Developing trading strategies based on risk-analysis of stocks

Risk Management has always been of fundamental importance to financial markets. The aim of all good trading strategies is based around minimising possible risk and at the same time achieving most profit. A balance between these two factors must be struck for different risk – profit profiles. In this paper we describe an innovative way for visually quantifying risk, and we show how our method can be used as a tool for developing trading strategies to help manage risk. We run our algorithm on selected historical FTSE-100 stocks and pick some companies for a more detailed study of trading strategies. The method shows considerable promise for future research work.