How is the order of position reduction determined on Bybit?

Understanding Position Reduction Mechanics on Bybit

Bybit employs a systematic approach to manage position reductions, particularly during volatile market conditions or when users approach liquidation thresholds. The process ensures fairness and transparency across all active positions. Each user’s margin level, leverage setting, and order type directly influence how and when their positions are reduced.

Factors Influencing Reduction Priority

1. Positions with lower margin ratios are prioritized for reduction as they pose higher risk to the platform’s solvency.
2. Contracts nearing liquidation are evaluated in real-time using the Mark Price mechanism to prevent unfair executions.
3. Isolated margin positions are assessed independently from cross-margin accounts, leading to different reduction triggers.
4. Users employing high leverage face earlier reductions due to amplified exposure relative to their collateral.
5. The time of entry does not affect reduction order—only current risk metrics determine action priority.

Liquidation and Auto-Deleverage System (ADL)

1. When a position's equity falls below maintenance margin, liquidation procedures initiate automatically.
2. Bybit uses a Insurance Fund to cover most liquidations, minimizing reliance on ADL under normal conditions.
3. In extreme volatility, if the Insurance Fund is insufficient, the ADL system activates to offset losses.
4. ADL ranks counterparties based on profitability, starting with the most profitable short or long positions.
5. Traders affected by ADL are notified through real-time alerts and can monitor their rank via the ADL indicator.

User-Controlled Risk Mitigation Strategies

1. Adjusting leverage manually allows traders to reduce susceptibility to early position reduction.
2. Increasing margin allocation in isolated mode enhances buffer against price fluctuations.
3. Setting stop-loss orders helps exit positions before automatic systems intervene.
4. Monitoring the estimated liquidation price enables proactive adjustments to open trades.
5. Utilizing take-profit levels ensures partial exits at desired prices, lowering overall exposure.

Frequently Asked Questions

What triggers a position reduction on Bybit?A position may be reduced when its margin balance drops close to the maintenance threshold. This typically occurs due to adverse price movement eroding available equity. The system initiates partial or full closure depending on contract type and risk settings.

Does Bybit notify users before reducing a position?Yes, Bybit sends real-time notifications when a position enters a high-risk zone. These alerts appear within the app and may also be delivered via email or push notification, allowing users to act before automatic measures take effect.

How is the ADL ranking determined?ADL ranking is based on the profitability of opposing positions. The most profitable traders are first in line during an auto-deleveraging event. This ensures that those benefiting the most from market moves contribute proportionally during exceptional scenarios.

Can I avoid being impacted by ADL?Traders can reduce ADL exposure by closing highly profitable positions proactively or avoiding holding large winning trades during periods of high volatility. Using lower leverage and maintaining healthy margin levels also decreases the likelihood of involvement.