Risks definition

A - B - C - D - E - F - G - H - I - L - M - N - O - P - Q - R - S - T - U - V - W - Y

See all glossary trading terms

In trading, risks are the ways in which an investment can end up losing you money.

In general, trading strategies focus on weighing up the potential risk of a trade against its potential return. If a trade has greater risk, it should carry the chance of a greater return in order to make that risk worthwhile.

There are two main forms of risk associated with trading:

Market risk

Market risk, also known as ‘systematic risk’, is the type of risk that can result in losses due to adverse price movements. Market risk affects the entire market and so cannot be avoided through portfolio diversification.

Liquidity risk

Liquidity risk is the risk that trading an asset may affect its price. This may arise because the asset is illiquid, meaning there are not enough people in the market to trade with. It can also be caused by one of the participants in your trade failing to meet financial obligations. 

Visit our education section

Different assets will have different levels of risk, and different means of managing risk. Read our guide for more information.

Help and support

Get answers about your account or our services.

Get answers

Or ask about opening an account on 1800 601 799, or +61 (3) 9860 1799, or helpdesk.au@ig.com.

We're here 24hrs a day from 1pm Saturday to 7am Saturday (AEST).