Top Lessons From The Best Trading Greats of our Lifetime – Introduction
In our lifetime, we have seen them all. We have seen the greatest investors/traders ever. We have also seen their rise and even the fall of some of the sharpest traders ever. For example, we have lived in the generation of Warren Buffet and James Simmons who are regarded as the best investors and traders of all times. We have also lived in the same generation as Andy Hall and Anthony Ward who were the best cocoa and crude oil traders of all time. Here are some of the lessons we can learn from these spectacular individuals.
First, the need to have a philosophy. The success of Warren Buffet and other value investors has come from following an investing philosophy. For example, Warren has always been a value investor who buys undervalued growth companies that he believes are undervalued. He then goes on to hold these companies for decades. His philosophy is different from that of James Simmons who uses complex mathematical formulas and algorithms to make trading decisions. By having a philosophy, you will be at a better position to master it and become the best at it.
Second, the need to adopt to change. While Warren Buffet has been so successful in the past 60 years, he would have been more successful had he invested in technology companies like Google, Facebook and Netflix. But he didn’t. The lesson here is that traders and investors should always be open to change. The same can be said about successful traders like Andy Hall and Anthony Ward, who failed to capitalize on the emerging field of algorithmic trading. In the past, these traders were the best when people did not rely on algorithms to trade.
Third, the need to remain humble even in the best of times. A good example of this came a two weeks ago when Wall Street Journal published a detailed report on David Einhorn. David is one of the most-followed investors in the country today. His calls on companies like Allied Capital has made him a popular Wall Street figure. The article was about his failures because in the past three years, he has seen his hedge fund lose more than $10 billion. Part of the reason why all this made news is because David was always in the limelight. He always talked about his investments and appeared on financial media. The same can be said about his friend Bill Ackman who is being ridiculed for his investment picks. Being humble and avoiding the limelight can help reduce the exposure to negative criticism when you fail.
Fourth, the need for honesty. As a trader, you probably trade money for your clients. These clients have high expectations from you. Therefore, it is very important to be honest in your dealings with your customers because often, you will fail. Some trades you initiate will not work out. By telling your traders the truth, you will be at a better position to avoid the humiliation and lawsuits. It will help you build your confidence with them.