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The DNA of Successful Trading

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The world of trading is often filled with enigmatic elements due to the fact there is no one formula to trade and be successful. Think of the trading market as an ocean and imagine that all the traders in it are surfers. Now, what does a good surfer require? He requires balance, discipline, patience, a proper surfboard and a keen eye on the environment around him. That is what will allow him to ride the waves successfully and not crash at every attempt. Well, the world of trading isn’t that different and you have to do all of the aforementioned if you wish to conduct successful trading.

The DNA of Effective Trading

The Approach

Before you begin to trade, it is important that you first prepare. You should identify your targets, your goals and align yourself with the market and the instruments you would require to successfully accomplish your goals. Do what you know best. For example, if you’re into retail, then look up retail stocks instead of oil trades.

A Proper Time Frame

After you set your goals, the next thing to do is identify a proper timeframe in which you will assess what type of trading is best suited to your ability and your attributes. For example, trading using five-minute market charts indicates that you are more comfortable in a position where there is no overnight trade risk. However, selecting a weekly chart to trade would suggest you are more comfortable with overnight trades and the risks associated with them which includes letting a couple of days slide by.

Moreover, try to first determine whether or not you have the strength and focus to sit in front of your laptop or PC or if you would rather do research all weekend and arrive at a trading decision in the week ahead based on your evaluations. Always remember that if you want to make money in the trading market, learn to wait.

Methodology

Once you have determined a timeframe, the next thing to do is discover a good methodology. For example, most traders prefer to buy support and then sell resistance, while others prefer to buy or sell breakouts, yet many trade using MACD and crossover indicators. Furthermore, upon selecting a methodology, it is important that you give it a test run to see whether or not it is consistent with your strategies. If you see that your system combined with your methodology is reliable most of the time, it is safe to say you have an edge. So, test each methodology for positive results.

Discipline

Discipline here refers to how much patience you have. It is essential that you have the patience to sit and wait for you system to indicate an opportunity for you and when that happens, you have to be ready. However, there will be times when the price action will not reach your predicted price level. When that happens, you have to be patient enough not to start second guessing your system.

Objectivity

Objectivity plays a crucial role in trading and it can make or break a trader. Your emotional detachment relies on your strategies and methodology of trade. When you see you have a system that gives you a good entry and exit into the market, you have nothing to worry about. You can’t allow your emotions to get the best of you and be influenced by other traders who will never be interested in your trade levels and may often misguide you. This is by the far the most important aspect of trading.

Keep Your Expectations Real

It is true that, at times, the market does makes exceptionally big moves, but being realistic here implies to the fact you can expect to make $2000 off a $500 trade each time you make a move in the market. Though using short-term timeframes entails fewer opportunities to make a profit, long-term trades carry high risk, but high profits. In the end, you will have to make a ‘reward versus risk’ decision.

Control the Risks

At the end of it all, successful trading depends on how you control and manage your risks. Be quick with taking losses, if necessary. It is important you direct your trade in the right direction. If it pushes you back, exit the market and try again. Controlling risk requires both discipline and patience.

So, in the end, it is all about your approach, tactics and discipline when it comes to pulling off successful trades. In regards to this, Warren Buffet says that there are two rules to trading successfully

  1. Don’t ever lose money

  2. Always remember rule number one.

So, always be prepared to counter losses quickly and never wait for big losses to happen.

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The traders glossary

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Traders Analysis

Mentioned below are some of the most common terms used in the Forex trading market:

Ask Price

Also known as the Offer Price, Ask Prices are market prices for traders interested in purchasing currencies. Ask Prices are displayed on the right side of a quote, for example, EUR/USD 1.1965/68. This means that you can buy €1 Euro for $1.1965.

Aggressive

Traders and/or price action are acting with conviction.

Analyst

An analyst is a financial expert who has the knowledge and evaluative skills to assess investments and in light of his research, diligently pulls together buy, sell and hold recommendations for his clients.

Appreciation

A product will ‘appreciate’ when it gains strength in terms of price correlating with the total demand in the market.

Arbitrage

The concurrent buying or selling of a financial product to enjoy the benefits of small price differentials in between different markets is known as arbitrage.

Bar Chart

Bar charts are used in the technical analysis of trading in a market. Bar charts consist of time divisions which are shown vertically with the following information: the top of the bar is the price high, the bottom is low price and the horizontal line, which is on the left, indicates the opening price and the horizontal line on the right side indicates the closing price.

Base Currency

Refers to the first currency when you look at a currency pair, a trade quote indicates how much the base currency is worth. For example, in the quote USD/JPY 112.13, the base currency is US dollars with $1 having a worth of 112.13 Japanese Yen.

Bid Price

Bid price is the price at which traders can sell their currencies. The bid price is always indicated on the left side of each quote, for example, EUR/USD 1.1965/68. This means that €1 can be sold for $1.1965.

Bid/Ask Spread

This refers to the difference between the bid price and the ask price pertaining to a currency quotation. The spread indicates the broker’s fee and differs from broker to broker.

Broker

A broker is an intermediary representing both buyers and sellers. Most brokers in the Forex market are linked with well-known financial institutions and make a commission by placing a spread between bid and ask prices.

