Currency Trading For Dummies E-Book

Kathleen Brooks

• Herausgeber: John Wiley & Sons
• Kategorie: Ratgeber
• Sprache: Englisch

Seitenzahl: 655

Veröffentlichungsjahr: 2015

Beschreibung

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.

Leseprobe

Currency Trading For Dummies®, 3rd Edition

Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com

Copyright © 2015 by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Trademarks: Wiley, For Dummies, the Dummies Man logo, Dummies.com, Making Everything Easier, and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc., and may not be used without written permission. All other trademarks are the property of their respective owners. John Wiley & Sons, Inc., is not associated with any product or vendor mentioned in this book.

LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: WHILE THE PUBLISHER AND AUTHOR HAVE USED THEIR BEST EFFORTS IN PREPARING THIS BOOK, THEY MAKE NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE CONTENTS OF THIS BOOK AND SPECIFICALLY DISCLAIM ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NO WARRANTY MAY BE CREATED OR EXTENDED BY SALES REPRESENTATIVES OR WRITTEN SALES MATERIALS. THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR YOUR SITUATION. YOU SHOULD CONSULT WITH A PROFESSIONAL WHERE APPROPRIATE. NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM.

For general information on our other products and services, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax [phone]. For technical support, please visit www.wiley.com/techsupport.

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

Library of Congress Control Number: 2014950596

ISBN 978-1-118-98980-7 (pbk); ISBN 978-1-118-98981-4 (ebk); ISBN 978-1-118-98983-8 (ebk)

Manufactured in the United States of America

10 9 8 7 6 5 4 3 2 1

Currency Trading For Dummies®, 3rd Edition

Visit www.dummies.com/cheatsheet/currencytrading to view this book's cheat sheet.

Table of Contents

Introduction

About This Book

Foolish Assumptions

Icons Used in This Book

Beyond the Book

Where to Go from Here

Part I: Getting Started with Currency Trading

Chapter 1: Currency Trading 101

What Is Currency Trading?

Speculating as an enterprise

Currencies as the trading vehicle

What Affects Currency Rates?

Fundamentals drive the currency market

Unless it’s the technicals that are driving the currency market

Or it may be something else

Developing a Trading Plan

Finding your trading style

Planning the trade

Executing the Trading Plan from Start to Finish

Chapter 2: What Is the Forex Market?

Getting Inside the Numbers

Trading for spot

Speculating in the currency market

Getting liquid without getting soaked

Around the World in a Trading Day

The opening of the trading week

Trading in the Asia-Pacific session

Trading in the European/London session

Trading in the North American session

Key daily times and events

The U.S. dollar index

Currencies and Other Financial Markets

Gold

Oil

Stocks

Bonds

Getting Started with a Practice Account

Chapter 3: Who Trades Currencies? Meet the Players

The Interbank Market Is “The Market”

Getting inside the interbank market

Bank to bank and beyond

Hedgers and Financial Investors

Hedging your bets

Global investment flows

Speculators

Hedge funds

Day traders, big and small

Governments and Central Banks

Currency reserve management

The Bank for International Settlements

The Group of Twenty

Chapter 4: The Mechanics of Currency Trading

Buying and Selling Simultaneously

Currencies come in pairs

The long and the short of it

Profit and Loss

Margin balances and liquidations

Unrealized and realized profit and loss

Calculating profit and loss with pips

Factoring profit and loss into margin calculations

Understanding Rollovers and Interest Rates

Currency is money, after all

Value dates and trade settlement

Market holidays and value dates

Applying rollovers

Understanding Currency Prices

Bids and offers

Spreads

Executing a Trade

Trading online

Orders

Part II: Driving Forces behind Currencies

Chapter 5: Looking at the Big Picture

Currencies and Interest Rates

The future is now: Interest rate expectations

Relative interest rates

Monetary Policy 101

Looking at benchmark interest rates

Easy money, tight money

Unconventional easing

Watching the central bankers

Interpreting monetary policy communications

Official Currency Policies and Rhetoric

Currency policy or currency stance?

Calling the shots on currencies

Taking a closer look at currency market intervention

Financial stability

Debts, deficits, and growth

Gauging credit risk

Geopolitical Risks and Events

Gauging risk sentiment

Risk on or risk off?

