The first thing I did when I thought about writing an article about a punter was to find out what the term meant, especially in relation to forex trading (the theme of my article). On the web, I searched for the term punt, but came up with a myriad of definitions. Searching for ‘punter’ was more successful, and the definition I was looking for turned out to be British. The term ‘punter’ describes one who stakes a bet against another person, or bookmaker.

Through my searches, I did not find a formal definition for the word ‘punter’ in forex trading. In line with the general definition for ‘punter’ that I had found, a punter in forex trading is someone who treats trading more like gambling - they trade using instinct and often appear to go against the market.

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 (Oct 20, 2009) there was an event that prompted me to write an article about punting. The Bank of Canada made its monetary policy decision - there was no surprise that they decided to keep rate unchanged. This announcement caused the USD/CAD to firm after the previous day where a weak US dollar had caused a sharp fall. Trading was in the region of 1.0310 before the decision, but afterwards, as the price started to firm, punters were looking to sell at every pause. This was also my instinct. However, discipline told me to hold off and look at a chart. I soon abandoned the idea of selling. The USD/CAD price hovered at various levels through the day, sucking the punters into trades. It finally peaked at around 1.0525. Punters may have been lucky and grabbed a few pips by fading moves and quickly buying back, but the price action offered a poor risk/reward strategy. Losses far outshone the gains, unless entry was timed right.

You cannot guarantee long term success by either punting or any other form of forex trading. If you currency trading is approached as though you were in a casino, in the long-term you will get the same results as though you were gambling in a casino. When forex trading is approached with solid business strategies, with good analyses, proper risk/reward rations and money management in place, the chances of success are much improved.

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