Leveraged Trading Overview
Leveraged trading allows traders to enter positions larger than their wallet balance and to enter short positions. Both profit and loss will be accelerated if a trader trades more than 1x leverage. In order to trade with leverage, trades will operate on margin. Margin refers to the amount of capital that is required to enter a leveraged position.
Initial Margin & Maintenance Margin
Initial margin refers to the margin required to open a position, determined by the position size and leverage. Maintenance margin refers to the minimum amount required for holding a leveraged position and determines the Liquidation Price.
Initial Margin (IM)
Open Long order IM requirement: [Contract size*Min (Long limit order price, best ask price)]/Leverage. Order will reserve a two-way (fee to open + fee to close) taker fee of 0.075%. Actual trading fees will be calculated based on the nature of the order and the execution price.
Open Short order IM requirement: [Contract size*Max (Short limit order, best bid price)]/Leverage. Order will reserve a two-way (fee to open + fee to close) taker fee of 0.075%. Actual trading fees will be calculated based on the nature of the order and the execution price.
A close position order does not require any Initial Margin.
Maintenance Margin (MM)
Maintenance Margin(MM) is calculated using the maintenance margin rate (MMR) of the position. The MMR of each position increases as the margin tier increases.
For all positions, the required maintenance margin is MMR * Contract value at the open position price. The taker fee for closing the position will also be included in the maintenance margin requirement. This is the minimum margin required to continue holding a position. If the margin available in the position is less than the maintenance margin, the position will be liquidated.
MMR increases as tiered margin increases. For more details on Tiered Margin, please click here.
Bybit traders can hold long and short positions of one USDT contract simultaneously. For each contract, all long positions are combined as one long position, and all short positions are combined as one short position.
When holding long and short positions simultaneously, both positions require initial margin based on their corresponding margin tiers.
Isolated Margin & Cross Margin
The maximum loss of an isolated position is its initial margin and extra margin (if any). If the position gets liquidated, no additional margin will be drawn to the position.
Traders may manually append extra margin to an isolated position, which reduces the effective leverage, resulting in a better Liquidation Price. Once the position leverage is adjusted, all the extra margin posted previously will be reset to 0.
Besides, traders may enable auto margin replenishment (AMR) to append extra margin to the position when it is close to liquidation. Min(Initial margin of position, account available balance) will be drawn to the position when AMR is triggered. All the USDT available balance of the trading account can be drawn.
All USDT available balance in the trading account can be drawn to the cross margin position to prevent its liquidation. All unrealized profit and loss is shared among cross margin positions, where unrealized profit increases the account’s available balance while unrealized loss decreases the account’s available balance. The available balance can be used as margin to open new positions, and is also the trader's withdrawable amount.
When a trader switches a position from isolated margin mode to cross margin mode, if they hold long and short positions of the contract simultaneously, both positions will be switched to cross margin mode. When a trader tries to switch a position from cross margin mode to isolated margin mode, they can only do so when he holds either a long or short position or no position. If they hold both long and short positions of the contract simultaneously, cross margin mode cannot be switched to isolated margin mode.
Bybit uses Mark Price to avoid liquidation caused by low liquidity or market manipulation.
Under isolated margin, when position margin decreases to maintenance margin level, the position is liquidated. Please take note that if a trader holds long and short positions simultaneously under isolated mode, it may happen that both positions get liquidated under extreme market movement since long and short positions are independent.
Under cross margin mode, when available balance decreases to 0 and position margin decreases to maintenance margin level, the position is liquidated. Please take note that when holding hedged positions of both long and short under cross margin mode, only the net long or net short position may be liquidated. Fully hedged portions will not be liquidated.
When liquidation happens, Bybit uses partial liquidation to reduce the required maintenance margin to avoid full liquidation. The liquidation process is as follows.
Traders under the lowest margin tier
Cancel active orders of all USDT contracts;
If it still doesn’t meet the maintenance margin requirement, the position will be closed at the Bankruptcy Price by the liquidation engine.
Traders under second or higher margin tier
The liquidation engine will try to lower the margin tier to lower the margin requirement:
Cancel active orders of all USDT contracts;
Submit a FillOrKill order of the difference between the current position value and the lower margin tier value which satisfies the margin requirement, thus preventing further liquidation;
If the position still doesn’t meet the maintenance margin requirement, the whole position will be closed at the Bankruptcy Price by the liquidation engine.
For more details on the liquidation process, please click here.
If Bybit can close the liquidated position at a better value than the bankruptcy price, the residual margin will be added to Bybit's insurance fund.