Chapter 6: Understanding and Applying Market News and Information

Sourcing Market Information

The art of boarding a moving train

Taking the pulse of the market

Rumors: Where there’s smoke, there’s fire

Putting Market Information into Perspective: Focusing on Themes

Driving fundamental themes

Analyzing technical themes

Reality Check: Expectations versus Actual

The role of consensus expectations

Pricing in and pricing out forecasts

When good expectations go bad

Anticipating alternative outcome scenarios

Chapter 7: Getting Down and Dirty with Fundamental Data

Finding the Data

Economics 101 for Currency Traders: Making Sense of Economic Data

The labor market

The consumer

The business sector

The structural

Assessing Economic Data Reports from a Trading Perspective

Understanding and revising data history

Getting to the core

Market-Moving Economic Data Reports from the United States

Labor-market reports

Consumer-level data reports

Business-level data reports

Structural data reports

Major International Data Reports

Eurozone

Japan

United Kingdom

Canada

Australia

New Zealand

China

Chapter 8: Getting to Know the Major Currency Pairs

The Big Dollar: EUR/USD

Trading fundamentals of EUR/USD

Trading behavior of EUR/USD

Tactical trading considerations in EUR/USD

East Meets West: USD/JPY

Trading fundamentals of USD/JPY

Price action behavior of USD/JPY

Tactical trading considerations in USD/JPY

The Other Majors: Sterling and Aussie

The British pound: GBP/USD

The new kid in town: Trading the Aussie

Understanding Forex Positioning Data

How to interpret the data

The FX fix

Forex and regulation

Chapter 9: Minor Currency Pairs and Cross-Currency Trading

Trading the Minor Pairs

Trading fundamentals of USD/CAD

Trading fundamentals of NZD/USD

Tactical trading considerations in USD/CAD, AUD/USD, and NZD/USD

Trading the Scandies: SEK, NOK, and DKK

Swedish krona — “Stocky”

Norwegian krone — “Nokkie”

Danish krone — “Copey”

Cross-Currency Pairs

Why trade the crosses?

Stretching the legs

Trading the JPY crosses

Trading the EUR crosses

Part III: Developing a Trading Plan

Chapter 10: Training and Preparing for Battle

Finding the Right Trading Style for You

Real-world and lifestyle considerations

Making time for market analysis

Technical versus fundamental analysis

Different Strokes for Different Folks

Short-term, high-frequency day trading

Medium-term directional trading

Long-term macroeconomic trading

Trading on Auto-Pilot

Potential inputs to drive an EA system

Caveat emptor on models

Using social media for trading: The power of the crowd

Developing Trading Discipline

Taking the emotion out of trading

Managing your expectations

Keeping your ammunition dry

Chapter 11: Cutting the Fog with Technical Analysis

The Philosophy of Technical Analysis

What is technical analysis?

