About Risk

Discussion in 'Trading' started by gamalruach, Mar 13, 2004.

  1. When trading, what do you know about risk?

    I read that, "You must set yourself in the way of danger (risk) in order to make money in the market."

    Do you have any example or can you give your own insight, or can you tell us how you use risk to make money trading, pls?

    A specific trade example(s) you were (are) in whereby you used (use) risk to win would be awesome!

    Example: Friend of mine recently traded the EU interest rate cute rumor. Day came for the news announcement.

    If the European Central Bank cut their interest rate, EUR/USD would tank. If they did NOT cut the rate, EUR/USD price would spike.

    Rumor had it that EU was going to cut the rate, so a week previous to the actual news announcement EUR/USD fell 800 points based on that rumor.

    My friend set two limit orders a distance away from the market price a few minutes out from the actual announcement. One trade was long; one trade was short.

    On the announcement (they did not cut the rate) he caught the 200 point price spike up on his long trade. His short limit order was never engaged.

    He closed his long trade position 130 points up clean profit in about 10 seconds.

    His trade did have risk. He used the risk to win.

    Best regards,