This article aims to answer questions such as how bybit works or how to trade on bybit. I will explain trading on Bybit, differences between order types, fees associated with trading on Bybit and how to manage your position.

If you are not a Bybit user already, use this link to register to Bybit and receive a welcome bonus of $60 ($10 for registration and $50 for a 0.2 BTC initial deposit.

After registering I recommend taking the 5 minutes and setting up a 2FA (two-factor authentication). In order to do that head over ‘Account & Security’ page.

Drop down menu on Bybit

Under the ‘Two-Factor Authentication’ section choose your preferred way of authenticating yourself (I recommend using Google authentication as it is the most popular and easiest way). This is absolutely mandatory to make sure your funds are safe.

After enabling two-factor authentication.

Available trading pairs

Bybit has four different cryptocurrencies that you can trade:

BTC (BTC/USD)

XRP (XRP/USD)

ETH (ETH/USD)

EOS (EOS/USD)

Bybit uses perpetual contracts which means you have to deposit the underlying currency (such as ETH) in order to trade that pair. You cannot trade ETH/USD pair with Bitcoin as margin, like you can in Bitmex.

Choosing your leverage

Generally the rule of thumb is that the lower the leverage the better — getting liquidated and losing your whole margin (or collateral) is not the most optimal way to limit risk as you lose maintenance margin and initial margin. The default maintenance margin is 0.50% and initial margin 1.00% for the lowest risk limit of 100 BTC. Risk limit is the maximum BTC value of your position and starts off at 100 BTC (maximum 550 BTC).

For an easy way to calculate leverage you can use Bitmexresources — made for Bitmex but works on Bybit as well. You can find the calculator here.

Order types

Bybit has three different order types: limit, market and conditional orders.

Bybit’s order types

Limit order

Let’s start with the limit order (see the picture above), which is something you are probably familiar with. Limit order is a order type, which allows you to set a predefined price point where you will either sell or buy an asset when the price reaches the price point. Limit order guarantees that an order is filled at your specified price. Also you earn 0.025% of your position size for making and getting filled with limit order!

Example:

Quantity (Qty) = 5,000 USD

Maker fee = -0.025%

5,000 * 0.025 / 100 = 1.25 USD earned

Post-Only options makes sure that the order is not executed as a market order. For example when you set your order’s price below the current price when making a buy order. It is really helpful to make sure that you do not make any mistakes when entering order.

Reduce-Only option does what it says — only reduces your position. This option is used when you want to set your target before, but you are not sure if you entry gets filled or not.

Market Order

Market order tab on Bybit

Market order is the fastest way to enter or exit a position. Market order works by moving up the order book and filling your order using the best prices available at that moment. By using a market order you have to pay a 0.075% fee on the size of your position.

Example:

Quantity (Qty) = 5,000 USD

Taker fee = 0.075%

5,000 * 0.075 / 100 = 3.75 USD for fees

Conditional order

Conditional order’s tab on Bybit

Conditional orders on Bybit allow you to set a trigger price that creates either a limit or market order. Conditional order gets executed as soon as the trigger price is reached. Depending on type on conditional order (either market or limit) you have to pay or get paid the same fees as above.

Trigger Price types:

Last price — the price of the last trade that happened on Bybit.

Index price — average price of multiple exchanges combined (more info).

Mark Price — index price and funding basis combined (more info).

Choosing mark or index price over last price can be helpful to avoid getting stopped out on wicks that can happen as a result of cascading stop losses or liquidations.

Conditional orders are most commonly used as a way to limit your losses. You can do that by setting a predefined Conditional Market order that closes your position as soon as the price reaches the trigger price. Using a ‘Close on trigger’ option is recommended when using conditional order as a stop loss because it prevents you from accidentally taking a position to the other side instead.

For the description of Post-Only option, scroll a bit higher.

Funding rate

Funding rate happens every 8 hours on Bybit and is determined by the difference in last price and mark price in the past 8 hours (simplified — check the link below if you are interested in the calculations used).

Bybit’s funding rate

If the funding rate is positive then longs pay shorts, if funding rate is negative then shorts pay longs.

Example:

You are long with 5,000 USD (contracts) and the funding rate is 0.01%.

If you have that position open when funding happens then you will have to pay: 5,000 * 0.01 / 100 = 0.5 USD

If you were short with -5,000 USD (contracts) instead, then you would receive 0.5 USD profit.

In order to avoid paying funding rates you have to close your position before the funding happens and you can open your position immediately after again. Paying funding can become expensive if the market is trending in the same direction for long periods of time and can eat in to your profits, so it is a good idea to keep an eye on the funding to make sure your hard earned profits don’t get eaten away as fees. Also funding can be a good indicator of market sentiment — if funding is very positive or negative then the sentiment is similar.

More information about funding rate can be found here.

Making your first trade on Bybit

Now that you have learned about different order types and the fees associated with trading, there is only one thing to do — open your first trade.

Risk management

But… before we can get to the good part, we still have to talk about risk management. Risk management’s importance cannot be stressed enough. It is wise to risk 1–5% (even 5% might be too much) of your balance on a single trade. This way you won’t lose all your money if couple of unlucky trades go south.

Calculating the amount of contracts (position size) can be difficult so I recommend using a position size calculator from BitmexResources. They have many different calculators for Bitmex (they also work the same way on Bybit from my experience). In this example I will be using one of the easier calculators called Position Size Calculator (link few sentences back).

Example:

Entry price: 8400

Stop loss price: 8500

Risk percentage: 1%

Balance: 1 BTC

Amount to risk on the trade: 1 BTC * 1% / 100 = 0.01 BTC