> ## Documentation Index
> Fetch the complete documentation index at: https://docs.trinigence.com/llms.txt
> Use this file to discover all available pages before exploring further.
# Risk Management
> How Trinigence controls risk, exposure, and losses inside a strategy.
## 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.
***
## Core risk components
Every strategy may include one or more risk controls.
Limits loss per trade.
Defines how large each trade is.
Restricts how much capital is exposed.
Controls how many trades can be open.
***
## Stop loss
The stop loss defines the **maximum acceptable loss per trade**.
Example:
```text theme={null}
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.
***
## 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:
```text theme={null}
Use 5% of available capital per trade.
```
Position sizing often has more impact than entry precision.
***
## 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
***
## Trade limits
Trade limits control **how frequently the strategy can trade**.
Examples:
```text theme={null}
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
***
## Direction-specific risk
Risk rules may differ by direction.
Example:
```text theme={null}
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
***
## 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.
***
## Default behavior
If risk rules are:
* missing → ATI enforces safe defaults
* partially defined → ATI fills conservatively
* conflicting → ATI requests clarification
See how safety defaults are applied.
***
## 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.
***
## Best practices
* Define stop loss first
* Keep risk rules simple
* Review drawdowns before profits
* Test risk changes independently
Learn how risk shows up in metrics.
***
## What to read next
Interpret risk through results.
How exits interact with risk.
Return to the full model.
Improve safely over time.
Risk management does not make strategies exciting.\
It makes them survivable.