Leverage

Leverage lets you control a position larger than your account. At 5× leverage, $1,000 of equity controls $5,000 of notional exposure:

leverage = notional value / equity used as margin

The double edge

Leverage multiplies returns in both directions. On that 5× position, a +2% market move is +10% on your equity, and a −2% move is −10%. Push far enough against you and the exchange force-closes (liquidates) the position to protect the borrowed funds.

A useful mental model: leverage doesn't change the odds of your strategy, it changes the consequences of its losing streaks. A system with a 25% max drawdown unlevered has a ruinous ~75% drawdown at 3×, and that's before accounting for liquidations that unlevered testing never hits.

In backtesting

AlphaProve applies leverage through risk settings (account and per-symbol caps) rather than baking it into strategy code, so the same rules can be tested at different risk levels without rewriting the strategy.

On AlphaProve

Alongside those caps, a levered position can run on cross or isolated margin, and the engine models the liquidation price instead of assuming your stop always fills first. When a move reaches that price before the stop does, the trade closes as a LIQUIDATION in the tearsheet's exit-reason breakdown, so the ruinous drawdowns the note above warns about show up as actual forced exits rather than a footnote. Portfolio kill-switches such as daily_loss_limit_pct and max_gross_exposure_pct add a second brake that caps damage across every open position at once.