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Igor Ganapolsky
Igor Ganapolsky

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AI Trading: Lesson Learned #121: Investment Strategy Audit - Honest Assessment (Jan 9, 2026)

#ai #trading #python #machinelearning

Lesson Learned #121: Investment Strategy Audit - Honest Assessment (Jan 9, 2026)

Date: January 9, 2026
Severity: CRITICAL
Category: Strategy/Operations/Trust
Status: Under Remediation

Summary

CEO requested comprehensive strategy audit after expressing distrust. This lesson documents the honest findings with evidence.

Key Findings

1. Phil Town Rule 1 Compliance: PARTIAL

What we have:

  • rag_knowledge/books/phil_town_rule_one.md (279 lines of knowledge)
  • 20 YouTube transcripts on Phil Town topics
  • phil_town_strategy.enabled: true in system_state.json
  • 4Ms watchlist (AAPL, MSFT, GOOGL, AMZN, BRK.B)

What we don't have:

  • Average return is -6.97% (LOSING MONEY)
  • Paper trading broken for 4 days (Jan 5-9)
  • 200% stop loss is NOT "Rule 1" (should be tighter)

Verdict: Knowledge exists, execution fails. Rule #1 is "Don't Lose Money" - we ARE losing money.

2. Risk Mitigation: CRITICAL GAPS

Evidence from system_state.json:443-445:

"risk_rules": {
  "max_delta": 30,
  "stop_loss": "200%"  // THIS IS WAY TOO LOOSE
}
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Problems identified:

  • 200% stop loss = can lose 2x position before exiting
  • No trailing stops implemented (ll_110)
  • Open positions have no protection

3. $100/Day North Star: REALISTIC BUT LONG-TERM

Math from system_state.json:

$30 current → $0/day target (accumulation only)
$500 → $1.50/day
$5,000 → $15/day
$50,000 → $100/day (REQUIRED for North Star)
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Timeline with $10/day deposits + 2% compounding:

  • June 2026: $5,000
  • 2028-2029: $50,000 (realistic $100/day target)

4. RAG Recording: NOT WORKING

No trades to record:

  • Paper trading broken 4 days
  • No trades directory: ls data/trades/ → "No trades directory found"
  • sync_trades_to_rag.py exists but has nothing to sync

5. Learning Systems: PARTIALLY WORKING

Working:

  • 20 YouTube transcripts in rag_knowledge/youtube/transcripts/
  • 21 insights files in rag_knowledge/youtube/insights/
  • Phil Town blogs ingested

Not Working:

  • No autonomous daily learning
  • No 2026 content visible
  • YouTube analyzer skill not running continuously

6. Dashboard: WORKING BUT STALE

Evidence from WebFetch:

  • Last Updated: Thursday, January 08, 2026 at 09:24 PM ET
  • Dashboard shows accurate data
  • Data is stale (last trade Jan 6)

Root Cause Analysis

Primary Issue: Paper Trading Workflow Dead

Evidence from ll_120:

❌ 2026-01-09: NO TRADES
❌ 2026-01-08: NO TRADES
❌ 2026-01-07: NO TRADES
✅ 2026-01-06: 3 trades (ONLY successful day)
❌ 2026-01-05: NO TRADES
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Cause: GitHub Secrets may not exist:

  • ALPACA_PAPER_TRADING_5K_API_KEY
  • ALPACA_PAPER_TRADING_5K_API_SECRET

Actions Taken This Session

  1. ✅ Comprehensive audit with evidence
  2. ✅ Identified paper trading as #1 blocker
  3. ✅ Updated TRIGGER_TRADE.md to trigger workflow
  4. ✅ Pushed to branch: claude/review-investment-strategy-qmtKh
  5. ✅ Created this lesson learned
  6. ⏳ PR needs to be merged to main

Required Fixes

IMMEDIATE

  1. Add GitHub Secrets (CEO action):

  2. Merge PR:

  3. Verify workflow executes by checking GitHub Actions

SHORT-TERM

  1. Reduce stop loss from 200% to 25-50%
  2. Implement trailing stops (ll_110)
  3. Add continuous YouTube learning via CI
  4. Set up LangSmith integration

LONG-TERM

  1. Build to $50,000 for $100/day target
  2. Implement self-healing workflow monitoring
  3. Add bidirectional RAG learning (read before trade, write after)

Evidence Summary

Metric Status Evidence
Phil Town Knowledge ✅ 279 lines in phil_town_rule_one.md
Phil Town Execution ❌ -6.97% avg return
Risk Mitigation ❌ 200% stop loss
Trading Active ❌ 0 trades in 4 days
RAG Recording ❌ No trades to record
Learning Systems ⚠️ Exists but not continuous
Dashboard ✅ Working, data stale
Compounding Math ✅ Correctly calculated

Key Takeaway

We have the knowledge infrastructure but NOT the execution.

The most important action is: Fix the paper trading workflow.

Nothing else matters if we can't trade.

Tags

strategy-audit, phil-town, risk-mitigation, trust, critical

This lesson was auto-published from our AI Trading repository.

More lessons: rag_knowledge/lessons_learned

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