Is Risk Management necessary in Financial Trading?

Everything that we do includes some type of risk, it is all around us. Whether we are crossing a long road or catching a flight to your hometown or even making a normal breakfast at home, it is everywhere and in everything.

This automatically makes a person want to avoid it; especially if it includes finances as obviously no one wants to lose some hard earned money.

Most of us avoid risk everyday in our lives, often without you even realizing that we are doing it. Taking the examples listed above, while crossing the road we judge our distance from the other cars coming to avoid being hit. Similarly with other things, we evaluate the risk and manage to avoid it.

The possibility of facing misfortune or loss is very high when it comes to financial trading, if not taken proper decisions, this can be a common problem for you. However, this does not mean that you should not jump into and start your trading journey. If good financial decisions are taken, you are in to earn a lot of money, enough to make this your hobby.

You will find many people in this trading world who take extreme approaches in this financial trading world that really does not match up to some other areas of risk.

This might be a good decision for some people and bad for others, it all depends on the experience that they have. Although, if you are new, I would recommend burying your funds in a safe investment, after all you obviously do not want to lose most of your money in the beginning of your journey. Burying the funds in a safe investment will allow you to get some return to cream off the profits.

Many people will tell you that there is a very small percentage of risks involved with your funds in any trade however this might not be true. Ultimately, every single trader or investor have a different highly personal risk tolerance which is based on the level of experience which they have in the field.

There are two main types of investors/traders you will find in the market.

Investor A being more of a kind who invests all his funds in a safe investment to guarantee themselves some profit.

Meanwhile Investor B, who has gone the other way dumping all his funds in a high risk venture.

They may seem extreme however; many investors follow these exact approaches while a few others try to find a middle ground.

The choice is all yours of which type you are willing to turn to.  

In the starting of any journey, people like researching and learning a thing or two before jumping into it to get a boost, you can do the same. Something which many new beginners do is look up risk management on the internet or even in investment books. You can also use trading softwares like the Arya app available on which allows you to set the risk you are willing to take based on your experience before starting the investing and trading work.