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Risk and Money Management

Module Overview

Risk and money management is arguably the most important aspect of trading and investing. Having a strong understanding of various aspects of risk and deploying a strategy to control risks is extremely critical in protecting one’s capital and in achieving long-term success in trading and investing. The objective of this module is to equip readers with various aspects and strategies of risk and money management.

Chapters

1. Introduction to Risk and Money Management

7 Lessons

In this elementary chapter, we will familiarize the reader with what risk is and how the level of risk varies from one person to another as well as from one asset class to another. Lastly, we will introduce the concept of risk and money management, which forms the crux of this module.

2. Risks that Investors Face – Part 1

6 Lessons

In this chapter, we will introduce the two types of risks that investors face: systematic risk and unsystematic risk. We will then process to explain in detail some of the key systematic risks that investors are exposed to and how to manage these risks.

3. Risks that Investors Face - Part 2

7 Lessons

In this chapter, we will continue from where we left off previously and discuss some of the key unsystematic risks that an investor needs to be aware of, at all times, as well as how to mitigate them.

4. Risks that Traders Face

6 Lessons

In the previous two chapters, we talked about various risks that investors are exposed to. In this chapter, we will turn our attention to the other end of the spectrum, i.e., trading, and focus on the key risks that traders face.

5. Statistical measures of Risk – Part 1

9 Lessons

By now, we know the basics of risk as well as the various risks that investors and traders are exposed to. Over the next few chapters, our objective is to explain various statistical ways of measuring and quantifying risk and return. In this chapter, we will focus primarily on Mean and Standard Deviation.

6. Statistical Measures of Risk - Part 2

3 Lessons

In this chapter, we will carry forward our discussion from the previous chapter and talk about the normal distribution, how to identify potential future range based on mean and standard deviation, and the concepts of skewness and kurtosis.

7. Statistical measures of Risk – Part 3

4 Lessons

In this chapter, we will talk about Covariance and Correlation, two tools that are widely used in statistical analysis and portfolio management to measure the relationship between two securities and diversify the portfolio to reduce risks.

8. Statistical measures of Risk – Part 4

3 Lessons

Over the past three chapters, we discussed some key statistical tools that help in analyzing individual risks of a security as well as in understanding the relationship between two securities. In this chapter, we will talk about another important statistical metric that helps in measuring the systematic risk of a security, Beta.

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