Currency Trading for Dummies: Second Edition
By Brian Dolan
Wiley Publishing, Inc
$24.99, 342 pages
In “Currency Trading for Dummies”, Brian Dolan, a currency strategist and media commentator, seeks to shatter the myth that international currency trading is for hedge funds, global banks and multinational corporations and not for the private investor. The advent of modern technology, especially the Internet and fast communications, has given the individual investor/ trader unparalleled access to global financial markets, including forex.
I have heard people in bookstores dismiss the idea of buying a book marketed as “for Dummies” as if, in some way, such a title connotes an inferior intelligence or dumbs down the reader.
In fact, the “for Dummies” series attracts good authors; and Brian Dolan is no exception. As chief currency strategist at GAIN Capital Group and a 20-year veteran of the interbank currency market, Dolan knows of what he writes. He pens a primer on currency trading that is for every individual with the smarts and guts, and the right temperament, who wants to make money from trading international currencies.
Early in the book Dolan advises traders to examine their appetite for risk and settle upon a trading style even before they develop a trading plan. Dolan devotes much of Chapter 10 (Training and Preparing for Battle) to an explanation of trading styles, which he says boils down to a four pronged approach to currency trading: How long to hold a position?
Trading many currency pairs or just one or two? Fundamental analysis or technical analysis? How much are you prepared to risk and what expectations do you have for a return?
A prospective forex trader must create a good trading plan, says Dolan, without which they cannot expect to make money or enjoy the challenges and exhilaration of the currency markets.
Citing the Chinese military philosopher Sun Tzu who famously observed that every battle is won or lost before it is even fought, Dolan says, “I can think of no better analogy when it comes to trading financial markets in general or forex markets in particular.”
Dolan says in order to keep pace with a plethora of economic data and news, a trader needs to develop an efficient daily routine of market analysis, including monetary policy issues, understanding debts, deficits and growth and keeping an eye on geopolitical risks and events.
Chapter 11 (Cutting the Fog with Technical Analysis) defines technical analysis, identifies how to find support and resistance, use momentum correctly and efficiently and how to spot key chart patterns.
The book helps to identify trading opportunities and how to manage risk. Part IV explains how to execute a trading plan, manage a trade, close a position and assess the results.
Last, Part V (“The Part of Tens”) describes 10 habits of successful currency traders; identifies 10 beginner trading mistakes; lists 10 rules of risk management; and 10 great resources to use.
Typical of the ‘for Dummies’ series format, the book is peppered throughout with icons that either offer tricks of the trade (Tip), key takeaways (Remember), potential errors and misconceptions that cost you money or your sanity (Warning), and non-essential yet useful material (Technical Stuff).
Patrick Kelly is a freelance writer with a background in commodity market reporting.