Page 8 - ART® Study Manual html5 - flash

® “Home-Study Course” Study Manual Page 8

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Accepting Risk

There are three primary types of risk you need to accept:
1. Trade Risk
2. Market Risk
3. Margin Risk

1. Trade Risk is the “calculated” risk you take on each trade. With
ART® your risk will never be more than 2% on any given trade.
You will maintain this 2% risk by adjusting your “Trade Size” using
the “Trade Size Calculator™” and setting a stop-loss exit.

2. Market Risk is the “inherent” risk of being in the market. This type
of risk involves the entire gamut of risk possible when in the
markets. “Market Risk” can exceed “Trade Risk”. For this reason
ART® traders never actively trade more than 10% of their net
worth. “Market Risk” encompasses catastrophic world events and
crashes that paralyze markets. Events causing market “Gaps” in
price against your trade position is an example of “Market Risk”.

3. Margin Risk involves risk where you can lose more than the dollar
amount in your margined trading account. You would then OWE
your brokerage firm money if your trade goes against you.

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