2023/01/10 (145) Column

George Soros
– My Role Model, When It Comes To US WallStreet,
Financial Market, And/Or Especially CFD Derivative Trading.
Incl. A Short Explanation: How Does Leverage Business Work?
With Some Wise Quotes From Great Old Master André Kostolany


George Soros became famous with his bet against the British pound in 1992.
The financier is said to have earned the exorbitant sum of $1 billion in one day.
Back then, the UK economy was ailing, which is usually a drag on a country’s currency. However, Great Britain joined the European Monetary System in autumn 1990. This meant that the pound was only allowed to fluctuate within a relatively narrow range against all other currencies. Because of the ailing economy, the pound was trading at the lower end of the target range and had to be supported by the Bank of England.

How does his leverage business work,
to trade (buy/sell or do nothing) with borrowed money

Let me explain it like this: Imagine you go to your favorite supermarket; preferably the one you go to every day, every week. And you borrow also money from him before that. And that by first paying something into the account of the supermarket, like at every bank, like at your CFD online broker too. Let`s say 1000 USD; what means that your supermarket, your bank, your cfd online broker, with 1000 USD has something like a monetary insurance for it`s own, if you trade cfd`s with leverage – with money that you don`t have. Normal banking credit business – like house buying, car buying, with a credit (money you don`t have – and will pay back later). That`s the basic understanding of cfd`s! Do you have understand this? If not? Read back this columne, from start! Because that`s how the lever, derivatives, CFD, come into play. With which you can buy or sell far more than you have on the account. And regardless of whether you want to trade fish, cheese, salami, poultry and/or meat in the supermarket. Even like exchange rates, bonds, individual commodities, individual stocks, and/or even entire stock market futures, with your CFD online broker.

Let’s take a Swiss cheese, for example, which currently costs 36 euros (1 kg).
You assume that the price will fall. Because you have read that there is too much milk on offer right now. And you think the supply is greater than the demand. So it’s only a matter of time before the price falls. You sell 100 kg of Swiss cheese for EUR 3600 in your supermarket – with a leverage of 100. Which would normally cost you EUR 3600 in total. And you could not have afforded it without CFD`s. That`s why your supermarket, your bank, your CFD online broker handles the transaction with you – thanks to the sum you have previously paid in. Like 1000 USD in our case. Your supermarket, your bank, your cfd online broker also want to benefit, just like you. And because he, like you, does not know the future, i.e. at what price the Swiss cheese will be traded on the coming trading day, he has the 1000 USD from you as an insurance sum, in his account. If the price of the swiss cheese unexpectedly should not develop in the direction you expected. So that he can and/or will stop trading with you at the latest when the Swiss cheese develops by USD 1000 in the direction you did not 
expect. Because for the resulting losses, as well as profits, you alone take the moral and formal-legal monetary responsibility. Your CFD online broker, your bank, i.e. your supermarket, to stay with the example of our Swiss cheese, only lends you the money to trade. So a normal loan lending business. Which is why you don’t have to pay anything to your supermarket, your bank or your CFD online broker when you make profits – except for the low running costs.

Okay, let`s break all possible scenarios down, about this example.
You sell 100 kg of the swiss cheese for 3600 EUR – what is named as a short order. Because you`re excepting lower prices. So you`re giving your cfd online broker a sell order, which he excecute. And that he`s doing with another cfd online brokers and/or banks. As you`re waiting what the price action will be, next hours, next days, next weeks. You`re waiting and waiting. Until the Swiss cheese only costs EUR 33 (1 kg) – in the supermarket, at your CFD online broker. And you`re think that`s enough. I will buy the Swiss cheese cheaper back at my supermarket, at my cfd online broker, for just EUR 33 (1 kg). Which is 3300 EUR for 100 kg. This leaves you with a profit of 300 EUR. What is colloquially referred to as short trading. So that you`re closing the short trade at this price action.

Of course, the prices do not always develop in the direction we’re expecting. We expect falling prices, are going short, the price action falls, we`re buying back – and have a profit. Profitable short trading. That`s why don`t ignore the fact that not profitable short trading is also possible. Like not profitable long trading. And/Or non profitable long trading.

Profitable short trading as explained:
we`re selling 100 kg swiss cheese at 36 EUR (1 kg), with a 100 leverage. And buying back at a cheaper price action of 33 EUR (1 kg) later. So we made a profit of 3 EUR (1 kg). And thanks our leverage of 100 cfd`s even 300 EUR.
That`s it – that´s profitable short cfd trading.

Non profitable short trading:
we`re selling 100 kg swiss cheese at 36 EUR (1 kg), with a 100 leverage. And buying back at a more expensive price action of 39 EUR (1 kg) later. So we made a lost of 3 EUR (1 kg). And thanks our leverage of 100 cfd`s even 300 EUR.
That`s it – that´s non profitable short cfd trading.

Non profitable long trading:
we`re buying 100 kg swiss cheese at 36 EUR (1 kg), with a 100 leverage. And buying back at a cheaper price action of 33 EUR (1 kg) later. So we made a lost of 3 EUR (1 kg). Andthanks our leverage of 100 cfd`s even 300 EUR.
That`s it – that´s non profitable long cfd trading.

Profitable long trading:
we`re buying 100 kg swiss cheese at 36 EUR (1 kg), with a 100 leverage. And selling back at a more expensive price action of 39 EUR (1 kg) later. So we made a profit of 3 EUR (1 kg). And thanks our leverage of 100 cfd`s even 300 EUR.
That`s it – that´s profitable long cfd trading.

