Philosophically, it's harder to manage risk for mean-reversion trades vs trend, because the trade looks more attractive the more it goes against you. If you're short a spread at 1std, you definitely want to be short the spread at 2std, 3std all the way until you get liquidated.
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@therobotjames@macrocephalopod@saanglee@saah1lk imo (man there needs to be a better way of doing @ fintwit).
Max position size is a good static rule. Dynamically, cut position size when a reversion trade goes against you. Can always add back when the spread tightens (reduces profit but prevents blowup) or if it *really* blows out you have preserved capital for a more attractive trade.
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Be *very* careful about adding to a losing reversion trade. The fact that you lost money is evidence that your thesis is wrong. Unless there is a cap on how wide a spread can go, this is a good way to blow up.
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