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    Risk Limit (Perpetual and Futures Contracts)
    bybit2024-05-07 08:39:28



    Introduction to Risk Limit

    The concept of dynamic leverage plays a crucial role in Bybit's Risk Limit system. This means that as traders hold larger contract values, the maximum allowable leverage decreases. In simpler terms, the initial margin requirement gradually increases by a fixed percentage as the contract value rises to a specific level. Each trading pair has its own maintenance margin base rate, and margin requirements adapt in response to changes in the risk limit.

     

    The risk limit is a vital risk management tool designed to curb traders' exposure to risks. In highly volatile markets, substantial positions with high leverage can lead to significant contract losses once liquidated. Contract losses occur when a position is liquidated below the bankruptcy price. If the insurance fund cannot fully cover these losses, it triggers the Auto Deleveraging (ADL) system. Large positions with high leverage increase the risk of ADL for other traders on the exchange. To mitigate the risk of triggering ADL, Bybit imposes risk limits on all trading accounts based on their total contract value.

     

    As the position value increases, the system will automatically adjust the user's risk limit based on both the position value and the active order value. Consequently, the requirements for maintenance margin and initial margin will also change accordingly. In cases where users have no active orders or positions, the risk limit will default to the lowest tier. 

     

    For traders with higher risk limits, Bybit employs a laddered liquidation process in the event of liquidation. It automatically reduces the maintenance margin level, striving to lower the risk limit levels to the minimum possible level. This approach prevents an immediate full liquidation of the trader's position. 

     

    For more comprehensive information on the Liquidation process, please refer to our dedicated guides below: 





    How to View Risk Limit Information

    To view the Risk Limit information for all trading pairs, you can click on the Derivatives Info → Derivatives Trading Rules → Margin Data or visit this page.

     

     

    Select the trading pair you would like to view, and you can see the complete Risk Limit information. 

     

    RL 01.png

     

    Please note that the risk limit information only applies to the Isolated and Cross Margin Mode. Under the Portfolio Margin in the Unified Trading Account, traders are not able to adjust or view the risk limit, as the risk in the Portfolio Margin is calculated based on the overall portfolio in the Unified Trading Account.




     

    How Automatic Adjustment of Risk Limit Works

    Your chosen leverage determines the maximum allowable position value that can be opened. The automatic adjustment of risk limit tiers doesn't alter your leverage directly. Instead, it dynamically increases or decreases the risk limit tiers within the allowable range of the maximum position value. This adjustment is based on each of your open active orders and positions, ensuring your position consistently aligns with the most suitable risk limit tier while maintaining the security of your account.

     

    Note: The system will conduct a trial calculation before automatically adjusting the risk limit tier to ensure that immediate liquidation will not be triggered. If the immediate liquidation occurs due to the adjustment of the risk limit tier, the risk limit tier will remain unchanged.

     

     




    Example:

    Let’s consider Bob, who sets the leverage for the BTCUSDT contract to 90x. According to the risk limit tier table, the maximum allowable position value for 90x leverage is 2.6 million.

     

    Suppose Bob currently holds a long position in BTCUSDT contracts with a value of 1 million. Now, Bob has placed an additional long order for 1 million in BTCUSDT contracts, the risk limit tier will move from the first tier to the second tier.

     

    However, if Bob attempts to place another long order for 1 million in BTCUSDT contracts, the system will block the order. This happens because the total value of 3 million in positions and active orders exceeds the 90x maximum allowable position value of 2.6 million. If Bob intends to open a position exceeding 2.6 million, he must manually reduce the leverage to a maximum of 80x. This adjustment will raise the maximum allowable position value to 3.2 million.

     

    RL 02.png




     

    Calculation for Risk Limit’s Effective Position Value

    For One-way position mode:

    Effective Position Value = Max (Long Open Position Value + Long Order Value, Short Open Position Value + Short Order Value)

     

    Examples:

    1. If Bob holds 1 BTC of BTCUSDT long position with an average entry price of $40,000 and simultaneously has a 0.5 BTC long order with an order price of $30,000, the risk limit value is calculated as Max (40,000 + 15,000, 0) = $55,000.
    2. If Bob holds 1 BTC of BTCUSDT long position with an average entry price of $40,000, along with a 0.5 BTC long order with an order price of $30,000 and 3 BTC short order with an order price of $50,000. The risk limit value is calculated as Max (40,000 + 15,000, 150,000) = $150,000.

