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Protect Your Capital

You don’t want to just chase APYs. You also want to protect your downside. Here’s how you can trade confidently without putting your capital at unnecessary risk.

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What You’ll Learn

• How to avoid common pitfalls that wipe out profits
• Key risks and how to manage them
• Exit strategies that lock in gains

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Best Practices

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1. Make Data-Driven Decisions

Base your pool selection on onchain data, not hype. Telegram groups and Discord calls are noise. Real alpha comes from actual trading activity.

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2. Stay Near the Action

Position your liquidity ranges close to current prices. Liquidity that’s too far from the action doesn’t earn fees.

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3. Monitor Continuously

Use real-time analytics and PnL tracking. Know your true profit at all times, not just paper gains.

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4. Have an Exit Plan

Before entering any position, know:

• When you’ll reduce exposure
• When you’ll exit entirely
• Your maximum acceptable loss

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5. Protect Your Transactions

Use MEV-protected transactions and low-slippage platforms. Every bit of slippage eats into your profits.

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6. Understand the Math

Learn how fees, impermanent loss, and liquidity curves work. Knowledge is your best defense.

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7. Start Small

Begin with smaller positions to understand the dynamics before scaling. There’s no rush. The pools will still be there.

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Key Risks to Manage

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Impermanent Loss

When the price ratio of your pooled assets changes, you experience impermanent loss. This is the primary risk in market making. How to manage it:

• Monitor impermanent loss in real-time (MetEngine calculates this for you)
• Compare fees earned vs. loss incurred
• Exit when loss exceeds fees

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Liquidity Risk

Sometimes you may not be able to exit a position when you need to. How to manage it:

• Avoid pools with very low volume & low organic score
• Ensure sufficient market liquidity exists
• Maintain exit flexibility by not overconcentrating

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Exit Strategy Framework

Your disciplined exits will separate you from those who give back their gains. Set clear rules:

• Define your target profit level
• Define your maximum acceptable loss
• Stick to your parameters. Don’t let emotions drive your decisions

Know when to exit:

• When impermanent loss exceeds fees for extended periods
• During extreme market conditions
• When volume drops significantly

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You’re Now Ready To

Understanding risk management is the foundation of profitable market making. Now you can start trading with confidence.