By George: Investing The Soros Way.
“ Markets are constantly in a state of uncertainty and flux, and money is made by discounting the obvious and betting on the unexpected. ” – George Soros.
To George Soros, the words listed above are no hyperbole. Drilling down and gathering critical investment information, and investing when others are divesting, is the calling card of George Soros, one of the most famous financiers of the past half-century. That said, don’t judge Soros on his investment acumen alone. He’s also proven to be a major power broker on the global political scene as well as a benevolent philanthropist.
To understand the “Soros Way” of investing, it helps first to know Soros the man, Soros the political force, and Soros the champion of the global lower class.
There is no template for an investment legend like Soros, but you can start with the financier’s background as a child in Budapest, Hungary, where he was born on August 12, 1930. As a pre-teenager, Soros witnessed the atrocities of the Nazi regime, and survived to flee Eastern Europe in 1947, making his way to England to study at the London School of Economics. It was in London, after reading Karl Popper’s tome, "The Open Society and Its Enemies," where Soros first combined the concepts of science and politics. Soros never abandoned that concept, and relied on it again and again as he championed individual rights over the collective.
Soros applied science and free markets to his investment principles, starting with his first post-graduate job at F. M. Mayer, a New York City money management firm. Within 20 years, Soros had opened his first Wall Street enterprise, Soros Fund, which later was renamed to the Quantum Fund, where he was able to test his free market principles in the capital markets.
Soros turned an original seed funding of $12 million into $20 billion by the first decade of the 21st century. If you had invested $1,000 in Soros’ Quantum Fund in 1969, you would have earned $4 million by 2000 – at an annual growth rate of 30%.
Along the way, Soros founded the Open Society Foundations in 1984, a philanthropic organization that “builds vibrant and tolerant societies whose governments are accountable and open to the participation of all people,” according to the foundation’s website. With the OSF, Soros sought to “strengthen the rule of law; respect for human rights, minorities, and a diversity of opinions; democratically elected governments; and a civil society that helps keep government power in check.” George Soros has donated $8.5 billion to charity as of March 31, 2013 through his institution. (Soros' generosity still doesn't match up to two other powerful billionaire philanthropists - Bill Gates [$28 billion charitable giving] and Warren Buffet [$17.5 billion].)
Soros shaped his individual liberty and free market concepts after a decade of testing his investment principles in the global financial markets. That blend of free markets, human rights, and scientific inquiry found its way into Soros’ investment strategy – a strategy erected on the scientific method Soros studied at the London School of Economics, merged with his passion for social change.
Here are five key points on how George Soros invests his money:
The “reflexivity” theory – Soros uses reflexivity as the cornerstone of his investment strategy. It’s a unique method that values assets by relying on market feedback to gauge how the rest of the market is valuing assets. Soros uses reflexivity to predict market bubbles and other market opportunities. Applying the scientific method – Soros also bases his market moves on the scientific method – creating a strategy that tracks what will transpire in the financial markets, based on current market data. Invariably, Soros will test his theory with a smaller investment first, then broadens his investment if the theory proves positive. Physical cues – Soros also listens to his body when making investment decisions. A headache or a backache has proven enough for him to abandon an investment. Blending political acumen with investment acumen - On September 16, 1992, Soros famously bet heavily against the U. K. government’s decision to hike interest rates. That would set off a trigger effect, devaluing the British pound and sending stocks higher after that devaluation. That move earned Soros $1 billion, along with the famous moniker as “The Man Who Broke the Bank of England.” Effectively, Soros went short a position in the British Pound (worth $10 billion) and earned $1 billion as the British currency slid amid political and economic turmoil linked to a policy of higher interest rates. Consolidate . . . and reflect – Soros uses a handful of advisors to make big investment decisions. Once he confers with his team of analysts, making sure to review at least one contrary view to his strategy, Soros says he takes time “to read and reflect” before pulling the trigger.
Can Investors Learn the “Soros Way”?
Can regular folks invest like George Soros? It takes moxie and it takes confidence, two attributes that Soros has in abundance. Once he makes up his mind, Soros often goes “all in” on a position, holding the view that no investment position is too large - as long as it’s the correct position.
Perhaps the biggest takeaway from the Soros method is that you can’t be too bold once your mind is made up on a market move. One of Soros’s favorite maxims is “to be in the game, you have to endure the pain.” For regular investors, that means picking the right broker/advisor – and sticking with that broker/advisor – taking a “trial and error” approach to one’s portfolio decisions, and keeping emotion out of one’s investment picks.
