Trading risk involves the actual execution of trades:
This type of risk is the focus of omnipresent risk warnings in Forex, and CFD trading, and other day-trading opportunities. Mechanisms and methods to gauge, mitigate, and control trading risk are well established. To manage trading risk, it must first be measured. This is done using the so-called risk/reward ratio. A prerequisite for being able to determine this ratio is money management, a basic virtue in all trading activities.