AI Trading: Lesson Learned: Phil Town Rule 1 Violation - Unprotected Positions Lost $93.69 (Jan 7, 2026)

Lesson Learned: Phil Town Rule 1 Violation - Unprotected Positions Lost $93.69 (Jan 7, 2026)

Date

2026-01-07

Category

CRITICAL - Capital Protection Failure

Summary

Paper trading account lost $93.69 today (-0.09%) despite having +$762 in unrealized option gains.
Root cause: Open positions have NO stop-loss protection. Market drift eroded gains.

Evidence

• Daily P/L: -$93.69 (from Alpaca screenshot 9:52 AM ET)
• No trades executed today (last trade: Jan 6)
• Open positions unprotected:
  • SPY: +$266.34 unrealized (NO stop-loss)
  • INTC260109P00035000: +$159.00 (NO stop-loss)
  • SOFI260123P00024000: +$47.00 (NO stop-loss)
  • SPY260123P00660000: +$556.00 (NO stop-loss)

Phil Town Rule 1 Analysis

"Rule #1: Don't Lose Money. Rule #2: Don't Forget Rule #1."

We violated Rule 1 by:

1. Not setting stop-losses on winning positions
2. Allowing market drift to erode unrealized gains
3. Having no automated protection mechanism

Root Cause

• Trading system executes trades but does NOT manage existing positions
• No trailing stop-loss logic implemented
• No position monitoring during market hours

Required Fix

1. Add trailing stop-loss orders to all open positions
2. Protect at least 50% of unrealized gains
3. Automate position management in daily-trading workflow

Prevention Checklist

• [ ] Implement manage_open_positions() function
• [ ] Add trailing stop at 10% below current price for winners
• [ ] Add hard stop at -20% for losers (per system_state.json risk_rules)
• [ ] Run position check every hour during market hours

CEO Directive

"Losing money is NOT allowed" - CLAUDE.md ABSOLUTE MANDATE

Lesson

A trade without a stop-loss is a hope, not a strategy.

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

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