Leverage - Trading Glossary

Leverage on AsterDEX allows you to control larger positions than your account balance would normally permit, using borrowed funds to amplify both potential profits and losses.

How Leverage Works

Basic Leverage Mechanics

Position Size = Account Capital × Leverage Ratio
Required Margin = Position Size ÷ Leverage Ratio

Example with 10x leverage:
- Account capital: $1,000
- Maximum position size: $10,000
- Required margin: $1,000

Leverage vs Margin Relationship

• 2x leverage = 50% margin requirement
• 5x leverage = 20% margin requirement
• 10x leverage = 10% margin requirement
• 20x leverage = 5% margin requirement

AsterDEX Leverage Options

Perpetual Pro Leverage Limits

Asset Category	Maximum Leverage	Typical Use Case
BTC/USDT	100x	Major crypto exposure
ETH/USDT	75x	Blue chip altcoin trading
Top 10 Altcoins	50x	Large cap altcoin exposure
Mid-cap Alts	25x	Medium risk speculation
Small-cap/New	10x	High risk speculation

1001x Simple (Ultra-High Leverage)

• Maximum leverage: Up to 1001x
• Minimum position: $5
• Use case: Short-term speculation and momentum trading
• Risk level: Extremely high - positions can liquidate on small moves

Leverage Risk Assessment

Risk-Return Calculation

Potential Gain/Loss = Price Change % × Leverage × Position Size

Example: 10x leveraged position with 5% price move
- Unleveraged return: 5%  
- 10x leveraged return: 50%
- 10x leveraged loss (if wrong): -50%

Liquidation Distance by Leverage

Leverage	Liquidation Distance	Safe for Price Moves
2x	~40% against you	Large swings, long-term holding
5x	~17% against you	Medium volatility
10x	~8% against you	Low volatility, short-term
20x	~4% against you	Very low volatility, scalping
50x	~1.5% against you	Micro-movements only
100x+	~0.7% against you	Extreme precision required

Appropriate Leverage by Strategy

Conservative Strategies (2-5x leverage)

• Swing trading: Hold for days/weeks
• Trend following: Ride major market moves
• DCA strategies: Regular accumulation with slight leverage boost
• Hedge positions: Risk management with modest amplification

Moderate Strategies (5-15x leverage)

• Day trading: Intraday momentum and breakouts
• Range trading: Buy support, sell resistance
• News trading: Capitalize on event-driven moves
• Technical breakouts: High-conviction technical setups

Aggressive Strategies (15x+ leverage)

• Scalping: Very short-term price movements
• Arbitrage: Risk-free strategies with tight margins
• Event trading: Immediate reaction to announcements
• Funding rate trading: Interest rate arbitrage

Leverage Management Principles

Position Sizing with Leverage

The Kelly Criterion for leverage:

Optimal Leverage = (Win Rate × Average Win - Average Loss) ÷ Average Win

Conservative approach: Use 25-50% of Kelly optimal

Rule of thumb:

• Beginners: Maximum 3x leverage
• Intermediate: Maximum 10x leverage
• Advanced: Maximum 25x leverage
• Professionals only: 50x+ leverage

Dynamic Leverage Adjustment

Reduce leverage during:

• High volatility periods (VIX > 30)
• Major news events and earnings
• Low liquidity hours (Asian session for some pairs)
• Personal emotional stress or fatigue

Increase leverage during:

• Low volatility, ranging markets
• High conviction, well-researched trades
• Proven strategies with strong track record
• When position sizing allows for the risk

Leverage Costs and Considerations

Interest and Funding Costs

Perpetual funding rates:

• Paid every 8 hours
• Typically 0.01-0.1% per payment
• Can be positive or negative (you pay or receive)
• Higher leverage = larger funding payments

Transaction Cost Impact

Break-even on leveraged position:
Required Price Move = (Entry Fee + Exit Fee + Funding) ÷ Leverage

Example with 10x leverage and 0.1% total fees:
Required move = 0.1% ÷ 10 = 0.01% to break even

Advanced Leverage Techniques

Cross vs Isolated Margin

Cross margin leverage:

• Uses entire account as collateral
• Higher effective leverage possible
• Account-level liquidation risk
• Better for portfolio strategies

Isolated margin leverage:

• Fixed margin per position
• Limited risk per trade
• Position-level liquidation only
• Better for testing and risk control

Leverage Laddering

Staged entry technique:

• Start with lower leverage
• Add leverage as position moves favorably
• Reduce leverage as profits accumulate
• Example: 5x → 10x → 15x → back to 5x

Common Leverage Mistakes

1. Maximum leverage usage: Using highest available leverage
2. Ignoring correlation: Multiple leveraged positions in same direction
3. Revenge trading: Increasing leverage after losses
4. No position sizing: Not adjusting position size for leverage
5. Funding ignorance: Not accounting for overnight costs
6. Emotional leverage: Increasing leverage due to FOMO or fear

Leverage Safety Guidelines

Pre-Trade Checklist

1. ✅ Calculate exact liquidation price before entering
2. ✅ Ensure liquidation distance >10% for the leverage used
3. ✅ Account for potential funding costs
4. ✅ Set stop losses tighter than liquidation price
5. ✅ Size position for maximum acceptable loss
6. ✅ Have plan for adding margin if needed

Risk Management Rules

• Never risk more than 2% of account per trade (regardless of leverage)
• Maintain 20%+ distance to liquidation at all times
• Use stop losses on all leveraged positions
• Reduce leverage during volatile market conditions
• Keep emergency reserves for margin calls

Leverage Psychology

Mental Framework

• Leverage amplifies emotions as well as returns
• Start small and gradually increase as you gain experience
• Focus on risk-adjusted returns not absolute leverage
• Treat high leverage as a precision tool, not a wealth accelerator

Behavioral Guidelines

• Set leverage limits before trading (not during emotional states)
• Use position sizing calculators to remove emotion
• Track performance by risk-adjusted metrics
• Take breaks after significant leveraged gains or losses

Leverage is a powerful tool that can accelerate both success and failure—master risk management before increasing leverage beyond basic levels.