Leverage

Leverage on VDEX allows traders to amplify their position size by borrowing funds against their collateral. 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.

Chart Example

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

Please note: We have only 3x leverage in beta. However, the leverage will go up with time.