Secrets of Success #2: tips from top traders

Whether you’re a trading newbie or a market veteran, there’s always a lesson or two to be learned from others who’ve succeeded in the trading world. So we’ve found some tips from top traders including billionaires George Soros, Ray Dalio, Jim Simons and more.

Read on to find out why practice makes perfect, why not to get overemotional and why making mistakes is a good thing…

Take a break

Screen Shot 2015-02-04 at 15.05.01Kit Kat strongly recommended, but not essential. Seriously though, this might not sound like the best recipe for success. Getting to know the markets and trade successfully takes time, so surely any time you’re spending away from the charts is costing you, right?

Wrong. If you don’t believe us, take it from the man who broke the Bank of England. Billionaire investor and business magnate George Soros says investors “often forget one important thing: living”. He advises newbies to make sure to take a break from the busy world of investing and remember to spend quality time with loved ones.

That’s really what our Trader Lifestyle section is all about – giving you a bit of much-needed distraction from the trading world, whether it’s five minutes of funny news in Five Lessons Learntkeeping up to date with the latest internet sensations in Viral Videosor planning your summer holidays with our travel features. Trading isn’t easy – you deserve a break every now and then.

Control your emotions

Screen Shot 2015-02-04 at 15.07.02Trading can be a bit of a rollercoaster ride, so all the best traders out there will tell you you’ll have the most success trading if you can take your emotions out of it and focus on the maths instead of the money. The more money involved, the more true this becomes.

Paul Tudor Jones is the president and founder of one of the world’s most successful macro hedge funds, and he claims that one of the most important lessons trading has taught him is that “You have to be able to handle getting your butt kicked. No matter how you cut it, there are enormous emotional ups and downs”.

There are two important points to help you with this (and we’ve covered both of them many, many times before). The first is to have a trading plan, and stick to it. That way, your decisions are based on a carefully formulated plan and not on a whim. And the second is to never trade money you can’t afford to lose. You’re never going to be able to take your emotions out of trading if you’re risking the money that’s going to pay your bills.

For trading plans, strategies, indicators and advice on managing risk, check out our Forex Trading Course

Believe in yourself

Screen Shot 2015-02-04 at 15.07.55Okay, this one doesn’t just apply to trading, but to life in general. Make like hedge fund manager John Paulson and have the confidence to do what you want to do and what you believe is right, even if everyone around you tries to tell you different.

Paulson had his big break in trading when he made more than $15 billion on a risky bet that the housing market would implode. Clients, industry pros and several advisors questioned his bet, but Paulson did his homework, trusted his gut and challenged the expert opinion that although the housing market would weaken, it would not collapse. And it paid off.

The big lesson here isn’t to put on blinkers and stop listening to the advice of those around you. It’s more about having the confidence to challenge the beliefs of others and doing your own research instead of taking what others tell you as gospel – and then believing in yourself enough to act on your findings.

Mistakes are good

Screen Shot 2015-02-04 at 15.24.17One of the first things to get your head around as a trader is that you won’t be right 100% of the time. You won’t win 100%. And actually, you don’t need to – the really successful traders are the ones who understand that they’re going to get it wrong at times and allow for this as part of their strategy.

One example of this is billionaire owner of Bridgewater Associates Ray Dalio, who puts his success down to a set of guiding principles he follows in all areas of life. Dalio believes that mistakes are a good thing, as most learning comes via making mistakes and reflecting on them. Dalio also believes that finding out about your weaknesses is a good thing, as it is the first step towards learning how to overcome them and not letting them stand in your way.

Understanding your strengths and weaknesses is a vital starting point for new traders, and one of the first steps we recommend when drawing up a trading plan. Be honest with yourself (this is the hard part) about what you’re good at, what you’re not so good at, and what you’re frankly terrible at (and no fibbing – you don’t have to ‘fess up to anyone but yourself!)

For more about Ray Dalio and his trading principles, read Littlefish Legends #2: Ray Dalio to find out why he’s one of Littlefish FX CEO Sam Barry’s trading heroes. 

Practice, practice, practice

Screen Shot 2015-02-04 at 15.41.08Many of the brightest stars in trading will tell you that their success isn’t due to some god-given talent for trading, but because they worked hard, learned everything they could and practiced hard – and are still working, learning and practicing to this day.

Trading legend James Harris Simons famously said that “successful trading is a teachable science, not an innate talent”.  Commodities and futures trader Linda Bradford Raschke, whose hedge fund performance is ranked in the top 2% by Barclayhedge, agrees. She thinks of trading like a craft, for example playing the piano. She says “Like any craft, such as piano playing, perfection may be elusive – I’ll never play a piece perfectly, and I’ll never buy the low and sell the high – but consistency is achievable if you practice day in and day out”.

This is a useful way to think of trading – not as a skill you’ll eventually master, but as something you have to continue to practice at and keep learning as long as you keep trading. It’s always a work in progress, there’s always more to learn and you can always do better – and this should inspire you, not discourage you.

Tweet us @LFXKatie and @LittlefishFX and let us know your secrets to success – for trading, life in general and winning at board games (especially the latter, please).

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