What technical analysis is not

Forms of technical analysis

Finding support and resistance

Waiting for confirmation

The Art of Technical Analysis

Bar charts and candlestick charts

Drawing trend lines

Recognizing chart formations

Fibonacci retracements

The Science of Technical Analysis

Momentum oscillators and studies

Trend-identifying indicators

Trading with clouds — Ichimoku charts

Chapter 12: Identifying Trade Opportunities

Developing a Routine for Market Analysis

Performing Multiple-Time-Frame Technical Analysis

Identifying Support and Resistance Levels

Trend lines

Highs and lows

Congestion zones

Fibonacci retracements

Ichimoku levels

Looking for Symmetry with Channels

Drawing price channels

Listening to Momentum

Factoring momentum analysis into your routine

Looking at momentum in multiple time frames

Trading on divergences between price and momentum

Using momentum for timing entry and exit

Trading on Candlestick Patterns

Building a Trade Strategy from Start to Finish

Chapter 13: Risk-Management Considerations

Managing Risk Is More Than Avoiding Losses

Leverage amplifies gains and losses — and expectations

Knowing your margin requirements

Market liquidity, volatility, and gap risk

We have a winner here! Protecting your profits

Placing your orders effectively

Applying Risk Management to the Trade

Analyzing the trade setup to determine position size

Doing the math to put the risk in cash terms

Devising the trading plan in terms of risk

Choosing Your Trading Broker

Different business models of brokers

Financial risks of brokers

Technology Issues and Contingency Planning

Part IV: Executing a Trading Plan

Chapter 14: Pulling the Trigger

Getting into the Position

Buying and selling at the current market

Averaging into a position

Trading breakouts

Making the Trade Correctly

Buying and selling online

Placing your orders

Chapter 15: Managing the Trade

Monitoring the Market while Your Trade Is Active

Following the market with rate alerts

Staying alert for news and data developments

Keeping an eye on other financial markets

Updating Your Trade Plan as Time Marches On

Trend lines move over time

Impending events may require trade plan adjustments

Updating Order Levels as Prices Progress

Increasing take-profit targets

Tightening stop-loss orders to protect profits

Chapter 16: Closing the Position and Evaluating Your Results

Closing Out the Trade

Taking profit and stopping out

Setting it and forgetting it: Letting the market trigger your order

Squaring up after events have happened

Exiting at the right time

Getting out when the price is right

Assessing Your Trading Strategy

Identifying what you did right and wrong

Updating your trading record

Part V: The Part of Tens

Chapter 17: Ten Habits of Successful Currency Traders

Trading with a Plan

Anticipating Event Outcomes

Staying Flexible

Being Prepared for Trading

Keeping Technically Alert

Going with the Flow/Trading the Range

Focusing on a Few Pairs

Protecting Profits

Trading with Stop Losses

Watching Other Markets

Chapter 18: Ten Rules of Risk Management

Trade with Stop-Loss Orders

Leverage to a Minimum

Trade with a Plan

Stay on Top of the Market

Trade with an Edge

Step Back from the Market

Take Profit Regularly

Understand Currency-Pair Selection

Double-Check for Accuracy

Take Money out of Your Trading Account

Chapter 19: Ten Great Resources

Technical Analysis of the Financial Markets

Japanese Candlestick Charting Techniques

Elliott Wave Principle

Technical Analysis For Dummies

The Book of Five Rings

Market Wizards: Interviews with Top Traders

Come into My Trading Room

Zero Hedge

BabyPips.com

Forex Factory

Appendix: Trading Strategies

What’s Your Sign? Determining Your Trader Type

Looking at Trading Strategies Based on Trader Type

Strategies for the scalper

Strategies for the swing trader

Strategies for the position trader

About the Authors

Cheat Sheet

More Dummies Products

Guide

Table of Contents

Begin Reading

Pages

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

99

100

101

102

103

104

105

106

107

108

109

110

111

112

113

114

115

116

117

118

119

120

121

122

123

124

125

126

127

128

129

130

131

132

133

134

135

136

137

139

140

141

142

143

144

145

146

147

148

149

150

151

152

153

154

155

156

157

158

159

160

161

163

164

165

166

167

168

169

170

171

172

173

174

175

176

177

179

180

181

182

183

184

185

186

187

188

189

190

191

192

193

194

195

196

197

198

199

201

202

203

204

205

206

207

208

209

210

211

212

213

214

215

216

217

218

219

220

221

222

223

224

225

226

227

228

229

230

231

232

233

234

235

236

237

238

239

240

241

242

243

244

245

246

247

248

249

250

251

252

253

254

255

256

257

258

259

260

261

262

263

264

265

266

267

268

269

270

271

272

273

274

275

276

277

278

279

280

281

282

283

284

285

286

287

288

289

290

291

292

293

295

296

297

298

299

300

301

302

303

304

305

306

307

308

309

310

311

313

314

315

316

317

318

319

320

321

322

323

324

325

326

327

328

329

330

331

332

333

334

335

336

337

338

339

340

341

342

361

362

363

364

Introduction

Today, millions of individual traders and investors all over the world are discovering the excitement and challenges of trading in the forex market. You don’t even have to be at your desk to trade — these days, you can trade on the go using a smartphone or other handheld device.

No question about it, the forex market can be one of the fastest and most volatile financial markets to trade. Money can be made or lost in a matter of seconds or minutes. At the same time, currencies can display significant trends lasting several days to weeks and even years. Most important, forex markets are always moving, providing an accessible and target-rich trading environment.

In contrast to stock markets, which are more familiar and relatively intuitive to most investors, the forex market somehow remains more elusive and seemingly complicated to newcomers.

In this book, we show you how the forex market really works, what moves it, and how you can actively trade it. We also provide you with the tools you need to develop a structured game plan for trading in the forex market without losing your shirt. We cover the following:

Getting a handle on the forces that drive currency movementsUnderstanding forex market trading conventions and strategiesInterpreting economic data and official statementsFinding sources of data and market intelligenceGauging market psychology, sentiment, and positioningIdentifying key traits of individual currency pairsUtilizing technical analysis to spot trade opportunitiesDeveloping a regimented and disciplined approach to trading currenciesFocusing on risk management to minimize losses and keep more of your gains

About This Book

If you’re an active trader looking for alternatives to trading stocks or futures, the forex market is hard to beat due to its sheer size (more than $5 trillion turnover per day at last count) and the depth of the market.

But as an individual trader, gaining access to the forex market is only the beginning. Just because you’ve got the keys to a Formula One race car doesn’t mean you’re ready to compete in a Grand Prix. First, you have to understand how the car works. Then you have to figure out some of the tactics and strategies the pros use. And then you have to get behind the wheel and practice, developing your skills, instincts, and tactics as you go.

To succeed in the forex market, you’ll have to do the same. This book gives you the no-nonsense information you need, with the perspective, experience, and insight of two forex market veterans.

