BitMEX is a popular peer-to-peer crypto-products trading platform that allows traders to leverage their trades up to 100x with only Bitcoin as collateral. However, trading with leverage can be risky, and BitMEX has implemented risk limits to prevent traders from losing more than they can afford. In this guide, we will explore BitMEX’s risk limits and how they work.
Understanding BitMEX’s risk limits is crucial for any trader who wishes to use the platform. BitMEX’s risk limits are designed to ensure that traders do not lose more than they can afford to lose. The Trading Platform is designed so that the maximum risk associated with any position on the Trading Platform shall not exceed the actual amount of digital assets allocated to the relevant position. This is achieved through a combination of fees, funding, margin, and premium. BitMEX also has a liquidation system in place to prevent traders from losing more than their initial investment.
Key Takeaways:
- BitMEX is a peer-to-peer crypto-products trading platform that allows traders to leverage their trades up to 100x with only Bitcoin as collateral.
- BitMEX’s risk limits are designed to ensure that traders do not lose more than they can afford to lose.
- The Trading Platform is designed so that the maximum risk associated with any position on the Trading Platform shall not exceed the actual amount of digital assets allocated to the relevant position.
Understanding BitMEX
Ownership and Operation
BitMEX is a peer-to-peer cryptocurrency trading platform owned and operated by HDR Global Trading Limited, a company incorporated in the Republic of Seychelles. The platform offers trading in various cryptocurrency derivatives, including Bitcoin futures and swaps, with up to 100x leverage.
Supported Browsers
BitMEX recommends using the latest version of Google Chrome or Mozilla Firefox to access its platform. Users are advised to avoid using old browsers as they may not support the latest security protocols. Opera is also supported, but users are encouraged to upgrade to the latest version for optimal performance.
Restricted Jurisdictions
BitMEX restricts access to its platform from certain jurisdictions due to regulatory reasons. Users from the United States of America, Québec (Canada), Hong Kong Special Administrative Region of the People’s Republic of China, Bermuda, Cuba, Crimea and Sevastopol, Iran, Syria, North Korea, and Sudan are prohibited from accessing the platform.
| Restricted Jurisdictions |
|---|
| United States of America |
| Québec (Canada) |
| Hong Kong Special Administrative Region of the People’s Republic of China |
| Bermuda |
| Cuba |
| Crimea and Sevastopol |
| Iran |
| Syria |
| North Korea |
| Sudan |
BitMEX takes compliance with regulatory requirements seriously and reserves the right to block access to its platform from any jurisdiction where it is not authorized to operate.
In summary, BitMEX is a peer-to-peer cryptocurrency trading platform that offers trading in various cryptocurrency derivatives with up to 100x leverage. It recommends using the latest version of Google Chrome or Mozilla Firefox to access its platform and restricts access from certain jurisdictions due to regulatory reasons.
BitMEX Trading Platform
BitMEX is a peer-to-peer cryptocurrency trading platform that allows users to trade Bitcoin and other cryptocurrencies with leverage. The platform is known for its advanced trading features, high liquidity, and low fees. In this section, we will explore the user interface and testnet platform of BitMEX.
User Interface
The BitMEX trading platform is designed to be user-friendly and intuitive. The platform’s interface is divided into several sections, including the order book, chart, and trade history. Users can easily navigate between these sections to view real-time market data and place orders.
The order book displays all the buy and sell orders for a particular cryptocurrency. Users can view the price, quantity, and order type of each order. The chart section displays a real-time price chart for the selected cryptocurrency. Users can customize the chart by selecting different timeframes and indicators.
The trade history section displays a list of all the trades that have taken place on the platform. Users can view the price, quantity, and time of each trade. The platform also offers advanced trading features such as stop-loss orders, take-profit orders, and trailing stops.
Testnet Platform
BitMEX also offers a testnet platform that allows users to test their trading strategies without risking real money. The testnet platform is identical to the live platform, except that it uses testnet Bitcoin instead of real Bitcoin.
Users can create a testnet account and receive a certain amount of testnet Bitcoin to trade with. This allows users to familiarize themselves with the platform’s features and test their trading strategies in a risk-free environment.
| BitMEX Trading Platform | Testnet Platform |
|---|---|
| User-friendly interface | Identical to live platform |
| Advanced trading features | Uses testnet Bitcoin |
| High liquidity | Risk-free trading environment |
| Low fees | Allows users to test trading strategies |
Overall, BitMEX’s trading platform is designed to be user-friendly and intuitive, while also offering advanced trading features and low fees. The platform’s testnet environment allows users to test their trading strategies without risking real money.
