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Every system must control its risk, and most analysts believe that nearly
any system can be profitable with proper risk management. This also means that
any system can lead to ruin without risk controls. Risk can be managed from
the trade level, with individual stop-losses, to asset allocation, by varying
the size of the position traded, and by leveraging and deleveraging. Some form
of management is necessary.
—Perry J. Kaufman, from
Trading Systems and Methods, 3rd edition (1998,
John Wiley & Sons, New York).
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