Every trader must understand the power of compounding returns. Actually one of the sections of Chapter 6, The Tricks of the Trade is about the necessity of understanding compounded returns. A small trading edge applied many times over a period of time will generate a fortune while just a small defect in your trading or just plain random trading minus trading costs, will ruin you over time.
Albert Einstein once said, "Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” Yes, its that powerful.
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