Trading on BitMEX
BitMEX is a peer-to-peer trading platform that allows users to trade cryptocurrency derivatives. It is known for its high leverage and risk management features. In this section, we will discuss the different aspects of trading on BitMEX, including contracts, leverage, margin requirements, and risk limits.
Contracts
BitMEX offers a variety of contracts, including XBT futures contracts, ETH futures contracts, and perpetual swaps. These contracts are settled in Bitcoin and do not involve the transfer of the underlying asset. The contracts are designed to track the price of the underlying asset and allow traders to speculate on its price movement.
Leverage
BitMEX offers up to 100x leverage on its contracts. This means that traders can control a large amount of Bitcoin with a small amount of initial margin. However, it is important to note that leverage is a double-edged sword and can amplify both profits and losses.
Margin Requirements
BitMEX requires traders to maintain both an initial margin and a maintenance margin on their positions. The initial margin is the amount of Bitcoin required to open a position, while the maintenance margin is the minimum amount of Bitcoin required to keep a position open. The margin requirements vary depending on the contract and the amount of leverage used.
Risk Limits
BitMEX has several risk management features in place to protect traders from excessive losses. These include a liquidation engine, which automatically closes positions if the maintenance margin is breached, and a funding rate, which ensures that the price of the contract remains close to the underlying asset. Additionally, BitMEX has a risk limit system in place that limits the amount of Bitcoin that can be traded on the platform at any given time.
| Contract | Leverage | Initial Margin | Maintenance Margin |
|---|---|---|---|
| XBTUSD | 100x | 1% | 0.5% |
| ETHUSD | 50x | 2% | 1% |
| XRPUSD | 20x | 5% | 2.5% |
Overall, trading on BitMEX can be a high-risk, high-reward endeavor. Traders should carefully consider their risk tolerance and use proper risk management techniques when trading on the platform.
Understanding Liquidation
When trading on BitMEX, it is important to understand the concept of liquidation. Liquidation occurs when the margin balance in a trader’s account falls below the required maintenance margin. This can happen when a trader’s position moves against them and they do not have enough funds to cover the losses. When this happens, their position is automatically closed by the liquidation engine, and their remaining funds are used to pay off the remaining debt.
Liquidation Price
The liquidation price is the price at which a position will be liquidated. It is calculated based on the initial margin, maintenance margin, and leverage of the position. The liquidation price is different from the bankruptcy price, which is the price at which a position has zero equity left (all posted margin has been depleted).
To calculate the liquidation price, the following formula is used:
Liquidation Price = averageEntryPrice / (1 – initMargin + maintenanceMargin)
For example, if a trader has a short XBT position at 10x leverage with an average entry price of 3500, the liquidation price would be:
Liquidation Price = 3500 / (1 – ((1/10)+0.0015) + 0.00575) = 3870.61
Preventing Liquidation
Traders can take steps to prevent liquidation by monitoring their positions and ensuring that they have enough margin to cover potential losses. One way to do this is to set up stop-loss orders, which will automatically close a position if it reaches a certain price.
Another way to prevent liquidation is to adjust the maintenance margin requirements. BitMEX allows traders to adjust the maintenance margin requirements for their positions, which can give them a larger buffer against price moves before their losses are realized and lower the risk of liquidation.
For example, if the maintenance margin requirements are reduced to 3.5%, the liquidation price would be $106.5 (remembering the $10 of initial margin), or a 6.5% price move. This gives traders a larger buffer against price moves before their losses are realized and lowers the risk of liquidation.
| Action | Result |
|---|---|
| Set up stop-loss orders | Automatically closes position if it reaches a certain price |
| Adjust maintenance margin requirements | Gives larger buffer against price moves before losses are realized and lowers risk of liquidation |
In summary, understanding liquidation and the liquidation price is crucial for traders on BitMEX. By monitoring their positions and taking steps to prevent liquidation, traders can minimize their risk and increase their chances of success.
Security Measures
BitMEX takes security seriously and has implemented several measures to ensure the safety of its users’ funds and data. This section will discuss two important security measures: Wallet Security and Data and Log Management.
Wallet Security
BitMEX uses multi-signature wallets to secure its users’ funds. The wallets require a quorum of signers to approve any transaction before it can be executed. This means that even if a hacker gains access to one private key, they would still need to obtain the other private keys to access the funds. BitMEX also regularly performs risk checks after every order placement, trade, settlement, deposit, and withdrawal to ensure that all accounts in the system sum to zero at any time. If they do not, trading is halted for everyone.
Data and Log Management
BitMEX uses Amazon Web Services (AWS) for its infrastructure, which provides world-class security. All data is encrypted in transit and at rest, and access to data is strictly controlled. BitMEX also logs all user activity and system events to detect any suspicious behavior. The logs are stored securely and are regularly audited to ensure their integrity.
