> For the complete documentation index, see [llms.txt](https://learn.charm.fi/charm/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://learn.charm.fi/charm/manage-liquidity/how-it-works.md).

# How it works

<figure><img src="https://3306594273-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FncWpbfiN022KvH5AGrQq%2Fuploads%2F7Aq6qRWBSNuelTKAXCMb%2Fimage.png?alt=media&amp;token=d24b7cf7-c541-4f41-89df-3404bbda7600" alt=""><figcaption><p><strong>Fig 1 -</strong> Alpha Vaults deposits liquidity into 3 range orders on Uniswap V3</p></figcaption></figure>

Alpha Vaults manages liquidity using 3 Liquidity Positions: a [Full-Range Position ](https://help.uniswap.org/en/articles/5391541-provide-liquidity-on-uniswap-v3)to guarantee tokens can always be traded and reduces LP risks, a [Base-Order](/charm/products-overview/alpha-vaults/whitepaper.md#overview-of-passive-rebalancing) to Concentrate Liquidity, and a [Limit-Order](/charm/products-overview/alpha-vaults/whitepaper.md#overview-of-passive-rebalancing) to reduce Capital Loss.&#x20;

By changing the vault's [Strategy Parameters](/charm/manage-liquidity/user-guides/vault-parameters.md#strategy-parameters), Liquidity Managers can choose how much liquidity to concentrate, how the vault reduces Capital Loss, and how much Liquidity there will be when tokens trade Out-of-Range. These parameters can be [changed](/charm/manage-liquidity/user-guides/walkthroughs/edit-vault.md) at any time.

After setting the parameters, a single call will trigger the vault to choose new Liquidity Positions. This process can be [fully automated](/charm/manage-liquidity/user-guides/walkthroughs/automating-rebalance.md).

### Track record&#x20;

<figure><img src="https://3306594273-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FncWpbfiN022KvH5AGrQq%2Fuploads%2FXPhSmQczJHcuG2w6zVpw%2FScreenshot%202023-06-28%20at%2006.01.29.png?alt=media&amp;token=91978ea2-9645-4d51-b126-d8a1284c3821" alt=""><figcaption><p>Fig 2 - <a href="https://dune.com/queries/850055/1483210?Number+of+days_t6c1ea=750">On-chain data</a> shows that for 2+ years, Alpha Vaults kept the market price (red line) within the middle of the ranges (blue region) chosen by the vault.</p></figcaption></figure>

Since May 2021, Alpha Vaults chose [over 1000](https://etherscan.io/address/0x1cea471aab8c57118d187315f3d6ae1834ccd836) Liquidity Positions on behalf of the Liquidity Manager.