DEFINITION of All risks (AR)
All risks are a type of insurance coverage providing somewhat more than the minimum coverage. It gives a premium above the base amount paid under a particular policy.
WHAT IT IS IN ESSENCE
Regrettably, all risks coverage does not cover all loss. They don’t cover the subject of war, riots, and strikes. There is no standard nomenclature for this kind of coverage.
An AR insurance contract offers you coverage and protection from all harm or perils that could damage your home or contents and personal property. Unless the damage is excluded specifically in the policy wording. The insurance contract might specify that any home loss caused by the flood will be covered. Therefore, an insured who experiences a loss or damage caused by a fire cannot file a claim to his or her insurance provider. The reason is simple, a fire is not included as a peril under the insurance coverage.
HOW TO USE
Traders should understand what exactly is covered in all risks coverage. They have to decide whether or not they need additional coverage, before agreeing to such a term.
In other words, the risk is uncertain, it is unpredictable. But, when you define trading risk, you are actually calculating the probability of a stock going up. Versus the trend to go down. It allows you to weigh how much trading risk you are willing to take. You must be prepared to assume a trading risk in order to achieve the desired result of profits. It is essential that you stay aligned with your goals and trading strategies.
Well, it is difficult at times to draw a line between prudent risk and thoughtless risk. If you are too risk-averse, or “trading scared”, you will not have the stomach to hold your winning positions long enough to realize the potential profits that you expect.