Risk Management
Toro DEX implements institutional-grade risk management to protect traders and liquidity providers.
Core Principles
- Structural Resilience — Multi-level risk buffers for extreme market events
- Fair Liquidations — Auction-first approach before auto-deleveraging
- Isolated Risk — Each market operates independently
Liquidation System
Liquidation Price
Your position is liquidated when your margin ratio falls below the maintenance margin requirement.
Liquidation Price (Long) = Entry Price × (1 - Initial Margin + Maintenance Margin)
Liquidation Price (Short) = Entry Price × (1 + Initial Margin - Maintenance Margin)Liquidation Waterfall
Toro uses a fair liquidation waterfall that protects traders:
Liquidation Auction
Positions first go to auction, allowing liquidators to compete for the best execution price.
Insurance Fund
If auction fails, the insurance fund covers any shortfall.
Auto-Deleveraging (ADL)
Only as a rare last resort, profitable positions may be reduced to cover losses.
Auto-deleveraging is designed as a safety mechanism and is rarely triggered under normal market conditions.
Isolated Markets
Each trading pair on Toro operates as an isolated market:
| Benefit | Description |
|---|---|
| Independent Risk | Issues in one market don't affect others |
| Custom Parameters | Each market has optimized risk settings |
| Contained Losses | Bad debt is isolated to the affected market |
Oracle System
Toro uses multiple oracle sources for reliable price feeds:
- Primary Oracles — Pyth, Chainlink
- Price Bands — Prevent manipulation by limiting price deviation
- Staleness Checks — Reject outdated price data
Risk Parameters
Position Limits
- Maximum position size per market
- Maximum leverage per asset class
- Open interest caps
Margin Requirements
| Parameter | Description |
|---|---|
| Initial Margin | Required to open a position |
| Maintenance Margin | Minimum to keep position open |
| Liquidation Margin | Triggers liquidation process |
Protecting Your Positions
Best Practices
- Use Stop-Losses — Always set a stop-loss to limit downside
- Appropriate Leverage — Lower leverage = more room for volatility
- Monitor Positions — Keep track of your margin ratio
- Diversify — Don't concentrate all capital in one position