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What Can We Learn from Successful Traders?

Although at times trading can seem like banging one’s head against a wall, there is light at the end of the tunnel.

There are traders – some legendary and some unheard of – that extract money out of the markets on a consistent basis.

So the question is what can we learn from these individuals?

George Soros

It would be remiss of us not to mention the man, the legend, Mr George Soros.

Soros sealed his reputation as a legendary money manager on September 16, 1992 – later dubbed Black Wednesday. He reportedly profited more than $1 billion shorting the GBP on speculation that the British government would be forced to break from the European Exchange Rate Mechanism, and allow the pound to devalue relative to other currencies. This cemented his reputation as a premier currency speculator. From then on, Soros earned the title of ‘The Man Who Broke the Bank of England’.

He recognized his mistakes. This should strike a chord with almost every trader reading this! How many times have you made the same mistake over and over again, and lost money as a direct result? Identifying these mistakes not only helps your bottom line, but it’ll also help you grow as a trader. We LEARN from our MISTAKES.

Another poignant gem from Soros:

Soros’ quote really drives home that you can make money in this business EVEN if you do not win the majority of your trades! We touch on this subject here Thinking in probabilities and also here Risk-Reward Ratio. At its most basic, though, traders should understand that as your reward on each trade increases, the number of winning trades required can diminish.

Stanley Druckenmiller

Although not as well known as Soros, Stanley Druckenmiller is another legend of the business.

Until 2000, he worked for Soros. The duo famously bet against the British pound in 1992 and, as mentioned above, made huge profits.

Druckenmiller made it big as a hedge fund manager for 30 years. The man averaged more than 30% returns over THREE decades! He had very few losing quarters and did all of this trading size. From what we can gather he was the perfect trader, possessing mental flexibility and the ability to think independently.

Interestingly, Druckenmiller noted that he learned many things from Soros, but perhaps the most significant was the quote highlighted above – ‘it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong’. This stresses the importance of this statement even more!

A quote that particularly stands out from Druckenmiller, however, is:

We traders can surely relate to this, right?!

Ever found yourself deviating from your trade plan and entering no man’s land? Of course you have. We’re all guilty of this! Focusing on only those setups clearly defined in your trading methodology and leaving out the grey areas is one of the key elements to staying consistently successful.

Trader A

Trading quietly in the background, yet controlling a reasonably hefty account, Trader A is an interesting character. For the sake of identity, we’ll not be using his real name.

Unlike Soros and Druckenmiller, we were able to get up close and personal here.

Trader A travels a lot and is essentially trading on the go using a laptop and two compact monitors. It may surprise you that his account is in the high six figures, and uses price action as a central trading medium. During our conversation, he emphasized the following points:

  • Discipline is essential. He believes this can be learnt.
  • Having a well-defined trading plan is also vital.
  • He mentioned that he risks no more than 0.5% of his account on each trade. He added that once your account is large enough you can essentially take less risk. To begin with, though, his risk was a strict 1.5% on each trade.
  • Recording each and every trade is worthwhile for research. It helps recognize mistakes you may not otherwise be cognizant of during the trade.
  • Although he considers himself an intraday trader, he does not feel compelled to trade every day. In fact, he mentions that he regularly has days where the market offers him little opportunity to trade.
  • ‘Trading should be as easy as making a good cup of tea’. Yes, he’s British!

In an effort to extend his last point, he went on to explain that trading is simple and that it is the trader who complicates things. Focusing on one’s psychology and thinking in probabilities are the keys he emphasized, and then it is simply a matter of finding your setup and executing as per your trade plan.

Just to be clear here, Trader A has NO financial background and is in no way advising that you copy his trading plan. It took nearly nine years of grit and determination before he saw results.

What can we take away from these traders?

Several things!

  • Be quick to recognize mistakes. Keep a journal!
  • Have a trade plan and do not deviate.
  • Only trade setups that are black and white – pass on the grey areas.
  • Think of trading in terms of probabilities, not in terms of being right or wrong!
  • Trading should be simple. Do not overcomplicate things.
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