Risk Page

The Risk page monitors compliance with the PDT rule, position/portfolio limits, circuit breakers, and provides the kill switch for emergency stops.

Overview

Risk management is the most critical aspect of automated trading. This page ensures:

  1. Regulatory compliance — No PDT violations (FINRA penalties)
  2. Loss prevention — Drawdown and daily loss limits enforced
  3. System safety — Circuit breakers halt trading when conditions are dangerous
  4. Emergency control — Kill switch provides instant manual override

PDT Day Trade Guard

The most prominent section tracks your Pattern Day Trade usage:

What is the PDT Rule?

FINRA (Financial Industry Regulatory Authority) enforces the Pattern Day Trader rule for accounts under $25,000:

  • Maximum 3 day trades per rolling 5-business-day window
  • Day trade definition: Buy and sell (or sell and buy) the same stock on the same day
  • Penalty: Account is flagged as PDT and restricted from day trading for 90 days

Why this matters: Violating the PDT rule locks you out of day trading, severely limiting your strategy options.

PDT Counter Display

The counter shows:

  • Large number (e.g., “2/3”) — Day trades used out of maximum allowed
  • Color coding:
    • Green (0-1 used) — Safe, plenty of day trades available
    • Amber (2 used) — Caution, one away from limit
    • Red (3 used) — Maxed out, cannot day trade until oldest trade exits the 5-day window
  • Progress bars — Visual indicator of usage (filled bars = used trades)
  • Reset message — “Window resets as oldest trade exits 5-day lookback”

Example:

2 / 3
██████  ██████  ░░░░░░
2 day trades remaining · Window resets as oldest trade exits 5-day lookback

You’ve used 2 day trades. If you use the 3rd, you cannot day trade again until the oldest trade (from 5 business days ago) rolls off the window.

How the System Protects You

The PDT guard is conservative by design:

  • Rejects potential day trades when count is at 3/3
  • Enforces minimum hold periods (strategies use min_hold_days >= 2)
  • Logs every decision for audit trail
  • Counts sells on same day as a buy even if separated by hours

The guard is the system’s most critical safety component. Never disable or bypass it without fully understanding the consequences.

Drawdown Chart

A 60-day area chart showing your account’s drawdown over time:

  • X-axis: Date (last 60 days)
  • Y-axis: Drawdown percentage (0% to -20%)
  • Red dashed line: Maximum drawdown limit (default: -10%)
  • Red area fill: Current drawdown zone

Understanding Drawdown

Drawdown measures how far your equity has fallen from its peak:

Peak Equity: $25,000 (Jan 1)
Current Equity: $23,500 (Jan 15)
Drawdown: ($23,500 - $25,000) / $25,000 = -6.0%

Why it matters:

  • Large drawdowns are hard to recover from (-50% requires +100% to break even)
  • The system halts trading if drawdown exceeds -10% (default limit)

Interpreting the chart:

  • Flat at 0% — Account at all-time high (no drawdown)
  • Shallow dips (-2% to -5%) — Normal market volatility
  • Moderate drawdown (-5% to -10%) — Strategy underperformance, review needed
  • Near/at limit (-10%+) — Circuit breaker triggers, trading halted

Limit Utilization

Four progress bars show how close you are to portfolio limits:

1. Drawdown

  • Current: Your current drawdown percentage
  • Limit: Maximum allowed drawdown (default: 10%)
  • Color: Cyan (safe), amber (>70% utilized), red (>90% or exceeded)

2. Daily Loss

  • Current: Today’s loss as a percentage (absolute value)
  • Limit: Maximum daily loss (default: 3%)
  • Calculation: |min(Daily P&L %, 0)|

If you’ve lost 2.5% today and the limit is 3%, the bar shows 83% utilization (2.5 / 3.0).

3. Positions

  • Current: Number of open positions
  • Limit: Maximum positions allowed (default: 20)
  • Why it matters: Too many positions dilute focus and increase margin risk

4. Cash Reserve

  • Current: Cash as percentage of equity
  • Limit: Minimum required cash reserve (default: 10%)
  • Note: This bar is inverted — color is green when cash is above the limit

Example:

Drawdown:     ████████░░  80% (8.0% / 10%)  [AMBER]
Daily Loss:   ██████░░░░  60% (1.8% / 3%)   [CYAN]
Positions:    ████░░░░░░  40% (8 / 20)      [CYAN]
Cash Reserve: ██████████  100% (12% / 10%)  [CYAN] ✓

This portfolio is nearing max drawdown (amber warning) but has healthy cash reserves.

Circuit Breakers

Circuit breakers automatically halt trading when dangerous conditions are detected:

Status Indicator (top right)

  • All Clear (green check) — No breakers tripped, trading allowed
  • Breaker Tripped (red X) — At least one breaker is active, trading halted

Breaker Cards

Each breaker shows:

  • Icon: Green check (inactive) or red X (tripped)
  • Name: Breaker type (e.g., “VIX Spike”, “Stale Data”)
  • Reason: Brief explanation of status

1. VIX Spike

Triggers when: VIX (volatility index) exceeds 35 Why: Extreme market volatility increases risk of large losses Action: Trading halts until VIX drops below 35

2. Stale Data

Triggers when: Market data hasn’t updated in 15+ minutes Why: Stale prices lead to bad decisions (can’t trust signals) Action: Trading halts until fresh data arrives