If Bybit is unable to close the liquidated position at a better value than the bankruptcy price, the insurance fund will be drawn to absorb the loss. If the insurance fund is insufficient to cover the loss, Auto-Deleverage (ADL) will be triggered.
Bybit uses the insurance fund to prevent traders from auto-deleveraging. All USDT contracts share the same insurance fund to prevent the unnecessary ADL of less liquid contracts.
When a position gets liquidated, it will be taken over by the Bybit liquidation engine. If the liquidated position can not be closed at a better than Bankruptcy Price, and the insurance fund is insufficient to cover the loss, ADL mechanism will deleverage the opposite positions with the highest ADL ranking. ADL ranking is based on the effective leverage and PnL percentage.
ADL ranking of each position is indicated by ADL indicator. Each lit light indicates a 20% increase in the ADL ranking priority.
Under cross margin mode, should ADL be triggered, only the net long or short position will be auto-deleveraged. Under isolated margin mode, the long position and short position of the same contract may be auto-delevelaged by the ADL mechanism separately.
ADL Ranking Calculation
ADL ranking is determined by PnL percentage and the effective leverage high profit% and high leverage lead to high ADL ranking.
ADL Ranking = P&L Percentage × Effective Leverage (If P&L Percentage > 0)
ADL Ranking = P&L Percentage / Effective Leverage (If P&L Percentage < 0)
Effective Leverage = Abs[(Mark Value/(Mark Value - Bankruptcy value)]
P&L Percentage = (Mark Value - Avg Entry Value) / (Avg Entry Value)
Mark Value = Position Value at Mark Price
Bankruptcy Value = Position Value at Bankruptcy Price
Avg Entry Value = Position Value at Average Entry Price
Under isolated margin mode, the margin tier of each position is determined by the position size and active order of this position. Under cross margin mode, when a trader holds long and short positions of one contract simultaneously, the margin tier of both sides is determined by the larger position (including existing positions and active orders) of the long and short.
New Maintenance Margin (MM)% = MM% Base value + (No. of tier increments * MM% incremental value)
New Initial Margin (IM)% = IM% Base value + (No. of tier increments * IM% incremental value)
New Maintenance Margin Amount = New MM% * Total position value
For more details on Tiered Margin, please click here.
Perpetual Contract Overview
A perpetual contract is a derivative product similar to futures. It differs from futures as
Trading Mechanism of Perpetual Contract
When trading a perpetual contract on Bybit, apart from the principle of margin trading, traders should be aware of:
Mark Price: Mark Price is used to trigger liquidation.
Initial Margin and Maintenance Margin: Initial margin determines the margin to be used, and the Maintenance Margin determines the Liquidation Price.
Funding: Funding fee is exchanged directly between buyers and sellers every 8 hours. When the funding rate is positive, long positions pay to short positions. When the funding rate is negative, short positions pay long positions. Traders will only pay or receive a funding fee if they hold a position at funding timestamp.
Funding Timestamp: 00:00 UTC, 08:00 UTC and 16:00 UTC.
Funding fee = Position value * Funding rate
Funding is determined by interest rate and price premium/discount. Funding ensures that Bybit's last traded price is anchored to the reference index price, where the funding fee is exchanged between buyer and seller.
Interest rate = (USDT interest - Underlying asset interest) / Fund rate interval
Current daily USDT interest is 0.06%, and 0.03% for underlying asset interest. Fund rate interval is 3 (once every 8 hours). The current interest rate is 0.01%.
Perpetual contracts may be traded at a premium or discount to the mark price. Premium/discount will affect the next funding rate.
Premium Index (P) = (Max (0, Impact bid price - Mark price) - Max (0, Mark price - Impact ask price)) / Index price + Funding rate of current interval
Funding rate (F) = Premium index (P) + clamp (Interest rate (I) - Premium index (P), 0.05%, -0.05%)<br/>The Funding Rate is determined by the 8-Hour Interest Rate and the 8-Hour Premium / Discount. A +/-0.05% dampener is added. Therefore, if (I - P) is within +/-0.05% then F = P + (I - P) = I. In other words, the Funding Rate will be equal to the Interest Rate. The funding rate calculated from 00: 00-8: 00 is exchanged at 16: 00, the funding rate calculated from 8: 00-16: 00 is exchanged at 00: 00 and the funding rate calculated from 16: 00-00: 00 is exchanged at 00: 00.
