Whether you are new to forex trading and learning forex or a professional, you probably have one dream in mind: success in the forex market. This article tells the stories of famous forex traders who have achieved great levels of success and also gives tips on how to become successful in this market.
How to become more successful in the trading profession?
One of the ways to improve and progress is to learn from successful examples, and getting to know the best and most successful traders in the world can be a good start. But who is the best forex trader? And how have they reached this level of success? By the end of this article, you will know the common characteristics of the top foreign exchange market traders and how these strengths have helped them earn huge profits.
You may have heard various published statistics that the ratio of rich traders to failed traders is small, but there are reasons why you should not pay attention to such news and claims. Firstly, due to the lack of concentration and the over-the-counter nature of the forex market, it is very difficult to gather accurate and correct information from traders. Additionally, there are many educational resources on forex trading strategies online that will help you improve your trading performance.
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Second, the graph of the distribution of successful and unsuccessful traders is expected to resemble a bell curve, meaning that:
- Very few traders fail completely
- Lots of small losing traders
- Lots of traders with little success
- Very few very successful traders
Data from forex and CFD companies (although this volume of data is a small fraction of the total forex market data) shows that traders rarely achieve very high levels of success. Most people give up as soon as they lose more than a certain amount, but the best traders keep going. There are slightly more traders with small losses than traders with small profits, which is mainly due to market spreads. Therefore, the percentage of successful forex traders is not much smaller than that of unsuccessful traders.
There is little doubt that successful traders are among the privileged and rare elite of societies. However, looking at a group of famous traders, we can see that these people have some things in common:
- Order , the ability to recognize wrong transactions and therefore reduce losses
- Loss control Having a correct and accurate understanding of the ratio of profit to loss of transactions
- The courage to want to be different from other people in society most of the time
- Alertness and shrewdness is the ability to correctly judge trends that shape market trends
Possessing the above characteristics results in obtaining large and continuous profits. So, without further ado, we will look at which types of traders have such characteristics, and at the same time, you will also see a list of successful forex traders around the world.
Top forex traders in the world
We start reviewing some success stories in forex with one of the legends of this field, George Soros. If the question were to be asked, “Who is the biggest forex trader?”, Soros’ name would definitely appear at the top of any list. Mr. Soros is known as one of the biggest investors in history. According to reports, his reputation as a money management legend is due to a profit of more than a billion pounds from a short sale on the British pound. He entered into this deal before Black Wednesday, September 16, 1992.
At the time, the UK was a member of the Exchange Rate Mechanism (ERM). According to this mechanism, the government was obliged to intervene directly if the value of the British pound against the German mark decreased more than a certain limit. Soros found that a combination of factors (including high UK interest rates at the time, and UK membership of the ERM at inappropriate rate levels) left the Bank of England (BoE) in a vulnerable position.
Britain was committed to maintaining the value of the pound when the pound weakened against the German mark, either by buying pounds or by raising interest rates, or both. But due to the economic recession, the increase in the interest rate would lead to damage to other aspects of the country’s economy. At the time, this practice prevented investment, while investors were required to come in. BoE economists had recognized that interest rates were too low to support the value of the pound as part of the ERM.
However, the value of this currency was maintained by the British general commitment to buy the pound.
During the weeks leading up to Black Wednesday, Soros sold the British pound through his Quantum Fund. On the eve of Black Wednesday, news was published by the head of the Federal Bank of Germany. This news indicated that some currencies will be under pressure in the future.
This news caused Soros to add a significant amount to the volume of his sell deal. When the BoE bought several billion pounds that Wednesday morning, they realized that the price of this currency had changed drastically. This change was caused by the high volume of transactions that other investors had sold this currency following Soros.
The last efforts by increasing the interest rate, which had reached 15% by default, were unsuccessful. When the UK announced its exit from the ERM and the resumption of the floating rate of the pound, the value of the pound fell by 15% against the German mark, and by 25% against the US dollar. As a result, Quantum Fund benefited billions of dollars and Soros became famous as the man who brought the Bank of England to its knees. This masterpiece deal of his made his name shine in the list of top forex traders.
Although the Soros pound sale transaction was very large, but at the same time, the ability to increase the value of the pound was relatively limited. Following his trade, the market did not show a desire to increase the pound. This was evident in the need for direct and frequent intervention of the British government to support the pound. Even if his trade ended in a loss and the UK could somehow remain in the ERM, price inertia would likely prevail and the pound would rise sharply.
This is where Soros’s strong understanding of the profit-loss ratio can be seen. This is one of the qualities that has made him famous as the best trader in the world. Instead of relying on the old economic theory that prices eventually move towards their equilibrium region, Soros found the theory of price elasticity more useful in determining the direction of financial markets.
This theory states that there is a feedback mechanism between perception and events. In other words, the traders’ understanding of the market forms the market price, and the price, on the other hand, confirms the traders’ perception. This theory has been implemented in his pound selling trade, meaning that the fall in the value of the pound occurred when enough traders believed that the BoE was no longer able to maintain the value of the currency.
