The Forex Titans
Published on Selasa, 19 Februari 2013
04.57 //
Forex Article
titan of the forex world
One such titan of the forex world is Bill Lipschutz.
Back in the 1980s he helped create one of the most powerful trading groups on earth: the Salomon Brothers FX department. Lipschutz was a key player in the currency-option market on the Philadelphia Stock Exchange. Often times he was the market, sometimes holding 80% of the open-interest.
When holding so much sway it is not surprising that in an article in Trader Monthly Lipschutz remarked:
“Underlying fundamentals often didn’t matter. It was about who blinked first.”
After leaving Soloman Brothers in the early 1990s, Lipschutz formed his own currency management company which was initially a subsidiary of Merrill Lynch. The company later evolved into a completely independent venture called Rowayton Capital Management. In 1995, Lipschutz left Rowayton to help form Hathersage Capital Management, where is still currently working.
Bill Lipschutz’s performance results over the past 15 years speak for themselves.
He has kept a low profile for much of his career, although he garnered a lot of attention after being interviewed for The New Market Wizards by Jack D. Schwager
In the interview Bill offers some valuable insight into his trading methodology. I found the following passage particularly interesting, especially given my view that forex markets are very random at short time frames, thus making it all but impossible to have pin-point entries and exits:
You have to trade at a size such that if you’re not exactly right in your timing, you won’t be blown out of your position. My approach is to build to a larger size as the market is going my way. I don’t put on a trade by saying, “My God, this is the level; the market is taking off right from here.” I am definitely a scale-in type of trader.On the flip side, in his very next comment Bill describes how he very much in the ‘let your winners run’ camp, which I don’t really follow at all:
I do the same thing getting out of positions. I don’t say, “Fine, I’ve made enough money. This is it. I’m out.” Instead, I start to lighten up as I see the fundamentals or price action changing.
I don’t have a problem letting my profits run, which many traders do. You have to be able to let your profits run. I don’t think you can consistently be a winning trader if you’re banking on being right more than 50 percent of the time. You have to figure out how to make money being right only 20 to 30 percent of the time.Of course, the winning percentage rate of your system does not solely determine if you’ll be profitable or not. To figure that out you need to calculate the expectancy of your trading system.
Bill Lipschutz is one of the world’s great currency traders, which is why he is richly deserving of being the first inductee into this website’s Hall of Fame.
Bruce Kovner
Sept. 13 (Bloomberg) --
Bruce Kovner, the billionaire co-founder of Caxton Associates LP, is
retiring from the $10 billion hedge fund, ending a three-decade run
during which he traded everything from soybeans to Japanese yen futures
and returned twice as much as the Standard & Poor's 500 Index.
Andrew Law, chief investment officer, will take over from Kovner as
chairman and chief executive officer on Jan. 1, the New York-based firm
said today in a letter to investors. Bloomberg's Sheila Dharmarajan and
Matt Miller report. (Source: Bloomberg)
Kovner is attempting a rare handover of power in the $2 trillion hedge-fund industry, where some of the most successful managers, including Stanley Druckenmiller and George Soros, chose to transform their firms into family offices rather than put another trader in charge. A family office usually oversees money for a wealthy individual and their relatives.
“In a lot of cases, the founder is the firm,” said Brad Alford, head of Alpha Capital Management LLC in Atlanta, who has invested in hedge funds for two decades. “All these guys say they have deep benches, but the founders are the glue that keeps these places together.”
Macro Pioneer
Kovner declined to comment beyond the letter. He has been preparing for his exit since 2008, when he named Law, a 45-year- old former Goldman Sachs Group Inc. managing director, as CIO.A one-time college instructor and New York City cab driver, Kovner opened Caxton in 1983, one of the first hedge-fund managers who sought to profit from macroeconomic trends by trading a variety of assets, including stock indexes, bonds, currencies and commodities. Among the best-known managers, only Druckenmiller, who turned his Duquesne Capital Management LLC into a family office in August 2010, and Soros, who followed suit this July with his New York-based Soros Fund Management LLC, had longer tenures at the helm of a macro fund.
Kovner’s main Caxton Global Investment fund has returned an average of 21 percent a year since inception, compared with an average gain of 11 percent including dividends by the Standard & Poor’s 500 Index. The $7 billion fund had one losing year, in 1994, when it fell 2.5 percent. Since 1983, the S&P has fallen in five calendar years, including a 37 percent decline in 2008. The top returns have helped Kovner amass a fortune estimated at $4.5 billion, according to Forbes magazine.