3. Reconciliation Mismatch

Triggers when: System’s position records don’t match broker’s records Why: Accounting errors can cause duplicate trades or missed exits Action: Trading halts until positions are reconciled (manual intervention required)

4. Dead Man Switch

Triggers when: Backend hasn’t received a heartbeat in 10+ minutes Why: System may have crashed or lost broker connection Action: Trading halts until backend reconnects

When Breakers Trip

  1. System immediately cancels all open orders
  2. No new orders can be submitted
  3. Dashboard shows warning (red banner at top of all pages)
  4. Alert notifications sent (Slack/Telegram if configured)
  5. Manual review required to understand the cause

Resetting breakers:

  • Most breakers auto-reset when conditions normalize (e.g., VIX drops, data refreshes)
  • Reconciliation breaker requires manual intervention (check logs, fix accounting)
  • Dead man switch resets when backend reconnects

Kill Switch

The kill switch is your emergency stop button. It instantly:

  1. Cancels all open orders
  2. Halts all trading activity
  3. Prevents new orders from being submitted
  4. Requires manual deactivation to resume

When to Use the Kill Switch

  • Market crash: Avoid further losses during extreme volatility
  • Strategy gone rogue: System is making irrational trades
  • Broker issues: IBKR connection is unreliable or orders aren’t filling correctly
  • Personal emergency: You need to step away and ensure no trades happen
  • End of trading day: Prevent overnight positions if you prefer not to hold

How to Activate

  1. Click the “Kill Switch” button on the Risk page
  2. A modal appears with a confirmation prompt
  3. Type “KILL” (all caps) in the text field
  4. Click “Activate Kill Switch”

The modal has a red pulsing background to emphasize the severity of the action.

Confirmation Modal 

┌─────────────────────────────────────────┐
│ 🛑 Activate Kill Switch                 │
│ This will cancel all open orders and    │
│ halt all trading.                       │
│                                         │
│ ⚠️  Warning:                            │
│ All open orders will be cancelled       │
│ immediately. No new trades will be      │
│ submitted until the kill switch is      │
│ deactivated and the cooldown period     │
│ has elapsed.                            │
│                                         │
│ Type "KILL" to confirm:                 │
│ [________________]                      │
│                                         │
│ [Cancel]  [Activate Kill Switch]       │
└─────────────────────────────────────────┘

How to Deactivate

  1. Click the “Resume Trading” button (appears when kill switch is active)
  2. A modal appears (similar to activation)
  3. Type “RESUME” (all caps) in the text field
  4. Click “Resume Trading”

Cooldown period: After deactivating, the system waits 60 seconds before allowing new trades. This prevents accidental reactivation during volatile conditions.

Kill Switch Status

When active:

  • Red banner appears at top of all dashboard pages: “⚠️ KILL SWITCH ACTIVE — Trading halted”
  • All order submissions are rejected with an error message
  • Status persists across backend restarts (stored in database)

When to Use This Page

Check the Risk page:

  • Daily: Review PDT count and drawdown status
  • Before trading: Ensure no circuit breakers are tripped
  • After large losses: Check if you’re approaching daily loss limit
  • In market volatility: Monitor VIX breaker (check if it’s close to triggering)
  • Emergency: Activate kill switch if conditions warrant

Key Metrics to Watch

PDT Count

  • 0-1 used: Safe to day trade if needed
  • 2 used: Be cautious, save last trade for genuine opportunities
  • 3 used: Cannot day trade; only swing trades allowed

Drawdown

  • <5%: Normal volatility
  • 5-8%: Monitor closely, review underperforming positions
  • 8-10%: Danger zone, consider reducing risk
  • >10%: Circuit breaker trips, manual intervention required

Daily Loss

  • <1%: Minor fluctuation
  • 1-2%: Notable loss, review trades
  • 2-3%: Approaching limit, avoid new positions
  • >3%: Circuit breaker trips, trading halted

Cash Reserve

  • >15%: Healthy buffer
  • 10-15%: Minimum acceptable
  • <10%: Limit violation, cannot open new positions until you sell something
  • Portfolio: See how positions contribute to drawdown
  • Strategies: Identify which strategies are causing losses
  • Trades: Review recent trades to understand loss sources

Troubleshooting

Q: PDT counter shows 3/3 but I haven’t day traded A: Check trade history for same-day buy/sell pairs. System may have counted a trade you didn’t notice. Review logs for audit trail.

Q: Circuit breaker won’t reset A: Check backend logs for underlying issue. For reconciliation breaker, manually verify positions in IBKR TWS match system records.

Q: Kill switch activated accidentally A: Deactivate it by typing “RESUME”. There’s a 60-second cooldown before trading resumes.

Q: Drawdown limit seems too strict A: Limits are configurable in config/risk_limits.yaml. Default -10% is conservative; adjust only if you understand the risks.

Best Practices

  1. Never disable PDT guard — The penalties are severe (90-day day trading ban)
  2. Respect drawdown limits — Deep drawdowns are hard to recover from
  3. Use kill switch liberally — Better safe than sorry; reactivating is easy
  4. Monitor VIX during volatility — If VIX is near 35, consider reducing exposure preemptively
  5. Keep cash reserves — 10-15% minimum ensures you can act on opportunities and meet margin requirements
  6. Review breaker logs — Understand why breakers trip to prevent recurrence

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