Forex VaR (Value At Risk) Calculator

Instrument Confidence Level
Candle Granularity Trade Duration
Period of Study

Value at Risk (VaR) is a widely used risk management measure in finance. It provides an estimate of the potential loss for a portfolio of assets based on the historical performance. There are 3 elements in definition of VaR:

  1. amount of loss in value
  2. time period over which risk is assessed
  3. level of confidence or probability of estimated risk

The VaR calculation can be applied to any financial market including Forex as shown in the experimental calculator on this page. It is important to note the VaR shown by this calculator does not imply direction of the market movement. This allows for an assessment of risk for both short and long positions (i.e. risk exists in either direction).

There are various methods for calculating VaR and each can generate a different result. The VaR calculator here uses historical distribution of price movements (high-low) for the selected currency pair and time window. The distribution is used to approximate movement level at various probabilities (confidence level)*. While this is a simplified approach it still can be used to get an idea of movement amount for different currency pairs and time windows.

Note: VaR does NOT take all types of risks into account (e.g. liquidity risk, regulatory risk, sovereign risk, etc.) and there is always the possibility of the market moving beyond the estimated amount shown by above calculator. In the Forex market specifically, major economic events can cause a steep rise or fall of prices in a short period of time. Therefore it is highly recommended to take additional measures into account when assessing the risk associated with Forex trading.

*Value At Risk determined by numeric interpolation on the inverse cumulative distribution curve of historical candlestick height (high - low) distribution. Weekend candles with zero height are ignored.
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