Currency Trading For Dummies, 4ed

Introduction

About This Book  

Foolish Assumptions  

Icons Used in This Book  

Beyond the Book  

Where to Go from Here  

Part 1: Getting Started with Currency Trading 

Chapter 1: Currency Trading 101

• What Is Currency Trading?  
• Speculating as an enterprise  
• Currencies as the trading vehicle  
• What Affects Currency Rates?  
• Fundamentals drive the currency market  
• But sometimes it's the technicals that are driving
• the currency market  
• Or something else may be a driving force  
• Developing a Trading Plan  
• Finding your trading style  
• Planning the trade  
• Executing the Trading Plan from Start to Finish  

Chapter 2: What Is the Forex Market?

• Getting Inside the Numbers  
• Trading for spot  
• Speculating in the currency market  
• Getting liquid without getting soaked  
• Around the World in a Trading Day  
• The opening of the trading week  
• Trading in the Asia-Pacific session  
• Trading in the European/London session  
• Trading in the North American session  
• Key daily times and events  
• The U.S dollar index  
• Looking at Currencies and Other Financial Markets  
• Gold  
• Oil  
• Stocks  
• Bonds  
• Getting Started with a Practice Account  

Chapter 3: Who Trades Currencies? Meet the Players

• The Interbank Market Is "the Market"  
• Getting inside the interbank market  
• Bank to bank and beyond  
• Hedgers and Financial Investors  
• Hedging your bets  
• Global investment flows  
• Speculators: Running the Forex Show  
• Hedge funds  
• Day traders, big and small  
• Governments and Central Banks  
• Currency reserve management  
• The Bank for International Settlements  
• The Group of Twenty  

Chapter 4: The Mechanics of Currency Trading

• Buying and Selling Simultaneously  
• Currencies come in pairs  
• The long and the short of it  
• Looking at Profit and Loss  
• Margin balances and liquidations  
• Unrealized and realized profit and loss  
• Calculating profit and loss with pips  
• Factoring profit and loss into margin calculations  
• Understanding Rollovers and Interest Rates  
• Currency is money, after all  
• Value dates and trade settlement  
• Market holidays and value dates  
• Applying rollovers  
• Checking Out Currency Prices  
• Bids and offers  
• Spreads  
• Executing a Trade  
• Trading online or on the phone  
• Orders  

Part 2: Data and Details You Can Use to Trade Currencies 

Chapter 5: Looking at the Big Picture

• Currencies and Interest Rates  
• The future is now: Interest rate expectations  
• Relative interest rates  
• Monetary Policy   
• Looking at benchmark interest rates  
• Easy money, tight money  
• Unconventional easing  
• Watching the central bankers  
• Interpreting monetary policy communications  

• Official Currency Policies and Rhetoric  
• Currency policy or currency stance?  
• Calling the shots on currencies  
• Taking a closer look at currency market intervention  
• Financial stability  
• Debts, deficits, and growth  
• Gauging credit risk  
• Geopolitical Risks and Events  
• Gauging risk sentiment  
• Risk on or risk off?  

Chapter 6: Cutting the Fog with Technical Analysis

• The Philosophy of Technical Analysis  
• What is technical analysis?  
• What technical analysis is not  
• Forms of technical analysis  
• Finding support and resistance  
• Waiting for confirmation  
• The Art of Technical Analysis  
• Bar charts and candlestick charts  
• Drawing trend lines  
• Recognizing chart formations  
• Fibonacci retracements  
• The Science of Technical Analysis  
• Momentum oscillators and studies  
• Trend-identifying indicators  
• Trading with clouds: Ichimoku charts

Chapter 7: Getting Down and Dirty with Fundamental Data

• Finding the Data  
• Economics  for Currency Traders: Making Sense of Economic Data  
• The labor market  
• The consumer  
• The business sector  
• The structural  
• Assessing Economic Data Reports from a Trading Perspective  

• Understanding and revising data history  
• Getting to the core  
• Market-Moving Economic Data Reports from the United States  
• Labor-market reports  
• Consumer-level data reports  
• Business-level data reports  
• Structural data reports  
• Major International Data Reports  
• Eurozone  
• Japan  
• United Kingdom  
• Canada  
• Australia  
• New Zealand  
• China  

