a regimented and disciplined approach to trading currencies
Focusing on risk management to minimize losses and keep more of your gains
Whether you’re an experienced trader in other markets looking to expand into currencies, or a total newcomer to trading looking to start out in currencies, this book has what you need. Best of all, it’s presented in the easy-to-use For Dummies format. Divided into easy-to-follow parts, this book can serve as both your reference and troubleshooting guide.
Note: Trading foreign currencies is a challenging and potentially profitable opportunity for educated and experienced investors. However, before deciding to participate in the forex market, you should carefully consider your investment objectives, level of experience, and risk appetite. Most important, don’t invest money you can’t afford to lose. The leveraged nature of forex trading means that any market movement will have an equally proportional effect on your deposited funds; this may work against you as well as for you. (To manage exposure, employ risk-reducing strategies such as stop-loss or limit orders.) Any off-exchange foreign exchange transaction involves considerable exposure to risk, including, but not limited to, leverage, creditworthiness, limited regulatory protection, and market volatility that may substantially affect the price or liquidity of a currency or currency pair. Using the internet to trade also involves its own risks, including, but not limited to, the failure of hardware, software, and internet connection.
I (coauthor Paul) certainly can’t do better on guiding you through the exciting and challenging world of forex than coauthors Kathleen and Brian. Since the third edition of this book, there have been exciting changes in the currency world that I think readers should be aware of. Here is a brief list of new content in this fourth edition to help you succeed in the world of currency trading:
Currency exchange-traded funds (ETFs) are a hot opportunity and a great vehicle for currency beginners.
Currency futures contracts offer speculators great opportunities.
Call and put options can add firepower to your currency trading pursuits.
The world of cryptocurrencies has exploded on the scene in recent years and is included.
You discover how to keep more of your currency trading profits with a chapter on taxes.
One last note: This book is a reference. You don’t have to read it from beginning to end, in order; instead, you can use the table of contents and index to find the information you need right now. Sidebars (text in gray boxes) and anything marked with the Technical Stuff icon are skippable — they’re interesting but not essential to your understanding of currency trading. Also, within this book, you may note that some web addresses break across two lines of text. If you’re reading this book in print and you want to visit one of these web pages, simply key in the web address exactly as it’s noted in the text, pretending as though the line break doesn’t exist. If you’re reading this as an e-book, you’ve got it easy — just click the web address to be taken directly to the web page.
Foolish Assumptions
Making assumptions is always a risky business, but knowing where we’re coming from may help put you at ease. Obviously, not all these assumptions will apply to you, but at least we’ll have it all out in the open. In writing this book, we assume the following:
You’ve heard about currency trading, and you’re looking to find out more about what’s involved before you try it.
You’re intrigued by the international dimensions of the forex market, and you want to find out how to profit from currency movements.
You’re seeking to diversify your trading activities or hedge your investments.
You want to discover more about technical analysis and how it can be used to improve trading results.
You understand that trading currencies carries the risk of losses.
You’re prepared to devote the time and resources necessary to understand what’s involved in currency trading.
You have the financial resources to pursue margin trading, meaning that you’ll never risk more than you can afford to lose without affecting your lifestyle.
You aren’t gullible enough to believe the infomercials that promise easy money by trading currencies.
You understand that there is a big difference between gambling and speculating.
These assumptions should serve as a healthy reality check for you before you decide to jump into currency trading actively. A lot of it is similar to being a weekend golfer and being disappointed when your play doesn’t reach pro-level scores. But when you think about it, why should it? The pros are out there practicing and playing all day, every day — it’s their full-time job. Most people can only hope to get in a round on the weekend or get to the driving range for a few hours a week. Keep your perspective about what’s realistic for you, and you’ll be in a much better position to profit from actively trading.
Icons Used in This Book
Throughout this book, you see icons in the margins, highlighting certain paragraphs. Here are the icons we use and what they mean.
Beyond the Book
In addition to the material in the print or e-book you’re reading right now, this product also comes with some access-anywhere goodies on the web. Check out the free Cheat Sheet for tips on choosing a broker for currency trading, the fundamentals of currency rates, and more. To get this Cheat Sheet, simply go to www.dummies.com and search for “Currency Trading For Dummies Cheat Sheet” in the Search box.
Where to Go from Here
This book is set up so you can jump right into the topics that are of greatest interest to you. If you’re an absolute newcomer to trading in general and currencies in particular, we recommend reading Parts 1 and 2 to build a foundation for the other topics. If you have more experience with trading, use the table of contents and index to find the subject you have questions about right now. This book is a reference — keep it by your computer and turn to it whenever you have a question. We wish you a successful journey in the world of currency trading.
Part 1
Getting Started with Currency Trading