How to manage risk when trading on Bybit?

Effective risk management on Bybit involves setting stop-loss and take-profit orders based on technical levels, using leverage wisely, and sizing positions to protect your account from major losses.

Jul 22, 2025 at 09:42 pm

Understanding Risk Management in Crypto Trading

Risk management is the cornerstone of sustainable trading on platforms like Bybit. Without a structured approach, traders expose themselves to potential liquidation or significant losses. The key lies in recognizing that risk is not avoidable—it must be measured and controlled. Bybit offers several tools to help traders manage exposure, but using them effectively requires discipline. Traders must define their risk tolerance before entering any position and stick to it, regardless of market sentiment. This means setting clear parameters for how much capital can be allocated per trade—typically between 1% and 5% of total funds.

Setting Stop-Loss and Take-Profit Orders

Stop-loss and take-profit orders are essential tools for managing downside risk and locking in gains. On Bybit, these can be set directly in the order placement window.

• Navigate to the “Order” tab on the trading interface
• Select either “Limit” or “Market” order type
• Enter your desired price for entry
• Under “Advanced,” toggle on “Stop Loss” and input the price at which you want to exit if the market moves against you
• Similarly, set a “Take Profit” level to automatically close the position when your profit target is reached
  

  These orders must be based on technical levels such as support/resistance or volatility indicators—not arbitrary numbers. For example, placing a stop-loss just below a known support level helps avoid being stopped out by minor price fluctuations. Bybit’s conditional orders ensure your positions are protected even when you’re not actively monitoring the market.

  Using Leverage Wisely

  
  Bybit allows leverage up to 100x on certain contracts, which can amplify both gains and losses. New traders often underestimate how quickly high leverage can lead to liquidation. To manage this:
• Start with low leverage (e.g., 2x–5x) until you understand how liquidation works
• Use the “Risk Limit” feature in the futures contract settings to reduce exposure
• Monitor your “Maintenance Margin” level constantly—it shows the minimum equity needed to keep your position open
  

  Leverage multiplies your effective position size, so a 1% move against you at 50x leverage equals a 50% loss. Always calculate your liquidation price before entering a trade using Bybit’s built-in calculator or third-party tools. This helps avoid emotional decisions when the market moves unexpectedly.

  Position Sizing Based on Account Balance

  
  Proper position sizing ensures that no single trade can wipe out your account. On Bybit, this means calculating how much you’re willing to risk in dollar terms, then determining the appropriate contract size.
• Decide your maximum risk per trade (e.g., $50 on a $5,000 account = 1%)
• Determine your stop-loss distance in percentage terms (e.g., 5% from entry)
• Divide your risk amount by the stop-loss percentage: $50 / 0.05 = $1,000 position size
• Input this value under “Quantity” when placing your order
  

  This method ensures consistency across trades. Even if one trade fails, your account remains intact for future opportunities. Bybit displays position size in USD value for inverse contracts and in coin amount for linear contracts—double-check which format applies to your chosen market.

  Monitoring Liquidation Price and Margin Ratio

  
  Bybit displays your liquidation price and margin ratio in real time on the position tab. These metrics are critical for active risk management.
• If your liquidation price gets too close to the current market price, consider reducing position size or adding margin
• A margin ratio below 5% means you’re at high risk of liquidation—act immediately
• You can manually add margin to your position by clicking “Add Margin” under the open position
  

  Ignoring these warnings can result in automatic liquidation without notice, especially during high volatility. Traders should refresh their positions regularly or use Bybit’s email/SMS alerts to stay informed.

  Utilizing Bybit’s Risk Management Tools

  
  Bybit provides advanced features like partial close, trailing stop, and auto-deleveraging prevention.
• Partial Close: Exit part of your position to lock in profits while letting the rest run
• Trailing Stop: Set a dynamic stop-loss that follows price movement—ideal for trending markets
• Auto-Deleveraging Prevention: Avoid being AD’d by maintaining healthy margin levels and avoiding excessive leverage during volatile periods
  

  These tools are accessible via the “More” menu in the position panel. Using them proactively reduces emotional trading and enforces discipline.

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  FAQs

  Q: Can I change my stop-loss after placing a trade on Bybit?
  
  Yes. Go to the “Conditional Orders” tab, find your active stop-loss order, and click “Edit.” Adjust the price and confirm. Note that modifying orders may incur fees depending on your account tier.

  Q: What happens if my position gets liquidated on Bybit?
  
  Bybit’s insurance fund covers most losses beyond your margin, but you lose the full margin allocated to that position. Your remaining balance stays intact unless you have cross-margin enabled with insufficient funds.

  Q: How do I know if I’m using too much leverage?
  
  If your liquidation price is within 5% of the current market price, you’re over-leveraged. Reduce position size or lower leverage immediately to avoid forced closure.

  Q: Does Bybit offer risk alerts via mobile app?
  
  Yes. Enable “Price Alerts” and “Position Alerts” in the app’s notification settings. You’ll receive push notifications when your liquidation price or margin ratio reaches critical levels.