Mike’s note: Tonight’s the night.
Currency market legend Andy Krieger will take the stage and reveal the details of a 30x trade he says is just months away…
Now, on to today’s essay…
As Andy’s shown you this week, trading on Wall Street is almost never a black and white affair. It takes intuition… And the kind of instinctive trading prowess that comes from watching the markets day in and day out, for years.
In today’s story, Andy demonstrates how that instinct brought about a huge trading profit… And the key rule that developed his instinct.
The Trading Gods Smiled… and I Walked Away With $50 Million
By Andy Krieger, editor, Andy Krieger Trading
Yesterday, I walked you through how I took the other side of a popular dollar trade at exactly the right time in 1988.
It was a fantastic profit opportunity…
But at the same time, I was faced with a difficult situation in my short trade against the British pound…
I didn’t know how far the pound might drop that day, but I only had a few days for the trade to work out. The face amount of my position was about $5.5 billion, and I wanted to make sure that I made some profits on the trade as the pound traded lower. I was thinking about how hard it might be to find enough liquidity in a wild market to buy the 2 billion pounds I needed to hedge up my short-dated puts and lock in my profits.
Suddenly, the pound’s drop started to accelerate. It was dropping quickly, and I had to struggle to keep calm and not get excited. (I always found it harder to manage my emotions when I was making lots of money.)
I think the Buddha really nailed it when he said that the pain of losing something is greater than the pain of wanting something you’ve never had. I was not immune to this truth, and as the pound started coming down faster and faster, I was quickly calculating how much money I was making on my short-dated put options.
Then the chief dealer suddenly called over to me and asked, “Andy, do you have any interest in quoting a large customer on several billion pounds in the spot market?”
At first, I thought he was joking. I had been trying to figure out how to buy 2 billion pounds in the spot market and now we had a customer who needed a price on this huge amount. I replied, “Jack, are you serious? You want me to quote a customer in spot on 2 billion pounds? I’m not even a spot dealer.” Jack glared at me and said, “Do you think I would joke about something like that?!”
The pound was tumbling lower and I said that I would show the customer a bid of 1.8400 for the full amount. He looked shocked that I had such a huge interest, but he was pleased. We had a major client out of Asia who was well known to have gigantic interests from time to time, so I knew the client’s interest was real. I was just hoping he was a seller.
Anyway, the customer hit my bid, a full 5 cents lower than where the pound had started that day.
I just sat there quietly mulling over the strange series of events which led to my making about $50 million in just a couple of hours.
The option’s value had shot up 10-fold to 1%, and I knew that in a market like that, it would be easy to find buyers for over $5 billion dollars’ worth of short-dated options. The probability of getting to buy $3.7 billion pounds in one trade, however, was negligible.
It was hard to believe that I had just been involved in perhaps the largest single spot deal ever. Everything in the universe aligned perfectly at that moment for me to earn the $50 million profit in just a few hours.
My overwhelming feeling, however, wasn’t pride, but gratitude. It was like the universe was throwing a gift my way. Sure, I had the courage of conviction, but I certainly didn’t “deserve” everything to work out so perfectly on that day. I didn’t feel especially smart. I just felt gratitude.
The customer filled my interest to buy 2 billion pounds on one deal – a $3.7 billion spot transaction which was just enormous and almost unimaginable. Everything had worked out better than I could have dared hope, and I was truly grateful for the experience.
Learning to Love Bad Luck
Sadly, trades like that – when the universe conspires to give me a special gift – don’t come around often. So I really appreciate them when they do.
I have had far too many trades when everything imaginable can go wrong. I have had phone systems crash while trying to execute deals to take profits, which remained non-functional until the market had moved wildly against me.
I have had normally reliable employees execute massive deals backwards, costing me millions of dollars.
Rumors about presidential assassinations have come out precisely when I was trying to sell dollars, sabotaging my efforts and costing me tremendous losses.
Yes, when things are going wrong, even the best positions can turn into losses.
I remember hundreds and hundreds of losing trades when it felt like the gods of trading were conspiring to slap me in the face to keep my perspective on things, and more importantly, to keep my ego in check.
So, one key rule to trading successfully is to always remember that having losing trades is a crucial part of the process of winning.
It would just be so much more fun if we didn’t get slapped by the universe with bad luck… but that’s part of the process. And just as often, the universe will send some good luck your way, too.
Rational traders should learn to accept their failures as learning experiences. It strengthens character and encourages treating victory and defeat the same way – by sticking to your principles and doing your best at all times.
Editor, Andy Krieger Trading
P.S. If you have any intention of preserving what you’ve built up over the last ten years of this bull market, listen closely…
Soon, the old rules of market action will no longer apply. We’re entering unprecedented territory, and a new paradigm is fast approaching. (Keep an eye on your inbox later today for more on this…)
What I’m seeing is so alarming, in fact, that I just couldn’t operate from the background any longer. I felt that I could really help people see what’s happening… and position them to profit while everyone else stumbles into this new era.
I’ll reveal all the details in tonight’s event. If you haven’t yet signed up, do so here, right now.