Contingency Planning

Contingency planning is the creation of a pre-defined response plan for when a crisis occurs. It is not enough to identify risks; traders must also know exactly what to do when those risks manifest.

This might include a plan to liquidate positions at a certain price, hedge exposures if volatility exceeds a threshold, or move assets to a cold wallet if exchange risk is suspected. For crypto derivative traders, having these plans ready to execute automatically or manually can mean the difference between survival and ruin.

It is the practical application of risk management during times of extreme stress or failure.