Street Smarts

“ Every trading strategy in this manual is absolutely 100 percent useless without proper money management.

“ Every trading strategy in this manual is absolutely 100 percent useless without proper money management. ” e.style.display='none');if(typeof getContentsSections==='function')setTimeout(getContentsSections,50)" /> A study of 925 CTAs proved it. Finance professor Fernando Diz analyzed commodity trading advisor programs from 1974 – 1995. Of 925 programs, 435 went out of business. The single best predictor of failure? How long a program spent recovering from its worst drawdown. Two money management variables alone explained 88% of the predictive power of a model using every edge and money management variable combined. Failed traders had enough skill to survive. Successful programs generated 48% higher monthly returns than failed ones — yet achieved this with lower risk and smaller drawdowns. The Sharpe ratio for survivors was 61% larger. The failed traders' strategies weren't broken; their inability to control losses was the real cause of death. TAKEAWAY 2

“ All it takes is getting sloppy once, or experiencing the 'frozen rabbit syndrome' in a bad trade, to undo the efforts of the previous 20 trades. ” e.style.display='none');if(typeof getContentsSections==='function')setTimeout(getContentsSections,50)" /> Every strategy in the book shares four rules: 1. Enter your entire position at once — don't add to winners 2. Immediately place a protective stop one to two ticks beyond the nearest support or resistance 3. Scale out as the market moves in your favor to lock in profits 4. If the market goes parabolic or prints a huge range expansion bar, exit everything Time in the market is risk. The longer you hold, the more exposed you are to price shocks. Every setup in the book should reward you almost immediately. If a trade goes quiet and makes no progress after entry, don't wait for your stop — just get out. Seek a more active opportunity. TAKEAWAY 3

“ Instead of trying to show the market how smart you are, take a step back and let it talk to you! ” e.style.display='none');if(typeof getContentsSections==='function')setTimeout(getContentsSections,50)" /> Larry's "guru-itis" nearly destroyed him. In 1987, he poured 30% of his net worth into OEX call options based on a newsletter guru's prediction of an 800-point Dow rally. He went condo shopping in Maui while the market collapsed. Day after day, his secretary delivered worse news, but the guru kept insisting the "grand supercycle" was intact. The crash came shortly after. Your educated brain is the second trap. A typical upbringing trains everyone to think identically: bad crop report means soybeans go up, bad inflation means bonds go down. When thousands of traders reach the same logical conclusion, there is zero edge in that thinking. Self-reliance is non-negotiable — if you need someone else's opinion on…