Ever dream of being that one investor? The one who predicts market events before anybody else knows they’re coming, and gets away with millions of dollars fitting nicely in your pocket? Well, it might be hard to stuff that much money your pockets… but I’m sure you would have no trouble finding a nice safe place to store your millions. Wouldn’t it feel great to make it on the list of legendary traders known for their cunning and incredible returns?
1929: Jesse Livermore shorted the stock market (predicting the crash) and made $100 million.
1987: Paul Tudor Jones shorted the stock market (predicting Black Monday), making an estimated $100 million.
The 1980s (after Black Monday): Andy Krieger shorted the Kiwi (predicting it was highly overvalued) and made $300 million.
1992: George Soros shorted the British pound, making $1 billion dollars (meanwhile Stanley Druckenmiller invested in the german mark and made an additional $1 billion for Soro’s Quantum fund)
2000: John Templeton made $80 million in a week shorting the Dot-Com bubble.
2003: Andrew Hall went long (like, 5 years long) on oil and made enough to land a $100 million dollar bonus.
2007: John Paulson and Kyle Bass both made $3-4 billion shorting subprime mortgages and mortgage-backed securities.
2009: David Tepper went long on banks (predicting they would recover from the financial crisis) and made $7 billion.
Of course, while some take opportunities in the market to make millions, you have to realize the enormous risk behind these trades. As investor Spidey-man would say, ‘With great returns comes risk of great losses.’ For example: Yasuo Hamanaka lost $2.5 billion shorting copper, Brian Hunter lost $6.5 billion in natural gas futures, and Jerome Kerviel lost an incredible $7.1 billion in European futures. Just this last May, China’s richest man lost $15 billion when his company shares plummeted. Ouch – somebody didn’t have their stops on!
The difference between us and them is as simple as a couple of zero’s. Say you make 20 pips with one lot, while somebody else makes 20 pips with 100 lots. You both made 20 pips, but the one with 100 lots made a lot more money. Honestly, it all depends on how much money you put into the trade. The more you practice hitting your 20 pips a day, the more comfortable you’ll become trading in the market. The more comfortable you become in the market, the more money you’ll invest in it. The more money you invest, the more money you’ll make (as long as you’re smart about it). Then, you’ll be hitting your daily 20 pips with 100 lots and making a lot more zeros.