Calculate potential risk and potential profit of a trade

Hi,

I would like to calculate the potential risk and potential profit of a trade and thereby the portfolio and display them as statistics in my web application. I believe this would be useful for the traders to evaluate the risk regularly and take appropriate action such as hedging, if needed.

Thought max risk and max profit may not be of much use as they would be the entire investment and infinite in most unhedged stock transactions. I need help in calculating the potential risk and potential profit of the trade with a certain probability.

Appreciate if some could share the formula. Please let me know if you need any other details.

Thanks,
Venkat

 

Look for e-ratio or MFE/MAE.

 

I swear I sometimes think I am the only one in the world (yup I'm that guy lol) that is aware a thing called google exists.

 

I swear I'm the only one that is aware metacrawler exists, which existed before Google. I don't use it though, because it has 6 extra letters over Google, so longer to type, heh.

 

Are you aware that Metacrawler was conceived and executed by MacBookProHo back in the day?

 

MBPH does not have a Ph.D in anything.

 

Piled High and Deep, baby.

 

Thank you. I will look them up.