Big Figure

A big figure refers to the beginning 3 digits of a currency quote, for example 117 USD/JPY or 1.26 in EUR/USD. So, if the price alters by 1.5 big figures it has moved 150 pips.

Candlestick Chart

A candlestick chart is also used for the technical analysis of a trade. Every time the division on the chart is shown as a candlestick, which is basically a red or green vertical bar with extensions which run above and below the body of the candlestick body, the highest point of the extension indicates the highest price for the chart and the bottom extension indicates the lowest price. Red candlesticks indicate a reduced closing price in comparison to the opening price while the green candlestick indicates a rise in the price.

Cross Currency

It is a currency pair which does not have US dollars, for example EUR/GBP.

Currency Pair

Two currencies involved in a FOREX transaction, for example, EUR/USD.

Capitulation

Refers to the point at the end of an intense trade where traders are holding losing positions and exiting. Capitulation is usually a sign that traders expect a reversal soon.

Economic Indicator

An economical indicator is a statistical report published by the government or by the academic institutions, indicating various economic changes, factors and conditions in the economy.

First In, First Out (FIFO)

Refers to open orders liquidated in sequence, for example, the first order liquidated is the first one which will be opened in the market.

Foreign Exchange (Forex, FX)

FX refers to the concurrent buying of one currency and the selling of another.

Fundamental Analysis

It is an analysis of the political and economic conditions of a country which can, in turn, affect the price(s) of different currencies.

Leverage or Margin

The ratio which represents the value of a trading transaction, taking into account the required deposit, the common margin for Forex trading is 100:1, which means you can trade a currency which is worth 100 times more than your deposit.

Limit Order

An order to buy or sell when the price reaches a specified level is known as a limit order.

LOT

The size of a Forex transaction, standard lots are worth about $100,000.

Major Currency

The Euro, German Mark, Swiss Franc, British Pound, and the Japanese Yen are all major currencies.

Minor Currency

The Canadian dollar, the Australian dollar, and the New Zealand dollar are all minor currencies.

One Cancels the Other (OCO)

Two orders placed simultaneously with instructions to cancel the second order upon execution of the first.

Open Position

An active trade which has not been closed is referred to as an ‘Open Position’.

Pips or Points

The smallest unit a currency can be traded in.

Quote Currency

The second currency in a currency pair, for example, in the currency pair USD/EUR, the Euro is the quote currency.

Rollover

Lengthening the settlement time of spot deals to the existing delivery date, rollover costs are calculated using swap points based on interest rate differentials.

Technical Analysis

Analysis of historical market data to predict future movements in the market is referred to as technical analysis.

Tick

The minimum change in price is called a tick.

Transaction Cost 

The cost of a Forex transaction, typically the spread between bid and ask prices.

Volatility

A statistical measure indicating the tendency of sharp price movements within a period of time is known as market volatility.

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Trader Personality: Paul Tudor Jones

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New York, business center

Born on the 28th of September, 1954, in Memphis, Tennessee, Paul Tudor Jones II is the founder and owner of the Tudor Investment Corporation. The management of his other private investment partnerships is done through his own corporation, which you can refer to as hedge funds. Tudor Jones had an estimated net value of $3.2 billion in 2010 and as of now, it stands at $4.3 billion.

He studied and attained an undergraduate degree in economics from the University of Virginia in 1976 and was also a welterweight boxing champ. He began working on the trading floors in 1976 as a clerk and gradually became a broker for the famous firm E.F. Hutton four years after. In 1980, he was adamant on earning on his own and made a lot of profitable deals for almost two and half years before he started to get particularly ‘bored’ with his work.

After realizing that he has to do something else, he then successfully applied to the Harvard Business School, and to the surprise of many did not join because he realized the skill set he really wanted to capitalize on wasn’t going to be taught to him by anyone and decided to take another approach. He went to William Dunavant Jr. for career advice. Dunavant, who is the founder of one of the globe’s foremost and biggest cotton merchant company, sent him to meet another commodities broker by the name of Eli Tullis, who was in New Orleans.

It was Tullis who took him in and began to mentor him, showing him the ropes of cotton trades and painted the future of the cotton industry on the New York Stock Exchange.

The Early Success of Paul Tudor Jones

In 1980, Jones proceeded towards establishing his own company, the Tudor Investment Corporation, which is regarded as today’s foremost organization in asset management companies and has its headquarters in Greenwich, Connecticut. The corporation consists of affiliations tied to leading active trading, investing and research in global equity, venture capitalism, currency, debt, and the commodities markets.

Jones became really popular following the events of Black Monday in 1987, when he accurately predicted the markets, earning massive profits due to large short trade positions. He, along with his colleague and friend, Hunt Taylor went on to successfully create FINEX, the financial futures’ section of the New Board of Trade and were also instrumental in the making of US dollar index futures contracts.

Paul Tudor Jones also went on to becoming the Chairman of the New York Cotton Exchange from 1992 to 1995.

The Futures Trading Strategies of Paul Tudor Jones

Paul Tudor Jones is a contrarian investor. He keeps going for single trades until an idea essentially changes his mind. Most of the times he works on keeping his position in the markets cut down. Then he attempts to trade in small amounts when he has trouble hauling in good trades. Jones also considers himself as the best when it comes to identifying and taking advantage of market opportunities. When he thinks up of a brilliant idea, he initiates the pursuit of its implementation from a low risk perspective until he is deemed and proved wrong or at least till another idea befalls him.

