"Haha, the trend of the pound exchange rate over the past few trading days has truly been exhilarating!"
When investment sentiment in the pound exchange rate market, both domestically and internationally, had fully tilted towards the long side, and the entire market had fully formed a short squeeze situation, on June 8th, during the Asian trading session, in Hong Kong, inside 'Tianhe Capital,' which had already earned tens of millions of dollars in unrealized gains from its investments in the pound exchange rate market, the company's founder and chief fund manager Gu Chijiang said with an excited look on his face.
"The pound exchange rate has indeed moved quite smoothly these past few days,"
responded Xie Hongxing, the company's trading team manager.
"Looking at this situation, the bulls have achieved a complete victory on the pound exchange rate market. Once the 1.5300 level is breached, the pound exchange rate should form an even sharper one-sided upward trend."
"The key is that the Bank of England is also conducting market operations,"
Gu Chijiang said.
"It's truly a case of 'when the time comes, all forces conspire.' Now, 'Huayi Capital,' the main short seller in the market, probably won't have time to withdraw, right?
We just need the pound exchange rate to break through the 1.5000 level upwards, and I estimate we'll see 'Huayi Chengyuan No. 1,' Huayi Capital's main hedge fund, suffer a complete rout, cutting losses and covering positions, or even being forced into liquidation. That's not impossible."
Xie Hongxing nodded slightly and said,
"General Manager Su of 'Huayi Capital,' shorting the pound exchange rate by himself and provoking a long-short battle among various global capitals in the pound exchange rate market, was indeed somewhat overconfident. His current predicament is purely his own doing."
"Still too young,"
Gu Chijiang shook his head.
"He thought that if he could dominate the A-share market, he could also profit in the international financial markets, but he didn't realize that compared to the enormous foreign exchange financial market, the domestic A-share market is merely a beginner's village."
Xie Hongxing said,
"Looking at General Manager Su of 'Huayi Capital's operations on the pound exchange rate this round... It's genuinely hard to believe that he achieved a hundredfold investment return in half a year in the domestic A-share market earlier, and it's also hard to believe that he could raise such a large amount of capital and funds."
Gu Chijiang said with a smile,
"The domestic financial circle always likes to create gods."
Xie Hongxing nodded,
"True. Before this General Manager Su, there was a General Manager Xu from 'Zexi Investment' who was also lauded to the skies by a group of people in the domestic financial circle.
But what was the outcome? General Manager Xu's famous technique in the A-share market for many years was simply relying on information channel advantages to continuously engage in insider trading."
"When I first heard that General Manager Su of 'Huayi Capital' raised 20 billion yuan in fund products overnight when his new company opened, I was also quite shocked,"
Gu Chijiang said.
"Originally, I was a bit curious and admired this General Manager Su, thinking of arranging a private dinner sometime to meet each other.
Now it seems... there's no need for that. Considering General Manager Su's operations in the pound exchange rate market, it feels like his previous investment track record was more due to luck.
After all, from his operations in the pound exchange rate market this time, whether it's risk control, position scaling, or leverage selection, there were huge problems. Thinking it over carefully... he doesn't seem like a mature trader."
"This person's previous investment track record must have been luck,"
Xie Hongxing said.
"I don't know where he gets his confidence from; despite earning money purely by luck and having very average trading skills, he insists on abandoning the beginner's village of the A-share market and putting all his assets into the high-risk foreign exchange financial market."
Gu Chijiang smiled and said,
"Perhaps General Manager Su truly mistook luck for skill."
"In this financial market, money earned by luck will eventually be lost back by skill,"
Xie Hongxing said.
"In this regard, General Manager Su is quite honest, perfectly demonstrating this point."
Gu Chijiang smiled,
"Haha... It's really true, losing money by skill."
Xie Hongxing nodded, paused, and then continued,
"In some ways, General Manager Su is truly a great philanthropist. In this round of unilateral upward movement of the pound exchange rate, many long-position institutions in the market are profiting from the massive short positions held by General Manager Su."
Gu Chijiang said,
"Now the entire market is waiting for General Manager Su to be liquidated, or to close out his positions with massive stop-losses, taking the loss and exiting. Before General Manager Su withdraws his positions, I estimate that the long-position group in the market will continue to squeeze the shorts and continue to push the pound exchange rate upwards."
