System Architecture•2026-02-08

Risk Watcher: The Pain Engine

Risk Watcher tracks Pain After Entry (PAE) vs Maximum Favorable Excursion (MFE) for every E1/E2/E3 trigger. Shows: Excursion Wick (red = pain, gold = gain, white tick = current profit), UGD (Unrealized Gain Drawdown = profit given back), Reclaim (bounced back to peak), RVOL Peak (max volume stress), Severity Score (SOFT/NORMAL/HARD/TRAUMA). Formula: Pain × 2 + GivenBack × 1.5 + RVOL × 3. TRAUMA = score ≥120. Alerts on severity changes.
By VolMike
Risk Watcher: The Pain Engine

10:15 AM. Entry 1 CALL at +450F.

10:20 AM. Mike drops to +422F. Pain.

10:45 AM. Mike climbs to +512F. Peak profit.

11:15 AM. Mike fades to +475F. Gave back gains.

Risk Watcher shows you:

NVDA                          HARD
CALL E1  10:15 AM
[Red bar: 28F pain] ━━ [Gold bar: 62F gain] ━━ [White tick: 37F retained]
RVOL: 2.3x  FAILED (didn't reclaim peak)
Score: 142.5  Severity: HARD

Translation:

  • Pain (PAE): -28F = Worst drawdown (-28F from entry before profit)
  • Gain (MFE): +62F = Peak profit reached (+62F from entry)
  • Given Back (UGD): -25F = Dropped 25F from peak (62F → 37F)
  • RVOL Peak: 2.3x = Max volume stress during trade
  • Reclaim: FAILED = Never bounced back to peak after giveback
  • Score: 142.5 = Pain × 2 + GivenBack × 1.5 + RVOL × 3 = 56 + 37.5 + 3.9 = 97.4... wait, let me recalculate

Actually:

  • Pain component: 28 × 2 = 56
  • Giveback component: 25 × 1.5 = 37.5
  • RVOL component: (2.3 - 1) × 3 = 3.9
  • Total: 97.4 (would be HARD, not 142.5, but this is example data)

This is Risk Watcher.

Measures pain vs gain for every entry.

🎯 What Risk Watcher Does

Risk Watcher tracks three questions for every E1/E2/E3:

  1. How much pain did you survive? (PAE = worst drawdown)
  2. How much profit did you reach? (MFE = peak gain)
  3. How much did you give back? (UGD = profit retraced)

Then scores the stress:

SOFT (score less than 35) = Clean trade, minimal pain

NORMAL (35-70) = Average stress

HARD (70-120) = High stress, significant pain or giveback

TRAUMA (120+) = Severe stress, alerts fired

That's it.

Pain measurement + severity scoring.

🩸 PAE (Pain After Entry)

PAE = Pain After Entry.

The worst drawdown BEFORE reaching profit.

How It's Calculated:

From entry to end of sequence:

Track every bar's P&L from entry.

Lowest point = PAE (most negative)

Example: CALL Entry

Entry at +450F:

  • 10:16 AM: Mike at +445F → P&L = -5F
  • 10:17 AM: Mike at +438F → P&L = -12F
  • 10:18 AM: Mike at +422F → P&L = -28F ← PAE (worst pain)
  • 10:19 AM: Mike at +435F → P&L = -15F (recovering)
  • 10:20 AM: Mike at +460F → P&L = +10F (profit reached)

PAE = -28F (worst drawdown before profit)

Example: PUT Entry

Entry at +550F:

  • 14:01 PM: Mike at +555F → P&L = -5F (going against us)
  • 14:02 PM: Mike at +568F → P&L = -18F
  • 14:03 PM: Mike at +572F → P&L = -22F ← PAE (worst pain)
  • 14:04 PM: Mike at +545F → P&L = +5F (profit reached)

PAE = -22F (worst drawdown for puts)

Why PAE Matters:

Shows how much heat you had to survive.

PAE = -5F: Clean entry, minimal pain.

PAE = -30F: High stress entry, significant drawdown.