He is also a swing trader and believes that considerable money can be made at different market turns. Although he has missed quite a bit of meat all around the middle, he always managed to catch a good share of tops and bottoms. He is by the far the calmest investor and trader of all and is always relaxed, thinks coolly and always exits the market swiftly whenever his losing position in the market starts to get to him.

Jones has the habit to decrease his trading mass when he sees he might lose and increases it as his trades get successful. Plus, he also tracks his whole portfolio equity in real-time and believes that prices always move first, the fundamentals should always be a secondary concern. He always looks at the bigger picture and does not even think about the losses he incurred moments ago. Jones also emphasizes deeply on not involving your ego in the game. He says that a good trader always questions his ability and form at every turn, always yearning to improve. If you think you are better than the rest, you will fail.

Contributions

Paul Tudor Jones has also made sizeable donations to the University of Virginia, his Alma mater, and has contributed $35 million for the development of a brand new basketball arena which he named after his father, John Paul Jones.

Married to a former Australian model Sonia since 1988, Jones and his wife have four children together.

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Trader Personality: Jim Rogers

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New York, business center at night

Which trader doesn’t dream of making millions and conveniently retire at the age of 30? Surely, it is every investor’s sole purpose and their dream. But for market guru and legend Jim Rogers, a commodities trader, it was just the dawn of an illustrious career on Wall Street that has lasted for over 60 years and has helped him make millions of dollars.

Jim Rogers amassed his wealth and grew his business empire using his phenomenal ability to monitor and pinpoint long-term trends long before anyone else could which blissfully ended up building him a reputation as a sharp contrarian. Rogers retired at the age of 38 to pursue his love of motorbike riding around the globe, and since his retirement he has also been a treasured guest professor of finance at Columbia Business School.

Rogers is known for the huge gains in commodity he made back in the early 2000’s, but he really became a living legend after correctly forecasting the collapse of the housing market, ending up making millions.

A Look into the Early Life of the Rogers

Rogers always had a fondness or affinity rather, for business, beginning from an early age. In fact, Rogers first started stepping on the trading floor in the financial world at the age of 5 and used to sell peanuts and gather empty bottles that were left behind by baseball fans in Alabama. Rogers graduated from Yale University back in 1964 and has a Bachelor’s degree in history. After his studies, he went on working as an investment banker on Wall Street which eventually led him to meeting another billionaire stock market legend, George Soros.

It was him and Soros that founded the exceptional Quantum Fund in 1973 which made a stupendous amount of money in its first 10 years, enjoying up to 4200% in returns. His early success allowed him to retire earlier than most traders. But that wasn’t the end of his career. Rogers still trades as a private trader and an astute investor, securing massive gains on the way. Moreover, he is also the author of the book “Investment Biker”, published in 1990, and is about his trip around the world on his motorbike.

Rogers’ Investment Methodologies and Massive Gains

Rogers has a timely approach to investing and employs a top-down model when analyzing the economy, which according to him is instrumental in guiding his investment methods and style. Rogers also said he has never been able to time the markets. So, instead he has adopted a long-term approach to investing.

Jim is a popular contrarian investor and his eagerness and assertiveness has led him to always go against the tide of the buck and grain and has allowed him to form some diligent ideas. He is also well-known for his ability to spot particularly long-term trends faster than any other trader or investor. After being instrumental in the success of Quantum Fund in the early 70’s and 80’s, he was able to call the commodities boom a decade later  allowing him to establish the Rogers International Commodity Index in 1998 before the boom of the commodities market in the 2000’s.

The key feature in the way Rogers invests and trades is nothing but patience. Irrespective of whether he was predicting the early boom of the commodities market in the 2000’s or shorting the market in the 2008 stock market collapse, he has always focused on being patient and has emphasized its importance to follow through a successful investment. To sum it all up, this is what Jim Rogers said about being patient in the market, “I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime.”

Jim Roger’s Investment Portfolio: What Does He Hold Now?

Rogers has his target set on what he believes to be the greatest of all opportunities that happened to have landed on his lap: the food and agriculture industry. He is also big on bullish commodities and analyzes that the ceasing process of the central bank will sustain hard assets. He also invests in precious metals like gold and silver and is particularly fond of these metals. Back in 2011, he mentioned that in 1987, gold and silver stock fluctuated from 40% to 80%, but compared to what’s going to happen now, that era seems like a blip.

In 2007, Rogers moved to Singapore with his family to further take advantage of the growth of the nation’s economy. Rogers even started his the Rogers Global Resources Equity Index, an index primarily designed to capitalize on the most liquid companies pertaining to agriculture, mining and metals and alternative energy industries in 2011.

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Top 10 Successful Traders Ever

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Traders Analysis

There are a number of fundamental differences between a trader and an investor. The only similarity they may share is that both investors and traders can lose money just as easily as they make it. We can learn from the successful traders.

To start trading though, you don’t need an investment or apply for a loan. You’d be surprised to know some of the world’s most brilliant and legendary traders themselves went through a lot of trial and tribulations before they became what they are today and before their names were immortalized in the history of trading.

