Risk Limits is one of the risk management mechanisms to prevent large position losses. Risk Limits use the concept of Dynamic leverage, which means that the maximum leverage that can be used when trading will vary depending on the value of the position held by the trader: the larger the value of the position held, the higher the percentage of initial margin required and the lower the maximum leverage used. Therefore, the risk limit reduces the likelihood of loss through positions and therefore reduces the triggering of automatic position reduction. Note: Margin requirements will increase or decrease as the risk limit changes.
A risk limit is a risk management mechanism used to limit a trader's exposure to a position. In a trading environment with high price volatility, a single trader holding a large position using high leverage will potentially incur a significant loss of position penetration. To prevent this from happening, MEME imposes risk limits on all trading accounts, optimizing risk management and protecting all traders from additional risk.
Dynamic risk limits for contracts
Each contract has a base risk limit and an incremental amount. These limits, combined with the base maintenance and starting margin requirements, are used to calculate the full margin requirement for each position.
As positions are added, the maintenance and starting margin requirements are increased. Margin requirements and position leverage will increase or decrease as risk limits change.