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Trading Glossary

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Risk

3 terms

Risk

A predefined price or condition used to exit when the original trade idea is no longer valid.

Why it matters

Defining the stop before entering helps control the amount of capital at risk.

Example

A trader entering at ₱100 may decide the setup is invalid below ₱98.

Risk

Choosing how many shares to trade based on the amount of money you are willing to risk.

Why it matters

Position sizing connects the stop level to the actual peso risk of the trade.

Example

If risk per share is ₱2 and planned maximum risk is ₱500, the theoretical size is 250 shares before board-lot and execution constraints.

Risk

A comparison between the amount planned to be risked and the potential reward being targeted.

Why it matters

It helps traders evaluate whether the possible reward is reasonable relative to the downside they accept.

Example

Risking ₱1 to target ₱2 is commonly described as a 1:2 risk/reward relationship.