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
Powered by GitBook
On this page
  • Overview
  • Dynamic Leverage Explained
  • Mechanism Summary
  • Why This Matters
  1. USDT Margined Perpetual Contract

Leverage and Position Limit

Overview

Risk limits are a core risk management mechanism designed to control the exposure of individual traders, particularly in highly volatile markets. Without such constraints, a trader holding a large position with high leverage could pose systemic risks and experience significant losses.

To manage this, the system implements dynamic leverage, where the maximum allowable leverage decreases as the position size increases.

Dynamic Leverage Explained

  • The larger the position value, the lower the maximum leverage available to the trader.

  • Conversely, higher leverage selections automatically reduce the maximum allowable position size.

This creates a balanced trade-off between risk and exposure, helping to ensure market stability.

Mechanism Summary

Let:

  • Lmax​: Maximum allowable leverage

  • Psize​: Trader’s current position size

Then:

  • As Psize↑, → Lmax↓

  • As Lchosen↑, → Pmax↓

This relationship ensures that:

Where f and g are decreasing functions reflecting the inverse relationship between leverage and position value.

Why This Matters

This approach helps:

  • Prevent market manipulation

  • Mitigate liquidation risk

  • Maintain platform integrity during high-volatility periods

It protects both the trader and the broader market from the negative impact of oversized, over-leveraged positions.

PreviousIntroductionNextLadder Maintenance Margin Rate

Last updated 1 month ago

Lmax=f(Psize)andPmax=g(Lchosen)L_{\text{max}} = f(P_{\text{size}}) \quad \text{and} \quad P_{\text{max}} = g(L_{\text{chosen}})Lmax​=f(Psize​)andPmax​=g(Lchosen​)