How to Use the Bybit Unified Trading Account for Effective Risk Management

As a crypto trader, you've probably become accustomed to juggling multiple assets across different accounts, even within the same exchange. Multiple accounts require regular asset transfers between them and keeping track of margin collateral and overall portfolio performance separately. This setup doesn't allow margining to net out, resulting in less efficient risk management.

Even though multiple trading accounts may be the industry standard, Bybit now offers the Unified Trading Account (UTA), a game-changer for traders looking to streamline portfolio management. With the innovative UTA, you can easily trade and manage multiple assets across the crypto ecosystem from a single portfolio without the typical complexities and risks associated with regular trading accounts.

In this article, you'll learn how to use Bybit’s Unified Trading Account for a simplified experience, effective risk management and optimal trading execution.

Key Takeaways:

• Bybit's Unified Trading Account (UTA) simplifies portfolio management and enhances risk management capabilities for crypto traders. 

• UTA provides a consolidated view of your portfolio, allowing you to identify potential risks and take appropriate actions quickly.

• UTA supports three margin modes that facilitate risk management in different ways: Portfolio Margin, Cross Margin and Isolated Margin.

What Is Bybit UTA?

The Bybit Unified Trading Account (UTA) is a versatile all-in-one account mode that offers access to multi-currency trading and core trading products with just one click, including Spot, Derivatives, USDC and USDT Perpetual, USDC Options, and USDC Futures. It provides traders with a powerful option to combine trading and cross-collateral margining under a single account. You can access up to five trading products, risk management and portfolio management without switching between accounts.

The UTA is an upgrade optimized for a seamless trading experience for all traders, from retail spot traders to institutional traders who prefer consolidated accounts. The account's functionalities are simple to use, making it suitable for traders of all levels. Additionally, as long as you have supported collateral assets in the UTA and your USD value is sufficient, you can open positions even if you don't have a balance in that particular coin.

Overall, the UTA boasts an innovative product feature that simplifies trading, risk management and account finances, providing traders with a seamless trading experience and enhancing their trading strategies. 

Learn more: Find out if you're suited for the Bybit UTA upgrades.

Benefits of Using UTA for Risk Management

Bybit UTA is designed to enhance risk management capabilities for traders. The following are some key benefits of using the UTA for risk management.

Better View of the Consolidated Portfolio 

Bybit UTA provides a consolidated view of all positions across multiple trading pairs and products. Traders can view their holdings in various cryptocurrencies, such as BTC, ETH and USDT, and also view their exposure to different trading pairs, such as BTC/USD and ETH/USDT. With a better view of their consolidated portfolio, traders can quickly identify potential risks and take appropriate actions to manage their positions.

The consolidated portfolio view feeds traders important information, such as their total account balance, margin requirements and unrealized P&L across all their positions. Traders can also view their position details, such as entry price, size and liquidation price, as well as set stop-loss and take-profit orders. For example, a trader who has significant exposure to a particular cryptocurrency may consider reducing their position size or setting stop-loss orders to limit their downside risk.

Effective Deployment of Risk Management Tools

Bybit UTA offers a range of risk management tools, such as stop-loss and take-profit orders, auto-borrowing and cross-asset collateralization, and customizable leverage settings. These tools allow traders to mitigate potential losses and protect their profits, while also optimizing their trading strategies based on their risk tolerance and objectives.

The margin calculation is performed at the account level instead of the individual position level, creating a more robust risk management framework. This is because any unrealized trading profits and losses can balance out, preventing risk from being amplified. A loss on one single position doesn’t have to trigger a liquidation. Rather, margin requirements factor in the overall risk of the unified trading account. Additionally, the Bybit UTA implements risk management strategies across a diversified portfolio, which can further enhance a trader's risk profile.

Better Asset Diversification

Bybit UTA supports the trading of various cryptocurrencies, including Bitcoin, Ethereum and other altcoins, as well as perpetual contracts and other derivatives. The comprehensive range of investment products allows traders to diversify their portfolios and manage risks more effectively by allocating funds across multiple assets and products.

How to Use UTA to Improve Margin Efficiency

Since Bybit UTA is a multi-asset account that allows users to manage multiple crypto assets across the crypto ecosystem in one portfolio, it can help traders improve their margin efficiency, which in turn can help maximize returns while minimizing the risk of losses.

Portfolio Margin

Supported Products: Spot Trading, Margin Trading, 

USDT Perpetual, USDC Perpetual, USDC Futures and USDC Options

Position Mode: One-way Mode

An important feature of Bybit UTA is its Portfolio Margin functionality, designed for professional derivatives traders. Unlike traditional margin accounts that calculate margin requirements for each position separately, Portfolio Marginestimates margin requirements for the entire account, allowing high–net-worth customers to manage their risks more proactively. This means the ability to use margin across multiple positions, potentiallyoptimizing returns.

