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I'm wondering if the total amount invested should include the SL. Total amount invested = sum of the nominal value of all positions, but can I look at this as what I am risking at the moment?
Because if you have the same lots or volume but two different distances in stop losses, one short and one long, then the CVs should differ.
Hi Emma,
The objective of VaR is to understand the potential loss for a portfolio, which helps in setting up risk management measures such as SL. Typically, the input for VaR is the total amount invested. Therefore, could you please elaborate on what you mean by including stop losses (SL) in this context? Additionally, it would be great if you could help us understand why do you feel the need to include SL in the VaR calculation?
Understanding your reasoning will help provide a better explanation 
Thanks
Rushda
Let's say I have two identical portfolios with the same assets and the same amount of money. The only difference is that I used a stop loss for all my positions vs. none. You are saying my VAR for both portfolios would and should be the same?
This is interesting.
Hello Emma,
In the VaR equation, the "Total Amt. Invested port" usually sums up the values of all positions in a portfolio, without factoring in stop-loss levels. However, some traders choose to include potential losses from stop-loss orders in this total. That means if all stop-losses were hit, they'd consider that part of their total investment at risk.
Consider this:
If you have identical positions in two portfolios but use different stop-loss distances, the potential losses and overall risk for each position would vary. A tighter stop-loss means a smaller potential loss, while a wider one means the opposite.
Now, imagine you have two exactly the same portfolios—same assets, the same amount of money—but one uses stop-loss orders and the other doesn't. It's expected that they wouldn't have the same risk level. The one with stop-loss orders is likely to have a lower risk. Why? Because those stop-loss orders act as a safety net, limiting potential losses and reducing overall risk exposure.
I hope this helps! Please let us know if you have any additional queries on this.