Dynamic risk analysis


Senior member
Assessing the risk of a trade is the most important factor to determine the fate of every single trader.. Traders who survive the market are those who conduct business with the market than take a trade based on a certain indicator..

I have enclosed the chart of today's YHOO..

Risk analysis of trade :--

If a trader takes a long trade on the last bar on the chart these are his chances as shown



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As the price approaches its VWAP the risk of staying in the trade increases.. Some traders class this as still a bullish situation and only sell 1/2 .. I however sell most my position when Price approaches its VWAP ..

Compare the the risk of trade before the rally towards the mean against the price while at VWAP ..

The complete risk analysis is generated dynamically bar by bar to give a clue on when to exit a trade

Compare the number of SD's away from the VWAP ..


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Price approaching its upper VWAP

YHOO is approaching its upper VWAP band ( One of you guys was using SIGMA band which is very similar to VWAP bands Any chance of posting a chart of 1 minute YHOO for comparison )..

The risk of staying long is now too much and statistically one would be better off to close his postion and go flat..

Blue line is the upper VWAP and the yellow os the lower .. VWAP is the red line


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hi grey1,

can you try and make your charts a bit smaller, im getting puffed out scrolling. :}
Hi Grey1

Still haven't got my head completely round risk analysis. Getting there slowly, just not fast enough :cheesy:

Anyway, a question if I may. When you say there is a 30% risk and a possible 70% reward, how are you determining these values?


Boy ,

I would lose quality if I reduce size .. Unless there is a way round it ..


The only way to asses risk is to establish a price bench mark first... You then can use various statisitcal techniques to compute risk of each trade.. I have out lined this extensively in my previous posts..
Risk analysis AMZN 3rd DEC

The first charts shows AMZN weakness by a fall of around 40C in no time .. it seemed a bargain and I saw few large trades going through on L2 but look at the reward/Risk .. it is only 0.8 with .35 C to gain against 47 loss.. Well you would be better off betting on RED or BLACK in casino at least you get paid equal and the chances of winning is equal too ( ignore Zero for the time being )

The second chart tells you another story .. 60 C gain against a possible 25 C loss to give a 2.7 reward to risk .. Not a bad deal hey..

The only entity worth measuring in the market is Risk and you would need a meaning ful bench markt to gauge that and that is VWAP..

The risk is dynamically calculated and adjuted to give an overview of the stock ..


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