CHAPTER 05 / 8 · Evaluate the strategy
Separate your range from pool policy.
Explain the roles and limits of directional fees, bounds and LP access.
You choose your position. AMM Markets manages supported pool policy. These decisions interact, but a policy change does not automatically resize or rebalance your NFT.
Jump to the interactive experiment ↓Separate the curve from the terms of access
Changing a fee changes the effective price paid by the trader; it does not directly move the stored spot price. A bound constrains which swaps are allowed; it does not sell your inventory, move your range or freeze the external market. A transaction may fail even where liquidity exists if policy disallows that execution.
Consider a buy range at 2,400–2,800. If a configured bound prevents the pool from moving through part of that range, the full accumulation path in the ordinary-curve simulator may be unreachable. Check the overlap between your position and the actual policy before committing capital.
Research informs the terms of trading
Our off-chain research considers market and volatility conditions to inform supported policy parameters. ADPP can price swap directions differently. Higher fees may seek more compensation; lower fees may improve competitiveness. Actual income depends on trades and active liquidity share, so maximizing the fee setting is not the same as maximizing LP results.
Two boundaries with different jobs
Your position range determines where your liquidity participates. Hook price bounds constrain swaps according to the configured policy. A bound is not a stop-loss order, does not stop the external market, and does not promise a withdrawal price. Restrictions can also reduce trading opportunities. Use the live numeric policy and its units, not an illustration, for a real decision.
TRY IT YOURSELF
Make the mechanics visible.
Toggle the policy boundary below. Notice that the position range stays the same. Then use the full Lab to compare an illustrative one-way mandate with standard liquidity.
The position endpoints have not moved.
Illustrative prices on a shared 2,000–4,000 axis. Policy constraints are independent of deposited liquidity. This diagram is not a live execution simulator or an exact depiction of directional boundary rules.
A shared market needs aligned objectives
A restricted LP market may be designed for a particular inventory objective or risk preference. Joining without understanding that mandate can be unsuitable even when swaps are publicly accessible. A dedicated one-way policy can prevent reverse swaps while active; simply raising a fee is not the same hard restriction. Completing an accumulation target still needs capital and counterparties. Exact controls depend on the deployed contract and agreed design.
A higher fee must be tested against lost flow
Suppose an interval produces 1,000,000 USDC of eligible input at a 0.30% LP fee, and your active share is 10%. Your fees are 300 USDC. Double the rate but retain only 40% of volume and your fees fall to 240. Retain 70% and they rise to 420. Neither scenario tells us the inventory P&L or adverse-selection cost.
Treat fee and volume assumptions separately. Our research can inform policy, but the goal is a testable net outcome under an agreed mandate, not the largest displayed fee. The sensitivity below is a thought experiment, not a fitted demand curve or a live policy recommendation.
- Q: fee-paying input volume; f: LP fee rate; s: your fraction of active liquidity.
AssumptionsOne fee band and fixed share. Allocate changing fees/liquidity step by step. Excludes other fee recipients and inventory P&L.
TEST IT HERE · CHANGE ONE ASSUMPTION
Baseline: eligible volume 1,000,000 USDC × LP fee 0.30% × active share 10% = 300 USDC
Both controls are independent assumptions. No demand curve is estimated. Equal period, fixed share, one fee band; excludes hook/protocol revenue, inventory P&L, markouts, hedges and gas. A fee-only improvement is not a net-return improvement or an optimal policy.
GO DEEPERTurn a thesis into a testable LP mandate.
A single-sided range is a conversion schedule
Put only USDC into an ETH range below spot and trades can convert it into ETH as pool price descends. For a completely traversed fee-free range [a,b], USDC spent per ETH acquired is √(ab). Derive it as L(√b−√a) divided by L(1/√a−1/√b). A 2,400–2,800 range averages about 2,592.30 USDC/ETH if fully traversed. It is not a guaranteed fill or a promise that the asset is cheap. If only partially traversed, use actual amounts; external price touching a level does not itself transact.
Suppression and prohibition are different controls
A high fee against ETH leaving the pool discourages reverse conversion; it is not necessarily a hard prohibition. A direction block, if implemented and enabled by the actual contract, is a different rule. Neither guarantees counterparties will deliver a target quantity by a deadline. Policies act at pool level, so a bespoke accumulation mandate may conflict with another LP’s desire to sell. LP access controls help align participants; they do not constitute a guarantee against loss.
Design the experiment before observing the result
Record objective, numeraire, budget, inventory limits, benchmark, expected source of fees, and exit/review conditions. Replay policies using only information available at each decision time; include latency, rejected flow, gas, slippage, hedging costs and parameter-update failures. Separate calibration from out-of-sample evaluation. Stress jumps, depegs, stale data and liquidity withdrawal. Compare net P&L and objective fulfillment alongside fill rate, adverse markouts and time at inventory limits.
ADPP supplies controls; evidence supplies confidence
Position design, directional fees and price bounds are complementary tools. Bounds constrain permitted execution; they do not hedge the value of assets already held. Router policy checks protect a trader from an execution using different checked values; they do not promise best execution or lock market price. Off-chain research can inform settings, but an asserted risk advantage must be measured. A bespoke proposal should identify deployed controls, proposed extensions, decision responsibility and monitoring explicitly.
CHECK YOUR UNDERSTANDING
What does this mean for you?
If your goal is to keep acquired ETH, what policy and access questions would you ask before joining?
CONNECT IT TO AMM MARKETS
From understanding to a real decision.
Open an ADPP market and inspect both directional fees, Hook fees, bounds and LP access. If the mandate does not fit, discuss a bespoke market with our team rather than assuming every ADPP pool pursues the same goal.
Discuss your investment objectives ↗Opens Telegram. Your plan is not sent automatically.References and scope
Course edition: October 2026. Distinguish protocol principles from product instructions; actual market parameters come from the live interface and on-chain state.