AI trading bot risk management checklist
A risk management checklist for an AI trading bot lists the controls outside the model that its own reasoning cannot change. Allocait covers one: allocation and position size after the trade.
The controls and who owns each
Agentic trading is an AI agent proposing or placing trades. Each control has an owner: you, your broker or your own code.
Paper first: the agent runs on a simulated account before real money.
Owner: You.
Small first: the agent starts live at a small size.
Owner: You.
Maximum order size: an order above a limit you set is refused.
Owner: Your code or your broker.
Duplicate-order guard: an order identical to one just sent is refused.
Owner: Your code.
Price sanity: an order far from the last price you hold is refused.
Owner: Your code.
Daily loss limit: orders stop once a loss limit is reached.
Owner: Your code or your broker.
A human yes for live orders: the agent proposes and a person approves each live order.
Owner: You.
A kill switch: a way to cut the agent off at once.
Owner: Your broker or your code.
Allocation and position size after the trade: where each asset class and holding lands once the order fills, against your own written rules.
Owner: Allocait reports it.
What Allocait covers
Allocait covers the last item, as a check that reports and does not stop anything. The pre-trade check page has the definition. It stops no trade, places no order and has no kill switch. Every other item stays with you, your broker or your code.
- Pre-trade check for AI agents: what the allocation and size check asks and returns, with a worked example.
- Check before you trade: the request, the result and how to read it.
How can an AI trading bot check position size before it orders?
People ask how to stop a bot from over-concentrating in one stock. Allocait does not stop an order. Write a size range for each position, and have the bot check every proposed trade against it before it orders. The check reports a position that would land above its maximum, and the bot or you decide what happens next.
What does a position size check report for an AI trading bot?
Your range for ECHO is 3% to 9% and you hold 7%. The bot proposes a buy that would take ECHO to 13%, so ECHO would land 4 points above its maximum.
The check reports that and stops there. The bot then decides what to do, or you do.
Illustrative example. The figures are hypothetical, not a recommendation.
Sources
Public sources on the same controls for firms. Allocait is not affiliated with them.
- SEC Rule 15c3-5: risk management controls for brokers with market access.
- FIA automated trading risk controls: a paper on pre-trade controls, including limits on order size and position.
- FINRA Regulatory Notice 15-09: supervision and control practices for firms that trade with algorithms.