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What risk management is

Risk management defines how much a strategy is allowed to lose and under which constraints it operates. Good entries find opportunity.
Good exits define outcomes.
Risk management ensures survival. In Trinigence, risk rules are enforced independently from entries and exits.

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Core risk components

Every strategy may include one or more risk controls.

Stop Loss

Limits loss per trade.

Position sizing

Defines how large each trade is.

Exposure limits

Restricts how much capital is exposed.

Trade limits

Controls how many trades can be open.

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Stop loss

The stop loss defines the maximum acceptable loss per trade. Example: 
Use a 1% stop loss.
Stop losses can be:
  • fixed percentage
  • fixed price distance
  • direction-specific
A strategy without a stop loss is considered unsafe.

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Position sizing

Position sizing defines how much capital is allocated to each trade. Common approaches:
  • fixed size
  • fixed percentage of capital
  • risk-based sizing
Example: 
Use 5% of available capital per trade.
Position sizing often has more impact than entry precision.

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Exposure limits

Exposure limits restrict how much capital can be at risk at the same time. Examples:
  • only one open trade at a time
  • maximum 20% total exposure
  • no overlapping positions
These rules prevent:
  • overleveraging
  • correlated losses
  • runaway drawdowns

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Trade limits

Trade limits control how frequently the strategy can trade. Examples: 
Allow only one trade per day.
Allow a maximum of 3 open trades.
Trade limits are especially useful for:
  • lower timeframes
  • high-frequency signals
  • noisy markets

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Direction-specific risk

Risk rules may differ by direction. Example: 
For long trades use a 1% stop loss.
For short trades use a 1.5% stop loss.
This allows:
  • asymmetric risk profiles
  • adaptation to market behavior

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How risk rules are enforced

Risk rules are evaluated:
  • continuously while a trade is open
  • before allowing new entries
  • independently from signal logic
Risk constraints always override entry signals.

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Default behavior

If risk rules are:
  • missing → ATI enforces safe defaults
  • partially defined → ATI fills conservatively
  • conflicting → ATI requests clarification

What Trinigence fills automatically

See how safety defaults are applied.

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Common mistakes

Many strategies fail not because of entries, but because of poor risk control.
Volatility differs across symbols. Risk should adapt.
Too many constraints can eliminate valid trades.

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Best practices

  • Define stop loss first
  • Keep risk rules simple
  • Review drawdowns before profits
  • Test risk changes independently

Backtesting metrics

Learn how risk shows up in metrics.

Backtesting & metrics

Interpret risk through results.

Exit logic

How exits interact with risk.

Strategy overview

Return to the full model.

Iteration & optimization

Improve safely over time.
Risk management does not make strategies exciting.
It makes them survivable.