Stop the FX Fixation Please

Reader: I have been focusing on trading FX for many years and I’m still struggling to trade consistently and now you’re saying to trade a few different markets at the same time. I’m seriously doubting myself in my ability if I’m able to focus on trading so many different markets at the same time since I’m struggling to trade well in FX only for many years.

Covel: These are instruments (not markets):

1. LEAPS
2. futures
3. ETFS

A trend follower can use any of those 3 INSTRUMENTS to trade all markets. What are markets? Stocks, gold, oil, corn, Apple, Google, bonds, currencies (FX), etc. When you are a trend following trader you don’t care what markets you trade. You treat them all the same. As a trend follower you treat FX markets just like Apple or Google or coffee. There is no fundamental trading involved here. Your prior experience of FX only — should be forgotten about as a sunk cost

Reader: My reason of choosing to focus on FX is I want to be a specialist trading in this market. I’m not sure if that is considered a good reason to you but at least it is to me. I fully agree with you saying I will miss some or a lot of market opportunities as FX market only trade about 10-20% of the time and other time, other markets will be trending right?

Covel: Trying to be a specialist in one market is the kiss of death. You almost guarantee more losses. Trading FX is not a good reason to those that have developed an understanding and expertise. Please stop FX only. It’s a very bad idea. Yes, I know all about FX brokerages and their ads, etc. Just bunk. They are brokers.

Reader: Are you referring to limited trading opportunities?

Covel: Trend following is absolutely for FX markets, but you need to trade more than just currency markets. Not enough diversification. So FX is part of what goes in a TF portfolio — not all.

Note: You are not Chris Cruden.

You might like my 2017 epic release: Trend Following: How to Make a Fortune in Bull, Bear and Black Swan Markets (Fifth Edition). Revised and extended with twice as much content. Out April 24th 2017.