> For the complete documentation index, see [llms.txt](https://eosi-finance-1.gitbook.io/eosi-finance-documentations/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://eosi-finance-1.gitbook.io/eosi-finance-documentations/eosi-finance/5.-architecture-of-the-eosi-finance-ecosystem/5.6-funding-pools-trader-access-and-protection-layers/5.6.3-risk-engine-automated-protection-for-lps.md).

# 5.6.3 Risk Engine – Automated Protection for LPs

* **Drawdown and Loss Limits:** The protocol enforces daily and total drawdown limits. If breached, the trader’s allocation is automatically revoked.
* **Position Sizing and Leverage Caps:** Smart‑contract logic caps position sizes and leverage, preventing traders from taking excessive risk.
* **Segmentation and Circuit Breakers:** Funds are spread across cohorts to diversify risk. During periods of extreme volatility, circuit breakers pause allocations until markets stabilise.
* **AI‑Driven Oracles:** Risk parameters can tighten or loosen dynamically based on market volatility and sentiment, similar to how DeFi protocols adjust interest rates algorithmically


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