What are common mistakes to avoid when trading Bybit contracts?

Avoid overleveraging on Bybit—high leverage can lead to quick liquidation; always assess risk, set stop-losses, and understand funding rates and liquidation mechanics. (154 characters)

Aug 09, 2025 at 05:14 am

Overleveraging Without Risk Assessment

One of the most frequent errors traders make on Bybit contracts is applying excessive leverage without a structured risk management plan. While Bybit offers leverage as high as 100x on certain perpetual contracts, using such levels can lead to immediate liquidation even with minor price fluctuations. New traders often misunderstand that high leverage amplifies both gains and losses, and without proper position sizing, a small adverse move can wipe out an entire account. It's crucial to assess your account balance, set a maximum risk per trade (e.g., 1%–2%), and calculate the appropriate leverage based on your stop-loss distance. For example, if you have a $1,000 account and are willing to risk $20 on a trade with a 2% stop-loss, using 50x leverage on a $400 position may already expose you to significant risk if the market moves against you.

Ignoring Liquidation Price Mechanics

Many traders fail to fully understand how liquidation price is calculated on Bybit, which can result in unexpected margin calls. The liquidation price depends on your entry price, leverage, position size, and whether you're using cross or isolated margin mode. In isolated margin, only the allocated margin is at risk, while in cross margin, your entire wallet balance can be used to prevent liquidation. Misjudging this can lead to total loss. To avoid this, always check the liquidation price indicator on the trading interface before confirming a trade. You can adjust your margin manually in isolated mode to push the liquidation price further from the current market price. For instance:

• Open the contract trading page
• Select Isolated Margin mode
• Enter your desired leverage
• Adjust the margin input field to increase the buffer
• Observe how the liquidation price shifts on the chart
  

  Failing to Use Stop-Loss and Take-Profit Orders

  
  A common oversight is entering Bybit futures trades without setting stop-loss (SL) and take-profit (TP) orders. Emotion-driven trading often leads to holding losing positions in hopes of a reversal, which can escalate losses. Bybit allows you to set these orders when placing a trade or after opening a position. To set them properly:
• Click on the "Limit" or "Market" order tab
• After entering your position size and price, locate the "Advanced" section
• Enable "Stop-Loss" and input your desired trigger price
• Set "Take-Profit" at a level that aligns with your risk-reward ratio (e.g., 2:1)
• Confirm the order
  

  Using these tools ensures discipline and protects your capital from sudden market volatility. Traders who skip this step often experience larger drawdowns during sharp reversals or news events.

  Misunderstanding Funding Rates and Holding Costs

  
  Traders frequently overlook the impact of funding rates when holding perpetual contracts on Bybit. Unlike traditional futures, perpetual swaps have periodic funding payments exchanged between long and short positions every 8 hours. If you're holding a long position and the funding rate is positive, you pay the short holders. Conversely, if it's negative, you receive payment. High funding rates can erode profits over time, especially in one-sided markets. To monitor this:
• Check the funding rate displayed on the contract info panel
• View the next funding time (shown in UTC)
• Use the funding history tab under your account to analyze past payments
• Consider closing positions before funding events if rates are unfavorable
  

  Ignoring this cost can turn a seemingly profitable trade into a net loss over several days.

  Trading Without a Clear Strategy or Journaling

  
  Many users jump into Bybit contract trading based on social media signals or FOMO without a documented strategy. Successful trading requires consistency, backtesting, and performance tracking. A lack of a defined entry/exit plan leads to erratic decisions. To build a robust approach:
• Define your trading style (e.g., scalping, swing trading)
• Identify key technical indicators (e.g., RSI, MACD, moving averages)
• Establish clear entry and exit rules
• Maintain a trade journal using spreadsheets or dedicated apps
• Record every trade with details like date, entry/exit price, reason, and emotional state
  

  Reviewing this journal weekly helps identify patterns in winning and losing trades, allowing for iterative improvement. Trading without this structure often results in repeated mistakes and emotional fatigue.

  Overtrading During Low-Volatility Periods

  
  Another common mistake is forcing trades when the market lacks direction. Periods of low volatility or sideways movement on assets like BTC/USDT often lead to false breakouts and whipsaws. Traders may open multiple positions trying to capture small moves, increasing transaction costs and exposure. Instead, use tools on Bybit to assess market conditions:
• Monitor the ATR (Average True Range) indicator to gauge volatility
• Observe order book depth for signs of accumulation or distribution
• Wait for clear candlestick patterns like engulfing bars or breakouts with volume
• Avoid trading during major holidays or low-liquidity sessions
  

  Patience is critical. Entering trades without confirmation often leads to stop-outs and diminished confidence.

  Frequently Asked Questions

  
  Q: How do I calculate my liquidation price manually on Bybit?
  A: For a long position, the approximate liquidation price (in isolated margin) is calculated as:
  Liquidation Price = Entry Price × (1 - Initial Margin / Position Value)
  For a short:
  Liquidation Price = Entry Price × (1 + Initial Margin / Position Value)
  Note: Maintenance margin and fees slightly alter this, so always verify using Bybit’s built-in calculator.
  

  Q: Can I change my leverage after opening a position on Bybit?
  
  A: Yes, you can adjust leverage at any time if using isolated margin. Navigate to your open position, click "Leverage", and input a new value. This changes your margin allocation and liquidation price instantly.

  Q: What happens when my position gets liquidated on Bybit?
  
  A: Bybit initiates an auto-deleveraging system (ADL) if the insurance fund is insufficient. Your position is closed at the bankruptcy price, and remaining margin is lost. You won’t owe additional funds, as Bybit uses a no-negative balance protection policy.

  Q: How often are funding rates charged on Bybit perpetual contracts?
  
  A: Funding occurs every 8 hours at 00:00 UTC, 08:00 UTC, and 16:00 UTC. You only pay or receive funding if you hold a position at the exact funding timestamp.