Anyone that makes or earns money has risk with this money. Do we spend it and risk losing out on opportunities? Do we store it in a mattress and risk losing to inflation? Do we buy CD's and gurantee a loss since they are always behind the inflation curve. Do we take on stocks in hopes of gaining more than inflation but risk losing all of it? Do we buy bonds and risk losing if interest rate go up?

Questions and more questions. What do we do.

First off, you need to understand your risk tolerance. If you cannot sleep at night with the investments you are in then it is not a good investment. However as you learn more and become more competant, what was scary now becomes regular.Hopefully as we grow we can see just what is more risk than we are able to stand.

Like wise if we are older, we certainly do not want to risk our estate as much as a younger person would want to risk to obtain an estate.

Insurance is nothing but managing risk. Risk you and I are not willing to take. Paying a premium for this transfer of risk. So how does insurance survive while taking on so much risk?

They manage the potential losses. They only insure so much on a life, even though the policy says a certain company, they have other reinsure. They only insure so many homes in a given area so as not to exceed exposure. Once again an agent may sell everyone in the neighborhiood, but once again it is reinsured.

So too successful investors manage risk. Only trading what they can afford to lose, only trading 10% of a portfolio in an one trade, only risking so much on each trade and setting stop losses to get out of the trade if the loss has been hit. AND of course, setting before the trade is even accepted what the exit price will be.

For more insights into trading email Dell dc@dcadvisors.net or visit out blog options-blog.blogspot.com