risk-manager

Risk Manager - Intelligent Portfolio Risk Management and Protection Skills

Skill Overview

Risk Manager is a professional portfolio risk management skill that helps you systematically control trading risk and protect your portfolio by using R-multiple analysis, position sizing calculations, and stop-loss strategies.

Applicable Scenarios

1. Trading Risk Assessment and Analysis

Before executing trades, use this skill to evaluate the risk exposure of both individual trades and the overall portfolio. By leveraging VaR calculations, correlation analysis, and stress testing, you gain a comprehensive understanding of potential risks and can make more informed trading decisions.

2. Position Sizing and Stop-Loss Management

Based on your account risk percentage and the Kelly formula, the skill calculates a scientifically sound position size for each trade. It automatically sets stop-loss and take-profit levels to ensure that the risk of each trade remains controlled, helping prevent excessive concentration and major drawdowns.

3. Portfolio Protection and Hedging

Build hedging strategies using derivatives such as options and futures to reduce the impact of market volatility on your portfolio. Monitor correlation changes in real time and adjust position allocations promptly to achieve long-term, stable growth.

Core Features

R-Multiple Tracking and Expectancy Calculation

Standardize the profit and loss of each trade using R-multiples (1R = the maximum loss you are willing to accept), eliminating differences caused by varying trade sizes for objective performance evaluation. Automatically calculate trade expectancy (expectancy = win rate × average win − loss rate × average loss) to quantify the strategy’s long-term profitability potential.

Smart Position Sizing Calculator

Given account risk percentage, entry price, and stop-loss price, automatically calculates the number of contracts or shares you should hold for each trade. It supports Kelly formula optimization suggestions, helping you maximize long-term returns while keeping risk under control.

Comprehensive Risk Dashboard

Provides an integrated risk dashboard including a correlation matrix, maximum drawdown analysis, VaR calculation results, and stress test reports. Uses Monte Carlo simulation for scenario analysis to anticipate portfolio performance under different market conditions.

FAQs

What is an R-multiple, and why is it more important than percentage profit/loss?

An R-multiple is a standardized measure of trading profit/loss relative to your predefined maximum acceptable loss (1R). Compared with percentage profit/loss, R-multiples remove the influence of trade size, allowing you to objectively compare performance across different trades. For example, a trade that makes 2R means you earned profits equal to twice the amount of risk—this reflects risk-adjusted returns better than simply knowing you “made 10%.”

How do I determine an appropriate position size for my trading strategy?

Risk Manager uses an account risk percentage method to calculate position size: first determine the percentage of account risk you are willing to take per trade (typically 1–2%), then. a) calculate the difference between the entry price and stop-loss price, and finally b) derive the position size you should hold. The skill also provides Kelly formula recommendations for reference; however, since the Kelly formula may suggest aggressive sizing, it’s recommended to use its fractional value (e.g., half-Kelly) to ensure long-term stability.

What is the practical value of monitoring portfolio correlation?

Correlation monitoring helps you identify how closely the price movements of assets in your portfolio are related. When multiple assets with high correlation rise at the same time, your actual risk exposure may be far higher than expected. Risk Manager displays real-time relationships between assets via a correlation matrix and issues warnings when correlation becomes too high, recommending adjustments to your position allocation or adding hedges to avoid concentrated losses if the market turns.