SF - Estimated leverage ratio
Estimated leverage ratio
Indicator appearance
Description
The estimated leverage ratio (ELR) is defined as the ratio of open interest to the exchange reserve.
Features
In the graphics settings window, the user can choose the display colors and the opacity of the indicator and the zero line.
Indicator graphics settings
Access by plan
| Basic | Basic | Trader | Pro |
|---|---|---|---|
| Estimated leverage ratio | - | + | + |
Interpretation
The estimated leverage ratio shows how much leverage users take on average. For a derivatives exchange, ELR shows the average leverage used by its users. This measures trader sentiment: whether traders take high or low risk, and the overall trend in investors' appetite for leverage.
High ELR: the market is over-leveraged, so volatility may rise. Low ELR: volatility is lower.
Rising trend: leverage is increasing
Rising values show that more and more investors take on the high risk of using leverage when trading derivatives.
Also, if ELR is high compared with the last two days, it shows that traders are quite confident in their positions.
Falling trend: leverage is decreasing
Falling values show that fewer and fewer investors take on the risk of using leverage when trading derivatives.
Also, if ELR is low compared with the last two days, it shows that traders are changing their minds or closing their positions.
Source: cryptoquant