The Best Forex Traders In History
Given just how unpredictable the currency markets have been in recent years, it is perhaps not surprising that quite a few people have started investing in forex with the help of a prop firm that provides them with instant funding.
What makes forex special compared to commodities, stocks and bonds is that there are so many varying elements that can shape and shift the prices of currency pairs, from geopolitical events to tariffs to overall market sentiment.
The best traders in the space are the ones who can navigate these often complex sets of circumstances and find a clear, stable path. Here are some of the best forex traders and what we can learn from their most successful trades.
Stanley Druckenmiller
It is very difficult to discuss the forex market without talking about Quantum Fund, the former hedge fund owned and operated by George Soros. However, whilst Mr Soros is a very public and very important figure in the world of forex, a perhaps even more critical figure was his right-hand man, Stanley Druckenmiller.
When he was hired by Quantum Fund, his first success was going long on the German mark right after the fall of the Berlin Wall, as the initial depression of the currency due to the complexities of merging two divergent sides of the country appeared to be overly pessimistic.
This turned out to be a masterstroke and would ultimately help him with his most famous trade by creating a place for investors to go once Black Wednesday hit.
Whilst Mr Soros is credited as the man who “broke” the Bank of England and potentially changed the history of the country in the process, Mr Druckenmiller ultimately spotted the weakness of the pound in the European Exchange Rate Mechanism.
Mr Druckenmiller’s philosophy for trading in forex was in the importance of position size, particularly given that Quantum Fund would often hold gigantic positions, either short or long, but also that strong convictions should be held as strongly as the market reality allows them to.
As well as this, it also highlights just how different forex is to other markets in the opposite way to many other traders; whilst an excellent forex trader with a remarkable hit record, he infamously struggled to handle the very different world of technology stocks.
He lost a lot of money betting against the market for reasons that turned out to be true, and then lost billions jumping into the dotcom bubble right as it burst.
Andy Krieger
At one point the most successful currency trader in the world, Andy Krieger was a famously aggressive and assertive operator in the forex market and his early successes gave him the leverage and capital to make one of the most audacious short plays in forex history.
Leading up to the events of Black Monday, the 1987 stock market crash, his $700m capital limit given to him unanimously by the board of Bankers Trust, put him in the perfect position to short the New Zealand dollar.
As investors in the US dollar quickly tried to get their money elsewhere, Mr Krieger noticed that the Kiwi seemed hugely overvalued as a result of the market rush, so he accumulated a short position so large it was said to be more than the liquidity of the New Zealand dollar itself.
Following a precipitous fall in the value of NZD caused by both the short position and the rally of USD and a major political controversy in New Zealand itself, he ultimately earned Bankers Trust $300m.
The lesson we can learn from Andy Krieger is the importance of timing entry and exit positions, something that he perfected through his remarkable grasp of the fundamentals of forex, mixed with more than a little bravado.
Had he waited any longer, he might have lost a fortune due to a surge in the value of the NZD in 1988.
Bill Lipschutz
Trading is as much about weathering and learning from mistakes as it is about reaping the rewards of success, and perhaps nobody epitomises this more than Bill Lipschutz.
The first part of Mr Lipschutz’s journey is one that many traders will be familiar with; he inherited $12,000 as an inheritance and turned it into $250,000 through a remarkable run of what he later described as “beginner’s luck” before nearly losing it all with one bad trade. As he later put it, there is a lot of pain in trading.
However, he persevered and treated it as a learning experience. He then joined Salomon Brothers as part of their then-new forex department and at one point was making $300m a year for the major investment fund.
He left in 1990 to continue his development as a trader and highlighted a rather extreme example of the benefits of feeling the pain of loss but treating it as something to learn from.