The careers of the world’s most famous traders are colored by both triumph and tragedy, with some exploits achieving mythological status within the industry. The dramatic and varied stories of the most famous traders have made compelling material for books and movies.
Themes of boldness, adventurism and ambition run through the lives of the 10 most famous traders selected for this designation by Investopedia. Short selling securities is a tactic many of these individuals share.
The top 10 are listed below in chronological order of their birth dates. All but the first two are still alive. Most of the historical material is from Wikipedia.
Jesse Lauriston Livermore
Jesse Lauriston Livermore, an American who lived from 1877 to 1940, shorted the stock market crashes of both 1907 and 1929 and was worth $100 million at his peak.
He began his trading career at 14 by posting stock quotes for Paine Webber in Boston.
Livermore would write down calculations about future market prices and later check them for accuracy. He began to put money on the market by making a bet at a “bucket shop,” an establishment that took bets on stock prices but did not buy or sell the stock.
The bucket shops eventually banned him for winning too much money. He moved to New York City and began trading in legitimate markets. This led him to devise new rules to trade the market.
He created a working philosophy for trading securities that emphasizes increasing the size of one’s position as it moves in the right direction, then cutting losses quickly. He said his lack of adherence to his own rules was the reason for his losses after making his fortunes in 1907 and 1929.
In 1907, he noticed a lack of capital existed to buy stock. He predicted a sharp drop in prices with speculators forced to sell by margin calls and lack of credit. Without capital, there would be no buyers to absorb the sold stock, driving down prices. He took advantage of this situation and bought stocks at depressed values. After the crash, he was worth $3 million.
Livermore was worth $100 million in 1929 following a similar scenario to 1907.
It was never clear what happened to his fortune, but he lost it all by 1934. It is believed he turned prematurely bullish and bought stocks and commodities long before the market bottomed in the summer of 1932.
He committed suicide in 1940.
William Delbert Gann
William Delbert Gann, a finance trader who lived from 1878 to 1955, used market forecasting based on geometry, astrology and ancient mathematics. His technical tools included “Gann angles” and the “Square of 9.” He wrote a number of books.
Gann started trading when he was 24. He reportedly believed in the religious and scientific value of the Bible. He was also a Freemason, to which his knowledge of ancient mathematics is attributed. He also studied the ancient Egyptian and Greek cultures.
In his book, “The Basis Of My Forecasting Method,” published in 1935, Gann described the use of angles in the stock market.
Calculating a “Gann angle” is equivalent to determining the derivative of a certain line on a chart. Each geometric angle divides time and price proportionally.
Gann called the most important angle the 1×1 or the 45-degree angle, which represented one unit of price for one unit of time. By drawing a perfect square and then a diagonal line from one corner of the square to the other illustrates the angle, which moves up one point per day.
There is no consensus whether Gann made profits by his own speculation.
Born in Hungary in 1930, George Soros is the chairman of Soros Fund Management, one of the most successful hedge funds. He earned the moniker, “The Man Who Broke the Bank of England” in 1992 after short selling $10 billion worth of pounds, earning a $1 billion profit. In February 2017, his worth was estimated at $25.2 billion.
He began his career by working at merchant banks before launching his first hedge fund in 1969. He started his second hedge fund in 1970.
His studies of philosophy led him to apply Karl Popper’s General Theory of Reflexivity to capital markets. He claims this theory provides a clear view of the fundamental/market value of securities, asset bubbles and value discrepancies for use in swapping and shorting stocks.
Soros’ fund was later renamed the Quantum Fund based on Werner Heisenberg’s principle of quantum mechanics.
By 1981, the fund grew to $400 million when a 22% loss and substantial redemptions by some investors cut it in half.
In 2011, Soros said he had returned funds from outside investors’ money and invested funds from his $24.5 billion family fortune due to changes in U.S. Securities and Exchange Commission disclosure rules. The fund had at the time averaged over 20% per year compound returns.
In 2013, the Quantum Fund made $5.5 billion, the most successful hedge fund in history. Since its inception in 1973, the fund has generated $40 billion.
Soros built a large position in pounds sterling for months leading up to September 1992. He recognized the unfavorable position of the United Kingdom in the European Exchange Rate Mechanism. On September 16, 1992, his fund sold short more than $10 billion in pounds, profiting from the government’s reluctance to raise its interest rates or float its currency.
The U.K. withdrew from the European Exchange Rate Mechanism, which devalued the pound. Soros’s profit was estimated at over $1 billion.
James Rogers, Jr.
James Rogers, Jr., born 1942, is the chairman of Rogers Holdings. He co-founded the Quantum Fund along with George Soros in the early 1970s. He is known for his correct bullish calls on commodities in the 1990s.
In 1964, Rogers joined a Wall Street firm where he learned about stocks and bonds. In 1998, he founded the Rogers International Commodity Index. In 2007, the index and three sub-indices were linked to exchange traded notes under the banner, Elements. The notes track the total return of the indices as a way to invest in the index.
In February 2011, he started a new index fund focusing on leading companies in metals, agriculture, mining, and energy sectors as well as those in the alternative energy space.
Richard J. Dennis
Richard J. Dennis, born in 1949, became successful as a Chicago-based commodities trader. He reportedly built a $200 million fortune in 10 years from his speculating. With partner William Eckhardt, he co-created the mythical Turtle Trading experiment.
He began as an order runner on the Chicago Mercantile Exchange trading floor at 17.
