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Chasing Nickles Around Dollar Bills

What Does Chasing Nickles Around Dollar Bills Mean?

The expression chasing nickles around dollar bills is slang for when a foreign exchange (forex) trader pursues a trend in the currency market. Traders chase nickles when they go after the price of a currency during fads or enter a trade when a trend is near its end. The expression may also apply to a company's management focus on trimming small, trivial costs instead of cutting more severe and significant costs.

Key Takeaways

  • Chasing nickles around a dollar is a metaphor that is commonly used for losing sight of what's important and focusing too intently on minor details.
  • In foreign exchange trading, this often means chasing trends or trending news events instead of sticking to a disciplined plan.
  • It is typically futile unless the trader has a long-term plan or strategy.
  • In business, chasing nickles around a dollar means focusing too much on cost-cutting and not enough on investing in the business.
  • The phrase implies that business owners should understand that short-term pain should result in long-term gain.

Understanding Chasing Nickels Around Dollar Bills

Trading on the forex marketplace can inspire a number of emotional reactions including elation, fear, greed, loss, and panic. That's why it's important that traders eliminate emotion from the trading equation. This means that they must keep their personal feelings out of the decision to buy or sell any particular currency. 

One way of doing this is by chasing nickles around dollar bills. This metaphor describes this kind of irrational market behavior. Foreign exchange market efficiencies make it challenging for traders who use chase-the-market strategies to realize substantial gains. For these reasons, chasing the market is typically a futile endeavor unless the trader has a long-term investment plan or proven strategy. This limitation gives institutional investors an advantage as they trade with funds from massive pooled-fund portfolios. 

Businesses can also chase nickles around dollar bills the same way individual traders do. They do this when they undertake unimportant budget-cutting in the name of fiscal responsibility. The phrase encourages taking the long view and understanding that short-term financial pain should result in long-term financial gain and resource allocation.

This issue is often a concern of small business owners, who can get caught up in trimming costs while losing sight of more meaningful changes that may be apparent to an outside observer. For example, the costs of investing in training or technology upgrades can be costly, but the potential improvements in efficiency and service are worth more in the long run to the business owner.

Some experienced day traders may be able to chase market profits, but overall, the efficiency of the market makes pursuing short-term gains less attractive.

Example of Chasing Nickles Around Dollar Bills

Trading is dangerous as a rule. Enter the deal too early or too late and you could find yourself with significant losses. Trading a fad usually occurs when breaking news, the outbreak of war, or a natural catastrophe causes a considerable move in the exchange rate of a currency pair. These moves are generally unsustainable.

Trend trading is a strategy that attempts to capture gains through the analysis of a currency's momentum in a particular direction. Traders may enter a long position when the currency trends upward or take a short position when it is trending lower. They assume that the movement will continue to move in its current direction.

A trader who uses technical analysis as their strategy examines the prices of specified currencies over time. In most cases, they will recognize repeated patterns, which they then use to predict the market's direction and if the trend is beginning, ending, or a phantom trend. Having an expectation for how long trends tend to last can help maximize profits and alert to potential turning points.

Following new developments and trends may present profitable opportunities. However, waiting too long to chase established trends is where traders may find trouble. Trading based heavily on a market-chasing strategy rather than careful forex analysis can also be problematic and typically unprofitable.

Conversely, traders may place trades against a trend or fad. A countertrend strategy is a speculation method that attempts to make small gains by trading against the current trend through the use of use momentum indicators, reversal patterns, and trading ranges to determine the best areas to execute trades.

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