To become Great at anything, including trading, you have to have three things:

1. A passion for what you do.
2. An unwavering internal confidence.
3. Great risk management, or 1 and 2 won’t matter.

The recent financial struggles of two formerly great athletes are a reminder that risk management is vitally important, no matter how much money you have.

First is former Cleveland Browns quarterback, Bernie Kosar. Kosar is smart, talented, hard working, generous and an over-achiever. Now in his mid 40s, he is divorced, his body is falling apart and he recently filed for bankruptcy. Bernie may be broke, but he’s not broken. Why? Because he’s a winner and he knows it. Kosar says adjusting to regular life is hard, making money is not. Kosar worked hard in the past to win and will do the same again to get back on top.

And then, there’s Lenny Dykstra. The guy’s nickname is nails, and no one played professional baseball harder. But Lenny’s been hammered by extremely poor risk management and had to file for bankruptcy. Is he a genius? Probably not. But he is an entrepreneur and a winner — after all, Dykstra did start a car wash franchise and sell it for tens of millions of dollars.

The lesson: You can have passion and internal confidence in abundance, but without great risk management, failure is the likely outcome.

Think better, invest smarter. Click here to view the video associated with this post.

People tend to see what they want to see, so it’s not surprising Bernie Madoff was able to convince scores of investors his scam was legit. And while many still wonder how such a large-scale fraud could happen, there were a number of missed warning signs for investors. [View the video online].

So rather than be mad at Madoff, we should thank him for reminding us of certain lessons we seem to have forgotten:

1) Never put all your eggs in one basket. You’ve heard the stories about people who lost everything with Madoff. That’s what happens when you put all your faith in one investment. Diversify, diversify, diversify.

2) If it sounds too good to be true, it probably is. After all, if the market is losing 30 percent and your money manager is always up, you may be too busy counting your blessings to track the details.

3.) If someone only caters to the elite, be skeptical. If someone makes their product or what they do sound like it is reserved only for the rich and that makes you want it more, be skeptical, because there is likely more to the story.

4.) Stop being so trusting. P.T. Barnum told us that a long time ago there is a sucker born every minute. A healthy dose of skepticism really is a very good thing. It helps you manage risk and profit in the long run.

5.) Always ask questions, especially when things are going well. In reality, the Madoff scam is a classic example of how the old adage, “if it ain’t broke, don’t fix it” can come back to bite you. Madoff’s scam didn’t look “broke” for many years, and that should be the first red flag for any professional money manager. Always look under the hood.

6.) Do your own homework. Do not blindly trust a friend’s opinion or recommendation. How many Madoff investors became involved only because a friend told them about him? You need to look behind the scenes so you can determine your own best course of action.

7.) Take responsibility for all your personal and financial decisions. This is the most important lesson of all. It’s your life, your money. Don’t give control over to someone else.

Think better, invest smarter.

Market coach Doug Hirschhorn discusses the four reasons why investors should expect a slow summer. Watch the video online.