Equity Thresholds

Equity thresholds are the specific mathematical levels of account value that trigger different stages of risk management, such as warnings, partial liquidations, or full position closures. These thresholds act as automated checkpoints that monitor the financial health of a user's portfolio.

By setting clear and transparent thresholds, protocols allow users to manage their risk effectively while ensuring the system remains protected. These levels are often calibrated based on the risk appetite of the protocol and the volatility of the underlying assets.

When a user's equity crosses these thresholds, the protocol takes predetermined actions to mitigate potential losses. This system creates a predictable and rule-based environment for leveraged trading.

It is a fundamental component of automated risk control.