For anyone interested in trading the currency markets I believe this is the perfect book as a starting place.
Carley Garner has created the perfect book for anyone interested in getting started in currency trading. Whether you are an experienced trader of stocks or options looking to diversify markets you can trade or you are completely new to trading in general this book will get you on the right path very quickly.
The book warns novices of both the dangers and possible rewards of trading currencies. “The goal is to give you a realistic idea of what to expect in order to avoid becoming a statistic”.
The author takes you through currency trading step by step from understanding the difference between FOREX and currency futures to how to trade them. The reader will get an understanding of each currency pair and a table with each three letter abbreviation for currencies and the order in which they are paired. You are advised to stick with the currency ‘majors’ for liquidity and avoid the ‘minors’ so you are not hurt with the wide bid/ask spreads in low volume markets.
Currency pair values per contract are $100,000 per standard contract, $10,000 per mini contract, and $1,000 per micro. The book also has a table for currency futures contracts.
While FOREX traders are able to leverage their trades with 50 to 1 margin the author warns traders about the dangers of leverage and how it can wipe out your account. There is always an equal downside risk for every possible upside profit with leverage and currency traders would be wise to trade appropriate position sizes that does not put their entire account at risk in one trade.
Carley warns readers that many FOREX brokers that claim to be commission free are really just taking the other side of your trades as off exchange trades instead of executing your trades on the open market like currency futures brokers do through a centralized and regulated exchange. Many FOREX brokers make their money through the bid/ask spreads that you buy and sell at when getting in and out of trades. Also FOREX trading has counter party risks while currency futures trading is guaranteed by the exchange to make all parties whole.
“FX and futures traders are not buying or selling an asset; instead they are trading a liability that is dependent, or derived, from the value of the underlying asset; thus, they are known as derivatives.”
She also covers different technical indicators to use in your trading and how they measure price to give buy and sell signals. You will also get the basic styles of trading and what usually works in the currency markets.
I strongly advise any trader interested in trading currency markets to first read this book by Carley Garner before you venture into those waters.