A drawdown guard is not really a risk control. It is a commitment device. You are deciding, calmly, what you will do in a situation where you will not be calm.
That is why the details matter more than the number.
Measure from the high-water mark
Three common anchors, and what each hides:
- From the start of the day. Hides a slow multi-week decline entirely.
- From the start of the month. Resets on an arbitrary date, and a bad run that straddles month-end is measured as two smaller ones.
- From the highest equity reached. Hides nothing.
Raptor measures from the high-water mark. If the account reached 13,105 and now sits at 12,927, the drawdown is 1.36% — regardless of what day it is or how the month started.
The objection is that this feels harsher, and it is. It is harsher in exactly the situation where every other anchor is quietly flattering you.
Decide what "breach" does
A guard that has no defined action on breach is a notification, not a guard. The options, in increasing severity:
- Warn. Log it, surface it, change nothing.
- Stop opening. Existing positions run; no new risk is added.
- Stop acting. Automation stops entirely and continues observing.
- Disarm. Automation withdraws its own authority and hands control back.
- Flatten. Close everything.
We default the drawdown guard to disarm rather than flatten, and that is a deliberate opinion. Forced liquidation at the worst available price is itself a risk event, and the decision to realise a loss belongs to a person. Automation stopping is almost always the right automated response; automation panicking is not.
Flatten exists — as an operator-triggered kill switch, with an audit record — because sometimes a person does need to hit it.
Three horizons, three controls
One number cannot cover a bad hour, a bad fortnight and a structural decline:
| Control | Horizon | Typical action | |---|---|---| | Daily loss budget | One session | Stop acting, keep observing | | Drawdown from high-water mark | Weeks to months | Disarm | | Profit floor | Life of the account | Refuse the order outright |
They compose. Consuming the daily budget does not touch the drawdown guard, and neither of them can breach the profit floor, because the floor is checked before an order exists.
Write it down before you need it
The useful version of this conversation is not "what is a reasonable drawdown limit". It is: what will you do at 4%, at 8%, at 12%? Put those in the mandate. The system will hold you to them, which is the entire point of asking the software to enforce it rather than promising yourself you will.
Related: the capital architecture
Trading leveraged products carries a high level of risk to capital. Technology can improve analysis and controls; it cannot remove market risk.