Monday, September 8, 2008

Risk and reward ratio

I made three test,where the capital,commission,trade no,probablity, risk per catital are the same but increased reward in second test by 100% and 200% in third test.


Starting Capital: $5000
Commission: $7 per trade
No of trade: 10
Probability of success: 70%
Percent of capital risk 1%
R: R= 1:1
Test: 1
Results:
Trade 1: Market goes your way...
Risk $49.93 / Gain $49.93 / Commissions $7.00
Net Gain $42.93
Capital: $5,042.93
Trade 2: Market goes your way...
Risk $50.36 / Gain $50.36 / Commissions $7.00
Net Gain $43.36
Capital: $5,086.29
Trade 3: Market goes your way...
Risk $50.79 / Gain $50.79 / Commissions $7.00
Net Gain $43.79
Capital: $5,130.08
Trade 4: Market goes your way...
Risk $51.23 / Gain $51.23 / Commissions $7.00
Net Gain $44.23
Capital: $5,174.31
Trade 5: Market moves against you...
Risk $51.67 / Lose $51.67 / Commissions $7.00
Net Loss $58.67
Capital: $5,115.64
Trade 6: Market goes your way...
Risk $51.09 / Gain $51.09 / Commissions $7.00
Net Gain $44.09
Capital: $5,159.73
Trade 7: Market goes your way...
Risk $51.53 / Gain $51.53 / Commissions $7.00
Net Gain $44.53
Capital: $5,204.25
Trade 8: Market moves against you...
Risk $51.97 / Lose $51.97 / Commissions $7.00
Net Loss $58.97
Capital: $5,145.28
Trade 9: Market moves against you...
Risk $51.38 / Lose $51.38 / Commissions $7.00
Net Loss $58.38
Capital: $5,086.90
Trade 10: Market goes your way...
Risk $50.80 / Gain $50.80 / Commissions $7.00
Net Gain $43.80
Capital: $5,130.70
After 10 Trades: $5,130.70
Test: 2
Starting Capital: $5000
Commission: $7 per trade
No of trade: 10
Probability of success: 70%
Percent of capital risk 1%
R: R= 1:2
Results:
Trade 1: Market goes your way...
Risk $49.93 / Gain $99.86 / Commissions $7.00
Net Gain $92.86
Capital: $5,092.86
Trade 2: Market goes your way...
Risk $50.86 / Gain $101.72 / Commissions $7.00
Net Gain $94.72
Capital: $5,187.58
Trade 3: Market moves against you...
Risk $51.81 / Lose $51.81 / Commissions $7.00
Net Loss $58.81
Capital: $5,128.77
Trade 4: Market goes your way...
Risk $51.22 / Gain $102.44 / Commissions $7.00
Net Gain $95.44
Capital: $5,224.21
Trade 5: Market goes your way...
Risk $52.17 / Gain $104.34 / Commissions $7.00
Net Gain $97.34
Capital: $5,321.55
Trade 6: Market moves against you...
Risk $53.15 / Lose $53.15 / Commissions $7.00
Net Loss $60.15
Capital: $5,261.41
Trade 7: Market goes your way...
Risk $52.54 / Gain $105.09 / Commissions $7.00
Net Gain $98.09
Capital: $5,359.49
Trade 8: Market goes your way...
Risk $53.52 / Gain $107.05 / Commissions $7.00
Net Gain $100.05
Capital: $5,459.54
Trade 9: Market goes your way...
Risk $54.53 / Gain $109.05 / Commissions $7.00
Net Gain $102.05
Capital: $5,561.59
Trade 10: Market goes your way...
Risk $55.55 / Gain $111.09 / Commissions $7.00
Net Gain $104.09
Capital: $5,665.69

After 10 Trades: $5 665.69
Test: 3
Starting Capital: $5000
Commission: $7 per trade
No of trade: 10
Probability of success: 70%
Percent of capital risk 1%
R: R= 1:3
Results:
Trade 1: Market goes your way...
Risk $49.93 / Gain $149.79 / Commissions $7.00
Net Gain $142.79
Capital: $5,142.79
Trade 2: Market goes your way...
Risk $51.36 / Gain $154.07 / Commissions $7.00
Net Gain $147.07
Capital: $5,289.86
Trade 3: Market goes your way...
Risk $52.83 / Gain $158.49 / Commissions $7.00
Net Gain $151.49
Capital: $5,441.35
Trade 4: Market goes your way...
Risk $54.34 / Gain $163.03 / Commissions $7.00
Net Gain $156.03
Capital: $5,597.38
Trade 5: Market moves against you...
Risk $55.90 / Lose $55.90 / Commissions $7.00
Net Loss $62.90
Capital: $5,534.48
Trade 6: Market goes your way...
Risk $55.27 / Gain $165.82 / Commissions $7.00
Net Gain $158.82
Capital: $5,693.30
Trade 7: Market goes your way...
Risk $56.86 / Gain $170.59 / Commissions $7.00
Net Gain $163.59
Capital: $5,856.89
Trade 8: Market goes your way...
Risk $58.50 / Gain $175.50 / Commissions $7.00
Net Gain $168.50
Capital: $6,025.39
Trade 9: Market moves against you...
Risk $60.18 / Lose $60.18 / Commissions $7.00
Net Loss $67.18
Capital: $5,958.20
Trade 10: Market moves against you...
Risk $59.51 / Lose $59.51 / Commissions $7.00
Net Loss $66.51
Capital: $5,891.69
After 10 Trades: $5 891.69

http://www.valtinho.com/invest/risk_management_simulator.html#trade10

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