Trading risk

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9 Oct 2022
14

The likelihood of losing some or all of your initial investment when trading or investing is known as risk. The potential reward, or potential profit, is on the other side. Generally speaking, we argue that the potential value or return on investment increases with risk.

However, traders and investors are constantly searching for a competitive advantage, a means to increase their profit or reduce their risk. They might try to find ways to gain more leverage in order to receive a bigger reward. They could employ stop-loss orders or a hedging technique to lessen their risk exposure. Risk is the variable component of your overall trading cost because it reflects uncertainty, but on Nadex, you can set the upper and lower bounds of that cost.

The most crucial component of your trading plan is risk control.

To consistently succeed as a trader, you must keep your losses under your gains. Determining your highest possible profit is typically more difficult than limiting or managing your maximum possible loss. Before you execute each trade on Nadex, you can specify your maximum allowable risk down to the dollar level. Your total risk is the sum you spend to enter the deal. More than your initial trading cost can never be lost.


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