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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.

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.

Gut instinct trades are not well thought through in terms of risk and reward. When you are on the right side of trading, the profits come too soon, but on the wrong side the losses come too late. Instinctive trades are based on the hope that you have timed it right to find wither 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.

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.

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