$12 Billion
The fund over its lifetime has produced cumulative net gains for investors of more than $12 billion, according to Kovner’s letter and an estimate by LCH Investment NV, a money manager based in Curacao. That ranks Caxton at seventh among the industry’s most-profitable funds. Soros Fund Management LLC tops the list with gains of $35 billion through the end of last year, according LCH.Unlike many top hedge-fund managers who started buying stocks while still in high school, Kovner took a roundabout route to trading.
After getting a bachelor’s degree from Harvard University in 1966, he started a Ph.D. program at its John F. Kennedy School of Government, only to give up four years later.
Credit-Card Startup
In the mid-1970s, he became interested in financial markets, according to “Market Wizards,” a 1989 book by Jack Schwager. He started trading, borrowing $3,000 on his MasterCard and turning it into $45,000 in a matter of months, before losing $23,000 of his nest egg on a disastrous soybean wager.It was that bet that taught Kovner an important lesson. “When something happens to disturb my emotional equilibrium and my sense of what the world is like, I close out all positions related to that event,” he told Schwager.
A few months later, he answered an ad to be an assistant trader at Commodities Corp., a Princeton, New Jersey-based firm that traded everything from cocoa to corn to currencies. The head of firm, Helmut Weymar, was so impressed on his first meeting with Kovner that he made him a full trader instead. After six years at the firm, which was later bought by Goldman Sachs, Kovner opened Caxton.
Rational, Disciplined
When Kovner was asked by Schwager what made him a successful trader, Kovner said: “First, I have the ability to imagine configurations of the world different from today and really believe it can happen. I can imagine that soybean prices can double or that the dollar can fall to 100 yen. Second, I stay rational and disciplined under pressure.”Law, who grew up in Cheshire, England, and earned an undergraduate degree in economics at the University of Sheffield, joined Caxton in 2003. He is based in London and spends a week out of each month in New York, a practice he said he will continue.
He previously worked at Chemical Bank, where he started at 23, and Goldman Sachs, where he rose to be head of proprietary trading in London.
At Caxton, Law manages about 20 percent of the assets of the flagship fund, including leverage, or about $3.5 billion. This year the fund is down about 1 percent, according to investors who asked not to be identified because the information is private, about the same as the Bloomberg macro hedge-fund index.
Learning to Listen
Law’s trading style has always been similar to Kovner’s, he said in an interview in his office on Park Avenue in Manhattan. Yet the older man drove home some important lessons.“I’ve learned to listen to the markets more,” said Law, meaning that he pays close attention to how markets move relative to one another, and how they react to events. He depends on these observations, rather than what he calls “abstract fundamental preconceptions,” to forecast future price movements.
Law also embraces Kovner’s practice of cutting risk when he doesn’t understand what’s going on in markets, something that Law did in May and June of this year. “Bruce has done this many times in his career,” he said.
Starting next year, Law will institute an operating committee to run the day-to-day business of the firm. Its members will include Law; John Forbes, chief operating officer and chief financial officer; Mike Bolitho, who oversees back- office functions; and Scott Bernstein, general counsel. Caxton will limit the amount of money it will take from new investors, a step known as a “soft close.”
Minority Stakes
Kovner and D’Angelo will remain investors in the fund and will retain “substantial minority stakes” in the firm, Law said.Kovner, who will keep an office at Caxton, will continue to pursue his many outside interests, including the arts, education and politics, according to his letter to investors. He is chairman of Juilliard’s board and vice chairman of Lincoln Center for the Performing Arts. He’s a managing director of the Metropolitan Opera and a trustee of the American Enterprise Institute.
A promoter of education reform, Kovner founded the School Choice Scholarships Foundation, which provides money to low- income students in New York City so they can attend the primary schools of their choice.
He will also continue to make investments in drug and medical-technology companies. He currently sits on the board of Lexington, Massachusetts-based Synta Pharmaceuticals Corp., which is developing drugs to fight cancer and diabetes.
“Most of all I look forward to spending more time on the simple pleasures of life with family and friends,” he wrote. “I may even be able to have a little more time at the piano!”
Bruce Kovner
Interviews and Trading Strategies
Unlike his left-wing counter part, the eloquent George Soros, Bruce Kovner
rarely gives out interviews. When Fortune Magazine suggested an
interview titled "The $11 Billion Man" with Mr. Kovner, he declined.
