How Risk Normalization Works

The Problem

Imagine a leader with a $1,000,000 account opens a $50,000 BTC long. That's only 5% of their portfolio — a conservative trade. If a follower with $2,000 copies the same dollar amount, they'd be opening a position 25x their account size — an extreme leverage bet that could be liquidated instantly.

The Solution: Copy Risk, Not Size

HyperSync calculates the risk percentage the leader is taking, then applies that same percentage to your account.

The Formula

Leader Risk % = Position Value / Leader Account Equity

Your Position Size = Your Equity × Leader Risk % × Risk Multiplier

Final Position Size = min(Your Position Size, Max Position Size Cap)

Worked Example

Leader:
  Account equity:    $500,000
  Position value:    $25,000 BTC long
  Risk percentage:   25,000 / 500,000 = 5%

Follower (you):
  Account equity:    $5,000
  Risk multiplier:   1.0x
  Max leverage cap:  10x

Calculation:
  Base position:     $5,000 × 5% × 1.0 = $250

Risk Validation:
  Leverage used:     $250 / $5,000 = 0.05x ✓ (under 10x cap)
  Liquidation check: Estimated liq price is >25% away ✓
  Margin check:      Sufficient free margin ✓

Result: Open $250 BTC long

With Risk Multiplier Variations

Using the same example above (leader risking 5%):

Your Equity	Risk Multiplier	Position Size	Effective Leverage
$5,000	0.5x	$125	0.025x
$5,000	1.0x	$250	0.05x
$5,000	1.5x	$375	0.075x
$5,000	2.0x	$500	0.1x
$10,000	1.0x	$500	0.05x
$50,000	1.0x	$2,500	0.05x

Leverage Capping

If the calculated position would exceed your maximum leverage cap, HyperSync reduces the position size:

Leader uses 20x leverage on a trade
Your max leverage cap is 10x

Step 1: Calculate based on risk %  → $2,500 position
Step 2: Check leverage              → $2,500 / $5,000 = 0.5x
Step 3: Under cap? Yes (0.5x < 10x) → No adjustment needed

But if the leader takes a highly leveraged position:

Leader: 50% of portfolio on BTC at 25x leverage
Calculated position for you: $2,500 at 25x
Your leverage cap: 10x

HyperSync reduces position to stay under 10x leverage
Adjusted position: $1,000 (10x leverage on $5,000 equity)
Risk event logged: "Position resized due to leverage cap"

Liquidation Buffer

Before executing any copy trade, HyperSync estimates the liquidation price and ensures there's a 25% buffer:

Entry price:           $60,000
Estimated liq price:   $55,000
Distance to liq:       8.3%
Required buffer:       25%

8.3% < 25% → Trade REJECTED or position size reduced

The system will reduce the position size until:
  - The liquidation distance exceeds 25%, OR
  - The trade is rejected as too risky

What Gets Logged

Every copy trade generates a Risk Event in the audit log:

• Approved: Trade passed all checks, executed as calculated

• Resized: Trade was reduced to meet leverage/liquidation constraints

• Rejected: Trade failed risk validation and was not executed

You can view all risk events in the Risk Dashboard (/dashboard/risk).