🥵 Leverage

What Is Leverage?

Leverage enables traders to amplify their buying power by borrowing funds. Essentially, you can control a larger position than your initial investment would normally allow.


Perplex offers easy access to leverage directly from the platform, allowing users to:


  • Deposit Collaterals: This is the assets you pledge to cover potential losses.


  • Open Leveraged Positions: Once collateral is deposited, you can open leveraged positions without needing to switch between exchanges or lenders.


  • Manage Everything in One Interface: All your leveraged trades and collateral can be monitored and managed seamlessly within the Perplex platform.

Example:


Imagine you want to go long on Ethereum (ETH) using 10x leverage. Here’s how it would work:

  • Investment: $1,000 of your own capital.
  • Leverage: 10x leverage amplifies your buying power.
  • Position Size: With 10x leverage, your $1,000 investment controls a position worth $10,000.


Potential Outcome:


  • If ETH increases by 10%, your position's value rises to $11,000. This means you make a $1,000 profit (10% of $10,000), instead of just $100 if you had no leverage.
  • However, if ETH decreases by 10%, the value drops to $9,000, and you would lose $1,000. The losses are magnified because of the leverage.


Risk Of Leverage: Liquidation

Leverage is a double-edged sword: it increases both potential profits and potential losses.


Liquidation occurs when the market moves against your position, causing your collateral to fall below the required maintenance margin. To prevent further losses, Perplex will automatically liquidate your position.


This means your collateral is sold off to cover your losses, and you could lose more than your initial investment. Understanding this risk is crucial when using leverage.


Read more about liquidation

Leverage On Perplex

On Perplex, leverage is simple and accessible:


  • Fixed Leverage: Leverage is fixed at 10x, meaning you can control positions worth up to 10 times your deposited collateral.


  • Multiple Collaterals Supported: You can use various assets as collateral, giving you flexibility in your trading.


  • Direct Access: Leverage and liquidity are sourced directly from Perplex’s liquidity pools, ensuring seamless trading without the need for third-party platforms.

Key Takeways

  • Leverage Increases Risk and Reward: While leverage can boost your profits, it also increases your exposure to losses. Always use leverage with caution.


  • Liquidation Risk: Be aware of the risk of liquidation if the market moves against your position. Monitoring your margin levels regularly is essential.


  • Effortless Trading: Perplex allows you to access leverage directly from its platform, providing a streamlined trading experience that connects to the liquidity pools without the need for external services.

Disclaimer: Leverage trading carries high risks and is not suitable for all traders. It is important to fully understand how leverage and liquidation work before engaging in such trades.