Dynamic Risk Management

Dynamic Risk Management intends to dynamically manage the size and risk of open positions throughout the time the positions are held.

Dynamic Risk Management can be based on any portfolio-level risk situation or combination of conditions.

Dynamic Risk Management involves dynamically and precisely controlling risk by position, by sector, by market, by system, or across all of these levels universally.

Dynamic Risk Management based on portfolio-level risk can have a more critical impact on risk-adjusted performance than initial sizing alone and predefining risk. Dynamic Risk Management goes beyond just predefining risk to managing the position over the entire period it is held.

Dynamic Risk Management includes:

  1. Predefining intital risk.
  2. Managing the risk the position becomes a laggard.
  3. Managing the risk of giving up too much of a profit.

At Shell Capital Management, we apply Dynamic Risk Mangement systems. For example, with Dynamic Risk Management, if total portfolio risk exceeds a predetermined percentage of total equity, we can trim our position size from every position in the entire portfolio—one by one, in any order we decide—until our portfolio risk parameters are satisfied.