Margin Risk

Leverage can reduce or eliminate your equity quickly. Privacy does not protect against financial loss. Read this page before opening a position, including a demonstration position if you are learning how margin works.

Leverage amplifies losses

Ignoring costs and liquidation, a 2× long with $1,000 of equity has about $2,000 of asset exposure. A 10% decline in that asset is roughly a $200 loss, or 20% of the starting equity. Interest, swap costs and liquidation can make the result worse.

A short loses when the borrowed asset rises in price. The repayment cost can rise sharply. These are illustrations, not predictions or a complete liquidation calculation.

Liquidation is possible

Aave can allow liquidation when an account's health factor falls below 1. Price movements, collateral changes and borrowing interest can move the account toward that boundary even when you do nothing.

Liquidators can repay permitted debt and take collateral under Aave's rules. You can lose collateral and the position's entire equity. A healthy quote or signed execution minimum is only a check at execution time, not a lasting safety guarantee.

Markets in the same account share one health factor. Losses in one market can expose collateral added for another. Separate accounts have separate liquidation risk, but still share dependencies on Aave, tokens, oracles and SEAL contracts.

Rates, prices and liquidity can change

Borrowing rates are variable and debt grows with interest. Collateral prices can fall, stablecoins can lose their peg, and a borrowed asset can become more expensive. An account can deteriorate between checks.

Adding collateral or repaying debt may improve health, but cannot guarantee that your transaction confirms before liquidation. Reducing or closing also depends on lending and swap liquidity, execution prices and remaining shared debt.

Oracle and execution risk

Aave's oracle prices determine collateral valuation and liquidation conditions. Incorrect, delayed or discontinuous prices can cause losses. Thin Uniswap liquidity, price impact, slippage and MEV can worsen execution or cause a reviewed action to fail.

A failed atomic transaction preserves its unspent private inputs and account changes, but can still cost gas. Quotes do not reserve future prices or capacity.

Account and dependency risk

Keep the private margin controller key in a tested encrypted backup. Losing every copy can remove your ability to manage the account while its debt and liquidation risk continue.

SEAL, Aave, Uniswap, token issuers, oracles, RPCs and intent services introduce different failure risks. No independent SEAL security audit has been completed. See Risks & Security, audit status and the Margin Trading guide.