Account Risk Vs Trade Risk
A 1-minute lesson from the MarketPro academy, one of 22 in risk management.
Risk on a single trade and risk across an entire account are related but distinct measurements, and confusing the two can lead to underestimating true exposure. Trade risk is the amount that would be lost if a single position hit its stop loss, usually expressed as a percentage of account balance for that one trade.
Risk on a single trade and risk across an entire account are related but distinct measurements, and confusing the two can lead to underestimating true exposure.
Trade Risk
Trade risk is the amount that would be lost if a single position hit its stop loss, usually expressed as a percentage of account balance for that one trade.
Account Risk
Account risk (sometimes called aggregate or portfolio risk) is the combined risk across every open position at a given moment. If several trades are open simultaneously, their individual risks add up, and can compound further if the positions are also correlated with one another.
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