Posted on February 14th, 2008 at 11:00 AM

Some traders risk too much on their trades. For those traders, it is not a matter of IF they will go broke. It is a matter of WHEN they will go broke. In gambling, this is referred to as gambler's ruin. Imagine this experiment. You sit down at a roulette table. The roulette wheel is rigged and you know in advance that black will come up 70% of the time. You can still go broke. How could you possibly go broke when you know that black is going to come up 70% of the time? Though you know that 7 out of 10 spins will yield black, you don't know when those 7 will be. This is where money management comes in. How much do you bet on each spin to optimize your gains without ever risking going broke? There is a formula for this.

By Richard L. Muehlberg*
Posted: February 15, 2008

As a trader, if all you want to do is make money, then you probably won't make money. You'll fail. How, then, do you make money? What should your goal be? I will answer based on my own experience.

I was channel-flipping one day and found a TV documentary on a French free solo climber. He had been free climbing for decades. He was an "old" guy at the time the scenes were shot. I think he was in his late forties, early fifties. He climbed in a part of France known for its spectacular, bizarre cliff formations. What struck me were his skill, focus...age ...and unique outlook on "winning".