Earlier in the day Taylor, 34, handed himself in to FBI agents in New York, reports The BBC.
He pleaded guilty – before US District Judge William Pauley in a federal court in lower Manhattan – to a count of wire fraud, and said he was “truly sorry”.
Taylor was dismissed in December 2007 after the incident, which resulted in a $118m loss for the Wall Street bank.
Goldman paid $1.5m last year to settle charges that it had failed to appropriately supervise Taylor.
Taylor told the court he knew his actions were wrong and illegal but established the trade to boost his reputation and pay packet.
His salary was $150,000 and he expected a $1.6m bonus.
Taylor started his Wall Street career at Morgan Stanley in 2001 after attending the Massachusetts Institute of Technology.
He joined Goldman Sachs in 2005 and worked there until his sacking, for building up “inappropriately large proprietary futures positions in a firm trading account”, according to a filing with the Financial Industry Regulatory Authority (Finra).
After leaving Goldman, Taylor returned to Morgan Stanley, where he remained until July 2012.
He will be sentenced on 26 July.