6.20 Why Loss Control Is the Only Thing You Fully Control
You can't control whether a trade wins, only how much you lose when wrong. Recovery is brutally asymmetric, so size, stops, and correlation decide survival more than any signal.
Independent research on systematic & quantitative trading
Aligrithm is an independent research publication on systematic trading, quantitative research, market microstructure, and adaptive systems. Long-form essays, code notebooks, and architecture breakdowns across eight pillars, built for traders who care more about how markets behave than about hype.
More about the publication →The ten pillars
Read in order. Each pillar walks you out of one trap with one new ability. The newest article is the worst place to begin.
- 1 The Scientific Trader Rebuild what you accept as evidence. Every rule becomes a hypothesis, every backtest an experiment you can falsify. 26
- 2 Indicator Engineering The input decides the ceiling. Build features with measurable properties that survive the tests. 82
- 3 Robust Systems Lab A strategy is not robust for surviving one friendly backtest. Here it survives hostile testing. 37
- 4 Market Structure Notes The same rule is edge on one instrument and noise on another. Read a market's personality before you deploy. 71
- 5 Microstructure Alpha The order-book layer. The same signal is worthless as taker flow and valuable as a maker improvement. 45
- 6 Portfolio Construction & System Death A real signal still loses if the size and correlations are wrong. Sizing is part of the signal. 48
- 7 Python Research Notebooks Stop taking results on faith. Re-run every claim on your own data and see whether it holds. 3
- 8 Physics, Geometry & Event-Driven Markets The frontier. Markets as event-driven nonlinear systems, not fixed-time price series. Read it last. 9
- 9 Prediction Market Arbitrage The cleanest money on Polymarket and Kalshi comes from prices that contradict each other, not prices that turn out wrong. 33
- 10 Cross-Sectional & Factor Investing Stop timing one asset. Rank the whole cross-section and let relative value, not direction, carry the return. 15
Latest articles
6.2 Ranked Long/Short Systems Explained
Score the universe, sort it, buy the top slice and short the bottom in equal risk. The broad market cancels and you hold only the spread between winners and losers.
6.19 When to Switch Off a Trading System
Traders kill good systems in normal drawdowns and ride dead ones on hope. Write the kill rule before the pain, tie it to the drawdown envelope, and treat it as a dial, not a switch.
6.18 Smooth Equity Curves Are Built, Not Found
The single perfect equity curve doesn't exist. Smoothness is assembled from several rougher, uncorrelated systems whose drawdowns fall at different times, and even that fails in a crisis.
6.17 The Hidden Importance of Time in Market
Two systems with equal per-trade edge differ once you put them on a clock. Time in market sets return on capital, decides whether systems can offset each other, and charges hidden opportunity cost.
6.16 Profit Factor, Expectancy, and the Shape of Returns
Profit factor and expectancy are both blind to the shape of returns. Two systems with the same numbers can be robust or rest entirely on two lucky winners. Read the distribution, not just the summary.
6.15 Why Percent Profitable Is Overrated
An 80% win rate can lose money and a 36% win rate can print it. The win rate is half a number, useless without the payoff ratio, and optimizing for it quietly destroys real systems.
6.14 Expectancy: The Most Important Formula in Trading
Expectancy is the average win or loss per trade, the one number that says if a system makes money. A 36% win rate can print and a 70% win rate can bleed; only expectancy tells the truth.
6.13 When a Drawdown Means the System Is Broken
Every system draws down, so depth alone is no kill signal. Compare the live drawdown to the permutation envelope, set a breach line before the pain, and act when it's crossed instead of freezing.
6.12 Average Drawdown vs Extreme Drawdown
Your backtest's max drawdown is one draw from a distribution you never measured. Reshuffle the trades thousands of times, read the extreme off a high percentile, and know it understates loss streaks.
6.11 Drawdown Is Not Just a Number: It Is a Diagnosis
A drawdown's depth tells you almost nothing. The same dip can be a trend system paying its fee or a dead edge. Read the trades underneath; the diagnosis decides the treatment, not the number.
6.10 How to Build a Cost-Aware RSI Ranking System
RSI as a 70/30 trigger is noise. Z-score it cross-sectionally, check the shape, rank and risk-size the extremes, then buffer the turnover. The four-step pipeline works for any indicator.