Risk Management

Risk Management is a core skill from the CLI Trader project that teaches trading agents how to manage capital exposure across stocks, crypto, and DeFi positions. Built by the CLI Trader team, this skill establishes the foundational risk controls that every other trading skill depends on. It turns your agent into a disciplined risk manager that enforces position limits, validates every trade against portfolio-level constraints, and prevents the kind of uncontrolled losses that destroy accounts.

The skill covers three major position sizing frameworks — fixed fractional, Kelly criterion, and volatility-adjusted sizing — giving the agent the ability to select the right method based on strategy characteristics and market conditions. Stop-loss methodology includes ATR-based dynamic stops, technical level stops anchored to support and resistance, and time-based exits for trades that fail to perform within a defined window. Beyond individual positions, the skill teaches portfolio heat monitoring, which tracks total open risk as a percentage of equity and prevents the agent from stacking correlated bets that look diversified but carry concentrated exposure. Every trade proposal must pass through a mandatory pre-trade risk validation gate before it reaches you for approval.

In practice, this skill acts as the safety layer that wraps around all other trading operations. When your agent generates a trade idea from technical analysis or signal research, the risk management skill evaluates whether the trade fits within current portfolio constraints, sizes the position appropriately, and attaches stop-loss and risk parameters before presenting the complete trade plan. This ensures that no trade reaches execution without explicit risk controls, regardless of how compelling the signal appears.

For the complete methodology — including formulas, decision trees, worked examples, and validation checklists — see the full Risk Management skill guide.