Stock market trading offers profit opportunities, but it also involves significant risks that traders must understand and manage carefully. One of the biggest risks is market risk, where prices move unpredictably due to economic data, political events, interest rate changes, or global crises. Even well-researched trades can fail when broader market sentiment turns negative.

Another major risk is volatility risk. Sudden price swings can trigger stop losses or lead to large losses, especially during earnings announcements or breaking news. Closely related is liquidity risk, which occurs when a stock cannot be bought or sold quickly at the expected price, often resulting in slippage.

Emotional and psychological risk is often underestimated. Fear, greed, and overconfidence can cause traders to abandon their strategies, overtrade, or hold losing positions too long. Leverage risk also plays a critical role, as borrowed capital can amplify losses just as quickly as gains, sometimes wiping out accounts.

Additionally, strategy risk arises when a trading approach stops working due to changing market conditions. Operational risks, such as technical failures, execution errors, or broker issues, can further impact performance. Lastly, lack of proper risk management, including poor position sizing and ignoring stop losses, remains one of the most common causes of trading failure. Understanding these risks and applying disciplined risk management is essential for long-term success in stock market trading.