Bill Lipschutz has one of the most amazing stories when it comes to losses. How did he manage to turn the tide and become the Sultan of Currencies?
Bill Lipschutz, the founder and director of portfolio management at Hathersage Capital Management, is one of the most successful traders in the world of trading. Throughout his lifelong career, he has proven his skill many times and earned a number of prestigious awards. In October 2006, he was featured in the Trader Monthly Hall of Fame.
He was also featured in a few best-selling books about top market traders, one of them being "The New Market Wizards: Conversations with America's Top Traders" by Jack D. Schwager in 1992. He's also known as "the Sultan of Currencies" for his impressive success rate.
Bill Lipschutz was born and raised in Farmingdale, New York. He attended Cornell University and earned a Bachelor's degree in Fine Arts from the Architectural Design program. Right after that, he decided to take business management classes at the Johnson School of Management in Cornell University and managed to earn an MBA in Finance in 1982.
Apparently, Lipschutz started his career in trading unintentionally. When he was still studying at Cornell University, he inherited a $12,000 worth of account with at least 100 different stocks from his grandmother. It seemed like his grandmother was a trader too back in the day. However, Lipschutz soon found out that his grandmother didn't use proper risk management to manage the trades. As a result, he could lose a lot of money if he liquidated the account.
Lipschutz then decided that he had to start investing and managing his inheritance. He spent hours in the library and read everything he could find related to the market conditions at that time. While doing so, he discovered a new interest in the currency market. Before he graduated, he found himself working in a big investment firm Salomon Brothers under the newly formed foreign exchange department.
Managing Risks and Focusing on Fundamentals
Bill Lipschutz managed to grow his grandmother's account to $250,000. Unfortunately, such massive success didn't last long and he almost lost his entire fortune. Lipschutz admitted that he wasn't as sad about losing the money as he was disappointed with the way he traded. He also remarked that the strategy he got from Salomon Brothers simply didn't work because of one bad decision.
Even after such a devastating failure, Bill Lipschutz didn't give up a single bit. Instead, he kept trying and put even more effort into his trading career. Over time, he managed to earn back his lost money and performed a series of successful trades by focusing on two crucial aspects:
- Preparing a good risk management system and closely calculating the risk-to-reward ratio in every single trade.
- Emphasizing the importance of fundamental factors.
He said that it's necessary for every trader to observe how the market responds to fundamental data changes. He also warned traders to not miss a single chance on the market because if you're late to the game, then you're basically entering the wrong market.
Don't Limit Your Profits
Another thing about Bill Lipschutz is that he doesn't like to limit his profit. He said that if the price moves in your direction, then you should try increasing the size of your trading lot, averaging, or pyramiding instead of limiting the profit potential. In other words, when you see a big trading opportunity, you need to take as much advantage as possible.
Many successful traders like to share their experiences to contribute to the trading and investment industry. Bill Lipschutz taught traders to never give up and always learn from mistakes. Instead of crying over his massive loss, he assessed his past performance and see what he did wrong. Among other things, Bill Lipschutz believes that traders need to focus on risk management and consider using fundamental analysis to make better decisions. Last but not least, he tries not to limit his profit when the price is moving in his favor.