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What is a risk ratio?

Miembro desde Aug 20, 2009  229 mensajes kennyhubbard (compuforexpamm) Sep 16 2009 at 04:43 (editado a las Sep 16 2009 at 04:50 )
Hi there,

Please forgive my ignorance(I am sure there are others that do not understand) but please can you explain what risk ratio is and how it is derived.

Is it a simple mathematical addition(or division) of the wins and losses for a currency pair, or is there something more scientific about it?

Would there be any value in adding an aggregate risk ratio to the portfolio so that people can see it at a glance with the major stats? Some-one previously mentioned sharpe ratio......this would also be nice.

Thank you.


Wealth Creation Through Technology

Miembro desde Jul 31, 2009  1353 mensajes Ethan (Staff) Sep 16 2009 at 07:01
Kenny, it's a perfectly valid question. We do apologize for not having a detailed explanation in the help section, as we're very busy with platform development, but promise to add it in the near future.

As covered in previous thread:

'It measures the risk:reward ratio, showing you the average reward you are getting on each trade in the selected currency. So if you have a risk ratio of 1.5 in EURUSD, it means that for every 1 unit of the trade you are initiating, you're expected to get back 1.5 units.

More over, you can see from this statistic which currencies are your more profitable than others and based on that you can decide in which currencies to increase your position sizing, and which to lower, which will eventually increase your profitability.'

Regarding to adding a risk ratio to the portfolio - this is something we might add, thank you.

As to the sharpe ratio - there are several variations of it, so not sure it would help showing it. For example, you can base the calculation on absolute yield or cumulative which will result in two different ratios.

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