Forex for Beginners: A Comprehensive Guide to Profiting from the Global Currency Markets

287 Pages·2012·8.6 MB·English

by  Adam Kritzer

Forex for Beginners: A Comprehensive Guide to Profiting from the Global
Currency Markets
Copyright © 2012 by Adam Kritzer
All rights reserved. No part of this work may be reproduced or transmitted in
any form or by any means, electronic or mechanical, including photocopying,
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written permission of the copyright owner and the publisher.
ISBN-13 (pbk): 978-1-43024050-1
ISBN-13 (electronic): 978-1-4302-4051-8
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symbol with every occurrence of a trademarked name, we use the names only in
an editorial fashion and to the benefit of the trademark owner, with no intention
of infringement of the trademark.
President and Publisher: Paul Manning
Acquisitions Editor: Morgan Ertel
Developmental Editor: Jeff Olson
Editorial Board: Steve Anglin, Mark Beckner, Ewan Buckingham, Gary
Cornell,
Louise Corrigan, Morgan Ertel, Jonathan Gennick, Jonathan Hassell,
Robert
Hutchinson, Michelle Lowman, James Markham, Matthew Moodie, Jeff
Olson, Jeffrey Pepper, Douglas Pundick, Ben Renow-Clarke, Dominic
Shakeshaft, Gwenan Spearing, Matt Wade, Tom Welsh
Coordinating Editor: Rita Fernando
Copy Editor: Joanna Meekins
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Cover Designer: Anna Ishchenko
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To Lili and Ethan
Contents
About the Author
Acknowledgments
Preface
Introduction
Chapter 1: Historical Background
Chapter 2: What Are Your Options?
Chapter 3: What Makes Currencies Move?
Chapter 4: Forex Analysis
Chapter 5: Fundamental Analysis
Chapter 6: Technical Analysis
Chapter 7: Trading Strategy
Chapter 8: Opening an Account
Chapter 9: Account Management
Chapter 10: Pitfalls and Risks
Chapter 11: Successful Investing
Appendix: Online Forex Resources
Index
About the Author
Adam Kritzer is a professional writer, investor, and former investment banker.
He first began analyzing currencies in 2004, as the inaugural writer for the Forex
Blog (www.forexblog.org). His goal was to provide an alternative method for
analyzing currencies. What began as a basic overview of relevant news stories
has since evolved into what is the web’s premier source for fundamental analysis
of the currency markets. His work has been cited by Dow Jones, and his articles
have been published in media outlets as diverse as the Wuhan Evening Post and
Mergers & Acquisitions Journal. A native of Philadelphia, Pennsylvania, Adam
holds a BA in Economics and East Asian Studies from the University of
Pennsylvania. He is fluent in Mandarin Chinese and currently resides in Yunnan,
China, with his wife Lili and son Ethan. When he’s not analyzing currencies,
he’s probably out hiking or gardening.
Acknowledgments
It’s a pleasure for me to acknowledge the contributions of many people to this
book. From my parents and teachers, I first developed an interest in economics,
which ultimately guided my approach to analyzing the currency markets. I am
indebted to Andy Hagans for taking a chance and hiring me as the inaugural
writer for the Forex Blog, and to Aaron Wall for continuing to invest in the
website and support my approach in the years that followed. I’d like to thank Jeff
Olson of Apress who first proposed that I write this book, and to Morgan Ertel,
Rita Fernando and the rest of the team at Apress including Jill Balzano, and
Joanna Meekins for shepherding this book through the writing and editing
process. Finally, I am eternally grateful to my wife Lili for her patience and
support during the lengthy period I spent laboring on this book.
Preface
A friend recently asked for my advice; his multinational employer was
temporarily relocating him from the United States to the Netherlands.
Furthermore, his salary would no longer be paid in US dollars, but in euros. His
quandary was such that, while his long-term finances were denominated in
dollars, he would still need to maintain a local supply of euros to fund living
expenses. What would be the best method, he wondered, for minimizing any
foreign exchange losses upon his eventual return to the United States? The
answer to this question, I informed him, could easily fill a few hundred pages.
This book is albeit less concerned with personal money management and is
really about a type of financial investing. My interest in writing it—and
certainly, your interest in reading it—follows from the idea that it is possible to
actively profit from fluctuations in exchange rates. Nonetheless, the fact of the
matter is that foreign exchange is an integral component of the global economy
and its influence is felt daily by businesses, governments, and individuals such
as you, me, and my perplexed friend. I firmly believe that the principles upon
which I will expound in the following pages can be applied not only to forex
trading, but to issues as mundane as the foregoing one.
I’ll begin by offering an overview of how the forex market has historically
operated and explain how it differs from some of the other financial markets, in
both positive and negative respects. After a brief discussion of history, I will
move directly into the forces that cause exchange rates to fluctuate. There will be
an overview of trading strategies and an in-depth discussion of the various
analytical tools that investors can use to develop such strategies. I will explain
how to choose a broker and open an account, and conclude with some
commonsense wisdom on avoiding certain pitfalls and maximizing your odds of
success in the forex market. Throughout the entire book, examples are both
abundant and topical to make the presented concepts more concrete. Given that
this book was written from 2011 to 2012, there will be a special emphasis on the
credit crisis, as well as on the years that preceded and followed it.
Before I get into the nuts and bolts of forex, I want to offer a brief caveat: this
book should not be filed under the domain of get-rich-quick schemes. There is