3 Financial Gurus to Improve Your Trading

The financial markets are a maze of uncertainty. Even seasoned traders see their fair share of wins and losses. As a beginner, learning from the experience of the most celebrated traders can strengthen your financial education and trading strategies. Here are lessons from trading legends, whose techniques and strategies have revolutionised trading decisions.

1. Peter Lynch
   There is so much to learn from Peter Lynch. But first, the things you need to know about him. He is most well-known for heading the Fidelity Magellan Fund from 1977 to 1990. During his tenure, the mutual fund averaged an annual return of 29.2%, outperforming the S&P 500 by over 100%. His book, Beating the Street, explains the trading strategies that led to this success in detail. However, Lynch’s best work is creating the PEG ratio, widely used by traders to evaluate the growth potential of value stocks. Lynch is also the author of multiple best-selling trading books, including those for beginners, such as Learn to Earn and One Up on Wall Street.  Some lessons from his books to help your trading decisions include:
   • Even a successful trader is right only 60% of the time. Traders should be ready to embrace “losses, setbacks, and unexpected occurrences.”
   • Lynch is all for making informed decisions. His famous saying, “Know what you own and why you own it,” stresses trading the instruments you understand. More importantly, map your trading decisions to your financial goals.
   • He is big on grasping the fundamentals and coined the term “tenbagger.” It refers to an undervalued asset with the capacity for outsized growth, typically 1,000%. 
   • Peter Lynch often quips about not having to “kiss all the girls.” This means traders do not have to capture every market opportunity since overtrading can be counterproductive. Instead, staying consistent and on track with your trading strategy yields better portfolio performance in the long term.
2. George Soros
   Popularly known as the “Man Who Broke the Bank of England” in the financial community, George Soros is one of the world’s greatest investors. His short trade led to the devaluation of the pound sterling on September 16, 1992, famously known as “Black Wednesday.” The GBP plunged after Soros short sold the currency, going down as one of the most successful trades in the history of financial trading. His speculation against the British pound when the Bank of England raised interest rates resonates with his unique trading style. This is summarised in his famous quote, “Markets are constantly in a state of uncertainty and flux, and money is made by discounting the obvious and betting on the unexpected.” Flexibility to respond to the markets is the key to his trading strategies. Soros’ trading strategies hinge on cues from: 
   • Market data: Use it with the reflexivity theory (investors base their perceptions of reality instead of what is actually happening) to identify bubbles and potential turning points. He identified the US real estate bubble using this theory.
   • Analytics: Apply scientific methods, such as probability, to quantify opportunity. Soros has one of his teammates exclusively work on validating a theory opposite to his before making trading decisions.
   • Intuition: Soros calls this physical cues. As a trader, you must listen to your gut feeling. Soros could exit a trade if he had a headache or a backache after opening a position.
   • Politics: Those in power influence the markets and investor sentiment. Hence, he suggests keeping an eye on politics and economics to make informed trading decisions.
   • Global sentiment: Remember to consider global macroeconomic trends for your trading decisions.
3. John C. Bogle
   John C. Bogle is the founder of the one of largest asset management firms in the world, the Vanguard Group.  Bogle revolutionised investing by inventing Index Funds and making the first publicly tradable one available for retail traders. This transformed the world of investing. Indices are the ultimate tool to bring down the cost of investing and minimising risk by broadening exposure to the financial markets. The financial community will forever remain grateful for his genius idea. Although he passed away in 2019, his legacy of over a dozen books will continue to unpack the nitty-gritties of index trading for years to come. His technique has become one of the most popular trading styles for retail traders. Even Warren Buffet applauded John Bogle’s work saying that he was the only individual to have “done the most for American investors.” Popularly known as “Saint Jack,” Bogle’s mission was to educate people about investing. His teachings are a treasure trove of trading wisdom for beginner as well as experienced traders. Some of his teachings include:
   • “The time in the market beats timing the market.” This highlights the importance of consistency to capture the benefits of compounding.
   • Saint Jack authored “The Little Book of Common Sense Investing” and emphasised that rereading his books during trying times enabled him to follow his own advice and “stay the course.”
   • “Impulse is your enemy” is one of his most famous quotes and reminds traders to never let their emotions interfere with their trading decisions.
   • John Bogle also believed in the principle of trading with only the money you are comfortable losing. Those having trouble losing 20% of their capital, “shouldn’t be in stocks” said the Father of Index Funds.

The insights of successful traders are invaluable. However, your success rests on aligning your trading strategy to your financial goals and risk appetite. Make informed decisions based on fundamentals, historical data and market sentiment. Regularly refine and backtest your strategy to align with the markets. And, most importantly, don’t stop adding to your financial education.

To Sum Up

• Learning from the experiences of expert traders can elevate your trading strategies.
• Peter Lynch, George Soros and John C. Bogle are among the most followed traders of all time.
• Understand your assets and your trading decisions well – P. Lynch
• Stay flexible to change your trading strategy according to market conditions – G. Soros
• Keep your emotions out of trading decisions – J. Bogle

Disclaimer:

All data, information and materials are published and provided “as is” solely for informational purposes only, and is not intended nor should be considered, in any way, as investment advice, recommendations, and/or suggestions for performing any actions with financial instruments. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation or needs, and hence does not constitute as an advice or a recommendation with respect to any investment product. All investors should seek advice from certified financial advisors based on their unique situation before making any investment decisions in accordance to their personal risk appetite. Blackwell Global endeavours to ensure that the information provided is complete and correct, but make no representation as to the actuality, accuracy or completeness of the information. Information, data and opinions may change without notice and Blackwell Global is not obliged to update on the changes. The opinions and views expressed are solely those of the authors and analysts and do not necessarily represent that of Blackwell Global or its management, shareholders, and affiliates. Any projections or views of the market provided may not prove to be accurate. Past performance is not necessarily an indicative of future performance. Blackwell Global assumes no liability for any loss arising directly or indirectly from use of or reliance on such information here in contained. Reproduction of this information, in whole or in part, is not permitted.