Famous Investors and Tips (+)

"Winning traders may be made, not born"

The Experiment

In 1983, Richard Dennis and William Eckhardt started the “Turtle Experiment” to prove that anybody could be taught how to trade successfully. After placing an ad in The Wall Street Journal, thousands of novice traders applied but only 14 would make it through the first "Turtle" program. The program proved very successful. By the end of the experiment, the novice traders had generated tens of millions of dollars.

The Turtles used a trend-following system focusing on entry and exit rules, position sizing based on market volatility, and risk management.

Read more: The Turtle Experiment by Richard Dennis

The Most Successful Forex Traders Ever

These are considered some of the most successful Foreign Exchange traders ever:

■ Andy Krieger

■ George Soros

■ Bill Lipschutz

■ Stanley Druckenmiller

(i) Andy Krieger

Andy Krieger is a Forex trader who made a lot of money by trading the New Zeeland Dollar or else the Kiwi. In 1987, the US Dollar faced enormous selling pressure and consequently, the other major currencies became fundamentally overvalued. Exactly that time, Andy Krieger placed very large selling orders on Kiwi. He managed to sell more currency than New Zealand could even supply (money supply) and by this way, he managed to gain billions of US dollars. He used the power of derivates (options) to leverage his funds and to achieve the Kiwi crush.

(ii) George Soros

George Soros is one of the most famous investors in the world. He was born in 1930 and graduated from the LSE (London School of Economics). George Soros in 1992 managed to gain 1 billion US dollars from a single transaction in just one day. He is known as the man who managed to “Break the Bank of England”.

(iii) Bill Lipschutz

Bill Lipschutz was born in New York in 1956. He is a Forex trader and the co-founder and Director of Portfolio Management at Hathersage Capital Management. He was awarded a B.A. in Cornell College in Fine Arts and a Masters Degree in Finance. Originally Bill Lipschutz was a Stocks trader, but afterwards, he became a Forex Trader. Bill Lipschutz managed to make over $300 million from Forex Trading in a single year.

(iv) Stanley Druckenmiller

Stanley Druckenmiller started his career as an oil analyst for the Pittsburgh National Bank and in 1988 started to work for George Soros.

Druckenmiller made his first grand trade after the collapse of the German Wall. Firstly he bought the German mark and after he bought German Bonds against the German Stocks. During that particular day, he managed to make 1 billion US dollars. This trade was in accordance with the attack of George Soros on the British Pound.

READ MORE:

◙ Paul Tudor Jones Tips

◙ Hedge Funds Market Wizards 2012

◙ New Market Wizards 1993

◙ Market Wizards 1989

■ The Most Successful Forex Traders Ever

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Linda's Trading Strategies

Linda Bradford Raschke began her professional trading career in 1981. She has been the principal trader for several hedge funds and started her hedge fund in 2002. Linda’s hedge fund was ranked 17th out of 4500 for best 5-year performance by BarclaysHedge. Linda retired as a CPO and CTA in 2015, however, she continues to trade daily for her account. Linda became a world-known trader through a dedicated chapter in Schwager’s book “The New Market Wizards”.

A Few Words about Linda's Trading Style

According to Linda, successful trading needs a good chart pattern, a sound research process, solid position sizing, and a good market read. Linda is not a 100% mechanical trader, however, she tries to systematize her processes as much as possible. She also mentions that if you do use a system it has to be your system.

Read more: Trading Advice from Linda Bradford Raschke

Paul Tudor Jones

Paul Tudor Jones is an American Trader founder of Tudor Investment Corporation. Paul Tudor long-term annual returns are close to 19.5%. Here are some important rules by this notorious trader.

MORE: ◙ Hedge Funds Market Wizards 2012 | ◙ New Market Wizards 1993 | ◙ Market Wizards 1989

■ I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms.

■ One principle for sure would be: get out of anything that falls below the 200-day moving average.

■ When you are trading size, you have to get out when the market lets you out, not when you want to get out.

■ First of all, never play macho man with the market. Second, never overtrade.

■ Don't ever average losers. Decrease your trading volume when you are trading poorly; increase your volume when you are trading well. Never trade in situations where you don't have control.

■ Don't be too concerned about where you got into a position. The only relevant question is whether you are bullish or bearish on the position that day.

■ Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible drawdown. Hopefully, I spend the rest of the day enjoying positions that are going in my direction. If they are going against me, then I have a game plan for getting out. Don't be a hero. Don't have an ego. Always question yourself and your ability.

■ When I trade, I don't just use a price stop, I also use a time stop. If I think a market should break, and it doesn't, I will often get out even if I am not losing any money.

■ When we came in on Monday, October 19, we knew that the market was going to crash that day. As the previous Friday was a record volume day on the downside. The same thing happened in 1929, two days before the crash.

■ Everything gets destroyed a hundred times faster than it is built up. It takes one day to tear down something that might have taken ten years to build.

■ The first is, you always want to be with whatever the predominant trend is. My metric for everything I look at is the 200-day moving average of closing prices. I’ve seen too many things go to zero, stocks and commodities. The whole trick in investing is: “How do I keep from losing everything?” If you use the 200-day moving average rule, then you get out. You play defense, and you get out.”

■ The sweet spot is when you find something with a compelling valuation that is also just beginning to move up. That’s every investor’s dream.

■ I’m looking for 5:1 Risk / Reward ratio. Five to one means I’m risking one dollar to make five. What five to one does is allow you to have a hit ratio of 20%. I can actually be a complete imbecile. I can be wrong 80% of the time, and I’m still not going to lose.

■ My contrarian trading was based on the fact that the markets move sideways about 85 percent of the time. But markets trend 15 percent of the time and you need to follow the trend during those times.

■ I love trading macro. If trading is like chess, then macro is like three-dimensional chess. It is just hard to find a great macro trader. When trading macro, you never have a complete information set or information edge the way analysts can have when trading individual securities. When it comes to trading macro, you cannot rely solely on fundamentals; you have to be a tape reader, which is something of a lost art form. The inability to read a tape and spot trends is also why so many in the relative-value space who rely solely on fundamentals have been annihilated in the past decade.

■ I am always thinking about losing money as opposed to making money. Don’t focus on making money; focus on protecting what you have. At the end of the day, the most important thing is how good are you at risk control.

■ I look for opportunities with tremendously skewed reward-risk opportunities. Don’t ever let them get into your pocket – that means there’s no reason to leverage substantially. There’s no reason to take substantial amounts of financial risk ever because you should always be able to find something where you can skew the reward-risk relationship so greatly in your favor that you can take a variety of small investments with great reward-risk opportunities that should give you minimum drawdown pain and maximum upside opportunities.

■ Only bet when the odds are substantially in your favor. Don’t bet unless you have a margin of safety.

Read more: Paul Tudor Jones Tips