What exactly is a “Rio Trade”?

It’s a phrase you may hear banded around dealing rooms in the City when things aren’t going quite according to plan.

Time for a Rio trade mate!

But it turns out that even after using the phrase in conversation when speaking to a few stay-at-home traders they don’t actually know what one is.

This is systematic in finance.  If you don’t understand – blag it and hope no one notices.

A Rio trade is, in fact, a phrase used to describe a go-for-broke trade.  A last bastion of hope, a go for broke that will dig a trader out of a black hole of losses.   Basically, betting the farm on one last punt.

In fullness, the process would be.  Leverage up to the max the last remaining funds in your account (or circumvent your firm’s risk controls).  Pick and asset class at random, hit buy or sell at random.  Go to the airport.  Buy a ticket to Rio.  Whilst holding that ticket at the departure gate check the market on your iPhone to see if your trade is profit or loss.

If it is profit, go back to the office and act like you knew what you were doing all along.

If it is a loss, get on the plane to Rio and never look back.

It happens more often than you think, but instead of traders going to Rio, they go to Jail, or the compliance sin bin, or try to return to politics as though they haven’t bankrupted one of the oldest financial institutions and pretend nothing happened.

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