This page describes the risk-management methods used in Illuminatek’s own trading system. These include position sizing, predefined exit rules, automated monitoring and restrictions on trading activity.
The controls are intended to manage exposure and reduce discretionary intervention. They cannot prevent every loss or guarantee that trades will execute as intended.
Account Structure
The trading setup uses separate accounts for long and short exposure. Returns are assessed on the combined balance across the active accounts so that both sides are included in the performance record.
Separate trading accounts do not remove shared risks. Accounts using the same exchange remain exposed to that platform’s security, availability and handling of funds.
Following the Drift Protocol security incident in April 2026, trading was paused and the execution infrastructure was rebuilt. The incident resulted in a loss of access to trading capital and demonstrated that trading rules cannot protect against every platform or custody failure.
The published performance series excludes the capital loss associated with that incident and continues using replacement capital. It therefore measures the tracked trading results rather than the company’s overall financial outcome including that loss. Further details are provided on the performance page.
Exposure and Position Sizing
Earlier stages of development used higher exposure. Position allocations have since been reduced, and the current setup operates at 1× leverage with smaller allocations during testing.
Smaller positions reduce the account’s sensitivity to individual price movements, but they do not eliminate market or platform risk. Trading perpetual futures at 1× leverage still involves derivative exposure.
Changes in allocation and strategy selection also affect comparisons between periods. Results achieved under an earlier configuration should not be treated as representative of the current setup.
Weekly Return Profile
The chart below shows recorded weekly returns across the combined trading accounts. It includes periods with different position sizes, strategies and execution arrangements
Both profitable and losing periods form part of the record. A period of lower volatility does not establish that future returns will be smoother or that losses will remain within previous levels.
The maximum drawdown recorded in the tracked performance series is:
Max Drawdown: -10.73%This measures the largest peak-to-trough decline within that series. It reflects the series’ exclusions and adjustments, including the treatment of the Drift incident described above. It is not a limit on future losses or a measure of all losses incurred by the company.
Stop Losses and Trailing Exits
Each strategy uses a predefined stop-loss level, set before entry and not widened once a trade is live.
The system also uses staged trailing exits. These adjust the intended exit level after favourable price movements, allowing a trade to remain open while seeking to retain some of its unrealised gain.
Stop levels are instructions, not guaranteed execution prices. Slippage, sudden price changes, insufficient liquidity or technical failures can cause a trade to close at a worse price than intended. An unrealised profit may be reduced or lost before an exit completes.
Protective Execution
Protective stop instructions are placed on the exchange where supported. The bot also monitors positions locally and can attempt an emergency reduce-only market order when required.
Using both local monitoring and exchange-side instructions reduces reliance on the local machine alone. However, each mechanism has limitations. Local monitoring depends on connectivity, software and access to the exchange, while exchange-side orders depend on the venue continuing to operate and process them.
Neither mechanism guarantees that a position will close successfully or at the intended price.
Circuit Breakers
Each strategy has a circuit breaker intended to disable it when its defined loss threshold is reached, pending manual review.
A separate system-wide circuit breaker can stop further trading when losses across strategies reach a configured threshold.
These controls are intended to restrict continued exposure after losses. They cannot reverse losses already incurred, guarantee an exact stopping point or prevent losses arising from platform failures. Their operation depends on functioning software, timely data and exchange access.
Strategy Selection
Strategies are assessed using historical analysis and observations from live trading. The review considers sample size, trading costs, drawdown and performance across different market conditions.
Historical testing has limitations. Results can be affected by data quality, execution assumptions and selecting settings that fit past observations too closely.
Strategies may be added, reduced, paused or removed as evidence develops. Neither a favourable backtest nor a profitable live period establishes that a strategy will remain profitable.
Treasury and Capital Allocation
Trading uses the company’s own capital. Retained trading profits may be allocated to further trading or development, subject to review.
Trading balances are held primarily in USDC. USDC is a dollar-referenced cryptoasset and should not be treated as equivalent to a protected bank deposit. Its use introduces risks associated with its issuer, dollar peg, custody arrangements and the platforms on which it is held.
Following the Drift incident, platform concentration forms part of the allocation review. Reducing dependence on a single venue remains a development objective. Holding separate accounts on the same venue does not achieve that diversification.
Limitations of the Framework
The framework provides rules for sizing positions, managing exits, monitoring activity and restricting further trading after losses.
Its effectiveness depends on market conditions and the operation of the underlying software and trading platforms. Substantial losses remain possible, including the loss of all capital committed.
This page documents internal trading practices. It does not recommend a trading strategy or provide assurance about future results.