To circumvent a rule requiring traders to be at least 21 years of age at the MidAmerica Commodity Exchange, he worked as his own runner, hiring his father to trade in his stead in the pit.
He profited as he bought successively new weekly and monthly highs in the inflationary markets of the 1970s, a time of global crop failures.
Dennis held positions for longer periods than most traders, riding out short-term fluctuations.
When a futures trading fund he managed suffered major losses (estimated around $10 million) in the U.S. stock market crash of 1987, he quit trading for several years.
He managed funds for a period in the mid and late 1990s, but closed these operations following losses in the summer of 2000.
Paul Tudor Jones II
Paul Tudor Jones II was born in 1954 and is the founder of Tudor Investment Corporation, a leading hedge fund. He gained notoriety after making around $100 million from shorting stocks in the 1987 stock market crash.
His cousin, William Dunavant, Jr., CEO of one of the world’s largest cotton merchants, introduced him to a commodity broker who hired him and mentored him trading cotton futures.
The Tudor Group investment strategies include growth equity, discretionary global macro, quantitative global macro (managed futures), quantitative equity market neutral and discretionary equity long/short.
Predicting Black Friday 1987 allowed him to triple his money during the event due to his large short positions.
While the hedge fund industry standard is 2% per annum of assets under management and 20% of the profits, Tudor Investment Corporation charges 4% per annum of assets under management and 23% of the profits.
Forbes Magazine in 2013 listed him as one of the 40 highest-earning hedge fund managers.
John Paulson, born 1955, runs the hedge fund Paulson & Co. He made $4 billion in 2007 using credit default swaps to sell short the U.S. subprime mortgage lending market.
Paulson started his career at Boston Consulting Group in 1980 researching and advising companies. He worked at Odyssey Partners, Bear Stearns and eventually Gruss Partners LP, where he was a partner. He founded his own hedge fund in 1994 with $2 million and one employee. By 2003, the firm had $300 million in assets.
The firm specializes in “event-driven” investments — i.e., in mergers, acquisitions, spin-offs, proxy contests, etc. Such events involve merger arbitrage, described as waiting when one company announces it’s buying another, buying the target company’s shares, shorting the acquirer’s stock, and then earning the differential between the two share prices when the merger closes.
In 2010, he set another hedge fund record making nearly $5 billion in a single year.
In 2011, he made losing investments in Bank of America, Citigroup and the China-Canada listed company, Sino-Forest Corporation.
Steven Cohen, born 1956, started SAC Capital Advisors, a hedge fund focused primarily on equities.
After school at Wharton, Cohen took a Wall Street job as a junior options arbitrage trader at Gruntal & Co. in 1978.
His first day on the job, he made an $8,000 profit. He would eventually make the company around $100,000 a day.
In 1992, Cohen launched SAC Capital Partners with $20 million of his own money. By 2009, the firm managed $14 billion in equity.
On November 20, 2012, Cohen was implicated in an alleged insider trading scandal involving an ex-SAC manager.
Cohen was not directly named in the 2012 indictment.
A civil case against Cohen was settled in January 2016. The agreement prohibits him from managing outside money until 2018.
The hedge fund itself pleaded guilty to similar criminal charges in a $1.8 billion November settlement that required it to stop handling investments for outsiders.
David Tepper, born in 1957, is the founder of the successful hedge fund Appaloosa Management. He is a specialist in distressed debt investing.
For the 2012 tax year, Institutional Investor’s Alpha ranked Tepper first, for earning $2.2 billion. In 2016, he earned $1.2 billion, making him the world’s fourth highest earning hedge fund manager.
After earning his MS in 1982, he took a position in the treasury department of Republic Steel in Ohio.
In 1984, he was recruited to Keystone Mutual Funds in Boston, and in 1985, Goldman Sachs recruited him for its high yield group. Within six months, Tepper became the head trader on the high-yield desk, focusing on bankruptcies and special situations.
He started Appaloosa Management in 1993.
In 2001, he generated a 61% return focusing on distressed bonds.
In 2005, he began focusing on Standard & Poor’s 500 stocks. He makes significant gains investing in companies such as Mirant, Conseco, Marconi and MCI.
In 2009, his hedge-fund earned about $7 billion by buying distressed financial stocks and then profiting from the recovery of those stocks.
Nicholas Leeson, born in 1967, is a rogue trader who caused the collapse of Barings Bank. He served four years in a Singapore jail, but later bounced back to become CEO of Galway United, a football club.
Following school, his first job was as a clerk with a private bank, Coutts. He then moved to Morgan Stanley in 1987 for two years, then to Barings.
In 1992, he became general manager of a new futures markets operation in the Singapore International Monetary Exchange.
Barings Bank allowed Leeson to remain chief trader while also being responsible for settling his trades, jobs usually done by different people. This made it easier for him to hide his losses from his superiors.
At the end of 1992, the account’s losses surpassed £2 million, which expanded to £208 million by the end of 1994.
The beginning of the end occurred on 16 January 1995, when he placed a short straddle in the Tokyo and Singapore stock exchanges, betting the Japanese stock market would not move overnight. But an earthquake hit early in the morning on January 17, sending Asian markets into a tailspin.
Leeson fled Singapore in February. Losses reached $1.4 billion, twice the bank’s available trading capital. Following a failed bailout attempt, Barings was declared insolvent in February.
Leeson was arrested in Frankfurt and extradited to Singapore.
He pleaded guilty to two counts of deceiving bank auditors and of cheating the Singapore exchange, including forging documents.