Portfolio-level risk controls, drawdown management, exposure limits, and circuit breakers for crypto trading

Risk Management Portfolio level risk controls for crypto and Solana trading. This skill provides frameworks for drawdown management, exposure limits, circuit breakers, and crypto specific risk considerations. Risk Management Hierarchy Every decision must respect this priority order: 1. Survival — Never risk account ruin. No single trade, day, or week should threaten your ability to continue trading. 2. Capital preservation — Protect what you have. Losses compound geometrically; recovery requires outsized gains. 3. Growth — Only after survival and preservation are secured, pursue returns. Violating this hierarchy (chasing growth at the expense of survival) is the primary cause of account blowups. Portfolio Level Controls 1. Maximum Drawdown Limits Halt trading when portfolio drawdown from equity peak reaches a threshold: Account Type Max Drawdown Action Conservative 15% Full stop, review all strategies Moderate 20% Full stop, reduce to minimum size on recovery Aggressive 25% Full stop, mandatory cooling period Recovery math makes this critical: a 20% drawdown requires +25% to recover. A 50% drawdown requires +100%. See references/drawdown management.md for the full recovery table. 2. Daily Loss Limits Stop opening new positions after daily P&L (realized + unrealized) hits: Conservative : 3% of account Moderate : 4% of account Aggressive : 5% of account Reset at midnight UTC. Three consecutive days hitting the daily limit triggers a weekly halt. 3. Weekly Loss Limits Reduce size or halt after weekly P&L reaches: Reduce size by 50% : 5% weekly loss Minimum size only : 7% weekly loss Full halt : 10% weekly loss 4. Concentration Limits Maximum allocation to any single dimension: Dimension Max Concentration Single token (blue chip) 10% of account Single token (mid cap) 5% Single token (small cap) 2% Single token (PumpFun/micro) 0.5% Single sector/narrative 30% Single strategy 40% 5. Exposure Limits Total deployed capital constraints: Normal conditions : 50–80% deployed, 20–50% cash reserve Elevated risk : 30–50% deployed Drawdown 10% : 20–30% deployed Max concurrent positions : 5–10 depending on account size 6. Correlation Management Crypto assets correlate 0.7 during sell offs. Effective diversification requires: Treat all meme tokens as a single correlated bucket Limit total meme exposure to one position size equivalent Diversify across strategies (trend, mean reversion, scalp), not just tokens Monitor rolling correlation and reduce when correlations spike See references/exposure limits.md for detailed limits by token type and strategy. Drawdown Management Response Framework Drawdown Status Response 0–5% Normal Continue trading at full size 5–10% Caution Reduce position sizes by 25–50% 10–15% Warning Minimum position sizes only 15–20% Critical Halt new trades, manage existing positions only 20% Emergency Full stop, review everything before resuming Recovery Requirements Loss Required Gain to Recover 5% +5.3% 10% +11.1% 15% +17.6% 20% +25.0% 30% +42.9% 40% +66.7% 50% +100.0% The asymmetry accelerates rapidly. Managing small drawdowns prevents them from becoming catastrophic. See references/drawdown management.md for the full framework. Circuit Breakers Automated controls that restrict trading when conditions are met: Time Based No trading for 24 hours after hitting daily loss limit 48 hour cooling period after weekly loss limit Mandatory weekly review day (no new positions) Loss Based 3 consecutive losses → reduce size 50% 5 consecutive losses → minimum size only 7 consecutive losses → halt 24 hours, full review Volatility Based Portfolio volatility 2× rolling average → reduce exposure 50% Market wide liquidation events → pause all new entries Individual token volatility spike → exit or tighten stops Emotional (Self Assessed) Recognize tilt: anger after losses, urge to "make it back" FOMO: rushing entries without proper analysis Overconfidence: increasing size after a win streak without justification See references/circuit breakers.md for implementation details. Risk Metrics Value at Risk (VaR) 95th percentile daily loss estimate using historical returns: Expected Shortfall (CVaR) Average loss in the worst (1 confidence)% of scenarios: Maximum Drawdown Additional Metrics Win/loss streak tracking : Detect hot/cold streaks for circuit breaker logic Rolling Sharpe ratio : 30 day rolling risk adjusted returns Calmar ratio : Annualized return / max drawdown Sortino ratio : Return / downside deviation (penalizes only negative volatility) Crypto Specific Risks Smart Contract Risk Never allocate 5% of account to a single unaudited protocol Diversify across audited protocols for yield strategies Monitor exploit databases and social channels for emerging threats Rug Pull Risk Size inversely with token age: newer tokens get smaller positions Verify: locked liquidity, renounced mint authority, holder distribution Cross reference with token holder analysis skill for red flags Bridge and Custody Risk Don't hold 20% on any single platform or bridge Self custody the majority of trading capital Budget for bridge fees and delays in execution planning MEV and Execution Risk Budget 1–3% for MEV/slippage on Solana DEX trades Use priority fees during congestion See slippage modeling skill for detailed cost estimation Correlation Spikes In crashes, crypto correlations approach 1.0 Your "diversified" portfolio may behave as one position Stress test portfolio assuming all positions drop simultaneously PumpFun Risk Framework PumpFun and similar meme token platforms require a distinct risk approach: Core Principle Treat every PumpFun trade as a potential 100% loss. Size accordingly. Position Limits Per token maximum : 0.1–0.5 SOL Daily PumpFun budget : Fixed allocation (e.g., 2 SOL/day) Never exceed budget : When daily allocation is gone, stop Tracking Track PumpFun P&L separately from main portfolio Calculate PumpFun win rate and expectancy independently Don't let PumpFun losses affect main portfolio risk limits Risk Adjustments No stop losses on PumpFun (assume 100% loss at entry) Take profits aggressively: 2×, 3×, 5× partial exits Time based exit: close within hours, not days Integration with Other Skills position sizing : Use risk limits from this skill to constrain position sizes exit strategies : Circuit breakers override exit strategies (forced exits) portfolio analytics : Feed portfolio metrics back for risk assessment liquidity analysis : Adjust position limits based on available liquidity slippage modeling : Factor execution costs into risk calculations Files References references/drawdown management.md — Drawdown math, response framework, causes, and remediation references/exposure limits.md — Position limits by token type, portfolio limits, correlation management references/circuit breakers.md — Implementation details for all circuit breaker types Scripts scripts/risk dashboard.py — Portfolio risk dashboard with limit checking and color coded status scripts/drawdown analyzer.py — Equity curve drawdown analysis with response recommendations Quick Start

risk-management