Jesse Livermore made $100 million during the 1929 crash.

Then he lost everything.

Not because his strategy stopped working. Not because the markets changed.

But because he made one mistake that destroyed even the best traders.

Here’s his story…

They called him the Boy Plunger. He started trading at 14, and eventually, the bucket shops banned him because he kept taking their money.

In 1907, when the market panicked, he shorted it and made a fortune in a single day.

In 1929, as the world fell into the Great Depression, he reportedly walked away with around $100 million.

Adjusted for inflation, that's more money than I could spend in ten lifetimes, even if I buy a Lambo for every lifetime.

And gave one to my wife. And one to each kid. And one for my mother-in-law (God help me).

This man could read the tape better than anyone alive. His edge was real. Not luck.

At the same time…

He filed for bankruptcy in 1915. He rebuilt. He filed again in 1934. He rebuilt again. And eventually, he took his own life.

You're probably thinking:

"His strategy stopped working."
"The markets changed."
"He got unlucky."

Nope. Nope. And nope.

His edge was never the problem. What he lacked was risk management.

Livermore bet big. When he was convinced, he loaded up. And when he was right, it was glorious. But being right 6 times out of 10 doesn't save you when the other 4 take everything.

In other words, you can have the best trading strategy in the world. But without risk management, you can’t keep any of the profits.

So here are a few risk management tips for you…

1. Watch your total exposure.

Five trades in five oil stocks is one trade wearing a disguise.

If oil collapses, all five go down together, and your "diversified" portfolio cries in unison.

2. Never increase your size because you feel certain

This one is dangerous. Because the more certain you feel, the more you bet.

And the more you bet, the more it hurts when you're wrong.

Feeling certain is exactly what bankrupted Livermore. Twice.

3. Know the probability and the magnitude

Before you place a trade, ask yourself two things:

How likely am I to lose?
And if I lose, how much will I lose?

Then decide if the trade is actually worth it.

Cheers,

Rayner “always-protect-your-downside” Teo

P.S. If you're looking for trading strategies backed by sound risk management, then grab a copy of Trading Systems That Work.