Following the improbable misadventures of Arthur Dent, the only human being to survive the destruction of the Earth, The Hitchhiker’s Guide to the Galaxy by Douglas Adams has become a sci-fi classic and a cultural phenomenon. The titular electronic guidebook can help the intrepid galactic traveller cross the gulfs of interstellar space, but does it have anything to teach the forex trader?
As the novel explains, “It is said that despite its many glaring (and occasionally fatal) inaccuracies, the Hitchhiker’s Guide to the Galaxy itself has outsold the Encyclopedia Galactica because it is slightly cheaper, and because it has the words ‘DON’T PANIC’ in large, friendly letters on the cover.”
It’s good advice in general, but in trading terms, not panicking is essential. Sometimes, it makes sense to close a trade if the currency you’re currently trading is moving the wrong way, but it’s not always the right decision. Waiting for the trend to reverse can see you come out on top, but the decision should always be made with a cool, analytic head. There are other ways that panic can manifest itself; making a quick succession of rash trades in an effort to make back a loss, or the opposite – freezing and failing to make the right trades for fear of failure. You won’t get it right all the time, but analytical thinking will help you score more hits than misses.
Never trade after a Pan Galactic Gargle Blaster
The Pan Galactic Gargle Blaster is widely regarded as the galaxy’s best drink, and its effect is akin to “having your brains smashed in by a slice of lemon wrapped round a large gold brick.” The advice here is not just to refrain from trading if you’ve drunk enough to floor the Ravenous Bugblatter Beast of Traal. That should go without saying, but even a slight amount of alcohol can alter your thinking and trading behaviour – generally by lowering your inhibitions, which can make you act a bit more recklessly.
Many traders fuel themselves on caffeine, especially if they’re staying in for the long haul, but really, anything that can change the way you think and react can also have an adverse effect on your trading decisions. This can even be applied to your general state of mind. If you wake up feeling particularly despondent or with the gloriously optimistic feeling that nothing can go wrong that day (and we believe there are people like that), your trades are likely to be swayed one way or the other.
Improbable doesn’t mean impossible
The Infinite Improbability Drive is “a wonderful new method of crossing interstellar distances in a mere nothingth of a second, without all that tedious mucking about in hyperspace.” It has to be said that, while you’re extremely unlikely to turn into a penguin while trading, you should be prepared to expect the unexpected. The best-laid analytical plans can go awry when the market takes a completely unexpected turn, so it’s always best to have a contingency plan or at least be prepared to take the odd loss on trades that appeared to be home bankers.