Opinion: The Risk of Trading

Here is an opinion I believe is worth sharing.

Risk is something that most people associate with trading. In fact, to the public at large, you are often likely to get the response, “isn’t that risky,” when you tell them that you trade for a living. However, I think that is one of the biggest myths about trading, and I assert that trading is no more risky than most other jobs.

{{{gold}}}

When I ran my own business, on the first of each month, the moment I woke up I was 60K in the hole. That meant that in order to just “keep the lights on” I had to generate 60K in revenue each month, even before taking a dime out for myself. And every month that I decided to keep my company going, I had to take the risk that I would not meet my nut.

Trading has no operational costs (or very minimal ones), which makes the decision to pursue the endeavor a relatively risk free one.

“Yeah, but where else do you have the possibility of losing more money than you started the day with,” is the lame rebuttal I often hear. Really…? These people obviously have never run a business. If one of my employees damaged a client’s merchandise or backed a truck into a parked car I could easily lose more money than I started the day with.

Trading has no operational risk. No employee is going to hurt his back and jack your workman’s comp rates up. No douche from OSHA is going to unexpectedly show up at your office and tell you that you are not in compliance with a new law passed the previous week and are on the hook for a large fine. And you are not going to have a piece of equipment go south on you that you have to drain your bank account to replace.

But that is only for business owners right? What if you do the “dance” by getting a four-year degree and going to work for a solid blue chip company? Well in some ways that is one of the riskiest things you can do. Now you have turned over the fate of your continued employment to some mid-level management asshats or fair weather board of directors. Take a look at how many people took that “safe” path to corporate security and got tossed out on their ear when the economy imploded in 2008.

Trading has no asshat risk. Nobody will even come into your trading room and tell you that you are being downsized, or that the macrame conglomerate you work for is going out of business after 75 years because the board of directors couldn’t resist getting involved in arbitraging high risk CDO’s.

At the end of the day, trading is one of the rare businesses where ONLY YOU DECIDE THE AMOUNT OF RISK YOU ARE WILLING TO TAKE.

The reason that most people go off the rails and blow their account out is not because there is any outsized risk associated with trading, but because the barriers to entry are so low, they are able to jump in feet first without really knowing what they are doing (or they are a seasoned pro who lets their ego get the best of them).

Being a pro football QB is risky. Being a firefighter is risky. Being a jet fighter pilot is risky. But the average Joe can’t just jump into those positions without a shitload of training and without attaining a high level of competency. And thus the risk is less for a Tom Brady, for a fire Captain, and for a Top Gun pilot.

Gordon Gekko from "Wall Street"


Trading gets a bad rap due to the portrayal it has received in pop culture and Occupy Wall Street type propaganda. It’s perception has been “Gekkoized.” But in reality it may be one of the safest professions if you do it properly and make the choice to keep your ego in check.

The Greatest Myth About Trading. This post by Brian Lund has been edited and the emphasis is mine.

4 Responses to “Opinion: The Risk of Trading”


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