With the market’s recent volatility, wanting to lower your risk of loss is understandable. It can be easy to put the market’s volatility to work for you. The TradeStops Risk Rebalancer can help you take equal risk per position and lower the risk of your portfolio. Let’s see how easy it is to use volatility to put more money into your steadiest investments and just the right amount of money into your most exciting investments.
Getting Started with the Risk Rebalancer
To access the Risk Rebalancer in TradeStops, click Research and then click Risk Rebalancer. This brings up the tool.
First, you’ll want to select the portfolio that you want to rebalance. Simply click the drop-down menu, and then click the portfolio. The active portfolio will then appear in the drop-down box.
Next, decide if you want to include cash in the rebalancing. This cash will be used to help you in acquiring the new position sizes. If there is a green checkmark by cash, it means you’re including cash. You can edit the cash value by clicking the pencil.
Then, decide if you want to include your dividends. Just like with cash, a check mark means you’re including it. A white box means that you’re not.
Click Rebalance when you’re ready.
There are three sections to review after clicking Rebalance – the Overview, Results, and Steps to Take. We’ll go over one section at a time to make it easy to follow.
Rebalanced Overview
The Rebalanced Overview gives you an idea of what following the results will do for your portfolio. First, we tell you your PVQ – the Portfolio Volatility Quotient.
For this portfolio, the overall risk would be about 9%. That’s down 2.79% from how it currently stands. The PVQ gives you a sense of how volatile you can expect your entire portfolio to be over the period of a year or more.
We give you the risk per position too.
The total portfolio capital for this portfolio we’re looking at is $1,854.40. So… these results could prepare you for a capital drawdown of each position in this rebalanced portfolio for as much as $14.87.
Rebalanced Results
If you like the overview, you can check out the results. This page will let you review the results in greater details. You’ll see the adjusted position sizes, the adjusted risk per position, and the adjusted number of shares.
Now, you may notice that the Risk Rebalancer asks you to add shares to a red SSI position, like in PCG in the photo below.
This is because the Risk Rebalancer looks at the VQ – the volatility – of the stock. So, if a red stock is in the low risk zone, the Risk Rebalancer could add to the red stock.
The Rebalanced Results offer some additional fun features too! In the actions column you can choose to lock and exclude positions.
Clicking the lock will lock the position. You would keep the same position size that you currently have, and when you update the results, the locked position’s volatility would still be included. Clicking the X will exclude a position. Its risk won’t be taken into consideration when you update results.
Steps to Take
This section simplifies the rebalanced results. It shows the symbol, your current holdings, the rebalanced holdings, and the steps to take.
If you aren’t quite ready to make all these changes, you can save these results as a New Portfolio. This won’t make any changes at your broker – we never make changes at your broker for you. Just click Save as New Portfolio in the bottom left corner.
In the pop-up that appears, you can rename the rebalanced portfolio if you’d like. Then, just click Save. The new portfolio will appear on the Portfolios page in TradeStops. You can review the portfolio more and watch its performance in the market.
Try the Risk Rebalancer Today
The markets have been more volatile lately than normal. Knowing how to protect your portfolio without fear is vital to your success. The Risk Rebalancer can help you reduce your portfolio’s overall volatility and help you to make more and risk less.
-Customer Success Team
