A good investor/trader knows his personality inside out. He also knows his targeted returns and the risks that he is willing to take in order to achieve them. That means doing a lot of homework even better sinking money into an random stock that may look good on pure 'technical analysis'.

One big homework question to ask ourselves, apart from the most rudimentary risk/reward policy but similar, is the expected Beta correlation between the stock daily returns and that of the STI. Remember that buying into a stock entails accepting its market and idiosyncratic risk.

Idiosyncratic Risk. This risk lies solely on the actions of the company and its operating risks. In other words, there is nothing to do with market sentiments, just stock-based sentiments. To understand this in another light, consider a downbeat market where a stock can still be increasing in price because it just launched ...