Combining assessments with your own risk controls
Where the platform's read ends and your risk policy takes over.
9 min read · intermediate · lesson 8 of 8
What this covers
- Separate what the platform computes from what you decide
- Supply the inputs that make a size suggestion yours rather than a default
- Understand the limits available and what each one bounds
- Account for exposure the platform has no sight of
- Keep the risk policy fixed while the reads vary
The division of labour
| The platform | You |
|---|---|
| States a read and the confidence attached | Decide whether the read warrants a position |
| Names the level that would overturn it | Decide the risk you accept on it |
| Computes a size from the inputs you supply | Set the account size and risk percentage those inputs come from |
| Enforces the pre-trade limits you configure | Choose what those limits are |
| Sees what you track inside it | Account for everything you hold elsewhere |
The suggestion is only as good as what you gave it
Set account size and risk per position in trading preferences and a suggested size is computed against them, using the invalidation distance from the read.
That makes the output yours rather than a generic default, and it makes the inputs worth keeping current. A risk percentage set once against an account that has since changed materially produces a suggestion for an account that no longer exists.
The suggestion also inherits your policy, mistakes included. A risk percentage set too high produces a confidently computed size that is too large. The arithmetic is right. The policy is the problem.
The limits and what each one bounds
- Risk per position
- The percentage of the account accepted on any one position. Bounds the ordinary loss and drives the size calculation.
- Pre-trade limits
- Ceilings configured on the execution side: daily volume, daily notional and the number of open positions. They are checked before an order is placed, and an order that would breach one does not go.
- Correlated exposure
- A ceiling on how much of the account rides on one underlying driver. This is the one most often missing, and it is the one that turns several sound positions into a single large bet.
- Account drawdown limit
- The depth at which trading stops for review. Without it the other limits still permit an indefinite slide.
What the platform can and cannot account for
Coherence checks read what you track inside the platform: the composition of a watchlist, whether it concentrates in one sector, whether its direction opposes the wider condition. The check is real. It is also bounded by what you have told it.
Positions held at another broker, in another account, or never recorded here sit outside it. A warning about concentration cannot include exposure it cannot see. Its absence is not evidence that none exists.
Aggregate exposure across everything you hold before sizing anything, and treat any check here as covering the part of your book it knows about.
Where execution is connected
The platform can transmit orders to a broker you have connected, on the highest plan. It does not hold client funds; the money and the account remain with the broker.
Where that is in use, the pre-trade limits stop being advisory. They are checked before an order is sent, and one that would breach them is refused.
The policy behind them matters more once that is switched on, not less. A limit configured carelessly is enforced carelessly, at speed, without the pause that placing an order by hand provides.
The policy is fixed; the reads are the variable
The reads change several times a day. The risk policy should change on the order of months, from a record, and never in response to a particular assessment.
A policy adjusted because one read looks compelling is a preference wearing the word policy, and it gets applied at exactly the moment judgment is least reliable.
Key takeaways
- The platform states a read and computes against your inputs; every decision above that is yours.
- A size suggestion inherits your risk policy, including a policy set badly.
- Four limits are worth having: per position, pre-trade, correlated exposure, and account drawdown.
- Coherence checks cover what you track here, and the absence of a warning is not evidence of no exposure.
- Connected execution makes configured limits binding rather than advisory.
- Risk policy changes from a record, on a slow cycle, never in response to one read.
Common mistakes
- Accepting a suggested size without checking the inputs behind it are current.
- Treating the absence of a concentration warning as confirmation of none.
- Setting per-position risk with no ceiling on correlated exposure.
- Adjusting the risk policy because a particular read looks compelling.
Knowledge check
OptionalRelated
- What PecuDesk does not doUsing PecuDesk
- When not to actUsing PecuDesk