Book Review > The little book of currency trading: How to make big profits in the world of forex

Kathy Lien is probably the world’s most well known Forex expert and in this book she explains what approach she uses to be successful in the Forex market.  The book is relevant to anyone interested in learning the ins and outs of currency trading anywhere in the world and Kathy uses examples from a number of currency pairs.

After my first browse through the book I noted that there were only nine charts in amongst the 198 pages. I have a technical analysis bias so being new to Forex, I was prepared to have to labour through all the “fundamental stuff” to get to the “heart” of Forex trading.  However, what Kathy does is clearly explain how vital understanding the fundamental issues is to success in the currency markets.  The technical analysis entry strategies she describes are clearly explained but they are not the major emphasis of the book.  What I found most valuable from my review was a better understanding of how to assess market sentiment and an insight into a different approach to risk versus reward and trade management.

There are fifteen chapters, each with a catchy title which draws you in to explore further.  A lot of early pages of the book are spent on explaining why currency trading has risen in popularity and how the rise and fall of currencies affects business and also us as the end consumer.  Kathy makes the point that “currencies are not as foreign as you think! They are part of everyone’s lives already.”

Other early chapters cover topics such as basic knowledge, getting started and what causes currencies to move.  There is a “how to calculate pip values” explanation and daily trading ranges table both of which I would find useful as reference material.  Then the book delves deeper into what approaches an individual might take – investing or trading – followed by the actual strategy – risk/reward, setting stops and profit targets, taking profits, entry strategies and risk management.

The final few chapters are dedicated to exploring mistakes and strategies that may be used to mitigate them, avoiding scams, the importance of having a daily plan and how to become a better trader/investor by keeping a journal and reviewing it regularly.

The writing style is friendly and personal and uses some strong everyday analogies to foster greater understanding.  Each chapter’s key messages are captured at the end of the chapter with a “Get it? Got it? Good!” summary section. Some of the references to TV shows and other mechanisms she uses to make her point, like the Mount Everest and preparing your children for university story, seem to take up too much space for little added value but overall though, the book was easy to read and understand.

I found the five questions (seven if you are a trader) she asks to determine whether a trade is worth the risk or not worthwhile and I liked her explanation of exactly how she uses a simple spreadsheet as a trading log.  The book has a number of very practical suggestions and approaches that the reader could take away and apply.

If you are just starting out in the world of Forex this book will be of interest to you.  If you are looking for insights into what you need to understand to be successful at currency trading and need a methodology or approach as a starting point then this book provides all the basics to help steer you in the right direction.