James Dicks. 6 Ways to Trade the Dollar. McGraw-Hill

Transcription

1 2008 AGI-Information Management Consultants May be used for personal purporses only or by libraries associated to dandelon.com network. FOREX MADE EASY 6 Ways to Trade the Dollar James Dicks McGraw-Hill New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto

2 Contents Preface xiii Acknowledgments xvii What Is the FOREX? 1 Introduction 1 FOREX Defined 12 A Brief History of the FOREX 13 Free-Floating FOREX Market 13 Major FOREX Participants 14 More FOREX 15 Currency Pairs 15 Recommended Currency Pairs 16 Why Trade the FOREX 19 Volume in the FOREX 19 Analyzing the FOREX 23 How Profits Are Made 23 The FOREX as a Two-Way Market 25 Forecasting the Market 29 Fundamental Analysis 29 Technical Analysis 32 Fundamental versus Technical Analysis 33

3 viii CONTENTS 4 Currency Options 35 Currency Options Introduction 35 Options Pricing 36 Advantages of Trading Options 37 European and American Options 37 Exotic Options 38 Lock in Profits 40 Accelerate Your Profits 41 5 Creating a Workstation for Trading 43 Workstation Location 43 Trading Computer and Accessories 44 Internet Connection 45 Trading Software Programs 45 Continuing Education 48 6 Fundamentals of Trading 51 Introduction to Trading Theory 52 Trends Defined 53 Trend Cycles 53 High-Probability Trading 55 Sideways, Nontrend Strategy: Wait for Strong Trends 55 Uptrend Trading Strategy: Buy at Dip Bottoms 55 Downtrend Trading Strategy: Sell at Rally Tops 58 Symmetrical Triangle 58 Ascending Triangle: A Bullish Continuation Pattern 63 Descending Triangle 65 The Falling Broadening Formation 67 Support Breakdown or Resistance Breakout 67

4 CONTENTS The Double Bottom 68 Head and Shoulders (Crown) 70 7 Economic Fundamentals 73 Introduction 73 Economic Indicators 74 Inflation Indicators 76 Employment Indicators 78 Consumer Spending Indicators 78 Leading Indicators 79 8 Introduction to Technical Analysis 81 Technical Analysis Defined 81 Technical Analysis Assumptions 82 Bar and Candlestick Charts 83 Technical Analysis Terms 86 Market Patterns: Uptrends, Downtrends, and Sideways Trends 87 Support and Resistance 95 Moving Averages 95 9 Advanced Trading Charts and Indicators 103 Tools for Technical Analysis 104 Bollinger Bands 104 Directional Movement Index (DMI) 107 Stochastic Indicator 107 Moving Averages (Simple, Weighted, and Exponential) 110 Moving Average Convergence/Divergence (MAC/D) 116

5 x CONTENTS Momentum 119 Relative Strength Index (RSI) 119 Rate of Change (ROC) 122 Volume Fibonacci Numerical Sequences and Elliot Waves 125 Introduction 125 Fibonacci Rectangles and Shell Spirals 127 Fibonacci Retracements 128 Fibonacci Extensions 128 Fibonacci Time 129 Fibonacci Circles 130 Elliot Waves Money Management Principles 139 Trade with Sufficient Capital 140 Exercise Discipline 140 Be Patient and Persistent 141 Employ Risk-to-Reward Ratios 141 Follow Trading Rules 143 Accept Losses 144 Always, Always Use Stops 144 When In Doubt, Stay Out 145 Never Overleverage Your Account 145 Make Realistic Goals That Can Be Achieved within Reason 146 Always Trade with Money You Can Afford to Lose 147 Protecting Your Profits 147 Keep a Trading Log 147

6 CONTENTS 12 Six Steps to Success 149 Identify Current Long- and Short-Term Trends and Which Trend to Trade 149 Check News and Market Announcements 150 Identify Support and Resistance Levels 151 Use Studies and Indicators for Entry 151 Buy at Dip Bottoms (Uptrends) or Sell on Rally Tops (Downtrends) 151 Use Proper Money Management Getting Started with a Trading Station 155 Access the PremiereTrade Web Site 156 Install and Run the Dealing Software 156 Open a Demo Trading Account 156 Dealing Rates Window 157 Open Positions Window 159 Accounts Window 161 Multiple-Accounts Window 163 Orders Window 163 Placing a Market Order 164 Placing a Stop/Limit on an Open Position 167 Change Price on a Stop/Limit (Open Position) 168 Delete Stop/Limit (Open Position) 168 Close an Open Position 169 Placing an Entry Order 170 Change an Entry Order 171 Canceling an Entry Order 173 Reports 173

7 xii CONTENTS Customizing the Trading Screen 173 Trading Station Options Corporations in the FOREX 179 Introduction 179 Forward Transactions 180 Examples of Strategies 181 Portfolio Management and Currency Risk The Business of Trading 185 Staring your Business 185 The Tax Code 186 How to Become a Trader 187 What If I Don't Make Enough Money to Use Those Deductions? 188 How to Make the Win/Win Better 188 What Kind of Corporation Should You Use? 189 Let's Take a Look at Some Examples 190 Appendix: Bretton Woods System and Post-Bretton Woods System 193 Glossary 199 Bibliography 207 Charts, Figures and Credits 207 Index 209