Daytrading to earn a living: Are you risk tolerant?

Determine your risk tolerance..
Different folks have different strokes.Some investors can handle higher investement risks,some cannot.A person's risk tolerance may change according to the person's life stage.A person who is willing to take high investment risks when he is young and single,may be less willing to take the same risks when he is older and has a family.So,when you are determining your risk tolerance,ask yourself these simple questions:-

Describe yourself?
(a) I am a middle-age person or I am nearing retirement.
(b) I am still young and still have a long way to go.

How much spare money do you have?
(a) I only have enough to pay my bills and for some savings.
(b) I have quite a healthy amount of spare money every month.

What financial commitments do you have?
(a) I have a long list of commitments.
(b) I do not have that many financial commitments.

How long can you keep an investment?
(a) I do not mind waiting as long as it gain a healthy and steady profit.
(b) I want my profit to come as soon as possible.

What do you expect on the day you stop investing?
(a) I would want at least the same amount that I have invested in.
(b) I would want the highest possible return.

***If your answers are mostly As,investments that come with high risks are most probably not suitable for you.You would be better off investing in products that give you reasonable and consistent return and at the same time,preserve your initial capital.

***If your answers are mostly Bs,you are better able to handle investments that come with high risks.But,the ability to handle risks alone is not sufficient.You have to be very knowledgeable in investment and able to monitor your investment consistently.Do not fall into the trap of trying to get a fast buck without knowing what you are getting yourself into!

"How much money am I prepared to lose?" is a question every investor should ask before they make an investment.The rule of thumb is that the higher the reward promised by an investment product,the higher the investment risk.

"But can I avoid investment risks altogether and ensure my money is safe and earning some returns?The simple answer is NO because no matter what you do with your money,it will be exposed to some form of risk.
You can put your money under the mattress but you risk losing it all if there is a fire or theft.
If you put your money in the bank,the interest rate may not be high enough to match inflation rate,leaving you with less buying power in the near future.And if you invest your money in an investment product,naturally you will face the investment risk associated with the product.

As an investor,you cannot eliminate risk altogether.However,investment risks are not all bad and you can manage them to make them work for you.
Diversify your investment and not to put all in one basket.However it is not advisable to over-diversify as it may depress your potential returns from your investments.While you do not want to put all eggs in one basket,you do not want to put them in too many baskets either!!!

Tracking the Dow movement on Tuesday 2/10/07

The impact of Monday's huge Dow movement has brought in many profit-takers.Such a good opportunity not to be missed.It's the beginning of the last quarter of the year and the window dressing has begun!!!

The bears overwhelm the bulls today and ended the day with bullish hammer.Watcha!!!It's below the Moving Average...weakness ahead!