Value at Risk
A thorough trade risk assessment is crucial to prevent significant financial losses. Using tools like Value at Risk can help inform decisions that shape a trading strategy with an appropriate risk-to-reward ratio.
Effective risk management isn’t just about choosing a stop-loss; it’s about understanding the statistical probability of a price move. Our Value at Risk tool analyzes historical price action to help you estimate the potential risk of a position over a specific timeframe.
The shaded areas on the graph represent the distributions of price ranges in pips, with the green area representing a rising trend and the pink a falling trend, respectively. Average, median, threshold and minimum-maximum values are also displayed, which may help you determine where to place stop-loss and take-profit levels.
Based on your selection, we do the calculations. For example, let’s say you selected EUR/USD with a hold period of 5 days and a calculation period of 300 days.
- Using data from OANDA’s proprietary platforms, core mid-pricing from daily candles is collected for the last 300 days before being split into 5-day periods.
- Using price data from each period, the opening prices and the lowest and highest prices across the period are recorded.
- The difference is calculated from the opening price to the highest recorded price, then to the lowest recorded price, with values presented on the chart.
Data sources: Proprietary OANDA mid-market pricing. Calculations utilize historical daily closing mid-prices to estimate portfolio risk parameters over your chosen time horizon.
Disclaimer: This insight is for general information purposes only, not to be considered a recommendation or financial advice. Past performance is not indicative of future results. Forex trading is high-risk. Losses may exceed deposits.
