Risk Management

all risk management parameters are subject to change over time to reflect evolving market conditions, ensuring sustainable liquidity and a well balanced trading environment dynamic trading fees trading fees are dynamically adjusted based on order size, collateral liquidity, and market volatility this approach ensures that the cost of large orders more accurately reflects their impact, fostering a fairer and more balanced trading environment https //docs typus finance/fees#iomq1 maximum trade size to manage the risk exposure of tlp holders, the maximum trade size is governed by two key factors the open interest cap and the maximum single order reserve usage open interest cap an open interest (oi) cap has been implemented to prevent excessive one sided exposure in any given market this helps reduce the risk of disproportionate losses for liquidity providers and promotes more stable and balanced trading conditions the maximum allowable oi is not a static number it automatically adjusts based on the current depth and tvl of the pool as liquidity grows, the market capacity grows with it example sui/usd market user long position size = 25,000 sui user short position size = 10,000 sui oi cap (per direction) = 100,000 sui remaining oi for new long positions = 100,000 sui 25,000 sui = 75,000 sui remaining oi for new short positions = 100,000 sui 10,000 sui = 90,000 sui maximum single order reserve usage for each collateral token, the maximum single order reserve usage is determined by the available capacity and a maximum reserve ratio of total collateral liquidity maximum single order reserve usage = min ( total collateral liquidity reserved amount , max reserve ratio total collateral liquidity ) example total collateral liquidity = 35,000 usdc reserved amount = 10,000 usdc max reserve ratio = 10% maximum single order reserve usage = min ( 35,000 usdc 10,000 usdc , 35,000 usdc 10% ) = min ( 25,000 usdc , 3,500 usdc ) = 3,500 usdc the maximum single order reserve usage directly limits the maximum trade size when using leverage it represents the maximum amount of collateral that can be borrowed for a single trade this mechanism helps manage risk and ensures the platform maintains sufficient liquidity for all users auto deleveraging (adl) during periods of high market volatility, rapid price movements can lead to significant gains for traders resulting in significant unrealized losses for typus liquidity pools to ensure the long term sustainability of the platform, the system may automatically close profitable positions even if the trader has not set a take profit order this is known as the auto deleveraging (adl), a risk management safeguard it is designed to mitigate extreme exposure and preserve balance for all participants auto deleveraging (adl) serves as the final backstop for protocol solvency trigger lp's total unrealized losses exceed 30% of the pool's tvl execution ranking positions are ranked from highest to lowest by adl score sequential closure the protocol begins closing positions starting with the highest adl score termination deleveraging continues until the lp’s unrealized loss ratio falls back below the 30% threshold this ensures only the necessary amount of open interest is reduced to restore system stability adl score calculation the adl score measures how much a position has gained and how much risk it adds to the pool category condition direction multiplier strategic intent penalty position direction is opposite to lp exposure 1 0 high priority for closure as these positions increase lp risk net zero lp exposure is neutral 1 0 neutral priority peace position direction is the same as lp exposure 0 5 lower priority for closure as these positions help hedge lp risk t+1 profit lock to prevent predatory trading activity and ensure market stability, trading altcoins such as the $typus market utilizes a t+1 profit lock realized profits gains from closed positions are subject to a 24 hour lock period before they can be claimable immediate margin return your initial margin (collateral) is returned to you immediately upon position closure, allowing you to maintain operational liquidity while the profit is secured insurance fund insurance fund a critical layer of protection for tlp to safeguard tlp holders against extreme market volatility and unexpected losses, 1% of the notional value from each liquidated position is allocated to the insurance fund this fund acts as a safety net, reimbursing the tlp in the rare event of significant loss helping preserve the integrity and sustainability of the liquidity pool additionally, during liquidation, any remaining collateral after deducting losses and fees is retained as a liquidation fee and contributed to the tlp, further reinforcing the system’s resilience together, these mechanisms form a robust defense for tlp against adverse trading outcomes