Trading risk is the likelihood that a trade will not perform as expected and could result in a loss.

Trading risk is the likelihood that a trade will not perform as expected and could result in a loss. Every market, strategy, and timeframe carries its own set of uncertainties - from price volatility and gaps to liquidity shortages and counterparty issues. Understanding trading risk helps you protect capital, shape realistic expectations, and build a repeatable process instead of relying on luck.

Effective risk management begins before you enter a position. Define your maximum acceptable loss per trade, size positions accordingly, and place stop-loss orders where your thesis is proven wrong, not where they merely "feel safe." Balance potential reward against risk using clear targets and a consistent risk/reward ratio. Diversify exposures, avoid excessive leverage, and plan for news-driven volatility. Just as important, track drawdowns and review your edge through data, not emotions.

This page explains core types of trading risk and practical ways to control them so you can trade with discipline. Whether you are day trading, swing trading, or managing a long-term portfolio, mastering risk is what keeps you in the game.

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