In trading and investing, risk management is defined as the process of understanding, identifying, adjusting and managing all of the potential risks that an account is exposed to so the size of losses and drawdowns are minimized for the magnitude of negative impact they will have on a systems risk of ruin and long term profitability. Some examples of possible risks to investment portfolios and trading accounts include strong reversals during trends, correlation of positions, gap downs in price, political events, market crashes, bankruptcies, currency risks, earnings reports, government reports, inflation, and ... (full story)