Making a risk management algorithm

By now, we're aware of the different types of risks and factors, including the risks in a trading strategy and the most common risk metrics for algorithmic trading strategies. Now, let's have a look at incorporating these risk measures into our volatility adjusted mean reversion trading strategy to make it safer before deploying it into live markets. We will set the risk limits to 150% of the maximum achieved historically. We are doing this because it is possible that there is a day in the future that is very different from what we've seen historically. Let's get started:

  1. Let's define our risk limits, which we are not allowed to breach. As we discussed previously, it will be set to 150% of the historically ...

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