Portfolio Distribution

portfolio-distribution

Overview

This skill provides guidance on translating risk assessments and market analyses into specific portfolio allocation decisions. Your role is to determine optimal position sizes while respecting risk management constraints.

Instructions

1. Position Sizing Framework

Base Position Size Calculation

Base_Size = Portfolio_Risk_Percentage × (Account_Size / Risk_Per_Trade)
Adjusted_Size = Base_Size × Confidence_Modifier × Risk_Modifier

Confidence Modifiers

• Very high confidence (>0.85): 1.5x
• High confidence (0.70-0.85): 1.0x
• Medium confidence (0.50-0.70): 0.75x
• Low confidence (<0.50): 0.25x or skip

Risk Modifiers (from Risk Judge)

• Low overall risk: 1.2x
• Medium overall risk: 1.0x
• High overall risk: 0.5x

2. Portfolio Risk Management

Total Exposure Limits

• Maximum total position size: 80% of portfolio
• Single position maximum: 25% of portfolio
• Correlated positions combined: <40% of portfolio
• Reserve minimum: 20% cash for opportunities

Diversification Rules

• Don't concentrate >40% in one sector
• Consider correlation between positions
• Balance long and short exposure when appropriate
• Maintain liquidity for rebalancing

3. Action Determination

Buy Actions

• Bull case won with high confidence
• Current position < target allocation
• Entry zone identified with favorable risk/reward
• Liquidity adequate for execution

Sell Actions

• Bear case won with high confidence
• Current position > target allocation
• Stop loss hit or target reached
• Risk/reward deteriorated

Hold Actions

• Unclear winner or low confidence
• Current allocation within target range
• Waiting for better entry/exit
• Preserving capital for better opportunities

4. Execution Planning

Priority Ordering

• Highest conviction trades first
• Most time-sensitive opportunities
• Rebalancing underweight positions
• Taking profits on overweight positions

Timing Recommendations

• Immediate: High confidence, favorable conditions
• Limit Order: Medium confidence, specific entry target
• Wait: Low confidence or better setup expected
• Scale In/Out: Uncertainty about timing, reduce entry/exit risk

5. Trade Structuring

Entry Strategy

• Single entry: High confidence, clear signal
• Scaled entry: Medium confidence, want better average
• Layered limit orders: Range-bound market
• Market order: Time-sensitive, high urgency

Exit Strategy

• Initial stop loss: Below key support (long) or above resistance (short)
• First target: 1.5-2R (risk units)
• Second target: Major resistance/support
• Final: Trailing stop to ride trend

Output Format

{
  "distribution": {
    "allocations": [
      {
        "symbol": "BTC/USDT",
        "action": "buy",
        "current_percentage": 10.0,
        "target_percentage": 18.0,
        "quantity_change": 0.15,
        "entry_range": {"min": 45000, "max": 46000},
        "stop_loss": 43000,
        "targets": [48000, 52000, 55000],
        "reason": "Strong bull case with 0.70 confidence, medium risk, favorable risk/reward"
      },
      {
        "symbol": "ETH/USDT",
        "action": "hold",
        "current_percentage": 15.0,
        "target_percentage": 15.0,
        "reason": "Unclear winner, low confidence, wait for better setup"
      }
    ],
    "total_risk_exposure": 0.65,
    "cash_reserve": 0.35
  },
  "execution_plan": {
    "priority_order": ["BTC/USDT", "ETH/USDT"],
    "timing_recommendation": "immediate",
    "notes": "BTC showing strong bullish momentum, enter on any pullback to 45k-46k range. Set stops below 43k. Scale out at targets."
  },
  "risk_summary": {
    "portfolio_risk": "medium",
    "max_drawdown_estimate": "12%",
    "correlation_warning": "BTC and ETH highly correlated, don't oversize both"
  }
}

Best Practices

1. Never overleverage - Respect maximum position sizes
2. Always define stops - Know your exit before entry
3. Scale positions by conviction - Higher confidence = larger size
4. Consider correlation - Don't concentrate risk
5. Maintain reserves - Keep cash for opportunities
6. Document decisions - Save to /memories/distributions/ for review
7. Review regularly - Rebalance as conditions change
8. Risk first, returns second - Preserve capital above all

Common Mistakes to Avoid

• Over-sizing on high confidence (still need risk limits)
• Ignoring correlation risk
• Taking on too many positions at once
• Forgetting to set stops
• Chasing after moves already made
• Panic selling on temporary drawdowns
• Revenge trading after losses