Whether you’re an experienced trader in other markets looking to expand into currencies, or a total newcomer to trading looking to start out in currencies, this book has what you need. Best of all, it’s presented in the easy-to-use For Dummies format. Divided into easy-to-follow parts, this book can serve as both your reference and troubleshooting guide.

Note: Trading foreign currencies is a challenging and potentially profitable opportunity for educated and experienced investors. However, before deciding to participate in the forex market, you should carefully consider your investment objectives, level of experience, and risk appetite. Most important, don’t invest money you can’t afford to lose. The leveraged nature of forex trading means that any market movement will have an equally proportional effect on your deposited funds; this may work against you as well as for you. (To manage exposure, employ risk-reducing strategies such as stop-loss or limit orders.) Any off-exchange foreign exchange transaction involves considerable exposure to risk, including, but not limited to, leverage, creditworthiness, limited regulatory protection, and market volatility that may substantially affect the price or liquidity of a currency or currency pair. Using the Internet to trade also involves its own risks, including, but not limited to, the failure of hardware, software, and Internet connection.

Finally, this book is a reference. You don’t have to read it from beginning to end, in order; instead, you can use the table of contents and index to find the information you need right now. Sidebars (text in gray boxes) and anything marked with the Technical Stuff icon are skippable — they’re interesting but not essential to your understanding of the topic at hand. Also, within this book, you may note that some web addresses break across two lines of text. If you’re reading this book in print and you want to visit one of these web pages, simply key in the web address exactly as it’s noted in the text, pretending as though the line break doesn’t exist. If you’re reading this as an e-book, you’ve got it easy — just click the web address to be taken directly to the web page.

Foolish Assumptions

Making assumptions is always a risky business, but knowing where we’re coming from may help put you at ease. Obviously, not all these assumptions will apply to you, but at least we’ll have it all out in the open. In writing this book, we assume the following:

You’ve heard about currency trading, and you’re looking to find out more about what’s involved before you try it.You’re intrigued by the international dimensions of the forex market, and you want to find out how to profit from currency movements.You’re seeking to diversify your trading activities or hedge your investments.You want to discover more about technical analysis and how it can be used to improve trading results.You understand that trading currencies carries the risk of losses.You’re prepared to devote the time and resources necessary to understand what’s involved in currency trading.You have the financial resources to pursue margin trading, meaning that you’ll never risk more than you can afford to lose without affecting your lifestyle.You aren’t gullible enough to believe the infomercials that promise easy money by trading currencies.You understand that there is a big difference between gambling and speculating.

These assumptions should serve as a healthy reality check for you before you decide to jump into currency trading actively. A lot of it is similar to being a weekend golfer and being disappointed when your play doesn’t reach pro-level scores. But when you think about it, why should it? The pros are out there practicing and playing all day, every day — it’s their full-time job. Most people can only hope to get a round in on the weekend or get to the driving range for a few hours a week. Keep your perspective about what’s realistic for you, and you’ll be in a much better position to profit from actively trading.

Icons Used in This Book

Throughout this book, you see icons in the margins, highlighting certain paragraphs. Here are the icons we use and what they mean:

Theories are fine, but anything marked with a Tip icon tells you what currency traders really think and respond to. These are the tricks of the trade.

Paragraphs marked with the Remember icon contain the key takeaways from this book and the essence of each subject’s coverage.

Achtung, baby! The Warning icon highlights potential errors and misconceptions that can cost you money, your sanity, or both.

You can skip anything marked by the Technical Stuff icon without missing out on the main message, but you may find the information useful for a deeper understanding of the subject.

Beyond the Book

In addition to the material in the print or e-book you’re reading right now, this product also comes with some access-anywhere goodies on the web. Check out the free Cheat Sheet at www.dummies.com/cheatsheet/currencytrading for tips on choosing a broker for currency trading, the fundamentals of currency rates, and more.

You can find articles on trading forex with other asset classes, determining what kind of trader you are, and more at www.dummies.com/extras/currencytrading.

Where to Go from Here

This book is set up so you can jump right into the topics that are of greatest interest to you. If you’re an absolute newcomer to trading in general and currencies in particular, we recommend reading Parts I and II to build a foundation for the other topics. If you have more experience with trading, use the table of contents and index to find the subject you have questions about right now. This book is a reference — keep it by your computer, and turn to it whenever you have a question about currency trading.

Part I

Getting Started with Currency Trading

For Dummies can help you get started with lots of subjects. Visit www.dummies.com to learn more and do more with For Dummies.

In this part …

Get a comprehensive overview of the forex market and how it works.Find out what moves currencies.Get acquainted with the main players in the forex market.Understand the motivations behind trading decisions and simple strategies to get started.Find out why the world’s biggest market is the most fascinating market.Get an introduction to trading plans.