Risk Parity Strategy Allocation

Entry Logic

• Long entry: Capital is allocated to different strategies based on their risk, not their expected return. The goal is to have each strategy contribute equally to the overall portfolio risk.
• Short entry: Same as above.
• Confirmation: The risk of each strategy is measured by its volatility or contribution to portfolio volatility.
• Timeframe: Any.
• Location: Any.
• Market Condition: Any.

Exit Logic

• Profit Target: Not applicable.
• Scaling Out: Not applicable.
• Trailing Stop: Not applicable.
• Signal Failure: Not applicable.
• Opposite Signal: Not applicable.
• Time Expiration: Not applicable.
• Momentum Loss: Not applicable.

Stop Loss Structure

• Hard Stop: Not applicable.
• Soft Stop: Not applicable.
• Max Dollar Loss: Not applicable.
• Max Percent Loss: Not applicable.
• Structural Stop: Not applicable.

Risk Management Framework

• Risk Per Trade: Not applicable.
• Daily Limit: Not applicable.
• Weekly Limit: Not applicable.
• Max Drawdown: Not applicable.
• R:R Requirement: Not applicable.

Position Sizing Model

• Sizing Approach: The allocation is based on risk parity.
• Volatility Adjustment: The core of the strategy.
• Conviction Sizing: Not applicable.
• Scaling In: Not applicable.
• Scaling Out: Not applicable.

Trade Filtering

• Market Conditions: Any.
• Setups: Not applicable.
• Instruments: Any.
• Time Restrictions: Any.
• Chop/News Avoidance: Any.

Context Framework

• Trend Direction: Not applicable.
• VWAP Relationship: Not applicable.
• MA Relationship: Not applicable.
• Range Location: Not applicable.
• Higher TF Alignment: Not applicable.

Trade Management Rules

• Breakeven: Not applicable.
• Scale Out: Not applicable.
• Add Size: Not applicable.
• Fast vs Slow Moves: Not applicable.

Time Rules

• Optimal Window: Any.
• Times to Avoid: Any.
• Session Notes: A popular institutional approach to portfolio construction.

Setup Classification

• A+ Setup: Not applicable.
• A Setup: Not applicable.
• B Setup: Not applicable.
• C Setup: Not applicable.

Market Selection Criteria

• Instruments: Any.
• Volume: Any.
• Volatility: Any.

Statistical Edge Metrics

• Win Rate: Not applicable.
• Avg Win: Not applicable.
• Avg Loss: Not applicable.
• Profit Factor: Not applicable.
• Expectancy: Not applicable.

Failure Conditions

• Market Conditions: When the historical volatility of a strategy is not a good predictor of its future volatility.
• Specific Scenarios: A black swan event.

Psychological Rules

• Mental Discipline: A focus on risk management above all else.

Advanced Components

• Regime Detection: Not applicable.
• Filters: Not applicable.
• Correlation: The allocation can take into account the correlation between strategies.
• MTF Alignment: Not applicable.

Location

• Strongest: In all market conditions, due to its focus on risk diversification.
• Weakest: In a market where low-risk strategies have very low returns.