The Forex trading course : a self-study guide to... (PDF) (2024)

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The ForexTrading Course

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The Wiley Trading series features books by traders who have survived the market’s everchanging temperament and have prospered—some by reinventing systems, others by get-ting back to basics. Whether a novice trader, professional, or somewhere in-between,these books will provide the advice and strategies needed to prosper today and well intothe future. For more on this series, visit our website at www.WileyTrading.com.Founded in 1807, John Wiley & Sons is the oldest independent publishing companyin the United States. With offices in North America, Europe, Australia, and Asia, Wiley isglobally committed to developing and marketing print and electronic products and ser-vices for our customers’ professional and personal knowledge and understanding.

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The ForexTrading CourseA Self-Study Guide to Becominga Successful Currency TraderSecond EditionABE COFNAS

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Copyright © 2015 by Abe Cofnas. All rights reserved.Published by John Wiley & Sons, Inc., Hoboken, New Jersey.The First Edition of this book was published by Wiley in 2008.Published simultaneously in Canada.No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or byany means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permittedunder Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permissionof the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright ClearanceCenter, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web atwww.copyright.com. Requests to the Publisher for permission should be addressed to the PermissionsDepartment, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008,or online at http://www.wiley.com/go/permissions.Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts inpreparing this book, they make no representations or warranties with respect to the accuracy orcompleteness of the contents of this book and specifically disclaim any implied warranties of merchantabilityor fitness for a particular purpose. No warranty may be created or extended by sales representatives orwritten sales materials. The advice and strategies contained herein may not be suitable for your situation. Youshould consult with a professional where appropriate. Neither the publisher nor author shall be liable for anyloss of profit or any other commercial damages, including but not limited to special, incidental, consequential,or other damages.For general information on our other products and services or for technical support, please contact ourCustomer Care Department within the United States at (800) 762-2974, outside the United States at (317)572-3993 or fax (317) 572-4002.Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material includedwith standard print versions of this book may not be included in e-books or in print-on-demand. If this bookrefers to media such as a CD or DVD that is not included in the version you purchased, you may download thismaterial at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.Library of Congress Cataloging-in-Publication DataCofnas, Abe, 1950-The Forex trading course : a self-study guide to becoming a successful currency trader /Abe Cofnas. – Second edition.pages cm. – (The Wiley trading series)Includes index.ISBN 978-1-118-99865-6 (pbk.) – ISBN 978-1-118-99867-0 (epdf) – ISBN 978-1-118-99868-7 (epub)1. Foreign exchange futures. 2. Foreign exchange market. 3. Speculation. I. Title.HG3853.C64 2015′332.4 5–dc232015013790Cover Design: WileyCover Image: ©iStock.com/alexaldoPrinted in the United States of America10 9 8 7 6 5 4 3 2 1

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ContentsPreface viiAbout the Author ixPART 1 What Drives the Forex Market? 1CHAPTER 1 The Fundamentals of Forex 3CHAPTER 2 The Role of Inflation, Reflation, and Deflation 17CHAPTER 3 Exploiting Information about Economic Growth 23CHAPTER 4 The China Factor 35CHAPTER 5 The Commodities Connection: Gold, Copper,Commodity Index, Equities, and Forex 43CHAPTER 6 How Business Confidence and Consumer SentimentAffect the Market 51CHAPTER 7 Fundamental Personalities of Currencies 53CHAPTER 8 The Personality and Performance of the US Dollar 71CHAPTER 9 Conducting Your Own Fundamental Analysis 77PART II Timing the Trade with Technical Analysis 85CHAPTER 10 Mapping Price Action 87CHAPTER 11 Finding Significant Support and Resistance 97CHAPTER 12 Volatility in Forex and Its Dimensions 113v

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vi CONTENTSCHAPTER 13 Chart Formations and Price Patterns YouShould Know 139CHAPTER 14 Trading Styles and Strategies 149CHAPTER 15 Stops, Limits, and Tactics for Risk Control 167PART III Putting It Together 177CHAPTER 16 Transitioning to Real Trading 179CHAPTER 17 Strategies and Challenges for DifferentAccount Sizes 183CHAPTER 18 Paths to Success in Forex Trading 199CHAPTER 19 Test Your Forex IQ 207CHAPTER 20 Trading Bitcoin 213Index 225

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Prefacehis edition is more than an update on the first edition. Since the first edition wasreleased in 2008, theworld of forex trading has significantly changed. The challengesTfacing the forex trader are new and greater than ever. The financial collapse of 2008ushered in a rebalancing of the world economy, with monetary policy and currencies askey instruments. The era of quantitative easing began, and with it, central bank inter-vention became and remains since a prime mover of currencies. Forex trading becamesubject to greater spikes and disruptions and, more than ever, sensitive to market emo-tions. Expectations regarding global growth and inflation have significantly influencedcurrency movement. These changes underscore the need for a refocus on fundamentalsfor forex trading.The significant advances in the Internet since 2007 have also transformed forex trad-ing and its technological environment. The forex trader today has the opportunity toaccess more information, more quickly than ever before. Also, a popular phenomenoncalled social media trading has emerged where the forex trader can “copy” the trades ofother traders. The Internet wraps information flow with rumors and hyperbole, creatingherding behavior and swarming patterns.Since 2008, an entirely new instrument for trading currency directions and marketemotions—binary options—has emerged. It is one of the fastest-growing markets in theworld. Forex firms are increasingly offering binaries to their customers.This edition shows how to use binaries in combination with forex trades tostrengthen skills in choosing direction, targets, and stops. Most recently, the emergenceof crypocurrencies as a potentially hybrid currency/commodity has special significancefor the forex trading, because ultimately owners all need to sell their currencies andexchange them into local currency. This edition also provides insight into bitcoin as analternative currency.vii