Andy Krieger is known as one of the most aggressive currency traders worldwide, and the conqueror of the New Zeeland dollar. In 1986, he joined Bankers Trust where he made the legendary short trade against the New Zealand dollar. Later, he worked for George Soros. In 1992, he published the book: “The Money Bazaar: Inside the Trillion-Dollar World of Currency Trading”.

ANDREW KRIEGER TIPS

■ The key steps to effectively analyze a currency pair (by Imre Gams)

When I analyze a currency pair... I look at everything... I look at all these things in both countries of the currency pair:

(1) From the political situation in the country to the monetary policy of the central bank, to the growth rates in the economy, to the demographics, and so on.

(2) I don’t think I’ve ever taken a trade in a currency without first looking at everything from stock markets to bond markets to relative interest rates. All these things go into my equation.

(3) Then I try to figure out what’s priced into the market. In other words, what does the market expect? Does the market expect certain types of data? Does the market expect certain growth rates? Does it expect certain outcomes in elections?

(4) But if I know what’s expected, I get important information… because when economic or political data is released, I can watch the market’s reaction. That reaction tells me a lot about how the market is positioned.

(5) Once I have that information, I can study the technical factors, which give me still more information.

So it’s a multi-tiered, complex process.

■ The first steps in trading

I’m not sure how I first learned to trade, because I didn’t have charts. I was trying to put my finger on the pulse of the market to determine what was coming next. It was very short-term, initially. Later, it evolved into much more of a fundamental top-down approach.

■ Empirical analysis

This type of analysis is so important. If you sit back and analyze why certain outcomes have certain effects, you can learn so much.

The Big Short on the New Zealand Dollar against the US Dollar

In 1987, he was a 32-year-old trader at Bankers Trust. In 1987, during the Black Monday (Oct. 19, 1987), the Dow Jones Industrial Average (DJIA) lost about 22% in a single day.

After the American stock market crash, there were some currencies that were rallying against the US Dollar. By that time, Andrew Krieger thought that the New Zealand dollar was obviously fundamentally appreciated. Therefore, he decided to go heavily short on Kiwi. He used his trading limit on the firm ($700 million), and in addition, by applying options techniques he managed to leverage his position by 400:1. Overall, he built a vast short position, larger even than the whole New Zealand dollar money supply.

Within a few hours of starting his short position, the New Zealand dollar against the US dollar crashed 5% and he made $300 million for Bankers Trust and $3 million for himself.

■ Andrew Krieger (Forex Trader)

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