Managing Risk

The Speeding Driver

Getting away with speeding ten times doesn't make the eleventh attempt safe. Traders often mistake surviving stupid risks for being good at managing them.

That last 10% of the move always feels amazing if you catch it. But what usually happens is you hit euphoria, and a few days later you're punished extremely hard for over-risking. We've all been there — the important thing is that you learn from it.

When conditions are trending, start risk on early. As the move extends, start adjusting your risk. Near the highs, start to cut risk.