Legendary Traders

The history of markets is full of remarkable traders whose results, methods and mistakes still shape how people trade. Some were discretionary speculators who read markets by feel; others were systematic pioneers who built rules and models. Their styles differ enormously, yet a few principles appear again and again: strict risk control, cutting losses, letting winners run and sizing positions according to conviction and risk. Studying them is valuable, as long as you remember that their stories are filtered by survivorship and that copying a famous name's trades is not the same as having their edge.

Profiles#

Jesse Livermore#

Livermore made and lost several fortunes. He became famous for shorting before the 1907 panic and again during the 1929 crash. Edwin Lefèvre's 1923 book "Reminiscences of a Stock Operator", a lightly fictionalised account of his career, remains one of the most recommended trading books. His story also carries a warning: despite his skill, he went bankrupt more than once, often after breaking his own rules. See Best Trading Books.

Jim Simons and Renaissance#

Jim Simons, a former codebreaker and award winning mathematician, founded Renaissance Technologies in 1982. Its Medallion Fund, run mainly for employees, used statistical models to find short term patterns. According to Gregory Zuckerman's book "The Man Who Solved the Market", Medallion averaged returns of about 66% a year before fees from 1988 to 2018. Its success helped inspire the growth of quantitative investing. See Quantitative Trading.

The Turtle experiment#

In 1983, Richard Dennis and his partner William Eckhardt debated whether trading could be taught. Dennis recruited a group of novices, the "Turtles", taught them a rule based trend following system with strict position sizing based on volatility, and gave them money to trade. Several went on to successful careers, supporting the idea that disciplined rules can be learned. See Trend Following and Donchian Channels.

Common principles#

A healthy perspective#

Famous traders are famous partly because they won. Many equally skilled people took similar risks and lost. Their market conditions, access to information and capital also differed from those of a retail trader today. Learn their principles, especially around risk, rather than chasing their returns. See Survivorship and Selection Bias and Hindsight and Outcome Bias.

Frequently asked questions#

Who is the greatest trader of all time?#

There is no agreed answer; names often mentioned include Jim Simons, George Soros, Stanley Druckenmiller, Paul Tudor Jones and Jesse Livermore, each with different styles.

What was the Turtle trading experiment?#

A 1983 experiment in which Richard Dennis taught novices a rule based trend following system to test whether trading could be taught.

What do successful traders have in common?#

Strict risk management, cutting losses, letting winners run, disciplined position sizing and willingness to adapt.

Next, draw the lessons together in Lessons From Market Failures.