# Leverage Trading

Leverage trading on XEI allows traders to borrow assets for immediate trading, utilizing strategies like short selling and leverage long positions. In short selling, investors profit from declining asset prices by repaying the lender at a lower cost. Leveraged long positions involve borrowing to purchase assets, profiting from price increases. These strategies depend on price changes and leverage ratios, offering a balanced mix of risk and reward.

What sets our perpetual swap design apart is its full on-chain functionality, based on margined loans provided to traders. This unique approach enables traders to engage in perpetual swaps using leverage funds sourced directly from the on-chain loan platform YEI.

In practical terms, XEI allows anyone to create lending pools for specific trading pairs, such as SEI/USDC, facilitating a wide range of leveraged trading activities. Users contribute to these pools, providing liquidity and earning interest based on utilization rates. Traders can then borrow from these pools for leveraged trades, with XEI ensuring efficient execution and loan management. 

This system simplifies the trading process and enhances liquidity on the decentralized exchange, obviating the need for separate order books. When traders close their positions, XEI handles the conversion and repayment processes, ensuring that lenders receive their due while traders settle their debts, reaping profits or bearing losses as per their trade outcomes.

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