Value At Risk And
This method uses market volatility and the concept of value
at risk to help determine meaningful stop-loss prices and
position limits for trading securities.
Many traders and investors apply
security analysis techniques, either
technical or fundamental, to
take positions using mechanical
buy and sell signals generated
by their systems. In developing
their systems, time is spent on
developing the entry signals and,
to a lesser extent, the exit signals.
But as a rule, not as much
time is spent reviewing the expected adverse moves typical of
that system and market. Few traders fully consider the risk
side of their trades beyond using stop orders to set limits on
the losing side of their trades.