Skip to main content
Track Risk of ruin
20 / 24
Search the archiveLibrary
Library

2015issue C0745

Closed-trade quality screens before sizing risk

An automated system-efficiency score is generated on the trading summary only after at least two trades have been closed, and is used to judge whether results look better than chance. TradersWeek editorial interpretation: until a method clears that bar, keep stop distance and exposure at their tightest bound.

  • A system-efficiency score is generated only after at least two trades have been closed, and is used to judge whether results look better than chance.
  • A separate practice portfolio for each method keeps rehearsal books comparable when the same symbols are run under different entry and exit rules.
  • Automation is presented as a way to keep risk-control decisions objective rather than discretionary, with capital preservation treated as the condition that extends staying power.
  • TradersWeek editorial interpretation: until the chance-level bar is cleared, keep stop distance and exposure at their tightest bound and do not treat a tidy rehearsal as permission to size up.
Entries in this reading3 entries
Current trackRisk of ruin48 readingsExpected value61 readingsDrawdown limit68 readings

Score the book after trades close

An automated system-efficiency score is generated on the trading summary only after at least two trades have been closed. That score is used to judge whether results look better than chance.

The accompanying manual treats a score above 1.65 as better than chance, above 2 as very good, and above 2.5 as excellent.

Keep rehearsal books comparable

Users can build and backtest a separate practice portfolio for each method so rehearsal books stay comparable. A practice portfolio is a rehearsal book that applies competing entry and exit rules to the same symbols so methods can be compared before live risk is raised.

The same symbols can be run under different entry and exit rules to see which rule set scores higher on the efficiency metric.

Keep the decision objective

Automation is presented as a way to keep risk-control decisions objective rather than discretionary. The evaluation treats capital preservation as the condition that extends a trader's ability to remain in the market. That extra time a trader remains able to operate after losses have been kept inside a planned bound is staying power.

Leave the loss filters in place

Risk of ruin remains a pre-trade and in-trade filter that asks whether the planned exposure can exhaust the account, so a loss decision stays bounded before the order is placed.

Expected value remains a filter that checks whether stop distance, payoff shape, and exposure still leave a positive expectancy before any increase in size.

A drawdown limit remains a ceiling on how far equity may fall before exposure is cut, used to keep one method from consuming the account.

TradersWeek editorial interpretation: a higher system-efficiency score does not replace these filters. It only decides whether the tightest bound on stop distance and exposure may be reconsidered.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
20 of 24 in the Risk of ruin track
201938-39 pp.Next on Risk of ruinSize mini futures from drawdown and leftover marginMini and micro labels do not equalize dollar risk. A mini grain contract can swing about $50 to $100 on a typical day, while an emini equity-index contract can swing about $1,000 to $2,000.
All readings on this track · 24 readings
  1. 1985Forced-close odds from monthly edge and leverage
  2. 1986Constructing a pre-entry risk filter on price-ratio grids
  3. 1991Ratchet the halt floor and stage exposure against cash
  4. 1992Sizing capital from degraded records and volatility
  5. 1992Filter size by expected value and ruin
  6. 1995Risk of ruin as a pre-entry position filter
  7. 1995Filter leverage by sequence-loss odds
  8. 1996Grading track records by drawdown, expected value, and ruin
  9. 1998When quieter returns lose their survival edge
  10. 1999Loss response versus a precommitted trading process
  11. 1999Reauthorize ruin and drawdown filters after a winning stretch
  12. 2000Sold premium, survivorship, and ruin bounds
  13. 2001Monte Carlo drawdown risk and volatility position sizing
  14. 2001Alertness is a size filter, not a mood
  15. 2002A constant percent risk bound beats a higher win rate
  16. 2010Risk of ruin with fractional and reserve betting
  17. 2014Payout identity, expectancy, and path-dependent ruin
  18. 2015Spreading names is not a substitute for a ruin bound
  19. 2015Prestige labels versus one testable trade procedure
  20. 2015Closed-trade quality screens before sizing risk
  21. 2019Size mini futures from drawdown and leftover margin
  22. 2019Starting account size as a survival filter
  23. 2019Pre-entry ruin and volatility caps for short options
  24. 2020Forced margin, stop-loss, and ruin risk in 2020
By fieldStops and loss limits76 readingsBy year2015181 readings
All 48 readings tagged Risk of ruin
Also on Risk of ruin5 readings
1996Grading track records by drawdown, expected value, and ruin1985Forced-close odds from monthly edge and leverage1988Modified-martingale progression lists and ruin bounds1992Filter size by expected value and ruin1999Pre-trade size filters for expectancy and ruin