True Range, Reward/Risk, And Position Size by Alan M. Binder
ARTICLE SYNOPSIS ...True Range, Reward/Risk, And Position Size by Alan M. Binder
This method uses the concept of value at risk and true range to determine a reward to risk ratio and position size for trading stocks. The process has been reduced to two Excel spreadsheets for ease of calculation.
Reward/risk ratio and position size are two variables you need to know before you initiate a trade. Value at risk (Var) will help you calculate these two variables. The Var of an equity position is the amount of money that you can expect to lose during a fixed period within a certain probability. Using the usual measure...