đ„A MUST READ FOR EVERY TRADER!!!
Bill Lipschutz is one of the respected and successful traders in the world of trading. He was so good at his craft that, he traded a position size of $20 - $50 million on a day-to-day basis with incredible profit results.
This is how he started:
Lipschutzâs first experience in actual trading was prompted by a $12,000 inheritance that he steadily built up to $250,000 over a four (4) year period. Just like any high-risk trader, he ended up blowing the entire account because of the drastic mistake of overleveraging his position. He learnt the hard way that: âthe market is a stern enforcer that unmercifully and unfailingly extracts harsh fines for all trading transgressionsâ.
When he was out of Cornell University, he had internship opportunity at Salomon Brothers Inc., an American multinational bulge bracket investment bank headquartered in New York City. It was one of the five largest investment banking enterprises in the United States and a very profitable firm on Wall Street during the 1980s and 1990s. After his internship, the Salomon Brothers saw his potential and offered him a full-time role at the firm.
Despite having had no previous experience whatsoever in the currency markets. Lipschutz applied the skills he used to grow $12,000 to $250,000 and married it with risk management. He was significantly profitable in his very first year of trading these markets and became extraordinarily profitable over the next seven years. Over that period, he traded a position size of $20 - $50 million on a day-to-day basis with incredible profit results of half a billion dollars for the Salomon Brothers.
In an interview with Jack D. Schwager, Lipschutz attributed his success to these five (5) pillars:
Confidence: Although he took over 4years to turn $12,000 to $250,000 and lost it all in just few days. He didnât allow that mistake to keep him down. He had the confidence to accept responsibility for the loss, learnt the lessons and bounced back stronger. đȘ
Focus: He decided always to focus one trade at a time.
Patience: Great things take time. It took him 4years to turn $12, 000 to $250, 000. Then went on later to make millions at Salomon Brothers.
Courage: It is not enough to simply have the insight to see something apart from the crowd, you need to have the courage to act on it and stay with it.
Risk management: Making money and keeping money are two different skill-sets. He knew how to make profit but didnât know how to keep his profits. Thatâs when he became risk-control oriented.
Lessons:
Avoid the temptation of wanting to be completely right: No one can accurately predict the direction of the market. Trading is not about âalways do this and thatâ but it has more to do with âwhat to do in each market situationâ.
If you have a strong conviction about a trade and the market has a large move because a of a news event, the best decision may well be to bite the bullet and buy on extreme strength (or sell on extreme weakness).
Start small and scale up: You donât have to get in or out of a position all at once. Just like the whales, Scale in and out of all your trades.
In conclusion, Bill Lipschutz resigned from Salomon Brothers after a great 8-year spell to start his own trading and investment firm which he managed till the time of his passing.
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