Risk Limit

Risk Limit

The platform applies risk limit to all trading accounts in order to reduce the possibility of significant forced liquidation.

Risk limit is a kind of risk management mechanism used to limit the position-holding risk of traders.  Under trading environment with large price fluctuation, a single trader who uses high leverage to hold a large position is likely to cause heavy close-out loss. Once margin amount is exhausted, ADL system may be triggered and thus bring additional risks to other traders.

The mode of incremental risk limit will help avoid the occurrence of such situation. Under such mode, the trader with large position needs to pay a higher initial margin while the maximum available leverage is lower.

Dynamic Risk Limit

Every contract has basic risk limit and incremental amount. Combining the requirements of basic maintenance and initial margin, these parameters are used to calculate the complete margin requirement for every position.

As the position increases, the requirements of maintenance margin and initial margin will also increase. Margin ratio will increase or decrease with the change of risk limit.

Risk limit level of current contract:

Risk limit level = (position value + untraded order value - basic risk limit) / incremental amount + 1

Note: risk limit level is rounded up to an integer.

The margin requirements for every contract product are as follows:

Initial margin ratio: IMR = risk limit level * 0.01
Maintenance margin ratio: MMR = risk limit level * 0.005

The risk limit of every contract product can be directly viewed on the trading page of the contract.