# Vault Lifecycle

Complete journey from proposal to settlement.

## Phases

1. **Proposal** - Investor creates offer
2. **Acceptance** - Trader accepts, vault activates
3. **Active Trading** - Strategy execution
4. **Closure** - Deal ends or limits breached
5. **Settlement** - Profits split, funds distributed

## Phase 1: Proposal

### Create

1. **Funding** > **Create Proposal**
2. Configure terms (capital, profit share, duration, risk limits)
3. Reserve vault address
4. Transfer USDC to vault
5. Confirm funding

**Status**: PENDING

### States

| State    | Meaning                  |
| -------- | ------------------------ |
| Pending  | Awaiting trader response |
| Accepted | Moves to Phase 2         |
| Declined | Trader rejected          |
| Canceled | Investor canceled        |
| Expired  | Timeout reached          |

## Phase 2: Acceptance

### Trader Review

1. View proposal on **Funding** page
2. Check terms (capital, share, duration, limits)
3. Click **Accept** or **Decline**

### Vault Activation

On acceptance (automatic, takes 2-5 minutes):

1. Funds bridge to Hyperliquid
2. Risk monitoring begins
3. Trading is enabled

**Initial state**:

* Status: ACTIVE
* Balance: Your capital
* Peak: Your capital
* Deadline: Now + duration

## Phase 3: Active Trading

### Trading Operations

**Trader**:

* Place orders on Hyperliquid
* Manage positions (long/short)
* Monitor PnL and drawdown
* Stay within risk limits

### Risk Monitoring

Balance is monitored in real-time:

* Max drawdown checked continuously
* Daily drawdown checked continuously
* Peak balance updated on new highs
* Auto-pause if limits breached

**If limit breached**: Vault pauses, new orders rejected, positions can be closed.

### Investor Monitoring

**Dashboard shows**:

* Current balance (real-time)
* Drawdown % from peak
* Daily drawdown % from day start
* Open positions
* Trade history

**Alerts**:

* Warning: Within 5% of limit
* Critical: Within 2% of limit
* Paused: Limit breached

### Pause Scenarios

**Max Drawdown Example**:

* Initial: $10,000
* Peak: $11,000
* Max Drawdown: 20%
* Pause at: $8,800

**Daily Drawdown Example**:

* Balance at midnight UTC: $10,000
* Daily Drawdown: 5%
* Pause at: $9,500 (resets each midnight UTC)

**When paused**:

* New orders rejected
* Can close positions (reduce-only)
* Monitoring continues
* Unpause after recovery or close vault

## Phase 4: Closure

### Triggers

| Trigger           | Description                   |
| ----------------- | ----------------------------- |
| Deal Deadline     | Duration expires              |
| Risk Limit        | Max/daily drawdown hit        |
| Early Termination | Mutual agreement (if enabled) |
| Inactivity        | No trades for extended period |

### Process

1. Trader closes all open positions
2. Closure is triggered
3. Final balance locked
4. Settlement processes

### Profit Calculation

**Example:**

* Initial: $10,000
* Final: $12,000
* Profit: $2,000
* Share: 80/20 (trader/investor)

Result:

* Trader: $1,600 (80% of profit)
* Investor: $10,400 ($10k + 20% of profit)

### Scenarios

**Profitable**:

* Capital: $10,000, Final: $15,000, Profit: $5,000
* Trader: $4,000, Investor: $11,000

**Loss**:

* Capital: $10,000, Final: $9,000, Loss: $1,000
* Trader: $0, Investor: $9,000

**Max Drawdown Hit**:

* Capital: $10,000, Paused at: $8,000
* Trader: $0, Investor: $8,000

**Recovery After Pause**:

* Capital: $10,000, Paused at: $8,000, Recovered to: $11,000
* Trader: $800, Investor: $10,200

## Phase 5: Settlement

### Automatic Settlement

1. Final balance calculated
2. Profit splits computed
3. USDC distributed to trader and investor
4. Vault marked complete

**Timing**: Processes within minutes of closure.

### Post-Settlement

* Status: CLOSED
* Historical data preserved
* Trade history exportable

## Timeline Example

* Day 0: Proposal ($10k, 30d, 80/20)
* Day 1: Accepted, vault activated
* Days 1-28: Trading, grows to $13k
* Day 29: Positions closed at $13.5k
* Day 30: Deal closes, profit $3.5k
  * Trader: $2,800
  * Investor: $10,700
* Day 31: Settlement completes

## Best Practices

### Traders

**During trading**:

* Check status before sessions
* Monitor drawdown daily
* Keep 5-10% buffer below limits
* Set stop-losses

**Approaching deadline**:

* Plan exit 2-3 days before
* Unwind gradually
* Lock in profits

**If paused**:

* Assess recovery vs. closure
* Use market orders if closing

### Investors

**During trading**:

* Monitor daily (don't micromanage)
* Trust trader's strategy
* Intervene only for severe issues

**Risk management**:

* Diversify across traders
* Start small
* Set 20-25% limits
* Review weekly

**At closure**:

* Verify final balance
* Check settlement calculation
* Confirm fund receipt

## FAQ

**Can I extend duration?** No. Close current vault, create new proposal.

**What if trader disappears?** After inactivity timeout, trigger closure and withdraw current balance.

**Can I withdraw mid-deal?** No. Funds locked until closure to protect trader's strategy.

**What happens to open positions at deadline?** Trader must close before deadline. Grace period provided.

**Can profit share be renegotiated?** No. Terms locked at creation. Close vault, create new proposal.

## Next Steps

* [Profit Sharing](/funding-and-vaults/profit-sharing.md)
* [Risk Controls](/trading/risk-controls.md)
* [Creating Proposals](/funding-and-vaults/creating-proposals.md)


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