Trading glossaryReviewed 16 July 2026
Definition
Risk management is the structured process of identifying, measuring, limiting, monitoring, and reviewing exposures that could impair a trade, portfolio, or account.
In market context
Practical controls include position sizing, diversification, leverage limits, exit criteria, liquidity checks, secure custody, and contingency planning. Each control addresses particular failure modes and can break down during gaps, correlated moves, outages, or fraud. Good risk management defines acceptable loss before entry and protects the ability to continue, but it cannot transform uncertain returns into guaranteed outcomes under real market conditions.
Source
Use the primary source for fuller regulatory or market context.