Trading this afternoon can best be described as desultory with the US closed & eurozone ministers in purdah, but it provides a valuable lesson and one that is probably the most difficult to master. I am sure you will all remember the song that starts : “I’m busy doing nothing, working the whole day through” and in trading forex doing nothing is often the best option but so difficult to achieve and some of you reading this may wonder why but I can assure you that when presented when a live, flashing screen of data the desire to trade and “do something” can be overwhelming leading to “boredom trades”, “fun trades”, “let’s see what happens trades”, all of which will have one result, namely they will result in a LOSS.
This behaviour is part of our DNA as we all like to be seen to be “doing something” and I was reminded of this during yesterday’s football (or for my US readers’ soccer) match between Wolverhampton and Manchester City when with 20 minutes remaining of the match Wolverhampton were awarded a penalty. As usual the goalkeeper stood on his line and as usual when the kick was taken made a spectacular dive to his right with the ball going to the left. The question is why? The answer is simple: statistically the goalkeeper has a much greater chance of saving the penalty if he were to stand and do nothing and wait for the kick to be taken. Unfortunately this is not an option as with 40 thousand pairs of eyeballs trained upon him, he has to be seen to be doing something. The fact that it is the wrong thing to do is irrelevant as he has at least made an attempt and everyone leaves happy. The penalty taker is happy because he scored a goal: the goalkeeper is happy because he made a brave attempt and at least half the crowd is happy because their team scored a goal. What price the goalkeeper who is prepared to stand in the middle and do nothing and wait – I would suggest very long odds indeed but I would suggest this is the best option since most footballers shoot down the middle, fully expecting the goalkeeper to dive one way or the other and this simple strategy would result in a significant increase in the number of penalties saved.
In trading, in case you had not realised, the hardest thing to do, but often the best, is to simply stand on the goal line and do nothing.