#28 — ZR ML=4 force-close + CAR-25

Hypothesis — what it tests

Does hard-capping Zone Recovery at 4 legs (force-closing deeper cycles) limit catastrophic drawdown without destroying the edge — and what does a Bandy CAR-25 Monte Carlo say about ruin risk?

Description

A risk-management study run before considering the higher-yield ta/td+PSAR Zone Recovery variant for live deployment. Question one: does a circuit-breaker that force-closes any cycle about to open a 5th recovery leg limit catastrophic drawdown? Answer: it destroys 101.6% of the edge — ML=4 backtests at −111.9 vol-pips/day vs +7,158.6 for uncapped ML=10, because force-closing just 4.2% of cycles (at a mean −705 vp each, when those same cycles recover to +644 uncapped) wipes ~231,000 vol-pips. The leg-distribution table showed 96% of total edge concentrated in the rare deep 5–10-leg cycles. Question two used Howard Bandy's CAR-25 / bristle-chart methodology (2,000 Monte Carlo equity paths): ML=10 strictly dominates on every percentile (CAR-25 +171% vs −12%, lower drawdown, lower ruin probability), and the feared '15-leg account-wiping cycle' is mathematically impossible — margin constraints cap real cycles at 5–6 legs, worst case an OANDA 50%-NAV closeout (≈−$50 on $100). The durable lessons: never cap ML below the cycle horizon, and CAR-25 joined the standard validation toolkit (it later delivered the fatal verdict on the live SMA-Stack in Entry 66).

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