What is Leverage?
Leverage is using borrowed money or margin to control a position larger than your own cash, which magnifies both gains and losses by the same factor.
How it works
With 10x leverage, a 1% move in the asset is a 10% move in your capital. If the loss reaches the margin you put up, the position is closed by force, called liquidation. Higher leverage therefore means a smaller adverse move is enough to wipe out the whole stake, and fees and funding charges add to the cost of holding.
What it can't tell you
Leverage does not create an edge, it scales whatever result you already have, including the losses. Most of the strategies Tickfloor has tested trailed their benchmark before leverage is added.
Does it work as a strategy?
This is a concept more than a trading rule, so there is no single strategy to score. It matters for reading the results below.
Tickfloor's research desk has backtested 517 strategies, most against an equal-weight benchmark of the same assets rebalanced daily that pays no costs (the strategies pay theirs). After correcting for the 598 tests run (Benjamini-Hochberg), 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.
Common questions
What is Leverage?
Leverage is using borrowed money or margin to control a position larger than your own cash, which magnifies both gains and losses by the same factor.
How does Leverage work?
With 10x leverage, a 1% move in the asset is a 10% move in your capital. If the loss reaches the margin you put up, the position is closed by force, called liquidation. Higher leverage therefore means a smaller adverse move is enough to wipe out the whole stake, and fees and funding charges add to the cost of holding.
What are the limits of Leverage?
Leverage does not create an edge, it scales whatever result you already have, including the losses. Most of the strategies Tickfloor has tested trailed their benchmark before leverage is added.