Understanding Arbitrage Risks
Market Risk
MediumPrice volatility affecting your positions
Mitigation:
- Use conservative position sizes
- Monitor market conditions constantly
- Have clear exit criteria
- Avoid trading during high volatility
Exchange Risk
HighPlatform issues or insolvency
Mitigation:
- Use reputable exchanges only
- Diversify across multiple platforms
- Keep funds in cold storage when not trading
- Monitor exchange financial health
Liquidation Risk
HighPosition closure due to insufficient margin
Mitigation:
- Use low leverage (2-3x max)
- Maintain adequate margin buffer
- Set stop-loss orders appropriately
- Monitor margin requirements closely
Funding Rate Risk
MediumRates changing before funding payment
Mitigation:
- Monitor rates constantly
- Have minimum acceptable rate threshold
- Be ready to exit quickly if rates turn negative
- Focus on stable, high-rate opportunities
Position Sizing Guidelines
Position Size = Risk Capital × Risk Percentage
Never risk more than you can afford to lose on a single trade
| Total Capital | Conservative (1%) | Moderate (2-3%) | Aggressive (5%+) | Recommendation |
|---|---|---|---|---|
| $1,000 | $10 per trade (1%) | $20-30 per trade (2-3%) | $50+ per trade (5%+) | Start with conservative sizing |
| $5,000 | $50 per trade (1%) | $100-150 per trade (2-3%) | $250+ per trade (5%+) | Moderate sizing acceptable with experience |
| $10,000 | $100 per trade (1%) | $200-300 per trade (2-3%) | $500+ per trade (5%+) | Professional sizing with strong risk management |
Stop-Loss Strategies
Funding Rate Stop
Exit if funding rate drops below threshold
Example: Close positions if rate falls below 0.02%
Use Case: Protects against negative funding scenarios
Time Stop
Exit after maximum holding period
Example: Never hold more than 2 funding periods
Use Case: Limits exposure to market conditions
Drawdown Stop
Exit if total portfolio drops by X%
Example: Stop trading if portfolio down 10%
Use Case: Protects against consecutive losses
Emergency Procedures
1. Rapid Market Movement
- • Close both positions immediately regardless of P&L
- • Do not try to "wait it out" - preserve capital
- • Review what caused the movement before trading again
2. Exchange Issues
- • Document all open positions with screenshots
- • Contact exchange support immediately
- • Consider closing positions on alternative exchanges if possible
3. Consecutive Losses
- • Stop trading for at least 24 hours
- • Review recent trades for mistakes
- • Reduce position size by 50% when resuming
Pre-Trade Risk Checklist
Position Analysis
- Funding rate above minimum threshold
- Adequate liquidity on both exchanges
- Position size within risk limits
- Margin requirements met with buffer
Exit Strategy
- Stop-loss parameters set
- Maximum holding time defined
- Funding rate threshold determined
- Emergency exit plan prepared
Ready to Trade Safely?
Upgrade to Whale tier for advanced risk monitoring features including liquidation alerts, portfolio rebalancing notifications, and priority access during market volatility.
✅ Liquidation alerts • ✅ Portfolio monitoring • ✅ Advanced analytics