When to use which protection level in Oracle Access Manager?

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When we have to use protection level as excluded?
When we have to use protection level as unprotected/public?

What is the difference between excluded and unprotected/public resource?

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The Protection Levels apply to Resources. A Resource is typically a URL that you want to protect so you can apply authentication policy to it. So when a user wants to access this Resource, the user can be authenticated and authorized before access is granted to the resource. There are 3 levels of Protection- Protected, Unprotected and Excluded.

Now to answer your question as to which protection level to use- you will use Protected Level (which is the most common use case), when you want to protect your Application URL or resource by challenging the user for authenticating before access is granted to that resource. Both, Authentication and Authorization policy can be applied to this type of protection level. Next is Unprotected Level- in this level the resource is provided an Authentication Level 0 policy (which is the unprotected level). This is similar to an anonymous authentication scheme. You may associate a basic Authorization policy for this level, that is all that is required for this level. Similar to Protected Level a trip to OAM server is made to check whether access can be granted to this resource (in Unprotected Level). So auditing and Session management can be done in both Protected and Unprotected Level. The only difference being that if user session expires for a Unprotected Level resource, user is not challenged to authenticate and user can continue to access the resource as anonymous.

The third protection level is the Excluded Protection Level. For any access to a resource which is Excluded, the webgate does not check with OAM server for this resource, instead access is granted right away. Obviously there are no Authentication and Authorization policies associated with a Excluded resource and there is no session management or auditing. If you want a resource to have public access then you may provide Excluded protection level. Here is the Oracle doc which provides details.