Fading a 10.65% day against a fixed daily loss limit in a 101% volatility week
Should the desk keep fading BTC's intraday spikes at its usual size, or cut trade size so that a repeat of Thursday's 5.14% hour cannot exhaust the daily loss limit?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 17 December 2018, BTC rose 21.69% from 3,229.22 to 3,929.71, with a 28.73% range, annualised realised volatility of 101.0%, and a close in the upper third of the range. The best day was 10.65% (20 December) and the worst was -5.26% (21 December), the day after. Volume ran 1.57 times its prior 12-week average, and three of the four prior weeks were down. An illustrative intraday mean-reversion desk trades against these swings under a fixed daily loss limit.
Judgment
A week that ranks in the 98th percentile of history, on 1.57 times normal volume, trends rather than reverts; fading Thursday's 10.65% gain met Friday's -5.26% day and would have stressed the limit. Reduce position size so the limit survives an hour like the 5.14% move on 20 December, and stop fading only after a spike has already reversed rather than as it forms. Accept smaller per-trade profit against the limit's survival.
What would change it
If realised volatility and volume fall back towards their prior 12-week levels and the best and worst days shrink well inside the limit's tolerance, the desk can restore its usual size. A further week closing in the lower third of its range would also argue for reversion sizing.
What sets this case apart
This is sizing a reversion strategy against its own loss limit in a volume-confirmed trend week, not a judgment on BTC's direction.