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Why is stable risk (Rs element) investable?
•

If you trade to manage investor capital, two risk appetites come into play
• Yours – as defined by how you manage your own capital
• Your investors – for their investment in your trading

•

Investors expect risk at any time to match expected risk when they invested –
and will monitor any deviations very closely

•

Deviations in risk – particularly sudden ones – will make investors lose
confidence in your risk management, and trigger capital calls

•

This is the reason why stable risk matters
• The level of risk DOES NOT matter
• Ideally, risk should stay constant
• If risk changes, change should take place as slowly as possible over
time, allowing investors to re-adjust their leverage levels with respect to
you
2
INDEX

1. UNDERSTANDING RS
2. IMPROVING ON RS
3. QUESTIONS?

3
Rs - Risk stability – What is it?
We track worst potential loss in a strategy over time
Risk stability is the difference between max and min potential loss

1

A VERY IMPORTANT badge at the TS Challenge, it has an important
weight in the TS Score

2

Stable Risk = Predictable Risk = Investable Risk (if it delivers returns :-)

3

Designed to re-assure investors that risk is managed to a PREDICTABLE level

4
Rs – An example for stable risk

Maximum risk in last month
Risk in this specific date

Minimum risk in last month

A Difference > 1 will penalize your Risk Stability

5
Rs – An example for unstable risk

Wouldn’t this
make you
nervous?

6
INDEX

1. UNDERSTANDING RS
2. IMPROVING ON RS
3. QUESTIONS?

7
Rs – How to improve?
Can investors trust that a strategy won’t overstep their risk appetite?
If they don’t trust, they won’t invest

1

Consider trade duration, market and asset volatility in leverage decisions

2

Improvements to leverage consistency (Lc) will likely improve risk stability

3

Experiment with the effects of your leverage decisions on your risk profile

4

Use our Risk Manager for free to improve your Lc and Rs badges

8
INDEX

1. UNDERSTANDING RS
2. IMPROVING ON RS
3. QUESTIONS?

9
Questions?
Trading is hard – no wonder there are unanswered questions!
(Why not, together, build a Knowledge Base that answers them all?)
•

The Knowledge Base contains TS Mentors’
answers to all your questions!
•
Mentors are Traders like you who
enjoy helping out, and are voted
very good at it, AND
•
Trading educators hand-picked for
quality and broker independence,
who pitch their materials

•

Want to contribute? Great!
•
Post an article / Post
•
Ask or answer questions
•
Rate fellow traders’ contributions

10
Can you do better?
•

This article is a “stub” (an unfinished entry that MUST be improved)
•
We need your questions & feedback to improve it!
•
Feel free to post your questions to the TS Knowledge Base

•

Have suggestions?
•
theowl@tradeslide.com can’t wait to hear them
•
We’d love to credit you for improving our content

•

Contributing to this section will boost your mentor score if others like what you post –
helping out will reflect on your community standing, which means
•
More traders will visit the URL on your profile
•
When they visit, they’ll request your mentoring!

11
TS Risk Stability Element

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TS Risk Stability Element

  • 2. Why is stable risk (Rs element) investable? • If you trade to manage investor capital, two risk appetites come into play • Yours – as defined by how you manage your own capital • Your investors – for their investment in your trading • Investors expect risk at any time to match expected risk when they invested – and will monitor any deviations very closely • Deviations in risk – particularly sudden ones – will make investors lose confidence in your risk management, and trigger capital calls • This is the reason why stable risk matters • The level of risk DOES NOT matter • Ideally, risk should stay constant • If risk changes, change should take place as slowly as possible over time, allowing investors to re-adjust their leverage levels with respect to you 2
  • 3. INDEX 1. UNDERSTANDING RS 2. IMPROVING ON RS 3. QUESTIONS? 3
  • 4. Rs - Risk stability – What is it? We track worst potential loss in a strategy over time Risk stability is the difference between max and min potential loss 1 A VERY IMPORTANT badge at the TS Challenge, it has an important weight in the TS Score 2 Stable Risk = Predictable Risk = Investable Risk (if it delivers returns :-) 3 Designed to re-assure investors that risk is managed to a PREDICTABLE level 4
  • 5. Rs – An example for stable risk Maximum risk in last month Risk in this specific date Minimum risk in last month A Difference > 1 will penalize your Risk Stability 5
  • 6. Rs – An example for unstable risk Wouldn’t this make you nervous? 6
  • 7. INDEX 1. UNDERSTANDING RS 2. IMPROVING ON RS 3. QUESTIONS? 7
  • 8. Rs – How to improve? Can investors trust that a strategy won’t overstep their risk appetite? If they don’t trust, they won’t invest 1 Consider trade duration, market and asset volatility in leverage decisions 2 Improvements to leverage consistency (Lc) will likely improve risk stability 3 Experiment with the effects of your leverage decisions on your risk profile 4 Use our Risk Manager for free to improve your Lc and Rs badges 8
  • 9. INDEX 1. UNDERSTANDING RS 2. IMPROVING ON RS 3. QUESTIONS? 9
  • 10. Questions? Trading is hard – no wonder there are unanswered questions! (Why not, together, build a Knowledge Base that answers them all?) • The Knowledge Base contains TS Mentors’ answers to all your questions! • Mentors are Traders like you who enjoy helping out, and are voted very good at it, AND • Trading educators hand-picked for quality and broker independence, who pitch their materials • Want to contribute? Great! • Post an article / Post • Ask or answer questions • Rate fellow traders’ contributions 10
  • 11. Can you do better? • This article is a “stub” (an unfinished entry that MUST be improved) • We need your questions & feedback to improve it! • Feel free to post your questions to the TS Knowledge Base • Have suggestions? • theowl@tradeslide.com can’t wait to hear them • We’d love to credit you for improving our content • Contributing to this section will boost your mentor score if others like what you post – helping out will reflect on your community standing, which means • More traders will visit the URL on your profile • When they visit, they’ll request your mentoring! 11