Introduction To Risk Management

[Leth]

Risk Management

The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. Essentially, risk management occurs anytime an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or inaction) given their investment objectives and risk tolerance. - Investopedia

You won't see much on the web or in books on the subject of Risk Management. Store-bought trading systems rarely incorperate it and system developers rarely consider it. Risk Management (bet sizing, money management, thinking in terms of odds, etc..) is an edge every trader should not be without; it could very well mean life or death in this game. It also takes alot of psychological fortitude to master. Reasearching this subject as much as possbile may just help you climb to the top 5%. - Leth