Coinlocally Docs
Perpetual Contracts
Perpetual Contracts
  • Introduction
  • Overview
    • Funding Rate
    • Mark Price
    • Index Price
    • Ladder Balancing Mechanism
    • Insurance Fund
    • Auto-Deleveraging (ADL)
  • USDT Margined Perpetual Contract
    • Introduction
    • Leverage and Position Limit
    • Ladder Maintenance Margin Rate
    • Margin and Profit/Loss Calculations
  • Coin Margined Perpetual Contracts
    • Currency Standard Perpetual Contract
    • Leverage and Position Limit
    • Ladder Maintenance Margin Rate
    • Margin and Profit/Loss Calculations
  • Functions
    • Perpetual Contract User Guide
    • One-way and Two-way Positions
    • Conditional Order
    • Take Profit, Stop Loss TP/SL
    • Take Profit Stop Loss Order
    • Contract Grid
    • Futures Copy
      • How to Carry Out a Transaction
      • Profit Sharing
      • How to Copy Trade
      • Futures Copy Trading Rules
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  • Overview
  • Dynamic Leverage Model
  1. Coin Margined Perpetual Contracts

Leverage and Position Limit

Overview

Risk limits are essential risk management tools designed to prevent excessive exposure from individual traders, particularly in high-volatility markets. Without such controls, a trader holding a large position with high leverage could create significant systemic risk and incur large losses.

To mitigate this, the platform utilizes a dynamic leverage model that adjusts according to the size of the position.

Dynamic Leverage Model

The system dynamically adjusts a trader’s maximum allowable leverage based on their open position size.

Key Rules:

  • The larger the position size, the lower the maximum leverage that can be applied.

  • Conversely, the higher the leverage selected, the smaller the allowable position size.

Mechanism Summary

Let:

  • Lmax: Maximum leverage available

  • Pvalue​: Value of the trader’s open position

Then:

Lmax=f(Pvalue)where f is a decreasing functionL_{\text{max}} = f(P_{\text{value}}) \quad \text{where } f \text{ is a decreasing function}Lmax​=f(Pvalue​)where f is a decreasing function

Likewise:

Pmax=g(Lselected)where g is a decreasing functionP_{\text{max}} = g(L_{\text{selected}}) \quad \text{where } g \text{ is a decreasing function}Pmax​=g(Lselected​)where g is a decreasing function

Purpose and Benefits

  • Limit exposure of large positions with high leverage

  • Reduces systemic risk in volatile market conditions

  • Encourages responsible trading behavior

By scaling leverage with position size, the platform ensures a balance between flexibility and risk control.

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Last updated 1 month ago