How is the strategy risk calculated?

On Coinmatics, the strategy risk is calculated using the Value at Risk model.

This model allows estimating the strategy loss with a given probability (5%). In other words, VaR allows estimating the amount of loss that will not be exceeded with a 95% probability.

The higher the expected strategy loss is, the higher the strategy risk is.

To calculate the Value at Risk the strategy's trades for a specified period are taken into account. On Coinmatics, the strategy risk is calculated and displayed for the latest month's period.

Example:
Let's assume that the strategy's 5% VAR value is 2% over a monthly period. Then, the strategy loss will be no more than 2% for the month with a 5% probability. The conversion of the 5% probability into a daily coin buy/sell ratio places the odds of a 2% loss at one day per month.