> For the complete documentation index, see [llms.txt](https://docs.dano.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.dano.finance/how-to-use/guides/leverage-trading.md).

# Leverage Trading

### What is Leverage Trading?

Leverage Trading allows traders to borrow funds (leverage) to open positions larger than their own capital. This means:

* You can amplify profits if the market moves in your favor.
* You can take long positions (betting the price will go up) or short positions (betting the price will go down).
* You don’t need to hold the underlying asset to speculate on its price.
* You can use leverage to take advantage of market volatility.

### Benefits

* Amplified returns: Trade larger positions with less upfront capital.
* Short selling: Earn profits when markets decline.
* Efficient capital use: Keep more of your funds available while still trading at scale.
* Risk management: When used carefully (moderate leverage, diversification), leverage can help hedge other positions.

### Risks

* Liquidation risk: If your margin falls below the maintenance requirement, your position can be liquidated.
* Magnified losses: Losses grow as fast as profits when the market moves against you.
* Interest & funding costs: Holding leveraged positions often requires paying interest on borrowed funds or periodic funding rates.
* Market liquidity risk: In volatile markets, spreads can widen and execution may be less favorable.
* Complexity: Requires strong understanding of margin, fees, and collateral mechanics.

### Assets and Collateral

Collateral requirement: You must deposit collateral to open and maintain leveraged positions.

Margin usage: Collateral determines your initial margin (to open) and maintenance margin (to keep the position open).

Fee payments: Fees, interest, and funding costs may be deducted directly from collateral

Accepted assets: Danogo defines which tokens can be used as collateral (commonly stablecoins and major tokens).