Traders have been speculating on market movements since forever. Below are the 10 of the most famous traders of all time. Please note that these are just a few of the traders who have either done well or have caused disruption in the financial markets. These individuals are not necessarily the best traders in history.
Peter Schiff, also know as ‘Dr Doom’, is an American trader & investor who became famous when he predicted the stock market crash of 2007 to 2010.
He was born in 1963. He is the son of a prominent tax protester, who encouraged Peter’s economic interest. In 2006, Schiff first warned of an economic collapse. He urged people to take action based on his prediction.
Although Schiff has been highly criticized over time, he appeared on numerous financial news programmes in the years preceding the crash, warning the public about the upcoming recession and market crash. In 2007 he wrote his book, where he said that the US government’s economic policy was fundamentally flawed and that there was a severe imbalance between supply & demand. His specific prediction was that hyperinflation would cause an economic collapse.
George Soros was born in 1930. He is one of the most successful forex traders of all time. He is immortalized by his bet against the British pound in 1992, where he reportedly secured $1 billion in profit, earning him the nickname of ‘the man who broke the Bank of England’. Soros likes to be known as a philanthropist, political activist and author.
As stated previously, his most legendary trade was made only a few days before the British government decided to devalue the pound. Predicting the decision, Soros leveraged his hedge fund to sell billions of pounds, buying them back at a much lower price right after the devaluation. This date is now known as the ‘Black Wednesday’. How did Soros make this decision? He applied a theory based on the relationship between cause and effect, which helped him get a “clear” picture of asset bubbles and value discrepancies in the market.
Jesse Livermore was born in 1877. He has experienced several great crashes in his life, including the 1929 Wall Street Crash. By that time, he had made a personal fortune of around $100 million. This is equivalent of billions today. He made and lost other fortunes along the way.
Livermore made his money without the aid of price charts or investment algorithms. He instead kept track of prices in a physical ledger. He developed the concept of pivot points, which involved watching a stock at key levels to see how it reacted. He would increase the size of his successful positions in a manner called ‘pyramiding’.
Simon Cawkwell was born in 1946. He is a well-known “spread bettor” and a “controversial bear”. His signature trades were finding out and shorting companies that he believed their share prices will fall. Some of his most famous trades are shorting the Northern Bank before it went into administration by the regulators, and shorting the market in the aftermath of the September 11 attacks.
Cawkwell claims that his advantage is his experience as an accountant. This enables him to quickly think and analyse the fundamentals of a company. He does not panic when the market moves fast, like other investors do.
Paul Tudor Jones
Paul Tudor Jones name is permanently linked with Black Monday – the stock market crash of 1987. He shorted multiple stocks during this time and made around $100 million, when everyone lost money. Jones was born in 1954. He started his career in investor as a clerk on a trading floor. 5 years after the Black Monday, he was appointed as the chairman of the New York Stock Exchange (NYSE).
Why was he successful in Black Monday? According to Jones it was because of his colleague Peter Borish, who mapped the 1987 market against the 1929 market crash. He shorted a number of stocks due to the similarities between the two graphs. His trading style is mostly based on technical analysis.
John Paulson was born in 1955. He started his financial career in 1976 when he studied business at New York University (NYU). He is most known for making billions of dollars when he shorted the real estate market during the stock market crash of 2007. More specifically, he bet against mortgage-backed securities (MBS) by investing in credit default swaps (CDS). In the end, he made approximately $3.7 billion on these trades. This catapulted him into ‘financial legend’ status. However, he had less success in the following years. Many of his critics call him a one trick pony.
Jim Rogers is an investor and financial commentator born in 1942. He is a close friend and colleague of another investor, George Soros. Together, they founded the Quantum Fund in the early 1970s. He has a great track record. He managed to grow the portfolio by 4200% in just 10 years. He is known for being over bearish on the U.S. market since the early 80s. He predicted that we would face increased number of real estate and consumer debt bubbles in the coming years.
Nick Leeson was born 1967. He is a derivatives trader who collapse of Barings Bank of UK in 1995. Before the scandal with Barings, he was the head of the bank’s operations in Singapore. He was known for making massive profits for the bank in asian markets. However, leading up to the collapse, he placed a few really bad trades and started to lose huge amounts of money for the bank.
Instead of coming clean, Leeson decided to hide the losses from the bank. The lack of proper supervision in the bank, meant that he did not have to report to a supervisor. He tried to make back the money he lost by placing more and more speculative bets. His worst trade included a short straddle on the Nikkei. Unfortunately, the index experienced a sharp drop overnight due to the Kobe earthquake that hit Japan. Despite his desperate attempts to recoup the losses with his bets, Barings Bank lost more than $1 billion. When everything started to unravel, Leeson fleed the country. He was later arrested in Germany and faced 4 years in prison.
Nicholas Darvas was born in 1920. He was a dancer by profession. He became a self-taught investor and made more than $2 million investing in stocks. After some disappointing investments, Darvas had his eyes on the potential high-growth sectors. He tried to find clues in the stock volume traded, waiting for a substantial increase. Afterwards, he narrowed his choices down to stocks trading in a narrow range and waited for a breakout in the pattern.
What makes his system remarkable is that he did all of this in the 1960s without computer. Imagine, during that time he keept in contact with his broker using a telegram.
Ed Seykota is one of the most known trend followers. Some call him the greatest. He was born in 1946. He started his career in finance when computers still used punch cards.
His trading approach was to follow mechanical signals to buy and sell, and then ride out the trend for as long as possible. He was a fanatic follower of his trading style. He claimed that you must follow it even when it showed a string of losses, since according his risk management each losing trade cost him only 1% of his capital.
Like Darvas, he didn’t stay all day watching the price movements. Instead, he only looked at the market at close of the day and updated his system.
By risking only 1% of his capital on each trade he was able to control his emotions to a greater extent than would have been the case if he risked more. He tried to avoid making predictions, arguing that the market would tell him what to do when the time came along.