Chapter 8: Getting to Know the Major Currency Pairs

• The Big Dollar: EUR/USD  
• Trading fundamentals of EUR/USD  
• Trading behavior of EUR/USD  
• Tactical trading considerations in EUR/USD  
• East Meets West: USD/JPY  
• Trading fundamentals of USD/JPY  
• Price action behavior of USD/JPY  
• Tactical trading considerations in USD/JPY  
• The Other Majors: Sterling and Aussie  
• The British pound: GBP/USD  
• The new kid in town: Trading the Aussie  
• Understanding Forex Positioning Data  
• How to interpret the data  
• The FX fix  
• Forex and regulation  

Chapter 9: Minor Currency Pairs and Cross-Currency Trading

• Trading the Minor Pairs  
• Trading fundamentals of USD/CAD  
• Trading fundamentals of NZD/USD  
• Tactical trading considerations in USD/CAD, AUD/USD, and NZD/USD  
• Trading the Scandies: SEK, NOK, and DKK  
• Swedish krona: "Stocky"  
• Norwegian krone: "Nokkie"  
• Danish krone: "Copey"  
• Checking Out Cross-Currency Pairs  
• Understanding reasons for trading the crosses  
• Stretching the legs  
• Trading the JPY crosses  
• Trading the EUR crosses  

Part 3: Executing a Trading Plan 

Chapter 10: Pulling the Trigger

• Getting into the Position  
• Buying and selling at the current market  
• Averaging into a position  
• Trading breakouts  
• Making the Trade Correctly  
• Buying and selling online  
• Placing your orders  

Chapter 11: Managing the Trade

• Monitoring the Market While Your Trade Is Active  
• Following the market with rate alerts  
• Staying alert for news and data developments  
• Keeping an eye on other financial markets  
• Updating Your Trade Plan as Time Marches On  
• Trend lines move over time  
• Impending events may require trade plan adjustments  
• Updating Order Levels as Prices Progress  
• Increasing take-profit targets  
• Tightening stop-loss orders to protect profits  

Chapter 12: Tax Considerations

• Determining Whether You Have Trader Tax Status  
• Understanding Ordinary Income, Capital Gains, and Capital Losses  
• Investigating ordinary income  
• Looking at long-term capital gains  
• Coping with capital losses  
• Evaluating scenarios of gains and losses  

• Buckling Down and Paying Taxes to the IRS  
• Tax notices  
• Tax forms  
• The softer side of the IRS: Tax deductions  
• Surveying Tax Specifics for Different Types of Currency-Related Activities  
• First things first: Do you use Internal Revenue Code  or ?  
• Taxes on currency ETFs  
• Taxes on futures and options  
• Taxes on cryptocurrencies  
• Taking Advantage of Tax-Advantaged Retirement Investing  
• IRAs  
• (k) plans  
• Seeking Some Tax Resources  

Part 4: Forex Alternatives

Chapter 13: Currency Exchange-Traded Funds

• Defining Currency ETFs  
• Picking Out the Pros of Currency ETFs versus Other Currency Vehicles  
• Currency ETF advantages  
• Other factors when choosing currency ETFs  
• Comparing U.S Dollar Bullish and Bearish ETFs  
• Feeling bullish  
• Being bearish  
• Examining Other Currency ETFs  
• Euro ETFs  
• Yen ETFs  
• Choosing Currency ETFs: Hedged or Unhedged?  
• Studying Some Currency ETF Resources  

Chapter 14: Currency Futures

• Defining Currency Futures  
• Comparing Currency Trading and Currency Futures  
• Focusing on the Fundamentals of Currency Futures Contracts  
• Basics included in a futures contract  
• Margin and maintenance requirements  
• Common currency futures contracts  
• Leverage: The double-edged sword  
• Surveying Basic Futures Trading Strategies  
• Going long  
• Other strategies  
• Reading Currency Futures Quotes  
• Sizing Up E-Minis and E-Micros  
• E-minis   
• Trading with the E-micro  
• Common currency E-mini and E-micro contracts  
• Checking Out Futures Trading Resources and Brokers  

