Risk aversion

Can somebody provide a more or less formal definition of "risk aversion"? I keep seeing medium-term price action trends come to an abrupt (and rather violent) end due to upcoming economic news releases, but isn't this BS? I mean - come on, forex trading inherently involves risks orders of magnitude greater than those found in equity trading, so if you want to avoid risk, why even bother with FX?

If you know what you are doing, rewards are higher than the risks. You can't avoid risk, you can try to minimize it.

That does not answer my question.

Risk aversion is a personal characteristic or perhaps I am not quite understanding your question, but if you are looking for a formal definition: from:
http://riskglossary.com/articles/risk_aversion.htm An investor is said to be risk averse if he prefers less risk to more risk, all else being equal. Portfolio theory tells us that such an investor will require compensation for taking systematic risk.
The opposite of risk aversion is risk seeking (sometimes called risk loving). A risk seeking investor prefers more risk to less, all else being equal. There are risks that he will pay to be allowed to take. Financial theories generally assume investors are not risk seeking. However, risk seeking behavior is observable in actual life. People who play lotteries or gamble at casinos accept a negative expected return in exchange for the thrill of financial risk.
Between risk aversion and risk seeking is a state called risk neutrality. An investor is risk neutral if he is indifferent to risk. He will neither pay to avoid it nor to take it. In a nutshell, risk does not affect his decisions.
Financial theories generally assume investors are not risk neutral. However, risk neutrality plays an important role as a formal tool in option pricing theory.

http://www.investopedia.com/terms/r/riskaverse.asp

http://en.wikipedia.org/wiki/Risk_aversion

u should find info on those sites

revoke

It sounds to me like you already have the definition. "Risk Aversion" is a term reporters and news traders use when the market does something that they could not otherwise explain.

You should treat risk with respect but you are correct; the best way to be risk adverse is to not trade.

Thanks, this is basically consistent with my understanding of this phenomenon... next time I can't figure out why the market has suddenly changed direction, I'll do what the "analysts" do - blame it on risk aversion.

Risk aversion in the financial markets refers to speculators and investors being nervous, often due to a major economic situation where the full extent is unknown. For example, when the subprime mortgage debacle started, investors became increasingly risk adverse due to the uncertainty. This caused some unwinding of the carry trades and caused the yen to abruptly appreciate sharply.