Top Three Most Successful Forex Traders Ever
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Whether you are completely new to trading Forex, or a seasoned trader on the currency markets, you are likely to share one key aspiration: becoming successful in the Forex markets. This article will delve into the stories of the famous professional FX traders who became highly successful, and it will also provide you with tips on how to become successful yourself!
How Do I Become More Successful at Trading?
One way to improve is to learn by example, and a good starting point is to find out who is the greatest forex trader in the world. But who is the best Forex trader? And how did they become successful? In this article, you'll learn about what the most successful currency traders have in common, and how those strengths helped them to achieve huge profits.
While you may have heard statistics thrown around suggesting that the ratio of the richest Forex traders to unsuccessful ones is small, there are at least a couple of reasons to be skeptical about such claims. Firstly, hard data is difficult to come by on the subject because of the decentralized, over-the-counter nature of the Forex market. But there is plenty of educational material and working Forex trading strategies available online to help you to improve your trading performance.
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Secondly, we would expect the distribution of successful traders and unsuccessful traders to follow something of a bell curve, meaning that there would be:
- very few significantly unsuccessful forex traders
- a great number of small unsuccessful traders
- a great number of small winners; and
- very few large winners
The data that is available from Forex and CFD firms (albeit a very small slice of the vast global FX market) suggests that it's rare for people to become hugely successful traders. Most people stop once they start losing beyond a certain threshold, whereas the big winners continue trading. The number of unsuccessful traders slightly outweighs the number of small winners, mainly because of the effect of market spread. So the percentage of successful Forex traders is not substantially smaller than the unsuccessful ones.
There is little doubt that the most successful traders are an elite few. However, by looking at a select group of famous traders we can see that they have a few things in common:
- Discipline—the ability to recognise when a trade is wrong and therefore minimise losses
- Risk control—having a strong understanding of a trade's risk/reward (You can read more about this in our risk management guide)
- Courage—the willingness to be different from the rest of the crowd, most of the time
- Astuteness—judging how perceptions are shaping market trends
The upshot of these characteristics has largely been consistent and large profits. So without further ado, let's find out which professional traders exhibit these characteristics and more, with our list of successful Forex traders from all around the world!
The World's Best Forex Traders
Let's begin our review of some of the best Forex success stories by looking at one of the industry's legendary beacons of good fortune, George Soros. If we were to ask, "Who is the greatest forex trader? " Soros' name would certainly always figure high on any list. Mr Soros is known as one of the greatest investors in history. He sealed his reputation as a legendary money manager by reportedly profiting more than £1 billion from his short position in pound sterling. He famously did so ahead of Black Wednesday, 16 September 1992.
At the time, Britain was a part of the Exchange Rate Mechanism (ERM). This mechanism required the government to intervene if the pound weakened beyond a certain level against the Deutsche Mark. Soros successfully predicted that a combination of circumstances—including the then high level of British interest rates, and the unfavourable rate at which Britain had joined the ERM—had left the Bank of England (BoE) vulnerable.
Britain's commitment to maintaining the pound's value against the Deutsche Mark involved intervention in the form of either buying sterling or raising interest rates when the pound weakened, or both. The recession meant that higher interest rates were detrimental to the rest of the economy. This hindered investment at a time when encouragement was needed instead. Economists at the BoE recognised that the appropriate level of interest rates were far lower than those required to prop up the pound as part of the ERM.
But the value of sterling was maintained because of the UK's public commitment to buying sterling.
In the weeks leading up to Black Wednesday, Soros used his Quantum Fund to build a large position short of sterling. But on the eve of Black Wednesday, comments came from the President of the German Bundesbank. These comments suggested certain currencies could come under pressure.
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And this led Soros to increase his position considerably. When the BoE began buying billions of pounds on that Wednesday morning, it was found that the price of the pound had hardly moved. This was due to the flood of selling in the market from other speculators following Soros' lead.
A last ditch attempt to hike UK rates that had briefly hit 15% proved futile. When the UK announced its exit from the ERM, and a resumption of a free-floating pound, the currency plunged 15% against the Deutsche Mark, and 25% against the US dollar. As a result, the Quantum Fund made billions of dollars and Soros became known as the man who broke the Bank of England. His feat can easily be featured in the list of the greatest forex traders to follow.
Want to know the best part?
Although Soros' short position in the pound was huge, his downside was always relatively restricted. Leading up to his trade, the market had shown no appetite for sterling strength. This was demonstrated by the repeated need for the British government to intervene in propping up the pound. Even if his trade had gone wrong, and Britain had managed to stay in the ERM, the state of inertia would have more likely prevailed, and have led to a large appreciation in the pound.
Here we see Soros' strong appreciation of risk/reward - one of the facets that helped carve his reputation as arguably, the best Forex trader in the world. Rather than subscribing to the traditional economic theory that prices will eventually move to a theoretical equilibrium, Soros deemed the theory of reflexivity to be more helpful in judging the financial markets.
This theory suggests there is a feedback mechanism between perception and events. In other words, the perceptions of market participants help to shape market prices, which in turn reinforce perceptions. This was played out in his famous sterling short, where the devaluation of the pound only occurred when enough speculators believed the BoE could no longer defend its currency.
