drawdown-management

Name: drawdown-management
Author: SKE-Labs

15stars2forks

How to install drawdown-management?

ske-labs/agent-trading-skills/drawdown-management

$npx -y skills add SKE-Labs/agent-trading-skills --skill drawdown-management

Installs into the current project.

Summary

Manage account drawdowns with limits and recovery protocols. Use when protecting capital during losing streaks, implementing loss limits, or developing recovery plans.

Files · 1

View on GitHub

SKILL.md

1	# Drawdown Management
2
3	Drawdown management protects capital and ensures trading longevity through loss limits and recovery protocols.
4
5	## Drawdown Types
6
7	\| Type \| Definition \|
8	\| ---------------- \| ------------------------------ \|
9	\| Max Drawdown \| Largest peak-to-trough decline \|
10	\| Daily Drawdown \| Loss in single trading day \|
11	\| Weekly Drawdown \| Loss in single week \|
12	\| Open Drawdown \| Unrealized loss on open trades \|
13
14	## Drawdown Policy
15
16	Obtain daily, weekly, strategy, and maximum-drawdown limits from the portfolio mandate. Define the equity series (realized plus marked-to-market P&L, fees, funding, deposits/withdrawals), peak reset rule, timezone, and whether open-position stress is added. If no limits exist, propose examples for approval rather than enforcing invented percentages.
17
18	## Loss Response Protocol
19
20	At a limit, block new risk as specified by the mandate and alert the owner. Do not automatically liquidate positions: compare orderly reduction with gap, spread, tax, and hedge consequences. Resume only after the documented cause, data/execution health, model validity, and revised risk budget pass an authorized review—not after an arbitrary pause or number of winning days.
21
22	## Recovery Math
23
24	Larger drawdowns require exponentially larger gains to recover:
25
26	\| Drawdown \| Return Needed to Recover \|
27	\| -------- \| ------------------------ \|
28	\| 10% \| 11% \|
29	\| 20% \| 25% \|
30	\| 30% \| 43% \|
31	\| 50% \| 100% \|
32
33	Formula: `Recovery % = Drawdown / (1 - Drawdown) x 100`
34
35	This is why preventing large drawdowns matters more than maximizing gains.
36
37	## Prevention Strategies
38
39	1. Size to mandate -- include gap and correlated exposure
40	2. Enforce approved limits -- block new risk and escalate exactly as documented
41	3. Manage correlations -- avoid stacking similar positions (see correlation-risk)
42	4. Reduce in losing streaks -- cut size early, don't wait for the limit
43	5. Diversify strategies -- single-strategy risk is concentrated risk
44
45	## Monitoring
46
47	Track these metrics continuously:
48
49	- Current drawdown from equity peak
50	- Number of consecutive losing days
51	- Deviation from the strategy's confidence interval for return and loss distribution
52	- Equity curve slope (flattening = warning)
53
54	## Evidence and Validation
55
56	- Treat the setup as a testable hypothesis, not a prediction. Define thresholds, entry, invalidation, and exit before evaluating outcomes.
57	- Calibrate on the same instrument, venue, session, and timeframe. Use closed candles and a held-out or walk-forward sample; record every variant tried.
58	- Include spread, fees, slippage, borrow or funding, partial fills, and latency. Reject the setup when net expectancy is not positive or depends on one narrow parameter.
59	- Return observed inputs, missing data, cost assumptions, entry, invalidation, exit, and a valid, watch, or no-trade status.
60	- Research basis: [Risk-constrained Kelly research](https://web.stanford.edu/~boyd/papers/kelly.html) explicitly trades expected growth against drawdown probability; loss limits should be chosen from mandate and tested distributions, not copied as universal percentages.
61
62	## Key Rules
63
64	- Never add risk to recover a loss unless a preapproved sizing policy independently calls for it.
65	- Preserve realized/unrealized P&L, cash flows, peak, limit, and response in an immutable audit record.
66	- Distinguish strategy deterioration, expected variance, concentration, data faults, and execution faults.
67	- Do not label a drawdown percentage normal without strategy-specific simulations and mandate approval.
68	- Use forward-looking stress and remaining risk budget, not winning/losing streak folklore, to set size.
69
70	## Related Skills
71
72	- position-sizing -- proper sizing is the primary drawdown prevention tool
73	- correlation-risk -- correlated positions amplify drawdowns

People who liked this also viewed

6 picks

Type

drawdown-management

15stars2forks

View on GitHub

How to install drawdown-management?

ske-labs/agent-trading-skills/drawdown-management

$npx -y skills add SKE-Labs/agent-trading-skills --skill drawdown-management

Installs into the current project.

