Each trader creates their trading path. They usually learn from the experiences of past traders and apply that knowledge. There is no hard and fast rule that any investor can blindly trust for success in their trading journey. While no quote or trading tip will make you a successful trader on its own, insights from successful traders can tell you where you should be focusing your attention, and what you should be working on.
Greatest traders of all time
- Jesse Livermore
Jesse Lauriston Livermore (1877–1940) was an American trader famous for both colossal gains and losses in the market. He successfully shorted the 1929 market crash, building his fortune to $100 million. But he lost his money by 1934 and tragically took his own life in 1940.
- William Delbert Gann
WD Gann (1878–1955) was a trader who used market forecasting methods based on geometry, astrology, and ancient mathematics. His mysterious technical tools included Gann angles, Gann fans, and the Square of 9. Gann wrote a number of books and taught courses in addition to trading. It’s said that his favorite book and learning tool was the Bible.
- George Soros
The name George Soros is notorious in trading and Soros remains among the most active and wealthiest traders as of 2023. He’s said to have amassed approximately $6.7 billion.
Soros is the chair of Soros Fund Management, one of the most successful firms in the history of the hedge fund industry. He earned the moniker “the man who broke the Bank of England” in 1992 after his short sale of $10 billion worth of pounds, yielding a tidy $1 billion profit.
- Jim Rogers
James Rogers, Jr. (born 1942) is the chair of Rogers Holdings. He co-founded the Quantum Fund along with George Soros in the early 1970s and it gained a staggering 4,200% over ten years.
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- Richard Dennis
Richard J. Dennis (born 1949) was known as the “Prince of the Pit.” He made his mark in the trading world as a highly successful Chicago-based commodities trader. He reportedly acquired a $200 million fortune over ten years from his speculating but what’s notable is that he reportedly started with just $1,600.
- Paul Tudor Jones
Paul Tudor Jones II (born 1954) is said to have earned about $7.5 billion as of 2023 and he remains active. The founder of Tudor Investment Corporation, one of the world’s leading hedge funds, Tudor Jones gained notoriety after making around $100 million from shorting stocks during the 1987 market crash after predicting it on a television documentary.
- John Paulson
John Paulson (born 1955), of the hedge fund Paulson & Co., rose to the top of the financial world after making billions of dollars in 2007 by using credit default swaps to effectively sell short the U.S. subprime mortgage lending market.
It’s said that his $4.4 billion fortune was largely earned by building the wealth of others but he lost a significant amount of his own money by 2020 due to some missteps taken on pharmaceutical, healthcare, and gold stocks. Numerous investors left his hedge fund as a result
- Steven Cohen
Steven Cohen (born 1956) founded SAC Capital Advisors, a leading hedge fund focused primarily on trading equities. SAC was charged by the Securities and Exchange Commission with failing to prevent insider trading in 2013 and later agreed to pay a $1.2 billion fine.
Cohen started out by investing money he had earned while playing cards in college. It’s said that he earned $8,000 on his first day at the investment banking firm Gruntal in 1978 before moving on to found SAC. He’s the founder and CEO of Point72 Asset Management in Stamford, Connecticut
- David Tepper
David Tepper (born 1957) is the founder of the wildly successful hedge fund Appaloosa Management. Tepper is a specialist in distressed debt investing. He began his career as a credit analyst and became famous for tagging distressed companies then rolling up his shirtsleeves and guiding them into profitability. He then proceeded to purchase bank bonds.
- Nick Leeson
Nicholas Leeson (born 1967) is the rogue trader who famously caused the collapse of the UK-based Barings Bank. Leeson served four years in a Singapore jail but later bounced back to become CEO of the Irish football club Galway United. Leeson’s success is notable because he didn’t pursue further education after high school.
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Tips and Tricks from Millionaire Traders
Here are a few tips and tricks that millionaire traders have shared:
- Don’t be afraid to cut losses
Risk control is one of the most important things in trading. If you have a losing position it’s advisable to get out, because you can always get back in. Loss aversion, unwillingness to cut a loss, is one of the most common trading problems and can deplete an account quickly.
- Learn Controlled Losing
Learning how to lose is equally important as learning how to win. Trading is always two steps forward, one step back. Make sure the steps back don’t erase everything you have done before
- Manage your risk
The stop-loss order is one of the simplest ways to control risk. Instead of focusing on avoiding loss, the best approach is to look to make your wins bigger.
- Be realistic
No successful trader is right in his trade choices every single time. In fact, millionaire traders make money from their trades by being correct only 20% – 30% of the time. Hence, always be realistic and never expect to be profitable in every trade.
