Biggest Loss $

Biggest Loss $

Definition
The largest amount of money lost on a single closed trade within a specific period.

Formula
Biggest Loss $ = Min (Loss on Trade 1, Loss on Trade 2, …, Loss on Trade N)
Where N is the total number of closed trades

Example
Imagine you have the following trade history for a week:

  • Trade 1: Profit of $100
  • Trade 2: Loss of $350
  • Trade 3: Profit of $50
  • Trade 4: Loss of $120

In this scenario, your Biggest Loss $ would be $350 (from Trade 2).

Key Points

  • Risk Assessment: Shows you the maximum amount you could lose on a single trade, indicating potential vulnerabilities in your strategy.
  • Position Sizing: Helps you determine appropriate position sizes to avoid excessive losses.
  • Psychological Impact: Prepares you for the possibility of substantial losses on individual trades.

Considerations

  • Only Closed Trades: Only trades where the position has been fully exited are included in this calculation.
  • Executions vs. Trades: Profits on individual executions within a strategy are not considered separate trades. The total profit or loss of the entire trade is used.

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