What book should I read to really learn currency trading?? I have read some already, and dome some trading too but something is missing. Cant feel I know how to trade yet. Looking for advices on how to do so. Thanks if you help.
I lost about $10,000 learning how to trade before I made it all back. I traded futures, currencies, and stocks. I'm still here 5 years later. Not super wealthy, but not broke either. This is just my opinion -- it's hotly contested on ET -- but indicator based technical analysis just does not work. The reason is because the indicators generally don't model what counts in any concrete sense. Plotting volatility in a 14-period time window or an RSI is a questionable activity that won't work over the long run. Stay away from books like this because they will trick you into thinking it's as simple as buying when something is oversold and selling when something is overbought. Stay away from most books and pick up a book on what counts in currency markets. If whatever book you get has technical analysis, it better be heavy on the fundamentals. Truth be told, most of what you find in Borders or Barnes and Noble is a poor waste of money that will cause you to lose money. I wish those books weren't out there because they lead people (like me in the past) into falsely thinking they are informed. Fundamentals are what really drive the market, or hunches about the nature of fundamentals. The "smart money" is essentially building forecasting models and doing time-series analysis where they have confidence intervals on the outcome of results. They'll hedge their bets and manage their risk carefully. Most books don't teach you how to manage risk, other than basic ideas about risk vs. reward constructed from some arbitrary chart or listing of data. However, fundamentals information is not updated constantly. You have to eventually learn what components and pieces of the market cause movements and drive the market one way or the other. It's a long, hard process. You're going to want to incorporate things like: - How does realtime news affect stocks? - What is the main sentiment in the financial press, and does it run contrary to the markets? - What are the driving factors behind exchange rates on currencies? - What are the interest rates everywhere else? Currencies are said to trend well because there is some deep underlying macroeconomic process going on and the powers that be want to make changes to the, let's say, "status quo." Do NOT think of the market as anything more than a game built around probability. This is simpler said than done, but many traders, even when profitable, don't fully understand what it is that constitutes their "edge". It's going to take you a LONG time to master this game, and, unfortunately, the winners in the game benefit from you having a messed up mindset.
Read the NFA Forex Brochure: http://www.nfa.futures.org/investor/forex/forex.pdf Absolutely the first step for a beginner.
Technical analysis works on forex like everything else. However, I am not sure the people who wrote any of the books out there actually are profitable traders. Do they have a public track record? I use technical analysis to trade but not alot of indicators. You kind of need to see what works for you. There are very few people who trade for a living. Do you really think that they would give away all their secrets in a $ 30/book?
I read an e-book called Bird Watching in Lion Country by Dirk du Toit. Besides having an intriguing title, it is a good book. He advises NOT using high leverage (never more than 3:1,) which is the opposite of what the forex brokers encourage you to do. His strategy involves entering near a mean and holding, then adding to your position when things are going well and taking profits. There's a lot more to it than that, of course, but this is an excellent book for explaining how to deal with the forex and have at least a chance of not going broke. You have to use small position sizing or it won't work. It's a good book, and I recommend it.
I would suggest something like the Bible or the Koran because you are going to need a lot of faith learning Fx. My preference is for futures because at least the Exchange posts the bid/ask correctly and the rest is up to you. regards f9