# 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
