It's not a trading idea, more of a a history lesson :-) Today while browsing the web I stumbled upon a well known story how Soros and his friends heavily shorted the Pound in 1992 and forced the government into surrender, pocketing more than a billion USD of gains. For the British Pound, this can largely be viewed as a black swan event - however, if we look at the chart and apply Elliott wave count, it becomes clear that GBP rise was over anyway as the zigzag correction was near its completion. The last subdivision of the zizzag, which was also a zigzag, completed equal A and C waves, so everything was set for a reversal. What made Soros successful in this deal is that he entered the market at the right moment. The black swan event worked out because the market was ready! Had the market been in a different place of the curve Soros could have bet all his fortune agains GBP and the market would just go by as usual. Black swans don't make the market move. They occur only when the market allows them to do so. And I believe the technical analysis can help is find the right moments. Just a thought :)
what i saw straight away was an a,b,c,d completion and a double top at a key round number.
anyone who was at the charts on that day could have profited from short positions.soros just had the capital and was in the right place at the right time.
Elliottician
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In your 1-2-3-4-5 labeling of the downtrend, it appears that wave 3 is the shortest. That isn't allowed.
AndyM
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Well, indeed, it could be counted as ending diagonal A-B-C-D-E instead, with all of the swings being comparable in duration and magnitude. Most important, the last movement of the setup would not change - once the last zigzag between July 1991 and Sept 1992 was completed the probability of market reversal was extremely high. So all Soros did was to enter the market at the best moment possible.
Flubberpants
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I can't say I agree with your count. Your wave II A-B-C looks far too large compared to wave I. Happy to hear your thinking behind this.
anyone who was at the charts on that day could have profited from short positions.soros just had the capital and was in the right place at the right time.