Positioning size /RISK

Discussion in 'Trading' started by A-doniz, Jan 20, 2011.

  1. A-doniz


    I have a question about positioning size.

    Usually it is calculated on the basis of risk one is willing to take on his trading account. Say a trade cannot cost more dan 2% of account equity. On the basis of this you calculate your position size.

    However, professional traders usually get a VAR assigned and NOT a trading account equity.

    How do you go about this. Do you substitute equity account for yearly var??
  2. Tricky concept. The VaR they get is a measure of the total portfolio risk given their positions.

    Position size must be calculated based on some exit prices. You do not normally calculate the exit prices based on VaR but in this world everything is possible. usually newbies first figure out how much they want to lose at max and then calculate exit price. Experienced traders first spot good exit prices and then figure out position size based on max percent loss.

    It is your money, go ahead and do what you feel is better. For newbies, this paper is a good strter:

  3. A-doniz


    @ Bill.....

    Good paper but the issue for me still remains....WHAT is account equity. professional traders get a VAR assigned and not a current banktoll.