Posted by Donovan Lind on 24th Apr 2008

US$2 trillion per day is traded on foreign exchange (FX) markets around the world, making it the biggest market in the world. The market’s sheer size, coupled with intense competition help to en-sure that it is transparent, has low transaction costs and is accessible to anyone prepared to learn about it.

FX Trading is a good place to start your education.

Subjects covered include—

· What FX is
· Factors influencing FX markets
· Techniques of fundamental and technical analysis
· Mechanics of trading
· Managing FX risk
· Getting started as a small-time speculator

Author Alex Douglas is a board member of the International Federation of Technical Analysts and president of the Australian Professional Technical Analysts. Co-author Peter Pontikis is a financial markets strategist specialising in foreign exchange while Larry Lovrencic is a director of First Pacific Securities.

For those who believe that FX trading is too risky, the authors have a word of encouragement right from the beginning—

“Risk is not something to be avoided. It is to be understood, mitigated and profited from”.

According to the authors, money management is the Holy Grail of FX trading, a point which they emphasise throughout the book, particularly its opening and closing sections. Effective money management is described as “the oyster shell that encases the growing pearl that is your trading methodology. Fingers crossed that with the discipline of iron-clad money management your wealth will grow steadily and surely, for you to reap its eventual rewards”.

FX Trading provides a valuable introduction to all of the key concepts of FX trading, and does so in a very readable style.

For instance, chapter 2 offers a fascinating explanation of FX markets, covering topics such as the creation of the Euro, the gold standard and the role of key market players in both making and moving the market.

With the advent of the Internet, there has been an explosion in the information and services avail-able to traders, and FX is no exception. Chapter 6 reviews the fundamentals of online margin FX trading platforms, comparing these with traditional inter-bank brokers. The authors give some useful tips when it comes to selecting a trading platform and its associated online margin FX provider, in-cluding the importance of doing basic reliability and integrity checks.

Chapters 8 and 9 present the fundamental concepts behind technical and fundamental analysis, as they relate to FX trading. Although the authors themselves are technical analysts, their treatment of fundamental analysis is both balanced and fair.

Overall, FX Trading is a useful introduction to the world of FX trading. It will not satisfy those among us who are already seasoned traders, but for others who have contemplated FX trading this book will whet their appetite for more.

“The willingness to take on risk is essential to the growth of a free market economy… If all savers and their intermediaries invested in only risk-free assets, the potential for business growth would never be realised”. (Alan Greenspan, former Chairman of the US Federal Reserve, as cited by the authors.)