I'm not sure I have seen this done anywhere so I have made it a coding project for myself. Basically I want to show a number of ticks that should be appropriate as an initial stop loss that has been compensated for current
volatility.
I am starting with the 3 *
ATR(14) as a volatility stop measure but I want to convert that value to a number of ticks (on any instrument I choose to display) and then compare that number of ticks to a percentage amount of an available trading capital amount. I will be using other methods later but I'll go with 3 * ATR for now while I code it.
For example, if I have an 3 * ATR(14) of 1.5
points on CL, then I want it converted to a tick risk of 15 ticks and a dollar value of n($US150) where n is the number of
contracts to be traded. Once I have the dollar value I will compare it to the available trading capital to see if it is under a risk threshold (say 2% of total)
So on my chart I want the following printed.
1. Number of ticks distance from current price for an initial stop loss based on volatility (3*ATR in this case)
2. A dollar value or number of ticks multiplied by contracts traded i.e. $150 or 15 ticks or 3 x 5 ticks
3. A percentage risk of capital available ie $150 risk $10,000 available risk = 1.5%
4. Colour the risk percentage text green or red as a go/no go indication for opening a trade.
The idea of this system is to make proper risk management almost automatic and usable regardless of the instrument I am looking at. Having the figures above on the chart will also make risk/reward and trade sizing much easier on the fly.
I don't want help on the coding project (as I'm trying to challenge myself) but the reason I posted this is to open up a thread on risk management idea's that I might be able to include in this system. Maybe if some good idea's are posted here I can try and include them so it might be useful to others. I won't promise though as I'm a little rusty on my coding and this will be a learning project to help me brush up on my code too.