Leverage, Collateral Ratio and Liquidation


Leverage allows you to trade with more notional amount than the amount of collateral pledged.
For example, if you wish to open a position with notional amount of 50 WETH and use a leverage of 5x, the amount of required collateral will be 10 WETH.
At Tribe3, users can open positions with up to 5x initial leverage (i.e. an initial requirement in collateral ratio of 20%).
Leverage=NotionalValue/CurrentCollateralLeverage = Notional Value / Current Collateral


While leverage enables you to open a large position with relatively small amount of collateral, it also increases the risk of your liquidation. Liquidation is a key part of leveraged trading so we have an entire section about liquidation in detail. If the collateral ratio falls to 10%, your position may be liquidated.