DEFINITION of 'Rio Trade '
In the securities market, a transaction made in a desperate attempt to recover previous losses. Rio trade was coined with the idea that if a trader fails in his or her attempt to recover previous losses, he or she would have to hop on a plane to Rio De Janeiro, Brazil, in order to escape from creditors. Since it is executed under dire circumstances, a Rio trade might be a higher-risk trade than an investor would normally consider.
BREAKING DOWN 'Rio Trade '
The level of risk associated with many investments and trading strategies depends on the expertise of the person making the investment decision. Speculators take high risks intentionally in the hope of achieving high returns. Their trades don't always pan out the way they hope, but they understand the potential ramifications of their decisions in advance. A new investor who uses lots of leverage in placing a forex trade, on the other hand, may get burned without even understanding where they went wrong.