Risk in the stock market
The Stock Market is Not Risk Free!
While most people would acknowledge the financial markets are risky, it's the risks we aren't aware of that messes up portfolios. It pays to stay alert and use the science generated from markets action to minimize trouble.
Types of Risk
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Earnings reports: The release of earnings to the public as required under securities laws is actually a significant risk and it's not just to disappointments. It works both ways.
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The market isn't always open. Significant back log in buying or selling orders can spark a significant swing in price at the open of the session (9:30 eastern).
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Bias. You can be an expert in analysis, technically, but something can steer portfolio decisions in a different direction. You know it.
Related: See what you can do about it in the Mindset study.
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Fixed strategy thinking the market will accommodate your bias.
Related: See the Strategy Study.
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Flawed system: this isn't about the market, but rather the connection of the market to portfolio decisions. Many investors are speculative or biased, use inaccurate information or systems and don't have a system for dealing with their weakness(es). Plenty could be added to this.
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Sudden events: it happens and you can't see it coming. Nobody can realistically.
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Random stock action; it happens due to the relative balance between buying and selling volume. It explains why the stock market seems irrational at times.
Stock strategy: It pays to know what works.
Terms and definitions: You'll get more using this along with standard investment terms knowledge.