Raghee's Risk Tolerance

2017-06-05 | Danielle Shay

“I love trading and I love traders. It’s what I do and it’s the way I look at the world. My goal every single day is to help traders find their path through the markets to success.”

— Raghee Horner

 Raghee is an aggressive futures and forex swing trader, who specializes in primarily trend following and directional plays. She likes to ride the trend until it ends.  Her combination of technical analysis, charting strategies, volatility events, and market psychology and price movement ranges determines how she trades. Her passion for Forex sprung out of her interest in trending markets, and there is nothing she enjoys more than teaching her students how to ride the waves of those trends. She excels in longer term plays that last days or weeks, averaging between 30-70% ROI. She likes to take what the market will give her! She will setup trades between 6-34 hours in advance of the trigger, allowing her the opportunity to be unglued from the screen. She utilizes alerts so she’s able to take a break.  Trading futures are different than trading options. Futures trade with typical margin requirements are in futures. Options are subject to implied volatility. For futures and forex traders, it’s a fixed cost. It’s a different animal. Margin will always be the same. So, she can project, how much she needs in her my account, to put on the size I need to put on. It is very different in futures and forex than stock or options.

Risk to Raghee is always on the forefront of her mind. Here is how she thinks of and manages her risk. Just remember, at the end of the day, you need to know what is right for you, and your account.

Risk Management at a Glance

Trading Style: Aggressive Futures & Forex Swing Trader – Trend Follower + Directional

Account Goals: Raghee doesn’t have account goals, she prefers to think of everything in terms of possible price movement. She is riding trends, so she can only take what the market will give her. She believes that goals cause you to either cut yourself short or have unrealistic upside expectations.

Risk is equal to = Position size x Volatility (especially dependent on calendar events) x Time Frame

Overall Acceptable/Recommended Account Risk: Everything Raghee does regarding risk, is related to her Price Movement Ranges graph. She does not recommend a specific percentage of your account per trade, she primarily looks at what the possible price movement range of the security is over the period of time she is trading. This defines her risk.

Strategy Use + Risk Taken Per Setup: Each setup she uses, she is always aware of the price movement range on the ticker of the time frame she is trading. Each security carries a different risk, simply based on the possible price movement range, number of lots, and volatility.

Methodology: By the very nature of the fact that she is a futures and forex trader, people consider that aggressive and risky due to the leverage required alone. However, she is a swing trader, rarely day trading, as long as there is a trend. Most traders define swing trading by how many days you’re in a trade. Raghee defines being a swing trader by entering the market in a correction or retracement, and riding the swing. Swing is market behavior. She loves to jump on trends in the correct spot, let the market give her as much as it can, and take her profits when she knows it is running out of gas.

Calculating Risk with Price Movement Ranges

How do we use daily price movement ranges to define where we have room to move, but still objective limit on how much risk tolerance we need or have to have? A couple things that were working for us today, in order to do this. The price movement ranges on a lot of the press that are pressing validity, our stop, a lot of them were still operating within their daily price movement range. We pull a losing trade off once it reaches the point of validity – trade is no longer valid.

AUDNZD – Risk Example

I go to the daily candle, and I grab the current range – the current high and the current low of the market. 1.0880 is my high, low is 1.0773 and that gives me a 0.0107. That gives me a high low range of the day, and I ask myself, of those 0.0107 pips, how many pips have we already used today? How much fuel is left in the tank?

AUDNZD Chart

This is where the Price Movement Ranges come in. If I know I will get 0.0135 pips in a day, that’s a 68% probability of this price movement on that day for this pair. I am going to take 0.0135 pips, subtract what we have already moved (0.0107), and I know we can get 0.0028 more pips that we can move in either direction left in the day. The high on the day right now is 1.0880, and then I add 0.0028. That takes me to a possible high of 1.0908. That would take me to the upper end of the 68% probability of price movement for the day.