6.5 Risk Management Framework

Baseline constraints:

• Max 2% risk per trade

  • Position sizing is bounded so that a worst-case loss (within defined assumptions) doesn’t exceed ~2% of your allocated capital.

• Daily loss cap = 5%

  • If cumulative realized PnL for the day hits –5%, the bot halts.

  • No “revenge trading”, no “doubling down to get back”.

• Time-based limits

  • Max holding period per trade / route.

  • Cooldown after a sequence of losses.

  • No indefinite exposure in “arb” positions that turned directional.

• Commitment constraint

  • For token-based access: 90-day minimum from snapshot.

  • If you drop below the required token balance before that, access is revoked.

Internally, sizing can be Kelly-inspired but capped; in practice you never run raw Kelly on real markets because tail risk exists and your inputs are noisy.