For ordinary retail traders who try to get by with a decent winning percentage in their trading and also dream of being able to be a full-time trader one day in the future, the title of being one of the top forex traders in the world would be a coveted one, a dream in fact. But for those who are really in the top league managing billions of dollars in funds in the forex market and who earn millions almost every month, that crown would sit lightly.
It is difficult to truly classify someone as one of the greatest forex traders as it is quite subjective. In fact, it is impossible to answer the question of who is the best forex trader. There are no fixed criteria for someone to be looked upon as a very good trader as what constitutes that varies from person to person. While most retail traders would like to classify traders purely based on the returns that a trader generates, other mature and professional traders are likely to apply many more criteria like drawdown, Sharpe ratio, assets under management, etc. But over a period of time, there emerges a consensus on who the most successful forex traders are and there is likely to be very little debate on the list below and we hope that the forex traders stories inspire others to follow suit:
There can be little doubt over the man who is top of the list of any top 10 forex traders in the world and on top of almost every list that anyone associated with the FX markets would make. Soros is considered by many as the best forex trader in the world, even now. Soros is probably not just the top forex trader but also the most famous one as well and who is credited with taking FX trading to the masses and making it appealing to all. Soros is most probably the answer to the question of who is the most successful forex trader.
Every field needs someone that others can look up to and get inspired and for Forex, that person must be Soros. He is also infamous for bringing down the UK Sterling in 1992 and making a billion dollars in this process though it is quite unclear on how much he was responsible for the fall and whether it was more due to the mismanagement by the Bank of England than any action from Soros himself.
The root cause for the fall was the fact that the BoE was involved in the ERM (Exchange Rate Mechanism) by which it had to maintain the Sterling at a specific level against the Deutsche Mark. Time and again, history has shown that this action of propping up a currency against another would never work in the long run and the same happened in this case as well.
To Soros’ credit, he did see the opportunity that presented himself as he deduced that a combination of high-interest rates that were prevailing and the rate at which the BoE entered the ERM would make it unsustainable in the long run and so he started building a short position on the pound sterling.
The BoE was forced to keep buying the Sterling to ensure that it maintained a certain level against the Deutsche Mark and it also had to keep adjusting the interest rates and maintain it very high to make this arrangement workable. On the day that the crash happened, the BoE continued to buy the Sterling but it realized that even buying billions of dollars worth of Sterling did not move the market by very much as more and more traders saw what was happening to the Sterling and realized that it was a freebie that was being given to those who can sustain the selling.
The BoE also tried to increase the interest rates but the selling did not stop and finally, the bank decided to throw in the towel and declared that it would no longer be part of the ERM. The pound sterling shifted back to free-floating and it fell 15% against the Deutsche Mark and over 25% against the US dollar.
This was the time for Soros and others to cash in and they did exactly that. The British Sterling did not get much attention till that time and no one was interested to trade the currency and so even if the BoE did not intervene, not much would have happened and the Sterling would have been propped up anyways. This is what is generally believed but Soros had already attained cult status for carrying out his plan to perfection. He came to be known as the man who brought down the Bank of England and that name seems to have stuck with him even after 30 years. He continues to be among the top 10 richest forex traders. His discipline and his approach to trading and investing have been appreciated by all and he was never afraid to admit it when he went wrong. In fact, this is a character that every trader has to imbibe to be a successful one as most retail traders refuse to accept that they are wrong and by the time that they do accept that, their account is close to zero and the cycle of trading for the trader begins to repeat.
Retail traders have to learn the art of getting out of a trade when they realize that it is wrong. The first step for doing that is to swallow the ego and admit that one has made a mistake in his trade and the market is, was, and will always be correct. Once this admission comes from the trader, his mind will be easy to accept the fact that the wrong trade has to be closed and he will be able to proceed to do the same.
The second person on the list, though he may not have claims to be the second-best Forex trader, is one of those who consider Soros as his mentor. Stanley was one of those who had participated in the selling of the Sterling in 1992 along with Soros and many of the strategies and trading ideologies that he believes in are quite similar to what Soros has. He also truly believes that capital preservation is the key to successful trading in the long run.
He ran his own hedge fund named Duquesne Capital which manages billions of dollars and it is said that his net worth is over 2 billion dollars. He also helped to manage Quantum Fund which belonged to Soros as a portfolio manager but he quit the fund management business in 2008 as he felt exhausted by all the pressure that was on him to keep proving himself over and over again.
He has been considered as one of the top traders in the world for quite some time now and again, there are lessons to be learnt from his trading as well. Like most retail traders, he had humble beginnings as he was born into a middle-class family in the US but rose through the ranks to become one of the most successful forex traders in the world. He has strategies that he follows very strictly and he does not enter any trade that does not fit his strategy. He also does not believe in continuing in a trade that has gone against his strategy and he has the habit of going in very strongly in a trade if he sees a very high chance of success.
All of these decisions are to be dictated by his strategy rather than any individual objective decision taken by him and this is also something that the traders should understand. They should believe in their strategy at all times and even if they fail a couple of times, they should use it as a lesson for them to correct themselves and evaluate their strategy once again rather than trying to be adamant and prove to themselves and others that their strategy always works.
Unlike the big two, Bill did not have any great backing nor was he related to or took to either Soros or Stanley in any way. He built his reputation on his own and there was no single event that defined his fame unlike the other two. He began trading when he was in college and even at that early age, he had the capability to grow accounts into massive ones very quickly. But as most inexperienced traders do, he also tended to lose out the account very quickly as well and this was one of the best lessons in risk management that he learnt early in his career and something that he ensured that he carried throughout his trading career.