Mentioned below are the names of the top successful traders who managed to beat others in the market through their skill, their diligence, tenacity and instincts. So, get ready to get some inspiration.

Top Ten Successful Traders of the World

1.  Jesse Livermore – The Master of Speculation

The skill of speculation that Jesse possessed thrived when he accurately predicted the 1929 stock market collapse. Livermore began trading as a 15-year old, trading at various gambling houses and through his studies and research he rose to fame and power when forecasted the 1907 and the 1929 markets collapses and made $100 million (which in today’s terms amounts up to $6 billion), in the blink of an eye. Having been associated with various industrialists at the time, Jesse proved to be instrumental in contributing towards America’s industrial revolution.

2. Paul Tudor Jones – Understanding the Core Dynamics of Trading

Paul Tudor Jones, another trading genius, called on the 1987 stock market crash because of that the day became labelled as Black Monday. Tudor accurately predicted the fall of the market by recognizing and understanding a series of events that led him to success. He understood at the time if the market started to descend rather than dry up, selling in the market would actually cascade. Jones understood an overvalued market would definitely give birth to more selling. Gambling on this, Paul went on making $100 million faster than you could say ‘I want to be rich!’

3.  George Soros – Defeating the Bank of England

As if this man needs any introduction at all, George Soros is the trader who broke the Bank of England without breaking a sweat. He predicted that the pound was going to fall and shorted it, making an easy $1 billion. Although many other traders deemed this gamble as nothing short of reckless, Soros was pleased about it. Well, of course, he would be. It was a ridiculously rewarding gamble! George forced the Bank of England to withdraw from the ERM (European Exchange Rate Mechanism).

4.  John Templeton – Betting on Japanese Assets and Winning

Templeton was the master of mutual funds. He invested $100,000 in Japanese assets when Japan was undergoing an economic change for the better, Templeton ended up making $55 million on a $100,000 investment. And in 1999, when Japan was starting to achieve it economic goals, Templeton decided to invest 60% of his funds into Japanese assets, which was again a spectacular success.

5.  Andrew Hall – Predicting the Oil Prices

In 2003, a barrel of oil was traded at $30. At the time, Andrew Hall predicted the price per barrel of oil is going to reach $100 within the next 5 years. Turned out his gamble was spot-on. He worked for Citigroup, making a ton of money for his employer. The trader made about $100 million.

6.  Paul Rotter – The Master Flipper

An expert in gauging the market’s psychology, his techniques were impeccable and significantly aided him in becoming a master of the markets. Paul being the initiator, his ideas and strategies proved to be instrumental in conducting trades on the Eurex exchange (Bund, Bobl and Schatz) markets.

7.  John Paulson – Shorting Real Estate

John Paulson is known for successfully executing what is known as the ‘greatest trade ever’. Paulson accurately predicted the asset bubble in the real estate market which had the potential for bringing in billions of dollars into Wall Street. Paulson ended up making $15 billion for his employers in 2007 for which he got a dizzying $3.7 billion.

8.  Jim Chanos – The Perceptive Short Seller

Jim Chanos rose to fame in October 2001 shortly after the downfall of Enron. Chanos was a master when it coming to shorting trades and made heavy profits by selling commodity currency and security. His most popular shorts include Baldwin-United and as of late, homebuilders like KB Home.

9.  Louis Bacon – The Gamble on Geopolitical Factors

Bacon is one of successful traders and ended up rightly predicting that Saddam Hussein would invade Kuwait. Just a year after that, he also predicted and gambled on the fact that the US would defeat Iraq when the oil markets were beginning to recover. He was a master at trading using geopolitical motivators and aspects and has made a lot of money doing so.

10. David Tepper – Investing Money in Diminishing Assets

The last on the list, another successful traders is Tepper has a record for investing in distressed assets and has made a lot of money doing so. He predicted the Bank of America along with Citigroup will not be nationalized and he made a fortune. David bought extremely depreciated shares and saw them grow tremendously in value towards the end of 2009.

So, these are the best traders you can learn from and be inspired by.

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The Power of Social Media: Influencing Trading and the Markets

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Social Media

It is no surprise that social media is expanding exponentially and it’s influencing trading. Just look at how Facebook has turned out since it was created in 2004. It now has over 1.3 billion users worldwide. Twitter generates over 500 million tweets every day and LinkedIn has over 260 million active users, trying to make new connections and to find jobs every day. If you look at social media from a broader perspective, you will see that it has come a long way and has significantly aided people in accomplishing things that otherwise would not have been easily possible. It has become a vital pipeline for thoughts and actions, and words and decisions pertaining to everything.

As a result of such growth, there are some bullet points that might be important for a trader in order to understand the scale of potential information flow:

Looking at it from another point of view, you will notice that social media has become the combined load and barometer of ideas, thoughts, and impulses in regards to the entire world. It has also served to be a combined source of wisdom, observation, and emotional reactions for those in the financial markets, such as asset managers, traders, investors, and equity analysts.

