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An Introduction to Trading in the Financial Markets: Global Markets, Risk, Compliance, and Regulation by R. Tee Williams

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3

Causes of Risk

Much of what is termed “risk management” is often reduced to a statistical process, the probability that an event can happen and/or the probability that one mitigation approach or another will work either to prevent the negative event or lessen its impact. Yet there are real actions that create the situations and events—the losses most often—that we call risky occurrences.

As you read the list of causes in this chapter, many seem more likely to be the subject of a sermon than the cause of a happening addressed in a book on the trading markets. Yet these labels, these sermon topics, are the proximate cause of huge losses in the trading markets. Figure 2.3 shows the various causes most often resulting in trading losses.

Figure ...

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