Mason Edward388_ Roberts#33

View translation

What is Value-at-Risk (VaR) and how do traders use it in forex?

Value-at-Risk (VaR) measures the maximum expected loss over a set period at a given confidence level. For example, a 1-day 95% VaR of $10,000 means there is a 5% chance of losing more than $10,000 in one day. Institutions use VaR to set risk limits, allocate capital, and satisfy regulators. Benefits: standardized, widely understood, and useful for comparison. Risks: VaR ignores extreme tail events and assumes stable distributions. Retail traders can apply simplified VaR by estimating max loss per trade or per day using volatility measures. VaR is not a crystal ball but a benchmark—it highlights risk exposure so traders avoid blind overleveraging.