Do You have

Enough Money

to Invest?

Planning on your total investment ability is crucial to setting up your trading plan. It is
impossible to design a trading strategy without knowing the amount of your investment.

A careful look at your overall financial picture is critical in determining your ability to
invest in both short and long term trading.

You will need to answer the following questions to determine your financial ability to
trade:

<strong>A) Is my job stable?</strong>

While you may have been with your company for 10 years (or more) there is no
guarantee of job stability. Many companies go through downsizing and while you can
look at how stable your job is today, you must be aware that there is no guarantee that
you will still have your position a year from now.

In looking at the stability of your job, take into consideration how many ‘new’
people have been hired, what their qualifications are, and where your particular job fits
into the ‘big’ picture in your particular company.

Today, none of us are guaranteed to be employed by the same employer for our
entire careers like our parents may have been. Oftentimes company policies change
resulting in changes to your career which you have no control over.

<strong>B) What are my savings?</strong>

Taking into consideration your current level of income, your savings should be
substantial enough to carry you through any ‘difficult’ periods, including job loss,
uninsured medical costs, and other unexpected expenses.

It is never a good plan to invest all of your savings into trading. While you do
your best to minimize your risk, there will always be a risk to trading and that could
result in substantial loss of your initial investments.

<strong>C) Have I planned for emergencies?</strong>

You must always have a back up plan. For those of us who own homes, we know
that furnaces break down, roofs need repair and other unexpected things come up all the
time. It is crucial to your overall financial health to have contingencies in place for these
types of emergencies.

While the overall goal in trading is always to show a profit, it is critical that you not
depend on these profits to handle emergency situations that come up. If you were to
lose your job tomorrow would you be able to continue to maintain the lifestyle you are

leading today for a period of time (six months is typically a good rule of thumb).

<strong>D) Do I have sufficient insurance, medical, life, homeowners, auto?</strong>

It is never recommended that you begin a trading plan without assuring that you have
sufficient other assets that your family can depend on. You certainly would not consider
investing your last $1,000 in the stock market with the expectation of doubling or tripling
your investment in a short term trade, and investing in any type of stock market trading
should never be considered good financial planning.

<strong>E) What is my other household debt?</strong>

Credit cards, auto loans, student loans, etc., all take their toll on your income, your
savings and your overall financial health. Be sure that you have sufficient savings to
accommodate all of these financial needs for a period of time that you determine to be
safe in the event that you should lose your initial investment in any stock or option trade.

When setting out your trade plan, you should take all of your financial obligations,
savings, and the overall financial health of your family as a whole before you determine
the level of investing that you are prepared to do. It would also be beneficial to you to
discuss your intentions with your tax preparer and see what tax concerns trading will
create for you, as capital gains and other considerations will impact your trading patterns
and abilities.