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One of main features of day trading is profit taking. Today, profit taking is a major reason that the Dow is slumping in a direction that could very well take it back below the 10,000 mark. In profit taking, the goal is to get out when you have profits. In most cases, these profits are not necessarily large. They are often small, as investors take what they make to avoid the chance of loss later on. (The opposite of this is running profits, in which you try to keep going in the hopes that your profits will get bigger and bigger, attempting to sell just before the investment turns around.)

Profit taking is a strategy that can be used with most investments. Day traders use it with stocks, and it is a very popular technique for active forex traders. Some commodities and futures traders use profit taking as well. Profit taking is a way to ensure that your losses are limited, since you get out as soon as a position is profitable for you, whether than waiting to see whether things get better. You end up with a lot of small profits, rather than one huge payoff. On the other hand, you are less likely to sustain large losses, which is a very definite risk of running profits.

It is important to be careful when you use profit taking as an integral part of your investment strategy. Every time you place a trade, you end up having to pay some sort of a transaction fee. And, of course, the taxes on short term capital gains is larger than the taxes you pay on long term capital gains. So if you are not careful, your profits can be eaten away by taxes and fees.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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Things are still volatile on the stock market. Witness today’s rout, and the fact that Dow 10,000 was short-lived this week. While, overall, the trend is for a higher stock market, ordinary people get jittery with this kind of volatility. And it isn’t helping that one of the reasons the stock market is falling today is that Bank of America has reported billions in losses. However, if you can handle taking the plunge, now is a decent time to buy.

Whether you are looking at clean tech or biotech or blue chips, looking for individual companies to buy right now can be tricky. But if you do your homework, and have an eye for bargains, you might be in good shape. Here is what MSNBC writes about buying in this market:

The trick, of course, is spotting companies like these early and having the courage to take the plunge when you do. It helps to get your information from someone you can trust — someone who has the experience and resources and does the legwork. In other words, not from some yahoo on the phone.

Courage is something that you need anytime you are putting your money out there. There is always a risk of loss when you invest, and you need to know that you have the risk tolerance for whatever it is you are doing. You also need to avoid putting in money you can’t afford to lose.

Limiting risk with funds

You can limit risks (but not eliminate them altogether) with the use of funds. Index funds and ETFs can provide a way for you to get in the market when things are still reasonably cheap, but limit your risk by ensuring that everything isn’t riding on a single investment. It is still necessary to have courage, though. You have to be able to ride out the down cycles, and not get too upset about times when the stock market heads lower.

In the end, investing is about having the guts to try and make a higher return on your money, even if it means risking losing your capital.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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It’s an exciting day for bulls. The stock market is broadly higher today, with the Dow making a run at 10,000. Indeed, the stock market rally seems bent on making Dow 10,000 a reality by the end of the week. In addition to that, oil prices have touched $75 a barrel. While they are lower now, the fact remains that they have reached that 2009 high, and there are hopes that oil prices, and other commodities, could move even higher.

Stock market rallies on earnings news

Third quarter earnings are sending the U.S. stock market higher today. One of the big factors is the report from JP Morgan. Large quarterly earnings are being reported, and not even the news about non-performing assets can dampen investor spirits. JP Morgan is providing hope that other financial sector companies will also see some success. Since the financial sector is the cornerstone of Wall Street, there is a great deal of interest surrounding how well the large banks and investment houses do.

Oil prices head higher

The stock market rally is also providing some support for oil prices. Even though oil prices have pared earlier gains, they still touched $75 a barrel earlier today. There are hopes that a stock market rally is indicative that the U.S. economy is getting ready to turn a corner and start a recovery in earnest. Oil prices are expected to gain as economic recovery increases demand for petroleum and petroleum products. Also helping oil prices is the idea that China is ready to ramp up its industrial operations.

With the optimism right now, it is little wonder that riskier investments are being preferred right now. However, it will take a little while to be sure that things really are turning toward recovery. Until then, volatility is likely to remain.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.