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Some of the most important traits for success include focus and passion. No doubt, these traits are also beneficial for traders who trade the markets, but they are not enough to see them through. Traders should know how to leverage their positions to boost returns and manage risk. Successful trading is technical and partly psychological; therefore, a great trader has to have a mix of winning character traits.
All great traders throughout history were masters at cutting their losses. Loss is inevitable in the trading world. However, capital preservation keeps alive in the investor world. In order to be successful in the trading world traders have to manage their losses and make efforts towards cutting losses. If they focus solely on avoiding losses then they can never be a successful trader. Successful traders are not those who avoid losses. But those who incur losses and know how to keep them at a bare minimum. Traders should work around this rule. Remember, the sooner you accept defeat, the sooner you will move on.
Consistency is the key to being the best in what you do. If you want to be the best, you have to be consistent. Consistency comes in every approach you follow throughout your trading journey. You pick a trading strategy, for example, Swing Trading, Position Trading, Day Trading, position trading, and/or Scalping. Once you feel comfortable with it stick to it and do not shift focus with every loss.
Many traders fail because they put unnecessary focus on their day-to-day profit and loss. Rather, they should know the best trading times and capitalize on them.
The old saying, “patience is a virtue” is applicable to the world of trading. Patience also happens to be the main virtue that most traders are deficient in, and this helps explain why most traders fail to make consistent money, or any money in the market. There is a positive correlation between the equity curve of your trading account and the amount of patience you possess as a trader. In other words, focusing on developing and maintaining patience while trading the market will cause your equity curve to rise much more consistently than not paying any attention or little attention to patience, as most traders do.
If you are a beginner, do not expect to make big profits right off the bat. You need the patience to learn the ropes and understand what the markets offer and how they work. A successful trader will be quick to take losses and slow to make profits. Do not be in a rush to take profits, develop consistent trading strategies and your profits will slowly accumulate. Traders should always be patient with the markets and only trade when they will get the most out of it.
Discipline in trading is the ability to stick to a set of rules and a broad trading plan, irrespective of the market conditions or emotions. It is the foundation of trading success and involves risk management, patience, practice, and consistency. To build trading discipline, one can write down the trading plan, find a compatible trading approach, visualize the trading process, avoid distractions, learn from mistakes, and develop a trading perspective.
Great and successful traders alike are highly disciplined. They not only identify opportunities but also do extensive research, and come up with strategies and exit tactics. They never lose their focus and do all that they can to attain their goals. In order to practice discipline, you must devise an independent trading strategy that will be a perfect fit for you.
Always Learn from the Markets
Great traders evolve with evolving markets. The moment you engage in learning new things, you will discover new trading opportunities that others will not realize.
By staying informed, learning from experts, practicing with demo accounts, managing risks effectively, keeping a trading journal, and maintaining discipline, traders can develop their skills and increase their chances of profitability.
Great traders are inquisitive. They know how to step back and go through each trade in order to develop new and unique trading strategies. If they encounter a loss, they ask what they could have done differently. No matter how many times they fail, their inquisitive nature allows them to learn from others and use the right techniques to acquire profits.
Inquisitiveness is the drive to ask the hard, probing questions needed to drill down to the nub of the issue at hand: the complete facts of a particular situation or problem, the key drivers of an organization’s revenues and profits, the critical risk factors that could impede a company’s success, the motivations of individual who work for the company and others that the company does business with.
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The 5 Trading Lessons from Successful Traders
- Only Buy Strong Stocks in a Bull Market and Only Short, Weak Stocks in a Bear Market – When this index is in an uptrend, focus on taking long trades in the stocks that are strongest. When the index is in a downtrend, focus on taking short trades in stocks that are the weakest.
- If You Don’t Have a Trade Setup, Don’t Trade – Developing a strategy and a trading plan takes time and work, but once in place, all you need to do is follow it. If the market isn’t providing trade setups based on your trading plan, then you shouldn’t trade.
- Trade With Stop Loss Orders, and Know What That Level Is Before You Take a Trade – There is a 50% probability of every trade ending in losses. Therefore, always use a stop-loss order, and make sure that it gets you out of the trade if the stock drops to your stop-loss price level. Successful day traders know when, where, and how they’re going to get out before they even place the trade.
- Don’t Average Down – Averaging down is when you add money to a losing position. If you already have a full position then adding to that position when it’s losing money is a bad investment decision. Averaging down can deplete your capital very quickly, especially if done multiple times, as the price keeps going against you.
