Curriculum·R409 Grid, DCA, and Rule-Based Automation·about 41 min
Configuration as a risk decision
By the end of this lesson you can
- →Show that the configuration screen is the entire risk statement, because there is no stop field
- →Compute how the level count changes the fee share of gross profit
- →Compute how the range width changes profit per cycle and required frequency
- →Set each parameter from a measurement rather than from a default
Senior · enrolled learners
This lesson opens with The Robinhood leverage configuration error, November 2019.
- What happened
- In November 2019 users discovered that Robinhood's margin system, when a Gold subscriber sold covered calls using borrowed funds, incorrectly added the value of those sold calls to the user's own capital. Because borrowing therefore increased the measured capital against which further borrowing was permitted, the loop had no natural stop, and the behavior was named the infinite money cheat code on a public forum. One trader publicly described a position of about $1M funded by a deposit of about $4,000, and another described turning about $2,000 into roughly $50,000 of purchasing power to buy put options. The firm said it was aware of isolated situations, suspended around twenty accounts that had exploited it and updated its systems.
- The decision point
- Nobody defeated a control. A parameter in a calculation was wrong, and every consequence followed from arithmetic executing exactly as configured. That is the shape of every automated trading loss in this course, and it is why the configuration screen is not a preferences panel. It is the position, stated in advance, with no opportunity to intervene once it is running.
What you will be able to answer
- →Why is the configuration the whole risk statement?
- →What does doubling the level count do?
- →What does doubling the range do?
- →Where should each parameter come from?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.cnbc.com/2019/11/05/some-robinhood-users-were-able-to-trade-with-unlimited-borrowed-money.html
- https://www.bloomberg.com/news/articles/2019-11-05/robinhood-has-a-glitch-that-gives-traders-infinite-leverage
- https://www.investmentnews.com/ria-news/robinhood-traders-uncovered-a-glitch-that-gave-them-infinite-leverage/170593
- https://www.benzinga.com/fintech/19/11/14739895/robinhood-glitch-allowed-users-to-have-infinite-money
Confidence high·Volatility low·Reviewed 2026-08-07·Owner unassigned
Contested
The individual position sizes in the Robinhood case were self-reported on a public forum and were not confirmed by the firm, which acknowledged the issue and said it had suspended around twenty accounts. The ratios are used here as reported examples of an unbounded loop rather than as audited figures, and the argument does not depend on the exact numbers.
The parameter arithmetic uses R409-01's stated configuration throughout so that each comparison changes one variable at a time. Real venues charge different maker and taker rates and some rebate makers, which changes the fee share materially. Per R409-L1 recompute with your own schedule.
R403-02 owns position sizing. R409-04 owns leverage in this family. This lesson owns the remaining parameters and where each should come from. Keep the splits.