In institutional trading, the primary differentiator between successful operations and failed ventures is rarely the "alpha" generation strategy itself. It is almost always risk management.
The Ruin Problem
The mathematics of ruin are unforgiving. A 50% loss requires a 100% gain to recover. Institutional capital cannot afford such volatility. That is why at ProFx AI, we prioritize "Risk Engine" architecture above signal generation.
Defining the Hard Limits
We implement what we call "Hard Limits" in our code. These are non-negotiable exit criteria that trigger regardless of market sentiment or potential reversal signals.
- • Maximum Daily Drawdown
- • Correlation Capping
- • Volatility-Adjusted Sizing
By automating these controls, we remove the most dangerous variable in trading: the human emotional response to loss.
This article serves as a general overview of our philosophy. Specific implementations vary by asset class.