Forex trading quotes are a dime a dozen, but they are worth observing when they come from a legend like Bill Lipschutz. Bill Lipschutz’s name is synonymous with some of the most successful and celebrated currency traders globally.
Lipschutz has traded several markets as far back as the 70s and worked in a plethora of financial firms ever since. These attributes clearly show he has a wealth of experience not many can match. In this article, we’ll look at 4 of the most powerful quotes from the man himself and what we can learn from them.
So, who is Bill Lipschutz?
The 65-year old American is presently the founder and chief investment officer of Hathersage, an asset investment management corporation specializing in G10 forex, a basket of the ten most traded or liquid currencies in the world.
One of the interesting things about Lipschutz is how he initially didn’t plan on a career in the financial markets. He must have entered university somewhere in the mid to late ’70s, where he studied a Bachelor’s Degree in Fine Arts from Cornell University, a qualification he completed.
The death of his grandmother was both sad yet also led him into trading equities after reportedly inheriting $12 000 worth of stock. He spent considerable time in the library while attending to learn equities, eventually having the confidence to invest the received capital.
One popular story is how he turned this amount into almost a quarter of a million dollars over a few years before losing it all eventually. The American also acquired an MBA in Finance from the same university in 1982.
From 1981 to 1990, Lipschutz had the privilege of joining one of the largest foreign exchange trading departments at the time, Salomon Brothers. It’s been reported he made at least $300 million in 1984.
1. You don’t need a high winning percentage to make money
The allure of having a near 100% winning strategy is natural. Humans are inherently inclined to always be right and take being wrong as a sign of failure and incompetence. Sadly, in the arena of trading, losing is inevitable regardless of the conviction one might have over a particular position.
To some extent, the probability of trading forex is binary or 50-50; a position can lose or win. It is statistically unlikely to achieve a near 100% win percentage, at least over the long term judging from this fundamental concept alone.
Therefore, the pursuit of having no losses is a futile one. Instead, the most important factor should be achieving a reward that is degrees larger than the money at risk. Traders accomplish this by looking only for the best opportunities likely to produce these outcomes over the long term.
It boils down to employing a model where the losing trades never deviate above a constant figure. Bigger winning positions subsequently offset these. Thus, the winning percentage is irrelevant.
2. The art of ‘doing nothing’
This quote sums up the importance of patience, perhaps the most characteristic any trader should have. Trading forex is nothing like a day job with specific to-do lists which need completion in a certain period. Traders aren’t necessarily compensated by the hour or the day in forex.
Therefore, there is usually never a need to do much else most of the time. Thus, we can best interpret the ‘art of doing nothing’ as never taking a position for the sake of being involved in the markets.
This can be best described as having an addiction to trading where a trader isn’t patient enough to execute when they’ve genuinely spotted a solid trading opportunity. So, doing nothing essentially means never over-trading.
Another takeaway from this lesson is what happens when someone wins a trade. Psychologically, a trader is likely to have more confidence and become less risk-averse. Unfortunately, this can be detrimental as it can, again, lead to taking sub-par trades which wouldn’t have formed part of someone’s trading plan from the get-go.
3. Focusing on the process instead of the money
An interesting irony exists over the motivations of any forex trader. There’s an innate human desire to make money in virtually any endeavor. Unlike other fields, trading currencies is one of the few directly involved with monetary gain, which is technically the benchmark for success.
Unfortunately, without having genuine passion and interest in trading, someone will likely lose and have a hard time persevering through the hard times. To achieve success in anything requires excelling that particular activity to an elite level. The profit factor is a by-product of mastering the game, not the main focus.
4. Being different from the crowd
Statistics suggest a failure rate as high as 90% in forex. Getting to the crème de la crème level means doing things in a completely different way to the herd or the crowd. In truth, retail traders all have access to the same information.
However, some can prosper because of how they use the knowledge to mirror the realities of forex rather than their desires and expectations. The previous sections on not searching for a high win percentage and ‘sitting on your hands’ are prime examples of acting differently from the rest.
Success will come from understanding all the myriad of contributing factors to how a trader can fail while trading and what to do instead.
While Bill Lipschutz may not be considered the greatest of all time, he certainly is one of the best forex traders in the world. As Lipschutz has managed millions of dollars in his decades of experience, there definitely is a thing or two we can learn from him.