The definition of trading success is tricky. It depends on perspectives. When it comes to forex trading, the first thing to decide upon is what your goals are and how you define success. At the same time, you need to set quantifiable and realistic goals. Then, you can go on to decide your trading assets, strategy, timeframe and technology tools. This is the part where you have to be diligent about choosing a regulated broker to support your trading.
Although a tough landscape, the forex market has seen its share of successful traders. These wise players have cultivated cult personas, through years of hard work, perseverance, discipline and patience. New and experienced traders have a lot to learn from their experiences.
Let’s see what some of the most celebrated traders have to say about trading efficiently.
“I’m only rich because I know when I’m wrong… I basically have survived by recognising my mistakes.”
One of the greatest traders of all time, George Soros is often called “The man who broke the Bank of England.” Soros and his firm shorted the Pound Sterling heavily in the Black Wednesday crash of 1992, making a profit of $1 billion in a single day.
In the above quote, Soros states that successful traders should be able to learn from their mistakes, in order to survive in the market for the long term. Many traders tend to hold on to losing position, thinking that the markets will soon turn around in their favour. This can lead to extreme losses. Soros also teaches here that no trader can be termed “perfect.” Even the most successful traders, including George Soros, have made mistakes. But it is those mistakes that can teach useful skills to succeed in the future.
“If a trader is motivated by the money, then it is the wrong reason. A truly successful trader has got to be involved and into the trading, the money is the side issue… The principal motivation is not the trappings of success. It’s usually the by-product – simply stated, “the game’s the thing”.”
Another widely followed trader in the forex community, Bill Lipschutz joined Salomon Brothers as a trainee, after graduating from Cornell University. He then went on to work for Salomon Brothers’ newly opened forex department. There he made $300 million for the firm, within a few years. Over the next few years, he proceeded to open his own hedge fund, which is still in operation.
Through the quote, Bill stresses that in order to be successful, you have to be passionate about trading. Not even the most successful traders make only consistent profits. Losses are part of the game. Therefore, it is passion that helps traders keep at it, even when the going gets tough. Of course, making money is the objective, but love for the financial markets will be a huge driving force. To be truly successful, trading cannot be taken as a part-time hobby.
“The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.”
Hedge fund manager and investor Paul Tudor Jones is known for his speculative trades in interest rates and currencies. Tudor Investment Corporation was founded by him in 1980, and for years it gave double digit annual returns. With an estimated net worth of $5.1 billion, Paul is one of the most successful currency traders in the world.
Paul says that every true trader wants to learn more about the markets. One has to consistently find new strategies that can be used to make trading easier. If a trader thinks that they have it all figured out, that could lead to stagnation. This is because the markets change every day, and there is always something new to learn.
“Risk management is the most important thing to be well understood. Undertrade, undertrade, undertrade is my second piece of advice. Whatever you think your position ought to be, cut it at least in half.”
Kovner, like all great traders, learnt that success comes the hard way. From humble beginnings as a taxi driver to a billionaire trader, Bruce is an inspiration for traders. He lost a considerable amount of money early on in soybean trading, which made him realise the importance of risk management. Today, he is known as one of the best macro traders in the business.
In this quote, Bruce talks about not only the importance of risk management, but also the value of having a defined risk-reward ratio. The amount of risk you take on and the money management principles you apply are important for long term returns. Retail traders often trade more than they need to. But, rather than over trading, it’s critical to find high probability setups. Bruce also advises against using a large portion of one’s capital in a single trade. This is especially true for novice traders.
“If you’re extremely confident, taking a loss doesn’t bother you.”
Stanley Druckenmiller learnt from George Soros and was, in fact, a part of the team that shorted the 1992 crash. From 1988 to 2000, he managed money for Soros’ Quantum Fund, and also founded his own hedge fund, Duquesne Capital Management, worth $12 billion in 2010.
Here, Druckenmiller says that losses are a regular part of trading. Traders need to be focused on protecting their gains, rather than concentrating on losses. Druckenmiller goes on to say that his own mentor, George Soros, was one of the best loss takers he has ever seen. Soros taught him to walk away from losing positions and on to the next winning trade. This is a crucial lesson in forex trading. The aim is to achieve more wins than losses, rather than getting bogged down by the latter.
There is no guaranteed formula for success in the forex market. Instead, with a combination of efficient trading tools, good risk management and a robust trading strategy, you can try to negotiate the markets sensibly.