182 lines
8.3 KiB
Markdown
182 lines
8.3 KiB
Markdown
# OPERATIONAL DOCTRINE: THE SURVIVAL-MOMENTUM PROTOCOL
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**TO:** All Trading Agents, Analysts, and Portfolio Managers
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**FROM:** System Architect / Risk Control
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**DATE:** January 11, 2026
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**SUBJECT:** OPERATIONAL DOCTRINE: THE SURVIVAL-MOMENTUM PROTOCOL
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---
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## THE CORE MANDATE
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We are not value investors. We are not momentum chasers. **We are Survivalists.**
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Our goal is to **capture Alpha during paradigm shifts while guaranteeing survival during regime collapses.** We achieve this by adhering to a rigid hierarchy of logic that prioritizes **Hard Data** over Narrative and **Trend** over Opinion.
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---
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## I. THE HIERARCHY OF TRUTH
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In the event of a conflict between agents or data sources, this hierarchy governs the decision:
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1. **Hard Code Overrides (The Safety Valves):** If `Price > 200SMA` and `Growth > 30%`, the system **CANNOT** sell, regardless of the Analyst’s fear.
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2. **Mathematical Regime (The Context):** The output of the `RegimeDetector` (Volatility + ADX) is the law. If the math says **TRENDING_UP**, the LLM cannot hallucinate "Uncertainty."
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3. **Fundamental Data (The Fuel):** Revenue Growth, FCF Margins, and Insider Activity are facts. Narratives about "future potential" are opinions.
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4. **LLM Synthesis (The Narrative):** The Analyst's prose is the last filter, not the first.
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---
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## II. THE MOMENTUM EXCEPTION ("Don't Fight the Tape")
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Value traps look cheap; Momentum rockets look expensive. **We do not short innovation.**
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### The Rule
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Valuation multiples (P/E, P/S) are **irrelevant** if:
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1. The Asset is in a **Confirmed Uptrend** (Price > 200 SMA).
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2. The Asset is in **Hyper-Growth** (Revenue Growth > 30%).
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3. The Market Regime is **Bullish/Momentum**.
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### The Consequence
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In this state, we **HOLD**. We do not "take profits" because a stock is "too high." We only sell when the Trend breaks or the Growth slows.
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---
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## III. THE SURVIVAL PRIORITY ("Don't Catch Knives")
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When the regime shifts to **VOLATILE** or **TRENDING_DOWN**:
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1. **Valuation Matters Instantly:** 100x P/S is a death sentence in a downtrend.
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2. **Insider Selling is a Siren:** If insiders sell into a downtrend, we exit immediately.
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### The Rule
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If expected value is negative and the trend is broken, we **liquidate**. We do not "average down." We do not "buy the dip" on broken structural stories.
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### Sizing
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In **Unknown/Volatile** regimes, position sizing must be reduced to ensure no single failure threatens the portfolio.
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---
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## IV. THE RELATIVE STRENGTH DOCTRINE
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We judge assets not in a vacuum, but against the Tide.
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* If the Market (SPY) is Flat/Choppy and the Asset is Trending Up, this is **Alpha**. We press the advantage.
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* If the Market is Up and the Asset is Flat, this is **Weakness**. We cut the laggard.
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---
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## V. EXECUTION DISCIPLINE
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1. **Binary Thinking is the Enemy:** Rarely is the answer "Sell 100%" or "Buy 100%." We scale out of risks and scale into strength.
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2. **No Hallucinations:** We do not invent "SG&A explosions" to justify fear. We verify data against the source.
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3. **The Stop Loss:** A Stop Loss is not a suggestion; it is a mechanism of **survival**. It must be respected above all conviction.
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---
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## SUMMARY
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* We are aggressive when the math supports velocity.
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* We are cowardly when the math signals destruction.
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* We do not have "feelings" about stocks. We have parameters.
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**Execute.**
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---
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# USER MANUAL: LOGIC & RULES
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This document details the operational logic of the Survival-Momentum Protocol. It translates the high-level doctrine into specific algorithmic rules, hard-coded overrides, and stress-test scenarios.
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This is the "User Manual" for the machine you have built.
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## 1. THE RULES (The Logic Engines)
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These are the fundamental laws programmed into the `RegimeDetector` and `MarketAnalyst`.
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### Rule A: The "Price is Truth" Law
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* **Concept:** Fundamental data (Earnings, P/E) is lagging (past). Price action is leading (future).
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* **The Code Logic:**
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* **IF** `RegimeDetector` calculates **TRENDING_UP** (based on ADX > 25 + Positive Returns),
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* **THEN** the system ignores traditional valuation warnings like "Overbought RSI" or "High P/E."
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* **Why:** In a mania, "Overbought" stays overbought for months. Selling early is a failure.
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### Rule B: The "Insider Veto" Law
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* **Concept:** Insiders know more than the algorithm.
