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Risk mitigation definition
Risk mitigation is the set of specific actions you take to reduce the potential loss on a position. It works to limit the downside rather than remove risk, which no open trade can do.
Mitigation tools include stop-loss orders, smaller position sizes, diversification, hedging, lower leverage, margin monitoring, and staying out of the market around high-impact news. Each one cuts how much a position can lose, or how likely a large loss becomes. You can apply them before opening a trade or add them while the position is live.
Risk mitigation is the action step, not the measuring step or the framework around it. Risk assessment measures how large a risk is before you act, and risk management is the wider process that decides which mitigations to use and enforces them across the account. Mitigation is what you actually do to a specific trade to shrink its downside.
Risk mitigation Example
You open a long position on EUR/USD at 1.0850 with USD 10,000 of equity.
To cap the downside, you place a stop-loss at 1.0800 and size the trade to risk 1% of equity:
USD 10,000 √ó 1% = USD 100
The stop-loss and the position size are the mitigation: they hold the most the trade can lose at USD 100 before the market moves further against you.
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