"That's beyond doubt,"
Xie Hongxing said.
"Recently, have there been any unusual news developments in the UK?"
Gu Chijiang asked.
Xie Hongxing replied,
"Besides the news of the Bank of England conducting open market operations, there doesn't seem to be any other significant bearish or bullish news fermenting."
Gu Chijiang nodded,
"Good. Although most of the news is neutral, as long as Huayi Capital still holds a large number of short positions and hasn't exited the market, we don't need to worry too much about the pound exchange rate's trend."
Xie Hongxing nodded,
"Mm. General Manager Gu, our foreign exchange investment fund's unrealized gains have now reached almost 10 million US dollars. I'm thinking... at this point, should we take profit on a portion of our positions to prepare for the future?"
Gu Chijiang said decisively,
"No need. Market sentiment and expectations for the pound exchange rate are still accelerating towards the long side, and according to the long and short position data, the sharpest phase of the bull's short squeeze has not yet arrived. The time for our fund to reap massive profits has not yet come.
At this moment... why should we prepare to reduce positions and take profits? Shouldn't the correct operational mode be to continue adding long positions using profits under relatively certain expectations?"
Xie Hongxing was somewhat surprised to hear Gu Chijiang's words and said,
"Continue adding long positions? General Manager Gu, if we continue to add long positions at this level, we won't have much of a cost advantage."
Gu Chijiang said,
"Don't worry about issues like cost advantage. Just follow market sentiment and expectations."
"Alright... alright then!"
Xie Hongxing hesitated for a moment, then nodded.
Although he felt a slight unease about continuing to add long positions at this level, at the same time, he also felt that Gu Chijiang was right.
Under the current circumstances.
It could be said that the short-selling institutions, led by 'Huayi Capital,' no longer had any ability to reverse the market trend or avoid being continuously squeezed by the bulls.
In other words...
With high probability, the subsequent trend of the pound exchange rate will accelerate upwards, challenging higher levels at 1.4000 and 1.5000.
And since an upward movement in the pound exchange rate is highly probable.
At the same time, forcing 'Huayi Capital,' this major short-selling institution, to cut losses and stop-loss, or even face desperate liquidation, is also a high-probability event.
Therefore, the risk-reward ratio for intervening in the market and continuing to go long at this time is still very favorable.
Given this, there's truly no need to reduce positions and take profits when holding substantial gains, and when expectations and sentiment are continuously building in the direction of one's holdings.
Gu Chijiang said with a smile,
"Such a unilateral short squeeze trend in the pound exchange rate market is not common in the forex market. Since we've caught such an opportunity, we must fully utilize it to maximize market profits as much as possible. We shouldn't blindly emphasize risk in low-risk operations, nor should we ignore the existence of risk in high-risk trading operations.'"
"Understood, General Manager Gu,"
Xie Hongxing nodded hastily.
Immediately, he turned around and directed the traders in the trading room to continue adding positions according to Gu Chijiang's overall strategic direction.
And while 'Tianhe Capital's main fund products further increased long positions in the pound exchange rate at high levels.
Meanwhile, inside 'Aberdeen Asset' in Hong Kong.
In the trading room of 'Aberdeen Asset Evolution No. 1' hedge fund, Frederick, as the manager of this main hedge fund, gazed at the pound exchange rate, which had already breached the 1.5300 level, and at the fund's short positions on the pound exchange rate on the main computer, which had already incurred tens of millions of dollars in huge losses.
His brows furrowed noticeably.
"Teacher, do we need to cut positions and stop losses?"
Noticing Frederick's furrowed brows, Dennis, the core trader and head of the trading team, asked.
"Cut positions and stop losses?"
Frederick was stunned for a moment, then replied,
"Dennis, you're mistaken. Our correct trading operation right now shouldn't be to cut positions and stop losses, but to continue increasing our short positions."
"Continue increasing short positions?"
Dennis didn't quite understand.
Frederick said,
"Yes, continue to increase short positions. On the market, the tighter the short squeeze by the bulls, the more it indicates that the bull market is nearing its end. Furthermore, I learned last night from our colleagues in London within the group that there are significant divisions among the British public regarding Brexit and remaining in the EU.
