We approach markets backwards. The first thing we ask is not what can we make, but how much can we lose. We play a defensive game.

I have noticed that everyone who has ever tried to tell me that markets are efficient is poor.

We approach markets backwards. The first thing we ask is not what can we make, but how much can we lose. We play a defensive game.

Never risk more than 1% of total account equity on any one trade. By risking 1%, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical.

I have two basic rules about winning in trading as well as in life: 1. If you don't bet, you can't win. 2. If you lose all your chips, you can't bet.

We diversify in two ways. First, we probably trade more markets worldwide than any other money manager. Second, we don't just use a single best system. To provide balance, we use lots of different systems ranging from short to long term. Some of these systems may not be that good by themselves, but we really don't care; that is not what they are there for.

There are just four kinds of bets. There are good bets, bad bets, bets that you win, and bets that you lose. Winning a bad bet can be the most dangerous outcome of all, because a success of that kind can encourage you to take more bad bets in the future, when the odds will be running against you. You can also lose a good bet no matter how sound the underlying proposition, but if you keep placing good bets, over time, the law of averages will be working for you.