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Trading

What Is Health Factor?

One number that tells you how close a borrowed position is to being closed.

Definition

Health factor is a lending market's summary of how much trouble you are in. Above 1.0 the position stands. At 1.0 it can be closed by anyone who wants to.

How it works

Health Factor = (Collateral Value x Liquidation Threshold) / Debt Value. Collateral falling or debt growing both push it down.

In Continuum

If you post L tokens as collateral somewhere, this is the number to watch. Volatility eats the buffer faster than most people expect, so 1.5 or better is the usual place to sit.

Related terms

Liquidation

Your position gets closed for you when the collateral no longer covers the debt.

Collateral

Assets deposited to back or secure a financial position.

Leverage

Borrowed money makes a position bigger, which multiplies the gain and the loss alike.

More trading terms

LiquidationLeverageFunding RatePerpetual Futures (Perps)

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