News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bullish
Oil - US Crude
Mixed
Wall Street
Mixed
Gold
Bullish
GBP/USD
Bearish
USD/JPY
Mixed
More View more
Real Time News
  • Traders in the Euro have a big decision to make this weekend: if EUR/USD hits 1.20, will it continue to advance, consolidate or fall back? Get your $EURUSD market update from @MartinSEssex here:https://t.co/8hAhguZcEA https://t.co/kwtatozp3z
  • The bullish engulfing candle is one of the forex market's most clear-cut price action signals for reversals and continuation. Learn more about this price action trading signal here: https://t.co/Yg6ecRZZNr https://t.co/9SdceNYUEK
  • The bull flag pattern is a great pattern to add to a forex trader's technical arsenal. Explosive moves are often associated with the bull flag. Learn more about the bull flag pattern here: https://t.co/yOEvLjKnct https://t.co/imv2PnapzH
  • Defensive stocks have proven critically important when navigating stock market volatility. Find out what are the most defensive stocks here:https://t.co/TMcbMALtbw https://t.co/mmldxxEtsc
  • Dollar Index has broken major uptrend support and risks accelerated losses into the December open. Get your $USD technical analysis from @MBForex here:https://t.co/Txo8l8S1f1 https://t.co/YLVzP95JH8
  • The MACD is an indicator that uses exponential moving averages (EMA) to determine trend strength along with entry points based on crossovers. Find out how you can use the MACD as a buy/sell signal here: https://t.co/qxnP99uqTQ https://t.co/tGVqSZ2zK3
  • Support and resistance are the cornerstone of technical analysis, making it the foundation that you build your knowledge on. Build a stronger foundation here: https://t.co/yXLaRpl90I https://t.co/reMoYpqkQO
  • Struggling to define key levels? Floor-Trader Pivots assist traders in identifying areas in a chart where price is likely to approach and can be used to set appropriate targets, while effectively managing risk. Learn how to use this indicator here: https://t.co/Ye4m1FMKUW https://t.co/sqeRL7Rf7u
  • Cyclical and non-cyclical stocks can help diversify a trader’s equity portfolio. Get your guide to understanding these stocks here: https://t.co/h7BKTd2J8N https://t.co/ukOW0dWJxf
  • Beautifully put. https://t.co/0fBsmUH6Pb
Billionaire Currency Trader: The Man Who Broke the BOE

Billionaire Currency Trader: The Man Who Broke the BOE

2013-05-10 16:00:00
Research, Research Team
Share:

Article Summary: George Soros netted a profit of over 1 Billion Euro in 1992. Find out more about his strategy and what he is trading today.

Remember Black Wednesday? On September 2nd,1992, George Soros became known to history as the “Man who broke the Bank of England.” On that day, George Soros sold short more than $10 billion in Pounds Sterling netting a profit of around 1 Billion Euro.

Let’s delve further into Soros’ strategy, philosophy, and his current moves.

Strategy

Simple economics: Soros trades within boundaries derived by rules. By doing so and by understanding the dynamics between economic giants in Europe, he puts the pieces together. Considering interest rates fluctuations and government interventions, Soros detected an emerging bubble.

He borrowed pounds, sold them for Deutschmarks; and overflowed the currency market with excess supply of pounds. This led to Pound devaluation.

1. Play by the rules

2. Detect an emerging bubble

How did Soros know?

In September 1992, United Kingdom’s government was between two crossroads on whether to raise their interest rates to the levels of the European Exchange Rate Mechanism (ERM) or to float its currency. Soros foresaw pound devaluation because: UK would have to withdraw the pound from the EERM because the Bank of England (BOE)would not be able to keep GBP exchange rate above the agreed limit. Therefore, the pound would have to be devalued.

Soros was aware that Deutsche Bundesbank, German’s Federal Bank, favored Sterling and Italian lira devaluation. Secondly, high British interest rateswould be calamitous towards UK’s asset prices. Therefore, prior to September of 1992, he began borrowing Sterling and converting them into a concoction of French Francs and Deutschmarks.

On September 16, 1992, the British Pound was forced out of the ERM.

Philosophy

George Soros takes advantage of the power of prediction from a slightly different angle. Soros is a pattern-detector: he looks for patterns of errors. He applies his knowledge regarding a social theory-- Reflexivity—towards his financial strategies. This theory is based on the principle within the Thomas Theorem: “situations that men define as true, become true for them”. In other words, essentially, our decisions are based on the predictions we make ourselves, therefore the predictions become fact.

Analogously, within the arena of economics and financial markets, individuals’ predictions about the market can possibly lead to prediction-biased decisions and actions. Here George Soros enters; detects an emerging financial bubble; predicts people’s actions; and then he goes against just that.

We all look for patterns to make our executions; however, discovering the minority financial strategy leads to the highest reward.

Soros 2013

Soros latest trade has been betting against the Japanese Yen. He has made almost $1 Billion on these trades since last year, as he is shorting the Yen. On April 4th, 2013, after Japan announced monetary easing measures to achieve a 2% inflation target, the Yen fell more than 3 percent against the dollar.

Soros says If the Yen starts to fall, which it has done, and people in Japan realize that it is liable to continue, and want to put their money abroad, then the fall may become like an avalanche,” on CNBC.

Learn Forex – USDJPY Weekly Trend

Billionaire_Currency_Trader_The_Man_Who_Broke_the_BOE_body_x0000_i1025.png, Billionaire Currency Trader: The Man Who Broke the BOE

Created using FXCM’s Marketscope 2.0 charts

Today you can take advantage of the weakening Japanese Yen just like the currency trading giant George Soros! As Japanese Yen pairs move towards higher highs, traders can utilize a breakout strategy.

Don’t have a strategy? FXCM offers a series of automated breakout strategies implementing buying, selling, and exit logic considering current market conditions. This is available to download through the FXCM App Store--Find out more about our Breakout 2 strategy here.

--Written by Sunaina Rajani, DailyFX Education

E-mails can be sent to instructor@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES