Forex News about Swings in History
This article is about forex news to try and understand how traders make decisions regarding their trades.
The forex industry’s base is the exchange of one currency for another. In terms of cash value trading, this is definitely the largest global market. It involves trading between central banks, multinational corporations, financial institutions, large banks, governments and currency speculators. The uniqueness of this market is due to its trading volume, the market liquidity, the 24-hour trading day, the geographical area that it covers, the range of factors that affect the exchange rates and the variety and quantity of traders that operate in the market.
Affected by Forex News
One of the issues that have an effect on exchange rates is not only forex news, but socio-economic and political news. This can be seen as one of the main advantages of forex trading, as no insider trading exists. All the trader needs to do is remain aware of what is happening in the news, form an opinion and apply it to the trading markets. Many of the top trades globally have been done by traders who religiously follow the news and use that information in their trades.
In the summer of ’92 there was speculation that the UK was going to be removed from the European Monetary Union. This event would have a huge impact on the British pound. The founder of The Quantum, which was one of the world’s largest hedge funds, Mr George Soros, decided to take advantage of this situation, and he placed a short position of ten billion in the market. The Bank of England decided to stabilise their currency by intervention and the depletion of all their reserves of foreign currency. Despite the efforts of the Bank of England, the pound plummeted on September 16, 1992 which is known globally as Black Wednesday. England had to withdraw from the EMU and Soros earned $1 billion in a single day.
In another forex news story, one of George Soros’ former money managers, Stanley Druckenmiller, developed a wonderful idea in 1989. While he was employed at The Quantum Fund, he purchased two billion German mark, with the idea that the reunification of Germany would have a huge impact on the deutsche mark. His idea definitely worked for him, as the mark spiralled in value over the years. The exact profits that he achieved on this deal are unknown; however, it was posted that he made a return in excess of 60%.
In 1987, during the stock market crash in the U.S., many traders decided to buy any currency that was growing strong against the dollar. At that point the most popular currency was the New Zealand dollar. Knowing that this could not continue indefinitely, Andy Krieger shorted 200 million New Zealand dollars. The currency could not hold its own under the pressure and allowed Krieger to walk away with a massive profit.
There is one main factor that links all these forex news stories: each trader had their own opinion, which they based on fundamental, economic data. Currently, the markets are more efficient and the traders have been regulated, which would make it nigh impossible for anyone to replicate these trades mentioned. It would be simple to replicate the foundation on which these trades were based, however.
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