Understanding Risk Limits in Perpetual Futures Trading

When trading perpetual or futures contracts, one of the most critical concepts every trader needs to master is the risk limit. A risk limit is a built-in safety mechanism that automatically adjusts your maximum leverage as your position size grows. In essence, the larger your position, the lower your maximum allowable leverage becomes—a dynamic relationship designed to protect your account from catastrophic losses and prevent the need for emergency liquidations that could destabilize the entire platform.

What Is a Risk Limit and Why Does It Matter

At its core, a risk limit functions as a protective guardrail in derivatives trading. The concept of dynamic leverage is fundamental to this system: as you hold larger contract positions, the maximum leverage available to you gradually decreases. This means your initial margin requirement increases in fixed increments as your contract value rises.

Why is this important? In highly volatile markets, traders holding massive positions with excessive leverage can trigger liquidations that result in contract losses. When these losses exceed what the insurance fund can cover, the system activates an Auto Deleveraging (ADL) mechanism—a cascading effect that forces other traders on the platform to reduce their positions involuntarily. For traders holding large positions, being on the wrong side of an ADL event can be financially devastating. By implementing a risk limit structure, platforms enforce graduated constraints that make it impossible to accumulate dangerously leveraged positions beyond certain thresholds.

Each trading pair has its own maintenance margin base rate, and margin requirements automatically adapt as your risk limit tier changes. The risk limit thus serves as both a personal account protection tool and a systemic safeguard for the broader trading ecosystem.

How Dynamic Leverage Affects Your Risk Limit

Your chosen leverage level determines the maximum position size you can open. However, the automatic adjustment of risk limit tiers doesn’t directly change your leverage setting—instead, it dynamically increases or decreases which risk limit tier applies to you based on your active positions and orders.

The system performs this adjustment in real time, analyzing each of your open orders and existing positions to ensure your account consistently aligns with the most appropriate risk limit tier. Crucially, before any automatic adjustment occurs, the system conducts a preliminary trial calculation to verify that the adjustment won’t trigger immediate liquidation. If an immediate liquidation would result from the new risk limit tier, the system keeps your current tier unchanged, protecting you from sudden forced closures.

Practical Example: Understanding Risk Limit Tiers in Action

Consider a trader, Alex, who sets 90x leverage on a BTCUSDT contract. According to the risk limit tier structure, at 90x leverage the maximum allowable position value is 2.6 million.

Alex currently holds a long position valued at $1 million. When Alex places an additional long order for $1 million, the system automatically moves the account from the first risk limit tier to the second tier—still within acceptable limits.

However, if Alex attempts to place a third long order for another $1 million, the system blocks this order. Why? Because the combined value ($3 million) would exceed the 2.6 million maximum allowable for 90x leverage. To proceed, Alex must manually reduce leverage to 80x, which raises the maximum allowable position value to 3.2 million, thereby allowing the larger position.

This graduated approach prevents traders from accidentally overleveraging themselves to the point of guaranteed liquidation.

Accessing Your Risk Limit Information

To view the detailed risk limit parameters for all trading pairs, traders typically navigate to the platform’s derivatives information section, often found under Derivatives Info → Derivatives Trading Rules → Margin Data. After selecting your desired trading pair, the complete risk limit structure appears, showing all tiers with their corresponding:

• Initial Margin Rate (IMR)
• Maintenance Margin Rate (MMR)
• Maximum allowable leverage
• Position limits per tier

It’s important to note that risk limit information applies specifically to Isolated and Cross Margin modes. Under Portfolio Margin structures in Unified Trading Accounts, the risk calculation shifts to an aggregate portfolio basis rather than per-pair limits, and traders cannot manually adjust individual pair risk limits.

Automatic Risk Limit Adjustment in Real Time

The system’s automatic adjustment mechanism operates continuously, updating your risk limit tier based on real-time changes to your position and order values. This dynamic response means your tier can shift multiple times throughout a trading session as prices move and positions grow or shrink.

Because the mark price fluctuates constantly, position values change accordingly. As a result, your risk limit tier adjusts in real time, which directly affects your required maintenance margin (MMR). For example, if the mark price increases and pushes your total position value higher, you might automatically move from Tier 2 to Tier 3, resulting in a higher maintenance margin requirement and increased account risk.

