Education

Who are the great traders of all time?


The financial world is composed of some truly great individuals who set out on a journey to develop their own strategy and find out the way that they can master the way in which they make and control finances, these people have gone through many adversities to reach the level they are at today and largely what they had to do to get there is to first develop their own strategy and unique way to see the markets. Just as any person starting out it took many mistakes and downfalls to get there, no one has ever started out trading and immediately mastered it as you will see with the traders we will discuss here, they have all one thing in common and that is that they have failed.

It is through this failure that they have been able to master what their edge is to provide wealth for their clients. By building a track record and proving their results and developing a reputation over time they have been able to deliver results and then they have had clients that have offered them their own money for these people to do exactly what they do for themselves but also for others and the incentive is that they can manage other peoples money and when they make money for the client they earn money as well, this is known as the 2 and 20 incentive, because if you invest with them they will take a 2% management fee which you pay them to manage your money, and then a 20% performance bonus so that if that made you money that year they get to keep 20% of the return as an incentive for them making you money, so you ultimately get the most from the returns and your simply paying them for the ability to do that without having to do all the hard work yourself.

By far and large one of the most successful traders and money managers of all time is Ray Dalio. Ray Dalio, as an American investor who manages one of the world’s largest hedge funds, the fund is named Bridgewater associates. At the start Ray began investing when he was a young boy at the age of 12, where he bought a stock in Northeast airlines for at the time around $300, he had no idea what he was doing really but thought it would be good to invest in the company, what he didn’t know is the company was in a lot of trouble and just after he bought the shares, another company had actually purchased that company and the stock price went up a lot, when this happened he almost tripled his money overnight and realized the potential of investing in the markets.

After Ray graduated, he started by working on the NYSE and he started by trading commodities and futures, he then went on to become the director for the commodities trading desk at a firm known as Dominick and Dominic LLC and then later became a futures trader and broker at Shearson Hayden Stone. After he had a dispute with his boss and punched him in the face, Ray went on to start his own firm and would promise himself he would never work for anyone else again.

He, for some time, did very well in this field and starting managing clients money as well, it wasn’t till he thought that during a specific market cycle there would be an economic crash and he invested a lot into his idea, only to find out later that this idea was wrong, and ended up losing a significant amount of money, to the point where he had to let go of all his staff and restart his company bridge water from his home kitchen and borrowing $4000 dollars from his dad to take care of the family bills. But after that period, he earnt from his mistakes and started his career from the ground up and then got back to the point where investors started investing with him again and then went on to grow one of the largest hedge funds in the world.

Another the trader is one known as Paul Tudor Jones, this is a man who also found his interest in the financial markets, he is an American hedge fund manager and founded his own hedge fund Tudor investments corporation. This is an asset management firm. Now before he ever set up this firm, after graduating from college, he approached his cousin to ask him to introduce him to the world of finance and began a career as a commodity broker and represented one of the worlds largest cotton traders. That same trader would go on to hire Paul and mentor him to teach Paul how to do what he did, but later the same man would end up firing Paul when one day he fell asleep at his desk after a night of partying. But Paul had acquired a good level of knowledge and later when on to serve as the treasurer and then as the chairman of the New York stock exchange.

Paul, with his understanding in the markets and investments, went on to start his own firm and later had his first two clients, one was his cousin who introduced him to the world of finance and another was his first employer and mentor who had previously fired him (when he fell asleep at the job).

The thing that both these men had in common so far is that they both had a period of learning and understanding the markets, they knew if they could come up with a strategy that made sense, over time they would be able to take consistent advantage of the markets to both obtain financial gain and to also use client money to leverage what they could do so that in this way they could not only profit from this but also create a reputation to be able to make money for themselves and for their clients and this was the business they sought to do. Because these men understand the “game” they understand that there are certain functions to the market and certain times to trade but also certain times to stay away, they have the same access to information that you do and they have spent enough time learning it because you cannot just start immediately trading and making money, some people have but then have also lost a lot because sometimes the markets are going one direction and you can easily make money in a market like that when you’re rarely wrong if your following that trend.

Which takes us to the last trader that was worth mentioning and this trader is known as Larry Williams. This trader, in particular, is a little different to the others in that for a long term after graduating and coming from a pretty normal background he started his career as a financial reporter but he often had to deal with financial reports which sparked his interest in trading. So, he started studying trading through different books and he also used his position in the financial realm to meet with successful traders to learn from them what he could. He is well known for his performance when he took place in the trading competition the Robbins Cup, where he took $10000 to over a million dollars in a year, this was a record result which has largely rarely been achieved but earned him his title, he later went on to make the indicator Williams %R and began mentoring people who wanted to learn from him and how he traded.

Larry contributed to the world of day trading and at the same time created his own theory about how the season of the year and the day of the week can influence the stock markets. He developed some indicators that we can now trade today on modern trading platforms like the ultimate oscillator, R% and something known as the COT, this is the commitment of trader’s report and proved the effectiveness of highly sensitive price levels.

One of the biggest things Larry learnt as a developing trader, is the value of seeking out those who know about the markets, listening to them and learning from people with proven track records that didn’t have a conflict of interest. He learnt to be humble as a trader and that all highly successful traders are a little unsure of themselves, so they never take huge risks that just take large enough risks to do well but maintain their outlook on their risk management so they never lose more than they are willing to risk and they do not waste time with emotions, even when losing they have the ability to look ahead and focus on the final goal for what they started out seeking to achieve

As you can see these traders set out from scratch, they developed their reputations by putting in the hard work required by the markets to get their understanding, you see the markets can be compared to getting your university career. If you study medicine, you don’t start studying by operating on someone, this comes later over several years to achieve the understanding to perform a surgery on a person because it takes time to master the understanding of what you are doing and how you will do it. When you start off by trading one of the biggest pitfalls to traders is they do not want to lose money, and of course, they don’t know body wants to lose money, but when you go to university or go study a course, you must pay for that course. So much like the markets at times when you take a loss, consider that you have just paid for a lesson and some insight as to what just happened. And you will take those lessons and over time understand what it is that you’re doing, know that losses are apart of the business and you will grow to manage them, and create your own reputation in the financial markets, where you have your own strategy unique to you that will allow you to do better than others and creates the ability that if you ever want to set up your own hedge fund or your own company that provides money management for clients you will be able to provide value to their lives and create value for your self and liberate yourself from the reason you started trading in the first place, either because you want your own business or want freedom from the job you may not enjoy doing.

Because once you understand how to trade, and once you understand the possibilities that come from the hard work you will end up with the drive and determination it took these men to achieve what they have. These same traders did not start off wealthy and they all have seen one time or another, a time in which they took a loss or had a setback, but it’s the ability to take that set back and keep moving forward.


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