When Bill Lipschutz worked at Solomon, Solomon Brothers was synonymous with investment banking. In the late 1980s, almost every statement of the highest financial performance was used to describe this investment bank, which cultivated many great traders. Solomon Brothers required traders to have some key qualities: confidence in bearing losses, and courage to overcome oneself and admit mistakes. How to analyze from bottom to top and become an expert with a winning edge?
"Traders must have some strange personalities. Traders must have strong confidence and a clear self. In some cases, they must even be domineering and force others to do things they don't want to do. Domineering is often important because as a trader, you make more mistakes than right."
"Assuming that you are waiting for an 80% chance of winning, it is impossible to be a successful trader. You have to calculate how to make money from a 20% chance of winning. This is an old 20/80 problem (according to this theory, in most industries, 80% of the results come from 20% of the efforts, and the remaining 20% of the results come from 80% of the efforts). Therefore, if you have to have some domineering or courage, this is quite understandable."
"But if you say, 'Even if everyone's views are not like this, I am still ready to gamble', this is not the courage we are talking about, this is a home run situation. The courage, confidence, and self we are talking about are not aimed at other people, but the psychological qualities that must be able to admit mistakes frequently. Many young people cannot accept the fact that they make mistakes."
"If you have no positions at all, it is usually easy to judge the market at that time and assess the possible future trends. But if you bet and judge wrong, it's hard. First of all, you have to admit that you bet wrong, and then end it. For everyone, this is a psychological breakthrough. Some people can easily do this, but this decision must also go deep into the heart. Therefore, you not only have to say 'I was wrong', but also go in the other right direction. This is very difficult, so courage is very important."
Therefore, there is no absolute quality of one-sidedness, and each quality needs to be balanced by another auxiliary quality. For example, the self that confidently admits mistakes must be balanced by the ability of introspection.
Self-reflection and self-reassessment are part of the self. Some people are very emotional and energetic. Of course, these are all interrelated. The ability to focus is derived from vitality, and you must have extraordinary vitality.
Following Solomon's team spirit, the people Bill hired also had the potential and quality of team operation. Of course, excellent traders need innate conditions and acquired cultivation.
"At that time, the traders of Solomon Brothers were all that we call 'factory products'. Therefore, the company selects students who have just graduated from university, usually with at least an MBA degree, and then undergoes the company's years of training. Now, I think the financial industry has become more luxurious. Institutions often dig each other's corners and absorb traders who have been quite successful. I believe Solomon is the same."
"I don't think this is a good phenomenon. Personal loyalty and close cooperation of the team, both of which require the company's cultivation, each link is very important for the entire dynamic structure. The pressure of trading is great, and we are all mortals."
"The relationship between colleagues that can rely on each other is very important, and this dependence is not only taking care of positions but also includes ideas, enthusiasm, and encouragement. To cope with the possible changes in the future, it is very important to cultivate solid cohesion and team spirit."
"When hiring traders, what I observe are mostly academic conditions, of course, this is the lowest condition. You want to find some smart, responsive, and mathematically trained people."
"But these are already existing conditions, and a balance must be achieved between personal conditions and group cooperation spirit, which is the key to my decision-making for talents. In large institutions, no matter how much individual contribution is, the function of being a member of the team and the ability to respect the integrity of the team are the final factors that determine success or failure."
Believers in luck
What is luck? What is not luck?
Bill Lipschutz believes that luck plays an important role in trading. Luck is usually defined as the element that can lead to favorable results outside the individual's control range. How does to create more luck in trading?
Let us consider an element that can lead to favorable results outside the individual's control range. Let us consider a pedestrian trying to cross the road. He has no control over the cars on the road. He may or may not be hit by a car.
If you cross the road with your eyes closed, the luck factor of crossing the road completely is high. Compared to opening your eyes, the luck factor of crossing the road safely with your eyes closed is higher. If you open your eyes, you can better control the behavior of crossing the road, and you don't need to rely on the luck factor.
Of course, opening your eyes to cross the road does not guarantee that you will not be hit by a car, but you can grasp a higher success rate. Increasing the success rate, and enhancing the control ability of the whole event, is equivalent to reducing the luck factor required.
Because part of luck comes from lack of control, Bill Lipschutz strengthens control as much as possible other words, increases the success rate.
"I believe that a large part of trading success comes from luck. Of course, this is not the fact that you want to emphasize in the product prospectus. If you do this, the investor's response may be 'Oh! Here is a fund manager who tells me that everything is luck'."
"I don't mean that, I don't mean the kind of luck like 'rolling dice'. Successful traders are not gamblers. As a successful trader, the key is to continuously accumulate favorable odds and odds. The more you can steadily accumulate these odds, the more likely you are to achieve long-term success."
"There are many things in the market that are helpless or helpless, completely beyond the control of traders. Traders can only control wise analysis and wise bets. The so-called wisdom is to grasp the odds or increase the probability of favorable results."
"However, if you want luck to come to your head, you have to be in the position where luck is most likely to happen. You have to put yourself in a position where you can accept the opinions of others, be flexible, calm down, and try to understand new ideas. In this position, you are usually more likely to win the favor of luck. This is another way of saying 'try to accumulate odds as much as possible'."
Therefore, according to Bill Lipschutz's statement, if you want to be lucky, you must first let the odds stand on your side to increase the control ability and reduce the luck factor. Since you cannot obtain absolute control and completely exclude the luck factor, whether it is good luck or bad luck in the end, you have to see whether the actual result follows the probability distribution.
For example, roll a dice and bet that the result is 1, 2, 3, 4, 5. Probability theory tells you that this bet has a high chance of winning. But as Bill explained, whether the final result is a cold 6, this is the luck factor.
Knowing that you are in luck
In addition to accumulating odds and increasing the probability of favorable results, you also need to know when you are "in luck" so that you can make full use of the opportunity.
"Let's make an analogy. In some cases, you accurately establish a position that is almost certainly correct and certain to make money. But you didn't realize that the market's development far exceeded your original expectations, and you exited too early. So you missed a big market."
"'Quickly admit losses and let profits continue to develop', this principle is to let your few profitable positions play to the extreme. Of course, no one 'knows' what the final result of a trade will be. Generally speaking, whether it is to fully grasp a major profit market or to withdraw from a major loss position as soon as possible, there are some luck factors in it."
Therefore, although you are unlikely to know whether you are "in luck", you can accumulate odds and make full use of your opportunities.
Other aspects of luck, the luck of traders not only involves the luck of trading results but also various aspects of the trading environment.
"Luck also has many other components. You must have the right time and be in the right place. For example, if you are a trader of a company, the company's environment must allow you to seize the opportunity."
"What will be the final development if you work for a trading company? You may have traded junk bonds in the late 1980s, which was the big hit at the time; also in the late 1980s, you may have been assigned to trade municipal bonds, which was a cold market."
"So there is also a luck factor. In addition, some seniors in the industry may be willing to tell you some tips, saving you years of groping, which is also luck. In short, in the trading industry, luck is always an important variable." How does Jon Najarian create his luck in trading?