AI AGENTS

Risk assessment agent: protecting your capital before you trade

Most traders focus on how much they can make. Professional traders focus on how much they can lose. Our Risk Assessment Agent is designed with this professional mindset. Before you enter any trade, it calculates exactly how much you are risking and whether the potential reward justifies that risk.

What the risk assessment agent does

The agent begins by analyzing the asset’s historical volatility using Average True Range (ATR), standard deviation, and beta relative to the broader market. Higher volatility means wider stop losses and smaller position sizes to maintain the same level of risk.

Based on volatility analysis, the agent calculates optimal stop loss placement. Rather than using arbitrary percentage-based stops, it uses technical levels (support, resistance, moving averages) combined with volatility measurements to find the stop loss distance that gives the trade enough room to breathe while limiting downside risk.

The agent then calculates position sizing based on your risk tolerance. If you follow the 1% rule and have a $10,000 account, the agent determines exactly how many shares, lots, or contracts you should trade so that if your stop loss is hit, you lose no more than $100.

Risk/reward analysis

For every trade setup, the agent calculates the risk/reward ratio. It identifies realistic profit targets based on the next resistance level (for long trades) or support level (for short trades) and compares the potential reward to the defined risk. Trades with a risk/reward ratio below 1:1.5 are flagged as unfavorable. Trades with 1:2 or better are highlighted as favorable.

The agent also runs scenario analysis. It calculates the maximum drawdown if the trade goes to its stop loss, the potential gain if it reaches the target, and the breakeven win rate required for the trade to be profitable over many repetitions.

What you get in your report

The Risk Assessment section includes suggested stop loss level with reasoning, optimal position size based on your account size and risk tolerance, risk/reward ratio with realistic profit targets, maximum drawdown scenario, historical volatility analysis and how it affects the trade, and an overall risk grade from Low to Extreme.

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Disclaimer: This is for educational purposes only and does not constitute financial advice. Trading involves significant risk of loss.

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AskTrade analyses are AI-generated and do not constitute financial advice.