Risk is the exposure to potential losses you take on when trading a security. Different assets have different levels of risk, which means you can tailor your strategy based on your experience and the level of risk you want to take on.
Typically, your exposure to risk increases in line with your exposure to potential profits. For example, using leverage, a common borrowing tactic in trading magnifies your potential gains, but it also magnifies your risk of losses.
What is risk management?
Risk management is any strategy taken to minimize risk during a trade. For example, a hedging strategy aims to decrease the amount you would lose if your trade moves against you by opening additional positions that balance your exposure.
Other popular risk management strategies include learning technical analysis, implementing a thoughtful trading strategy, and employing tools such as stops and limits.