Calculating Risk
- Thread starter Etr8r
- Start date
Depends on what KIND of risk you want to calculate. For current price risk, the trailing 20 days standard deviation should do.
Standard deviation is a piss-poor measure of risk. Use the Sortino ratio.
That's a measurement of return-risk using semi-variance as risk proxy.
It all depends on what you are trying to do. Using variance (as oppose to semi-variance) is fairly good for targeting price risk.
Again, sortino ratio (and it's cousins: the sharpe ratio, calmar ratio, etc) are not measures of risk, but performance.
It all depends on what you are trying to do. Using variance (as oppose to semi-variance) is fairly good for targeting price risk.
Again, sortino ratio (and it's cousins: the sharpe ratio, calmar ratio, etc) are not measures of risk, but performance.
Example of Risk Percent . A possible trade for tues 9-6-11. Symbol DZZ go long at 4.15 and stop loss at 4.00, risk percent 3.6 risk amount per 100 shares or $15.00. RISK PERCENT- is the percentage difference between the signal price and the suggested stop loss price. Multiply this times your position size to compute the dollar amount risk ( not including commissions). 5% or less is acceptable while greater than 5% risk becomes excessive. Trades with lower RISK PERCENT should be favored over trades with higher Risk Percent. Example of high risk trade for tues 9-6-11 is symbol OVTI go long at 17.70 stop at 16.65 Risk Percent is 5.9% with Risk amount per 100 shares is $105.00. I hope this helps but this is on my trade software.
NO,..
Risk per share = Entry price - Stop Loss price
Risk per trade = % of capital you want to risk. Lets say 1% of capital for example. Assuming a $100,000 acct that would mean $1000 per trade.
Now take the risk you wish to have per trade ($1000 in this example) and divide by the risk per share to get the MAX number of shares you can purchase.
(Risk/trade) / (Risk/share) = # shares/trade. If your stop was $0.15 away as you described then you have 1000/0.15 = 6666.66 shares maximum you could buy and still only risk $1000 assuming your loss was hit.
