Trading Risk – What to Know Before You Trade

Trading RiskMany traders and soon-to-be-traders make the mistake of assuming trading is low-risk and/or riches are easy to achieve. Trading is a high-risk activity and achieving profitability can be difficult. Profits and losses can occur. This is a fact regardless of any marketing you may have read. Let’s take a further look at trading risk.

There are many trading vendors that sell systems that make promises or provide guarantees. The goal of a marketer is to convince you a  product is worthwhile. In trading, it is common to use deceptive or confusing advertising to convince traders that will become profitable or minimize the risks associated with trading. Such companies should be avoided.

As an educational trading company, Day Trade to Win tells traders to expect losses and to be prepared for significant loss because of hypothetical performance and the unpredictable nature of the markets. Part of being a successful trader is realizing the potential for loss and having a plan to try to mitigate loss. This is why commonsense and access to a trading platform is provided – for practice and to reduce mistakes made when trading with real money. Reading the materials, watching the videos, asking questions, attending training – this is all encouraged. There are differences between trading in a live, simulated environment versus real money trading. In the event a trader uses real funds, he or she should have as much experience as possible, know the financial consequences of losing trades, how to operate the trading software, and only trade with money that can be lost without harming the trader. A trader will never be able to avoid risk entirely. Risk is part of trading.

Understanding Trading Risk

Licensed brokers can answer questions related to risk and help you understand the consequences and costs of trading. Licensed brokers exist for various types of markets: futures, commodities, forex/currencies, options, etc. Such brokers can discuss the appropriateness of investing/trading a particular investment or trading strategy. Fees, margins, risk and reward are all topics a trader should discuss with his or her broker. DayTradeToWin encourages traders to speak with brokers to understand how the markets operate and the trading risk.

Trading is serious business and must be done carefully. You will need to investigate and ask questions to ensure your understanding.

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