Forex trading has attracted many enthusiasts over the years and while some of them have been quite successful in their trading, others have hit a brick wall. The latter group entails both old hands at the game and the newcomers who are forever wondering how to be successful at Forex trading. You can learn to be successful by looking at other people who have been successful in the business.
It has been touted many times that the ratio of successful Forex traders is smaller as compared to that of unsuccessful traders. Also,Also, you can opt to hire the services of CMC Markets a leading CFD and spread betting trading in the UK. You should be skeptical about such claims because the Forex market is decentralized and has an over-the-counter nature; factors that make it difficult to get hard data about it.
Key Personalities that have been Successful at Forex Trading
Stanley Druckenmiller previously worked at the Quantum Fund but went on to start his on fund that was called Duquesne Capital. He boasted double digits profits in his fund and his net worth stands at over $2 billion. Druckenmiller’s philosophy for long -term returns included preserving capital and pursuing trades aggressively whenever trades were going up. This strategy downplays the issue of a person being either wrong or right but instead emphasizes maximizing on the opportunity each time you are right and minimizing on the damage whenever you are wrong.
During the period when Britain still participated in the Exchange Rate Mechanism (ERM), George Soros emerged as one of the heaviest investors in the world. George is seen as a legendary money manager because he reportedly posted more than a staggering £1 billion from a short position in the sterling pound. That was before Black Wednesday, 16 September 1992. During the ERM, the government was required to intervene whenever the pound weakened against the Deutsche Mark beyond a certain point.
The ERM left the Bank of England vulnerable and this is because the country’s commitment to keep the value of the pound against Germany’s Deutsche Mark meant that they had to intervene whenever the pound weakened by raising interest rates, buying the sterling pound or doing both. The recession during that period meant that people would feel the effect of the high interest rates thus stopping investment when it was needed instead.
Soros was able to successfully predict the vulnerability of the Bank of England due to the above reasons and he used up his Quantum Fund a few weeks to Black Wednesday. However, a day to Black Wednesday, the president of the German Bundesbank suggested that some currencies could come under pressure. This made Soros add much more to his position. Come Thursday morning, the Bank of England started buying billions of Sterling pounds but found it moved a little. This was due to more speculators who had flooded the market after seeing what Soros had done. The UK made the last attempt to raise its rates that had hit 15% but it did not work. On the same day the UK exited from the ERM and went back to a free-floating pound, causing the currency to plunge 15% to the German Deutsche Mark and 25% to the US dollar. Against this backdrop, the Quantum Fund earned billions in dollars and Soros gained the title of the man who broke the Bank of England.
Soros appreciated risk/reward which made him the best in Forex trading. He also chose the theory of reflexivity over the theory that prices eventually move to a theoretical equilibrium.
Bill Lipschutz is another Forex Guru who made his profits totaling hundreds of millions dollars at Salomon Brothers in 1980s. He did not have any previous experience in the currency markets. Lipschutz believed that to be successful you s not anchored on whether you are wrong or right. You should, instead work on making profits when you are right 20 to 30 per cent of the time. Other principles by the trading genius include building a position when the market trends are on your side and leaving in the same manner. You should also ease up whenever signs of the fundamentals and price action start changing. He also insisted on being ware of the focus of the markets. Finally, you should also manage risks by choosing your trading size. This will prevent a situation where you are forced out of a position at an inexact time.