It's also imperative to understand that, even for the greatest investors, not all investments will prove profitable. Soros has had both his good picks and his bad investments:
In 1992, George Soros wagered $10 billion against the currency policy of the Bank of England, and its underlying currency, the pound. Essentially, Soros' bet the pound would flounder in global currency markets. On September 16, 1992 - a day known as "Black Wednesday" among currency traders - the British pound cratered against the German mark and the U. S. dollar, earning Soros $1.2 billion in profits over the next few weeks - a bet that went down in history as the day George Soros broke the Bank of England.
On March 14, 2008, George Soros purchased a huge chunk of Bear Stearns' stock, valued at $54 per share. Only days later, the fabled Wall Street investment firm was sold to J. P. Morgan at $2 per share. Soros was correct in his assessment that Bear Stearns was on the trading block. But he was dead wrong on the takeover value of the company, an expensive lesson he details in his book, “The New Paradigm for Financial Markets.”
It's not easy emulating the portfolio results of George Soros, but you can learn a great deal from the patience, discipline and research Soros demonstrates with his investment strategy. Researching investment ideas by taking into account both the economic and the political realities, sticking with your convictions and getting out when your gut tells you to are some of the ways Soros wins.

George soros forex strategy

He's one of the world's greatest traders and became a legend when, his Quantum fund bet against the British Pound and broke the “Bank of England.” Here we will look at his trading strategy and the techniques, his trading is based on and get some trading tips, from one of the world's most successful traders.
The Theory of Reflexivity.
“ I contend that financial markets never reflect the underlying reality accurately; they always distort it in some way or another and the distortions find expression in market prices.”
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 biases. He opposes the view that any technical analysis of any kind, can predict what will happen in the future by knowing what happened in the past:
“ The financial markets generally are unpredictable. So that one has to have different scenarios. The idea that you can actually predict what's going to happen contradicts my way of looking at the market”
He sees any market including Forex markets as driven by investor opinion which cannot be mathematically modelled or predicted:
“ Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception”
Learn to Think Against the Crowd.
“ Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected”
Any successful Forex trader knows this is true. The quote really is about the art of trading contrary to the crowd. As the old saying goes “when its obvious, its obviously wrong.” Traders tend to believe the news and this distorts their view of the market or currency pair their trading. You can make money trend following but the really big money is made by correctly, trading signals on unexpected events which are not seen by other traders and George Soros was a master trader at doing this.
Treating Investment as a Business.
If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”
Good investing is boring because you have to wait for the best trading opportunities and then simply hold them with no emotion – there is no fun in doing this, the fun is the end result of trading which is profit in the bank. 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.
Making money with a Forex trading strategy is also about not working to many hours – if there are no trades around there is no need to be working. You only should trade the best set ups and this quote sums up the principle of a hard worker v a smart worker, who trades the markets:
“ The trouble with you, Byron [Byron Wein – Morgan Stanley], is that you go to work every day [and think] you should do something. I don’t, I only go to work on the days that make sense to go to work. And I really do something on that day. But you go to work and you do something every day and you don’t realise when it’s a special day”
Money Management and Losses.
“ Once we realize that imperfect understanding is the human condition there is no shame in being wrong, only in failing to correct our mistakes”
Money management is the long term key to profits – if you want to make money, you need to manage your losing trades and make sure, you preserve the equity and this means not taking losses personally. Most traders end up taking losses personally and feel its a failing within them or they personalize and get angry with the market. Instead of getting emotional about their losses, they should simply see them as a route to long term profits. You will have losses because the market by its very nature, will give them to you so just take them and make sure, you don't let them run out control.
George Soros has had some huge losers but that doesn't matter, to any serious trader because so long as your winning trades are bigger than your losing ones, you will make money over the longer term.
Advanced Techniques and Complex Trading Systems.
“ Unfortunately, the more complex the system, the greater the room for error.”
Anyone who think George Soros uses a complex trading system, only need read the quote above to see he doesn't. The reason for this is when trading Forex or any other investment market we are dealing with chaos – not order. Trading the markets has nothing to do with insider secrets or a set formula which can win all the time with no losses. Trading successfully is all about observing the reality on the chart and seeing, each unique situation and reacting to what you see:
“ Making an investment decision is like formulating a scientific hypothesis and submitting it to a practical test. The main difference is that the hypothesis that underlies an investment decision is intended to make money and not to establish a universally valid generalization.”
