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Bill Lipschutz

All about forexdiscountbrokers D forexbonusrebatecussion Topics: * Sources of capital forex discount brokers cashback forex impact * Mastering the individual traders edge * Crazy focus * Salomon traders * Reducing the element of luck * Mentors * Fear and worry * forexrebatesbrokersnformation networks and information aggregation * Trading structures Operating other peoples capital Trading sources of capital can affect operating style and performance, and it is difficult for the average person to understand this fear, as Bill Lipschutz explains Seven years ago, I thought very simply that whether the capital came from Salomon Brothers or from ten wealthy individuals, from a single client, the outcome would be no different. In fact, different sources of money, necessarily resulting in different trading strategies, force trading to change motivation The problem is definitely not simply to say: ‘I have some money on hand, regardless of the source, I will try to do my best and try to make some profit every day’ it is not that simple A company with rich clients naturally creates many different forces involved, and each months performance will determine whether you live or die Money Managing money is a very tricky industry issue not just in terms of operational performance, but also in terms of the clients expectations of investment results Absolute performance numbers are often misleading I could say to you: ‘Over the last five years, the total compensation for our most aggressive products has been 600%’ and you might say: ‘Wow! ’ However, if you do not know the operational performance of other foreign exchange managers, and do not know the risk we take to achieve this performance, the data itself does not have a clear meaning For example, suppose a manager manages $ 200 million of funds, of which $ 120 million is part of a fund with a specific investment objective If this part of the fund earns 600% in four years, the investor is likely to Lets consider the different trading approaches between George Soros and Bitter Lynch Soros typically operates through a highly credit-expanding fund whose sole objective is to make a lot of money Bitter Lynchs Magellan fund is very different, with the primary objective of safeguarding He was in the majority and a top stock picker, so he made a lot of money. But, believe me, as soon as the Magellan fund performance started to decline, you could see investors withdrawing a lot of capital, and eventually even the fund would disappear. Investors have very different motivations, and investors will pick the fund that suits their style. Finally, client preferences will definitely affect the trading style of the trader. As Bill Lipschutz explains, different sources of capital means different client motivations and fund operating objectives, which may also affect your trading style. Regardless of the source of capital, you must understand that because your trading style may be affected, it will also affect your trading performance. For purely speculative capital outside of investments, I have a high tolerance for risk. In principle, if I lose all of my speculative capital, I can accept it with open arms. This is an investment, and also hold a portfolio of stocks, which also counts as an investment The rest of myself is available for me to speculate, and I expect a higher rate of return than an investment, but am also prepared to accept higher risk, severe price fluctuations The devastating risk of such transactions is high, in other words, a 100% loss can occur For own funds, Bill Lipschutz only needs to be responsible for himself, and can be completely according to his own preferences However, with other peoples money, the freedom is obviously reduced, as he explains next Other peoples money However, when you are entrusted with the management of a clients money, it is another matter when the client says, ‘I know you are a speculative trader and I can honestly accept a 20% loss’I often talk to my clients in detail to try to understand what they think I want them to fully understand If a client looks me straight in the eye and says, ‘I can accept a 20% loss, no problem’ in that case, we know he means 5% if I call him three days later, ‘You know what? Your net worth has dropped 18% and I want to know what you think so we can discuss the next step’ I guarantee that he will forget about the earlier statement about the 20% loss. Since the client is not a trader, if a serious loss occurs, the client may not be able to handle it properly. You cant take your clients money and simply go into the market and speculate wildly. For a fund manager, if you buy IBM stock and the price drops 25%, no one is going to hire someone to walk away because everyone owns IBM. The client will withdraw the money and you will have a hard time raising it. The problem is not just the rate of return, there are many different motivations for the client to make an investment decision. Well, because a 5% chance of getting it wrong is far worse than getting it right, even if the chance of getting it right is as high as 95%. If I help clients earn 25%, they must be very happy, think I am great trader, then I can earn a lot of management fees’ But, you know what? If a 5% loss occurs, they will pull back their money and I may close my business. So, trading decisions are not just about the odds of winning or losing, they are much more complex. Your decisions are inevitably influenced by the clients reaction, which then affects the performance of the operation. With corporate money, there is relatively less pressure and more room to play, as Bill explains next
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