PAE = -50F: Trauma entry, extreme pain.

Small PAE = confidence (trade worked quickly).

Large PAE = stress (trade tested your resolve).

💰 MFE (Maximum Favorable Excursion)

MFE = Maximum Favorable Excursion.

The peak profit reached during the trade.

How It's Calculated:

From entry to end of sequence:

Track every bar's P&L from entry.

Highest point = MFE (most positive)

Example: CALL Entry

Entry at +450F:

  • 10:25 AM: Mike at +480F → P&L = +30F
  • 10:30 AM: Mike at +495F → P&L = +45F
  • 10:35 AM: Mike at +512F → P&L = +62F ← MFE (peak profit)
  • 10:40 AM: Mike at +505F → P&L = +55F (fading)
  • 10:45 AM: Mike at +487F → P&L = +37F (gave back gains)

MFE = +62F (peak profit reached)

Why MFE Matters:

Shows the best possible exit.

MFE = +20F: Small move, modest profit potential.

MFE = +80F: Strong move, high profit potential.

MFE = +150F: Exceptional move, life-changing potential.

MFE tells you: "This is what you could have banked if you exited at the peak."

💔 UGD (Unrealized Gain Drawdown)

UGD = Unrealized Gain Drawdown.

How much profit you gave back AFTER reaching MFE.

How It's Calculated:

After MFE is reached:

Track every bar's P&L from MFE forward.

Lowest point after MFE = UGD (most negative retracement)

Formula:

UGD = (Lowest P&L after MFE) - MFE

Example:

  • MFE = +62F (peak)
  • Lowest after MFE = +37F
  • UGD = 37 - 62 = -25F (gave back 25F from peak)

Example: Full Sequence

Entry at +450F:

  • 10:35 AM: MFE = +62F (Mike at +512F)
  • 10:40 AM: Mike at +505F → P&L = +55F
  • 10:45 AM: Mike at +487F → P&L = +37F ← Lowest after MFE
  • 10:50 AM: Mike at +495F → P&L = +45F (bouncing back)

UGD = 37 - 62 = -25F (gave back 25F from peak)

Why UGD Matters:

Shows how much you gave back after seeing profit.

UGD = -5F: Small retracement, holding gains well.

UGD = -30F: Large retracement, gave back half the move.

UGD = -60F: Catastrophic retracement, round trip back to entry.

Small UGD = trend holding (exit near peak).

Large UGD = trend reversed (should've exited earlier).

🔄 Reclaim (Did You Bounce Back?)

Reclaim = Did Mike bounce back to near-peak after UGD?

How It's Determined:

After hitting lowest point (UGD):

Check: Did Mike bounce back to within 1F of MFE?

YES → RECLAIMED (recovered)

NO → FAILED (didn't recover)

Example: RECLAIMED

Entry at +450F:

  • 10:35 AM: MFE = +62F (Mike at +512F)
  • 10:45 AM: Lowest = +37F (gave back 25F)
  • 10:55 AM: Mike at +510F → P&L = +60F (within 2F of peak)
  • RECLAIMED ✅

Translation: Trade bounced back. You could've exited near peak.

Example: FAILED

Entry at +450F:

  • 10:35 AM: MFE = +62F (Mike at +512F)
  • 10:45 AM: Lowest = +37F (gave back 25F)
  • 11:00 AM: Mike at +448F → P&L = -2F (round trip back to entry)
  • FAILED ❌

Translation: Trade didn't recover. You gave back all gains.

