Currency Trading For Dummies, 3rd Edition

Book description

Your plain-English guide to currency trading

Currency Trading For Dummies is a hands-on, user-friendly guide that explains how the foreign exchange (ForEx) market works and how you can become a part of it. Currency trading has many benefits, but it also has fast-changing financial-trading avenues. ForEx markets are always moving. So how do you keep up? With this new edition of Currency Trading For Dummies, you'll get the expert guidance you've come to know and expect from the trusted For Dummies brand—now updated with the latest information on the topic.

Inside, you'll find an easy-to-follow introduction to the global/ForEx market that explains its size, scope, and players; a look at the major economic drivers that influence currency values; and the lowdown on how to interpret data and events like a pro. Plus, you'll discover different types of trading styles and make a concrete strategy and game plan before you act on anything.

  • Covers currency trading conventions and tools
  • Provides an insider's look at key characteristics of successful currency traders
  • Explains why it's important to be organized and prepared
  • Offers guidance on trading pitfalls to avoid and risk management rules to live by

Whether you're just getting started out in the foreign exchange market or an experienced trader looking to diversify your portfolio, Currency Trading For Dummies sets you up for trading success.

Table of contents

    1. Introduction
      1. About This Book
      2. Foolish Assumptions
      3. Icons Used in This Book
      4. Beyond the Book
      5. Where to Go from Here
    2. Part I: Getting Started with Currency Trading
      1. Chapter 1: Currency Trading 101
        1. What Is Currency Trading?
          1. Speculating as an enterprise
          2. Currencies as the trading vehicle
        2. What Affects Currency Rates?
          1. Fundamentals drive the currency market
          2. Unless it’s the technicals that are driving the currency market
          3. Or it may be something else
        3. Developing a Trading Plan
          1. Finding your trading style
          2. Planning the trade
        4. Executing the Trading Plan from Start to Finish
      2. Chapter 2: What Is the Forex Market?
        1. Getting Inside the Numbers
          1. Trading for spot
          2. Speculating in the currency market
          3. Getting liquid without getting soaked
        2. Around the World in a Trading Day
          1. The opening of the trading week
          2. Trading in the Asia-Pacific session
          3. Trading in the European/London session
          4. Trading in the North American session
          5. Key daily times and events
          6. The U.S. dollar index
        3. Currencies and Other Financial Markets
          1. Gold
          2. Oil
          3. Stocks
          4. Bonds
        4. Getting Started with a Practice Account
      3. Chapter 3: Who Trades Currencies? Meet the Players
        1. The Interbank Market Is “The Market”
          1. Getting inside the interbank market
          2. Bank to bank and beyond
        2. Hedgers and Financial Investors
          1. Hedging your bets
          2. Global investment flows
        3. Speculators
          1. Hedge funds
          2. Day traders, big and small
        4. Governments and Central Banks
          1. Currency reserve management
          2. The Bank for International Settlements
          3. The Group of Twenty
      4. Chapter 4: The Mechanics of Currency Trading
        1. Buying and Selling Simultaneously
          1. Currencies come in pairs
          2. The long and the short of it
        2. Profit and Loss
          1. Margin balances and liquidations
          2. Unrealized and realized profit and loss
          3. Calculating profit and loss with pips
          4. Factoring profit and loss into margin calculations
        3. Understanding Rollovers and Interest Rates
          1. Currency is money, after all
          2. Value dates and trade settlement
          3. Market holidays and value dates
          4. Applying rollovers
        4. Understanding Currency Prices
          1. Bids and offers
          2. Spreads
        5. Executing a Trade
          1. Trading online
          2. Orders
    3. Part II: Driving Forces behind Currencies
      1. Chapter 5: Looking at the Big Picture
        1. Currencies and Interest Rates
          1. The future is now: Interest rate expectations
          2. Relative interest rates
        2. Monetary Policy 101
          1. Looking at benchmark interest rates
          2. Easy money, tight money
          3. Unconventional easing
          4. Watching the central bankers
          5. Interpreting monetary policy communications
