How forex really work vs how a speculator think it is working
Point A: George Soros shorted GBP from the very top and made 1 billion dollars in profit, that's why he's also known as the man who broke bank of England.
Normal day traders will look into the past and will put all kinds of lines and indicators there to give them a relief that it was an indicator or pattern which moved the market BUT the reality is far away from that.
In the example above the reason why it felt down hard was :
"Many speculators, George Soros chief among them, wondered how long fixed exchange rates could fight market forces, and they began to take up short positions against the pound. Soros borrowed heavily to bet more on a drop in the pound. Britain raised its interest rates to double digits to try to attract investors. The government was hoping to alleviate the selling pressure by creating more buying pressure. Paying out interest costs money, however, and the British government realized that it would lose billions trying to artificially prop up the pound. It withdrew from the ERM and the value of the pound plummeted against the mark. Soros made at least $1 billion off this one trade."
Most of the people are guided by charts or other large mechanical means of determining the right moments of buy and sell. The one principle that applies to nearly all these so called technical approaches is that one should buy because a stock or fx pair has gone up and sell because it has fallen down. This is the exact opposite of sound business sense everywhere else and is most unlikely that it can lead to lasting success. If you search on google you will not find a single person who has been successful long term from trading just based on charts, indicator and trends.
Reference: www.investopedia.com...-currency-trades.asp
book: The intelligent investor by Benjamin Graham
Normal day traders will look into the past and will put all kinds of lines and indicators there to give them a relief that it was an indicator or pattern which moved the market BUT the reality is far away from that.
In the example above the reason why it felt down hard was :
"Many speculators, George Soros chief among them, wondered how long fixed exchange rates could fight market forces, and they began to take up short positions against the pound. Soros borrowed heavily to bet more on a drop in the pound. Britain raised its interest rates to double digits to try to attract investors. The government was hoping to alleviate the selling pressure by creating more buying pressure. Paying out interest costs money, however, and the British government realized that it would lose billions trying to artificially prop up the pound. It withdrew from the ERM and the value of the pound plummeted against the mark. Soros made at least $1 billion off this one trade."
Most of the people are guided by charts or other large mechanical means of determining the right moments of buy and sell. The one principle that applies to nearly all these so called technical approaches is that one should buy because a stock or fx pair has gone up and sell because it has fallen down. This is the exact opposite of sound business sense everywhere else and is most unlikely that it can lead to lasting success. If you search on google you will not find a single person who has been successful long term from trading just based on charts, indicator and trends.
Reference: www.investopedia.com...-currency-trades.asp
book: The intelligent investor by Benjamin Graham