He once told the Wall Street Journal "I'm only rich because I know when I'm wrong". This quote demonstrates both his willingness to cut a trade that is not working, and the high level of discipline that is shared by the most successful Forex traders. So George Soros is number 1 on our list as probably one of the best known 'world's most successful Forex traders', and certainly one of the globe's highest earners from a short term trade.
George Soros casts a long shadow. and it shouldn't come as too much of a surprise that this successful Forex trader has ties to the next trader on our list. Stanley Druckenmiller considers George Soros his mentor. In fact, Mr. Druckenmiller worked alongside him at the Quantum Fund for more than a decade. But Druckenmiller has established a formidable reputation in his own right, successfully managing billions of dollars for his own fund, Duquesne Capital. He can easily be considered as one of the best day traders in the world.
As well as being part of Soros' famous Black Wednesday trade, Mr Druckenmiller boasted an incredible record of successive years of double-digit gains with Duquesne, before his eventual retirement. Druckenmiller's net worth is valued at more than $2 billion. Druckenmiller says that his trading philosophy for building long-term returns revolves around preserving capital, and then aggressively pursuing profits when trades are going well. This approach downplays the importance of being right or wrong.
Instead, it emphasizes the value of maximizing the opportunity when you are right and minimizing the damage when you are wrong. As Druckenmiller stated when interviewed for the celebrated book 'The New Market Wizards', "there are a lot of shoes on the shelf; wear only the ones that fit."
Oddly enough, Bill Lipschutz made profits of hundreds of millions of dollars at the FX department of Salomon Brothers in the 1980s - despite no previous experience of the currency markets. Often called the Sultan of Currencies, Mr Lipschutz describes FX as a very psychological market. And like our other successful Forex traders, the Sultan believes market perceptions help determine price action as much as pure fundamentals.
Lipschutz also agrees with Stanley Druckenmiller's view that when you are considering how to be a successful trader in Forex, it is not dependant on being right, and it is more often that you are wrong. Instead, he stresses that you need to work out how to make money when being right only 20 to 30 percent of the time.
Here's some of Lipschutz other key tenets.
- Any trading idea needs to be well reasoned before you place the trade
- Build a position as the market goes your way and exit the same way
- Start to ease up once there are signs that the fundamentals and the price action are beginning to change
- There is a need to be aware of the market's focus
- FX is a 24-hour market, and doesn't stop moving when you go to bed
Lipschutz also stresses the need to manage risk, saying that your trading size should be chosen to avoid being forced out of your position, if your timing is inexact.
A list of the best forex traders in the world is incomplete without the mention of Andrew Kreiger. A graduate from the Wharton School of Business, Kreiger joined the Bankers Trust in 1986, after a stint at Salomon Brothers. He was considered one of the most aggressive and famous traders of that time, impressing the top management so much that they granted him a trading limit of $700 million, against the normal limit of $50 million.
In the aftermath of the October 1987 crash, where most markets went spiraling downwards by at least 20%, Kreiger identified the New Zealand dollar to be highly overvalued. He went short on the currency at a leverage of 400:1; exceeding the actual circulating liquidity of the currency. Within a few hours the currency moved 5% against the US dollar, Kreiger ended up making $300 million for his company. Interestingly, he went on to work with George Soros in the future.
Paul Tudor Jones
Easily one of the best forex traders ever is Paul Tudor Jones, who also shorted the October 1987 market crash. He is one of the richest day traders alive today, with a net worth at $4.5 billion as of 2018. Born in 1954, Jones earned a degree in Economics from the University of Virginia, in 1976. He actually started his career as a clerk on the trading floor.
Turning down an opportunity to go to Harvard Business School, Tudor Jones went on to work as a commodities trader in the NYSE. He established his own firm, Tudor Investment Corporation. In October 1987, when the markets were crashing, he managed to make a profit of 62%, just by holding short positions. He went on to earn $100 million that year for his company. Tudor Jones went on to take his firm to new heights. From 1992 to 1995, he was the Chairman of the NYSE.
Michael Marcus is amongst the best professional FX traders in the world. He is the founding member of the Commodities Corporation Company. Trained by none other than Ed Seykota, Marcus would later go on to mentor another great trader, Bruce Kovner. During the Ronald Reagan era of presidency, Marcus held positions of almost US$300 million in German marks. It can be said that along with banks, he was the largest currency trader in German marks at that time.
How Successful is a Successful Forex Trader?
We've looked at the biggest Forex successful traders, and there are certainly many more successful forex traders to follow But remember, while there might be many professional fx traders out there trading with seemingly foolproof trading strategies, different techniques work for different people. Joining the list of traders who are able to consistently turn a profit each month trading FX is certainly an achievable goal. But you need to develop your own forex trading plan first.
So What's the Bottom Line?
Well, even the most successful trader had to begin somewhere and if you can regularly generate profits - you can consider yourself a successful Forex trader. Hopefully this article has given you some insights into traits shared by the most successful Forex traders. If you would like to learn more about forex trading and potentially join the growing list of Forex masters in the future, we recommend you to check out our guide on How to Become a Successful Forex Trader, which provides the basics of forex trading, together with, some professional tips and ideas for trading strategies.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the