What is a risk limit?
Risk limit is an important risk management tool that aims to reduce the potential risks brought by market fluctuations by setting an upper limit on the number of positions held by users. In contract trading, risk limits can effectively prevent drastic fluctuations in market prices due to large-scale forced liquidation.
Users can query the risk limit information of the corresponding trading pair in 《Contract Information》.
Explanation of parameters in risk limits
Risk limits are composed of several key parameters, each of which plays a different role in risk management:
- Basic risk limit: The initial maximum position that a user can hold in the contract market. After exceeding this limit, the maintenance margin rate and the starting margin rate will begin to increase.
- Maintenance margin rate: The minimum margin requirement for users to maintain existing positions. The lower the maintenance margin rate, the lower the relative risk of the position.
- Starting margin rate: The minimum margin amount that users need to provide when opening a position. As the risk limit increases, the initial margin rate will also increase accordingly.
The role of risk limits
The main role of risk limits is to protect market liquidity and prevent market fluctuations caused by large forced liquidations. In extreme market environments, higher positions may lead to huge losses, which in turn have a negative impact on the entire market. By setting risk limits, the system can adjust users' margin requirements in a timely manner to reduce potential risks.
How to adjust risk limits?
Users can increase risk limits according to their needs, but it should be noted that increasing risk limits will directly affect the increase in maintenance margin rate and initial margin rate, resulting in a reduction in the maximum leverage multiple.
Taking BTCUSDT as an example, the basic risk limit is 190,000 and the maximum risk limit is 750,000. As the risk limit increases, the maintenance margin rate and initial margin rate will also increase accordingly. Please refer to the risk limit level in the 《Contract Information》for details.
Notes
- The risk limit adjustment cannot exceed the maximum set value.
- After the risk limit is adjusted, the maximum leverage multiple will change accordingly.
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