The best traders in the world believe that to succeed in trading, you need to have a trading system that suits you. Learn how to develop your own trading methodology to trade the foreign exchange market and take control of your destiny.
Amazon - The Part-Time Currency Trader
The Part-Time Currency Trader
"Wealth is not measured by how much money we earn, or how much assets we have. It is measured by how much freedom we have to make the choices that are important to us: the freedom to choose where, how and why we live our lives."
-- Marquez Comelab
We go to work everyday. It is something we need to do, so we might as well do it with happy spirits. But in our spare time, nothing stops us from exploring the possibilities of all that we can achieve and all that we can give to ourselves, to the people we love and to the world around us.
You may already be trading the financial markets or you may have never heard of currency trading before, but if you want to take ownership and responsibility for your own economic future, then this book is for you.
In his simple, easy-to-understand language, the author takes you through a thorough study of all the crucial aspects of trading that can help novice and intermediate traders. Reading through it is much like having a friend next to you, patiently explaining everything you need to know to prepare for your journey, avoid the pitfalls of trading, accelerate your education and develop your own trading methodology.
If you are already familiar with trading, then I leave it to you to skip the chapters you believe you will not need. However, when you do have the time, I recommend for you to go back to those parts and scan through them, just in case there are lessons you are yet to learn. To get the most of the information provided in this book, I would recommend you to read it in chronological order.
Chapter 1 - Introduction
How This Book Is Organised
Chapter 2 - Forex Trading
Before we go through trading concepts, we need to discuss them in some form of context. I could have chosen to write this book as a general trading book; however, I decided to focus on providing examples of actual currency trading scenarios. The reason I choose to focus on the currency market is because it is the biggest market in the world and is fast becoming the trading vehicle for most private investors and traders alike. If you are happy trading shares, futures or options, the concepts in this book still apply. In this chapter, I will introduce the foreign exchange market to those of you who are not familiar with it.
Chapter 3 - The Basic Concepts Of Currency Trading
In this chapter, I outline the elementary ideas of currency trading so you know how a trade works and how you can make a profit or a loss from it. I will explain margin lending . If you are not familiar with the term, margin lending allows you to trade 50 to 400 times the size of your account. You will come to realise how you can effectively buy or sell 100,000 US Dollars by having only 500 US Dollars in your account.
Chapter 4 - Finding Your Forex Broker
You learn to do something by doing it. So I need you to start trading, if you are not already doing so. I will help you find a broker that will suit your needs. I will run you through certain precautions to avoid fraud and scams and to help you set minimum expectations about costs, fees, software, data, transaction speed and other extra features and benefits that brokers are offering nowadays.
Chapter 5 - Why Traders Fail And How This Book May Help
Before you start trading, I will ‘talk' about the four major reasons why most traders fail. Based from these, I will explain how this book may help overcome the problems and difficulties that people encounter while they are trading.
Chapter 6 - Preparation
We will discuss how to educate yourself and how to divide your financial resources before you start trading. Most importantly, I will touch on the consequences of the beliefs that some people may have about trading, about the market and about themselves; as well as their psychological qualities. We will consider how this may impact on your trading.
Chapter 7 - The Trading Methodology Development Process
When I began trading, I looked for a map that would give me a structure of how to organize all the information I had about trading. It took a long time for the lessons to sink in. In this chapter, I will demonstrate how to develop your own trading methodology based on how I develop mine. A trading methodology is not just about indicators, trading systems and position-sizing. It is a guideline of how a beginner may go about starting his or her own trading business. Equipped with this formula, novice traders would be able to speed up their learning a lot faster than I did.
Chapter 8 - Analysing The Market: Fundamental Vs Technical
In this chapter, I will discuss the two major means of analysing the market: fundamental and technical analysis . Fundamental analysis uses economic indicators to try to estimate the ‘intrinsic' value of a currency and technical analysis uses charts, mathematics and statistics to trade the market. I will outline why I prefer technical analysis to help you decide which method would be right for you.
Chapter 9 - How To ‘Read' Charts
The most essential skill in trading is the ability to read charts. Otherwise a trader would essentially be trading blind. In this chapter, I illustrate how to read charts and introduce close lines, bar charts and candlesticks. I will also show how to identify short-term trends and long-term trends using the Dow Theory: one of the most central doctrines in technical analysis .
Chapter 10 - How To Analyse Charts Using ‘Classical Charting' Techniques
I will also demonstrate how you can analyse charts using the classical charting method – a method that does not need computers. All you need is a print-out of the chart, a ruler and a pencil. I will take you through how you may enter and exit trades using trend lines, trend channels as well as support and resistance levels.
Chapter 11 - Your Tools: Indicators
Instead of giving you a full index of all indicators, I will just give you a run-down of the most popular indicators that I use. I will outline trend-following indicators (moving average, dual moving average and the MACD ) and sentiment-based oscillators (Stochastic, Williams%R and Commodities Channel Index). I will discuss their weaknesses, their strengths and how you can enter and exit a trade using their signals.
Chapter 12 - Trading Systems
After giving you an outline of indicators, I will explain how you can put them together to build your own trading system . I will discuss the psychological effects of trading without a system before I will make a distinction between discretionary systems from mechanical ones. We will touch on trend and counter-trend systems and how you can enter a trade using market orders, stop orders and limit orders. Apart from exiting using classical charting and indicators, I will also go through different ways in which you can exit trades when they go against you using various stop-loss mechanisms. After that, I will show you a few take-profit mechanisms that you can use to exit trades that turn out to be profitable. You will see how you can assemble a trading system from many various components. There are three trading systems given in this book. You may use or tweak them to make them your own.
Chapter 13 - Testing Trading Systems
After creating a trading system , you need to test it to assess whether it is likely to survive real-life market conditions. I am going to list the means with which you can test your system and show how you can get important statistical data about it. After you get your data, I will show you how you can calculate values, including your expected reward and your mathematical expectation of success. These numbers will help you assess the strength of your system if you keep trading it in the long run.
Chapter 14 - Position-Sizing
One of the biggest reasons traders lose a lot of money is because they do not know how to size their positions to minimize their risk and maximise the growth of their account. I will reveal to you something that is always so obvious that almost all novice traders miss it when they begin trading. And yet, it could be the key to their long-term survival. I will offer you a position-sizing formula that you can use to ensure that when you lose, you do not lose more than a particular percentage of your account. I will show you three different risk-management strategies and once you understand these, you can use their logic to create more complex ones in the future when you begin having more investors and more funds to trade with. We will also explore the different variables of position-sizing strategies by following a series of examples. You may come to realize certain relationships you did not know existed between risk, the growth of your trading money and your expectations.
Chapter 15 - Discipline & Psychology
As soon as traders start trading their systems, they will come to realize the hard-work is still not over. Most traders have problems following their own rules. In this chapter, we will examine how and why traders disobey their systems. I will take you through the operational, financial, psychological, health and life-related problems that traders face. After that, I will share with you the lessons I have learnt along the way and hopefully, they will help alleviate most of the psychological difficulties experienced by some traders.
Chapter 16 - Closing Remarks