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Learn Foreign Exchange Trading The Right Way

In my recent article I outlined the ways a home-based entrepreneur might go into the Foreign Exchange (Forex) business as a private trader much like a day trader in the stock market. In that article, I discussed several online trading platforms with small deposits required. All of these offer a way for the beginner to use a demo program indefinitely to learn how to make trades. What is missing from these excellent demos is the underlying theory of what you are trying to accomplish as a Forex trader, and I wanted to provide you with resources that can help in this area.

You may say you are interested in Forex as a way to make possibly serious amounts of money. That is certainly true. But there are many ideas about how this largest financial market in the world really operates. Currency fluctuations depend on so many factors—like government stability, international economic conditions, and just simple consumer psychology—that a serious trader must have a good foundation in how all of this information might affect the price of currencies they are trading. A very good way an entrepreneur can acquire this training is through studying some of the books available on the subject. Here are some of the best; you should study many of them to improve your chances of succeeding as a Forex trader:

Trading for a Living: Psychology, Trading Tactics, Money Management, by Alexander Elder and published by Wiley, 1993. The book is available from Amazon for $47.25 where it ranks number 2,728 in sales. Subjects covered include: “Psychology, The Key To Trading; The Odds Against You; What Is The Market?; Psychology of Trends; Managing vs. Forecasting; Classical Chart Analysis; Computerized Technical Analysis; Herrick Payoff Index, Stock Market Indicators, Consensus Indicators, Force Index, Trading Systems, and Risk Management.” The author is a practicing psychiatrist and has integrated the mental aspects of trading with current technology; 170 reader reviews give it an average of four and one-half stars.

High Probability Trading, by Marcel Link, published by McGraw-Hill, 2003. Amazon sells it for $25.17 and its sales rank is 4,576. The book discusses setting realistic goals, using the news, increasing chances with multiple time frames, trading with the trend, trading plan, system trading, employing a money management plan, discipline, the key to success, and dangers of overtrading; 70 readers rated this book with an average of four and one-half stars. The author is a trader himself.

Day Trading the Currency Market: Technical and Fundamental Strategies To Profit from Market Swings, by Kathy Lien, is published by Wiley in 2005. You can buy this book from Amazon for $42.00, the sales rank is 5,277; 34 readers rate the book with four stars. Kathy Lien could be an excellent author for a home based trader because she spells out the basics of day trading. For more technical information you need to read some other books. Kathy is chief strategist for the largest online currency trader in the world.

Japanese Candlestick Charting Techniques, Second Edition, by Steve Nison, is published by Prentice Hall Press, 2nd edition, 2001. You can buy it from Amazon for $63.00 where its sales rank is 5,685. It teaches this increasingly popular technique for market analysis (including foreign exchange trading) so called because chart lines resemble candlesticks. Ideas discussed are background of candlestick charting, drawing candle lines, reversal patterns, stars, Harami Pattern, continuation patterns, Magic Doji, trend lines, moving averages, candles with oscillators, candles with volume, measured moves, the best of East and West, and candlestick terms; 64 readers give it a four and one-half star rating. The author has many years personal experience using this technique.

Beat the Odds in Forex Trading: How to Identify and Profit from High Percentage Market Patterns, written by I. R. Toshchakov, is published by Wiley, 2006. Buy it from Amazon for $37.80 where it ranks number 6,024 in sales. This book tells you about how to start, how to develop a trading method, the Igrok Method, trading strategies using the Igrok Method, trading templates, and a sample trade. The book has received a four-star rating by 18 readers. The author is a personal trader and experienced Forex trainer ranked by some in the same level as George Soros. This should definitely be in the home based trader’s library.

Forex Conquered: High Probability Systems and Strategies for Active Traders, a book by John L. Person and published by Wiley, 2007. Amazon sells it for $56.70 and it ranks 8,022 in sales number. The author discusses successful trading rules, trade management, when to increase lot size, how to manage risk, how to use automated trading programs, "black box" Forex system, pivot points, candle charts, Fibonacci, stochastics, money management, and game psychology.

