Your work is really helpful as I, and I suspect other members as well, continue to weigh how much capital to allocate to the system. As we all know, Matt's system dodged the Flash Crash, but I think we all have to allow for the possibility that we might not be that lucky next time there is a Flash Crash or some kind of out-of-the-envelope Black Swan. Also, we all know that the Flash Crash rallied back VERY quickly, so had the system been long going in to the crash, the ultimate exit from the trade would not have been all that bad. But had the system been long going in to a 1987-like event, then the loss could easily be over 20%. And using a 15% Crash Stop as Matt discussed as a possibility, might or might not help. We also know that many Crash stops in the Flash Crash actually executed WAY below the stop points. So given all this -- your 15% rule of thumb number seems like a very reasonable point of reference.

In trying to think through risk parameters for the system itself, we also have to remember that the system does not exist in a vacuum, and if we are long in other positions at the same time, then what we really need to be looking at is how much total capital we have in the market at any moment in time, and what is our risk tolerance for our entire portfolio position.

Thanks again for all your excellent work on this!