Rsk management

Discussion in 'Educational Resources' started by simonee, Oct 24, 2005.

  1. simonee


    I want to learn about risk management (VaR, Monte carlo), can anyone recommend any book for beginners, because I am not so good in math.

  2. If your going to places trades, than all you need to know is the dollar risk of your stop and for long term equities, say a rule to never have more than 5% of your capital tied up in one stock. In options, Id say never have more than 2% of your capital tied up in one option trade. Unless you do spreads.

    Why exactly do you need the book for? Monte Carlo is like Poker hand probability, but your never getting the same hands in trading, I wouldnt bother With it, though I have a simulator around from when I thought that knowing monte carlo would be useful.
  3. simonee


    I want to now about how to calculate my risk/reward, how many trades can I lose and still be profitable, like those questions..
    I will trade stocks and index.
  4. System:

    Risk 1-2% of capital per trade
    Position Size
    = Money Management

    In order to know your risk/reward you generally have to have a backtested system. The backtest results will also tell you if your profitable , how many losers youve had, but that wont tell you
    that without a strategy to test.

    I suggest wealthlab online or amibroker, fairly cheap software for developing systems.

    Check out the Position Size attachement, still working on the index futures version that shows how many contracts to trade
    • ps.xls
      File size:
      15 KB
  5. 9th Gate

    9th Gate

    I just started reading "Risk Budgeting" by Pearson which is a good book for the concepts you were talking about, but these concepts are more for portfolio managers vs individual system traders.
  6. simonee


    In my system that I am devolping, I will not daytrade.
    Its about hold the position a few weeks, mybe I need more than 1-2% to putt on the stop, I think with that kinde of trades.
  7. hsmc1970