06 Strategy
Leverage and liquidation
2x, 3x or 5x, isolated by construction, and exactly where liquidation sits.
Each coin trades one market at 2x, 3x or 5x. Leverage never goes above the market's own cap at Lighter.
#Isolated by construction
Every coin has its own vault, and every vault owns its own Lighter account. That account holds the margin of that one coin and nothing else, so a liquidation can only take what is in it. The vault's idle ETH, its pending buyback, the reserve that has not been deposited and every other coin are out of reach.
#The liquidation price
Liquidation happens when the equity (margin plus unrealised profit) falls to the market's maintenance margin. Lighter publishes it per market: 1.2% of the position's notional for ETH, BTC, SPY and EURUSD, 2.4% for SOL and gold, 3% for most tokenised stocks, 6% for the smaller ones. The launch page uses the value of the market you pick.
- Long:
entry × (1 − 1/leverage + maintenance) - Short:
entry × (1 + 1/leverage − maintenance)
For a market with a 1.2% maintenance margin, such as ETH:
| Leverage | Long liquidates after a fall of | Short liquidates after a rise of |
|---|---|---|
| 2x | 48.8% | 48.8% |
| 3x | 32.1% | 32.1% |
| 5x | 18.8% | 18.8% |
The venue also takes a liquidation fee, which Lighter publishes per market (1% on ETH). Orders on Lighter charge no taker or maker fee today.
#What the vault does and does not do about it
The vault sizes each opening order so that the exposure stays under margin × leverage. This is checked in the contract on every order. It does not place a stop order: the take-profit and dip rules are the strategy, and the creator can close everything at any time with the emergency exit. See The vault and the venue.
#Take-profit triggers are on margin
A trigger of +25% on margin does not need a 25% price move. It needs 25% ÷ leverage:
| Trigger | 2x | 3x | 5x |
|---|---|---|---|
| +15% (Steady) | 7.5% | 5.0% | 3.0% |
| +25% (Balanced) | 12.5% | 8.3% | 5.0% |
| +100% (Degen) | 50% | 33.3% | 20% |
Higher leverage means the same trigger is reached on a smaller move, and so is the liquidation price. Choose the leverage with that trade in mind.
#The arithmetic is public
The same functions run in the strategy lab, in the launch quote and in the keeper. They are covered by unit tests: the liquidation formula (with and without a custom maintenance margin), the trigger table above and the fee split are all asserted.