Risk Policy Guiding Principles Capital preservation first : Survive to trade another dayNo single trade matters : Risk is managed at portfolio levelAssume the worst : Plan for slippage spikes, outages, and black swansNo manual overrides : System rules are absolute during live tradingDocument everything : Every exception logged with rationale Position Sizing Per-Trade Risk Account Type Max Risk per Trade Rationale Prop firm challenge 0.5% of balance Conservative during evaluation Prop firm funded 0.75% of balance Slightly more room, still safe Personal account 1.0% of balance Standard retail sizing High-conviction setup 1.5% of balance Requires explicit flag in system
Prop Firm Sizing Parameters # Position sizing config per prop firm
ftmo :
max_risk_per_trade_pct : 0.5
max_daily_trades : 5
max_concurrent_positions : 3
scale_factor_challenge : 0.8 # More conservative in challenge
mff :
max_risk_per_trade_pct : 0.5
max_daily_trades : 6
max_concurrent_positions : 3
scale_factor_challenge : 0.8
topstep :
max_risk_per_trade_pct : 0.4 # Trailing drawdown requires extra caution
max_daily_trades : 4
max_concurrent_positions : 2
scale_factor_challenge : 0.7
Drawdown Limits Hard Limits (Automatic Actions) Level Threshold Action Recovery Required Warning 3% daily Alert + log None Caution 4% daily Reduce size 50% EOD reset Stop 5% daily Halt all trading Manual review Total Warning 6% total Alert + reduce size Review meeting Total Stop 8% total Halt all strategies Full audit required
Prop Firm Buffer Policy Always maintain 40% buffer below prop firm limits:
Firm Limit Our Limit Buffer 5% daily 3% daily 2% 10% total 6% total 4%
Correlation Limits Constraint Limit Check Frequency Max pairwise strategy correlation 0.5 Monthly Max same-asset exposure 2 strategies Real-time Max same-direction exposure 60% of capital Real-time Max single currency exposure 40% of capital Real-time
Leverage Policy Market Max Effective Leverage Notes FX (majors) 10:1 Below typical 50:1 available FX (minors) 5:1 Higher spreads Crypto 3:1 High volatility Futures (equity index) 5:1 Per contract margin Futures (metals) 5:1 Per contract margin
Event Risk Scheduled Events Event Type Action Lead Time FOMC/ECB/BoE Close positions or widen stops 30 min before NFP/CPI Close positions 15 min before Earnings (for indices) Reduce size 50% EOD before Rollover (futures) Switch to new contract 3 days before expiry
Unscheduled Events Scenario Automatic Response Price gap > 2% Close all positions at market Spread > 3× normal Pause new entries API/connection failure Retry 3×, then halt + alert Broker outage Switch to backup or halt
Missing Data Handling Scenario Action Gap in price data Mark affected bars, exclude from backtest Delayed data > 30s Pause signals, use last known Missing session data Skip session for that day Corrupt data detected Halt, alert, require manual review
Slippage and Cost Assumptions Expected Slippage (Per Market) Market Normal High Vol Crisis EUR/USD 0.1 pip 0.5 pip 2+ pip GBP/USD 0.2 pip 1.0 pip 3+ pip BTC/USD 0.01% 0.1% 0.5%+ NQ futures 0.25 pt 1 pt 5+ pt Gold futures $0.10 $0.50 $2+
Cost Model Incident Response Severity Levels Level Description Response Time Escalation P1 Capital at risk, system down Immediate All hands P2 Strategy malfunction, wrong signals < 1 hour Owner P3 Degraded performance < 4 hours Scheduled review P4 Minor issue, no impact Next business day Log only
Incident Checklist Exceptions Policy Any deviation from this policy requires: 1. Written justification 2. Approval from risk owner (Founder) 3. Time-limited exception (max 1 week) 4. Logged in docs/runbooks/exceptions_log.md 5. Review at next weekly meeting
Policy Review Quarterly : Full policy reviewPost-incident : Review relevant sectionsNew strategy : Confirm policy compatibilityNew prop firm : Add firm-specific parameters