BitMEX also has a comprehensive incident response plan in place in case of any security breaches. The plan includes procedures for identifying and containing the breach, notifying affected parties, and restoring normal operations.
| Entity | Security Measure |
|---|---|
| Wallet | Multi-signature wallets |
| Log | Regular auditing of logs |
| AWS | World-class security |
Overall, BitMEX’s security measures are designed to minimize the risk of security breaches and protect its users’ funds and data.
Trading Strategies
Lower Margin Requirements
Traders who want to maximize their profits while minimizing their risks can take advantage of BitMEX’s lower margin requirements. With lower margin requirements, traders can open larger positions with less capital, which can lead to higher returns on investment. However, it is important to note that lower margin requirements also come with higher risks, so traders should carefully consider their risk tolerance before making any trades.
One way to take advantage of lower margin requirements is to use leverage. Leverage allows traders to borrow funds to increase their buying power, which can lead to higher profits. However, leverage also increases the potential for losses, so traders should be careful not to over-leverage their positions.
Another way to take advantage of lower margin requirements is to use stop-loss orders. Stop-loss orders are designed to limit losses by automatically closing out positions when they reach a certain price level. This can help traders avoid large losses and protect their capital.
Risk Limit Tiers
BitMEX offers risk limit tiers to help traders manage their risks and protect their capital. Risk limit tiers are based on a trader’s account balance and are designed to prevent traders from taking on too much risk. Traders can choose from several risk limit tiers, each with its own maximum position size and margin requirements.
Traders who want to take on more risk can choose a higher risk limit tier, while those who want to minimize their risks can choose a lower risk limit tier. However, it is important to note that higher risk limit tiers also come with higher margin requirements, so traders should carefully consider their risk tolerance before choosing a tier.
Overall, traders can use a combination of lower margin requirements and risk limit tiers to help manage their risks and maximize their profits on BitMEX. By carefully considering their risk tolerance and using the right trading strategies, traders can achieve their financial goals while minimizing their risks.
| Risk Limit Tier | Maximum Position Size | Margin Requirements |
|---|---|---|
| Tier 1 | 1,000 XBT | 1% |
| Tier 2 | 2,500 XBT | 2% |
| Tier 3 | 5,000 XBT | 3% |
| Tier 4 | 10,000 XBT | 4% |
| Tier 5 | 20,000 XBT | 5% |
Conclusion
BitMEX’s risk limits guide provides valuable information to traders looking to trade on the platform. By understanding the different types of risk limits, traders can better manage their exposure and avoid liquidation.
The guide outlines the different types of risk limits, including initial margin, maintenance margin, and liquidation price. It also provides examples of how these limits work in practice and how traders can calculate their own risk exposure.
Traders should keep in mind that risk limits can change based on market conditions and volatility. BitMEX has recently increased risk limits on its XBT futures contracts to provide users with even more value.
Overall, the BitMEX risk limits guide is a useful resource for traders looking to trade on the platform. By understanding and managing their risk exposure, traders can increase their chances of success and avoid costly liquidations.
Frequently Asked Questions
What is the maximum leverage allowed on BitMEX?
BitMEX allows traders to use up to 100x leverage on their trades. This means that for every Bitcoin deposited as collateral, traders can open a position worth up to 100 Bitcoins. However, it is important to note that high leverage can also lead to high risk.
How does BitMEX calculate maintenance margin?
BitMEX calculates maintenance margin based on the current market price of the contract. The maintenance margin is the minimum amount of Bitcoin that a trader must hold in their account to keep a position open. If the maintenance margin is not met, the position will be liquidated.
What are the available derivatives on BitMEX?
BitMEX offers a range of derivatives, including perpetual swaps, futures contracts, and options contracts. These derivatives are all settled in Bitcoin and allow traders to speculate on the price movements of various cryptocurrencies and other assets.
How does the BitMEX insurance fund work?
The BitMEX insurance fund is a fund that is used to prevent auto-deleveraging in the event of a liquidation. When a position is liquidated and the liquidation price is lower than the bankruptcy price, the remaining funds in the insurance fund are used to cover the loss. The insurance fund is funded by a portion of the fees collected by BitMEX.
What is the funding rate on BitMEX?
The funding rate on BitMEX is a fee that is charged every 8 hours to ensure that the price of the contract stays close to the underlying index price. The funding rate is determined by the difference between the contract price and the underlying index price, as well as the interest rate of the underlying asset.
What are the fees for trading on BitMEX?
BitMEX charges a taker fee of 0.075% and a maker fee of -0.025%. This means that makers (traders who add liquidity to the order book) receive a rebate of 0.025% on their trades, while takers (traders who remove liquidity from the order book) are charged a fee of 0.075%.