Rebirth of the Capital Legend

Chapter 264: The strategy of using oneself as bait to lure more customers!
"But Lao Meng, have you ever thought that under the premise that the Bank of England forcibly supports the market and maintains the pound exchange rate through open market operations, the longs who already have an absolute advantage in the market will further concentrate on shorting, which will also cause a continuous stampede of shorts in the market, thereby triggering extreme upward fluctuations in the pound exchange rate." Kong Fansheng said, "In fact, at this time, whether you are long or short, the risk is extremely high."

"Manager Kong is wrong," Su Yi responded with a smile, "In the current pound exchange rate market, the risk of shorting should be much smaller than the risk of going long.

First, the public speeches by important Federal Reserve figures last night have revealed to the market expectations of future interest rate hikes.

The increase in expectations for a US dollar interest rate hike will obviously create huge upward pressure on the exchange rates of non-US currencies, which will suppress further appreciation of the pound sterling exchange rate.

Secondly, the foreign exchange reserves held by the Bank of England are not sufficient.

As long as the pound exchange rate is still within their acceptable range and the market is slightly biased towards the bullish direction, the Bank of England will not inject too much foreign exchange into the market to stimulate the pound exchange rate. It will mostly just shout slogans and stabilize market confidence.

Furthermore, major exchanges and market makers have already made corresponding adjustments to the leverage multiples and margin ratios for pound exchange rate transactions.

In this case, there are long institutions in the market.

If one wants to further raise the pound exchange rate and further force a short squeeze, the amount of funds invested will be at least five times greater than before.

Moreover, the number of net long positions in the market is extremely large, and many long position holders have certain floating profits and have a strong desire to take profits and close their positions.

I'm afraid there are not many long institutions.

Willing to continue to invest such a huge amount of funds to support other long-term investors.

Of course, the most important factor is that within the UK, in Scotland, there have been a number of pro-Brexit marches. Many cities and regions that were previously expected by institutions to support Britain's remaining in the EU system are currently showing public opinion that is clearly inconsistent with the institutions' predictions.

In other words, based on current indications...

The probability of a 'black swan' event, in which the UK votes to leave the EU, is clearly increasing.

As we all know, in the financial market, price changes mainly come from changes in expectations and emotional feedback.

Since market expectations have changed compared to before, and the pound exchange rate has rebounded nearly 1000 points from its low.

So, at this time in the pound exchange rate market.

The direction of least resistance for price movement is the short direction.

In this situation...

Once the long institutions in the market want to force a long squeeze and want to greedily eat the "cake" that forces the shorts to trample on each other, I believe they will definitely pay a heavy price. "

"Since President Su believes that the long and short positions in the pound exchange rate market have been changing, and the market's long and short expectations have been shifting to the short side, why did President Su find our Huayin International and hope that our institution can participate in the market and conduct short selling to help resist the continuous short squeeze by the long side in the market?" Kong Fansheng continued with a smile, "I guess President Su is not sure that his short positions can last until the full reversal of market expectations and the day when the result of the UK's referendum on Brexit comes out on June 6?"

Su Yi replied: "I do have concerns in this regard. After all, the size of our institution's funds is still too small, far from being comparable to those large asset management institutions in the international financial market."

"Capital in the financial market is the most greedy," Kong Fansheng said. "I can almost conclude that with the Bank of England supporting the exchange rate, these long institutions that have already reaped a lot of profits and tasted a lot of sweetness in the market will definitely continue to squeeze out the shorts in the coming period, forcing Mr. Su and other major short institutions in the market to run out of funds and be forced to stop losses and close their positions, thereby causing a stampede of shorts and grabbing the most lucrative expected profits in the market."

"Yeah, I think so too." Meng Shengfei nodded slightly, paused, and then said, "However, Mr. Su, you just said... your institution has sufficient capital reserves. Why is it that in the market today, there are rumors everywhere that your institution's reserve funds have been basically exhausted and you are facing forced stop-loss to cover your positions, or even liquidation?"

Su Yi responded with a smile: "This is just fake news I deliberately released."

