Novice Traders' Notebook  |  AUG 1999

Value At Risk And Technical Analysis by Luis Ballesca-Loyo

Value At Risk And Technical Analysis 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.

by Luis Ballesca-Loyo