September 16, 1992: George Soros "Broke the Bank of England"
Updated
Analyzing George Soro's speculative trade on the pound.
Event:
Sept. 16, 1992 (Black Wednesday or the Sterling Crisis) was the day speculators forced the British government to pull the pound from the ERM. This trade was backed by large sponsors, such as the Geroge Soros and other groups of investors and hedge fund managers: Paul Tudor Jones and Bruce Kovner; placing bets against a central bank's capability to maintain the relatively "stable" value of its currency. According to some sources, Soros started to short the British pound late 1991 after volatility increased over the year of 1991 and it became overvalued. Let's say 1.8100 all the way up to 2.000 in August 1992. However, after observing the chart and I agree more with Investopedia that says, "it was during the summer of 1992 when Soros began building a short position in the British pound." And "German officials also made public statements that realignment within the ERM might be possible in mid-September." Then, "in response to these comments by German officials, Soros decided to increase the size of his bet massively. He went from a $1.5 billion position to a massive $10 billion in the middle of September" (investopedia.com/articles/investing/090815/3-best-investments-george-soros-ever-made.asp forbes.com/sites/steveschaefer/2015/07/07/forbes-flashback-george-soros-british-pound-euro-ecb/?sh=5de8c4e96131).
So, this means, around June 1992 to August 1992, between 1.8500 to 2.000, George Soros started to short the pound. This makes more sense. But, in September 11 -14, 1992, when the price started to fall fast and brake through the 50 EMA and horizontal support (and broke through the ichimoku cloud), Soros' position ballooned to 10 billion.
Technical:
On September 16, 1992, there was a 5%+ drop in GBP/USD one day in the major currency market.
Using my own strategy with other patterns:
September 11 -14, 1992, when the price started to fall fast and brake through the 50 EMA and horizontal support and DQed after visible dRd and ExDiv1. Price closed below and broke through the ichimoku cloud, but no tenkan-kijun yet.
Other patterns that occurred was a breakout signal and break of support.
Stage 3 ichimoku signal developed on the day on Black Wednesday (the Sterling Crisis), September 16, 1992.
After the dRd and ExDiv1 (on top) with a Crown DQ (the volume is not available to validate the pattern in this chart), there was a pb btw. 35% to 68% fib and/or horizontal resistance below cloud, which was also a 5EMAs MACD set-up. Then, a candlestick signal appeared: first a doji, then an evening star and a shallow pb signal.
Comment:
Even with a trade backed by large sponsors such as the famous Geroge Soros trade ("breaking the Bank of England"), wait for a set-up after the fact. A stop loss above 2 or 1.93 would have given me a good and conservative 1:1 or 1.5:1 reward:risk ratio or hold on to the position until a trailing stop exit. I think Soros only went 2:1 on margin (so, if he had 4 or 5 billion according to Druckenmiller, then his investment was about 10 billion. Others say 10:1 margin). Since the currency dropped about 2500 to 3000 pips in one month, and Soros' position was close to 10 billion, let's say 8 billion, then Soros would have had a short position with about 80,000 lots. If he had a stop loss above 2.00 and risked a maximum of 5% of his portfolio leverage size, then he would risk about $50,000,000, and his bet would control about 80,000 lots. A price dropped about 2000 would have netted him 1.6 billion dollars. If he had commanded 40,000 lots, then it would have taken the price to drop 3000 pips to make about 1 billion dollars. From the high of September to the low of October 1992, the price dropped about 4469 pips. I doubt that Soros caught the very top. But the drop from September 14 to the end of October was 3000 pips if he closed the trade by that time. It was reported in November that he made 1 billion in one month, so, maybe he closed the trade that month. And the price started to go flat and bottomed out mid-November and December 1992. Soro's reward:risk ratio in this trade would have been a 1.5 to 3:1 rr. It is a normal trade for an astute speculator. There is no greatest trade in the universe. He had billions to invest already. From a percentage growth perspective, this is achievable for a savvy investor. Others besides Soros made the same trade. The total time it took for his portfolio to double (or more) in would be about 5 months if he started building a position in the summer of 1992, not 1 month. But after the trade started to work in his favor, it took 1 month for the trade to work out to completion. Well, if one is familiar trading his own set-up, this is normal. It is up to others to call you great. Soros gained a sense of noticeability due to the size of his position and status. However, if it were an individual investor savvy in trading his own strategy (and not a hedge fund), then no one would have notice.
Further comments:
A trade backed by large sponsors helps.