"Deliberately released false information?" Meng Shengfei was shocked.

Su Yi nodded and said, "It's like fishing. There must be a bait within reach for the fish to take the bait. Our Huayi Capital is the bait that lures the bulls in the market to squeeze out the shorts continuously in order to beat the bears and grab excess profits."

"Lure the bulls to continue to squeeze out?" Meng Shengfei was even more surprised, and said, "Boss Su's courage is really admirable. You want the main bulls in the market to continue to invest huge amounts of funds to squeeze out while the pound exchange rate is relatively high, so as to get deeper into the market and trigger a larger-scale potential extreme market?"

"Manager Meng still understands." Su Yi said with a smile.

"You are walking on a tightrope," Kong Fansheng said. "If you use yourself as bait, you will end up with a liquidation and a total loss if you are not careful."

Su Yi responded calmly: "In the financial trading market, high profits are always accompanied by high risks."

"I think Mr. Su's strategy of 'luring the enemy in' is quite clever," said Meng Shengfei. "At this time in the pound exchange rate trading market, the leverage ratio for opening positions has been reduced, and the margin ratio has also increased. If the bulls want to continue to squeeze out, they will inevitably invest several times more funds than before.

Continuing to go long at high levels will first increase your holding costs.

Holding too large a long position.

When you want to close your position and leave the market, you will need more counterparties to take over.

In other words, the larger the long positions of these long institutions, the more severe the suppressive effect on the pound exchange rate will be when they cover their positions.

Under this situation, unless they defeat the short sellers in the market, they probably won’t be able to leave the market safely.

If we add the factors that Mr. Su just analyzed.

Once the market expectations and market sentiment really turn towards the bearish side.

Then, the net long position of about 80 lots in the market will instantly turn into 80 lots of short positions... With this amount of energy, the long positions in the market will inevitably collapse and stampede."

"It sounds like... it's indeed a good strategy." Zhang Yanshun, who had been listening to the conversation between the three people, pondered for a moment, nodded with a smile, and said, "It seems that President Su has already planned everything and has a clear idea of ​​the changes in market conditions and future expectations."

Su Yi replied, "I can't say I'm sure of it, but I think that at this point, the profit and loss ratio of shorting the pound exchange rate is already quite high." "Boss Su wants us in, probably to use us as bait to lure the bulls to continue to squeeze out the shorts, right?" After pondering carefully for a while, Kong Fansheng also said, "It's indeed a brilliant strategy. Once the holding costs of the long institutions in the market continue to rise, their floating profits will decrease, and the size of their holdings will continue to increase, then... if these long main institutions don't blow up their short positions, it will be difficult for them to leave the market.

The UK's referendum on Brexit is just ten days away.

At most, there are less than ten trading days left.

During this period, as long as we can withstand the continuous short squeeze of the bulls and make the bullish institutions in the market fall deeper and deeper, then the market pattern and expected reversal can really be expected. "

He had somewhat looked down on Su Yi before.

But now, after listening to Su Yi's entire short-selling plan and strategic planning, he began to look at the young man in front of him with admiration.

"That's it." Meng Shengfei said with a smile, "I think Mr. Su's strategy is completely feasible."

"The total long and short positions in the entire pound exchange rate market have reached nearly 300 million lots, right?" Zhang Yanshun thought for a moment and said, "Such a large-scale long and short position is already a precursor to the outbreak of extreme market conditions. If the long and short positions in the market continue to increase, what consequences will be caused by the long or short positions? What kind of extreme market fluctuations will it cause? I'm afraid it will really be amazing."

"With this volume of long and short positions, once the long and short forces are completely unbalanced, the pound exchange rate will have a fluctuation space of at least 2000 points, whether it is upward or downward," Kong Fansheng predicted. "This kind of extreme fluctuation can indeed reap several times, or even dozens of times the profit, once the direction is right."

"Haha...it seems that it is really a high risk and high profit." Zhang Yanshun said with a smile.

