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Risk Management

Risk in RegimeFlow is enforced by the RiskManager and optional stop-loss rules. Risk configuration is applied through BacktestEngine::configure_risk and the live engine's LiveConfig::risk_config.

Risk Limits

Risk limits are configured under limits.

Supported keys:

  • limits.max_notional maximum notional per order.
  • limits.max_position maximum position size in shares/contracts.
  • limits.max_position_pct maximum position as a fraction of equity.
  • limits.max_drawdown maximum drawdown fraction.
  • limits.max_gross_exposure maximum gross exposure as a fraction of equity.
  • limits.max_net_exposure maximum net exposure as a fraction of equity.
  • limits.max_leverage maximum leverage.

Sector and industry limits:

  • limits.sector_limits map of sector to max exposure pct.
  • limits.sector_map map of symbol to sector.
  • limits.industry_limits map of industry to max exposure pct.
  • limits.industry_map map of symbol to industry.

Correlation limits:

  • limits.correlation.window price history window length.
  • limits.correlation.max_corr correlation threshold.
  • limits.correlation.max_pair_exposure_pct max exposure for correlated pairs.

Regime-specific limits:

  • limits_by_regime.<regime>.limits.* use the same keys as above, scoped to a regime label.

Regime-aware overlays:

  • RegimeRiskOverlayLimit reads order.metadata["regime"] and applies matching profiles.
  • A profile can block new exposure while still allowing risk-reducing orders.
  • A profile can cap single-order notional and projected position notional as a fraction of equity.
  • A profile can reduce execution aggression by blocking market-style orders or IOC/FOK time-in-force values.

Example:

risk:
  limits:
    max_notional: 100000
    max_position_pct: 0.2
    max_drawdown: 0.2
  limits_by_regime:
    crisis:
      limits:
        max_notional: 25000
        max_position_pct: 0.05

Stop-Loss Configuration

Stop-loss rules are configured under stop_loss, trailing_stop, atr_stop, and time_stop:

  • stop_loss.enable and stop_loss.pct for fixed stop loss.
  • trailing_stop.enable and trailing_stop.pct for trailing stop loss.
  • atr_stop.enable, atr_stop.window, atr_stop.multiplier for ATR-based stops.
  • time_stop.enable, time_stop.max_holding_seconds for time-based exits.

Example:

risk:
  limits:
    max_position_pct: 0.2
  stop_loss:
    enable: true
    pct: 0.05
  trailing_stop:
    enable: true
    pct: 0.03
  atr_stop:
    enable: true
    window: 14
    multiplier: 2.0
  time_stop:
    enable: true
    max_holding_seconds: 7200

Next Steps

  • guide/execution-models.md
  • reference/configuration.md

Regime Risk Overlays

RiskFactory can build compact regime-aware overlays from config. Orders opt into a profile by carrying order.metadata["regime"]. Live and backtest configs can use the same shape:

risk:
  regime_overlays:
    crisis:
      allow_new_exposure: false
      max_order_notional: 5000
      max_position_pct: 0.05
      allow_market_orders: false
      allow_aggressive_tif: false

The same block is also accepted under risk.limits.regime_overlays for configs that keep all limit definitions under limits. Risk-reducing orders are still allowed when allow_new_exposure is false. Use allow_market_orders: false and allow_aggressive_tif: false to force passive/less urgent execution behavior in stressed regimes.