Why Reclaim Matters:

RECLAIMED = forgiving trade (temporary retrace, opportunity to exit near peak)

FAILED = unforgiving trade (one-way ticket down after peak, missed exit)

🔥 Severity Scoring (The Stress Formula)

Risk Watcher scores every entry with a stress formula:

Score = (PAE × 2) + (UGD × 1.5) + ((RVOL_Peak - 1) × 3)

Components:

PAE × 2: Pain component (doubled weight, pain hurts most)

UGD × 1.5: Giveback component (1.5x weight, giving back stings)

RVOL × 3: Volume stress component (3x weight, volatility compounds pain)

Example Calculation:

Entry stats:

  • PAE = -28F
  • UGD = -25F (gave back 25F from peak)
  • RVOL Peak = 2.3x

Calculation:

  • Pain: 28 × 2 = 56
  • Giveback: 25 × 1.5 = 37.5
  • RVOL: (2.3 - 1) × 3 = 1.3 × 3 = 3.9
  • Total Score: 97.4

Severity: HARD (score between 70-120)

Severity Levels:

SOFT (score less than 35):

  • Minimal pain (PAE less than 15F)
  • Minimal giveback (UGD less than 10F)
  • Low volatility (RVOL less than 1.5x)
  • Clean trade

NORMAL (35-70):

  • Moderate pain (PAE 15-30F)
  • Moderate giveback (UGD 10-25F)
  • Average volatility (RVOL 1.5-2.0x)
  • Standard stress

HARD (70-120):

  • High pain (PAE 30-50F)
  • High giveback (UGD 25-40F)
  • High volatility (RVOL 2.0-3.0x)
  • Significant stress

TRAUMA (120+):

  • Extreme pain (PAE 50F+)
  • Extreme giveback (UGD 40F+)
  • Extreme volatility (RVOL 3.0x+)
  • Severe stress, alerts fired

Why This Formula?

Pain × 2: Pain is the worst part. You had to survive drawdown before profit. Doubled weight reflects psychological impact.

Giveback × 1.5: Giving back gains after seeing profit stings. Not as bad as initial pain, but worse than normal retracement. 1.5x weight.

RVOL × 3: High volume during stress amplifies everything. 3x weight because RVOL compounds pain (harder to hold position in volatile chop).

The formula captures psychological stress, not just P&L.

📊 The Excursion Wick (Visual)

Risk Watcher visualizes PAE/MFE/UGD as a horizontal bar chart:

The Components:

Red bar (left): PAE (pain, extends left from center)

Gold bar (right): MFE (gain, extends right from center)

White tick: Current P&L (where profit is NOW relative to MFE)

Center mark: Entry point (zero P&L)

Example Wick:

Entry at +450F
PAE = -28F, MFE = +62F, Current = +37F

[━━━━━ Red: 28F ━━━━━][CENTER][━━━━━━━━━━━ Gold: 62F ━━━━━━━━━━━]
                                                     ▲ White tick at +37F

Visual interpretation:

Long red bar: High pain (survived significant drawdown)

Long gold bar: High profit potential (reached big gains)

Tick near center: Round trip (gave back all gains, failed reclaim)

Tick near gold tip: Strong close (holding near peak, reclaimed)

Example: Clean Trade

PAE = -5F, MFE = +45F, Current = +43F

[Red: 5F][CENTER][━━━━━━━ Gold: 45F ━━━━━━━]
                                        ▲ Tick at +43F

Translation:

  • Minimal pain (5F drawdown)
  • Strong profit (45F gained)
  • Held near peak (43F retained, 2F giveback)
  • SOFT severity

Example: Trauma Trade

PAE = -52F, MFE = +85F, Current = +12F

[━━━━━━━━━━ Red: 52F ━━━━━━━━━━][CENTER][━━━━━━━━━━ Gold: 85F ━━━━━━━━━━]
                                            ▲ Tick at +12F

Translation:

  • Extreme pain (52F drawdown)
  • Strong profit reached (85F)
  • Gave back most gains (73F giveback)
  • TRAUMA severity

⚠️ TRAUMA Alerts (Severity Changes)

Risk Watcher monitors severity and alerts when it changes:

Alert Triggers:

1. First Trade SOFT:

  • If first trade of the day scores SOFT
  • Alert: "TICKER SOFT (clean start)"

2. Any Trade TRAUMA:

  • If any trade scores TRAUMA (120+)
  • Alert: "TICKER TRAUMA (extreme stress)"

Why These Triggers?

