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 10x, the amount of required collateral will be 5 WETH.
At Tribe3, users can open positions with up to 10x initial leverage (i.e. an initial requirement in collateral ratio of 10%).
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 7.5%, your position may be liquidated.