How To Improve Your Currency Trading Game
I had decided to write an article about punters in forex trading. I looked up various definitions of 'punter' on the internet in relation to this. Simply searching for 'punt' resulting in more definitions than I needed, so I focussed on the word 'punter'. This lead to the definition I was after. The definition came from Britain, and describes a punter as a person who uses a bookmaker to place bets and gamble.
Having discovered what a punter is, I needed to know what a punter is forex trading was. I had not come across any sort of formal definition. Traditionally, a punter refers to someone who trades on instinct, often against market trends. This follows the British definition for 'punter' that I had found, which implies an attitude more akin to gambling than trading.
My desire to write an article about punting is partly down to the fact that after decades of forex trading, I occasionally have the urge to take a punt, to gamble on a trade. It is only discipline that prevents me from going ahead. In my early days, I was a bank trader. This was before the days of screens providing all the market details, and we had to rely on instinct in order to trade. Perhaps it is this background which leads to my desire to punt nowadays. On the contrary, it may be the wealth of market information that we now have available. You can focus on the price action on the screens and get drawn into trading that way. Either way, punting is not a method for long term success, no matter how good your market instincts are.
When trading simply on instinct, one often gets early profits when you are right, but the losses are often too late when you are wrong. These types of trades are not based on risk/reward strategies, which have defined targets and stop points. These trades are based on using gut instinct to hope that you have timed the trade to coincide with the top or bottom of the market.
The price action of the USD/CAD rate today (Oct 20, 2009) was one of the reasons that I decided to write an article about punting. The decision by the Bank of Canada to hold rates was not a surprise, but caused the USD/CAD to firm. The rate fell sharply in line with an overall weak US dollar the previous day, closing at 1.0298. Before the Bank of Canada's decision, trading was around 1.0310. Market punters looked to sell at every pause. I abandoned the idea after looking at the charts, despite my instinct telling me to sell. After pausing at various levels, many punters were drawn in, but it continued to rise higher, peaking at a final price of 1.0525. Some punters may have made a few pips by fading moves and quickly buying back USD/CAD, but generally losses far outstripped gains if entry into the market was not timed right. The risk/reward ratio was very poor.
No form of forex trading is a blueprint for long term success, but approaching it as a punter is less likely to bring the rewards of treating it as a business. Punting is like gambling in a casino, and will bring the same long term rewards - i.e. the house always wins and the punter comes away with a loss. If forex trading is approached with solid analysis, risk/reward ratios and good money management, i.e. treating it as a business, you have a much better chance of success. - 23222
Having discovered what a punter is, I needed to know what a punter is forex trading was. I had not come across any sort of formal definition. Traditionally, a punter refers to someone who trades on instinct, often against market trends. This follows the British definition for 'punter' that I had found, which implies an attitude more akin to gambling than trading.
My desire to write an article about punting is partly down to the fact that after decades of forex trading, I occasionally have the urge to take a punt, to gamble on a trade. It is only discipline that prevents me from going ahead. In my early days, I was a bank trader. This was before the days of screens providing all the market details, and we had to rely on instinct in order to trade. Perhaps it is this background which leads to my desire to punt nowadays. On the contrary, it may be the wealth of market information that we now have available. You can focus on the price action on the screens and get drawn into trading that way. Either way, punting is not a method for long term success, no matter how good your market instincts are.
When trading simply on instinct, one often gets early profits when you are right, but the losses are often too late when you are wrong. These types of trades are not based on risk/reward strategies, which have defined targets and stop points. These trades are based on using gut instinct to hope that you have timed the trade to coincide with the top or bottom of the market.
The price action of the USD/CAD rate today (Oct 20, 2009) was one of the reasons that I decided to write an article about punting. The decision by the Bank of Canada to hold rates was not a surprise, but caused the USD/CAD to firm. The rate fell sharply in line with an overall weak US dollar the previous day, closing at 1.0298. Before the Bank of Canada's decision, trading was around 1.0310. Market punters looked to sell at every pause. I abandoned the idea after looking at the charts, despite my instinct telling me to sell. After pausing at various levels, many punters were drawn in, but it continued to rise higher, peaking at a final price of 1.0525. Some punters may have made a few pips by fading moves and quickly buying back USD/CAD, but generally losses far outstripped gains if entry into the market was not timed right. The risk/reward ratio was very poor.
No form of forex trading is a blueprint for long term success, but approaching it as a punter is less likely to bring the rewards of treating it as a business. Punting is like gambling in a casino, and will bring the same long term rewards - i.e. the house always wins and the punter comes away with a loss. If forex trading is approached with solid analysis, risk/reward ratios and good money management, i.e. treating it as a business, you have a much better chance of success. - 23222
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posted by X - Men @ 9:48 AM
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