Value at Risk or VaR

14 July 2014
The Market Owl

You all have read these disclaimers:

“Trading may carry a high degree of risk to your capital”

Indeed, trading is risky. But you’ll probably agree that not all trading strategies carry the same risk. Wouldn’t it be great to have one single risk measure that tells, at a glance, how risky a given trading strategy is?

Forget Max. Drawdown, Max. Leverage or Standard Deviation… at Darwinex, risk is measured in terms of Value at Risk or VaR (note: we do also analyse Max. Drawdown, Max. Leverage & Standard deviation).

Understanding VaR

VaR measures the percentage of loss a trading strategy is likely to suffer in the worst month out of every 20 months. In other words: what is the risk an investor is taking when investing in a given strategy?

Because at Darwinex we know how important risk is when talking about trading strategies, we have recorded a brief tutorial that will help you to understand how we measure risk and why VaR is a powerful way to compare risk across trading strategies! 

Liked it? Your feedback would be greatly appreciated! Trade safe everyone!