Quant Trading Risk Management: 5 Life-Saving Rules
TL;DR: Rule 1: max 1% risk per trade. Rule 2: stop any strategy at 20% drawdown. Rule 3: max 3x leverage. Rule 4: control strategy correlation. Rule 5: write a black swan plan. Follow these and you beat 80% of traders.
| Metric | Healthy | Danger |
|---|
| Per-trade risk | ≤1% | >3% |
| Max drawdown | <15% | >30% |
| Sharpe | >1 | <0.5 |
| Leverage | ≤3x | >10x |
Risk warning: Risk management limits losses, never eliminates them. Only trade with money you can afford to lose.