As much as most people’s mouths water when profits are realized in leverage transactions, i.e. in derivative trading, especially CFD trading. But I don’t want to hide the fact that most people have a bad, bitter aftertaste on their tongues, because on average more than half of all CFD traders worldwide lose their money at their CFD online broker. That’s why I publish my DEVISE 2 DAY Affiliate Financial Market Online Newspaper daily, so that you, yes you, can count yourself among the few competent market guys to be able to make a little profit with CFDs. And that is also thanks to my 9 brokers, who finance this newspaper, so that I can inform every interested reader around the world without obligation every day. Even if he does not (yet) have a new CFD online broker trading account with one of my 9 brokers. Because I offer all account holders of my 9 online brokers additional info services, such as news tablet trading, smartphone real-time connection and/or live webinars. So that we as market guys – i.e. both they can learn from me and I can learn from you – can successively set ourselves up on an even higher and broader level, even better every day.

Okay, that`s well, understandable, may be you tell yourself!
But that’s always only 300 EUR profit (in our 2 profit examples). And or always a loss of only EUR 300 (in our 2 negative examples).

Yes, that’s right, my dear reader! You’re right!
But if you have a 1000 EUR deposit account in your supermarket, at your CFD online broker. And you traded 10 kg for 3600 EUR just with the help of a leverage of 100 CFD`s, to stay with our Swiss cheese example. You made a profit long trade and/or profit short trade of 30 percentages; if you were on the right side of the price action. Like a non profit long trade and/or non profit short trade of 30 percentages; if you were on the wrong side of the price action. What even is also the fascinating think about cfd`s. Because you usually can`t make on us wallstreet, on the financial markets, without derivates – even like CFD`s – so fast 30 percentages (non) profits. That is the fascination of leverage trading! That is the sensational thing about derivatives trading, especially in the form of CFD`s. Because the leverage is transparent and/or traceable. Even if incompetent dreamers, after reading this column, still disagree and/or may be tell you something else (un)consciously (un)intentionally…

However,
my admiration for George Soros
is not primarily based on his major speculation 1992.

No! Rather, for me he is something like an intellectual, philosophical and psychological role model when it comes to US Wall Street, the financial market, and my derivatives trading, in the form of CFD`s. Because I’ve been told that people don’t let anything and nobody captivate them as much as like-minded people, that you secretly admire; and you would like to imitate it right away – without negative thoughts, let alone emotional resentment. Just like me, with George Soros, in terms of understanding and acting on US WallStreet, on the financial market, while CFD trading. I was of the same opinion then as I was when I was a child or even a teenager, and I still am today when I was passionate about active sports. Copying that and then above all practicing your own style based on certain behavioral patterns was and/or is still a great method for strengthening your own competent personality. And that in context of George Soros theory of reflection. And that`s why I am dedicating my next 10 columns exclusively to him and his insights. And hopefully formulate them in such an interesting way that you can hardly wait to read my upcoming DEVISE 2 DAY Editions again. And that inclusive the wisdom of André Kostolany. Because of this old wise boys i started to be interested in the market price action as a teenager around the end of the 1990`s.

André Kostolany was born in Budapest in 1906, had an American passport, lived in Paris, Munich and on the Cote d’Azur. He studied philosophy and art history at the University of Budapest, but then, at his father’s request, completed an apprenticeship with a French stockbroker friend of his. First he went to the Paris stock exchange, later he explored the financial world in New York, London and Zurich and became a stock exchange professional. Later, when his capital income from the stock market would have allowed him to retire early, he became a financial writer. First as a book author, later as a columnist for the German financial magazine Capital. His third career began with the stock market seminars, which he and his friend and partner Gottfried Heller had organized since 1974 – as a “stock market professor”. But he never wanted to give stock market tips. Instead, he believed that his students would learn from him how to think, analyze, persevere and be less shaky. “I conclude from the letters of thanks that I reeive that they are successful,” says Kostolany. Kostolany died in Paris in 1999. 

„When all players speculate on a supposedly surefire bet, it almost always goes wrong.“
„Spend as much time buying stocks as you would buying a used car.“
„The stock price is to the economy like a dog is to a walker. He runs ahead but always comes back.“

are 3 remarkable quotes from him that I would like to share with you in this way. And which is worth thinking about in peace; to (not) draw your own conclusions based on this.

I was struck by his wisdom as a teenager, in the late 1990`s. And not just because he reminded me of my biological grandfather – my father’s father. Who, like Kostolany, was an old, baptized Roman Catholic, outspoken wise catholic storyteller. He just was a figure of authority that many of those around him listened to. Me too! That´s why I got the feeling, after one of the two popes left us at the beginning of 2023, and I took part in his funeral ceremony, that I had to dedicate 10 columns to André Kostolany and/or George Soros. André Kostolany based his stock market transactions to a large extent on his experience and imagination and less on fundamental factors. While, according to George Soros, we always pay too much or too little for a security on the financial market; because financial market prices, according to his theory of reflection, are always overvalued or undervalued. So that I had now come to the realization thanks to these two old boys who, at first glance, may perhaps oppose each other argumentatively, when reading their writings in detail, more clearly, are more similar than I had previously thought. And hopefully I can give you some new usefully informations in this D2D Edition too, with my own semantic words and/or mathematical calculations; so that you too can enjoy reading an advantage every day compared to everyone else who does not read our D2D daily, day by day.