Famous Traders and Their Strategies: Episode 3

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Bill Lipschutz

In this article we will cover one of the most successful traders of all time, who is often called the “Sultan of Currencies,” Bill Lipschutz. The story of his life can be inspirational for all traders, expert and novice alike. Bill Lipschutz started his journey with an accidental inheritance of $12,000. He went on to become the most successful trader for Salomon Brothers, and later co-founded Hathersage Capital Management.

Early Life

Born in 1956, Lipschutz grew up in New York. He was a good student and had a keen interest in Math and Tennis. He attended Cornell University, where he graduated in architectural design. Later, he went on to get an MBA degree from Johnson School of Management, France.

In Cornell, he inherited $12,000 worth of stock, after his grandmother’s demise. This amount was an accumulation of over 100 different stocks, which he managed to liquidate and consolidate, after spending much time and money. He began investing the amount in his free time. To do this, he read extensively about the markets and trading mechanisms.

As his interest began to grow, so did his money. He soon managed to convert his $12,000 into a portfolio worth approximately $250,000.

Later Success

This success was short-lived, and Lipschutz soon lost it all due to a bad decision. By this time, he had already developed a passion for trading and decided to work hard to turn his fortunes around.

He became a part of the Salomon Brothers training programme, where he helped them in forming a completely new department for forex trading. Despite very little experience, Lipschutz made hundreds of million dollars’ worth of profits for them in the 1980s. He once had 16 positive months in a row and was solely responsible for turning over half of the currency-option volume on the Philadelphia Stock Exchange.

By 1985, he was making $300 million a year for Salomon Brothers. He was the principal trader for the company’s foreign exchange account, till he left in 1990. After that, he went on to become the CEO of North Tower Group, a subsidiary of Merrill Lynch Corporation. In 1995, he co-founded Hathersage Capital Management, with his classmates from Cornell. The firm is a global macro-manager, specializing in G10 currencies.

Bill Lipschutz remains the Principal and Director of portfolio management at the firm.

Trading Strategies

One of the earliest lessons Bill Lipschutz learned was when he lost his entire fortune of $250,000 to an aggressive market. He learned the importance of risk control. He believes that traders need to pay attention to the risk-to-reward ratio. He maintains that it is not advisable to put the entire trading capital into one single trade.

Understanding the market sentiment also hold prime importance for Lipschutz. He advises traders not to ignore market trends and place trades only when the fundamentals are favourable.

The veteran trader is known to have trading screens in every room of his house. It is unclear how much truth lies in this assumption, but Lipschutz is very particular about staying up-to-date with price movements and economic releases around the world. He believes that a complete knowledge of market factors is required before making trading decisions.

He was inducted into the Trader Monthly Hall of Fame in 2006 and has been featured in books and journals worldwide.

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