Risk Management

Stock Market and Risk Management System

Recently, I was given the task of creating a calculator that would calculate the trading lot required to trade in stock market futures using a given risk level. This task is complete and we need to find its solution.

First, I went online to find information about this topic. He was even more surprised to find that this specific information is almost nonexistent on the network.

After looking through a number of websites, where he had read about how to calculate a lot for the Forex market, I realized that it would be a difficult task. It will provide a simple algorithm that allows you calculate the FORTS trading lot.

He explains the task before we can move on. This will help you understand why you need it.

You’ve probably heard of this concept as a “risk-management system” or “money system” and most likely the “fixed rate method.” This means that we do not risk the full amount of the deposit when we open a transaction. Instead, we only risk a small portion. Most of the time, this is 1-2% (“1% rule”)

Now, we need to calculate the trading lot required for the transaction. However, it is not based entirely on the deposit amount, but on the percentage of sediment that we will indicate.

To begin with, you must have some knowledge about exchange trade. Knowing how exchange trade works in your country is essential. Apart from stock exchanges and traders, regulators and self-regulating organisations, registrars and depositories, clearing agencies and clearing centers as well as clearing houses and clearinghouses are all part of the stock market, not only in the US, but in any other country.

A trading terminal is another important phenomenon. Once the trader has entered the purchase/sale application using the terminal, it will be sent to the broker’s trading system. These systems come with authorization and limit tools which enable you to route the request to the market. They also provide information about the client’s portfolio and status. It is also important to note that the majority of applications for modern exchanges are generated automatically by robots. For this reason, brokerage systems provide an API.

Trading robots can process hundreds or thousands of applications in seconds. Because there is an additional link in the form a brokerage system, the work on the “user” scheme (robot-brokerage system – core of the exchange) cannot satisfy all traders. This is why there was technology that allowed optimizing the chain as much possible, direct access to exchange.

After learning more about technologies and theoretical skills, traders often start trading straight away. Many traders lose their money. It is important to move slowly. For such an easy “working out” of the stock exchange and habituation to the trading method chosen, a virtual exchange trade or test was invented.

Many traders are aware of the “iron” part of trading in the stock market, and not just software. It is worthwhile to look into the different gadgets that can be used for trading before you plunge into the world of exchange battles.


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