Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: amoezzi who wrote (18717)	2/20/2004 4:49:25 PM
From: Sergio H	Respond to of 78748

Two suggestions: riskgrades.com or BETA (from the Yahoo financial glossary): The measure of a fund's or a stock's risk in relation to the market or to an alternative benchmark. A beta of 1.5 means that a stock's excess return is expected to move 1.5 times the market excess returns. E.g., if market excess return is 10%, then we expect, on average, the stock return to be 15%. Beta is referred to as an index of the systematic risk due to general market conditions that cannot be diversified away. Beta equation (security) The market beta of a security is determined as follows: Regress excess returns of stock y on excess returns of the market. The slope coefficient is beta. Define n as number of observation numbers. Beta = [(n) (sum of [xy]) ]-[ (sum of x) (sum of y)]/ [(n) (sum of [xx]) ]-[ (sum of x) (sum of x)] where: n = # of observations (usually 36 to 60 months) x = rate of return for the S&P 500 index y = rate of return for the security

To: amoezzi who wrote (18717)	2/20/2004 11:58:30 PM
From: James Clarke	Read Replies (1) \| Respond to of 78748

<<Can anyone help me to find out: How to estimate a risk to reward ratio for going long on a stock trade. A appreciate all the advice.>> Understand the business and understand the financial statements enough to value the business. Then understand what the current price vs. the intrinsic value and the risk inherent in the business implies about the odds of losing money on the investment. I know of no other way to do this. Shortcuts don't work, though there are plenty of them. If you're thinking of "going long a stock trade" you're not in the right frame of mind. Think of "buying a business" and what that means.

To: amoezzi who wrote (18717)	2/23/2004 5:30:25 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78748

amoezzi, if you are "going long a stock trade", then I assume that by "trading", you are a trader. If so, the best way (imo) to estimate risk/reward for your next trade is the historical performance you've recently experienced. Assuming further that your previous trades and next trade are about similar as regards the amount of money bet on each trade, then your risk to reward ratio best estimator (imo) for your next trade = ratio of past total of losses ($)to total of past gains ($). That is, for traders, I assume the best measure of risk to reward for an upcoming trade ought to correspond to what the trader's results have shown in similar past situations. jmo.