The risk score is a metric shown under the Overview tab of any strategy’s trading indicators. The risk score reflects the level of risk for the strategy, considering the free margin of the strategy: the lower the free margin, the higher the chance the strategy triggers a stop out, the higher the calculated risk score.
Low free margin more easily results in a strategy’s equity becoming 0, which forces open trades in that strategy to automatically close - this process is known as stop out.
Risk Score Table:
The risk score is measured by a scale of 1-10.
|1-5||Moderate||The chance of losing all capital in the short term is quite low.|
|6-8||High||Be very cautious and accept responsibility for your losses.|
|9-10*||Extra High||Pay extra caution and use only the capital you can afford to lose.|
*By default, strategies with extra high risk can only be seen by Investor’s who set their filter to All when browsing strategies in the Social Trading app.
Risk score calculation
Although the risk score shown in a strategy is the highest risk score achieved by the strategy for that day, the risk score is calculated every 20 minutes and increases only if the risk score climbs higher than the day’s highest score. The risk score can be improved when the Strategy Provider uses a smaller portion of the strategy’s capital to trade over a 30-day period.
Any strategy that achieves a higher risk score is immediately updated and, in the case of 9 and above, becomes hidden from potential Investors by default.
When you see a risk score of 6, the result indicates high risk. The higher the level, the lower the free margin available to the strategy, the more vulnerable it is predicted to be. With regards to strategy metrics, Drawdown illustrates what has happened, while risk tries to predict what is to come.