The world knows dozens of legendary traders and investors, but much fewer of them are truly successful. There is no doubt about George Soros’s success: decades of experience, virtuoso trades, and his unique approach to the market speak for themselves.
There will be no ethical evaluations in this article. We want to tell you some facts about his life that can be useful for traders.
Childhood, youth, ideals
The younger years of George Soros fell on the most turbulent period of the 20th century and deserve a separate story. Hitler occupied Hungary in 1944, and there were mass repressions against the Hungarian Jews. George’s family survived with fake documents and emigrated after the communists came to power.
In 1947, the Soros family ended up in the UK. This is where fate brought him into contact with Karl Popper, a famous ideologist of the “open society.” His book “Open Society and Its Enemies” laid the foundation for the future billionaire’s world view.
Thanks to this book George Soros is still a supporter of freedom and advocate of change. It is essential for traders to adopt this approach, as the market is constantly changing. Interest rates get adjusted, crises shake the markets now and then, the same asset charts can show opposite trends. There is nothing “traditionally sustainable” in the world of trading.
Path to Trading
In the 50s of the twentieth century, few could start trading in the financial market. It was an exclusive club, mainly for very wealthy people. Soros’s chances of becoming a member of this community were extremely low. Before joining the financial world, he only managed to work as a seller of haberdashery goods and a sales manager for tobacco products.
But one day George decided to stop and rethink his career path. He decided to take the unprecedented step of writing job application letters to the heads of all merchant banks in the UK.
The first interviews were unsuccessful. It was just a happy accident when Soros got hired by Singer & Friedlander, a bank run by a Hungarian. But this job was far from perfect.
A new work search brought him to a New York brokerage company owned by a university friend. By that time, Soros was 26 years old, and financial success still remained a distant dream. However, it was then, when he started his career as a speculator: he became a real arbitrage trader.
“One-Eyed King Among the Blind”
In the late 50s and early 60s, investors in the United States were poorly versed in European stocks, which later became extremely popular in the country. George Soros was immediately caught in the middle of events: his experience at a European bank gave him some insight into this business.
In his book “Soros on Soros: Staying Ahead of the Curve,” George called himself an “investment boom leader” and a “one-eyed king among the blind.” JPMorgan and the Dreyfus Foundation deferred to his opinion. So Soros had made his first career leap by the age of 30.
Intense Activity and a Decrease in Wealth.
After a short break, Soros started heavily investing. By the early 70s, he had established several investment funds with the total capital exceeding tens of millions of dollars.
In 1978-79, Soros and his partner Jim Rogers began to invest in the technology sector, which the Wall Street investors ignored. Then he underwent a psychological crisis, a divorce from his wife, and the economic crisis of 1981 when his fund was reduced from $400 million to $200 million.
1992. “Bank of England on its Knees”
Being a many-sided person, Soros did not limit his choice of assets. He paid attention to stocks and bonds, complex arbitrage trades, and oil. The foreign exchange market was no exception. Soros’s shorting of the British pound in September 1992 became his most stunning success on Forex.
Due to the devaluation crisis that took place on September 16, 1992, the Bank of England raised the interest rate and supported the pound with currency interventions. By shorting the pound, George Soros made a profit of about $1 billion.
Since then, George Soros has repeatedly shared his forecasts regarding the economies of different countries, invariably pointing out the weakness of any system based on rigidity and restrictions.
Retirement and Comebacks.
In 2004, George Soros decided to withdraw from business. His sons became the successors of a giant empire with the capital of more than $13 billion. But the master did not stay in the shadow for long.
He first returned to business on the eve of the global financial crisis in 2007. Even then, he was worried about the situation in the US mortgage sector. In two years, he was able to earn about $1 billion on this. The next comeback took place seven years later. Newspapers reported that Soros began to spend a lot of time in the office despite his somewhat advanced age of 86.
In recent years, the legendary financier has been actively involved in social activities. His funds sponsor non-profit organizations around the world, and therefore he is regularly accused of undermining the foundations of the states and sponsoring color revolutions.
Trade Like Soros: 2 Golden Principles
Soros’ experience is unique. It may seem that he owes his success exclusively to adventurous schemes, but the vector of his strategy was formed in the middle of the last century. In an interview, Soros formulated two main principles that made him successful.
- Principle One: the market participants’ views of the world are inconsistent and biased. He called this principle “the principle of fallacy.”
- Principle Two (the principle of reflexivity): imperfect views lead to erroneous actions.
How to Apply These Principles to Trading?
Let’s say traders are waiting for the news release on US crude oil reserves. When the reserves rise, oil tends to fall. Poorly informed traders start selling oil futures contracts.
However, there is definitely a group of investors who know that a severe storm will soon come to the Gulf of Mexico, oil refineries will be shut, and black gold production will fall below normal levels. This is a positive factor for oil quotes.
In this situation, a group of professional investors can overbid ordinary traders’ positions and earn on the purchase of the commodity. This is what actually happens: the investment companies and hedge funds often have a large amount of data and therefore act more efficiently.
Give Up Your Prejudices
George Soros teaches us to reason by preparing the right information ground for any deal. If you want to succeed, give up any prejudice. Everything in this world is on the move.
And Soros’s experience shows us that even his own developments can lose relevance. According to him, the effectiveness of the investment strategies George developed has decreased in recent years. This happened due to their popularization in Soros’s book ” The Alchemy of Finance.”
Every day, thousands of information flows collide in the Forex and other markets. It is not always possible to find the right way, but George Soros also made mistakes. However, he did not lose his desire to go further, which resulted in his getting rich and famous.
We all have similar experiences when trading, and therefore the examples of people like George Soros give us important lessons. They inspire and motivate us to move forward, develop, work with the market, information, assets, and money.