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Grid Exit Strategy - Market Making System

Project Status: Phase 2 COMPLETE ✅ | Phase 3 IN PROGRESS 🚀
Last Updated: 2026-02-16

Project Overview

Building a regime-aware Grid Exit Strategy system that enables profitable grid trading at scale by identifying regime breaks before they destroy accumulated profits.

Current Capital: £1K (validation phase)
Target Scaling: £10K (3-4 months) → £100K+ (external investment)

Phase Status

PhaseStatusEffortCompletionDocuments
Phase 1: Metrics Implementation✅ COMPLETE40-60h2026-01-31PR#6 merged, 60 tests passing
Phase 2: Exit Strategy✅ COMPLETE~50h2026-02-16PR#17 merged, 120+ tests, 90%+ coverage
Phase 3: Position Risk🚀 IN PROGRESS30-40hTarget: 2026-03-01EPIC-phase-3-position-risk.md
Phase 4: Testing & Validation📋 PLANNED40-50hTarget: 2026-03-15EPIC-phase-4-testing-validation.md
Phase 5: Operational📋 PLANNED20-30hTarget: 2026-04-01EPIC-phase-5-operational.md

Total Estimated Effort: 180-250 hours
Target Completion: 2026-05-01

Key Documents

🚀 Start Here

New to the project?

  1. README.md (this file) - Project overview and status
  2. DEVELOPMENT-GUIDE.md - Comprehensive onboarding for developers
  3. architecture.md - Complete architectural decisions and patterns
  4. RAIA.md - Risks, assumptions, issues, and actions

📊 Core Documentation

Architecture & Design:

  • architecture.md - Architectural decisions, patterns, and established conventions from Phase 1
  • SCHEMA.md - Data schemas for metrics, exit states, and decision records
  • prd.md - Product Requirements Document

Risk & Planning:

  • RAIA.md - Risk/Assumption/Issue/Action tracking with quarterly reviews

🎯 Phase Documentation

Phase 1 (COMPLETE ✅):

  • phases/phase-1-metrics/phase-1-plan.md - Implementation plan and results

Phase 2 (IN PROGRESS 🚀):

  • phases/phase-2-exit-strategy/EPIC-phase-2-exit-strategy.md - Detailed work breakdown
  • phases/phase-2-exit-strategy/stories/ - Individual user stories (2.1-2.6)

Phases 3-5 (PLANNED 📋):

  • phases/phase-3-position-risk/EPIC-phase-3-position-risk.md
  • phases/phase-4-testing/EPIC-phase-4-testing-validation.md
  • phases/phase-5-operational/EPIC-phase-5-operational.md

📁 Feature Documentation

Grid Exit Strategy:

  • grid-exit-strategy/product-brief-workspace-root-2026-01-31.md - Product vision
  • grid-exit-strategy/spec.md - Feature specification

Regime Management:

  • regime-management/requirements.md - System requirements
  • regime-management/design.md - Technical design

Dashboards:

  • market-maker-dashboard/ - Main dashboard feature
  • market-maker-dashboard-spot-checks/ - Spot check dashboard

📚 Historical Reviews

Located in reviews/:

  • SYSTEM_REVIEW.md - Deep system analysis (2026-01-31)
  • design-review.md - Architecture review and gap analysis
  • implementation-plan.md - Original statement of work (Phases 1-5)

What We Built (Phase 1)

Completed: 2026-01-31 (PR#6 merged to main)

Implemented Metrics (6 total):

  1. ADX (Average Directional Index) - Trend strength measurement
  2. Efficiency Ratio - Trend efficiency (Kaufman)
  3. Lag-1 Autocorrelation - Mean reversion detection
  4. OU Half-Life - Mean reversion speed (Ornstein-Uhlenbeck)
  5. Normalized Slope - Directional bias normalized by volatility
  6. Bollinger Bandwidth - Volatility regime measurement

Quality Metrics:

  • ✅ 60 comprehensive tests (100% passing)
  • ✅ 100% test coverage for new metrics code
  • ✅ All hardcoded dummy values replaced with real calculations
  • ✅ Type hints and docstrings throughout
  • ✅ CI/CD integration

Impact:

  • Metrics YAMLs are now trustworthy (previously had hardcoded dummy values)
  • Regime detection engine working with real calculations
  • Foundation complete for exit strategy implementation (Phase 2)

What’s Next (Phase 2)

Target Start: Immediately
Target Completion: 2026-03-15
Effort: 50-70 hours

Goals:

  • Implement complete exit state machine (WARNING → LATEST_ACCEPTABLE_EXIT → MANDATORY_EXIT)
  • State transition tracking in Git
  • Historical data loading for persistence checks
  • Comprehensive testing and validation

Developer Quick Start:

  1. Read DEVELOPMENT-GUIDE.md (comprehensive onboarding)
  2. Review phases/phase-2-exit-strategy/EPIC-phase-2-exit-strategy.md
  3. Start with Story 2.4 (Historical Data Loading) - foundation for other stories
  4. Follow story sequence in Epic document

Critical Design Decisions

1. Evaluation Cadence: 1-Hour (Not 15-Minute)

  • Decision: Start with 1-hour evaluation cycle
  • Rationale: Research indicates 12-24 hour warning windows
  • Assumption: RAIA A001, A004 - will validate in Phase 4 backtesting
  • Fallback: Can switch to 15-minute if assumption proves wrong

