Essentails of Foreign Exchange Trading

Preface xi
Acknowledgments xv
Chapter 1 Introduction to Foreign Exchange Trading 1
 Trading Money to Make Money 2
 Striking Gold 3
 Buying and Selling at Retail 4
 Big and Liquid, Like the Ocean 5
 Open 24/5 7
 Playing in the Majors 9
 Leveraged to the Hilt 12
 The Players 13
 What Moves the Forex Markets? 15
 What to Expect from This Book 17
 Chapter Summary 19
Chapter 2 Basic Foreign Exchange Trading Mechanics 21
 Anatomy of a Currency Pair 22
 Going Long and Selling Short 24
 Market Orders—On the Spot 27
 Entry Orders—Waiting until the Price Is Right 27
 Stopping Losses with Stop Losses and Trailing Stops 28
 Profit Limits—When You’re in the Money 31
 Exit with Caution 31
 Trade Size—Lots and Lots of Lots 32
 Leveraging Margin and Leverage 33
 Margin Call—Insufficient Funds 34
 Pips—The Currency of Currency Trading 37
 Spreading the Wealth—Spreads or Commissions? 39
 Interest—Giving and Receiving 41
 Hedging—Two Sides of the Same Coin 44
 Chapter Summary 45
Chapter 3 Technical Analysis—Tools for Trading Foreign Exchange 49
 Introduction to Technical Analysis—
 Interpreting Price Action 50
 Basics of Bars and Candlesticks 52
 Keeping Time with Chart Timeframes 57
 Support for Resistance (and Support) 59
 The Trend Will Set You Free 64
 How Trendy—Lines and Channels 67
 The Magic of Moving Averages 72
 Seeing Patterns in the Candles 78
 Currency Charts Take Shape 82
 Indicators of Change 88
 Pointing the Way with Pivot Points 95
 Fibonacci’s Magic Numbers 96
 Riding the Elliott Wave 98
 Getting to the Point & Figure 99
 Chapter Summary 100
Chapter 4 Fundamental Analysis—What Drives the
 Foreign Exchange Markets 103
 Introduction to Fundamental Analysis—Basic Economics 104
 A Healthy Interest in Global Bank Rates 105
 Carried Away with Trading 108
 Indication of Things to Come—Economic Indicators 110
 No News Is Bad News for News Traders 121
 Chapter Summary 124
Chapter 5 Foreign Exchange Trading Methods and Strategies 127
 Rules to Trade By 128
 Position Trading—Settling in for the Long Term 130
 Swing Trading—Riding the Waves 134
 Day Trading—In and Out, Day In and Day Out 137
 Trend Trading—Going with the Flow 140
 Range Trading—Between a Rock and a Hard Place 147
 Breakout Trading (and Fading)—Shooting for the Stars 150
 Pattern Trading—Playing with Shapes 158
 Fibonacci and Pivot Point Trading—Magic Numbers and
 Self-Fulfilling Prophecies 161
 Elliott Wave Trading—Two Steps Forward, One Step Back 166
 Divergence Trading—Separate Paths 170
 Multiple Timeframe Trading—Timing Is Everything 172
 Point & Figure Trading—Pointing Out Breakouts 175
 Carry Trading—In the Interest of Interest 179
 News Trading—All the News That’s Fit to Profit From 183
 Contrarian Trading—The Majority Doesn’t Rule 184
 Backtesting—History Repeats Itself 187
 Autotrading—Robots for Hire 190
 Chapter Summary 192
Chapter 6 Important Elements of Successful Foreign
 Exchange Trading 195
 The Boring Side of Success 196
 A Risky Business 196
 Fatter Is Healthier (But Only for Trading Accounts) 197
 Risk and Reward 198
 Fix Your Fractions 200
 Trailing Stops—Loyal Followers 201
 Size Matters 202
 Position Overload 205
 Measuring Risk with a Trendline 208
 Great Expectations 209
 Psychologically Speaking 210
 Plan the Trade and Trade the Plan 214
 Chapter Summary 216
Index 219