Risk

Family III · 45 entries

This family of terms covers the mechanics by which a trading account absorbs gains and losses: the capital committed to a position, the collateral reserved against it, and the thresholds at which the broker intervenes. The terms answer a single question — how much can be lost, and what forces a position to close — from the size of the stake through to the point of forced liquidation. A newcomer should read leverage first, because it sets the ratio between committed capital and market exposure that every other term in this section measures against. From there, margin and drawdown describe the two consequences of that ratio: the deposit required to hold a position and the peak-to-trough decline actually suffered.

The most common mistake is treating leverage, margin and position size as separate settings rather than one linked calculation, so that a change to any one of them silently alters the risk of every open trade.

Other families: I II IV V VI VII VIII IX X XI XII · Index A–Z