The Best and Worst Traders

While some traders make profits and others don’t, few reach celebrity status because of the magnitude of their gains or losses. However, there are some traders who have gone down in history because of their incredible successes or failures. Easy-forex takes a look at what it takes to become a trading legend – for good or for bad.

Two of the best

Paul Tudor Jones is one of the very few investors who came out smiling after Black Monday in 1987. Just before the 1987 stock market crash, Jones managed to quantify the effects of portfolio insurance if a bear market struck. Investors often buy put options on major indexes – which lowers their portfolio risk. However, Jones saw that if the market started to slide, more and more investors would exercise these options and drive the market down even more. To capitalize on this, he shorted the market and made his fortune on Black Monday – tripling his capital. Today, Jones is worth about $3.6 billion and runs his own $12 billion hedge fund.

George Soros is probably the world’s best-known trader, known for breaking the bank of England. Back in 1992, Soros spotted that the Bank of England did not have sufficient strength to keep the pound in the European Exchange Rate Mechanism if the pound started to depreciate. Along with colleagues at his hedge fund, Soros shorted the pound, building up a $10 billion position against the UK currency. The pressure caused the pound to move down, and the decline accelerated as the UK was forced to leave the European ERM. Soros made approximately $1 billion on the bet, and went on to amass a fortune of nearly $20 billion.

And two of the worst…

Toshihide Iguchi was a senior executive who traded US government bonds for Daiwa Bank in New York. Back in 1983, he concealed a $70,000 trading loss on Federal Reserve notes. Just like a gambler doubling down, he kept trading to try to make the money back, and things just got worse. In July 1989, he bet $3 billion on US treasury bonds – and racked up losses of $350 million. An investigation by the New York Fed ensued, but Iguchi managed to come away unscathed. It wasn’t until 1995 that Iguchi came clean in a confession letter. By that time, he had lost $1.1 billion in total.

Nick Leeson: Iguchi may have lost $1.1 billion in 12 years, but Leeson managed to bankrupt Barings Bank in less than two months. Back at the start of January 1995, Leeson bet that the Japanese stock market would remain stable overnight by placing a short straddle on the Tokyo and Singapore exchanges. On January 17, a major earthquake hit Kobe, and Asian markets went into a nosedive. Leeson tried to make back the money he lost through a number of incredibly risky trades, essentially betting that the Nikkei would recover quickly – which it didn’t. By February 26, Barings declared bankruptcy after Leeson’s losses hit $1.4 billion.

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