The total USD value of the UTA is based on the following calculation: 

Total Asset Value (in USD) = Number of Assets × USD Index Price × Conversion Ratio

The UTA uses the total asset value and takes into account the overall risk of the entire account, which results in a more accurate and efficient allocation of margin. It also lets you utilize both the simple account and multi-currency margin modes, providing additional options for managing margin requirements.

Cross Margin

Supported Products: Spot Trading, Margin Trading,

USDT Perpetual, USDC Perpetual, USDC Futures and USDC Options

Position Modes: One-way Mode and Hedge Mode (only for USDT Perpetual)

Apart from Portfolio Margin, Cross Margin (the default mode) also allows margin balances to be shared across multiple positions, with over 70 crypto assets as collateral. By opening positions across different trading products, you can increase leverage from hedging and enhance capital efficiency. Should you lose a position, you’ll also reduce the likelihood of a margin call and forced liquidation. 

Cross Margin is an ideal risk management tool for long-term trading strategies in the volatile crypto market. Both spot and derivatives traders can use Cross Margin mode.

Isolated Margin

Supported Products: Spot Trading, USDT Perpetual, USDC Perpetual and USDC Futures

Position Modes: One-way Mode and Hedge Mode (only for USDT Perpetual)

Spot and derivatives traders also have access to Isolated Margin mode. Although Isolated Margin is only assigned to a single position or an independent trading pair, the benefit is that if you experience a margin call or forced liquidation in the position it won’t affect your other positions. You can even set a different level of leverage, depending on whether you hold a long or short position. 

Hence, Isolated Margin is helpful for more conservative traders looking for flexibility in a single position while limiting their losses. Please note that Isolated Margin mode does not support spot margin trading.

Borrowing and Repayment

Bybit UTA allows traders to improve margin efficiency by optimizing borrowing and repayment functionality using the Portfolio Margin Mode. If the equity of any assets drops below zero because of trades and/or market fluctuations, the system will auto-borrow assets, which may be subject to interest. Manual borrowing is not available.

The following conditions may trigger auto-borrowing:

1. Your wallet balance is reduced by transactions

2. Perpetual contracts record unrealized losses

3. Decrease in value of USDC Options positions

4. When the Spot Margin trading function is enabled, assets are borrowed during margin trading

Another benefit of the UTA is that it offers a broader selection of collateral and borrowable assets, such as USDT, USDC, BTC and ETH. This allows users to access more than 60 assets as collateral, thus benefiting from more flexibility in managing their margin requirements.

Upgrade to Bybit UTA

Understanding the Liquidation Process With UTA

The liquidation process with Bybit UTA is triggered when the account's maintenance margin rates reach 100%. To understand how the liquidation process works, it’s important to understand the concepts of initial margin rate and maintenance margin rate. 

Initial Margin

The initial margin is the amount of collateral required to open a position, while the maintenance margin is the minimum amount of collateral required to keep a position open. The account's initial margin rate and maintenance margin rate are calculated based on the position's initial margin and maintenance margin, respectively.

If the account's initial margin rate reaches 100%, all active orders requiring additional margin will be canceled. This means that the account will only be able to open new positions or increase the size of existing positions once asset value is increased.

Maintenance Margin

If the maintenance margin rate is above 80%, all orders for spot margin that occupy costs will be canceled, and assets will be sold to settle liabilities.

Suppose a user account's maintenance margin rate reaches 100%. In that case, liquidation is triggered, which means the system will automatically sell off some or all of the position to cover the losses and bring the margin back to a safe level. The system first reduces the risk limit of all perpetual trading positions, and then closes positions according to the liquidity order of the trading pairs.

As long as the maintenance margin reduces to below 100%, liquidation can end. It’s important to note that the liquidation price may differ from the bankruptcy price, which is the price at which an entire position is completely liquidated.

If the maintenance margin rate suddenly exceeds the threshold, the liquidation system will take over the USDC Perpetual and USDC Option positions in the account.

Learn more: 7 Key Benefits of Upgrading to Bybit UTA

Recap

Using Bybit's Unified Trading Account (UTA) can be an effective way to manage your risks when trading cryptocurrency. By having access to a variety of risk management tools, such as cross-collateralization and net portfolio margining, you can better protect your capital and potentially increase your profits. 

It's important to take the time to learn how to use these tools effectively and to develop a solid trading plan that takes your risk tolerance and investment goals into account. With the right approach and tools, you can seamlessly and confidently trade multiple crypto assets.

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