2. WARNING Requires 2+ Conditions

  • Decision: WARNING state requires 2+ warning conditions (not single)
  • Rationale: Prevent false alarms from single noisy indicators
  • Critical: This is a core design principle - do not compromise

3. Git-Backed Audit Trail

  • Decision: Immutable decision records in Git (no database)
  • Rationale: Version controlled, investor-credible, simple architecture
  • Format: YAML files per recommendation, JSON files for state transitions

4. Human-in-Loop Execution

  • Decision: System recommends, human executes (no automated trading)
  • Rationale: KuCoin API limitation + regulatory simplicity + capital safety
  • Benefit: Reduces regulatory complexity, preserves operator control

Success Criteria (Phases 2-5)

User Success:

  • ✅ Decision confidence: Articulate WHY for every entry/exit using audit trail
  • ✅ Capital protection: Zero stop-loss breaches during normal conditions
  • ✅ Operational clarity: 30+ minutes warning time between exit state transitions

Business Success:

  • ✅ Capital scaling: Double stake from £1K to £2K during validation
  • ✅ Investor credibility: Complete immutable audit trail + backtesting results
  • ✅ Exit quality: KPI framework tracking exit effectiveness

Technical Success:

  • ✅ Phase 2: Exit strategy fully implemented and tested
  • ✅ Phase 3: Position risk quantification integrated
  • ✅ Phase 4: 100% test coverage + backtesting validated
  • ✅ Phase 5: Audit logging + KPI tracking operational

Repository Structure

.ai/projects/market-making/
├── README.md                     # This file - project overview
├── DEVELOPMENT-GUIDE.md          # Comprehensive developer onboarding
├── architecture.md               # Architectural decisions & patterns
├── prd.md                        # Product Requirements Document
├── RAIA.md                       # Risk/Assumption/Issue/Action tracking
├── SCHEMA.md                     # Data schemas
│
├── phases/                       # Phase-specific documentation
│   ├── phase-1-metrics/
│   │   └── phase-1-plan.md
│   ├── phase-2-exit-strategy/
│   │   ├── EPIC-phase-2-exit-strategy.md
│   │   └── stories/              # Individual user stories
│   ├── phase-3-position-risk/
│   ├── phase-4-testing/
│   └── phase-5-operational/
│
├── reviews/                      # Historical reviews & analysis
│   ├── SYSTEM_REVIEW.md
│   ├── design-review.md
│   └── implementation-plan.md
│
├── grid-exit-strategy/           # Feature documentation
│   ├── product-brief-workspace-root-2026-01-31.md
│   └── spec.md
│
├── regime-management/            # Feature documentation
│   ├── requirements.md
│   └── design.md
│
├── market-maker-dashboard/       # Feature documentation
├── market-maker-dashboard-spot-checks/
│
├── archive/                      # Completed/outdated items
│   ├── PROJECT-TYPE-REQUIREMENTS.md
│   └── regime-snapshot-architecture/
│
└── assets/
    └── image.png

Git Workflow

Current Branch: main

  • Phase 1 complete (PR#6 merged 2026-01-31)
  • All tests passing
  • Ready for Phase 2 development

Phase 2 Branch Strategy:

feature/phase-2-exit-strategy (Epic branch)
  ├── feature/story-2.1-latest-acceptable-triggers
  ├── feature/story-2.2-warning-triggers
  ├── feature/story-2.3-state-tracking
  ├── feature/story-2.4-historical-loading
  ├── feature/story-2.5-integration-testing
  └── feature/story-2.6-configuration-docs

Merge story branches → Epic branch → main when Phase 2 complete

Testing Strategy

Unit Tests (Target: 90%+ Coverage)

  • All trigger functions independently tested
  • State tracking and rate limiting tested
  • Historical loading with mocked file system
  • Edge cases and boundary conditions

Integration Tests (5+ Scenarios)

  • Full state progression: NORMAL → WARNING → LATEST_ACCEPTABLE → MANDATORY
  • WARNING requires 2+ conditions
  • Rate limiting prevents spam
  • LATEST_ACCEPTABLE triggers independently
  • Real data validation (last 7 days)

Real Data Validation

  • Run against historical metrics from market-maker-data/
  • Verify exit states are reasonable
  • No wild state oscillations
  • Timing aligns with regime changes

Key Contacts

Project Owner: Craig
Developer: TBD (starting Phase 2)
Deployment: Kubernetes (local cluster + VPN access)

Immediate Action Items:

  1. 🚀 Developer: Start Phase 2 with DEVELOPMENT-GUIDE.md
  2. 📋 Craig: Complete architecture.md implementation patterns (Step 5) then resume PRD workflow
  3. 📊 Both: Review RAIA.md assumptions during Phase 2 development

Next Milestones:

  • Phase 2 Complete: 2026-03-15
  • Phase 4 Backtesting (validates assumptions): 2026-04-15
  • All Phases Complete: 2026-05-01
  • RAIA Review: 2026-05-01

Last Updated: 2026-02-01
Phase 1 Status: ✅ COMPLETE (PR#6 merged, 60 tests passing)
Phase 2 Status: 🚀 READY FOR DEVELOPMENT (Epic and Stories created)

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