Value at Risk tool
A thorough trade risk assessment is crucial to prevent significant financial losses. Using tools like Value at Risk can help make informed decisions that can shape a trading strategy with an appropriate risk-reward ratio.
The Value at Risk tool can be applied to various instruments. When used in conjunction with other tools, it can allow you to better assess the potential price fluctuations at given confidence levels
Note that the prices and instruments in this tool refer to the product offerings of OANDA Global Markets self-funded trading account. The data can be used by OANDA Prop Trader Challengers and Signal Providers for educational purposes only.
To use the tool, first select an instrument. Then, specify how long you would like to hold the position and the timeframe in which historical data will be analyzed.
As seen above, the shaded areas on the graph represent the distributions of price ranges in pips, with the green area representing a rising trend and the orange a falling trend, respectively. Average, median, threshold and minimum-maximum values are also displayed, which may help you determine where to place stop-loss and take-profit levels.
Based on your selection, we do the calculations. For example, let’s say you selected EUR/USD with a hold period of 5 days and a calculation period of 300 days.
- Using data from OANDA’s proprietary platforms, core mid-pricing from daily candles is collected for the last 300 days before being split into 5-day periods.
- Using price data from each period, the opening prices and the lowest and highest prices across the period are recorded.
- The difference is calculated from the opening price to the highest recorded price, then to the lowest recorded price, with values presented on the chart.
To better understand how pip values vary depending on the selected asset, read our article: What is a pip in trading?