This real-time responsiveness creates a living, breathing system where your risk profile is continuously recalibrated—sometimes multiple times within a single volatile trading session—ensuring you never accidentally maintain a position that exceeds safe leverage parameters.

Understanding Position Value Calculations

The method for calculating your effective position value depends on your chosen position mode:

For One-Way Position Mode:

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

Example 1: Alex holds 1 BTC of long position valued at $40,000 with an active 0.5 BTC long order valued at $15,000. The risk limit calculation is: Max (40,000 + 15,000, 0) = $55,000

Example 2: Alex holds 1 BTC long position at $40,000, plus an active 0.5 BTC long order at $15,000, and simultaneously places a 3 BTC short order at $150,000. The calculation becomes: Max (40,000 + 15,000, 150,000) = $150,000—the larger value triggers the risk limit tier move.

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)

Example 1: Alex holds a 1 BTC long position at $40,000 plus a 0.5 BTC long order at $15,000 and a 1 BTC close-long order at $50,000. The calculation is: Max (40,000 + 15,000, 0) = $55,000

Example 2: Alex maintains a 1 BTC long position ($40,000) and a 1 BTC short position ($50,000), while having a 0.5 BTC long open order ($15,000) and a 1 BTC short open order ($60,000) active simultaneously. The risk limit value is: Max (40,000 + 15,000, 50,000 + 60,000) = $110,000

Important Notes on Value Calculations:

For USDT and USDC contracts:

• Position Value = Contract Size × Mark Price
• Order Value = Contract Size × Mark Price

For Inverse contracts:

• Position Value = Contract Size ÷ Mark Price
• Order Value = Contract Size ÷ Mark Price

Since mark prices continuously fluctuate, your position value changes in real time, causing your risk limit tier to adjust automatically and affecting your maintenance margin requirements accordingly.

Platform Rules When Risk Parameters Change

Platforms conduct routine assessments of market liquidity conditions. During periods of significant market volatility or structural shifts, risk parameters may be adjusted to maintain system stability. When this occurs, the following elements can be affected:

1. Initial Margin Rate (IMR)
2. Maintenance Margin Rate (MMR)
3. Maximum Leverage Allowed
4. Position Limits

Before implementing changes, the system performs a trial calculation to assess your account’s risk level under the new parameters. If your post-adjustment account maintenance margin ratio remains below 75% (indicating low risk), the new parameters are implemented immediately. Your margin requirements may shift as a result.

When Post-Adjustment Risk Is High

If the system determines that applying new risk parameters would push your account into a higher-risk category, the changes don’t apply immediately. Instead, a 10-day buffer period is activated during which:

• You can only place reduce-only orders or cancel existing orders for the affected trading pair
• You cannot open new positions or place market/limit orders that would increase your position size
• Conditional orders remain unaffected during this period
• Any existing orders are retained

This grace period gives you time to actively manage your risk by either:

• Transferring additional funds to your account
• Reducing position sizes
• Closing trades to align with new risk parameters

Once the 10-day buffer expires, the system automatically applies the new risk parameters. However, be aware that your positions may face increased liquidation risk following this adjustment. It is strongly recommended to manage your account during the buffer period by adding funds or reducing positions to prevent post-adjustment liquidation scenarios.

If you have already taken corrective measures, you can attempt to click “Lift Restriction” to remove trading limitations early.

Additional Considerations During Adjustment Periods

• Automated trading tools (Trading Bot, TWAP, Webhook Signal Trading, etc.) may be affected. New orders won’t execute if insufficient margin exists; consider depositing funds or resetting strategies.

• Existing leverage conflicts: If you hold no positions but your leverage setting exceeds the newly adjusted maximum, you’ll encounter order restrictions. Manually lower your leverage to match the new maximum.

• During the 10-day buffer:

  • Running strategies like TWAP or Iceberg Orders continue but only place reduce-only orders; all other pending orders face rejection.
  • Trading bots won’t auto-close existing positions but also won’t open new ones. Consider manual termination or additional capitalization to align with new parameters before the buffer expires.

Understanding how risk limits work provides traders with the knowledge needed to scale positions responsibly while the system provides the safeguards necessary to protect individual accounts and market stability simultaneously.