There is also a CD with practice trades and various calculators. This book has been published for only about two weeks at this writing and there is no reader rating. The author is president of a currency advisory service as well as a capital management firm. In 1998 he developed his own proprietary trading system. The book covers a wider range of subjects than some other trading books.

The 10 Essentials of Forex Trading, by Jared Martinez, is published by McGraw-Hill, 2007. Its sales rank is 8,756 and you can buy it from Amazon for $23.07. The book shows you how to understand trading patterns and turn them into profit, no matter what your investment level, discusses the Kings Crown method, shows 10 essential keys for succeeding in the Forex market, charting methods, and insights so you can begin trading currencies immediately. This is a new book, but four readers have given it a five star rating. The author is founder of Market Traders Institute, a leader in Forex training.

Getting Started in Currency Trading: Winning in Today’s Hottest Marketplace, by Michael Duane Archer and James Lauren Bickford. The publisher is Wiley, 2005. Its sales rank is 10,069 and you can buy it from Amazon for $12.57. As the title says, this book introduces Forex to the new trader and remains a reference in the future. It introduces many of the useful strategies used by successful traders; 27 readers rate the book at four stars. This is another book a new trader should own.

Candlestick and Pivot Point Trading Triggers + CD-ROM: Setups for Stock, Forex, and Futures Markets, by John L. Person, is published by Wiley, 2006. Sales rank for this book is 10,268 and Amazon sells it for $50.40. The author shows you how to devise your own setups and triggers based on a moving average approach, examines pivot point analysis, how to read candlestick charts, how to find certain setups, explains what triggers a call to trading action, walks you through the various types of stop orders, discusses some proprietary setups like the high close doji, the low close doji, and the jack hammer pattern. The book includes a CD-ROM containing Person's own Pivot Point Calculator and an instructional presentation on how to use it. This book contains a lot of strategic methods the author himself has used through many years as a successful trader. It’s the kind of book a trader should have. The book was published in late 2006, so there are only seven reader reviews giving it a five and one-half star rating.

Trading and Exchanges: Market Microstructure for Practitioners, by Larry Harris is published by Oxford University Press, USA, 2002. This book is for sale from Amazon for $95.00 and has a sales rank of 19,230. The table of contents explains what this book covers. There are sections on the industry organization, benefits of trading, speculators, liquidity and volatility, prediction, and different markets within the industry. A four and one-half star rating has been given to this book by readers. The author has written an entertaining book that explains in detail every aspect of Foreign Exchange trading. It is like the cornerstone of your trading library—a very important work. It’s a really big book.

Any discussion of how to succeed in Foreign Exchange Trading would be incomplete without reference to one of the great traders of all time.

George Soros, born in Hungary, now an American citizen, has made all of his money by financial investment including in the foreign exchange markets. In fact, he is known worldwide as perhaps the foremost currency trader ever, having once actually caused the Bank of England to lose tremendous amounts of money. His success results from the ability to step away from a market situation long before it turns sour. He loses no money this way. In many ways, Mr. Soros is a wonderful role model for beginning entrepreneurs.

Everything I ever read about why entrepreneurs succeed includes something about their being in business not entirely for the wealth but equally for the good they may be able to do. Soros uses his $8 billion U.S. to finance many charities, a lot of them on the African Continent and many others that try to help newly freed countries achieve their economic objectives. He is also a hardnosed political activist whose views everyone may not appreciate. Nevertheless, his investment acumen is something all traders should emulate.

These are all important books and a serious trader should have as many as they can afford. No book is listed with a sales rank greater than 20,000 (except the Soros-Buffett book) which means they are all rather popular. Get as many as you can from Amazon , Barnes & Noble, or another seller, and GO FOR IT IN FOREX!