Risk/money management
“Good management starts by limiting risks, whatever the type of business. the At Imperative Wealth, we make it a point of honour to establish best practices for minimizing losses and, above all, maximizing gains”.
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Optimizing returns also means limiting risks
THE STOCK MARKET IS NOT A CASINO
Stops - the risk/money management tool
Risk/money management consists of establishing the best compromise between risk-taking, which governs potential losses, and the quest for investment returns, which governs earnings.
The robot runs an algorithm that continuously calculates the best risk/return trade-off. performance. To do this, he places stops in the market. A stop is an order to liquidate the investment if a certain price is reached. The robot can terminate the investment either because it feels that the risk has become too great, or because it feels that profits are too high. are sufficient.
Limiting risk: stop loss
The stop-loss protects you in a situation where the trend is not confirmed, and stops or even turns around.
Once the robot has detected a market trend and triggered an investment, it calculates a stop loss. The stop loss guarantees that the loss will be limited if the market moves in the opposite direction. to the robot’s anticipations. The amount of risk accepted is carefully calculated, based on market volatility, and the investor’s appetite for risk.
Yield management: the "stop win
The stop-win enables you to liquidate your investment and reap the profits if the robot considers that the gains were sufficient. If the trend continues, and develops favourably over the medium to long term, the In the long term, the robot calculates a stop win.
Calculating a stop-win is a tricky operation. It’s all about making the most of a trend, to obtain the best possible return, while avoiding any gains being wiped out by a sudden trend reversal. The robot challenges this difficult compromise by continuously recalculating its stop-wins.
Managing systemic risk: "global stops
It’s not unusual to see entire sectors of the global economy moving in the same direction. For example, all US equities are bullish. In this case, the robot will be heavily invested on the various US equity indices (Dow Jones, Nasdaq, S&P, etc.).
If, however, this generalized rise takes on the appearance of a financial bubble, the robot can over-invested and highly sensitive to a sudden trend reversal. The robot detects these systemic risk situations, and calculates “global” stops designed to reduce exposure under certain conditions, and thus reduce risk.
