Kill Your Trading Account – Fast!

Want to destroy your trading account the fastest way possible? Then all you need to do is flip your positions constantly and aimlessly.

The one thing I’ve personally experienced and seen in trading is constant flipping of positions – mainly due to a fear of being on the losing side and also not having any idea where the directional bias is at the moment. Faulty price action reading or just lack of focus usually causes this.

Flipping is when one goes from a long position and reverses it to a short position or vice-versa. For example, a trader buys EURUSD to get long; later on they close out the position and immediately sell to get short (this can be accomplished in one trade transaction if their broker nets positions – doesn’t allow both long and short positions in the same currency pair).

Most of the time though it doesn’t pay to flip especially in FX trading. One reason is that when done incorrectly, you will lose the spread twice at minimum – at worst, you’ll lose more on top of the spread when the market moves against your positions. Flipping is more effective in instruments like the stock market where you can scalp and flip more profitably because you can actually buy on the bid or sell at the ask. Unfortunately, in retail FX as it is today we can’t do this – we’re limited to paying the ask to buy and hitting the bid to sell therefore incurring the spread as an instant loss immediately that we need to overcome.

One way to avoid getting ripped by flipping is to identify the directional bias of the pair you’re interested in trading. If there is no clear direction / trend then don’t trade it that day. There are times when it can make sense to flip but even then it’s still possible to lose anyway if the market has one if its volatile days and whipsaws strongly in both directions…sucking in traders in the process. For the beginning or less experienced trader it’s best to commit to trading one side only, win or lose, until you have more experience interpreting the price action.

If you haven’t already, read my earlier post on 5 Essentials of Price Action Trading.