# Loss limit explanation

## What are loss limits?

Loss limits allow you to limit the amount of money you can lose over a given period. The limit can be set over a period of one day, one week, one month or one year.

The limit functionality can be expressed in a simple formula as:

Limit amount + total account exposure + profit/loss in limit window >= 0

The loss limit is therefore a net limit, meaning any money won during a given limit period will be added to your limit amount for that period. Losses will be deducted from the remaining limit amount in the period in which they settle, regardless of when bets were placed.

Example:

A user sets a 1000 kr daily loss limit and immediately places a 1000 kr back bet on day 1. The bet settles in the same period, day 1, winning 500 kr. The user can now reach an exposure of 1500 kr during this period.

The user places a further bet of 500 kr, which loses on day 2. The user will only be able to bet a further 500 kr in this new period, despite having placed no bets in it as yet, as the 500 kr losses were recognised in this period.

## Total exposure

Setting a loss limit will also prevent your account from exceeding this amount, plus any winnings accrued in that period, in total exposure. This means that if you set a limit of 1000 kr and then place a bet for 1000 kr, you will not be able to place further bets until this bet settles. This is the case except where a further bet would reduce your overall account exposure, such as a trade out. This means that if you bet 1000 kr on an event that is happening 7 days from now, you will not be able to place any bets that increase your exposure until that bet settles, even if you have chosen a daily limit.

Example:

A user sets a 1000 kr daily loss limit and immediately places a 1000 kr back bet on an event finishing 5 days from now. The user will be unable to make any further bets that would increase total exposure until that bet settles. If the bet loses, the user cannot place any further bets until the following limit period, as 1000 kr of losses were recognised in the current period.

## Reset times

Loss limits at Smarkets will reset the next time the exposure of the account changes following the expiry of the current limit period.

Example:

A user sets a daily limit of 1000 kr at 15:00 on day 1. The limit will reset the next time the user's account exposure changes after 15:00 on day 2. If this is 15:36 on day 2, the limit will reset next on the first exposure change after 15:36 on day 3 and so on. The same logic applies to weekly, monthly and yearly limits.