What does not sell advertising so you will not see it: money management

Abstract

• Risk and money management (what risk really means and how professionals reduce it)

• How much money should you place on any trade?

In statistical terms, I figure I have traded about 2 million contracts … with an average profit of $70 per contract. This average profit is approximately 700 standard deviations away from randomness, a departure that would occur by chance alone about as frequently as the spare parts in an automotive salvage lot might spontaneously assemble themselves into a McDonald’s restaurant. Hedge fund trader, Victor Niederhoffer

On Wednesday Niederhoffer told investors in three hedge funds he runs that their stakes had been “wiped out” on Monday by losses that culminated from three days of falling stock prices and big hits earlier this year in Thailand. David Henry USA Today (October 30, 1997)