Learn to think about your trading and don't trust, any other judgement but your own. If you have a simple set of trading rules and are confident in your trading systems edge over the market, you can apply it with discipline and enjoy success.
“ How good are markets in predicting real-world developments? Reading the record, it is striking how many calamities that I anticipated did not in fact materialise. Financial markets constantly anticipate events, both on the positive and on the negative side, which fail to materialise exactly because they have been anticipated”
If you want to be successful at trading currencies, you need to understand not to bet on the obvious trade or the trade that feels easy – your job is to work out what other traders will do, to the best of your ability and react to the way they trade. Soros in his theory of reflexivity, gives us a methodology which in my view, gives us a greater understanding of market movement. If you study the theory and all the quotes above, you can incorporate the theory and the simple trading tips above and incorporate them, in your own strategy and make bigger profits.

Trading Strategies – 3 Biggest Forex Trades of George Soros.
Updated on Oct 20, 2016.
Big trades in foreign exchange normally remain unknown because the market is too big to spot individual traders. Also, it is highly unlikely that a single trader can influence entire economies. However, George Soros is an exception. Learn how he shattered entire economic regions and made huge profits by betting on their weakness. Uncover the trading strategies and analysis of his biggest and most notorious forex trades ever.
A very educating and ironic thing to note – 24 years after Soros made a $1 billion profit on Black Wednesday in 1992, he suffered major losses on the same currency after the Brexit vote! According to Bloomberg , Soros was long the pound (hoping that the pound’s value would increase) before Britain’s vote to leave the European Union on Friday. And he didn’t “speculate against sterling while he was arguing for Britain to remain,” his spokesman said. If you want to capitalize on the pound’s movements, but are not sure how, you can see other traders’ strategies and tips here .
The pound has lost almost 20% of its value against the US dollar since the referendum in June and is the worst performing currency in the world this year. However, despite the huge crash in the pound it appears that Soros was well protected (hedged). He made up for the losses from the pound with a $100 million bet against Deutsche Bank , and by going long on Gold (which rises when there’s a global economic uncertainty).
1. Soros breaks the Bank of England and earns $1 billion in 1 day.
September 16, 1992 went down in history as “Black Wednesday”, the most notorious forex market event where Soros earned the nickname “the man who broke the Bank of England” because of the transactions he performed together with other traders. They didn’t break it directly, but the devaluation of the pound was so bad that Britain had to take it out of the European Exchange Rate Mechanism (ERM).
Fig.1. How Soros Broke the Bank of England in 1992.
Even though Britain was in a recession in 1990, the pound (also known as sterling) joined the ERM that year. It fixed the pound’s rate to the deutsche mark in order to make the investments between Britain and Europe more predictable and stable. But as the political and financial situation in Germany changed during its unification, many ERM currencies were under big pressure to keep their currencies within the agreed limits. Britain had the most problems: its inflation rate was very high and the USD rate (many British exporters were being paid in USD) was also falling. As it became clear that the pound was not able to artificially withstand the natural market forces, more and more speculators began circling around and making plans on how to profit from this situation. They waited until the financial situation got as bad as it could naturally get, and then created extra pressure on the pound by selling it in huge amounts. The most aggressive of them was Soros who performed this transaction every 5 minutes, profiting each time as the GBP fell by the minute.
“The money that I made on this particular transaction would be estimated at about $1 Billion dollars. We very simply used the forward market – you borrow sterling and you sell the sterling that you’ve borrowed. And then you buy back the sterling when the loan expires.” – G. Soros.
Let’s look at a simplified example to understand this trading strategy :
Soros borrows 1 million GBP, sells it at the current rate for 2 million USD (GBP/USD = 2.00) and buys it back when the GBP/USD = 1.50 for 1.5 million USD, thus keeping the difference of 0.5 million USD.
In order to sustain the fixed rate, the Bank of England was buying 2 billion GBP an hour, which was an unprecedented amount. The policies of the ERM demanded that the countries with the strongest currencies have to sell their currencies and buy the weakest to help maintain the equilibrium. In this case, the Bank of Germany had to sell deutsche marks and buy pounds. However, they didn’t come to Britain’s rescue because apparently, Germany had an interest in seeing the GBP devalued. All of Britain’s efforts to pump in money and increase the already high interest rates proved futile. In the late afternoon of September 16, as the traders understood that the Bank of England had insufficient amounts of foreign currencies to buy in all the pounds that were sold, they pushed even more which resulted in a collapse. At 19:40, the British prime minister confirmed defeat and declared that Britain is leaving the ERM. youtube/watch? v=YBgXbTYvBfw.