The Extenuating Effect of Social Media on Daily Trading

Social media has allowed traders to conduct trades privately without being influenced by anything. The main difference between social media platforms for trading and a traditional offline social surrounding is that in the latter, you are more exposed to the decisions and the influence of other traders. Social media saves you from conducting misinformed or ‘low information’ trades or from following bad investment advice and decisions. For example, it helps you not to make rash decisions based on what your friends say about a particular stock, and how you should invest in it.

Social networking platforms provide traders with a complete net of streamlined information, which allows you to analytically consider a wider range of possible trading scenarios. For example, while a couple of your friends made money by investing in a certain stock, the majority of your friends and colleagues lost money investing in the very same stock. So it is likely that this information will suppress your immediate emotional response, which is to buy those shares, and instead, you will decide to forgo this opportunity, which is a considerably better option.

High End Investors Seek to Utilize the Benefits of Social Media

According to a study which was a made a couple of years ago by LinkedIn, with the help of the Cogent Research Group, it was identified that various social media platforms were being used by high trading net worth traders of about $5 million belonging to North America. It was discovered that they used social media to help them with make critical trading decisions. It was also realized that those investors have made social media their prime tool for decision making.

Retail Trading: Becoming One with the Global Investors

While using different social media instruments to predict various market trends, retail investors can depend on various resources for accurate information pertaining to the market. The goals of individual retail traders totally differ from those of professional investors and traders. Retail traders thrive by working as a network which helps share and spread market related information and ideas. And, what better platform is there to share and gather ideas than social media? Thus, it makes for a natural breeding place for retail traders to become an integral part of the trading community.

Just look at Facebook’s trading application for potential investors, called Zecco’s Wall. The application is streamlined to allow investors and traders to monitor their stocks and to buy them via the application anytime they want to. The application has made access to a much larger network of information very easy for all traders.

Also, via social media, there are many online traders who can interact with other online traders with similar trading portfolios. This allows them to improve their trading together while participating in collaborative successes.

No trader in this day and age can say that social media has not helped them attain financial prosperity in one way or another. Social media has had an extremely powerful influence on the way traders choose to analyze and assess potential investment opportunities. With that being said, it is important to realize that one has to iron out the disorganized nature of the trading information available on and attained via social media networks carefully. In order to make effective use of it, it has to be diligently filtered because of the massive amount of information present, which can prove to be misleading if not analyzed properly.

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The Best Traders Alive

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Forex Traders Chart

While it is true that investors trade to make money, a trade, strictly in technical terms, does not necessarily have to be an investment in anything.  Let’s consider the best traders alive. Do you know why? The answer to this question lies in the explanation of value investing given by Benjamin Graham, who is known to be the father of all value investment and movements. According to Benjamin Graham, an investment should always guarantee one thing, and that is the “safety of principal and a lucrative return”. In light of this information, the difference between a ‘trader’ and an ‘investor’ becomes significantly clear.

An investor takes their time to put in their money, and is in the habit of making informed and diligent decisions after a thorough evaluation of a particular set of business fundamentals of a specific company or organization. A trader, on the other hand, applies the use of careful evaluation and technical analysis to focus on the core aspects of the trading market, and then bets on which of them have the potential to provide a hefty profit with limited market volatility.

Exactly fourteen years ago, it was very common for people to terminate their employment, get the cash out of their 401k plan and start down the line of trading, and that too from the ease of their homes. Fuelled by a large and volatile stock market with real estate bubbles, it was easy to throw away investments, but it was easy to make money as well. However, things have changed over the past couple of years. The recession that crippled the economy in 2007, for example, also resulted in the consistent proliferation of financial regulations.

Moreover, who can ignore the significant advancements in technology which allow trading to be carried out by powerful software and sophisticated algorithms. Did you know that today, 50% to 70% of all trading is done through complex algorithms every given day?

Losing money in today’s financial markets is routine and there are many traders and investors who lose massive amounts of money in the span of a single trading day. On top of this, these traders hope their gains will fill in for the losses they have experienced. And in order to gain more money, traders have to incur substantial expenses to pay for rising transaction and trading costs, and to pay for keeping up with traders who use state of the art trading software and platforms.

With all of this being said, there is still a selective number of traders who possess the diligence, the grit, the boldness, and the heart to go against the odds and make money along the way. Here are a few of those people:

Paul Tudor Jones (1954-Present)

Paul Tudor Jones is the founder of the Tudor Investment Corporation, which consists of a $12 billion hedge fund. Tudor is famous for short selling his stocks in the 1987 stock market crash which ended up making him $100 million. He did this by predicting a massive multiplier effect on the portfolio insurance on the bear market.

Portfolio insurance is a risk management instrument popularly used by traders around the world. Investors and traders use portfolio insurance to reduce the investment risks which could threaten their portfolio. Jones’ brilliant analytical insight led to this prediction which in turn helped him become a very rich trader in 1987. He has an estimated net worth of $3.6 billion and still heads his own hedge fund.

George Soros (1930-Present)

Soros is by far the most popular trader of all time. In fact, he is known as “The Man Who Broke the Bank of England”. George Soros made a well calculated bet in 1992 that the British pound would deflate in value. The British pound at that time was on an ERM – the European Exchange Rate Mechanism – which was introduced to keep the currencies held together in a defined boundary to maximize financial stability. George Soros, along with his partners from the Quantum Investment Fund, found a pattern which led him to believe the pound would become weak and thus would not be able to survive in the ERM.

