Born in 1953, Stanley Freeman Druckenmiller is an American macro trader and hedge fund manager. He is the former president of Duquesne Capital. Until 2000, he worked for George Soros. In 1992, he made one billion dollars by shorting the pound with George Soros. As for 2017, Freeman Druckenmiller had 4 billion USD in net worth.

 

STANLEY DRUCKENMILLER TRADING TIPS

■ Focus on the FED and liquidity

Earnings don't move the overall market; it's the Federal Reserve Board.

• Focus on the central banks, and focus on the movement of liquidity.

• Most people in the market are looking for earnings and conventional measures. It's liquidity that moves markets.

 

■ Once an economy reaches a certain level of acceleration, the Fed is no longer with you

The Fed, instead of trying to get the economy moving, reverts to acting like the central bankers they are and starts worrying about inflation and things getting too hot.

• The market is fine because you've got all the free money in the Federal Reserve. But that can only last so long. Eventually, the hamster can't move on the wheel anymore.

 

■ Currency moves tend to last two or three years

The nice thing about currency moves, they tend to last two or three years.

 

 

■ Be careful when catalysts come in to change

When catalysts come in to change the market’s direction… you have to realize that the decline could be very major

 

■ Deflation creates an asset bubble

The way you create deflation is you create an asset bubble. Every serious deflation I've looked at is preceded by an asset bubble, and then it bursts.

 

■ The stock market predicts economic recovery

Whenever I see a stock market explode, six to 12 months later you are in full-blown recovery.

 

■ Invest in the future, not the present

Never, ever invest in the present.

 

■ My strength is economic forecasting

My strength is economic forecasting, but that only works in free markets, when markets are smarter than people. That’s how I started. I watched the stock market, and how equities reacted to change in levels of economic activity and I could understand how price signals worked and how to forecast them. Today, all these price signals are compromised

 

■ If something needs to be hedged, you shouldn't have a position in it

I don't really like hedging. To me, if something needs to be hedged, you shouldn't have a position in it.

 

■ What is more disciplined than a machine?

I believe that good investors are successful not because of their IQ, but because they have an investing discipline. But, what is more disciplined than a machine? A well-researched machine can make many average investors redundant, leaving behind only the really good human investors with exceptional intuition and skill.

 

■ Diversification is probably the most misguided concept

I think diversification and all the stuff they're teaching at business school today is probably the most misguided concept everywhere.

• Put all your eggs in one basket and then watch the basket very carefully.

 

■ The way you make big money

With my business, the way you make big money is you find a great management team and a good concept, and you stick to it, and you add to it over time.

 

■ Bitcoin is like anything else

Bitcoin is like anything else: it’s worth what people are willing to pay for it.

 

■ Investing is one big game

Investing is one big game. You need to be decisive, open-minded, flexible, and competitive.

 

■ Passion with integrity

Passion without integrity leads to jail

 

■ Stay unattached, be a pig 

The first thing I heard when I got in the business - not from my mentor - was, 'Bulls make money, bears make money, and pigs get slaughtered.' I'm here to tell you I was a pig. And I strongly believe the only way to make long-term returns in our business that are superior is by being a pig.

 

■ Commodities are driven by the cost of extraction 90% of the time

When I started in 1976, I was taught by my mentor that when cash flow rises equities go up. But commodities are driven by the cost of extraction 90% of the time, and over the long run, technology makes extraction cheaper, pushing the cost curve down and with it commodity prices. But that hasn’t always worked, if I’d followed that advice over the past few decades, I’d be in trouble.

 

THE MOST IMPORTANT LESSONS FROM GEORGE SOROS

 

■ Preservation of capital and home runs leads to long-term success

George Soros has a philosophy that I have also adopted: The way to build long-term returns is through preservation of capital and home runs.

 

■ It’s not whether you’re right or wrong that’s important

It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.

 

■ When you have a conviction on a trade you have to go for the jugular

Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to ride a profit with huge leverage.

 

■ Take the loss

Soros is the best loss-taker I've ever seen. He doesn't care whether he wins or loses on a trade. If a trade doesn't work, he's confident enough about his ability to win on other trades that he can easily walk away from the position. 

• If you're extremely confident, taking a loss doesn't bother you.

 

■ Decide how much money to allocate on a trade based on the risk/reward and your sense of conviction

I learned a lot at Soros, but not what I thought I would learn. I did not learn what makes the yen go up or down, or what makes the stock market go up or down. Soros’s great gift was how to use leverage, and how much money to have down based on the risk/reward and your sense of conviction. His view on the yen or the euro was better than random, but not much. And yet he was still one of the greatest money managers ever because he knew how to bet his convictions.

 

 

■ Stanley Druckenmiller (Forex Trader)

Forex-Investors.com (c)

 

 

BOOKS:

» Stanley Druckenmiller on Google Books