        3. Official Currency Policies and Rhetoric
          1. Currency policy or currency stance?
          2. Calling the shots on currencies
          3. Taking a closer look at currency market intervention
          4. Financial stability
          5. Debts, deficits, and growth
          6. Gauging credit risk
        4. Geopolitical Risks and Events
          1. Gauging risk sentiment
          2. Risk on or risk off?
      2. Chapter 6: Understanding and Applying Market News and Information
        1. Sourcing Market Information
          1. The art of boarding a moving train
          2. Taking the pulse of the market
          3. Rumors: Where there’s smoke, there’s fire
        2. Putting Market Information into Perspective: Focusing on Themes
          1. Driving fundamental themes
          2. Analyzing technical themes
        3. Reality Check: Expectations versus Actual
          1. The role of consensus expectations
          2. Pricing in and pricing out forecasts
          3. When good expectations go bad
          4. Anticipating alternative outcome scenarios
      3. Chapter 7: Getting Down and Dirty with Fundamental Data
        1. Finding the Data
        2. Economics 101 for Currency Traders: Making Sense of Economic Data
          1. The labor market
          2. The consumer
          3. The business sector
          4. The structural
        3. Assessing Economic Data Reports from a Trading Perspective
          1. Understanding and revising data history
          2. Getting to the core
        4. Market-Moving Economic Data Reports from the United States
          1. Labor-market reports
          2. Consumer-level data reports
          3. Business-level data reports
          4. Structural data reports
        5. Major International Data Reports
          1. Eurozone
          2. Japan
          3. United Kingdom
          4. Canada
          5. Australia
          6. New Zealand
          7. China
      4. Chapter 8: Getting to Know the Major Currency Pairs
        1. The Big Dollar: EUR/USD
          1. Trading fundamentals of EUR/USD
          2. Trading behavior of EUR/USD
          3. Tactical trading considerations in EUR/USD
        2. East Meets West: USD/JPY
          1. Trading fundamentals of USD/JPY
          2. Price action behavior of USD/JPY
          3. Tactical trading considerations in USD/JPY
        3. The Other Majors: Sterling and Aussie
          1. The British pound: GBP/USD
          2. The new kid in town: Trading the Aussie
        4. Understanding Forex Positioning Data
          1. How to interpret the data
          2. The FX fix
          3. Forex and regulation
      5. Chapter 9: Minor Currency Pairs and Cross-Currency Trading
        1. Trading the Minor Pairs
          1. Trading fundamentals of USD/CAD
          2. Trading fundamentals of NZD/USD
          3. Tactical trading considerations in USD/CAD, AUD/USD, and NZD/USD
        2. Trading the Scandies: SEK, NOK, and DKK
          1. Swedish krona — “Stocky”
          2. Norwegian krone — “Nokkie”
          3. Danish krone — “Copey”
        3. Cross-Currency Pairs
          1. Why trade the crosses?
          2. Stretching the legs
          3. Trading the JPY crosses
          4. Trading the EUR crosses
    4. Part III: Developing a Trading Plan
      1. Chapter 10: Training and Preparing for Battle
        1. Finding the Right Trading Style for You
          1. Real-world and lifestyle considerations
          2. Making time for market analysis
          3. Technical versus fundamental analysis
        2. Different Strokes for Different Folks
          1. Short-term, high-frequency day trading
          2. Medium-term directional trading
          3. Long-term macroeconomic trading
        3. Trading on Auto-Pilot
          1. Potential inputs to drive an EA system
          2. Caveat emptor on models
          3. Using social media for trading: The power of the crowd
        4. Developing Trading Discipline
          1. Taking the emotion out of trading
          2. Managing your expectations
          3. Keeping your ammunition dry
      2. Chapter 11: Cutting the Fog with Technical Analysis
        1. The Philosophy of Technical Analysis
          1. What is technical analysis?
          2. What technical analysis is not
          3. Forms of technical analysis
          4. Finding support and resistance
          5. Waiting for confirmation
        2. The Art of Technical Analysis
          1. Bar charts and candlestick charts
          2. Drawing trend lines
          3. Recognizing chart formations
          4. Fibonacci retracements
        3. The Science of Technical Analysis
          1. Momentum oscillators and studies
          2. Trend-identifying indicators
          3. Trading with clouds — Ichimoku charts
      3. Chapter 12: Identifying Trade Opportunities
