Solana (SOL)

I've been providing liquidity on @MeteoraAG for about 15 months. From my experience and that of other LPers I've interacted with, I can confidently say this: The best LPers don't earn the most because they chase every shiny coin. They earn the most because they manage risk well https://t.co/RcwdNaHsnw

We've all read stories of traders who roundtripped lifechanging profits. @coinfessions shares stories of 6-7 fig traders who gave everything back to the market. Not because they weren't profitable. But because they hadn't mastered risk management. LPing is no different.

After blowing up my capital multiple times and eventually building it back up, I realized it was never a lack of skill. It was a lack of proper risk management. In this thread, we define risk management as strategies that help you protect your capital and allow profit compound. https://t.co/ns36j1bgr7

The goal is not to avoid losses completely. That's impossible :) The goal is to keep losses small enough that one bad trade doesn't wipe out months of progress. 🔔 In this thread, I share risk management principles I use whenever I provide liquidity on Meteora.

1. Capital Allocation: One time, I deployed my entire trading capital, about $1,200, into a single LP position. It's not a story I enjoy telling. After the rug, I was left with $150. My mistake wasn't choosing the wrong token. It was putting ALL my capital into one position. https://t.co/vA7pXBVbqL

Its like using your entire trading capital to buy one token. Not smart :) Today, I split my capital based on risk. E.g > 50% in safer pairs like SOL-USDC, HYPE-SOL etc > 30% in higher volatility tokens like memecoin > 10% for speculation eg. Dammv2 > 10% reserved for fees

Even the 30% allocated to memecoins is spread across multiple positions instead of one coin. It may seem conservative, but remember this: 99% of tokens eventually die. You can never run out of tokens to LP. But you can absolutely run out of capital. So protect it.

2. Know When to Exit: Remember the position I mentioned above? Well, at one point, I was over +70% in profit. But I still lost it all. Why? Because I never had an exit plan. When the token started dumping, I convinced myself it would bounce and held for days. It never did. https://t.co/is2xMC1YhN

Now, before I LP, I already know where I'm taking profit and under what conditions I'll exit. 🔔 The best time to exit a position is when the chart is green and you're in profit and not the other way around Remember Warren Buffet's advice to be fearful when others are greedy.

You can also combine technical signals. One strategy I like is the @EvilPanda strategy. You exit when at least two conditions align: > RSI closes above 90 AND price closes above the upper Bollinger Band OR > RSI closes above 90 AND the MACD prints its first green histogram

🔔 Casestudy: Today, my profit target for $LUKE was +50%. Before price reached that level, I noticed the dev started acting sus so I exited while chart was green. About an hour later, the token dumped over -70%. Point is, have an exit plan and stick to it. https://t.co/Fbu6QxWFN7

3. Understand Volatility Strategies: Two people can LP the same token with the same amount of capital. One walks away with profit or minimal losses. The other gets destroyed. The difference is usually the volatility strat employed. E.g: Mr. A uses Curve Mr. B uses Bid-Ask https://t.co/wrauPHIFP2

The token nukes -30%. Mr A will no doubt lose more. Why? With onesided Curve, most of your liquidity sits near the current price, so even a small dip can be catastrophic. With Bid-Ask, liquidity sits further away from current price, giving you much better downside protection. https://t.co/72dvdM8dBY

Knowing when to use what strategy is one of the biggest risk management skills you can learn. Personally, I keep it simple. > Ranging? Spot > Newly launched or highly volatile tokens? One-sided Bid-Ask or @EvilPanda strategy > Stable pairs? Curve, because I'm optimizing for fees rather than protecting against massive price swings. PS: As a personal rule, I do not use Curve on memecoins. The downside simply isn't worth the risk to me :)

for fees rather than protecting against massive price swings. PS: As a personal rule, I do not use Curve on memecoins. The downside simply isn't worth the risk to me :)

4. Know When to Cut Losses vs When to Rebalance: My number one mantra is that capital preservation is always greater than any unrealized profit. There will always be another opportunity. If holding a position means watching it slowly go to zero, https://t.co/Fnq8J0hmxC

it's usually better to take the loss and move on. Every position should have a maximum acceptable loss before you even enter. ❓️Now the obvious question: Why cut losses when you can simply rebalance? For me, rebalancing depends entirely on the situation

> If I'm out of range because price moved upward, I'm already profitable. In that situation, rebalancing makes sense because I've already accumulated fees that can offset future impermanent loss. > If price moves outside my range to the negative and I don't expect it to return

soon, the downside is where I become much more cautious. Before rebalance a losing position, I ask myself: ● Am I revenge trading? ● Am I trying to save a dead token? ● What does the onchain data say? ● Any real catalyst that could revive this project? ● Is dev selling?

If I can't answer those questions confidently, I don't rebalance. Throwing more capital into a dying token rarely ends well. 5. Risk Signals: During a coaching call with @tiiagoslb last year, he said something that stuck with me. "Choosing the right token is 99% of the work." https://t.co/mPo24nTZAV

I completely agree. Good risk management starts before you even click "Create Position." Here's what I check: > Market Cap: Generally, I prefer tokens > $500K market cap. Anything below that usually carries much higher risk.

> Liquidity: A token can have a high market cap but very little liquidity. I check: ● Total liquidity available. ● Whether liquidity is locked or burned. ● Liquidity-to-market-cap ratio. > Holder Distribution: If the top ten wallets control > 40% of supply, I skip.

> Fee Generation: This is something I learned from @0xMrBeefman I usually want to see fee generation above 30 SOL before I consider entering. Generally, before entering any LP, I ask myself: ● Is the narrative still strong? ● Is volume increasing? ● Any upcoming catalysts?

> Community I always check community sentiment. Is the community active? Or is everyone farming. > Volume: This is one of my biggest filters. I like seeing daily trading volume close to half the mcap. E.g If mcap is $5M, I want to see around $2M-$2.5M in daily volume.

● Is the community genuinely active? If the answer to most of these questions is no, I skip. Bottomline, If you remember nothing else from this guide, remember these five things: > Protect your capital. > Always have an entry and exit plan. > Don't be afraid to cut losses.

> Know when rebalancing makes sense > Research every token before providing liquidity In short, LPing is not passive income It's active risk management And LPers who outperform are the ones protecting their capital while allowing their fees to compound over time. @met_lparmy