How to Become the Next George Soros

Asad Dossani
On 16 September 1992, George Soros made a billion dollars shorting the pound. He bet that Britain would leave the European Exchange Rate Mechanism and devalue their currency. He was right and was fantastically rewarded.

Two weeks ago, I wished I had done the same thing. Following the Brexit vote, the pound dropped nearly 10%. I could have made a killing.

Chances are, you've thought like this before. Wishing you'd made a trade in hindsight. News and political events can dramatically move markets. And who wouldn't want to take advantage?

Psychologists have a term for this. It's called hindsight bias. Events appear predictable after they've occurred, even if there was no way to predict the outcome beforehand.

Hindsight bias can make you feel like you're missing out on fantastic trading opportunities. But in fact, you're actually experiencing hindsight bias. This is most likely to occur when political events move the markets.

My best advice for trading politics is don't do it. This is especially the case if your trading signals come from analysing historical data. No indicator or chart could have predicted the outcome of the Brexit vote. And so it would have been of no use predicting the subsequent 10% fall in the pound.

Another issue with trading politics is the high volatility. Political events can cause unusually large moves in markets. Which is great it you're on the right side of the market. But otherwise, it's a disaster.

This is why I stay out of the market when large political events occur.

Now you're probably thinking: But wait, if George Soros can do it, why can't I? After all, his most famous trade came from speculating on a political event.

It's true that many traders speculate on political events. And some of them are quite successful. You can profitably trade politics if you meet the following three criteria:

  1. You have higher than average risk tolerance, even for a trader
  2. You can predict the outcome of political events better than most analysts and experts
  3. Your prediction for an event is different to what the market is currently expecting
If you're unsure whether you meet these criteria, here's what you can do: Find the next important political event and make a prediction. You'll need to predict the outcome of the event, as well as the market reaction.

Do this many times, and track how often you're right and wrong. And if you're success rate is high, then perhaps you've got what it takes to be the next George Soros.

Do you trade politics? Let us know in the club or share your comments here.

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2 Responses to "How to Become the Next George Soros"
Apt
20 Jul, 2016
Very generic, waste of time reading this !Like 
RAJKUMAR S D
10 Jul, 2016
Superb but of no use. You on the contrary with your expertise and experience can predict well the outcome of any political event, even it is contrarian to market behaviour. Hence you may advise suitable trade strategy to take handsome advantage of such political events such as forthcoming monsoon session in parliament based of passing of GST bill, forthcoming monetary policy, forthcoming FED bank rise in interest rates and many other events such as assembly election results, etc, which can bring good volatility in the market. But alias someone like you should advise for suitable trading strategy to take maximum profit with minimum loss from such recommendations. Thanks with regards.Like 
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