He began his trading at Salomon Brothers and he has built his entire reputation at this firm. He was a massive success working with the stock market and he was then allowed to manage the forex trading division of the company when it was launched. Even though he did not have any prior experience with forex trading, he took to it like a fish to water and quickly became a massive success in that as well. He built the forex account of the fund into a massive one and continued to work there till he left in 1990.
As far as his trading strategies go, like most institutional traders, he believes that one need not be successful most of the time in trading for the portfolio to grow. He believes that the strategy that a trader devises for his trading should be such that the returns should grow even though the success percentage is only 20-30% and this is what we get in real life as well. Most of the time, the traders are wrong in judging the market and so the trader should learn to live with only 2 or 3 trades out of 10 going his way. The trader needs to devise a method so that he continues to remain profitable even with a low success percentage in his trades.
For this, the trader needs to take his time to study the market, build the position as the strategy begins to work and the market moves his way and he should also be ready to jump out of the trade when things start going south.
Like all successful traders, Bill also believes that capital preservation is key and risk management should be the core of any trading strategy. It is this understanding that has been the difference between the good traders and the really great ones.
Again, we have now come back to a trader who became infamous for a single event in his forex trading career that catapulted them to fame and fortune and etched their name in the echelons of forex trading. Andy was known as a very aggressive trader but despite being aggressive he always ensured that he chose the right trade and also made sure that he quickly excited whenever he found that his trade was wrong.
He initially worked at Salomon Brothers and then joined Bankers Trust after that. He quickly gained a very good reputation as a trader and being aggressive, the company felt the need to give him an allocation that was more than their normal standards as they believed that he would be able to utilize those funds to the maximum possible extent. So, they gave him a total of $700 million to trade although the company standards allowed him to use only $50 million.
The faith of the company in him was repaid during the crash in October 1987 when the market crashed and there were many currencies across the board that was getting devalued at a very quick rate.
Andy realized that the New Zealand dollar was very vulnerable to the fall and he chose to go all in to short the NZD with a 400:1 leverage and his trade was bigger than the total money supply in New Zealand. Though it was a risky move, his trade proved to be right as the NZD fell across the board and he was able to quickly make a profit of $300 million for his company. This was a massively successful trade that made him an overnight sensation in the trading world, a reputation that has stuck with him even after three decades.
This proves that one need not always be conservative to be successful in trading but one needs to understand the balance, a balance that is very difficult to most to achieve. The top traders are not afraid to go in with increased trade sizes on trades that they truly believe in and more often than not, they have been proved right. But a word of caution though. It doesn’t always work this way and unless one knows what they are doing, this kind of strategy could lead to ruin for most traders. It is better to start a career in trading in a conservative manner and depending on how things go, there is nothing wrong to try out different strategies and different ways of doing things as long as one is comfortable with that.
Paul Tudor Jones
No top 10 forex traders list would be complete without the mention of Paul Tudor Jones. Unlike some of the names in the list, he has continued to dominate the forex trading landscape over many decades and remains probably the richest forex trader in the world with a net worth of over $5 billion.
He has been trading for a long time and like a few other major traders, he gained his reputation during the crash in 1987 when he was short selling a lot of the currencies and other instruments and managed to make a profit of 62% on his positions. He continued to remain on top of his game and remains a wealth manager to this day though the returns from his fund have dimmed over the years as he seeks to reduce his risks and trade in a more conservative manner and with fewer trades. The slowing of his returns has not done any damage to his reputation though as he still is considered one of the best forex traders out there who will be present among the top 10 in any forex trading list.
He has also been known to be involved in a lot of philanthropic work especially in recent years which many traders nowadays use to channelize their free time. Not much is known about his trading strategies though and he has also not divulged that information so far but that does not take away anything from the fact that he has been one of the foremost forex traders of this generation and many traders have been inspired by his story.
Lately, he has been in the news for all the wrong reasons including his comments and activities but with the forex trading industry looking out desperately for heroes on which retail traders can look up to, Paul does stand tall in this regard.
Another legendary forex trader is Marcus who is said to have learnt the ropes of trading from Ed Seykota and was instrumental in training another legendary trader in Bruce Kovner. During his heyday, he used to trade with 300 million German Marks and along with the banks, he was the one who was supposed to be holding the most Marks at that time. This gave him enormous leverage to trade the currency as he pleases and he was able to use this clout to do well with his trading.
Again, not much is know about his trading methods and that is natural because the top forex traders in the world definitely have an edge in the markets which when released could lead them to lose it. But the theme behind all great traders is the same.
The fact is that the biggest forex traders are humble and they realize that the market is right. They never really try to outguess the market nor do they try to hold on to positions that are losing in the hope that they would be ultimately proved right later.
Even though the traders above are billionaire forex traders, the market is much bigger than any other trader and no trader would have enough capital to control the market as he pleases. On the other hand, all the big traders do understand that capital preservation and risk management is the key to success for any trader. As long as the trader manages to continue in the market, he is likely to learn more and more and this would be useful for him in the long run and also give him a chance to turn things around so that he can be successful ultimately.
Another common aspect for all successful forex traders is the fact that they wait for the right opportunity and wait for the market to align to their strategy even though it may take several days for that to happen. Sometimes, it takes weeks or months for the markets to align for the right trade and the big traders do wait for this opportunity. But once the opportunity presents itself, they make sure that they make full use of it and cash in on the trade so that they have the time and the space to wait for the next trade and not get pressured to keep executing trades day in and day out.
The ones listed above are probably the most famous forex traders in the world but there could be much more hiding in plain sight as many traders continue to go about their daily job in an obscure manner as they do not want the attention and the troubles that such attention could bring along.
For those who have been with us all along, the question might remain, can you get rich trading forex? This is the question uppermost in the minds of most traders. All that we can suggest is to put your head down, follow the rules, and ensure that you do your best day in and day out and the results will follow.