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Instrctions of Risk Limit
Gate.io
Updated at:57 days 2 hours ago
lv

Risk Limit refers to the machinery set-up to prevent the great impact on the contract market caused by the huge liquidation amount. Setting up limits for the number of positions users can hold reduces the possible impact that smashing exceeds the maintenance margin ratio under a severe market situation.

The maintenance margin ratio is the space left for exchanges for liquidation. The lower the MMR, the smaller the space, and the more strict requirements for the liquidity of the exchanges. Apart from the liquidity, it will also be affected by the number of liquidated positions. The smaller the number is, the easier it is to accomplish liquidation.

Users can raise the risk limit to hold more positions, which will increase the MMR ( correspondingly increase the initial margin ratio, that is reduce the allowed leverage ).

Risk Limit Adjustment Table:

img 1.Sliding the increasing risk limit, the adjustment is effective for both directions. 2.Applying the sliding increasing risk limit on the corresponding trading pair, the basic risk limit can be viewed in the Contract Details. 3.For each increase of the position risk limit step, the MMR and initial margin ratio need to be increased by 1 unit correspondingly. 4.The adjustment of the risk limit cannot exceed the maximum risk limit.

For example:

Take BCH_USDT as an example, the maintenance margin is 1%, the basic risk limit is 500,000USDT, the risk limit step is 500,000USDT, the maximum risk limit is 500,000USDT. As shown in the following picture: img

When the risk limit of BCH_USDT is increased to 1,500,000USDT, the maintenence margin will become 3% ( 1% + 1% +1%). img

As shown in the picture above, the initial margin is adjusted from 2% to 4% ( 2% + 1% + 1%), since the initial margin ratio = 1/leverage *100%. After the adjustment mentioned above, the maximum leverage will be changed as well, that the maximum leverage = 1/ initial margin ratio.

According to the formula mentioned above:

when the BCH_USDT risk limit increased to 1,500,000USDT, the maximum leverage of this trading pair = 1/4% = 25

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