An introduction to Forex trading
Forex, a portmanteau of foreign exchange, also known as currency trading, is a decentralized global financial market where the world’s currencies are traded. According to a recent triennial report by the Bank for International Settlements, the forex market is the largest and most liquid market in the world, with an average of more than $5.1 trillion in daily trading volume.
The forex trading market is active 24 hours on weekdays and is affected by factors like the country’s Gross Domestic Product (GDP), interest rates, price hikes, and so on. These factors make the market quite complex and, therefore, demands a good understanding of trading psychology. Forex trading books enable you to build successful trading strategies and figure out the best Forex pairs while successfully minimizing risks.
So, where do you begin?
We’ve listed from user experience some of the best-recommended forex trading books you must read in 2020 for you to up your trading game a notch higher. These books will help aspiring traders avoid losing money and stay in the game in the competitive world of forex trading (platform like AvaTrade).
1. ‘Currency Forecasting’— an excellent read for a beginner:
Currency Forecasting makes it to the top of our best forex trading books list. This book was written by Michael Rosenberg in 1995 but is fully relevant even after more than two decades. It’s a great book that helps new forex traders understand price movement in the forex market. The book’s writing style is straightforward, concise, and written in a simple way for the reader to grasp the concept easily. The author has linked his field knowledge on financial dynamics and macro-economics with the global forex market news. You will find that the book will walk you through the fundamentals and the technical concepts of Forex and price predictions in a way that is very easy to understand. You’ll learn practical tools that will help you predict market prices, have a good understanding of indicators, price-charts, recognize the undercurrent and the pattern of the market, signals, and so on.
2. Mastering the internal emotional space of the trader through— ‘Trading in the Zone’:
This book, also by Mark Douglas, covers an unusual yet very important aspect of the traders’ mind— ‘the emotional space.’ Often, especially for a beginner, trading can be quite daunting. Factors like balancing emotions, fear of missing out (FOMO), or imbalance between the greed of earning more and more money and not knowing where to stop trading sensibly, or managing the excitement in the context of investment objectives, knowing what are the sources of high level of risk, etc. are well covered in this book.
You’ll learn about some highly useful forex traders traits and habits to become a successful trader. The author talks about something called ‘thinking strategy’ that covers five key insights into harnessing the maximum from your trading experience. Douglas presents a very practical perspective on how the forex market patterns are governed by probability rather than hardcore right and wrong fundamentals.
3. An incredible candlestick trading tool— The Japanese Candlestick Chart Technique:
The Japanese Candlestick Chart Technique was written by Steve Nison back in 1991. It’s a classic book on Japanese candlestick charting techniques. This book is a valuable tool that every trader should have in one’s collection of best forex trading books. Candlestick charts don’t need an introduction. They are very popular across various global trading financial markets and with individual traders as well. They give great insights on opening market rates of various currencies, the shutting down rate, the overall market behavior, and the high and low points in every candle, etc. Steve Nison provides a clear guide to candlesticks and how to use them with Western technical analysis techniques.
4. Unleash the power of attitude in forex trading through— The Disciplined Trader:
If you think forex trading is all about logical right and wrong numbers, then this book will make you re-examine your thoughts. The Disciplined Trader by Mark Douglas reveals how having a good attitude can boost your money making. This unusual book takes a detour from the usual topics such as— economic theories, trading tools, smart trading tools, technical and fundamental strategies. It emphasizes the mindset of the trader and highlights the importance of discipline over no-method to trading. Douglas, in his book, further talks about having good control over emotions while trading. He points out that managing emotions while trading isn’t a straightforward deal. It is complex and delicate to balance.
Douglas wrote this book based on his experience in forex trading; so, it can save the reader from some very expensive mistakes and a lot of time. He shares some very valuable trading lessons in this book. By following the insights and tips in this book, you can avoid losing money rapidly due to any unintentional financial mistake while having a healthy technical analysis of your trading trajectory.
5. A fine balance between forex fundamentals and its technicality—Day Trading and Swing Trading the Currency Market:
This best-selling book by a very popular market examiner- Kathy Lien, well known for her guest appearances on popular finance programs and TV-channels such as CNBC, Bloomberg, etc. is about intra-day trading. It runs through some highly useful fundamentals of forex trading strategies and its technicalities. She points at maintaining a good balance between the fundamentals of trading and its technical aspects. The book also talks about long-term and short-term points that can influence currency pairs, intra-market relations, the differentials on the rate of interest, swing trading, volatile nature of option and the interventional role of the central bank, etc.; that affect the market rates. It walks the reader through some useful technical, analytical trading strategies which the seasoned currency traders use on a daily basis.
