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.

Even after many years in forex trading, every now and then I find myself wanting to take a punt, but I am too disciplined to do so. This is the reason that I wanted to write the article. A reason for my desire maybe related to my early career as a bank trader. This was in the days before banks of screens covered the trading floor, and we had to rely on instinct to make trades. Alternatively, perhaps it is the development of electronic trading that makes it easy to be pulled into trading by constantly watching a price rise and fall on a screen. Whatever the reason, I know that no matter how good your instinct are, punting is unlikely to be method for long term trading success.

Basing trades mainly on gut feelings often leads to early profits when you get it right. However, losses often come too late when you get things wrong. A reason for this is that the trades have not been well reasoned. There is no risk/reward strategy with defined stop points and targets for profits. Instead, these trades are based on using instincts to hope you have timed your trade to catch the top or bottom of the market.

Today there was an event that encouraged me to begin to write this article. After the bank of Canada announced its decision on monetary policy – to keep rates unchanged – the USD/CAD firmed. The previous day, the rate had closed at 1.0298, after a sharp fall in line with a weaker USD. Before the announcement, trading was around 1.0310. However, afterwards, the price began to firm and punters were instinctively looking to sell at each pause. This was also my instinct, but experience told me to look at the charts and I abandoned the idea. Punters were lured into trading as the USD/CAD paused at various levels, but it carried on rising higher, until peaking at around 1.0525. Some punters may have been fortunate enough to gain a few pips, but the price action offered a poor risk/reward. The losses far outweighed the gains if the timing of entry was not perfect.

Neither punting, nor any other form of forex trading, are a guaranteed method for long term success. It has been said before, and it is worth reiterating, traders who treat currency trading as though they are gambling in a casino, will get the same results in the long term as though they were gambling in a casino. If forex trading is treated as a business, with strong analyses, risk/reward ratio strategies and good money management, there is a far greater chance of success.

Tags: Business

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