In an interview with the Wall Street Journal, he said: I am rich only because I know when I am wrong. This sentence, in addition to showing his willingness to close wrong deals, also shows his high level of discipline in trading, which is the common feature of all successful forex traders. So George Soros probably tops this list as the most famous top forex trader, and certainly one of those who made the most money from a short-term trade.
The footprints of George Soros are also evident here. It is also not too strange and far from expected that this successful forex trader is related to the next trader on this list. Stanley Druckenmiller considers George Soros as his mentor. In fact, Mr. Druckenmiller worked for ten years at the Quantum Fund company and alongside George Soros. But Druckenmiller has earned his reputation through the successful management of billions of dollars at his venture capital fund, Duquesne Capital. He can easily be considered one of the top day traders in the world.
In addition to being a part of Soros’s famous Black Wednesday deal, Mr. Druckenmiller had the incredible record of making double-digit returns on the Duquesne fund for several consecutive years prior to his retirement. Druckenmiller’s net worth is estimated at more than $2 billion. Druckenmiller states that his trading philosophy for long-term profits is based on preserving capital, then increasing profits when trades are going well.
Instead, this method emphasizes on maximizing profits when making correct predictions and minimizing losses on wrong trades. As Druckenmiller said during an interview at the launch of the book “New Magicians of the Market”: There are many shoes on the shelf, put on a shoe that fits”.
Bill Lipchatz, without any experience in the currency market, was able to earn hundreds of millions of dollars in the forex portfolio of Salomon Brothers in 1980. Mr. Lipchatz, who is often referred to as the king of currency, describes forex as a very psychologically effective market. Sultan Aruz, like other successful forex traders, believes that traders’ perception of the market is as effective as news and fundamental events in determining price behavior.
Lipchatz also agrees with Stanley Druckenmiller that success in forex trading does not depend on your correct and accurate forecasting, because most of the time you are wrong. Instead, he emphasizes that traders should learn how to increase their profits with a 20-30% accuracy rate.
Other key principles of Lipchatz are:
- Before entering into any transaction, there must be logical reasons for it
- Enter the trade with the movement of the market in your desired direction and exit the trade in the same direction
- Reduce your trading volume by observing the first signs and symptoms of fundamental news and price behavior that indicate a change in the direction of price movement.
- You must be aware of the areas of market concentration
- Forex is a 24-hour market and it doesn’t stop when you sleep and rest
Lipchatz also emphasizes the necessity of loss management and says that the size of your trade should be chosen in such a way that if you enter the trade at the wrong time, you will not have to exit it early.
Without the name of Andrew Krieger, the list of top forex traders would be incomplete. A Wharton business graduate, Krieger joined Bankers Trust in 1986 after a stint with Salomon Brothers. At that time, he was known as one of the famous and passionate traders, and by impressing the senior managers of the organization, he was able to obtain permission to increase the volume of his transactions from 50 million dollars to 700 million dollars.
Following inflation in October 1987, when most markets had fallen by at least 20%, Krieger recognized that the New Zealand dollar had reached overbought territory. Therefore, he entered into the sale of the New Zealand dollar with a leverage of 400:1 and even exceeded the amount of liquidity in circulation of this currency. Within a few hours, the value of this currency moved by 5% against the US dollar, and as a result, Krieger made a profit of $300 million for his company. It is interesting to know that he later started working with George Soros.
Paul Tudor Jones
Arguably one of the top forex traders, Paul Tudor Jones entered the sell trade during the October 1987 market crash. According to 2018 statistics, his net worth is estimated at $4.5 billion, making him one of the richest day traders out there. Born in 1954, Jones received his degree in economics from the University of Virginia in 1976. Before entering the field of trading, he was an employee of the stock exchange.
Jones turned down the opportunity to study at Harvard Business School and worked as a commodity trader at the NYSE. Then he founded Tudor Investment Company. In October 1987, when the markets were falling, he was able to achieve a profit of 62% by selling trades. In the same year, he managed to earn 100 million dollars for his company. Tudor continued in the same way to raise his company to better positions. From 1992 to 1995, he served as chairman of the NYSE.
Michael Marcus is also among the top forex traders. He is one of the founders of Kala Trading Company. Trained by Ed Cicotta, he later trained another successful trader named Bruce Kovner. During the presidency of Ronald Reagan, the volume of Marcos’ transactions on the German mark reached nearly 300 million dollars. It can be said that next to the banks, he was considered the biggest trader of the German brand at that time.
How successful is a successful forex trader?
In this article, we introduced the greatest forex traders, and there are certainly many successful traders that you can emulate. But remember that although there are many professional traders who trade with powerful strategies, there are different methods for different people. It is not an impossible goal to be able to join the group of traders who earn continuous income every month through forex. But you must plan your trading plan first.