Nick Leeson who made millions for Barings Bank by betting on the future direction of the Nikkei Index. His bosses back in London, who viewed with glee his large profits, trusted him. Leeson seems to have everything, bosses trusted him, he got paid handsomely, huge houses, cars, women. EVERYTHING! but, what goes up must come down.
Barings believed that it wasn't exposed to any losses because Leeson claimed that he was executing purchase orders on behalf of a client. What the company did not realise is that there was a computer account error where Leeson was able to hide his losses. This account had been set up to cover up mistake made by an inexperienced team member, which lead to a loss of £20,000. Leeson used this account to cover his own losses.
Barings was also to be stupid enough to actually believed that Leeson always make profit but no losses in the trade. No one in the history had actually come up with 100% win with no loss at all. And continue pump in money to let him trade. As the losses grew, Leeson asked for more funds and by doubling up the bets to hope that he will be able to rebuild his profit. (Absolutely a stupid idea)
Over 3 months, he kept upping his ante by buying more futures contracts worth about $180,000 and each in a vain attempt to move the market. (Again a stupid move)
About after three quarters, he lost about $1.3billion with those trades. When Barings finally discovered his action, they informed the Bank of England that Barings was totally busted. The action of Nick Leeson had wiped out the 233 year old investment bank. (Cool)
And for your information, the $1.3 billion dollars of liabilities was more than the entire capital and reserves of the bank.
This told us that we need to accept our losses bravely, learn from mistake, and strike again. Don't be a moron who think you will be able to out-guessed the market and double your stake each and every time. We also need to be able to monitor our trade carefully. For huge banks nowadays, they have front offices, and back offices. Those front offices are traders who do the trading, and back offices is for monitoring and reporting to higher level.
Lastly, don't trade emotionally, u will screwed up everything.
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