Risk & Liquidation

Leveraged trading amplifies both gains and losses. Understanding how risk works on Lavarage helps you size positions correctly, avoid liquidation, and manage your portfolio with confidence.

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Loan-to-Value (LTV)

LTV is the single most important number for managing risk. It measures how much of your position's value is borrowed.

LTV = Borrowed Amount / Position Value

Your LTV changes in real time as the token price moves. It also creeps up slowly as interest accrues on your borrowed amount.

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Liquidation

What Triggers It

Every lending pool sets a liquidation LTV threshold. When your position's LTV exceeds this threshold, it gets liquidated automatically. The protocol scans positions every 5 seconds.

How Thresholds Are Set

The liquidation LTV is set per loan offer by the lender, but the protocol enforces minimum safety buffers:

• For offers with max open LTV at or below 85%: liquidation LTV is the higher of 90% or (max open LTV + 4%)
• For offers with max open LTV above 85%: liquidation LTV is max open LTV + 5% (capped at 99%)

This guarantees at least a 4-5% LTV buffer between your entry point and liquidation. You always have room to react.

How Much Room Do You Have?

At 2x leverage, the token needs to drop ~44% before liquidation. At 10x, just ~5%. The higher the leverage, the tighter the rope.

What Happens When You Get Liquidated

1. Your position is closed automatically
2. The position's tokens are swapped back to repay the lender
3. Any remaining value goes to the lender — there is no partial return to the trader
4. The position is marked as "Liquidated" in your trade history

You lose your entire margin. That's the worst case for any position.

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The Hidden Risk: Interest Accrual

Interest doesn't just cost you money. It actively increases your LTV over time, pulling your liquidation price closer to the current market price, even if the token price stays flat.

Example: You open a 5x long with 80% starting LTV and 90% liquidation LTV. That's a 10% buffer. If you're paying 30% APR on the borrowed amount, your LTV grows by roughly 0.08% per day. After 30 days of flat price action, your buffer has shrunk from 10% to about 7.6%.

For high-leverage positions held over days or weeks, interest is a real threat. Factor it into your planning.

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How to Manage Risk

Before You Trade

1. Start with lower leverage. 2-3x gives you significant room to breathe. You can always increase later.
2. Size appropriately. Never put all your capital into one position. If a single liquidation would materially hurt you, you're too concentrated.
3. Set a Stop-Loss. This closes your position automatically before liquidation hits. Requires email login. SL orders are best-effort and execute at market price when triggered.

While the Position Is Open

4. Monitor the health indicator. Green is safe, yellow is caution, red is danger. Act before red.
5. Add collateral if the price moves against you. This reduces your LTV and pushes the liquidation price further away.
6. Partial repay to reduce your borrowed amount and de-leverage without closing the trade entirely.
7. Watch interest costs on longer holds. Your daily borrow cost is shown on the position detail.

Position Sizing Rule of Thumb

Ask yourself: "If this position gets liquidated and I lose my entire margin, can I keep trading?" If the answer is no, reduce your size.

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Risk Comparison by Strategy

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Next: Learn how to manage your open positions — partial closes, TP/SL, adding margin, and more.