But one I did go to a couple of years had a speaker who highlighted an article called “The Number One Mistake Forex Traders Make”. The title put my back up straight away as it sounds like some spivvy course - I was expecting a picture of someone on a laptop, under a palm tree, trading forex. London may well be the centre for fx trading but, based on the spam mail I receive, most forex trades originate in Antigua.
Anyway, it wasn't some make-a-million-by-next-Thursday course. It was some research by forex broker FXCM. They looked at 12 million trades by clients, which is a chunky old sample. It’s a well-worn market cliche that most people are wrong most of the time, right?
The data showed that when it came to forecasting direction, with the exception of the Australian Dollar/Japanese Yen (AUD/JPY) cross, individual clients were right more often than they were wrong. This chart shows the percentage of trades that ended with a profit for the client. For example, on that ever popular stalwart Pound against the Dollar (GBP/USD), 64% of trades were profitable. Here’s the chart:
Not so fast.
The next chart is the killer. Average number of points gained when right, versus points lost when wrong.
It’s much more sensible to focus on whether a trade is really worth doing: does the risk versus reward add up? The potential reward should be a multiple of the risk - otherwise, why bother? I used this simplistic but revealing research on many IG seminars over the last couple of years.
More on this whole risk versus reward thing next time. For now, if you are taking bookings, I would like to reserve the Antiguan palm tree nearest the bar please.
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