Understanding Leverage
Leverage allows traders to open positions larger than their actual capital by borrowing from the platform. For example, with 10x leverage, a trader can open a $10,000 position with only $1,000 in margin.
While leverage amplifies potential profits, it equally amplifies losses. A 10% move against a 10x leveraged position would result in a 100% loss of the margin (liquidation), whereas the same move on an unleveraged position would only be a 10% loss.
Different RWA perpetual platforms offer varying leverage limits: - Ostium: Up to 100x on select markets - Hyperliquid: Up to 50x - Lighter: Up to 20x
Higher leverage isn't necessarily better—it simply means higher risk. Professional traders often use lower leverage to give their positions more room to move without facing liquidation.
Key considerations when using leverage: - Higher leverage = higher liquidation risk - Funding costs apply to the full position size - Volatility of RWA markets should inform leverage choices - Start with lower leverage until comfortable with the mechanics
The leverage available often varies by market, with more volatile assets typically having lower maximum leverage.