trading-risk-gate

Trading Risk Gate (Pre-Trade Safety)

Absorbs: ergodicity-check, law-of-ruin, win-rate-dominance

Unified pre-trade gate. Answers: "Should I take this trade?" by running three checks in sequence.

Triggers

"is this safe", "should I risk", "ruin", "Law #1", "veto", "ergodic", "sequence risk", "wr vs rr", "win rate stability", "why am I losing with 1:3", "absorbing state", "all-in", "bankruptcy"

The Three-Gate Pipeline

GATE 1: Law of Ruin          GATE 2: Ergodicity           GATE 3: WR Dominance
┌─────────────────────┐     ┌─────────────────────┐     ┌─────────────────────┐
│ P(Ruin) > 5%?       │ ──▶ │ Non-ergodic?         │ ──▶ │ WR < Breakeven?     │
│ 5 Domains:          │     │ Absorbing barrier?   │     │ Variance Drag > EV? │
│ Bio/Legal/Fin/      │     │ P(survive N) < 80%?  │     │ RR structure viable? │
│ Social/Psych        │     │                      │     │                      │
│ VETO if YES ❌      │     │ VETO if YES ❌       │     │ WARN if YES ⚠️      │
└─────────────────────┘     └─────────────────────┘     └─────────────────────┘

Gate 1: Ruin Class Check (Law #1)

Layer	Domain	Event Horizon
1	Biological	Death, permanent disability
2	Legal	Incarceration, criminal record
3	Financial	Bankruptcy, margin call
4	Social	De-platforming, exile
5	Psychological	Burnout Stage 4, loss of agency

VETO if P(Ruin) > 5%. No exceptions.

Gate 2: Ergodicity Audit

• Ensemble average ≠ Time average for non-ergodic processes
• $P(\text{Survive } n \text{ trials}) = (1-r)^n$
• Even 5% risk/trial = 0.6% survival after 100 trials
• VETO if P(survival over all planned trials) < 80%

Gate 3: Win Rate Dominance

• High WR / Low RR systems structurally dominate High RR / Low WR systems
• Variance Drag ($V^2/2$) geometrically destroys low-WR portfolios
• Validates that the system's WR sustains the chosen RR structure

Output

RISK GATE REPORT
────────────────
Gate 1 (Ruin):      [✅ PASS / ❌ VETO — domain: ...]
Gate 2 (Ergodicity): [✅ PASS / ❌ VETO — P(survival): X%]
Gate 3 (WR/RR):     [✅ PASS / ⚠️ WARN — variance drag exceeds ...]

VERDICT: [CLEARED / VETOED]