The Risk of Trading: Mastering the Most Important Element in Financial Speculation

SUPPORT RISKS

There was much debate in the planning of this text as to whether support risk or the inability to maintain a supportive stakeholder network would fit in such a formalized textbook approach to trading risk management. During my research for the book, I watched one of my favorite documentaries related to trading. Floored, by James Allen Smith, walks you through the challenges of floor trading at the Chicago Mercantile Exchange in an electronic trading world. The film profiles floor traders and the inability of some to overcome their transition to platform-based electronic trading. One trader lost nearly everything including his personal life and family, with the exception of his son, who ironically got a job on the same floor where his dad once made the money to support him. After watching this brilliant compilation of trader stories, it was very evident that support risk must be included within the scope of identified risk, regardless of its disassociation with the other logical classifications of risk.

My experience with traders over two decades shows without any doubt that loss of a support network during challenging times as a trader is one of the most frequent causes of traders giving up the business. The topic surfaces in nearly every risk profile assessment ever conducted on my behalf. Like all other potential exposures, let us place it through the risk management process.

Support risk is critical for the beginning traders seeking a new career or the lure of ...