what is this called ?

Discussion in 'Risk Management' started by SethArb, Aug 15, 2008.

  1. a trader makes x % in a given week

    however his P+L swings up and down like a yo-yo

    what might be a stat for how much is too much

    ( i.e. this week I might make 3 % but when I tally in the ups and downs the total is almost ten times that )

    yes I do either need to be very very careful
    in sizing and placement of my trades
    and perhaps need to take 25-50 % of my acct's value
    and place it in a bank CD so as not to give me any more
    rolaids moments
  2. volente_00


    overleveraged and a blow up waiting to happen when a streak of bad trades strike. How long has the been happening ? Have you never had a losing strike pop up and drawdown the account severely ?
  3. had a blowup a few yrs ago
    made 7- 8 times the amount lost
    since then

    see my pm to you
  4. Tums


  5. thanks ... not sure if that ( MFE MAE )
    can be quantified in my case but it is something
    for me to look into on a weekly basis
  6. LearningMarkets

    LearningMarkets ET Sponsor

  7. That sounds like a roller coaster ride! I know the feeling all to well. Be careful, as us cowboys tend to lose risk management sometimes.
  8. LearningMarkets

    LearningMarkets ET Sponsor

    I also meant to mention that erratic position sizes can create the same effect.

    Brokers will tell you that a common denominator in traders who lose everything is inconsistent position sizes.
  9. The stat to measure this is the Sharpe's Ratio (http://en.wikipedia.org/wiki/Sharpe_ratio)

    It is the measure of increased gain to increased risk. Essentially it is:

    (Return - Risk Free Return) / StdDev of Return

    A Sharpes of 1 means you are gaining as much over the Risk Free rate as you are taking risk. Under 1 means you are taking on more Risk than you are gaining in Return.
  10. Variance.
    #10     Sep 28, 2008