Thread: How do you calculate risk with an automated system?

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  1. #1

    Default How do you calculate risk with an automated system?

    I use a maximum loss for the day. That is, the sum of all costs of a loss of all trading systems in a portfolio. Based on a mean of a losing trade, commisions and splipage expected. That gives me a worst case number and I target that that number is no more than 2% of account equity.

    Any different approach?
  2. #2


    My approach is off-the-wall by comparison to most, but it is very effective for me.
    I enter a trade when I know the trend within a given timeframe is stretched, then I enter the trade with 10% margining, which is 1 lot per 10K in the account. I kick back, and wait for the trade to make a favorable move, and then get out.
    I usually have about 8 pairs a week that is on my particualr watchlist, because they are the ones to most likely make the favorable move I am looking for.
    As an example, I just closed 3 GBP/CHF positions that were entered at 1.5711, 1.5574, 1.5428, and closed them at 1.5666. It doesn't look sexy, but it did get me a net of +284 pips. I view it as the bottom line being what is the reuslt once you press "close".
  3. #3


    Excuse me 4x but I don't understand. Where do I find the "risk" side on your exposure?
  4. #4


    If you are using several trading systems, automated or manual, then this appears to be a fair solution to minimise your losses. You could also have your ea's stop individally at a certain loss. Presumably some ea's will be stopped and others will be making gains. In this case you would almost never be completely shutdown. Of course your ea's can't all work off the same direction of the same trend in the same timeframe!.
  5. #5


    Horace, I'm not clear on what you mean by you wanting to find the "risk side of my exposure". I enter a trade that has minimal risk because of my calculations on the extremity of the trend, which indicates the proximity of the reversal. If the extremity has not been hit, then there is a creteria that gets met on the corrction, so in that case, find that point when the correction is completed, then get in the direction of the trend.
    If you reference has to do with some of the stereotypical risk: reward ratios, then I do not trade that way. I am not concerned with risk: reward ratios. I am concerned with how many pips I have once I press "close".
    If the reference was made to getting out at the end of a certain amount of losses, then that is not something I am used to. I've had one losing week in the last 3 years. 80% of my trades end up in the + column.
    If I answered your question, then okay. If not then maybe you can further clarify your question.
    BTW, my methodology wins no popularity contests. It also does not fit the stereotypes of my forex philosophers or books they may right, which is why I don't spend a lot of time reading their books. The only thing my methodology does is win consistently for me.

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