6. Become clear and confident on forex trading with—Forex Trading: The Basics Explained in Simple Terms:
Forex Trading: The Basics Explained in Simple Terms is written by Jim Brown. The Australian trader has poured his years of trading experience and insights into this book. Brown talks about some key topics in this book that are very contemporary, helpful, and quick to get into practice. It walks the reader through the fundamentals of Forex, market, pairs, lots, size, how to deal with the high risk of losing (e.g. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage), technical analysis, etc. This book is for traders who are just starting to consider trading Forex but don’t know where to start. It is a good first book to read to gain an understanding of the very basics. Brown also offers one of his Trading Systems, as well as the indicators without any further on-costs.
7. Technical Analysis of the Financial Market:
We’ve saved one of the best for the last. Often referred to as the ‘traders’ Bible, it is one of John J. Murphy’s best works. He is renowned for his expertise in the field of inter-market technical critical knowledge and technical analysis. This outstanding reference has already taught thousands of traders the concepts of technical analysis and their application in the futures and stock markets. It covers the fundamentals of Forex for beginners. It also covers advanced concepts. Currency traders from all levels of experience will find it highly useful. To give you a glimpse of its content— it cites more than four hundred charts as well as indicators to help the reader understand the crucial role technical analysis plays in investing. Readers gain a thorough and accessible overview of the field of technical analysis, with a special emphasis on futures markets. The latest edition has been expanded for the demands of today’s financial world. This book is essential reading for anyone interested in tracking and analyzing market behavior.
Best forex books for Beginners:
1. Currency Trading for Dummies, by Brian Dolan:
The beginners are in for a treat with this one. Suitable for all investors, this book is a straightforward one that is easy to understand and easy to follow. It covers currency trading conventions and tools, provides an insider’s look at key characteristics of successful currency traders, explains why it’s important to be organized and prepared, and offers guidance on trading pitfalls to avoid and risk management rules to live by, all in a very beginner-friendly manner. Whether you’re just getting started out in the foreign exchange market or an experienced trader looking to diversify your portfolio, Currency Trading For Dummies sets you up for trading success.
2. Currency Forecasting: A Guide to Fundamental and Technical Models of Exchange Rate Determination, by Michael R. Rosenberg:
First published in 1995, it still holds grounds in today’s time. It is a good mix of macroeconomics and global financial dynamics. Explained in simple terms, It is a good read for both trading analysts and traders alike.
Other books to explore are- ‘How to Make a Living Trading Foreign Exchange’ by Courtney D. Smith, ‘A Complete Guide To Volume Price Analysis’ by Anna Coulling, ‘A simple approach to trading foreign exchange using fundamental and technical analysis’ by Kathleen Brooks, ‘The Black Book of Forex Trading: A Proven Method to Become a Profitable Forex Trader in Four Months and Reach Your Financial Freedom by Doing it’ by Paul Langer, and ‘The alchemy of finance’ by George Soros. As a beginner, you want to have read books that will give you a clear understanding of how a demo account works, what retail investor accounts are, and to have a good understanding of the financial markets to develop a good market perspective.
Best forex books for Advanced Traders
1. How to Make a Living Trading Foreign Exchange: A Guaranteed Income for Life:
This one, by Courtney Smith, offers a good insight on how the forex market works in a way which uses easy to understand terms. It offers six useful currency pairs trading strategies that can generate real-world active income from trading forex exchange platforms.
2. Adventures of a Currency Trader: A Fable about Trading, Courage and Doing the Right Thing:
This one is by Rob Booker. Through a fictional forex trader character, the author explains his trading experience level. It is a creative read that explores the hard realities of forex currency trading.
3. The Death of Money: The Coming Collapse of the International Monetary System:
Through this book, James Rickards has tried to show the future of money. The plot rotates on the fact the financial market over-depends on the U.S Dollar. Due to over-dependence, the chances of the entire market getting disturbed due to any collapse to the USD in the near future becomes a strong possibility. The author has talked about the possible economic crash. The book has a futuristic viewpoint on the currency market. It discusses possible instability stemming from greed that can have consequential results. This book offers an interesting technical analysis of the forex market, which may not be suitable for beginners.
Forex trading can be highly rewarding. Foreign exchange can also prove to be quite risky at times, which is why you need to arm yourself with strong fundamental knowledge about how the market works, the trading psychology, learn the technicalities of trading patterns and price predictions from expert market analysts through the books we mentioned in this write up; We always urge our readers to make informed decisions and keep yourself well up-to-date at all times to stay at the top of your trading league.