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How to Leverage Farm Safely

Use leverage in DeFi farming responsibly. Risk management strategies.

Yield FarmingAdvancedEstimated reading time30 minutes6 stepsPrerequisites: DeFi experience, Understanding of liquidation
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Quick Overview

1Understand Liquidation
2Start with Low Leverage
3Calculate Buffer
4Monitor Health Factor
5Have Exit Plan
6Deleverage in Profit

Leveraged yield farming can multiply returns but also losses. Here is how to do it with proper risk management.

Leverage Risks

LeverageReturn MultiplierLiquidation Risk
. . . . .. . . . . . . . . -. . . . . . . . .
1x1xNone
2x2xMedium
3x3xHigh
5x+5x+Very High

Risk Management Rules

  1. Never use max leverage
  2. Maintain buffer above liquidation
  3. Monitor daily
  4. Have exit strategy

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Step-by-Step Instructions

1

Understand Liquidation

Know exactly at what price you get liquidated.

Warnings

  • ⚠Leverage can wipe out your entire position
2

Start with Low Leverage

Begin with 2x max. Increase only with experience.

Tips

  • ✓Many pros stay at 2-3x
3

Calculate Buffer

Leave at least 30% buffer above liquidation price.

Tips

  • ✓More buffer = sleep better at night
4

Monitor Health Factor

Check health factor daily. Below 1.5 is danger zone.

Tips

  • ✓Set up alerts on Fensory
5

Have Exit Plan

Know exactly what you will do if price drops X%.

Tips

  • ✓Pre-set stop losses if available
6

Deleverage in Profit

Take profits by reducing leverage, not just adding more.

Tips

  • ✓Greed is the enemy

Frequently Asked Questions

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