Trading is the new normal for most millennials and Gen Z. The pandemic offered people much time to dabble in trading, learn the ropes of the trade, and become traders. Trading however isn’t a profession that can be taken lightly. Traders are disciplined, hardworking, smart, curious, think long-term, and constantly keep their eye on the prize. Some of these traders have become icons and mentors. Learning from the best traders, their insights, wisdom, and experiences offer novices and seasoned traders a lesson or two.
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Some of the best traders across the world faced great wins, losses, made mistakes, and ultimately learned the stock market. Learning from these greats can inspire you and your trading principles to help improve your market performance.
Lessons some of the Best Traders / Investor in the World
1. Warren Buffet
Warren Buffet is an icon in the history of investing . More than one of his adages inspires not just investment but also, become life advice. His investing strategy and philosophy are case studies and courses that traders and investors learn from. There are many lessons from Warren Buffet and they largely revolve around one crucial element – “RESEARCH”. He always advocates thorough research to evaluate the company. This means assessing the work of a company, its financial statements, the people managing the company, which thus helps evaluate its growth and future stock price. Buffet acquired cheap stocks early in his career. He quickly learned that a cheap stock price does not qualify a business as profitable. This led him to shift his investment style to a research approach. This careful approach led him to buy Apple stocks only in 2016, once he understood the technology business. The lesson to learn from Warren Buffet is to research the industry, research the business, its brand value, its competitive advantage, growth prospects, and the balance sheet systematically before trading in that stock.
2. Paul Tudor Jones
The billionaire hedge fund manager of Tudor Investment Corporation, Paul Tudor Jones identified a crucial trend. He predicted the multiplying effect in a bear market back in 1987. This trend encouraged him to short his options, limiting his risks and tripling capital in the stock market crash of 1987. He firmly believes it is all about managing risks. The classic adage ‘You Win Some, You Lose some’ is the lesson Paul Tudor Jones teaches traders. But the key is to win more and win big than you lose on average. Even when you are on a losing trend, ensure the losses are smaller. His lesson is, “Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: get out, because you can always get back in.” Traders are optimistic about certain trades, even if they aren’t performing well. Not all trades can be winning trades, so learn to mitigate risk and ensure your loss is small. Some trades take time to run their course. This is where a trader alone can decide his loss strategy. Cut losses – make big wins and smaller losses.
3. Mark Weinstein
Since we are talking losses, Mark Weinstein’s insight is another lesson for traders to learn from. “You have to learn how to lose; it is more important than learning how to win. If you think you are always going to be a winner, when you lose, you will develop feelings of hostility and end up blaming the market instead of trying to learn why you lost.” One of the top traders in the stock market world, Mark Weinstein learned from some investment mistakes too. After losing his initial capital fast on the stock markets, he worked in real estate for a short stint. This stint offered him insight into the attitude of losing in the stock market. Big losses often deter traders, demoralizing their belief in the investment strategy. Instead, analyze what went wrong, analyze the market, and be humble about the big wins as much as you’d be upset about the loss. Traders must learn the ability to control loss and their attitude toward loss. Everyone loves a winning trade, but the stock market doesn’t always play out that way. When you are losing, lose gradually and gracefully. Winning on a trade and losing the same amount is not progress. Be flexible about your investment strategies and find a way to lose less next time. And lose even lesser or prevent it completely the next time – That is progress.
4. Bruce Kovner
Lesser known but vastly successful, Bruce Kovner is a trading genius at forex trade and forex futures trade in the financial markets. A Harvard University graduate, Bruce Kovner was successful even on the commodities market and is today Chairman of Caxton Associates. Kovner too followed wise principles of trading smartly and one of his key takeaways was to be robotic with trading – emotionless. The lesson to learn from him though is risk management – something that most investors overlook. Traders must understand the risks completely before they begin trading. Markets are objective and measured, so thinking from a place of emotion, prevents traders from evaluating risk potential objectively. Understanding the reasons for possible losses and the monetary ability to manage risks is crucial for novice traders. “My experience with novice traders is that they trade three to five times too big. They are taking 5 to 10% risk on a trade they should be taking 1 to 2% risk,” he said . This is where stop-loss orders play an important role in managing these risks. Always build a trading strategy that restricts risk to a predefined amount. Only when you assess maximum risk can you know how much profit can be driven out of that trade.
5. George Soros
Trading lessons would be incomplete without the legendary George Soros – “the man who broke the pound” or “the man who broke the Bank of England.” His bet against the pound in 1992 is what has brought him legendary status in the financial markets. While the European countries were busy trying to stabilize exchange rates, Soros speculated on the currency. With complete conviction, he took a risk. George Soros shorted the British pound, expecting it to devalue. He sold the pound converting it into other currencies, with an agreement to reconvert it later. This brought down the price of the British pound. The rest is history, he made $1 billion in profit on this transaction. Some trades are obvious, they do well and they’re winners. The big wins, however, come from the unexpected – the big bet that beats the market. Once you’ve assessed risks, traders must be ready to bet on that economic anomaly. The market can shift at a moment’s notice. It is at that moment where you make that big win. His famous adage goes, “Markets are constantly in a state of uncertainty and flux, and money is made by discounting the obvious and betting on the unexpected.” The lesson to be learned here is to work from conviction and learn to adapt quickly. Work the research, work the analysis, and trends and then go all-in with that trading decision. Don’t follow a herd mentality, don’t be too attached to the trade and you might just make money in the long run.
Notice how the successful traders talk about losses. Losing on the market is the greatest teacher and the best learning opportunity. Winning on the market is easy – the market becomes generous with price movements. There are tested trading strategies and investment philosophies that bring winning trades too. The key lesson for traders remains how to lose decisively, how to bounce back from losses and how to manage or control those risks.
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