Risk Assessment Framework
When to Use
- •Before any trade >10% of domain balance
- •Daily portfolio review
- •During high volatility periods
- •After significant losses
Risk Metrics to Monitor
Position-Level Risk
- •Individual position size vs balance
- •Leverage used (perps)
- •Liquidation distance (perps)
- •IL exposure (DLMM)
- •Time to resolution (polymarket)
Portfolio-Level Risk
- •Total capital at risk
- •Correlation between positions
- •Concentration in single asset/event
- •Cash buffer available
Market-Level Risk
- •Overall crypto market trend
- •Volatility regime (VIX equivalent)
- •Funding rates across perps
- •Liquidity conditions
Risk Limits
Hard Limits (Never Exceed)
- •Single position: 20% of domain balance
- •Single domain: 40% of total portfolio
- •Total leverage exposure: 2x portfolio value
- •Cash buffer: Always keep 10% liquid
Soft Limits (Require Justification)
- •Correlated positions: 30% of portfolio
- •Same asset across domains: 25% of portfolio
- •High-risk positions (memes, high leverage): 15% of portfolio
Risk Scenarios
Scenario 1: Market Crash (-30%)
Calculate impact on each position:
- •DLMM: IL + potential LP loss
- •Perps: Liquidation risk
- •Polymarket: Usually uncorrelated
- •Spot: Full exposure to drop
Scenario 2: Flash Crash (-50% then recovery)
- •Perps positions likely liquidated
- •DLMM IL crystalized if panic removed
- •Spot depends on if held or panic sold
Scenario 3: Specific Asset Collapse
- •How much exposure to that asset across all domains?
- •If >20% portfolio, overexposed
Risk Reduction Actions
Immediate (Crisis Mode)
- •Close all leveraged positions
- •Remove concentrated liquidity
- •Move to stables
- •Wait for clarity
Gradual (Risk Management)
- •Reduce position sizes by 50%
- •Lower leverage
- •Widen DLMM ranges
- •Add stop losses
Preventive (Before Risk Events)
- •No new positions before known volatility events
- •Reduce leverage ahead of announcements
- •Keep higher cash buffer
- •Avoid illiquid positions
Daily Risk Checklist
- • Total portfolio value calculated
- • Per-domain allocation checked
- • No position >20% of domain
- • Perps liquidation prices reviewed
- • Market conditions assessed
- • Upcoming risk events identified
- • Cash buffer adequate (>10%)
When to Stop Trading
Pause Conditions
- •Portfolio down >10% in single day
- •3+ consecutive losing trades
- •High uncertainty about market direction
- •Personal emotional state compromised
Resume Conditions
- •Market stabilized
- •Clear thesis for next trade
- •Position sizes reduced
- •Risk limits re-established