     

     

     

    For Hedge (Two-way) position mode:

    Effective Position Value = Max (Long Open Position Value + Long Open Order Value, Short Open Position Value + Short Open Order Value)

     

    Examples:

    1. If Bob holds a 1 BTC of BTCUSDT long position with an average entry price of $40,000 and simultaneously has a 0.5 BTC long order with an order price of $30,000 and a 1 BTC close long order with an order price of $50,000 in BTCUSDT contracts, the risk limit value is calculated as max (40,000 + 15,000, 0) = $55,000.
    2. If Bob holds a 1 BTC long position with an average entry price of $40,000 and a 1 BTC short position with an average entry price of $50,000 in BTCUSDT contracts, simultaneously has a 0.5 BTC with an order price of $30,000 long open order, a 1 BTC with an order price of $60,000 short open order in BTCUSDT contracts, the risk limit value is calculated as max (40,000 + 15,000, 50,000 + 60,000) = $110,000.



     

     

    Platform Rules on Risk Parameter Adjustment

    Bybit conducts routine assessments of market liquidity. In the event of significant changes in market conditions, the Risk Limit may undergo adjustments, and the specific risk parameters below will be affected:

    • Initial Margin rate (IMR)
    • Maintenance Margin rate (MMR)
    • Maximum Leverage Allowed
    • Position Limit

     

    Before any adjustments to the new risk parameters are made, Bybit will give users advance notice through announcements, and reach out to users with positions through email notifications. During the adjustment, the system will perform a trial calculation of your account’s risk. If the post-adjustment risk is deemed to be low, the system will implement the new adjustment to your account. As a result, the margin requirements for your position may change.

     

    If the system deems that the post-adjustment risk is higher, the new risk parameters will fail to apply to your account immediately. In this case, a 10-day buffer period will be given, during which you will only be allowed to place orders with a Reduce-only nature or cancel orders for the specific trading pair in question. You won’t be able to place new markets or limit orders that would increase your position size (conditional orders remain unaffected) until you add more margin to your account or position to accommodate the new risk limit tier. Any existing orders will be retained.

     

    When the 10-day buffer period ends, the system will automatically apply the new risk parameters to the trading pair, allowing you to open positions again. However, please be aware that your position may be exposed to liquidation risk after the adjustment. Therefore, you are advised to manage your position or account risk by transferring additional funds to align with the new risk parameters within the 10-day buffer period, reducing any potential liquidation risk. 

     

    If you have already taken the above measures, you can try to click on the Lift Restriction to remove restrictions.  

     

     




    Notes:

    — When your risk parameters are adjusted, it may affect your trading strategies executed via trading tools such as Trading Bot, TWAP, Webhook Signal Trading, and others. New orders will not be placed if you have insufficient margin. You can deposit or transfer more funds to your Derivatives or Unified Trading Account or reset your strategies.

    — If you have no position or active orders, and the existing leverage used is higher than the newly adjusted maximum leverage allowed, you may encounter an error message restricting you from placing an order. Please manually adjust the leverage to align with the adjusted maximum leverage allowed. 

    — During the 10-day buffer period: 

    1. Any running strategies such as TWAP, Chase Order, Webhook or Iceberg Order will not be terminated but only reduce-only order will be placed. Any open orders will be rejected until the 10-day buffer period is due. 
    2. Existing perpetual positions held by the trading bot will not be closed, and no new orders will be placed. The bot will not be terminated. It is recommended to manually terminate the bot during the 10-day buffer period or add more investment to your bot to align with the new risk parameters when the 10-day buffer period ends.

    — Criteria for determining lower account risk after risk parameter adjustments are as follows:

     

    • Standard Account:

    Long position: (Position liquidation price under the new risk limit rule × 0.75 + 0.25 × average entry price) < Current Mark price.

    Short positions: (Position liquidation price under the new risk limit rule × 0.75 + 0.25 × average entry price) > Current Mark price.

     

    • Unified Trading Account: 

    Under the new risk limit, Account Maintenance Margin Rate < 75%

    How To Resolve The Error Message: Expected Position Value Will Exceed Risk Limit When The Order Is Filled

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