Essentials of Foreign Exchange Trading

By Masonson, Leslie N. | Futures (Cedar Falls, IA), February 2010 | Go to article overview

Essentials of Foreign Exchange Trading


Masonson, Leslie N., Futures (Cedar Falls, IA)


Essentials of Foreign Exchange Trading

By James Chen

John Wiley & Sons, Inc.

$39.95; 221 pages

[ILLUSTRATION OMITTED]

Author James Chen states upfront that the contents of "Essentials of Foreign Exchange Trading" are not meant to be an exhaustive tome that covers all aspects of forex trading. He succeeded on that score, but he went too far to the other end of the pendulum by covering all topics very briefly without sufficient detail. The end result is a very basic book on FX trading suitable for novices with no knowledge or experience.

The book is written in a simple to read style. Chen writes clearly and his writing is easy to understand. Each chapter follows in a logical and organized fashion and the charts are large and easy to read. The book begins with a brief history and description of FX trading and covers the major players. The author then reviews the mechanics of FX trading by reviewing currency pairs, types of orders, margin calls, lot size, leverage, commissions, interest and hedging.

One chapter is devoted to technical analysis, which the author claims is a "comprehensive discussion of technical analysis as it is applied to foreign exchange trading." That claim is way off the mark. First, the discussion of over a dozen common technical indicators and basic chart patterns--candlesticks, point and-figure--cannot possibly be comprehensive in 50 pages. Second, there was only a mild tie-in to FX trading. The discussion could easily have been about trading equities and nothing would have been lost in translation regarding technical analysis. None of the chart examples showed real charts or any time frame. They just illustrated a particular point about a trend line or support or resistance or whatever was being discussed. Real charts over specific time frames with an explanation of the meaning of the indicators and patterns would have been much more educational in all respects.

The book also focuses on fundamental analysis, and the author spends many pages reviewing 13 basic key economic indicators of the U.S. dollar such as GDP (Gross Domestic Product), the employment situation summary, retail sales, Consumer Price Index and several more. However, there is no explanation of how the FX trader can use this information to become an astute trader. There also is a brief discussion of carry traders and global interest rates. …

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