leverage in Trading

Leverage allows traders to control larger positions with a smaller initial investment. This means potential profits (and losses) can be amplified.

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 can control $100,000 worth of BTC ($10,000 × 10).

• Price Change: +10%

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

By using 10x leverage, the trader's profit increases from $1,000 to $10,000—without needing additional capital.

⚠️ Important: While leverage can amplify gains, it also increases risk. Losses can be magnified just as much, potentially wiping out the initial investment.

Oversimplified, the user's Return on Investment (ROI), is equal to the levered amount, L, times the percent change, P:

ROI=L∗P

ROE = L*P. Likewise, to find the user's final profit or loss, one can utilize the profit-net-loss PNL, is equal to the position size, S, times the ROE:

PNL=S∗ROE

Only experienced traders should acquire leveraged positions because the use of margin can increase gains on the way up, but also losses on the way down.

Leverage (1x to 50x)

VDEX offers flexible leverage ranging from 1x to 50x, allowing traders to customize their risk exposure:

• 1x Leverage: No borrowing; trading with your collateral only.

• Up to 50x Leverage: Amplifies both potential gains and losses, requiring less collateral but increasing liquidation risk.

Key Leverage Features:

• Customizable Before and After Opening a Trade: Traders can set their leverage via a drop-down menu before opening a position. Leverage can also be adjusted after a position is open to increase or reduce exposure.

• Higher Leverage = Higher Risk: While higher leverage (e.g., 25x, 50x) allows traders to control larger positions with less collateral, it also narrows the margin for error, increasing the likelihood of liquidation.

• Lower Leverage = Lower Risk: Using lower leverage (e.g., 1x, 2x, 5x) reduces liquidation risk and allows for a more conservative trading approach.

Leverage & Liquidation Connection:

• Higher leverage requires less initial margin, but it also means a smaller price movement can lead to liquidation.

• At maximum leverage (50x), the Maintenance Margin is set at 50% of the Initial Margin Requirement, meaning liquidation can occur quickly if the market moves against you.

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