How Many Range Breaks Are Acceptable for Liquidity Providers?

Many LPs treat any move outside the range as a “failure.” In real markets, that standard is unrealistic.

The right question is not “did it break?” but how often, how severe, and whether the market accepts outside the range.

Three different events (not the same)

• Touched edge: price hits a boundary and returns
• Brief break: price goes outside intraday but does not stay there
• Sustained acceptance: price repeatedly closes/holds outside the range (true regime shift)

LP Regime focuses on market structure

LP Regime uses daily highs/lows to detect range interaction. That’s where LP stress happens.

Why allowing breaks is rational

• Volatility expands even in healthy regimes
• News spikes create temporary wicks
• Range-dominant markets still break occasionally

Allowing a realistic number of breaks prevents over-optimization and reduces emotional range chasing.

What a “bad” month looks like

• Frequent breaks beyond tolerance
• Increasing break frequency month-to-month
• Signs of sustained acceptance outside your LP range

Conclusion

A good LP regime is not “perfect.” It’s stable enough to deploy liquidity with discipline.

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