Leverage & marginLeverage & Margin
Leverage is the most powerful and most dangerous feature of TradFi contract trading. This page explains Mullet's initial margin, maintenance margin and liquidation mechanics, with worked examples of P&L and liquidation prices at different leverage levels.
Leverage is the most powerful and most dangerous feature of TradFi contract trading. This page explains Mullet's initial margin, maintenance margin and liquidation mechanics, with worked examples of P&L and liquidation prices at different leverage levels.
What leverage actually is
Leverage = position value ÷ your own margin. 10× leverage means $100 of yours controls a $1,000 position. The same multiple applies to P&L: if the underlying rises 5% your return is 50%, but a 5% move against you wipes out 50%.
Maximum leverage by asset class
| Asset class | Max leverage | Main instruments | Notes |
|---|---|---|---|
| Major forex | 100× | EUR/USD, GBP/USD, USD/JPY | The seven most liquid currency pairs |
| Minor forex | 80× | Crosses such as EUR/GBP, AUD/JPY | — |
| Major crypto | 20× | BTC, ETH, SOL, BNB | Leverage is capped because volatility is high |
| Other crypto | 15× | Top 100 altcoins | — |
| Commodities | 50× | XAU/USD, XAG/USD | Energy caps at 30× and steps down automatically before EIA data |
| Indices | 20× | SPX500, NAS100, DJI30 | — |
| Emerging markets | 50× | USD/MXN, USD/TRY and similar | — |
Three kinds of margin
Initial margin
The collateral locked when you open a position, equal to notional value ÷ leverage. Opening a 1,000 USDC SOL/USD position at 10× leverage requires 100 USDC of initial margin.
Maintenance margin
The minimum margin needed to keep the position open, usually 50% of the initial margin. When account equity falls below it, the position enters liquidation.
Available margin
Total account balance minus margin already in use. It can open new positions or absorb floating losses on existing ones.
Calculating the liquidation price
The liquidation price is where a position is closed automatically. The formulas are:
Worked example · liquidation price by leverage
Assume a long on SOL/USD at 180 USDC with a 0.5% maintenance margin rate:
| Leverage | Liquidation price | Drawdown you can absorb | Risk level |
|---|---|---|---|
| 2× | 91.80 | −49% | Low |
| 5× | 145.80 | −19% | Low |
| 10× | 162.90 | −9.5% | Medium |
| 20× | 171.90 | −4.5% | High |
| 50× | 177.30 | −1.5% | Very high |
| 100× | 178.62 | −0.77% | Very high |
The key observation: at 100× leverage, a mere 0.77% move against you wipes out your margin — and that can happen within 30 seconds. On assets like BTC / ETH with 60%+ monthly volatility, leverage above 50× is close to suicidal.
Partial vs full liquidation
Mullet uses tiered partial liquidation to avoid the market impact of force-closing a large position all at once:
- When equity falls below 110% of maintenance margin, a warning is sent
- When equity falls below 100% of maintenance margin, the liquidation engine steps in and closes at most 30% of the position each time
- Partial liquidation repeats until the margin ratio recovers above maintenance margin
- If the margin ratio keeps deteriorating and reaches 0%, full liquidation is triggered
Partial liquidations execute against the aggregated quote with a deviation of no more than 1%, and the platform charges a 0.1% clearing fee on the liquidated amount.
Negative balance protection: your maximum loss is limited to the assets in your account. If extreme market conditions push equity negative, Mullet does not pursue you for the shortfall.
Margin management tips
- Don't put everything into one instrument — even a correct call can shake you out
- Keep 30%+ available margin as a buffer for floating losses
- Beginners should stay under 5×, and only consider raising leverage after three months of consistent profitability
- Cross vs isolated margin: cross margin manages everything together but shares risk; isolated margin contains risk but uses capital less efficiently
Remember: leverage isn't a return amplifier, it's a time compressor — it makes you live through a full profit-and-loss cycle in far less time. Money management determines long-term survival far more than predicting direction does.