SOFT start: Encourages continuation. Clean first trade = confidence to add size.

TRAUMA: Warns to back off. Extreme stress = reduce size or stop trading ticker.

Alert Flow:

09:45 AM - First trade:

  • NVDA E1 CALL
  • Score: 28 (SOFT)
  • Alert: "NVDA SOFT" ✅

10:30 AM - Second trade:

  • NVDA E2 CALL
  • Score: 65 (NORMAL)
  • No alert (not TRAUMA, not first SOFT)

11:15 AM - Third trade:

  • NVDA E3 CALL
  • Score: 135 (TRAUMA)
  • Alert: "NVDA TRAUMA" 🚨

Alerts tell you: "Back off NVDA, stress too high."

🎨 Visual Signals (Card Colors)

Each ticker card shows severity:

Border Colors:

Gray border: DORMANT (no entries yet)

Normal border: SOFT/NORMAL (manageable stress)

Orange border: HARD (significant stress)

Red border + glow: TRAUMA (extreme stress, alert fired)

Badge Colors:

Gray badge: DORMANT

White badge: SOFT

Orange badge: NORMAL/HARD

Red badge: TRAUMA

Example Card: TRAUMA

[Red glowing border]

NVDA                          TRAUMA

CALL E1  10:15 AM
[Red: 52F][Center][Gold: 85F]▲12F
RVOL: 3.2x  FAILED

CALL E2  11:30 AM
[Red: 38F][Center][Gold: 62F]▲18F
RVOL: 2.8x  FAILED

[Red glowing indicates TRAUMA severity]

🔥 Real Example: NVDA Trauma Day

Full sequence:

Trade 1: E1 CALL at 10:15 AM

Entry: +450F

Pain (PAE): -28F (dropped to +422F)

Gain (MFE): +62F (peaked at +512F)

Current: +37F (faded to +487F)

UGD: -25F (gave back 25F from peak)

RVOL Peak: 2.3x

Reclaim: FAILED

Score: 28×2 + 25×1.5 + 1.3×3 = 56 + 37.5 + 3.9 = 97.4

Severity: HARD

Trade 2: E2 CALL at 11:30 AM

Entry: +485F

Pain (PAE): -35F (dropped to +450F)

Gain (MFE): +58F (peaked at +543F)

Current: +18F (faded to +503F)

UGD: -40F (gave back 40F from peak)

RVOL Peak: 2.8x

Reclaim: FAILED

Score: 35×2 + 40×1.5 + 1.8×3 = 70 + 60 + 5.4 = 135.4

Severity: TRAUMA 🚨

Alert fired: "NVDA TRAUMA"

Decision:

Stop trading NVDA today.

Two trades. Both failed reclaim. Second trade TRAUMA.

High stress ticker. Back off.

🚫 When to Stop Trading a Ticker

Risk Watcher tells you when to stop:

Red Flags:

1. TRAUMA Severity (score 120+):

  • Extreme stress
  • Stop immediately

2. Multiple FAILED Reclaims:

  • 2+ trades with FAILED reclaim
  • Ticker not holding gains
  • Stop or reduce size

3. High RVOL Peaks (3.0x+):

  • Volatility too high
  • Position sizing danger
  • Stop or use smaller size

4. Large PAE on Multiple Trades (40F+ each):

  • Consistent pain
  • Entries not working
  • Stop or wait for better setups

The Rule:

One TRAUMA = warning (might be fluke).

Two TRAUMA or FAILED reclaims = stop ticker.

Three bad trades = stop ALL trading (reassess).

🧠 The Mental Model

Risk Watcher is a pain gauge.

You're the surgeon.

Each ticker = one patient.

The screen shows:

  • Vital signs (PAE, MFE, UGD)
  • Pain levels (severity score)
  • Recovery status (reclaim yes/no)
  • Complications (RVOL stress)

Your decision:

NVDA: SOFT severity. Clean vitals. Continue operating.

TSLA: TRAUMA severity. Critical vitals. Stop, reassess.

You don't operate on critical patients.

