Risk Management skills for Traders

Introduction to Risk Management for Traders

What is Risk Management ?

Now naturally included in trading training courses, Risk Management is the discipline that identifies and acts around an organization’s risks in order to reduce uncertainties produced as a result of the organization’s performance. Today this skill is related to market finance in several forms, such as market risk, liquidity risk, etc. In reality, risk management existed long before market finance, developed consciously or subconsciously by directors of agricultural and industrial work. Having an understanding of this discipline is now more and more desirable, as economic globalization has created difficulties in analyzing cause and effect phenomena. Risk management theory will naturally be studied under a financial lens by the students at the CIT, then applied in the Trading Room.

Different types of risk studied at the CIT

  • Market risk : The risk of loss on an asset portfolio as a cause of fluctuation in exchange rates and currency values. This risk is the most common in finance, and its origin is complex. We measure it partially by using the notion of market volatility, which nonetheless does not explain all fluctuations. The practical study of this concept in a Trading Room is very useful, and allows students to see a variety of different situations that can lead to the implementation of risk management          

  • Change risk : This risk is specific to fluctuations of exchange rates of national currencies

  • Liquidity risk : According to the nature of the asset, the market in question will have a different liquidity, which can lead to difficulties in buying and selling

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