Risk Management

Capital Protection First

Every trade executed by AI Predicted Wins is governed by a layered risk management framework. The system is designed for sustainable, long-term performance — not aggressive speculation.

Kelly Criterion Position Sizing

The Kelly Criterion is a mathematically optimal formula for determining bet size based on edge and probability. AI Predicted Wins uses a conservative 25% fractional Kelly — meaning positions are sized at one-quarter of what the full Kelly formula suggests.

This fractional approach:

• Dramatically reduces variance and drawdown risk
• Accepts slightly lower expected returns in exchange for much smoother equity curves
• Accounts for estimation uncertainty in the AI probability model

Hard Risk Limits

Multiple circuit breakers prevent catastrophic losses:

• 5% maximum position size — No single trade can risk more than 5% of total bankroll
• 20% drawdown stop — If the portfolio drops 20% from its peak, the bot pauses all trading and alerts the operator
• 3 correlated positions maximum — The system limits exposure to events that might resolve together (e.g., multiple political markets in the same election cycle)
• Daily trade limits — Prevents overtrading during volatile periods

Real-Time Monitoring

The trading dashboard provides live visibility into all risk metrics:

• Current drawdown percentage
• Open position exposure
• Correlation matrix across active positions
• Historical P&L and equity curve
• Bot health status and last scan time