OPEN-SOURCE SCRIPT
IU VaR (Value at Risk) Historical Method
This Pine Script indicator calculates the **Value at Risk (VaR)** using the **Historical Method** to help traders understand potential losses during a given period( Chart Timeframe) with a specific level of confidence.
What is Value at Risk (VaR) ?
Value at Risk (VaR) is a measure used in finance to estimate the potential loss in value of an asset, portfolio, or investment over a specific time period, given normal market conditions, and at a certain confidence level.
Example:
Suppose you invest ₹1,00,000 in stocks. A VaR of 5% at a 95% confidence level means:
- There is a **95% chance** that you won’t lose more than **₹5,000** in a day.
- Conversely, there is a **5% chance** that your loss could exceed ₹5,000 in a day.
VaR is a helpful tool for understanding risk and making informed investment decisions!
How It Works:
1. The indicator calculates the percentage difference between consecutive bars.
2. The differences are sorted, and the VaR is determined based on the assurance level you specify.
3. A label displays the VaR value on the chart, indicating the potential maximum loss with the selected assurance level within one period eg - ( 1h, 4h , 1D, 1W, 1M etc as per your chart timeframe )
Key Features:
- Customizable Assurance Level:
Set the confidence level (e.g., 95%) to determine the probability of loss.
-Historical Approach:
Uses the past percentage changes in price to calculate the risk.
-Clear Insights:
Displays the calculated VaR value on the chart with an informative tooltip explaining the risk.
Use this tool to better understand your market exposure and manage risk!
What is Value at Risk (VaR) ?
Value at Risk (VaR) is a measure used in finance to estimate the potential loss in value of an asset, portfolio, or investment over a specific time period, given normal market conditions, and at a certain confidence level.
Example:
Suppose you invest ₹1,00,000 in stocks. A VaR of 5% at a 95% confidence level means:
- There is a **95% chance** that you won’t lose more than **₹5,000** in a day.
- Conversely, there is a **5% chance** that your loss could exceed ₹5,000 in a day.
VaR is a helpful tool for understanding risk and making informed investment decisions!
How It Works:
1. The indicator calculates the percentage difference between consecutive bars.
2. The differences are sorted, and the VaR is determined based on the assurance level you specify.
3. A label displays the VaR value on the chart, indicating the potential maximum loss with the selected assurance level within one period eg - ( 1h, 4h , 1D, 1W, 1M etc as per your chart timeframe )
Key Features:
- Customizable Assurance Level:
Set the confidence level (e.g., 95%) to determine the probability of loss.
-Historical Approach:
Uses the past percentage changes in price to calculate the risk.
-Clear Insights:
Displays the calculated VaR value on the chart with an informative tooltip explaining the risk.
Use this tool to better understand your market exposure and manage risk!
Open-source script
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in publication is governed by House rules. You can favorite it to use it on a chart.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.