Financial trading involves market risk, which refers to the possibility of an asset's value moving unfavorably due to changing market conditions. Prices can be influenced by economic data, geopolitical events, interest rate decisions, or company performance. Traders also face liquidity risk, where it becomes difficult to buy or sell an asset quickly without affecting its price. Additionally, leverage—while it can amplify returns—also increases potential losses, making risk management critical in trading strategies.

Another key risk in financial trading is emotional decision-making. Traders often react to short-term market movements with fear or greed, which can lead to impulsive decisions. This behavior can disrupt carefully planned strategies and cause unnecessary losses. Operational risks, such as technical glitches, poor connectivity, or software issues, can also affect execution speed and accuracy. Moreover, staying informed about regulatory changes is essential, as shifts in trading laws or compliance rules can impact access to markets or trading costs.