It's true that they were very profitable for several years, and then lost a ton of money at the end. Some of their worst losses were due to "style drift" into s

It's true that they were very profitable for several years, and then lost a ton of money at the end. Some of their worst losses were due to "style drift" into strategies that they were not experienced in, such as an unhedged bet on the Russian ruble before it was devalued. However, their core strategies involved exploiting very small profits with 25X leverage. Very few strategies can survive with that much leverage. Obviously a 4% decline in asset prices wipes you out, but in the case of LTCM it didn't take that large of a move. Since they were large and well-known when they started to lose money other traders figured out their positions and bet against their specific positions, knowing that LTCM would be forced to sell. This is all from the excellent book "When Genius Failed."