Chapter 15: Currency Options

• Introducing the Basics of Options  
• Why consider options?  
• What assets have options on them?  
• Buying a Call Option for Big Gains  

• Understanding how buying a call option works  
• Looking at the features of a call option  
• Distinguishing the "moneyness" of call options  
• Writing a Call Option to Generate Income  
• What if the security goes to the strike price or higher?  
• What if you don't want to sell at the strike price?  
• What if the security's price stays flat or moves sideways?  
• What if the security's price goes down?  
• How often can you write a covered call?  
• Using a Call Option for Safety or Hedging  
• Picking Apart Put Options  
• Use #: Bearish speculation  
• Use#: Generating income  
• Use#: For hedging and protection  
• Considering Some Combination Trades  
• Debit spreads and credit spreads  
• Diagonal and vertical calendar spreads  
• The bull call spread  
• The bear put spread  
• Breaking Down the Mechanics of Making Options Trades  
• Choosing a brokerage firm and gaining approval for options  
• Placing an order  
• Reading an options table  
• Getting a Few Golden Rules for Options Beginners  
• Trying Options Tutorials and Resources  

Chapter 16: Trading Cryptocurrencies

• Describing Cryptocurrencies  
• Considering the Main Benefits and Issues of Cryptocurrencies  
• It's Your Choice: Participating in the Cryptocurrency World in Three Ways  
• The greatest control: A cryptocurrency wallet  
• The simplest approach: A brokerage account  
• The safest approach: Business transactions  
• Looking at Leading Cryptocurrencies  
• Bitcoin (The mother of all cryptos)  
• Ethereum  
• Dogecoin  
• Taking the First Steps to Buying Cryptocurrencies  
• Choosing a platform or broker  
• Selecting storage  
• Examining Cryptocurrency ETFs  
• Getting a Few Golden Rules about Cryptocurrencies  
• Digging into Cryptocurrency Resources  

Part 5: The Part of Tens

Chapter 17: Ten Habits of Successful Currency Traders

• Trading with a Plan  
• Anticipating Event Outcomes  
• Staying Flexible  
• Being Prepared for Trading  
• Keeping Technically Alert  
• Going with the Flow (Trading the Range)  
• Focusing on a Few Pairs  
• Protecting Profits  
• Trading with Stop Losses  
• Watching Other Markets  

Chapter 18: Ten Rules of Risk Management

• Trade with Stop-Loss Orders  
• Leverage to a Minimum  
• Trade with a Plan  
• Stay on Top of the Market  
• Look for the Right Opportunities  
• Step Back from the Market  
• Take Profit Regularly  
• Understand Currency-Pair Selection  
• Double-Check for Accuracy  
• Take Money Out of Your Trading Account  

Chapter 19: Ten Great Resources for Currency Trading

• Technical Analysis of the Financial Markets  
• Japanese Candlestick Charting Techniques  
• Elliott Wave Principle  
• Technical Analysis For Dummies  
• The Book of Five Rings  
• Market Wizards: Interviews with Top Traders  
• FOREX.com  
• Zero Hedge  
• BabyPips.com  
• Forex Factory  

Chapter 20: Ten (Or So) Golden Rules for Currency Trading Beginners

• Read, Read, Read  
• Simulate Trading First  
• Start Small  
• Keep a Ceiling on Your Total Speculating  
• Be Diversified  
• Have a Rule on Profits (and Losses!)  
• Analyze the Trade That Went Bad  
• Learn from Others  
• Recognize That History May Not Repeat, but It Does Rhyme  
• Specialize If Possible (In Other Words, Focus!)  
• Know That Successful Trading Isn't Just What You
• Do but How You Do It  
• Finally, Don't Stop Educating Yourself  

Chapter 21: Ten Alternatives to Currencies

• Gold  
• Silver  
• Cryptocurrencies  
• Common Stocks  
• The "I" Bond  
• Commodities  
• Mutual Funds  
• Country Exchange-Traded Funds  
• Collectibles  
• Real Estate Investment Trusts  

Appendix: Trading Strategies  

Index