InvestorQ : Does risk in trading also look like the risk in my business?
Shreya Mashelkar made post

Does risk in trading also look like the risk in my business?

3 years ago

Of course it does! How is it really different? Whether you are trading or running a business, you are always focusing on balancing risk and returns. There is risk you need to take but ensure that the trade-off is meaningful. The same logic applies to your business and to your trading activity also. Equating your trading activity with business also gives you a better perspective of risk. What are the risks that a business focuses on? There is the market risk which arises from the competitive positioning in the industry. Then there is the regulatory risk that may arise from changes in government policy. We saw how the introduction of GST made a big difference to the fortunes of the organized sector in India. Business also looks at risk in terms of the stability of their business model. You can actually replicate the complete logic of a business risk analysis to your trading activity too. Firstly, your volatility risk is the biggest risk in trading. You face that on a daily basis during market hours. Secondly, the risk of external stimuli is also a major issue. Your risk is not only judged by what you do but also by what others do in the market. Lastly, there is the biggest risk of managing your capital in trading. Here again a very business approach helps a lot. You must risk in trading only what you can afford to lose. You are losing the trading game when you forget this basic equation.