2. Soros earns $790 million, crashes the Thai baht and triggers the Asian crisis.
The second most notorious trade of Soros came in 1997 when he saw a possibility that the Thai baht could go down. So he went short on the baht (by going long on USD/THB) using forward contracts. His actions were often considered a triggering factor, which resulted in the big Asian financial crisis that affected not only Thailand but also South Korea, Indonesia, Malaysia, Philippines, Hong Kong and others.
Fig.2. How Soros gained $790 Million and destabilised Thailand’s and Asian economies in 1997 – 1998.
1. Soros goes short on the baht. 2. Thailand spends almost $7 billion to protect the baht against speculations. 3. Soros sells all his baht resources and publicly warns people about its possible fall and ensuing crisis. 4. On July 2, Thailand is forced to give up the fixed rate of the baht and it starts to float freely. Thailand asks for help from the International Monetary Fund (IMF). 5. Thailand takes on hard austerity measures to secure the loan from the IMF. 6. Baht has fallen from 1 USD for 25 baht to 56 baht; Soros gains more than $790 million.
3. Soros gains $1.4 billion from the falling yen.
Japan’s economy was seriously damaged after the devastating tsunami in 2011 and its economic recovery had been slow. Since then, traders have been waiting for the yen to weaken. This started to happen at the end of 2012 when Shinzo Abe (then candidate for the Prime Minister post) publicly spoke about his plans to weaken the yen in order to boost the economy. Taking into consideration his high approval rating, this was a good signal for the investors to open big USD/JPY positions, betting that the value of dollar would rise against the yen.
Fig.3. How Soros used the the economic situation in Japan to earn $1.4 Billion in 2013.
The first one to jump in was Soros who is legendary for his skills of shorting different currencies with high leverages and worldwide consequences. He forecasted the upcoming trend and the Soros Fund Management allocated 10% of its $24 billion to USD/JPY in mid-November 2012. Since then, they have gained $1.2 – $1.4 billion (according to sources close to the Fund) in this deal and the yen is still going down. Other big players who opened similar positions include Daniel Loeb, David Einhorn, Caxton Associates, Tudor Investments and Moore Capital. These huge bets helped increase the momentum of the yen’s slide. This was not only beneficial for the traders who went short on the yen, but also for Shinzo Abe who knew that a weaker yen could make Japan’s export more competitive. This, in turn, was heavily criticized by EU countries who understood that such intervention would lower their export potential because Japanese production would cost less and less. Banks and hedge funds soon started telling their clients to go on this bet as well. The dollar increased even more when Shinzo Abe was elected as the Prime Minister on December 26, 2012. After this, even the Bank of America jumped in to make profits from this trend. Luckily for Japan, these moves of Soros and other traders didn’t threaten its currency as it did when Soros went short on GPB in 1992 and on Thai baht on 1997, damaging both currencies and creating financial collapses in both countries. The reason for this is that locals own the biggest part of Japan’s resources and debts.
What can we learn from these super deals?
The main strategy of Soros and other traders is to spot upcoming economical vulnerability of a country and then go short on its currency right before the fall happens. The highest potential for currency fluctuations — and consequently, gains — is when a currency has a fixed rate tied to another currency, as in the case of the pound and the baht. In these cases, the weak countries were very vulnerable to speculations as they tried to artificially sustain the fixed rate by buying in its own currency. This artificial currency balance is prone to dramatic collapse when it can no longer withstand natural market forces. In the case of Japanese yen, the signal to go short was when the Japanese government said it would depreciate the currency in order to boost its economy and attract investors. As you can see from these examples, economic crises often offer the best opportunities for currency traders. Of course, it looks much easier when observed in retrospect, but these are patterns which can be used by everyday traders as well.
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3 thoughts on “ Trading Strategies – 3 Biggest Forex Trades of George Soros ”
Great article! What I found interesting about his breaking the pound sterling…was that a long term trend following system with a 10 ATR was long, didn’t get stopped out and then the pound was at highs later and it was a profitable trade, that’s robust.
Thanks for the appreciation! The strategies of George Soros are quite robust indeed. Just like your response 🙂

George soros forex trading strategy.
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