- Don’t Follow Too Many Stocks – Focus on trading the strongest stocks in a bull market and the weakest stocks in a bear market. It limits the number of stocks you trade to a handful. The more stocks being watched, the more likely it is you’ll miss the important moves you’re waiting for.
Habits Of Highly Successful Traders
- Use A Positive Expectancy Model
A positive expectancy model creates more profits than losses that average out to profitability over time. A positive expectancy means you have an edge, that when you average out all the wins and losses you make money. If you divide your total profits by your total trades, you have a profit factor and have a positive outcome. A successful trader expects that if they place a certain amount of trades they will be profitable at the end of the sequence of entries and exits based on their statistical and systematic edge.
For every trader no matter what trading method they use on any timeframe, if they don’t have a positive expectancy trading model then they have no edge and will likely have no long-term profits.
- Use A Dynamic Trading Strategy
Trading dynamically means reacting and adapting to what the market price action is telling you. It means following a plan created to maximize wins and minimize losses. A trader can’t control:
- The price movement.
- The outcome of a trade
What they can control is:
- When they enter a trade.
- When they don’t trade.
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- The price they exit to stop a loss.
- The price target they will exit at to lock in a gain.
- To use a trailing stop loss to let a winner run.
- The position sizing for a trade.
- Their plan is to manage a maximum loss with the combination of position sizing and a stop loss.
- The technical indicators to use for signals.
- How their emotions are managed.
- The lessons they learn from every trade.
- Whether to keep trading or quit.
The dynamic of flexibility is a trait of most successful traders while stubbornness and arrogance is the factor that usually leads to ruin as opinions and trades become fixed.
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- Create Asymmetric Trades
The key to profitable trading is creating asymmetrical risk/reward ratios that are in your favor. Equal profit targets along with the same level as your stop would be considered symmetrical. Most traders do the worst thing they can by creating asymmetrical risk against themself. They take large position sizing going after small moves but will hold losing trades hoping to get back to even creating large losses. Risking a lot to make a little is the opposite of a favorable risk/reward ratio.
Successful traders limit their downside risk tightly with stop losses but leave their upside profit potential open with trailing stops and profit targets. This is what is meant by cutting losses short and letting winners run.
- Mental Model Of Success
The way a successful trader thinks can be at the core of their profitability. Having faith in the way you operate and execute trades is half your success. Don’t waste time and energy with self-doubt and second-guessing your investment decisions.
Successful traders, learn, adjust, and grow. They bring passion and energy to their trading and have confidence in themself to navigate the markets and create profits using their system. Their passion creates the energy they need to do the work to achieve success and then maintain their level of high performance. Successful traders think very differently from the majority who never make it. At their core, you will find positivity, passion, focus, and love for the game.
- Experts On Their Method
Successful traders are experts in their chosen method, markets, and time frame. They don’t attempt to master all traders just the one they have chosen and stick to it. It’s easier to win at a method you are an expert in than pursue things you don’t fully understand due to the fear of missing out on opportunities.
- Confluence Of Profitable Dynamics
Successful traders have created a confluence of the three required parameters for profitable trading.
- A winning system
- Right Risk Management
- Correct Trading Psychology
Trading a winning system using the right risk management along with correct trading psychology. If any of these three building blocks are missing then profitable trading will not be achieved.
- If you have a winning system with proper risk management but the wrong trading psychology you will have no discipline to follow it.
- If you have a winning system with the right trading psychology but no risk management you eventually will lose your account in ruin.
- If you have the right trading psychology and good risk management but no winning system you will have no edge leading to profitability.
- Hunger to Win
The biggest determinant of successful traders from others was their hunger to succeed. The successful traders had the hunger and desire to win. Trading was the game they chose and much like the greatest professional athletes their edge came from wanting to win. Their desire drove them to do the necessary work to achieve their goals.
Successful traders focus on their trades exclusively. They devise their strategies to capitalize on the strengths and neutralize the weaknesses. Successful traders are less concerned with how they measure up to others. They are more focused on themselves and how they are performing according to the standards they set for themselves. They make rational decisions and establish realistic goals. They recognize the importance of adapting their decisions according to the market situation and they own their profits and losses both.
Needless to say, above all, no success is achieved overnight. It takes time to learn and practice and countless losses to eventually succeed in the trading world. More importantly, success is not only measured by the profit figures on your portfolio but also by how consistently you have been practicing and learning and have perfected your trading strategy.
Anyone can make a profit simply because of random price movements. Successful traders focus more on controlling risk than dodging losses. Have a trading plan, control risk, and focus on creating strategies that will keep you in profit or steady even if you only win three or four trades out of 10.