“Risk limit” here is a risk management measure used to prevent large liquidation incidents. DueDEX applies Risk Limits on all trading accounts to minimize the occurrence of large liquidations on margined contracts.
When facing liquidation in a volatile market, traders holding large positions, together with high leverage may cause huge system losses. If there is a system loss, and the insurance fund is insufficient to cover it, the Auto-leveraging will be triggered.
The Step model helps avoid this by increasing margin requirements for large positions.
Dynamic Risk Limit
Every contract has a Base Risk Limit and Step. Combined with the base Maintenance Margin and Initial Margin requirements, these numbers are used to calculate the full margin requirement at each position size.
If the position size increases to a certain level, the maintenance and initial margin requirements will increase as well. You need to authorize a higher risk limit on the Positions panel. And when the risk limit changes, margin requirements will change automatically.
Please note that, when you choose a high Risk Limit, the highest leverage you can choose will be decreased, that is, the minimum initial margin rate will be increased. However, the maintenance margin rate might still keep the same. On DueDEX, maintenance margin rate will be increased according with the increase of total position value.
DueDEX Risk Limit