The calculation of VaR provides the probability that an asset (a currency pair, a share, a portfolio, etc.) exceeds a certain loss over a given time. In our tool, this probability is calculated based on past evolution. For instance, if we find that 3 times out of 10 the Euro/Dollar pair goes down 40 pips in 10 hours or longer over the last 100 days, we could say that the probability that a stop at -40 pips is reached over the next 10 hours is of 30%.
This calculation method had limitations. To be completely valid, the distribution of variations is supposed to follow a normal distribution, which isn't the case in practice. Therefore, it's advisable to interpret results with caution and not to use it as anything other than a complementary tool.
In the tool below, you need to enter the pair to be studied, the timeframe, the amount of historical data to use for the study, as well as the duration of trading in time units. We'll give you the distribution of variations.
Calculations are done in real-time.