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

# Risk Management

## Best Practices for Traders

### Managing Your Risk

* **Never risk more than you can afford to lose** — leverage magnifies both gains and losses
* **Always use stop losses** — protect your capital with automatic exit points
* **Monitor your liquidation price** — keep an adequate margin buffer, especially above 50x leverage
* **Start small** — test strategies with lower leverage before scaling up
* **Diversify** — avoid concentrating risk in a single market or position

### Choosing the Right Order Strategy

| Strategy                     | When to Use                                                            |
| ---------------------------- | ---------------------------------------------------------------------- |
| **Limit orders for entries** | Get better prices during volatile markets                              |
| **Market orders for exits**  | Ensure execution when closing positions quickly                        |
| **Bracket orders (TP + SL)** | Set both TP and SL for automated risk management                       |
| **Edit over cancel**         | Modify existing orders instead of canceling and recreating to save gas |

### Optimizing Fees

* **Check price impact before large orders** — low-liquidity markets charge higher impact fees
* **Monitor funding rates** — high negative rates increase your holding costs over time
* **Claim excess impact rebates** — if negative price impact exceeded the 50 bps cap, the excess is stored in a claimable balance; reclaim it from the Claim tab after closing
* **Time your entries** — wait for favorable funding rate flips when holding multi-day positions

### Avoiding Liquidation

| Action                       | How It Helps                                                       |
| ---------------------------- | ------------------------------------------------------------------ |
| **Maintain a margin buffer** | Keep your liquidation price at least 5–10% away from mark price    |
| **Add collateral early**     | Don't wait until liquidation is imminent — add margin proactively  |
| **Reduce leverage**          | Lower leverage = wider safety margin                               |
| **Take partial profits**     | Close a portion of your position to improve your liquidation price |

## Advanced Strategies

### Position Compounding

You can compound realized gains back into positions for accelerated growth:

1. Close a portion of your winning position (with Keep Leverage On)
2. Receive PnL + proportional collateral
3. Reopen a larger position using realized profits as additional collateral
4. Repeat to grow position size using market gains

{% hint style="warning" %}
Compounding maximizes capital efficiency but increases risk exposure. Always use strict stop losses when compounding.
{% endhint %}

### Hedging

Open opposing positions across different markets to manage directional risk:

* **Cross-asset hedging** — long crypto, short correlated equity indices
* **Spread trading** — long one commodity, short a related commodity
* **Basis trading** — capture funding rate differentials between markets

Each position incurs independent fees and margin requirements.

### Multi-Market Strategies

With access to crypto, forex, commodities, and equities, you can run strategies that aren't possible on single-asset platforms:

* **Macro plays** — trade forex pairs based on economic data and central bank policies
* **Correlation plays** — exploit relationships between crypto and traditional markets
* **Volatility trading** — short indices during calm markets, go long during uncertainty
* **Commodity cycles** — position in gold, oil, or agriculture based on seasonal patterns

***

{% hint style="danger" %}
**Risk Warning:** Trading with leverage carries substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is appropriate for you in light of your experience, objectives, and financial resources. Only trade with capital you can afford to lose.
{% endhint %}


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