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* **The Code Logic:**
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* **IF** Net Insider Activity is **Negative (Selling) > $50M** in the last quarter,
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* **AND** Stock Price is **Below the 50-day SMA**,
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* **THEN** Buy signals are **Disabled**.
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* **Why:** Smart money selling into a downtrend is the ultimate "Get Out" signal.
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### Rule C: The "Relative Strength" Filter
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* **Concept:** Don't buy a boat that is sinking while the tide is rising.
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* **The Code Logic:**
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* **IF** SPY (Broad Market) is **TRENDING_UP**,
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* **BUT** Target Asset is **SIDEWAYS** or **TRENDING_DOWN**,
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* **THEN** The asset is flagged as **WEAKNESS**.
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* **Action:** The Trader must prefer Leaders (Stocks matching or beating SPY regime) over Laggards.
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## 2. THE OVERRIDES (The Hard Gates)
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These are the Python functions in `trading_graph.py` that physically block the LLM from executing a bad decision.
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### Override 1: The "Don't Fight the Tape" (The PLTR Fix)
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* **Trigger:** The Analyst LLM tries to **SELL** or **SHORT**.
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* **The Check:**
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1. Is Price > 200-day Simple Moving Average (SMA)?
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2. Is Revenue Growth > 30% YoY?
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3. Is Market Regime **TRENDING_UP** or **BULL**?
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* **The Intervention:** If **ALL TRUE**, the system effectively "slaps the hand" of the Trader.
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* **Result:** Order converted from **SELL** to **HOLD**.
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* **Log Output:** `🛑 TREND OVERRIDE TRIGGERED: Cannot short hyper-growth in uptrend.`
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### Override 2: The "Falling Knife" Guard (The Zoom/Peloton Fix)
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* **Trigger:** The Analyst LLM tries to **BUY** the dip.
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* **The Check:**
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1. Is Price < 200-day SMA? (Downtrend)
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2. Is Market Regime **VOLATILE** or **TRENDING_DOWN**?
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3. Is Valuation > 50x P/S?
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* **The Intervention:** If **ALL TRUE**, the system blocks the Buy.
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* **Result:** Order converted from **BUY** to **WAIT**.
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* **Log Output:** `🛑 SAFETY VALVE TRIGGERED: Valuation too high for broken trend.`
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## 3. SAMPLE SCENARIOS (Stress Tests)
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Here is how the system handles specific market environments compared to a standard "Value" or "Momentum" bot.
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### Scenario A: The "Rocket Ship" (e.g., NVIDIA in 2023 / PLTR Now)
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* **The Setup:** Stock is up 200%. P/E ratio is 150x. Everyone on CNBC says it's a bubble.
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* **The Value Investor Bot:** Sells immediately. "Overvalued."
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* **The Human Trader:** Panic sells to lock in profits, then cries as it doubles again.
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* **YOUR SYSTEM:**
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* **Regime:** Detects **TRENDING_UP** (High Volatility is accepted via Momentum Exception).
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* **Analyst:** Screams "Valuation Risk!"
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* **Override:** Checks Growth > 30% + Price > 200SMA.
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* **Decision:** **HOLD**.
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* **Outcome:** You ride the bubble until the trend actually breaks.
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### Scenario B: The "Tech Crash" (e.g., ZOOM in 2022)
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* **The Setup:** Stock was $500, now $400. P/S is still 80x. Revenue growth slows from 300% to 40%.
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* **The "Dip Buyer" Bot:** Buys. "It's cheap compared to last month!"
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* **YOUR SYSTEM:**
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* **Regime:** Detects **TRENDING_DOWN** (Price < SMA, ADX High).
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* **Analyst:** "Fundamentals still look okay, maybe a buy?"
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* **Override:** Checks Price < 200SMA + Valuation (80x P/S) > Limit.
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* **Decision:** **SELL / AVOID**.
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* **Outcome:** You exit at $400 before it goes to $60.
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### Scenario C: The "Choppy Market" (e.g., SPY in 2015)
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* **The Setup:** Market is flat. Volatility is low. No clear trend.
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* **The Momentum Bot:** Gets chopped up (Buy high, sell low) repeatedly.
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* **YOUR SYSTEM:**
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* **Regime:** Detects **SIDEWAYS** or **MEAN_REVERTING**.
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* **Indicator Selector:** Switches logic. Instead of using breakouts, it uses Bollinger Bands or RSI Mean Reversion.
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* **Decision:** Buy at Support, Sell at Resistance.
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* **Outcome:** Capital preservation during noise.
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---
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## SUMMARY OF DOCTRINE
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* **In Bull Markets:** We trust the Trend. Valuation is ignored.
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* **In Bear Markets:** We trust the Math. Valuation is everything.
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* **In Uncertainty:** We trust Cash.
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**This architecture ensures you never miss a bubble, but you never hold the bag when it pops.** |