Trading
Risk Management
6 min read
How much can I lose?
⚠ Important
You can lose your entire position on any single trade. If you buy YES and NO wins, you receive nothing. Only deposit funds you can afford to lose completely.
Losses compound silently. A trader who loses 50% of a $1,000 bankroll is at $500. To return to $1,000, they need a 100% gain, not a 50% gain. Protecting your bankroll is more important than maximizing any single win.
Position sizing: the 2% rule
Never risk more than 2% of your total bankroll on a single market.
With a $1,000 bankroll, that means $20 per trade. With a $500 bankroll, $10 per trade. At this size, even a streak of 10 straight losses reduces your bankroll by about 18%, not 100%. You survive to trade the next round.
When the OU confidence is below 70%, consider reducing to 1% of bankroll. The edge is thinner. The downside is the same.
Correlated risk: the false diversification trap
Buying YES on BTC/USDT across Binance, Bybit, KuCoin, Gate, and Hyperliquid is not diversification. It is five correlated bets on BTC funding direction.
If BTC sentiment flips bearish, all five can resolve NO in the same 8-hour window. A $100 position spread across five $20 bets does not reduce your exposure. It multiplies it.
True diversification means trading different underlying assets, different exchanges, different settlement intervals, and mixing YES and NO positions based on your analysis.
Can funding rates flip suddenly?
Yes. On March 15, BSU went from +0.36% to -0.18% in under 4 hours. Traders who bought YES based on the prior positive rate lost their full stake.
Rate flips happen from: liquidation cascades, token unlocks, exchange outages, and broader market moves. The OU model predicts mean-reversion but cannot predict regime changes. A rate that has been positive for 20 consecutive settlements can still go negative.
When to stop trading a market
Exit signals: OU confidence drops below 60%, recent outcomes alternate YES/NO with no trend, or the live funding rate moves sharply opposite to the market price.
At 1% trading fee, you need at least a 51% win rate to break even at fair odds. At 50¢ markets (coin flip territory), the fee alone makes your expected return negative. Avoid markets where the model is uncertain and the price is near 50¢.
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