SPEC-EAV-001 v0.2 · Layer L2 Risk management
K-04 Absence of stop loss
K-04 tests whether a loss ceiling is actually observed in the record. The tail thickness and maximum of the losing-trade distribution are examined to distinguish losses that cluster near a bound from losses that spread without one.
What it examines
The shape of the losing-trade loss distribution, in particular its upper tail.
How it is computed
Tail thickness and maximum of the loss distribution. Distinguish clustering near a specific value from unbounded dispersion.
What a defect means
If no loss ceiling is observed, either no stop exists or it does not operate. A system in this state ends in a single trade regardless of how high its win rate is.
Judgment states
| Pass | The structure is observed and meets the threshold. |
|---|---|
| Caution | The structure is observed but sits at the boundary of the threshold. Evidence figures are presented alongside. |
| Defect | The structure is not observed, or clearly falls outside the threshold. |
| Not judgeable | The required input data is absent. Marked distinctly from a pass. |
Threshold
Not fixed. Determined from calibration data. See SPEC-EAV-001 §11.
Basis
Jung Chunghwa, FX Market Structure and Systematic Trading (2026), ISBN 979-11-220192-1-6. Research note R-001, Structural problems of EA-based systematic trading (2026-08-20).
Questions this item answers
- How can I tell if an EA has no stop loss from its trade history?
- What does the loss distribution reveal about stop loss behaviour?
Related items
Related terminology
Revision · SPEC-EAV-001 v0.2 · 2026-08-21