Nice write up. One point I disagree with is that mechanical drawdown limits have anything to do with momentum. The main hedge you are making with a mechanical drawdown rule is a *hedge against the strategy/PM having stopped working at all* (ie first moment misstating). Secondarily, you are hedging against a risk management failure on the PM’s part (second and higher moment misestimation). A strategy with a Sharpe of e.g. 1.5 run at X% risk target for Y years should not experience more than Z drawdown, you can back out what X/Y/Z should be, and if the drawdown is hit then either you are in a statistically very rare case, or one of your assumptions (probably the one on the first moment) is wrong. I also think that mechanical drawdown rules can work for basis type trades (by which I mean: positive carry, and become more attractive as the spread moves against you) except that you don’t cut the positions — you cut the PM and offer their positions to another PM running related strategies. Obviously this only really works in a multi manager setup, not in a single manager fund. The big pod shops do this pretty successfully I think (maybe not in vol, idk, but certainly in rates).