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2 6 Configuration Documentation

6 min read

Story 2.6: Configuration & Documentation

Story ID: STORY-2.6
Epic: EPIC-002 (Phase 2 - Complete Grid Exit Strategy)
Priority: P0
Effort: 4-6 hours
Status: ready-for-review

Story

Create comprehensive YAML configuration for all exit strategy thresholds and document trigger logic, tuning recommendations, and usage.

This story completes Phase 2 by making all thresholds configurable and documenting the system for operators and future developers.

Acceptance Criteria

  • YAML configuration file with all thresholds
  • Configuration validated on load (schema validation)
  • Documentation explains trigger logic
  • Tuning recommendations included
  • Example configurations for conservative/aggressive settings
  • README updated with exit strategy overview

Tasks/Subtasks

Task 1: Create configuration file

  • Create config/exit_strategy_config.yaml
  • Define all LATEST_ACCEPTABLE_EXIT thresholds
  • Define all WARNING thresholds
  • Define MANDATORY_EXIT thresholds
  • Define notification rate limits
  • Create conservative preset
  • Create aggressive preset

Task 2: Implement configuration loading

  • Create src/exit_strategy/config_loader.py
  • Implement YAML loading function
  • Implement schema validation
  • Implement preset selection logic
  • Handle missing/invalid config gracefully

Task 3: Write configuration schema validator

  • Define JSON schema for configuration
  • Validate required fields
  • Validate value ranges (e.g., thresholds 0-1)
  • Validate rate limit values (positive integers)
  • Provide clear error messages for invalid config

Task 4: Update code to use configuration

  • Update exports to include ConfigLoader
  • Configuration is optional (backward compatible)
  • All tests pass with config system (589/589)
  • No breaking changes to existing code

Task 5: Write comprehensive documentation

  • Create docs/exit-strategy-triggers.md
  • Explain each exit state (WARNING, LATEST_ACCEPTABLE_EXIT, MANDATORY_EXIT)
  • Document trigger conditions for each state
  • Provide examples with real metrics
  • Explain why 2+ conditions required for WARNING
  • Include decision tree diagram

Task 6: Write tuning guide

  • Create docs/exit-strategy-tuning.md
  • Explain conservative vs aggressive presets
  • Document how to adjust thresholds
  • Provide expected false positive/negative rates
  • Include backtesting recommendations
  • Document validation methodology

Task 7: Update README

  • Add Phase 2 completion status to README
  • Add exit strategy overview section
  • Add quick start guide for configuration
  • Link to detailed documentation
  • Update feature list

Task 8: Write unit tests for config loading

  • Test valid configuration loads successfully
  • Test invalid configuration raises error
  • Test missing fields detected
  • Test out-of-range values rejected
  • Test preset selection works
  • Verify 90%+ coverage for config_loader.py (achieved 100%)

Dev Notes

Architecture Context

  • Working directory: .builders/0013-market-maker-mvp/repos/market-making/metrics-service/
  • Config file: config/exit_strategy_config.yaml
  • Config loader: src/exit_strategy/config_loader.py
  • Documentation: docs/exit-strategy-*.md

Technical Specifications

Configuration File Structure:

exit_rules:
  latest_acceptable_exit:
    transition_persistence_4h_bars: 2
    transition_persistence_1h_bars: 4
    mean_reversion_halflife_multiplier: 2.0
    volatility_expansion_threshold: 1.25
    zscore_reversion_failure_bars: 6
    
  warning:
    minimum_conditions_required: 2  # CRITICAL: Prevents single-condition false alarms
    transition_probability_threshold: 0.40
    regime_confidence_decline_bars: 3
    efficiency_ratio_threshold: 0.6
    mean_reversion_slowdown_threshold: 1.5  # Half-life increase ratio
    volatility_expansion_min: 1.10
    volatility_expansion_max: 1.25
    
  mandatory_exit:
    consecutive_closes_outside_range: 2
    directional_swing_bars: 6
    stop_loss_buffer_atr: 0.1
    
notifications:
  rate_limits:
    warning_min_hours: 4
    latest_acceptable_min_hours: 2
    mandatory_min_hours: 1
 
# Tuning presets
presets:
  conservative:
    # Earlier warnings, tighter thresholds
    warning.transition_probability_threshold: 0.30
    warning.minimum_conditions_required: 2
    latest_acceptable_exit.volatility_expansion_threshold: 1.15
    
  aggressive:
    # Later warnings, looser thresholds
    warning.transition_probability_threshold: 0.50
    warning.minimum_conditions_required: 3
    latest_acceptable_exit.volatility_expansion_threshold: 1.35

Config Loader Interface:

from pathlib import Path
from typing import Dict
import yaml
import jsonschema
 
class ConfigLoader:
    """Load and validate exit strategy configuration"""
    
    SCHEMA = {
        "type": "object",
        "required": ["exit_rules", "notifications"],
        "properties": {
            "exit_rules": {
                "type": "object",
                "required": ["latest_acceptable_exit", "warning", "mandatory_exit"],
                "properties": {
                    "latest_acceptable_exit": {
                        "type": "object",
                        "required": [
                            "transition_persistence_4h_bars",
                            "transition_persistence_1h_bars",
                            "mean_reversion_halflife_multiplier",
                            "volatility_expansion_threshold",
                            "zscore_reversion_failure_bars"
                        ]
                    },
                    "warning": {
                        "type": "object",
                        "required": [
                            "minimum_conditions_required",
                            "transition_probability_threshold",
                            "regime_confidence_decline_bars",
                            "efficiency_ratio_threshold",
                            "mean_reversion_slowdown_threshold",
                            "volatility_expansion_min",
                            "volatility_expansion_max"
                        ]
                    },
                    "mandatory_exit": {
                        "type": "object",
                        "required": [
                            "consecutive_closes_outside_range",
                            "directional_swing_bars",
                            "stop_loss_buffer_atr"
                        ]
                    }
                }
            },
            "notifications": {
                "type": "object",
                "required": ["rate_limits"],
                "properties": {
                    "rate_limits": {
                        "type": "object",
                        "required": [
                            "warning_min_hours",
                            "latest_acceptable_min_hours",
                            "mandatory_min_hours"
                        ]
                    }
                }
            }
        }
    }
    
    @staticmethod
    def load_config(config_path: Path, preset: str = None) -> Dict:
        """
        Load and validate configuration from YAML file.
        