He then made a short position, borrowed a substantial amount of money from the fund, and made $1 billion.

John Paulson (1955-Present)

John Paulson is renowned for carrying out what is known as the ‘greatest trade ever’. Paulson became a wealthy trader in 2007, when he shorted the real estate market via the collateralized-debt market. He was the founding member of Paulson & Co., which was established in 1994. Although being a brilliant trader, Paulson was not very popular in Wall Street, at least not until the crippling of the economy in 2007.

John Paulson

Successfully forecasting a massive asset bubble in the real estate market, he helped his funds make a massive $15 billion, out which he got a cool $3.7 billion. Paul still manages his companies and is worth an estimated $11 billion.

Come to think of it, all three super traders shared one thing in common: each of their brilliant and high paying ideas was based on leveraged shorts. What does that tell you? It tells you that all traders have clear conflicts of interest, and each trader is motivated to make profits from a fluctuating market.

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Best Bitcoin Trading Platforms

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Bitcoin and criptocurrency

Bitcoin trading can be very enjoyable and lucrative at the same time. So let’s consider the best bitcoin trading platforms. It offers a variety of benefits in comparison to other trading markets. Peer-to-peer markets offer traders low priced trading with the freedom to trade very securely, and on top of that, you will know that the odds are not heavily stacked against you because of the advantages enjoyed by larger financial institutions. It is very difficult for regular retail traders to trade via traditional trading markets and the investments they tend to make or plan can often feel like they are gambling everything away at a casino – and we all know what happens most of the time at casinos: the house wins.

However, when you talk about Bitcoin trading, the tables can be turned to benefit all regular traders. How, you ask? Well, mainly because of the volatility in Bitcoin trading. Although the volatility levels associated with Bitcoin trading are potentially risky, the rewards are considerably bigger than the risks. This is the only reason why most people choose to trade on Bitcoin and many have prospered financially in the Bitcoin market.

So, if you have decided to indulge in Bitcoin trading, and have completely understood the risks you will be taking, then the next phase of business is to learn about the various platforms through which you can trade Bitcoin:

Bitfinex

Bitfinex is one of the very few Bitcoin platforms which allow traders to have complete access to ‘leverage’ using marginal trading, and it also offers you the opportunity to use your funds in order to liquidate other traders with a set amount of interest fee. The Bitfinex trading tool permits traders to efficiently trade using more money than they actually have, which gives you the advantage to collect profits made on your investment, but it also increases your losses if you happen to make a bad call.

For example, if you have invested $100 to take a ‘long’ stance on Bitcoin with 10 times the leverage, and you see that the price of the Bitcoin increased by 5%, then instead of making a $5 profit off your $100, you can actually make $50. Sounds implausible? Well, it really is not, because Bitfinex borrows an additional sum of money from liquidity providers and utilizes it to purchase the Bitcoin. What this does is increase your potential profits, but at a cost, of course.

Kraken

Kraken provided Bitcoin traders with a variety of trading options, all associated with Bitcoin. For example, it offers Litecoin, Dogecoin, Ripples, and various other digital currencies which you can trade with, and make a profit in USD OR Euros. Moreover, with Kraken, you are not limited to trading Bitcoin in limited orders. You can set up or automatically purchase or sell Bitcoins and other digital currencies at a percentage above or below the set market price. Your trades can also be automatically closed at a specific profit range, which you can set either as percentage or as a fixed amount.

Traders can also automatically set trailing close, stop, and a number of other options.

This revolutionary trading platform also has a sliding scale fee system. This means regular Bitcoin traders who do enough trading and make substantial profits to meet their targets will get gradual reductions in their trading costs. With most platforms offering trading fee up of to 0.1%, Kraken offers investors free trading options.

Coinsetter

Coinsetter allows you to trade with specific institutional investors who have the ability to spend substantial amounts of money. This is a feature offered only by Coinsetter, which makes it the first of its kind. Coinsetter offers its traders a deep order book, which means that investors can trade big sums of money without buying or selling above or below the market price. This is done through an amalgamation of the native order book with various exchanges allowing traders complete and quick access to the most popularly traded exchanges.

BTX Trader

BTX Trader specializes in providing traders with a multitude of different and advanced order types, which include stop loss orders and trailing stop orders. However, BTX Trader also has another very beneficial trading feature, one which very few Bitcoin platforms have, and that is its ‘hidden orders’ feature. The hidden orders feature allows a trader to make a limit order on the Bitcoin market which other traders will not be able to detect. This is particularly advantageous in thin market settings or markets which have considerably limited liquidity and volume, such as the Bitcoin market itself. However, you can use this hidden feature to make larger trades which have the power to swing the volatility of the Bitcoin market.

The best part about this feature is the fact that your offer will never be able to influence another trader, because they will not be able to see it.

So, these are some of the more popular Bitcoin trading platforms that you can trade on effectively.

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The Gamification of Online Trading

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Trading and exchange analysis

The consistent rise in the popularity of online trading and investment has been matched by the excitement of the general population displayed in using instant messengers and social media platforms. It is important to realize that both online trading, the gamification of online trading and social media function hand in hand with complete synchronicity. How? Well, the simultaneous and immediate messaging functionality of online platforms and networks allows traders and investors to discuss and exchange relevant and new information with each other right up until the second they initiate a trade.

