Kosta Ouzas says most trading accounts blow up because systems use fixed settings that ignore volatility and market conditions. He recommends the Power Law framework as a GPS to track where the market actually is and how much risk it can handle.
This is the flaw that almost everybody misses. Settings don't assess volatility, understand trend length, detect compression or respond dynamically to any kind of liquidity. So when the market behaves unpredictably, and it always will, a system built on settings becomes fragile. Fragility is why people blow up, not direction, not entries and not timing. Fragility kills trading systems more reliably than being wrong about our direction does. So let me just give you the simplest way to think about this. Settings, their coordinates. And for us we need a GPS because coordinates tell you where you want to go. And for us we use the Power law as our system because that tells us where we actually are, how far we can safely move and how much risk the terrain can support. Without the gps, the Power law, in our case, the coordinates are going to lead us absolutely nowhere. So with the Power Law as our gps, the coordinates are going to finally make sense.