Funding Rate Ceiling & Floor
Funding rate <= (Initial margin % of the first tier - Maintenance margin % of the firsttier) * 75%
Funding rate >= (Maintenance margin % of the first tier - Initial margin % on of the first tier) * 75%
For more details on funding, please click here.
Fair Price Marking
Bybit uses the Mark Price to prevent unnecessary liquidation caused by market manipulation or lack of liquidity. Liquidation is triggered by Mark Price.
Mark Price = Index Price * ( 1 + funding basis)
Funding basis = Funding rate * (Time until funding / Funding interval)
Note: When an order is executed, there may be immediate unrealized profit/loss, since the last traded price may deviate temporarily from the Market Price. Please note that it doesn’t mean you have made or lost money.
The Index Price represents the market consensus price of the underlying asset. It's derived from a weighted average of multiple spot exchange quotes, adjusted by data usability and weight adjustment factors. Test of data usability includes data’s timeliness and validity. The quoted price of reference exchanges that have passed the usability test will be weighted by an adjusted weight based on trading volume and price distance from the volume-weighted average price.
Ultimately, the Index Price of each pair is calculated by multiplying the prices of the various major spot exchanges by its adjusted weight.
Click here for the index reference details for each USDT Perpetual Contract.
USDT Perpetual Contract is quoted and settled in USDT. Margin is calculated and posted in USDT. Profit and loss is also calculated and settled in USDT. 1 contract represents 1 underlying asset, e.g. 1 BTC.
Order Cost Calculation
Order cost is the margin required to open a position. Traders can review the order cost on “Order confirmation window” and “Order zone”. It is calculated as the initial margin plus a 2-way taker fee. The actual fee charged/received depends on if the order is executed as a taker trade or maker trade.
Order Cost = Initial margin + Taker fee to open + Taker fee to close
For more detailed example, please click here
P&L for long position = Quantity x (Average exit price - Average entry price)
P&L for short position = Quantity x (Average entry price - Average exit price)
For more detailed example, please click here
Order Type Overview
Traders can place entry orders and exit orders on long and short sides respectively.
Limit order is used to specify the highest bid price / the lowest ask price a trader is willing to accept. Traders use this order type to minimize trading costs, while the order may not be executed if the order price is deep out of the market.
There are three types of Time in Force options for limit orders:
GoodTillCancelled Order (GTC) shall remain in effect indefinitely until fully executed or cancelled.
ImmediateOrCancel Order (IOC) must be filled immediately at the limit price or better only. If the order cannot be filled immediately or fully, the unfilled portion will be cancelled.
FillOrKill Order (FOK) is an order that must be immediately filled entirely at the limit price or better. Otherwise, it will be totally cancelled. No partial fills are allowed.
Post-only order won’t be executed in the market as a taker trade, and thus will earn a maker rebate when executed. Post-only order will be automatically cancelled if it can be executed immediately against an existing order in the market.
Market order is intended for traders who wish to have their orders executed immediately. The order will be filled immediately at the best price available from the order book. A large market order may have market impact and increase trade cost.
Conditional order is a limit order or a market order taking effect when a specific condition is met. Conditional order can be triggered by Mark Price, Last Traded Price or Index Price.
Take-Profit & Stop-Loss Orders
Take-profit and Stop-loss orders are exit strategies that traders place on positions to ensure timely and automatic exits. A Stop-loss order is used as a risk management tool to limit the loss of a position. Bybit offers the following three types of take-profit and stop-loss orders. Please click here for other settings of take-profit and stop-loss.
Take-Profit Market Order: Once price reaches take-profit price, a market order is placed immediately
Stop-Loss Market Order: Once the price reaches the stop-loss price, a market order is placed immediately
Trailing Stop Order: Traders set trigger price and trailing price distance.When trigger price is reached, trailing stop will be activated. When price reverts to reach the trailing price distance, market order is triggered to close the position. Trigger price can be Mark Price, Index Price or Last Traded Price.
Bybit may charge a trading fee when an order is executed.
The trading fee is incurred upon execution of an order. It is deducted from the wallet balance and won’t affect the initial margin of the order.
The trading fee is negative (-0.025%) for liquidity providers/makers (order enters the order book and increases market depth). In other words, traders receive trading fees as a rebate from the platform.
The trading fee is positive (0.075%) for liquidity consumers/takers (order executed immediately and reduces market depth). In other words, traders pay trading fees to the platform.
For a detailed example, please click here
The asset exchange for users to trade different types of contract.<br/>Market makers provide a fair exchange rate based on the Index Price. Bybit charges a fixed transaction fee to exchange assets.
For more details, please click here