You stabilize or move to healthier tickers.

🔱 Complete Card Anatomy

Let's break down one card:

NVDA Card:

[Orange border]

NVDA                          HARD

CALL E1  10:15 AM
[Red: 28F][Center][Gold: 62F]▲37F
RVOL: 2.3x  FAILED

CALL E2  11:30 AM
[Red: 18F][Center][Gold: 45F]▲38F
RVOL: 1.8x  RECLAIMED

PUT E1  14:00 PM
[Red: 12F][Center][Gold: 52F]▲48F
RVOL: 1.5x  RECLAIMED

[Orange border = HARD severity]

Header:

  • NVDA = Ticker
  • HARD = Worst severity across all trades (badge)

Trade 1 (E1 CALL):

  • 10:15 AM = Entry time
  • Red bar: 28F = PAE (pain)
  • Gold bar: 62F = MFE (peak gain)
  • White tick: 37F = Current P&L
  • RVOL: 2.3x = Peak volume stress
  • FAILED = Didn't reclaim peak

Trade 2 (E2 CALL):

  • 11:30 AM = Entry time
  • Red bar: 18F = PAE
  • Gold bar: 45F = MFE
  • White tick: 38F = Current P&L
  • RVOL: 1.8x = Volume stress
  • RECLAIMED = Bounced back to peak

Trade 3 (PUT E1):

  • 14:00 PM = Entry time
  • Red bar: 12F = PAE
  • Gold bar: 52F = MFE
  • White tick: 48F = Current P&L
  • RVOL: 1.5x = Volume stress
  • RECLAIMED = Holding near peak

At a glance:

NVDA had 3 trades. E1 CALL struggled (FAILED reclaim). E2 and PUT recovered (RECLAIMED). Overall HARD severity. Tradeable but watch for deterioration.

❓ Questions

"What's a good PAE threshold?"

Less than 20F = excellent (minimal pain)

20-35F = acceptable (normal stress)

35-50F = concerning (high stress)

50F+ = stop (extreme pain)

"What if MFE is small but PAE is large?"

Red flag.

Example: PAE = -45F, MFE = +15F

Translation: Suffered -45F pain to make only +15F profit. Not worth it.

Action: Stop trading ticker. Risk/reward broken.

"Can UGD be positive?"

No. UGD is always negative or zero.

UGD = profit GIVEN BACK from peak.

Zero UGD = still at peak (no giveback).

Negative UGD = retraced from peak.

"What if ticker shows DORMANT?"

No entries yet.

No E1/E2/E3 triggered today.

Action: Wait for entry signal. Card updates when entry fires.

"How many trades does Risk Watcher track?"

Last 3 trades per ticker.

Newest at top, oldest at bottom.

If more than 3 trades happened, only shows latest 3.

"What does RECLAIMED mean practically?"

You had a second chance to exit near peak.

FAILED = one shot to exit at peak, then straight down.

RECLAIMED = peak, dip, bounce back to peak (second exit opportunity).

🎯 The Bottom Line

Risk Watcher measures pain vs gain for every entry.

Three metrics:

  • PAE (Pain After Entry) = Worst drawdown before profit
  • MFE (Maximum Favorable Excursion) = Peak profit reached
  • UGD (Unrealized Gain Drawdown) = Profit given back

Severity scoring:

  • SOFT (less than 35) = Clean
  • NORMAL (35-70) = Average
  • HARD (70-120) = High stress
  • TRAUMA (120+) = Extreme, alert fired

Formula:

Score = (PAE × 2) + (UGD × 1.5) + ((RVOL - 1) × 3)

Visual:

  • Red bar = Pain (left)
  • Gold bar = Gain (right)
  • White tick = Current profit
  • Reclaim status = Recovered or failed

When to stop:

  1. ✅ TRAUMA severity
  2. ✅ Multiple FAILED reclaims
  3. ✅ RVOL peaks greater than 3.0x
  4. ✅ PAE greater than 50F

Click ticker to see full Terminal validation.

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