Leverage and Forced Risk

Leveraged trading magnifies profit and loss, and weak collateral can trigger forced closure.

Margin

Margin is collateral posted to open or maintain a leveraged trading position.

Leverage lets a trader control a larger position than their cash balance, amplifying both gains and losses.

Liquidation happens when a position is forcibly closed because margin is no longer sufficient.

The funding rate is a recurring payment between long and short perpetual futures traders.