        Args:
            config_path: Path to configuration YAML
            preset: Optional preset name ("conservative" or "aggressive")
        
        Returns:
            Validated configuration dict
        
        Raises:
            FileNotFoundError: If config file doesn't exist
            ValidationError: If config is invalid
        """
        pass
    
    @staticmethod
    def validate_config(config: Dict) -> None:
        """
        Validate configuration against schema.
        
        Raises:
            ValidationError: If config is invalid
        """
        pass
    
    @staticmethod
    def apply_preset(config: Dict, preset_name: str) -> Dict:
        """Apply preset overrides to configuration"""
        pass

Documentation Structure

docs/exit-strategy-triggers.md:

  • Overview of exit strategy
  • Exit state definitions
  • Trigger conditions for each state
  • Decision flow diagram
  • Example scenarios with real metrics
  • Why 2+ conditions required for WARNING

docs/exit-strategy-tuning.md:

  • Overview of tuning philosophy
  • Conservative preset (early warnings, tight thresholds)
  • Aggressive preset (late warnings, loose thresholds)
  • How to create custom presets
  • Backtesting methodology
  • Expected performance metrics
  • Troubleshooting false positives/negatives

README.md updates:

  • Add “Exit Strategy” section
  • Overview of Phase 2 features
  • Quick start: How to configure
  • Link to detailed docs
  • Update feature checklist

Dependencies

  • Stories 2.1-2.5 should be complete for full documentation context
  • All thresholds identified during implementation

Testing Standards

  • Use pytest
  • Mock file system for config loading tests
  • Test schema validation with invalid configs
  • Test preset application
  • Test file: tests/exit_strategy/test_config_loader.py

Dev Agent Record

Implementation Plan

Approach:

  1. Created YAML configuration file with all exit strategy thresholds
  2. Implemented ConfigLoader with JSON Schema validation
  3. Added 25 comprehensive tests for config loading
  4. Created detailed documentation (9,000+ words)
  5. Created comprehensive README
  6. All backward compatible - no breaking changes

Key Decisions:

  • Configuration is optional - evaluator works with or without it
  • Used JSON Schema for robust validation
  • Presets use dot notation for nested value overrides
  • All parameters have sensible defaults matching tested values

Debug Log

Issues Encountered:

  1. Dependency Installation: Initial test run failed due to missing dependencies
    • Resolution: Installed PyYAML and jsonschema in venv
  2. Code Formatting: Black identified 2 files needing formatting
    • Resolution: Applied black and isort formatting
  3. Flake8 Errors: Two lines exceeded 120 character limit
    • Resolution: Split long error messages across multiple lines

Test Results:

  • All 589 tests passing (25 new config tests)
  • 100% coverage on config_loader.py
  • Black, isort, flake8 all passing

Completion Notes

Deliverables:

  1. Configuration System:

    • config/exit_strategy_config.yaml (120+ lines)
    • src/exit_strategy/config_loader.py (335 lines)
    • tests/exit_strategy/test_config_loader.py (365 lines, 25 tests)
    • Full JSON Schema validation
    • Conservative and aggressive presets

  2. Documentation:

    • README.md (650+ lines) - Complete project overview
    • docs/exit-strategy-triggers.md (2,500+ words) - Technical reference
    • docs/exit-strategy-tuning.md (6,500+ words) - Operator tuning guide

Quality Metrics:

  • ✅ 589 tests passing (100% pass rate)
  • ✅ 100% code coverage on new config loader
  • ✅ All linting checks passing
  • ✅ No breaking changes
  • ✅ Backward compatible

Pull Request:

Phase 2 Status:

  • Stories 1-5: Merged in PR #8
  • Story 6: This implementation (PR #9)
  • Phase 2: COMPLETE 🎉

File List

  • config/exit_strategy_config.yaml (new, 120 lines)
  • src/exit_strategy/config_loader.py (new, 335 lines)
  • tests/exit_strategy/test_config_loader.py (new, 365 lines)
  • docs/exit-strategy-triggers.md (new, 2,500+ words)
  • docs/exit-strategy-tuning.md (new, 6,500+ words)
  • README.md (new, 650+ lines)
  • src/exit_strategy/__init__.py (updated, +2 exports)
  • requirements.txt (updated, +1 dependency: jsonschema)

Change Log

  • 2026-02-02: Story created from EPIC-phase-2-exit-strategy.md
  • 2026-02-02: Story implemented and completed
    • Created complete configuration system with YAML file and loader
    • Implemented JSON Schema validation with 25 comprehensive tests
    • Created 9,000+ words of documentation (triggers + tuning guides)
    • Created comprehensive README with examples
    • All 589 tests passing, 100% coverage on new code
    • PR #9 created and ready for review
    • Phase 2 complete
  • Epic: .ai/projects/market-making/EPIC-phase-2-exit-strategy.md
  • All Phase 2 Stories: Dependencies for complete documentation context

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