AI trading systems have made it easier and faster to trade. But they come with risks. Many traders think risk means only limiting losses. This is true, but there's more to it. Traders often ignore worst-case scenarios, thinking they won't happen. This mindset is dangerous. Remember the 2008 financial crisis? Markets kept falling. No one expected it to be that bad. Yet, it happened.
In the same period, Volkswagen's stock prices soared. It was unexpected but real. Traders shorting the stock faced huge losses. One must always be prepared for such events.
In 2015, the Chinese market crisis shocked the world. Markets fell hard and fast. It was a nightmare for many traders. One trader was shorting options and ready to sell futures at a certain price. The market halted just before he could act. When it resumed, the market went up. He was lucky, but luck shouldn't be a strategy. High volatility makes trading risky.
February 2018 saw another market shock. Prices went wild. Many traders faced serious trouble. Unexpected events like these keep happening. The coronavirus market crash was another example. Traders must stay cautious. They should never over-expose themselves in the market. Proper position sizing can help manage losses. Overconfidence can lead to big mistakes.
Broker risk is another concern. If a broker goes bankrupt, traders can lose their money. This happened with Terra Luna and FTX in the crypto world. People trusted these platforms and lost everything. Diversifying across brokers can reduce this risk. Don't put all your money with one broker. It is better to spread it out.
Trading offers many opportunities, but risks are part of the game. Don't let eagerness lead to over-exposure. Think about the risks of internet blackouts or power shortages too. Being pessimistic helps traders be cautious. This caution is key to staying in the game today and tomorrow.
