The foreign exchange (forex) market is the biggest financial market in the world. Every time countries trade goods or services, they also exchange currencies.
This creates a huge market where currency prices change all the time. Because of these constant changes, some traders look for small differences in prices to make profits. These are known as arbitrage opportunities.
Most traders make many small trades and earn little profits each time. But once in a while, a trader places a massive trade and either makes an enormous profit—or suffers a huge loss. In this article, we’ll take a look at some of the most famous and successful currency trades in history.
Key Highlights:
- The most well-known currency trade ever was made by George Soros in the early 1990s. He bet against the British Pound and made more than $1 billion.
- Most of these huge trades involve a lot of borrowing (leverage) and depend on predicting changes in currency values.
- Some believe that long-term investments are safer, but these short-term, high-risk trades often bring in the biggest profits (or losses).
How Currency Trades Work
Before diving into the trades, it’s important to understand how traders make money in the forex market. Unlike stock trading, currency trading has its own set of strategies. A trader can make four main types of bets:
- Shorting a currency – Betting that the currency’s value will fall compared to another currency.
- Going long – Betting that the currency’s value will go up compared to another.
- Straddle strategy – Betting that the currency will move a lot in either direction.
- Strangle strategy – Similar to straddle, but with wider price expectations.
If someone wants to short a currency, such as the Canadian dollar, they might take a loan in that currency and expect to pay it back when the currency’s value drops, costing them less.
But this method is too slow for professional traders. Instead, they use advanced tools like options, futures, forwards, and heavy leverage to place big bets. This leverage is what turns a good prediction into a million or even billion-dollar profit.
Andy Krieger vs. the New Zealand Dollar (The “Kiwi”)
In 1987, shortly after the stock market crash known as Black Monday, a young trader named Andy Krieger from Bankers Trust noticed some unusual behavior in currency markets. Many investors were leaving the US dollar and buying other currencies that hadn’t been hit as hard.
Krieger focused on the New Zealand dollar (nicknamed the “kiwi”). He believed it was becoming too expensive compared to its real value. Using newly developed trading options, he bet heavily against the kiwi—so much that his trades were bigger than the entire money supply of New Zealand!
This caused the currency to fall quickly. The kiwi dropped by around 5%, and Krieger made millions for his company. The story goes that a worried New Zealand official even called Bankers Trust to complain and ask them to stop Krieger. Eventually, Krieger left the firm and joined George Soros’ team.
Stanley Druckenmiller’s Two Big Bets on the German Mark
Stanley Druckenmiller, another legendary trader, made two famous trades involving the German currency, the mark, while working for George Soros’ Quantum Fund.
His first big bet came after the fall of the Berlin Wall. Investors were worried about the cost of reunifying East and West Germany, and that caused the mark to fall in value.
Druckenmiller believed this drop was overdone and started buying large amounts of marks. Soros encouraged him to go even bigger—up to two billion marks—and they ended up making millions.
His second bet came during the time when Soros was betting against the British Pound. Druckenmiller expected the pound to fall and the mark to rise, so he again bought marks.
At the same time, he bought British stocks, believing that lower interest rates would boost businesses.
He also bought German bonds, predicting that investors would turn to safer investments in Germany.
His complete trading strategy helped add even more profits to Soros’ already massive gains.
George Soros and the Fall of the British Pound
One of the most famous trades in history happened in 1992 when George Soros bet against the British Pound. At the time, the UK was trying to keep its currency linked to the German mark under the European Exchange Rate Mechanism (ERM). This required Britain to keep the pound’s value artificially high—even though the UK economy was struggling.
To hold this value, Britain had to keep interest rates very high, which also led to high inflation. Soros, along with other traders, believed this was unsustainable. He borrowed billions and placed a huge bet that the pound would fall.
The UK government raised interest rates even more to try and stop the currency from falling, but the cost became too much.
Eventually, they gave up and pulled out of the ERM. As a result, the pound collapsed in value, and Soros made at least $1 billion in profit.
Interestingly, the devaluation helped the UK economy in the long run. A weaker pound made British exports cheaper and more competitive, while high interest and inflation were finally under control.
Soros, after retiring, expressed regret about profiting from these kinds of trades, but many experts believe he was simply forcing countries to face economic truths that they were trying to ignore.
Final Thoughts
A weaker currency isn’t always a bad thing. It can actually help a country by making its products cheaper for foreign buyers, increasing exports, and boosting local sales.
While many people in the UK and New Zealand were angry about speculators betting against their currencies, others were glad because it corrected overvalued exchange rates and helped fix deeper economic problems.
Currency traders like Soros, Krieger, and Druckenmiller didn’t just make big profits—they pushed governments to make necessary economic changes, even if those changes were painful in the short term.
In the world of forex, big risks can lead to massive rewards—or devastating losses. But these legendary trades have shown that, with the right insight and strategy, a single trade can make history.
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