𝗪𝗵𝘆 𝗪𝗮𝗿𝗿𝗲𝗻 𝗕𝘂𝗳𝗳𝗲𝘁 𝗰𝗮𝗻 𝗻𝗲𝘃𝗲𝗿 𝗯𝗮𝗻𝗸𝗿𝘂𝗽𝘁 𝗮 𝗰𝗮𝘀𝗶𝗻𝗼 (𝗲𝘃𝗲𝗻 𝗶𝗳 𝗵𝗲 𝘄𝗮𝗻𝘁𝘀 𝘁𝗼)
Warren Buffet, the greatest investor of all time, is worth USD 67.7 billion (as of this writing).
Now, let’s assume that Warren Buffet has turned evil and wants to bankrupt all casinos.
He plans to play Blackjack with the casinos and bet $5 billion on each hand. If he wins, he can easily bankrupt all casinos.
But that will never happen.
Why?
Because every casino in the world has a table limit. This means there’s a maximum amount to how much a player can wager on every bet.
You’re probably thinking:
“Isn’t it better to let the players bet as much as they want since the house has an edge over the players?”
Yes, in the long run, the house always wins. But, in the short run, anything can happen (it’s not surprising to see a casino lose 5, 10, or 20 bets in a row).
That’s why every casino sets a table limit to how much a player can bet. That’s their risk management put in place so that a losing streak will not end their business.
And this is the same for trading!
You must manage your risk like a casino so that even a losing streak doesn’t blow up your trading account.
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