An issuance-through-LP strategy should be tested against clustered large relative-price moves, one-way trends and reversals, not only independent small fluctuations, before fee income or gross fills are treated as evidence of improved holder value.

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Extreme price swings are the norm in financial markets—not aberrations that can be ignored. Price movements do not follow the well-mannered bell curve assumed by modern finance; they follow a more violent curve that makes an investor's ride much bumpier. A sound trading strategy or portfolio metric would build this cold, hard fact into its foundations. Exactly how depends on the resources, talents, and stomach for risk of the individual; as ever, differing opinions make a market. But already, the mere knowledge that markets vary wildly is useful. It can be—and increasingly is—used in computer simulations to "stress-test" a portfolio, to play a wider and darker range of "what-if?" games on paper, before committing hard cash to a trading strategy. Thus, a cautious investor can build a portfolio with greater security than the standard models suggest. An aggressive trader can be better prepared to pounce on moments of high volatility. And a prudent market regulator can be more alert to urgent problems—thereby averting financial catastrophe and macroeconomic harm. Some commentators have called for a "Richter scale" of market turbulence; like that famous measure of earthquake intensity, its financial analog would rank market tremors and provide a scale for regulators to judge the severity of impending problems. Forewarned is forearmed. ### Rule II. Trouble runs in streaks.

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How does it work? It is based on my fractal mathematics, which subsequent chapters will elucidate. It is a model still development. What I know cannot yet be used to pick stocks, trade derivatives, or value options. Time and further research by others will determine whether it ever can. But to be able to imitate reality is a form of understanding. And as such, the multifractal model already offers some immediate insights into how markets work. Like the popular finance press, I can boil some of them down to five rules of market behavior, concepts that, if grasped and acted upon, can help lessen our financial vulnerability. Rule one. Markets are risky. Extreme price swings are the norm in financial markets, not aberrations that can be ignored. Price movements do not follow the well-mannered bell curve assumed by modern finance. They follow a more violent curve that makes an investor's ride much bumpier.