The internet has been around for a long time now, right? You would be surprised to know that many trading enthusiasts have been using chat rooms and other forms of online messaging to stay in the loop, sharing tips, chewing over which stocks are likely to make them money, and which ones they should stay away from.

On the other hand, online brokers have started to increase their target audiences beyond the traditional day trader setting and have begun reaching into a segment of the population which hasn’t yet been exposed to the share market past the odd bank stock or managed fund investment.

In trying to interact with this huge market, online trading has started to resemble an extension of role playing games. This is due to the nature of online trading as it entails making real life decisions to change something, for example life savings, incurring loss, and increasing wealth.

There are more than half a million Australians who actively use online trading platforms to trade shares and several of those online trading platforms expect the number to increase exponentially in Australia, as well as in the US. According to a recent report by the Common Wealth Bank of Australia (CBA), it was identified that the Australian share market might grow to three million traders.

Gamification & Trading

Mike Hamm, a frequent online trader, has experienced the rise of gamification of online trading over the preceding five years. Hamm is mostly engaged in active online trading and has a trading portfolio of over $100,000. His trading experience and the knowledge that he has gained over the years has also led him to creating his own trading blog named 5000trades.com

According to Hamm, social media networking has played an instrumental role in helping people interact with the stock markets in a more reserved and shallower way. In the past, vital trading tools consisted of exclusive access into the Bloomberg terminal or in the least, subscribed access to different broker reviews and reports.

But things have changed considerably, and now most trading decisions are made online via different articles posted on Facebook and Twitter.

According to the chief executive of Bell Direct, Arnie Selvarajah, steps are being considered for the gradual gamification of the entire world of online trading. However, Arnie has his reservations pertaining to the idea of making it too easy or too game like for traders because there is a potential for clients to lose money.

Stephen Karpin, who is the general manager of equities and margin lending of CommSec, says that bringing together the tools for effective trading and infusing the power of social media to make disparate information viable to daily traders could be very useful. In attempting to harvest all the tools of the ‘trade’ together, many people who have never traded in the share market will also do so actively.

However, there is also a growing need to facilitate part time traders with valid information from the stock market. Good online trade forums should have a reliable method of rating the viability and the quality of good trading information. For example, take Hotcopper, which has a thumb up and thumb down feature, allowing traders to go through good and bad trading information.

Websites have to consistently do well in search engine rankings and have to make it to the top so that more traders could enjoy viewing credible information, basing their trade decision on the news they read.

However, it is important to realize that online trading still functions with the same rules. Trading and investment decisions are still being made based on either signals or noise in the market.

The Bottom Line

The gamification of online trading is a gradual process, but with that being said, it is also important to note that social media networking has laid a powerful foundation for it to commence and spread quickly in the near future.

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The Greatest Traders in History

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Every day, there are thousands upon thousands of trades and transactions which are conducted between investors all across the globe. However, if you come to think of it, many of those investors will not be remembered for anything.  And in this regard, the legendary trades which have become a memorable part of financial history have to be absolutely amazing indeed.

If you are thinking the guys who made it into the history books simply landed there through making tons of money in the market, then you are wrong. Some of the greatest trades ever made have been made by people who used their intellect, their gut feeling, and cunning and intuition to determine the right moment to strike and to make it big, even when everybody else thought they were simply nuts for making such trades.

Just pause and think for a second. The famous John Paulson shorted the housing market of the US when every trader on Wall Street deemed the market bullish. Jim Chanos kept his Enron shares short even though he knew the stocks were going to shoot up. Now, moves like those require critical analysis, thorough knowledge, and above all, they require grit.

Listed below are some of the greatest traders who have made history, by making some of the greatest trades in the world through their diligence, and their feats still stand unmatched:

Jesse Livermore – The Man Who Shorted the Market Collapse in 1929 and made $100 million 

jesse livermore quote

Jesse Livermore is regarded as the most famous short seller in US stock market history. He began shorting stock purely on gut instinct just before the San Francisco earthquake hit. Although there was no way he could have predicted the earthquake, the trade did make him $250,000, which led to him consistently short selling stocks in the market. Shortly after, in 1907, he went on to make millions when he shorted the market collapse.

However, it wasn’t until 1929 that he made it into the big leagues. It was when he shorted the whole stock market and made a cool $100 million in the process. Imagine that! He is deemed as the pioneer of short sell trading and was the inspiration for the book, Reminiscences of a Stock Operator, which is a fictional account of a trader.

Paul Tudor James – The Man who Made $100 million by accurately Predicting Black Monday in 1987 and Shorting the Entire Stock Market

paul tudor jones quote

Utilizing the analysis from technical reports, various evaluations, and the historical information of S&P, Paul Tudor Jones accurately predicted that the market will collapse in 1987, and followed through by short selling his stock in huge quantities. And as he predicted, the Dow dropped by 22%, which made him an estimated $100 million.

Subsequently, PBS made a documentary about Paul Tudor Jones, which was named Trader, and just after its release, Jones went out and bought all the copies so that no one else could see the documentary. He was concerned it could reveal his trading secrets.

