What is Risk Limit? What effect does the Risk Limit have on Margin? (Inverse Contract)

The concept of dynamic leverage is used for Bybit's Risk Limit. This means the larger the contract value traders hold, the lower the maximum leverage allowed. In other words, the initial margin requirement incrementally goes up by a fixed percentage at every specific increase in contract value level. Please note that the maintenance margin base rate is 0.5% for BTC and 1% for ETH, EOS and XRP, and the margin requirements will increase or decrease accordingly as risk limit changes.

Risk limit is a risk management measure to limit the risk exposure of traders. A large position with high leverage may cause huge contract losses when liquidated in a highly volatile market. Contract losses are created when the position is liquidated beneath the bankruptcy price and coupled with a depleted insurance fund that is insufficient to fully absorb the losses, Auto deleveraging (ADL) system will be triggered. Traders with a large position pose an increased risk of ADL to other traders on the exchange. To minimize the possibility of ADL occurring, Bybit imposes a risk limit on all trading accounts according to their positional contract value held.

As the position contract value increases, the maintenance margin and initial margin requirements will also increase. Users can choose to increase or decrease the risk limit through the Asset Overview panel. The default risk limit level on Bybit will always start from the lowest risk limit level. 

Bybit will perform a laddered liquidation process for traders using higher risk limits, and will automatically reduce the level of maintenance margin by attempting to reduce the risk limit levels to the lowest possible level to avoid an immediate full liquidation of the trader’s position. For more information, please click here.

Risk Limit Table：

Formula：

For more details, please refer to the table below. 

Risk Limit for BTCUSD 

Risk Limit for ETHUSD 

Risk Limit for EOSUSD 

Risk Limit for XRPUSD