The ‘Billion Dollar’ Cable Trading Strategy.
· George Soros: The man, the myth, the legend. If you haven't heard of him and you're a trader, you are missing out on a lot of very valuable insight and wisdom. In today's lesson, we are going to discuss Mr. Soros, learn a little about why he is one of the greatest traders ever and most importantly, discover what he can teach us that will improve our own myblogmoversjjd.ga /trading-legend-george-soros. · George Soros rejects,the idea of technical analysis that all fundamentals are immediately reflected in the price and contents that investors and traders distort the fundamentals by their individual myblogmoversjjd.ga /george-soros-trading-techniques.
He is also arguably one of the greatest financial investors working today. In his well-regarded book, The Alchemy of Finance , Soros utilizes his management of the Venezuelan based Quantum Fund to demonstrate and test his own market theories, and offers unique international economic solutions to world-wide financial crises.
He also states that investment trades are usually based on biased behaviors or perceptions. And he states that various movements in the financial market created by these biased perceptions and trades can actually change the underlying principles and real value of the economic market. Conventionally, many economic theorists state that people behave rationally when they make economic decisions.
He points to self-reinforcing price based stock performances, such as individual people buying when they see a stock go up, and selling when they see it go down, which in turn create wider economic fluctuations throughout investment and credit markets internationally. The theory of reflexivity basically asserts that individual biases can at least potentially alter basic economic fundamentals. Soros claims that his concept of reflexivity, led directly to his own financial success through his understanding of the results of reflexive effects in the market.
He also states that reflexivity is most easily witnessed when investor bias grows and widens through trend-monitoring speculators and situations that employ the leveraging of equity. In the current economic environment, a good example of reflexivity has occurred in the housing market.
As lenders made more cash accessible to home buyers, more people bought more expensive housing, which increased the prices of housing. Because the housing prices increased, investments in housing looked sound, and more money was lent. In this article, we'll look at some of the greatest currency trades ever made. First, it is essential to understand how money is made in the forex market.
Although some of the techniques are familiar to stock investors, currency trading is a realm of investing in and of itself. A currency trader can make one of four bets on the future value of a currency:. Once you're decided on which bet you want to place, there are many ways to take up the position. For example, if you wanted to short the Canadian dollar CAD , the simplest way would be to take out a loan in Canadian dollars that you will be able to pay back at a discount as the currency devalues assuming you're correct.
This is much too small and slow for true forex traders, so they use puts , calls , other options and forwards to build up and leverage their positions. It's the leveraging in particular that makes some trades worth millions, and even billions, of dollars. In , Andy Krieger, a year-old currency trader at Bankers Trust, was carefully watching the currencies that were rallying against the dollar following the Black Monday crash. As investors and companies rushed out of the American dollar and into other currencies that had suffered less damage in the market crash , there were bound to be some currencies that would become fundamentally overvalued , creating a good opportunity for arbitrage.
The currency Krieger targeted was the New Zealand dollar, also known as the kiwi. Using the relatively new techniques afforded by options, Krieger took up a short position against the kiwi worth hundreds of millions of dollars. In fact, his sell orders were said to exceed the entire money supply of New Zealand. The selling pressure combined with the lack of currency in circulation caused the kiwi to drop sharply. One part of the legend recounts a worried New Zealand government official calling up Krieger's bosses and threatening Bankers Trust to try to get Krieger out of the kiwi.
Krieger later left Bankers Trust to go work for George Soros. Stanley Druckenmiller made millions by making two long bets in the same currency while working as a trader for George Soros' Quantum Fund. Druckenmiller's first bet came when the Berlin Wall fell. The perceived difficulties of reunification between East and West Germany had depressed the German mark to a level that Druckenmiller thought extreme.
He initially put a multimillion-dollar bet on a future rally , until Soros told him to increase his purchase to two billion German marks. A few years later, while Soros was busy breaking the Bank of England , Druckenmiller was going long in the mark on the assumption that the fallout from his boss' bet would drop the British pound against the mark. Druckenmiller was confident that he and Soros were right and showed this by buying British stocks.
He believed that Britain would have to slash lending rates, thus stimulating business, and that the cheaper pound would actually mean more exports compared to European rivals.
Following this same thinking, Druckenmiller bought German bonds on the expectation that investors would move to bonds as German stocks showed less growth than the British. It was a very complete trade that added considerably to the profits of Soros' main bet against the pound. The British pound shadowed the German mark leading up to the s, even though the two countries were very different economically.
Germany was the stronger country, despite lingering difficulties from reunification, but the U.
On the contrary, most of the time the trend prevails; only occasionally are the errors corrected.
The Life and Times of a Messianic Billionaire. Most traders could learn from this because most trade to much and want to feel the adrenalin rush of trading but this just gets emotions involved and sees them lose.