He did not want that kind of publicity. Interviews and Trading Strategies
Bruce Kovner graduated from Harvard College in 1966 but dropped out of the Kennedy School before he completed his Ph.D. Then he began to trade commodities.
In 1983 Bruce Kovner set up Caxton. Reports say Caxton has returned 28% annually since inception. According to Institutional Investor, Caxton returned--net of fees--31% in 2001 and Kovner made some $500 million personally that year.
As for the current markets, Bruce Kovner saw (in 2003) the dollar and yen depreciating more, and said, "We still have a very substantial move in gold ahead of us. The same could be true for a number of other commodities. We may be in for a ride in commodities the likes of which we haven't seen in a while." Kovner cited oil and natural gas as examples. As for bonds, he expressed concern about rising rates "for any investor with a two-year or more time horizon."
Quotes of Bruce Kovner
Fundamentalists who say they are not going to pay any attention to the charts are like a doctor who says he’s not going to take a patient’s temperature.—Bruce Kovner
In a bear market, you have to use sharp countertrend rallies to sell.—Bruce Kovner
Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are willing to lose.—Bruce Kovner
Bruce Kovner's Trading Methodology
* Make currency and futures trading judgments based on analyzing the worldwide political and economic events.
Research/ Analytical Techniques Employed by Bruce Kovner
- Spend tremendous amount of time to follow and analyze intricately the economies of many different countries and integrate these various analysis into a single picture.
- Bruce Kovner gets a gurus report daily. Includes Prechter, Zweig, Ned Davies, and Eliades. He looks for consensus that the marketing is not confirming. He wants to know when a lot of people are going to be wrong.
- Uses technical analysis a great deal, but he can’t hold a position unless he understand why the market should move. Technical analysis is like a thermometer.
- Important to have the ability to imagine configurations of the world different from today (alternative scenarios) and really believe it can happen. Also, stay rational and disciplined under pressure.
Trading Techniques Employed by Bruce Kovner
- To make money, you have hold a position with conviction. It is hard to do so when you are following someone else’s.
- He gets call 24-hours from his staff when currencies breaks out of a redefined (revised at least weekly) range, or if the prime minister resigns, say.
- When you have a fundamental view before a piece of major news, wait till the news is out and see how the market "vote".
- Bruce Kovner usually goes with breakouts.
Risk Management Techniques Employed by Bruce Kovner
- Place stops at where, if reached, will reasonably indicate that the trade is wrong, NOT at a point determined by the maximum dollar you are willing to lose.
- Pays strict attention to the correlation of all his positions, measured by total risk in the market every day.
- Loss of money slows him down, and the change in technical picture will also prompt him to reevaluate his view.
- Whenever Kovner enters a position, he has a predetermined stop.
Philosophy and beliefs of Bruce Kovner
- The reason Kovner is in this business is that he find the analysis of worldwide political and economic events extraordinarily fascinating.
- The first rule of trading is don’t get caught in a situation in which you can lose a great deal of money for reasons you don’t understand.
- A trader has to be willing to make mistakes regularly- Marcus taught him about making the best judgment, being wrong, make the next best judgment, being wrong, make the third best judgment, and then double the money.
- The Heisenberg principle - If something is closely observed, the odds are it is going to be altered in the process. The more a price pattern is observed by speculators the more prone you have false signals; the more the market is a product of nonspeculative activity, the greater the significance of technical breakout.
- Managing OPM represents a call.
- Believes that under a stable, moderate rates of inflation, technical trading systems will kill each other off.
- Stock market has many more short-term countertrends. Whereas, commodities markets are more trending.
- The market usually leads because there are people who know more than you do. e.g. Soviet Union was a very good trader in currencies and grains.
History and other facts of Bruce Kovner
* Worked with Michael Marcus and was colleagues of Jack Schwager at Commodities Corp.
* Studied political science and economics at Harvard, also taught political science at Havard and U. Penn.
Performance Record of Bruce Kovner
* 87% over 10 years: "During the past ten years, Kovner has realized a remarkable 87% averaged annual compounded return." MW, Jack Schwager 1989.
You Are The inspirations.. salut for You Bruce..
Professional traders already have the knowledge and experience to know which trading techniques and trading systems could be profitable and which trading techniques and trading systems should be avoided, but professional traders are not looking for a new trading technique or trading system (because they are already trading correctly). New traders do not have the knowledge and experience to know which trading techniques and trading systems could be profitable and which trading techniques and trading systems should be avoided, and new traders are exactly the traders who are looking for a new trading technique or trading system (and even worse new traders are often still looking for the holy grail of trading).
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