It does not matter if you know all there is to know about stock selection. Strategy mastery is not the most important skill to possess. You will be out of the game in short order if you can't control your money.

Money management is probably the most important skill a trader can have yet it is the most overlooked. Last week we talked about The Power of Diversification and the benefits of getting broader market exposure by not placing all of your eggs in one basket.

One day as a teenager I saw an advertisement that read, "Challenge a chess grandmaster".

A Russian chess grandmaster who was visiting my city had claimed that he could play 20 people simultaneously and beat them all. I signed up for the challenge. While I had never played

seriously and had developed no particular playing strategy or system, I was quite familiar with the uses of the individual playing pieces and felt I knew how to exploit the strengths of each.

Little John was proud of his new found knowledge on evaluating companies. L. J. had narrowed his search to ATT ( About to Tank) Industries. ATT had a marvelous balance sheet, great liquidity no debt, a P/E ratio of 10 which compared very favorably to its industry. ATT makes widgets and has five additional products in the pipeline.

The ROE is impressive, a good indication that management is doing their job.

Just a couple of decades ago it would have been almost unfathomable for the retail investor to consider generating consistent returns above 20% per year. Indeed, those who competed in arguably the most competitive financial market place, the stock market, were considered gurus when they beat the S&P 500 year in and year out.

Others, such as Jerome Kohlberg, Henry Kravis and George Roberts made a name for themselves in private equity as did Peter Peterson and Stephen Schwarzman with the Blackstone Group.

Many traders feel that they must be in the market all of the time. Wrong! There are times when it is prudent to "Stand Aside". This happens to be one of those times. The wild swings we have had in the markets are indicative of uncertainty. Uncertain markets are prone to large moves up or down on news. Case in point; at this writing, there is news that the government is going to step in with a repository RTC type plan to save failing banks.

I trade for a living now. When I was in "the real world" working for a living, I recalled an axiom that changed my view on work and life. "Are you living to work or working to live." Psychologists tell us that satisfying work is essential to emotional and mental well being. However, so many of us are attempting to climb the corporate ladder or just slugging it out day to day to make a living.

I was returning from a business trip recently and found myself walking on one of those moving walkways at the airport and as I was walking on the belt, I felt the sensation of gliding effortlessly along. I glanced over to my right and observed several people who were trudging along with bags in tow as I breezed past them.

When I got to the end and anticipated stepping of the moving belt, I noticed children on my left playing on the walkway that was moving in the opposite direction.

How are you doing in the stock market? If you are consistently successful, most probably you are in the minority. Those that are doing well have learned to follow the trend yet hedge against the inevitable adverse moves that can occur.

Some have been big winners with purely directional plays without regard to hedging. That is a dangerous game and should be left to those who have the stomach to play that way.