Position Health Factor

The position health factor is a single numerical value that represents the overall stability of a borrower's account. It is calculated by comparing the value of the collateral to the total debt, adjusted for the asset's volatility and the protocol's risk parameters.

A health factor above one generally indicates that the position is safe, while a factor approaching or falling below one signals that liquidation is imminent. This metric provides a simple, at-a-glance way for users to monitor their risk and take action before a liquidation occurs.

Protocols use this factor to automate risk management, triggering warnings or liquidations based on the value. It is the primary indicator used by both users and protocols to gauge the safety of leveraged positions in real-time.