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The Mathematics of Money Management

Ralph Vince · 1992 · Level: advanced

Optimal f and the hard math of bet sizing: how growth-optimal sizing behaves, and why it sits far closer to ruin than intuition says.

For prop traders: Read it to understand why the firms cap risk per trade, and why they are right.

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What I Learned Losing a Million Dollars

Jim Paul and Brendan Moynihan · 1994 · Level: all levels

A former CME governor loses everything by degrees, then dissects the psychology of how losses happen: the losing is rarely one bad trade.

For prop traders: Required reading before any evaluation. Every blown account story follows this script.

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Trade Your Way to Financial Freedom

Van K. Tharp · 1998 · Level: intermediate

The position sizing book: expectancy, R-multiples, and why the size you choose matters more than the system you trade.

For prop traders: Drawdown limits are a sizing problem before they are a strategy problem. Start here if you keep breaching daily loss limits.

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Super Trader

Van K. Tharp · 2009 · Level: intermediate

Tharp's program for rebuilding your trading as a business: beliefs, systems, sizing, and a written business plan.

For prop traders: The business-plan chapters translate well into an evaluation plan with pass and fail criteria set in advance.

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Fooled by Randomness

Nassim Nicholas Taleb · 2001 · Level: intermediate

How luck masquerades as skill in markets, and how a good run can be the most dangerous thing that happens to a trader.

For prop traders: Essential after a hot streak in an evaluation, which is exactly when accounts get oversized and lost.

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