£3.3 billion lost in a single day. $1 billion made by one trader Bookmark this BBC documentary - it shows the cleanest case of overreaction bias ever caught on tape. One sentence triggered it. But the real reason it cost £3.3 billion was what the British government did next September 16, 1992. The British pound was pegged to the Deutschmark inside the European Exchange Rate Mechanism. The peg was already cracking. Then Helmut Schlesinger, president of the Bundesbank, gave an interview he believed was off-the-record. One sentence hinted that more currencies might need to devalue. A journalist published it. Within hours, every trader in London was selling pounds That was the trigger. The collapse was the response The British government decided to defend the pound by raising interest rates from 10% to 12%. The market read it as panic. They raised again - to 15% in a single afternoon. The market read it as desperation. Soros' fund stopped selling in £5 million lots and started selling in £100 million blocks. One trader inside the fund called it "an invitation to double up." This is overreaction bias on a national scale. Not one mistake but two layers stacked - the government underreacted to market signals for two years, then panicked when reality hit. The harder they pushed, the more obvious it became that they had already lost By 8pm the pound was out of the ERM. Bank of England had burned £3.3 billion in reserves. Soros had made $1 billion in a single afternoon. The Chancellor went home, opened a bottle of white wine, and slept peacefully for the first time in months The lesson sits in every market today. The crowd doesn't price danger in proportion - it ignores it, then overcorrects, then overcorrects the overcorrection. The people who make money read the second move before it happens "Overreaction" is one of 5 cognitive biases I broke down in my article ↓