Contributing to a historical moment called Black Wednesday, Stanley Druckenmiller is one of the most accomplished investors of all time. What can we learn from him?
Every successful trader must have had a long and exhausting journey because trading is not an easy investment where they can get profit overnight. Trading needs a lot of patience and dedication in order to work out. It can take months or years before they can make consistent profits. They might even have to lose some money in the process because the market keeps changing and the price can suddenly move drastically in the opposite direction.
One of the ways to improve your trading skills is by learning from other traders' experiences. There are actually many successful traders out there who like to share their stories and even spend their retirement days writing books and educating newbies about trading. In this article, we will be focusing on the story of a legendary trader named Stanley Druckenmiller.
Stanley Druckenmiller is a successful American investor who was born in the city of Pittsburgh, Pennsylvania. He graduated from Bowdoin College in 1975 where he studied English and Economics. He also decided to pursue a Ph.D. at the University of Michigan, but he chose to drop out to work at Pittsburgh National Bank. This is where his journey in the financial market began.
Only a year after joining the national bank, Stanley was appointed head of the equity research department. In 1981, he even started his own fund management company called Duquesne Capital Management. Apparently, his astounding talent got noticed by one of the most successful traders at the time, George Soros. The expert was impressed by Druckenmiller's market analysis and decided to make him the lead portfolio manager of the Quantum Fund in 1985, replacing Victor Niederhoffer.
One of the Actors behind Black Wednesday
As a relatively young investor, Druckenmiller learned a lot of things from his new mentor. In 1992, they successfully "robbed" the Bank of England by betting $10 billion against the Sterling. While the Bank of England decided to significantly devalue the pound, Druckenmiller managed to earn $1 billion in only a day. This phenomenon is simply legendary and often referred to as Black Wednesday.
Soros and Druckenmiller continued their professional partnership for another few years before Druckenmiller finally decided to fully focus on his own management firm. During the time of operation, Duquesne Capital Management was able to manage several billion dollars worth of assets and earned an impressive annual return of 30%. Druckenmiller then decided to retire in 2010 and closed his management fund.
Today, Druckenmiller is dedicating his life to manage his personal asset and becoming a philanthropist. He is now the Chief Executive Officer of Harlem Children's Zone, a social organization that aims to help thousands of poor and abandoned children across the country. Thanks to his amazing trading journey, he is now one of the most well-known hedge fund managers in the world. At one point in his career, he made it to Forbes's top 400 richest Americans.
Be Realistic, Don't Depend on Luck
If we take a closer look, Druckenmiller actually uses a similar strategy as George Soros by holding several groups of stocks long, several groups of stocks short, and using leverage to trade futures and currency. For Stanley Druckenmiller, the key to a successful trade is strict money management. He believes that in order to generate profit in the long term, traders must be able to manage their capital in the short term. He also said that there is no such thing as luck in trading, so instead, he encouraged traders to just focus on realistic aspects like trading risks.
Above all, he believes that trading is more than just theories. It is an active investment that can generate real money. In order to be successful, a good trader must be able to execute the right position at the right time, and when the setup is ready, one needs to increase their position size.