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Book Review: Currency Trading For Dummies.

05/12/2011

I couldn’t help myself.  I was looking up some information I needed for a report I’m compiling and I turned to good old “Currency Trading For Dummies” for some background information.  Then I remembered how frustrating the book was to read and how little it actually prepared me to trade.  So, I just finished a review on Amazon.  I think the book decently describes a bunch of vague fundamental concepts.  It does not prepare the reader to use those concepts, and it sure doesn’t discuss technical enough for anyone to be profitable.  So take a read and see what you think.

Link to the Amazon review: 

First, I must say I am miffed by all the positive reviews regarding “Currency Trading For Dummies”. I first read this book about three years ago. I have also been successfully trading forex for over two years. And I assure you, this book deserves no credit for my trading success. So lets just say, I’m not some new guy reading this book thinking that I now know everything I need to know about trading. Anyone familiar with the Forex marketplace will know this book does not prepare the reader to enter the market. The book does a semi decent job defining the market, but that’s about it.

You can see this simply by looking at the table of contents. The book 200 pages discussing the market and only 100 pages discussing how to trade the market (Developing and Executing a trading plan) and only 22 pages in that section devoted to “Identifying Trading Opportunities”. It spends some time on basic technical analysis but not enough to be useful. Needless to say, this is 180 from how successful traders look at and trade the market on a daily basis. Just based on the content breakdown the book should be more aptly titled “The Forex Market For Dummies”

Lets look at each of those sections individually.

Successful traders trade primarily on a technical basis. We spend our time looking at charts, not watching CNBC, checking news reports. We study a lot of very not sexy stuff like moving averages and chart patterns etc. I imagine it’s important to have a basic understanding of the market dynamics, who the big players are, what reports are important, but past that “what” moves the market is far less important than taking advantage of movements in the market. This book does not teach you how to do that in a meaningful manner that you would be able to monetize.

If you want to trade “Fundamentally” you truly need to be smarter than the market. You need to anticipate not only the news, and the outcome, but also what the market has already precieved the outcome to be. Past that, after the event, you must anticipate how the market will react to better than or worse than expected news. That’s a lot of work. Successful traders may use this to flavor their trading style, but they will not use it to trade off of.

If you want to trade “Technically” you need to know that the market is moving. Then, you need to make entries and exits based on risk management and probability. Again, “why” it’s moving is not as important as “that” it’s moving. But where you enter and exit is critical.

Does the book go into market and trading psychology, identifying trading opportunities, identifying a successful trading strategy, risk management? only superficially. And before you say that’s beyond the scope of a “for dummies” book, Let me say that you teach someone to successfully trade in an afternoon. Trading isn’t about knowing what the estimated NFP will be and then reacting accordingly when the news invariable does not match up with expectations. Longevity in trading is about entries, exits, risk management, average return and average loss. It’s about developing a successful strategy and sticking with it. Gain (forex.com – and Dolan’s home company) no longer publishes results for their managed account program on their website. But as of last summer when they did, they were down pretty big for the year. Do you really want to learn to trade from that perspective. Gain makes their money on the spread, not on knowing how to trade.

One final note, as I mentioned above, the book does a semi decent job of discussing the market makers, market participants, market movers, and the market itself. (though, knowing what a hedge fund or bank is hardly prepares you to trade). But even in that it doesn’t do very well. Do a quick test. See if you can find the times that the market is active. When does it open, when does it close? Yes, of course I know it’s a 24 hr market and it opens with the Asian session Sunday afternoon New York time, and it closes with the New York Close Friday evening. So what? The book does not tell its readers what hour (or hours depending on your broker) the market opens. And it does not tell its readers what hour the market closes. When does London open? When does Europe open? When does Australia, New Zeland and Japan open? When does New York open (though for you American readers, hopefully you should know this.) And, when is the best time to trade these various markets? You would think basic information like this should be in a “for dummies” book.

In conclusion, if you would like a superficial taste of what trading is and what Forex is, this book is acceptable. It is not a book to learn “Forex Trading” however. If you would like one of those, try picking up Attacking Currency Trends, by Greg Michalowsk; Technical Analysis Explained by Martin J. Pring. “Emotion Free Trading” By Larry Levin. You may even try: Currency Trading and Intermarket Analysis: How to Profit from the Shifting Currents in Global Markets Analysis by Ashraf Laidi (again a bit of a misnomer because you will not learn how to trade (or profit from shirting currents) but you will gain a good overview of historical price movements and correlations in the market) Happy trading.

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2 Comments
  1. Zii permalink

    We said. Great article.

  2. Well written. Although I haven’t read this book, I totally understand your line of reasoning. imho too many books are written, programs sold, ea’s hawked, that do little more than get one’s hopes up. I believe your intention, with this review was to get at least some people thinking before whipping out the plastic.

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