Meng Shengfei responded: "High profits are certain, but high risks are also certain. In my opinion, shorting at this time is not a very high risk. However, it is indeed foreseeable that this time the British pound exchange rate market will definitely erupt into a bull-bear war that will shock the world, and it will definitely erupt into more extreme market fluctuations than last year's 'Swiss franc black swan' event."

"There shouldn't be any problem with President Su's strategy," Zhang Yanshun said. "However, unlike President Su's Huayi Capital, our Huayin International needs a lot of procedural approvals for such large-scale investment in the global financial market, especially the foreign exchange market, which has extremely high investment risks."

Su Yi replied: "I know this and I can understand it."

"But the strategy you just mentioned is indeed good." Zhang Yanshun said, "I will try to report it to the higher-ups for approval. If there is no problem, I will let Xiao Kong from Investment Department 1 and Xiao Meng from Investment Department 2 cooperate with you to fight a vigorous battle between bulls and bears in the pound exchange rate market."

When Su Yi heard Zhang Yanshun's words, a smile appeared on his face, and he said, "Thank you, Mr. Zhang, for your trust."

Zhang Yanshun laughed and said, "It is said that our Chinese-funded institutions are only harvested by 'Wall Street' capital and these large and small foreign-funded institutions in the international financial market. It is said that our Chinese-funded institutions are like meat on the chopping board in the international financial market, and can be slaughtered at will. This time... I hope that President Su can show these arrogant guys how we harvest them. I also hope that President Su can show the momentum of our Chinese-funded institutions in the international financial market."

"Don't worry, Mr. Zhang." Su Yi said firmly, "I will definitely do it."

Things have developed to the present...

This is no longer just a gamble on his part, and it also concerns his own interests and reputation.

However, knowing the established historical development trajectory and with the support of tens of millions of people across the UK, he believed that this time, as long as the main bulls participated in the pound exchange rate market, no matter how they calculated and struggled, in the end... they would not be able to avoid the fate of a margin call and destruction.

"Okay, let's eat some food, it's getting cold."

Seeing that they had finally reached a consensus in their ongoing discussion, Ms. Li said with a smile.

"I still have about $30 in funds. When I get back, I'll also support a few short orders." Fang Wanqing, who had been listening patiently, turned her eyes to Su Yi and said with a smile, "Boss Su, everyone is on your side this time. You must win!"

"Don't worry." Su Yi said with a smile, "I guarantee that by then, your $30 will turn into $300 million in seconds."

Fang Wanqing chuckled and said, "You said it. If you leave with less than 300 million US dollars, I will make you pay it back."

"No problem." Su Yi said.

As a reborn person, he knows the direction of history and the trump card, but he can still be strangled by the bulls in the market. He might as well just crash to death.

After discussing the business, everyone finished their meal while chatting.

Around 8:30 in the evening, everyone left the restaurant and went their separate ways.

"Wanqing, do you really trust this kid named Su so much?" On the way back, Ms. Li held Fang Wanqing's hand tightly and asked, "This is a big gamble. If we win, everyone will be happy. If we lose, this kid... will most likely be doomed."

Fang Wanqing nodded firmly and said, "Based on my understanding of him, he won't bet unless he has an absolute chance of winning, let alone betting billions of dollars with his entire fortune. So... I think he will definitely win this time."

"I hope so." Ms. Li exhaled softly and said, "Otherwise, I'm afraid it will be difficult for me, as the guarantor, to withdraw."

She and Su Yi have met twice so far.

From her personal point of view, she felt that Su Yi did have a different temperament from ordinary people.

At least, with most of her life experience, she had never seen a young man in his twenties who could remain calm and talk and laugh freely after betting all his chips.

After all, that's billions of Chinese yuan.

Take herself for example, even though she has experienced many ups and downs.

If she really invested so much money, facing an uncertain future and a financial account that fluctuated by millions every minute, she would not be as calm as he was.

This is enough to show that the other party is a person with strong determination and extremely confident in his investment ability and trading techniques.

If such a young man is successful, she thinks there should be no problem in matching him with her niece. This is also the fundamental reason why she agreed to Fang Wanqing to use her connections to help the other party and to give the other party credit endorsement.

(End of this chapter)