As with anything in life, when it comes to looking at the experts, there are always little parts of what they do that we can steal, or at least we can use what they know. This is no different when it comes to forex trading, they are experts for a reason after all, so why not take what they know or what they do and implement it into your own trading? So we are going to be looking at 10 things that expert traders do or what they think and ways that you can then implement that into your own trading.
“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.” – George Soros
What George is basically saying here is that the markets are constantly changing, you won’t make money by trading what has already happened, instead, you will need to look to the possibilities of what could happen next, if you are able to predict the future movements then you will make money, events that are not expected will help you to make even more as you will be one of hen few trading it.
“Play the market only when all factors are in your favor. No person can play the market all the time and win. There are times when you should be completely out of the market, for emotional as well as economic reasons.” – Jesse Livermore
This is all about patience and discipline, with near traders you often see them placing trades when they probably shouldn’t, this advice and way of reading is great as it means that you will only be placing trades in line with your strategy and avoiding bad trades outside of it. Only trade when the conditions are right and try not to force any trades.
“Many investors make the mistake of buying high and selling low while the exact opposite is the right strategy.” – John Paulson
A pretty obvious one but also an important one. Many traders know that you should buy low and sell high, yet so many of them get caught up in a large movement, something has risen a lot, traders then begin to jump on only for it to turn. They go into their position at the top, now the only way is down. Do not jump onto something just because others are or because something is rising, ensure that your analysis is correct and that it is the right time to trade.
“That was when I first decided I had to learn discipline and money management. It was a cathartic experience for me, in the sense that I went to the edge, questioned my very ability as a trader, and decided that I was not going to quit. I was determined to come back and fight. I decided that I was going to become very disciplined and businesslike about my trading.” – Paul Tudor Jones
Risk management is one of the most important things that you can do as a trader. Having the belief in yourself to continue is fantastic after losses, but you can reduce those losses by using proper risk management techniques. So ensure that you use them each time that you trade.
“I’ve certainly done it – that is, made counter-trend initiations. However, as a rule of thumb, I don’t think you should do it.” – Richard Dennis
It is considered a bad move to trade against the trend, hence the saying of trade. Some people do it but if they are successful it often comes down to a bit of luck that the markets turned at the right time. As a rule of thumb, you should be trading the trend, not trading against it.
“I’ve learned many things from him [George Soros], but perhaps the most significant is that it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” – Stanley Druckenmiller
Stanley is right, it is vital that you have the right risk to reward ratio in place. You need to ensure that you are limiting your losses and also having the appropriate winning margins too. If you do, you can technically be profitable with just a 20% or 30% win rate (depending on your risk to reward ratio). So it is not about winning all your trades, it is about ensuring that you are profitable.
“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. Even people who lose money in the market say, “I just lost my money, now I have to do something to make it back.” No, you don’t. You should sit there until you find something.” – Jim Rogers
Another one about being patient and it is right. You need to be patient, do not try and force your money to make money, in other words, do not try and force trades. You need to wait until the right market conditions are there, you need to wait until the right trade is there, just do not force it. Leave your money alone until the right trade is there.
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble” – Warren Buffet
While he is incredibly successful, Warren Buffet does like to take risks as he stated in this quote. He is basically saying that when there is a really good opportunity or a really good trade, you should put more into it than you would other trades. This increases the profitability of that opportunity, but it does also increase the risks, so only do this one if you are absolutely certain, but then again, nothing is guaranteed.
“I believe that the biggest problem that humanity faces is an ego sensitivity to finding out whether one is right or wrong and identifying what one’s strengths and weaknesses are.” – Ray Dalio
Many traders just look at the markets rather than themselves, yet the main area that we can often improve is within us and the actions that we take. You need to look at yourself, work out what parts of trading you are good at and what parts you are not so good at, that will give you a direction and work that you need to do with yourself in order to improve your own understanding and abilities when trading.
Those are some of the things that experts say and do, you can try and implement some of them into your own trading, they could be helpful, maybe you are already doing some of them which is great. Take what you can from the experts, they know what they are doing and they are doing it well, but do not blindly follow them, be sure that you create your own trading style and your own instincts, as you want to be around and successful long after they have gone.