When it comes to defining and managing “risk,” each trader may have a unique perspective on both its definition and the methods they will use to manage it effectively. Some traders consider risk as the potential amount they’re willing to lose in a trade. For others, risk could also mean the monetary amount allocated for each individual trade. Still, others may simply look at risk as the level of volatility for any one contract.
While the risk in a trade is typically linked to the loss of money in a trade, it is also what creates potential for profit. Traders should understand the following attributes of a contract to help manage their risk and help them identify products that fit their risk profile.
