Position and Price Fluctuations Limits

Position Limits

Every market has a maximum notional value of a position based on the Trade Limit Ratio variable, typically set at 5%. The maximum value is calculate using this formula:

$$maxPosNotional = (YesQuoteReserve + NoQuoteReserve) / TradeLimitRatio$$

For example, in a market where virtual YesQuoteReserve and NoQuoteReserve is equal to 500,000, the maximum position value a trader can hold is 50,000 USDC.

Fluctuation Limit

Each vAMM prediction market has a custom – typically 10% – fluctuation limit that prevents traders' from manipulating the market.

Due to the intrinsic nature between Yes and No pools, when opening or closing a position, the protocol ensures that the opposite side's pool does not change the price by more than the defined fluctuation limit.

In the event of position's opening or closures is over the fluctuation limit, traders are required to open or close the position in smaller batches.

This further creates a dynamic where as we reach the tail-end prices for both sides (1c/99c), the traders are required to batch smaller transactions.