Forex may seem like a market that became popular in the 2000s, though long before the digital age and the easy access given to retail traders, only the elite few working in large financial firms dared to trade this market.
Some may have crashed and burned, but a minority made incredibly speculative yet intelligent bets or trades worth millions of dollars, often during a rare financial event. As a result, they have and still receive global media attention for their daredevil, experience, skill, and passion.
Let’s look at five of the most well-known traders in forex and why their names regularly come up in trading literature.
Soros is famously known as ‘The Man Who Broke the Bank of England’ because of the short position on pound sterling he took that reportedly earned him at least $1 billion. He took this trade via his hedge fund, Quantum Fund, in September 1992 in what experts dub ‘Black Wednesday.’
Soros used advanced fundamental analysis of the economic situation between the pound sterling by thoroughly studying a system meant to achieve monetary stability in the EU called the European ERM (Exchange Rate Mechanism).
George had essentially bet on the eventual drop several months prior, having the courage to use borrowed funds before his famous ‘short sale.’ He predicted that due to increasing interest rates and inflation, the Bank of England would have no choice but to withdraw from the ERM after failing to stay above their currency exchange limit.
Aside from this incredible achievement, the Hungarian-born American (now 90 years old) is also a highly successful billionaire, investor, hedge fund manager, author, and philanthropist.
He has achieved near-mythical praise and respect in the forex community, having mentored some of the other legends in this list.
One notable mentee of Soros is the 68-year old American billionaire hedge fund manager, investor, and philanthropist, Stanley Druckenmiller. Druckenmiller was fortunate enough to work for Soros’ hedge fund from 1988 to 2000.
A famed bet by Druckenmiller occurred after November 1989’s Fall of the Berlin Wall. Druckenmiller observed challenges with the reunification of East and West Germany, which was the primary driver for a decline in the countries’ currency (marks) at the time.
In somewhat of a contrarian move, the billionaire predicted that marks would eventually increase in value and bought a few multi-million dollar worth of the currency. Soros advised Druckenmiller to significantly increase his position to two billion marks, a bold move that paid serious earnings, profiting his fund over 60% in returns for the year.
Lipschutz’s name often comes up in conversations over some of the legendary forex traders. Bill started getting more media attention after being featured in the first edition of the Market Wizard book series by Jack Schwager. However, the American had already done the hard yards long before.
Lipschutz first dabbled in equities during the late 1970s while pursuing a Bachelor’s degree in architecture at Cornell University. Upon his grandmother’s death, he was fortunate to receive $12,000 worth of stock as an inheritance.
After some shrewd investing, he miraculously turned this amount into $250,000 and then quickly lost it all. He eventually managed to recover. His immense skill and experience led him to the privilege of trading forex at one of the largest investment banks at the time, the Salomon Brothers.
He worked for the firm from 1981 to 1990 and is famous for reportedly making at least $300 million yearly from 1984 and a few years running after that.
Another legendary trader who made a fortune amidst a black swan event is the 66-year old American Andrew Krieger. Another mentee of George Soros, Krieger worked for one of the biggest American banks at the time, Bankers Trust, which was his second stint in the world of large financial institutions.
There, he garnered a reputation of being an aggressive trader. Despite the risk concerns, the board at Bankers Trust was entirely behind him and supposedly increased his trading limit from $50 million to $700 million.
When the crash eventually did occur in 1987, many investors moved out of the American dollar and into other currencies that were less affected. This flocking would naturally overinflate the value of these markets.
Kreiger targeted the New Zealand kiwi because it had the lowest currency circulation at the time, and the position he would take was said to exceed the country’s entire money supply. Reports suggest the kiwi’s value dropped between 5 and 10%, earning Krieger and his team at least $300 million.
Paul Tudor Jones
Jones is also another trader known for capitalizing on an insanely speculative position. The 66-year old is an American billionaire hedge fund manager and philanthropist whose rise to fame was in predicting and shorting during the 1987 stock market crash (also known as Black Monday or Black Tuesday, depending on the time zone referenced).
This single occasion is what made his first absolute fortune. Jones used his advanced knowledge of portfolio insurance, a hedging technique that manages risk by trading other instruments like indices and futures.
He believed more and more investors would go to this system due to the instability of stocks then, inevitably driving the markets severely down. It is assumed he tripled his money from this event, roughly equating to $100 million profit for the year.
One of the common threads within all these traders is their unparalleled years of experience in the markets and their knowledge working at the most prestigious financial institutions in their day.
Perhaps what is more evident is their claim to fame is a result of one highly bold contrarian bet or position that made them fortunes. On the negative side, this is never a recommended practice for anyone unless they have the financial backing that these traders had.
If we look at the positives, we can marvel and respect that knowledge always reigns supreme in any financial market, coupled with passion, grit, and risk management.