Other views with other indicators:
Regular ichimoku -
Guppy -
BBSR Wave with 50EMA -
SAR trailing (SAR start: 0.01; increment: 0.002; max value: 0.2) -
Event:
Sept. 16, 1992 (Black Wednesday or the Sterling Crisis) was the day speculators forced the British government to pull the pound from the ERM. This trade was backed by large sponsors, such as the Geroge Soros and other groups of investors and hedge fund managers: Paul Tudor Jones and Bruce Kovner; placing bets against a central bank's capability to maintain the relatively "stable" value of its currency. According to some sources, Soros started to short the British pound late 1991 after volatility increased over the year of 1991 and it became overvalued. Let's say 1.8100 all the way up to 2.000 in August 1992. However, after observing the chart and I agree more with Investopedia that says, "it was during the summer of 1992 when Soros began building a short position in the British pound." And "German officials also made public statements that realignment within the ERM might be possible in mid-September." Then, "in response to these comments by German officials, Soros decided to increase the size of his bet massively. He went from a $1.5 billion position to a massive $10 billion in the middle of September" (investopedia.com/articles/investing/090815/3-best-investments-george-soros-ever-made.asp forbes.com/sites/steveschaefer/2015/07/07/forbes-flashback-george-soros-british-pound-euro-ecb/?sh=5de8c4e96131).
So, this means, around June 1992 to August 1992, between 1.8500 to 2.000, George Soros started to short the pound. This makes more sense. But, in September 11 -14, 1992, when the price started to fall fast and brake through the 50 EMA and horizontal support (and broke through the ichimoku cloud), Soros' position ballooned to 10 billion.
Technical:
On September 16, 1992, there was a 5%+ drop in GBP/USD one day in the major currency market.
Using my own strategy with other patterns:
September 11 -14, 1992, when the price started to fall fast and brake through the 50 EMA and horizontal support and DQed after visible dRd and ExDiv1. Price closed below and broke through the ichimoku cloud, but no tenkan-kijun yet.
Other patterns that occurred was a breakout signal and break of support.
Stage 3 ichimoku signal developed on the day on Black Wednesday (the Sterling Crisis), September 16, 1992.
After the dRd and ExDiv1 (on top) with a Crown DQ (the volume is not available to validate the pattern in this chart), there was a pb btw. 35% to 68% fib and/or horizontal resistance below cloud, which was also a 5EMAs MACD set-up. Then, a candlestick signal appeared: first a doji, then an evening star and a shallow pb signal.
Comment:
Even with a trade backed by large sponsors such as the famous Geroge Soros trade ("breaking the Bank of England"), wait for a set-up after the fact. A stop loss above 2 or 1.93 would have given me a good and conservative 1:1 or 1.5:1 reward:risk ratio or hold on to the position until a trailing stop exit. I think Soros only went 2:1 on margin (so, if he had 4 or 5 billion according to Druckenmiller, then his investment was about 10 billion. Others say 10:1 margin). Since the currency dropped about 2500 to 3000 pips in one month, and Soros' position was close to 10 billion, let's say 8 billion, then Soros would have had a short position with about 80,000 lots. If he had a stop loss above 2.00 and risked a maximum of 5% of his portfolio leverage size, then he would risk about $50,000,000, and his bet would control about 80,000 lots. A price dropped about 2000 would have netted him 1.6 billion dollars. If he had commanded 40,000 lots, then it would have taken the price to drop 3000 pips to make about 1 billion dollars. From the high of September to the low of October 1992, the price dropped about 4469 pips. I doubt that Soros caught the very top. But the drop from September 14 to the end of October was 3000 pips if he closed the trade by that time. It was reported in November that he made 1 billion in one month, so, maybe he closed the trade that month. And the price started to go flat and bottomed out mid-November and December 1992. Soro's reward:risk ratio in this trade would have been a 1.5 to 3:1 rr. It is a normal trade for an astute speculator. There is no greatest trade in the universe. He had billions to invest already. From a percentage growth perspective, this is achievable for a savvy investor. Others besides Soros made the same trade. The total time it took for his portfolio to double (or more) in would be about 5 months if he started building a position in the summer of 1992, not 1 month. But after the trade started to work in his favor, it took 1 month for the trade to work out to completion. Well, if one is familiar trading his own set-up, this is normal. It is up to others to call you great. Soros gained a sense of noticeability due to the size of his position and status. However, if it were an individual investor savvy in trading his own strategy (and not a hedge fund), then no one would have notice.
Further comments:
A trade backed by large sponsors helps.
Other views with other indicators:
Regular ichimoku -
Guppy -
BBSR Wave with 50EMA -
SAR trailing (SAR start: 0.01; increment: 0.002; max value: 0.2) -
Note
George Soros might have "broke the Bank of England", but he did not risk the bank. He did not risk all of his money. I think that it was up to 5% in one currency at most. Certainly not his entire life savings. One trade is not worth that much. For an astute speculator, a trade is one of many in the string of thousands.
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