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Andrew Krieger: The Speculator Who Profited from Black Monday

Although not as well-known as George Soros, Andrew Krieger is a successful speculator famous for his bold move against the NZD during Black Monday in 1987. Krieger is one of the forex traders with extraordinary achievements, particularly during Black Monday 1987.


Andrew Krieger's Career Journey

After studying at the Wharton Business School, University of Pennsylvania, Krieger joined Solomon Brothers upon graduation. In 1986, he joined Bankers' Trust, where he made his name. While working at Bankers' Trust, Krieger's performance as a profitable trader kept rising. The company trusted him with capital up to $700 million, even though the standard capital limit was only $50 million. Fortunately, Krieger repaid this trust with impressive results.

Krieger and Black Monday

Andrew Krieger's name might not be as popular as George Soros or Bill Lipschutz, but it is closely associated with the Black Monday event in 1987. Black Monday is the day of a global financial crisis caused by the stock market crash in Hong Kong, which then spread to Europe and the United States on October 19, 1987. This event resulted in a significant drop in stock market values worldwide in a short time. Consequently, the Dow Jones Industrial Average (DJIA) plummeted 508 points or 22.61%. The crash in Wall Street significantly impacted the US Dollar, and traders rushed to sell the Dollar, causing its value to plummet against almost all major currencies.

Krieger's Strategy

While other traders were busy selling the US Dollar, Krieger saw potential in the New Zealand Dollar (NZD). He believed the rise in the NZD/USD pair had reached its fundamental and technical limits and needed correction. With this brief analysis, Krieger used a large amount of capital to force the NZD down and out of its supply zone. This decline was welcomed by other markets, causing the NZD/USD to drop nearly 5%.

Krieger used a leverage of 400:1, equivalent to $600 million to $1 billion, an amount exceeding the actual NZD supply circulation at that time. He dared to take high leverage because he had conducted thorough fundamental analysis of the market panic. As a result, Krieger managed to earn a net profit of $300 million for the company backing him.

Controversy and Aftermath

Despite generating enormous profits, Andrew Krieger's trading caused significant controversy among the New Zealand Central Bank. The bank and the New Zealand government requested the Chairman of Bankers' Trust to remove Krieger. Additionally, he was only given a $3 million commission from his trading profits on the NZD/USD pair. Disappointed with the commission, Krieger decided to leave Bankers' Trust and joined George Soros's firm.

Lessons from Andrew Krieger

From Andrew Krieger's story, several important lessons can be learned:

  1. Use the Dollar Index as a Benchmark: The Dollar Index can help determine the general market sentiment, whether the Greenback is ranging or breaking out.

  2. Add Other Technical Indicators: Besides using the Dollar Index, add other technical indicators to confirm potential price movements.

  3. In-depth Analysis: Avoid taking high-risk steps without deep and tested analysis. Krieger decided to open a position with large leverage because his analysis likely would prove accurate.

  4. Risk Management: Besides analysis, good risk management is crucial. Krieger had risk management strategies to anticipate the worst-case scenario.

  5. Detect Overbought Conditions: The ability to detect when a currency is overbought is very important. However, also ensure that your capital and risk tolerance are sufficient to take a reversal position against the market.

Krieger dared to go against the market because he had significant capital and full trust from his company. If you still have limited capital as a retail trader, tighten your risk management to avoid being trapped by false reversal signals.

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