        1. Developing a Routine for Market Analysis
        2. Performing Multiple-Time-Frame Technical Analysis
        3. Identifying Support and Resistance Levels
          1. Trend lines
          2. Highs and lows
          3. Congestion zones
          4. Fibonacci retracements
          5. Ichimoku levels
        4. Looking for Symmetry with Channels
          1. Drawing price channels
        5. Listening to Momentum
          1. Factoring momentum analysis into your routine
          2. Looking at momentum in multiple time frames
          3. Trading on divergences between price and momentum
          4. Using momentum for timing entry and exit
        6. Trading on Candlestick Patterns
        7. Building a Trade Strategy from Start to Finish
      4. Chapter 13: Risk-Management Considerations
        1. Managing Risk Is More Than Avoiding Losses
          1. Leverage amplifies gains and losses — and expectations
          2. Knowing your margin requirements
          3. Market liquidity, volatility, and gap risk
          4. We have a winner here! Protecting your profits
          5. Placing your orders effectively
        2. Applying Risk Management to the Trade
          1. Analyzing the trade setup to determine position size
          2. Doing the math to put the risk in cash terms
          3. Devising the trading plan in terms of risk
        3. Choosing Your Trading Broker
          1. Different business models of brokers
          2. Financial risks of brokers
        4. Technology Issues and Contingency Planning
    5. Part IV: Executing a Trading Plan
      1. Chapter 14: Pulling the Trigger
        1. Getting into the Position
          1. Buying and selling at the current market
          2. Averaging into a position
          3. Trading breakouts
        2. Making the Trade Correctly
          1. Buying and selling online
          2. Placing your orders
      2. Chapter 15: Managing the Trade
        1. Monitoring the Market while Your Trade Is Active
          1. Following the market with rate alerts
          2. Staying alert for news and data developments
          3. Keeping an eye on other financial markets
        2. Updating Your Trade Plan as Time Marches On
          1. Trend lines move over time
          2. Impending events may require trade plan adjustments
        3. Updating Order Levels as Prices Progress
          1. Increasing take-profit targets
          2. Tightening stop-loss orders to protect profits
      3. Chapter 16: Closing the Position and Evaluating Your Results
        1. Closing Out the Trade
          1. Taking profit and stopping out
          2. Setting it and forgetting it: Letting the market trigger your order
          3. Squaring up after events have happened
          4. Exiting at the right time
          5. Getting out when the price is right
        2. Assessing Your Trading Strategy
          1. Identifying what you did right and wrong
          2. Updating your trading record
    6. Part V: The Part of Tens
      1. Chapter 17: Ten Habits of Successful Currency Traders
        1. Trading with a Plan
        2. Anticipating Event Outcomes
        3. Staying Flexible
        4. Being Prepared for Trading
        5. Keeping Technically Alert
        6. Going with the Flow/Trading the Range
        7. Focusing on a Few Pairs
        8. Protecting Profits
        9. Trading with Stop Losses
        10. Watching Other Markets
      2. Chapter 18: Ten Rules of Risk Management
        1. Trade with Stop-Loss Orders
        2. Leverage to a Minimum
        3. Trade with a Plan
        4. Stay on Top of the Market
        5. Trade with an Edge
        6. Step Back from the Market
        7. Take Profit Regularly
        8. Understand Currency-Pair Selection
        9. Double-Check for Accuracy
        10. Take Money out of Your Trading Account
      3. Chapter 19: Ten Great Resources
        1. Technical Analysis of the Financial Markets
        2. Japanese Candlestick Charting Techniques
        3. Elliott Wave Principle
        4. Technical Analysis For Dummies
        5. The Book of Five Rings
        6. Market Wizards: Interviews with Top Traders
        7. Come into My Trading Room
        8. Zero Hedge
        10. Forex Factory
    7. Appendix: Trading Strategies
      1. What’s Your Sign? Determining Your Trader Type
      2. Looking at Trading Strategies Based on Trader Type
        1. Strategies for the scalper
        2. Strategies for the swing trader
        3. Strategies for the position trader
    8. About the Authors
    9. Cheat Sheet
    10. More Dummies Products

Product information

  • Title: Currency Trading For Dummies, 3rd Edition
  • Author(s): Kathleen Brooks, Brian Dolan
  • Release date: February 2015
  • Publisher(s): For Dummies
  • ISBN: 9781118989807