Maximum Loss
Maximum loss is the greatest amount a trader could lose on a position under the applicable contract structure, excluding circumstances outside the assumed market mechanics.
Why it matters to you
Before entering a trade, the trader should understand the downside in money rather than thinking only in probabilities. For a straightforward contract purchased for $0.60 that can settle at $0, the amount paid may be at risk. Understanding that loss before entering makes position sizing much easier.
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