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c13 JWBK182-McDowell April 25, 2008 16:20 Printer: Yet to come

CHAPTER 13

Know

Thyself—Your

Risk Profile and

Discipline Profile

K

nowing yourself will enable you to operate more profitably in the

financial markets. With that in mind, we want you to become intro-

spective and identify what your risk profile and discipline profile are.

These profile scores will assist you in customizing the best money manage-

ment plan for you, which is covered in Chapter 14.

HOW COMFORTABLE ARE YOU WITH

TAKING ON FINANCIAL RISK?

To know yourself and your risk tolerance is a valuable insight that can

improve your money management system. Some traders have a greater ap-

petite for risk than others. It is all relative, and that is why we need to

understand our tendencies and our financial goals. It is also important to

trade in our comfort zone.

On the one hand, if you are trading with too much risk for your toler-

ance level, you may increase your profit by reducing your stress and reduc-

ing your risk exposure. On the other hand, if you perform better with more

risk, you may need to take that into consideration and make the necessary

adjustments. It is all about knowing yourself and creating balance.

Your Risk Profile

We have developed a checklist and a scoring system to get you started on

identifying your personal risk profile. This profile is designed to give you a

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