Summary

Manage account drawdowns with limits and recovery protocols. Use when protecting capital during losing streaks, implementing loss limits, or developing recovery plans.

Files · 1

View on GitHub

SKILL.md

1	# Drawdown Management
2
3	Drawdown management protects capital and ensures trading longevity through loss limits and recovery protocols.
4
5	## Drawdown Types
6
7	\| Type \| Definition \|
8	\| ---------------- \| ------------------------------ \|
9	\| Max Drawdown \| Largest peak-to-trough decline \|
10	\| Daily Drawdown \| Loss in single trading day \|
11	\| Weekly Drawdown \| Loss in single week \|
12	\| Open Drawdown \| Unrealized loss on open trades \|
13
14	## Drawdown Policy
15
16	Obtain daily, weekly, strategy, and maximum-drawdown limits from the portfolio mandate. Define the equity series (realized plus marked-to-market P&L, fees, funding, deposits/withdrawals), peak reset rule, timezone, and whether open-position stress is added. If no limits exist, propose examples for approval rather than enforcing invented percentages.
17
18	## Loss Response Protocol
19
20	At a limit, block new risk as specified by the mandate and alert the owner. Do not automatically liquidate positions: compare orderly reduction with gap, spread, tax, and hedge consequences. Resume only after the documented cause, data/execution health, model validity, and revised risk budget pass an authorized review—not after an arbitrary pause or number of winning days.
21
22	## Recovery Math
23
24	Larger drawdowns require exponentially larger gains to recover:
25
26	\| Drawdown \| Return Needed to Recover \|
27	\| -------- \| ------------------------ \|
28	\| 10% \| 11% \|
29	\| 20% \| 25% \|
30	\| 30% \| 43% \|
31	\| 50% \| 100% \|
32
33	Formula: `Recovery % = Drawdown / (1 - Drawdown) x 100`
34
35	This is why preventing large drawdowns matters more than maximizing gains.
36
37	## Prevention Strategies
38
39	1. Size to mandate -- include gap and correlated exposure
40	2. Enforce approved limits -- block new risk and escalate exactly as documented
41	3. Manage correlations -- avoid stacking similar positions (see correlation-risk)
42	4. Reduce in losing streaks -- cut size early, don't wait for the limit
43	5. Diversify strategies -- single-strategy risk is concentrated risk
44
45	## Monitoring
46
47	Track these metrics continuously:
48
49	- Current drawdown from equity peak
50	- Number of consecutive losing days
51	- Deviation from the strategy's confidence interval for return and loss distribution
52	- Equity curve slope (flattening = warning)
53
54	## Evidence and Validation
55
56	- Treat the setup as a testable hypothesis, not a prediction. Define thresholds, entry, invalidation, and exit before evaluating outcomes.
57	- Calibrate on the same instrument, venue, session, and timeframe. Use closed candles and a held-out or walk-forward sample; record every variant tried.
58	- Include spread, fees, slippage, borrow or funding, partial fills, and latency. Reject the setup when net expectancy is not positive or depends on one narrow parameter.
59	- Return observed inputs, missing data, cost assumptions, entry, invalidation, exit, and a valid, watch, or no-trade status.
60	- Research basis: [Risk-constrained Kelly research](https://web.stanford.edu/~boyd/papers/kelly.html) explicitly trades expected growth against drawdown probability; loss limits should be chosen from mandate and tested distributions, not copied as universal percentages.
61
62	## Key Rules
63
64	- Never add risk to recover a loss unless a preapproved sizing policy independently calls for it.
65	- Preserve realized/unrealized P&L, cash flows, peak, limit, and response in an immutable audit record.
66	- Distinguish strategy deterioration, expected variance, concentration, data faults, and execution faults.
67	- Do not label a drawdown percentage normal without strategy-specific simulations and mandate approval.
68	- Use forward-looking stress and remaining risk budget, not winning/losing streak folklore, to set size.
69
70	## Related Skills
71
72	- position-sizing -- proper sizing is the primary drawdown prevention tool
73	- correlation-risk -- correlated positions amplify drawdowns

People who liked this also viewed

6 picks

Type