Currency Trading: How George Soros Made a Billion Dollars

Because the currency trading market is the largest market in the world, the potential to make millions in a single trade is possible and has been done many times. This article highlights one of the largest sums of money ever made, in excess of over a billion dollars, and how the architecture of the currency trading market makes huge profits and losses feasible.

Currency trading market size creates investment opportunities:

First of all, the reason the Forex currency trading is so massive is that it rests on foreign currencies worldwide changing hands as goods and services are traded between nations. Thousands of such transactions are happening every second, and as foreign currencies are traded currency values fluctuate. It is these fluctuations that currency traders use to create opportunities for profit making by speculating on the future value of a foreign currency. Adding to the size of the already massive market, online currency trading means that anyone can have access and have the opportunity to open up their own currency trading account.

Currency trading techniques:

There are four techniques (or bets) that can be made on the future values of currencies that are used by currency trading amateurs or professionals:

• Shorting: Traders believe that a currency value will decrease against another currency.

• Going long: Traders believe that a currency will increase against another currency.

• Strangle: Traders believe that a currency value will increase or decrease by a large margin.

• Straddle: Traders believe that a currency value will increase or decrease by a small margin.

If a currency trader speculates the depreciation of the Japanese Yen, she would ‘short’ the Yen by taking out a loan in Yen, then pay the loan back at a discount once the currency devalues. For professional currency trading brokers and professionals this method is too slow, although the principle remains the same. They use various financial instruments like ‘puts’, ‘calls’ and ‘forwards’, forms of borrowing capital, to leverage or increase the return of their investments. Here is how one man made over a billion trading foreign currency.

George Soros and the British Pound:

In the years leading up to the 1990’s the German and British currencies did not truthfully reflect the strength of the said economies. Besides reunification difficulties, Germany’s economy was stronger than Britain’s, but Britain wanted to fix the value of the pound above 2.7 marks and so their interest rates and inflation rates remained high. George Soros speculated that Britain’s fixed exchange rate could not be sustained against natural market forces, thus he took a short currency trading position against the pound, believing that the value would decrease by a large margin. As speculated the fixed value on the pound could not persist under the increasing market pressure and its value plummeted against the mark. At least $1 billion dollars were made off this single trade. These huge amounts of capital were generated off of a single trade and is one of the success stories that makes everyone convinced that forex trading is the simple way to make a fortune, although it must be noted that if his speculation was incorrect, he would have been a similar figure in the red. It’s a learned skill to correctly read the currency trading market; if you’re inexperienced, best to use reputed currency trading brokers.

Dave Tucker is an avid writer in global trading news and aims to educate readers on current events and trading tips. He encourages all those interested in economics to find a metatrader 4 download online from a reputable broker and test out a metatrader 4 demo account to find out all about the forex trading market first hand.