What We Can Learn from the Three Wealthiest Traders Today 

 

When we talk of the wealthiest traders in forex, many remember people like George Soros, who made billions from shorting the British Pound in 1992. However, such intense speculative trading is not the way to go for beginner retail traders. This is why we carefully picked three other relatively obscure traders who have made fortunes trading forex, to see what lessons we could learn from them.

Bruce Kovner

Arguably the largest single trader in the interbank currency market, Bruce Kovner, former CEO of global hedge fund Caxton Associates (which has more than $14 billion in assets under management) stands tall as one of the wealthiest forex traders alive. By his own confession, one of the secrets to his success is his ability to stay rational and disciplined under pressure. He also offers some insights as to what makes some traders successful and other failures:

– Traders who make it are strong, independent, and contrary in the extreme.
– They are able to take positions others are unwilling to take.
– They are disciplined enough to take the right size positions.

Kovner is a firm advocate of trading within the risk limits by only trading the right size positions. This in itself requires discipline.

Bill Lipschutz

Bill Lipschutz attributes his success to the practice of studying and reading widely, as well as only taking trades that aim for high returns for every pip that is risked. This means looking for trades that can deliver 300 to 600 pips for every 100 pips risked. He does this by actively searching for support and resistance areas, using the breakout or reversal trade to take positions, while setting stops close to the support or resistance without fear of them being taken out.

The rationale behind his method that when the trades are successful, they can provide insurance against losses sustained on other trades setup with the same risk management parameters. For instance, if a trader sets up a trade looking to make 350 pips profit for every 100 pips risked and actually succeeds in 3 of such trades, (1,050 pips), it will have to take 10 losses of trades set with the same 100 pips stop loss to wipe off the profits. So a trader can even lose on 6 trades, and still walk away with at least 550 pips.

The key to this approach is to search for these opportunities and recognise when they come along. This is where the studying and reading habits of Bill Lipschutz come in.

Laura Pedersen

49-year old Laura Pedersen has the distinction of being one of the youngest traders on the floor of the American Stock Exchange, where she got an entry level job at 17 years of age. She learnt the art of forex trading very quickly and by 20, she became a partner at Spears, Leeds and Kellogg Investment Company. By the age of 24 years, Pedersen had become a forex millionaire.

Pedersen learnt how to trade forex while still studying at high school. She proved that it is possible to trade forex and combine it with a day activity such as attending school or keeping a day job. Two lessons can be learnt from her journey. Firstly, it may never be too young to start trading. Secondly, tenacity and focus got her to where she is today.

 

Find more: Contributing Authors 

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