This fully indicates that the result of the 'referendum' on June 23rd is full of uncertainty, not as global major institutions claim, with no surprises. A future event full of uncertainty and with enormous impact.
Its influence on the current trend of the pound exchange rate will certainly grow increasingly significant. I have a feeling that truly smart money in the market will not turn a blind eye to this uncertain event.
Moreover, on the market, the net long positions of the bulls have already surged to almost 500,000 lots.
In this situation, under the suppression of numerous short-term long position holders constantly taking profits and closing positions, and without significant positive news to stimulate it, it will be relatively difficult to continue driving the pound exchange rate higher and sustain a short squeeze.
Because as long as 'Huayi Capital' can still hold on, by continuously replenishing margins and avoiding passive liquidation. Then, without too many short sellers actively cutting losses and exiting, there won't be enough short position covering.
Many short-term active funds in the market will simply have no incentive to continue holding positions. In other words... next, as short positions sharply decrease, profitable long positions will also sharply decrease.
In the financial market... Bulls and bears are like twins, like light and darkness. When one side completely overwhelms the other, it means the momentum for further short squeezes or long squeezes disappears, and it signifies that the long-short dynamic is about to reverse.
Although there's still some time until the referendum date on June 23rd. But it's still highly difficult for the pound exchange rate to continue rising and quickly move above the 1.5500 level. Therefore, whether judged from trading logic or the logic of event development.
The risk-reward ratio for shorting here is far higher than going long or closing positions with a stop-loss. And since that's the case... why don't we operate according to the correct thinking and continue to increase our short positions?"
"What Teacher said... seems to make some sense,"
Dennis mused for a moment and replied."
Frederick smiled and said,
"I furrowed my brow just now because I felt that the various institutions in the market engaging in the short squeeze seemed to have fallen into a cognitive bias in their assessment of the situation, which I found somewhat regrettable. However, precisely because of this, we have such an excellent timing and position for shorting."
After speaking, Frederick instructed the traders to continue increasing short positions on the market as planned.
And just as he finished issuing the corresponding trading instructions.
Outside the trading room, his secretary assistant Adrian suddenly walked in and reported to him,
"Mr. Frederick, Mr. Su from 'Huayi Capital' wants to invite you to dinner this afternoon. What do you think..."
"Mr. Su from 'Huayi Capital'?"
Frederick looked back at his assistant, clearly surprised.
Assistant Adrian nodded and said,
"Mr. Su's secretary contacted me by phone and asked me to convey Mr. Su's regards to you."
Frederick pondered for a moment about Su Yi's purpose in inviting him, then replied,
"Alright, meeting this person wouldn't hurt."
Seeing Frederick agree, Adrian hurried out again to respond to the other party.
"Teacher, do you know why General Manager Su wants to meet you?"
Dennis asked.
Frederick nodded slightly and said,
"I can roughly guess one or two things. It seems General Manager Su indeed has some capability. Holding a massive amount of short positions at this time, being forced to this point by the market's bulls, he hasn't panicked or senselessly cut losses and covered positions. Instead, he seems to have found an opportunity to counterattack the bulls."
Dennis said,
"This person is indeed not to be underestimated. However, the funds he can mobilize, and the leverage he can use to sway the market and counterattack the bulls, shouldn't be much left, right?"
"That's hard to guess,"
Frederick said with a smile.
Afterwards, the traders in the trading room proceeded with their transactions systematically, gradually increasing short positions as planned.
At 5:30 PM.
Frederick, accompanied by his assistant Adrian, arrived at the location agreed upon with Su Yi.
The other party had chosen a Western restaurant with a nice ambiance.
The restaurant's decor style and dishes were quite to his taste, indicating that the other party had previously gathered information and understood his preferences.
"Mr. Frederick, hello."
Upon seeing Frederick arrive, Su Yi stood up with a smile in the restaurant's private room and extended his hand to greet him.
"In forex trading, your battle with the 'Swiss Franc Black Swan' last year truly impressed me immensely. I am very pleased to finally meet you."
(End of Chapter)