Soros' theory of interactions only provides him with the direction of his investment objectives and the means to seize potential opportunities, not the precise orientation or the timing of important turns. Instead, one of the secrets to translating his theory into practice to reap profits is the invest first, investigate later approach.
Investing first and investigating later means making a hypothesis, building a position, testing the hypothesis on a small trial basis and waiting for the market to prove it right or wrong. If the hypothesis proves to be correct, the position is added, otherwise it is promptly withdrawn.
Sometimes it takes a considerable amount of time to confirm a move and it is likely that the market will have already started to reverse by the time he hesitates, so taking a position immediately after making a hypothesis helps him to seize the best time to invest.
The key to Soros' investment success was his philosophical thinking, he knew that people's perceptions are always flawed and that whatever assumptions are established, the investor's imagination is bound to be wrong at a given time, i.e. The assumptions are based on some flaw that is inevitably present in the assumptions. The key to success is to constantly look for flaws in the market's interpretation that are crucial to oneself. Pay attention to their impact on investment behavior. When Soros and rogers started the quantum fund, they had a division of labor. Rogers acted as the analyst and Soros as the decision maker, following the routine of investing first and examining later, with Soros investing first and rogers examining later.
Sometimes investments made for feel-good reasons are in line with current market movements, reflecting the convergence of such assumptions with popular investment psychology, which is often Soros' biggest concern, as flawed perceptions become the dominant bias in the market, the very side of the market that thrives. Once Soros has investigated the flaws and given them a high level of attention, he will be sensitive to signals that the market is moving into a boom or bust, which is where he will be looking for the tipping point of the trend. At this point he will leave the public alone, close all previously established positions to establish a new investment concept and take new positions to maximize profits in a new trend. When his hypothesis is correct, he will take additional positions, and when his hypothesis fails, he will try to study the reasons for the failure and without hesitation withdraw his position and get out of the market in style.
Investing first and investigating later, based on assumptions, is one of Soros’s secrets to getting a more accurate and comprehensive feel for the market, capturing opportunities and maximizing profits.