There is an article in this week's news section which is entitled How to Combat Over Trading. It's an issue that I tackle often in this column because it is probably the greatest source of pain for most traders I know. K and I are often amazed by emails we get from subs who tell us that they have blown up even after BKT has had a huge run of winning trades. The reason clearly is that they over trading their account. Now this particular article tries to fix the problem by talking about the need to "visualize you plan", "talk out your trades" and "keep a running diary". While all those sentiments are noble I am here to tell you that they are all pure bunk.
Let's face it, as currency traders we are in the markets because we love to trade. We don't pore over balance sheets looking for misalignment in cashflow calculations like the credit gnomes in the bond market. Nor do we spend endless hours researching business plans like stock investors. FX is the purest speculative market there is driven first and foremost by sentiment. What is the value of a currency anyway? Some will argue that the dollar isn't worth the paper its printed on. But we don't care. There are no bear markets in FX. We are the ultimate "absolute return" asset class.
Let's face it, as currency traders we are in the markets because we love to trade. We don't pore over balance sheets looking for misalignment in cashflow calculations like the credit gnomes in the bond market. Nor do we spend endless hours researching business plans like stock investors. FX is the purest speculative market there is driven first and foremost by sentiment. What is the value of a currency anyway? Some will argue that the dollar isn't worth the paper its printed on. But we don't care. There are no bear markets in FX. We are the ultimate "absolute return" asset class.
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