> For the complete documentation index, see [llms.txt](https://docs.thevolumeterminal.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.thevolumeterminal.com/trading-guides/risk-management.md).

# Risk Management

Generating high trading volume for rewards is a professional discipline. Without strict risk management, market volatility or leverage can quickly lead to losses that far outweigh any potential campaign payouts.

Apply the following risk management principles to protect your trading capital.

***

### 1. Leverage Caution

While trading with leverage (e.g., 5x, 10x, or higher on perpetual futures) increases your generated volume relative to your margin, it also increases your risk of liquidation.

* **Liquidation Risk**: In highly volatile crypto markets, even a small price movement against your position can trigger liquidation, wiping out your margin.
* **Recommended Practice**: Keep leverage low (e.g., under 3x) or trade spot assets directly. High volume is not worth the risk of capital liquidation.

***

### 2. Hedging Price Exposure (Delta-Neutral Trading)

Active trading exposes you to price volatility. To generate volume while minimizing exposure to price direction, traders often use **Delta-Neutral** strategies:

#### Spot-Futures Arbitrage

* **How it Works**: Buy $10,000 worth of an asset on the Spot market, and simultaneously open a $10,000 Short position on the same asset's Perpetual Futures contract.
* **Effect**: If the price rises, your Spot position gains value while your Futures Short loses an equal amount. If the price falls, your Spot loses value while your Futures Short gains. Your net price exposure (delta) is zero, while you accumulate volume on both trades.
* **Risks to Manage**:
  * *Funding Rates*: Shorting perpetuals may cost you funding fees depending on market conditions.
  * *Execution Skew*: Entering or exiting the spot and futures trades at different times can introduce price exposure. Ensure simultaneous execution.
  * *Liquidation*: Manage your futures collateral carefully to avoid liquidation on the short leg during price spikes.

***

### 3. Maintain Compliance to Avoid Disqualification

Generating volume through forbidden methods is a major risk to your campaign success:

* **Accrued Fee Waste**: If our backend flags your trading activity as wash trading (e.g., self-matching, circular accounts, or artificial spread manipulation), you will be disqualified from the campaign.
* **The Result**: You will lose all accumulated rewards, while still having paid the transaction fees to the exchange.
* **Compliance Rule**: Execute strategies that involve real market risk, interact with the organic order book, and represent legitimate trading intent.

***

### 4. API Key Security & Containment

* **Isolate Capital**: Always use a separate CEX sub-account for Volume Terminal campaigns. Do not link API keys of accounts that hold your long-term spot investments or primary cold storage portfolios.
* **Withdrawal Audit**: Periodically inspect your API key settings on your CEX to verify that withdrawal and transfer capabilities remain disabled.
* **Key Deletion**: If you stop participating in a campaign or using the platform, immediately delete the API key from your exchange's API management page.


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