Andy Krieger – The Man who shorted the Kiwi in the 1980’s and Ended Up Making $300 million

Back in 1987, when the market crashed on Black Monday, a majority of the investors discarded the US dollar and began to look for other currencies. 32 at the time, Krieger was a currency trader working for Banker’s Trust. He analyzed that the New Zealand dollar, which is also known as the Kiwi, was ridiculously overvalued. Using financial trading instruments which were new at the time, he shorted his position against the Kiwi, which was worth millions of dollars. His short sell order exceeded the entire New Zealand supply at the time.

And just like he had anticipated, the Kiwi fluctuated between a 3 to 5% loss, which made his company $300 million. Krieger himself ended up making $3 million from the trade.

George Soros – The Man who Made $1 billion by Shorting the British Pound

george soros quote

Back in the 1990’s, when the British economy was doing very well, the legendary George Soros proceeded to short the pound, and he borrowed massive amounts to accomplish this harrowing feat. Soros shorted the pound when the currency was traded on a fixed rate of exchange.

After Soros made the bet, the government of Britain realized it could end up losing billions if they consistently and artificially piled up the pound. Soon after, they moved away from the European Rate Mechanism, which resulted in a massive plummet of the pound’s value. This made Soros $1 billion, giving him the status: brilliant billionaire investor.

So, what do you think now? Some of the major traders and investors of today have been inspired by these great men who took trading to an entirely new level.

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The Framework for Predicting Failure in Trading

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You might have read or heard someone envisage or forecast that a particular retail organization or a chain of stores is going shut down due to being on the verge of bankruptcy. Can you remember how many times it did not happen the way you heard about it? Well, it might have happened a few times. Maybe you have also predicted that a store will shut down in the near future because of so and so reasons. Most people think like that.

If you take a look over recent years, you will notice there have been plenty of stores that closed down because of the super ecommerce retailer, Amazon. After the juggernaut was formed, the first ones to be crushed under it because of the financial crisis were Borders, Circuit City and Linen’ n Things. And now economic analysts have identified there could be a next wave of victims that could be destroyed by Amazon, namely Barnes & Nobel, Best Buy and RadioShack. Even Wal-Mart is showing signs of decreased store sales in the domestic division.

So, being an investor, what is the first question that pops into your mind? Of course, you will be asking yourself is it a good to differentiate an actual crisis at a brick and mortar retailer from that of a threatening one, but one that can be survivable? If you can distinguish the threat, you can avert a potentially dangerous investment but also make a profit on the consistent drop or a rebound in the company’s primary stocks.

Why Is It So Complicated To Forecast Failure?

The main reason why predicting failure can be overly complicated or calculating when a company will sink under is because bankruptcy is not just an issue of solvency (having more assets than liabilities), and if things were that simple, even a rookie investor would be able to foresee the downfall of a publicly traded company. Because all that would take is to review and evaluate the company’s shareholder equity portion in the balance sheet.

However, this doesn’t mean that solvency is of no importance, because it does matter. The thing to understand here is that solvency is not the leading cause of failure among companies. Let’s look at a textbook example. Consider the downfall of Circuit City which was a former electronics giant. When Circuit City filed for bankruptcy less than 6 years, it was deemed America’s second biggest electronics retailer and vendor. It had 700 superstores in different shopping malls and centres across the US. And on top of that, before it filed for bankruptcy, the ending balance sheet indicated that the company had $3.4 billion in assets in comparison to their liabilities which amounted to $2.3 billion.

This tells you that the company was not just solvency but it had a book value of over $1 billion. So, if solvency is not the problem here then what is? Quite simply, the answer to the question is liquidity. When an organization or company is in its final struggle, the first and most immediate problem it faces is the failure of converting assets into liquid cash, cash that can be used to pay off expenses such as rent and wages, etc.

This problem occurs when creditors begin to give up hope in the company and stop taking the company’s assets as collateral in order to be paid off. So, basically it is the inability to pay creditors what causes the entire problem, leading to the demise of a particular company and this is what exactly happened with Circuit City.

The Framework for Evaluating Liquidity

When liquidity becomes a problem, the traditional move should be towards the analysis of a company’s current assets, like cash, inventory and accounts receivable, and comparing it with its current liabilities, which could be debts and further obligations to be carried out. However, this method, referred to as  the current ratio analysis, can be both effective and misleading because of the fact that it includes assets which cannot be turned into cash, namely accounts receivable and the inventory, at short notice.

Current ratio also ignores cash flow which is the core of liquidity. Moreover there is also a one-sided aspect to liquidity that cannot be recorded in the financial statements. In essence, everything points towards the creditors of a company. Liquidity depends on the company’s creditors. Because of the fact that creditors are not interested in shorthand measures pertaining to the fiscal prosperity of company, like the current ratio, they are more worried about how they can topple competing creditors, thereby getting their repayments before time runs out.

Predicting Failure: The Bottom-Line

The point of what is explained here is to help you realize it is hard to pinpoint the failure of the companies which are on the brink of shutting down. There are immense complications because the analysis entails more elements than just solvency.

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Born on the 28th of September, 1954, in Memphis, Tennessee, Paul Tudor Jones II is the founder and owner of the Tudor Investment Corporation....
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