Born in Farmingdale, New York, Lipschutz began his trading career while attending Cornell University. He has a bachelor’s degree in fine arts and completed his MBA in finance in 1982. Lipschutz’s education background has undoubtedly contributed to his success in the forex market.
He became interested in stocks after inheriting $12,000 worth of stocks when his grandmother died. Eventually, Lipschutz managed to turn his inheritance into $250,000, after hours of stock market research. He has had his share of ups and downs in his investing career; he once lost his entire portfolio balance on a single bad trading decision because he failed to use an appropriate risk-management strategy. He could have walked away from trading after this major setback. But it fuelled his interest in trading, and he decided to learn from his mistakes. In 1995, he formed his own company, Hathersage Capital Management.
Lipschutz has featured in books such as The New Market Wizards: Conversations with America’s Top Traders, by Jack D. Schwager, 1992 and The Mind of a Trader: Lessons in Trading Strategy From The World’s Leading Traders, by Alpesh B. Patel, 1998. He was inducted into the Trader Monthly Hall of Fame in October 2006.
Trading Strategy
Lipschutz says the primary focus point of investors while trading should be the risk-reward ratio. He always focuses on a 3 dollar return for 1 dollar risk. Also, according to Lipschutz, it is important to understand the difference between a winning trade and losing trade, including the timing of trades, stop loss-take profit set, and the size of trades.
“If you make any mistake in calculating the trading size and winning or losing trade, you may have to pay the price with your trading capital. However, it is also essential to understand the big picture of the market, which is a crucial element of price action trading,” he said during an interview with Jack D Schwager.
Investors should focus on understanding the market well, whether they trade based on technical analysis or fundamental analysis. Many traders do not want to focus on fundamentals, he says, but it is critical to understand at least the essential function of fundamental analysis as it provides the logic and reason for market moves. “It is necessary to understand what the market is thinking and how to manage risks with the sentiment,” he said.
Many traders come into the market and consider it as a money-making machine, which is not a wise thing to do, he says.
Lipschutz has…
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