Book Review > Getting Started in Currency Trading

When it comes to trading, most retail traders focus on ASX-listed shares. However, currencies are by far the largest asset class, with an average of AUD$5 trillion traded globally each day, including around AUD$100 billion of spot foreign exchange in Australia. With such a large market, Michael Duane Archer has written his book “Getting Started in Currency Trading” to “introduce the novice investor to the exciting, complex and sometimes profitable realm of trading world currencies on the foreign exchange markets (FOREX).” Additionally, Archer hopes his book will “serve as a reference guide for stock and futures traders who wish to explore new trading opportunities.”

Archer’s book begins with a brief overview of the FOREX market, an historical overview of currency trading, and the two primary methods for participating in the FOREX market as a retail trader. Some of this introductory section is written in a question-and-answer style and by the end of it he hopes to dispel any myths the reader may have about FOREX.

“Getting started” is part two of Archer’s book and here he discusses the regulatory environment, the jargon used in the FOREX market and how to perform some basic calculations relevant to currency trading. Also included is a comprehensive section on selecting a FOREX broker, opening an account and the different types of orders that may be placed.

Continuing on from the basics covered in part two, “The tools of the trade” are covered in detail in part three. Here, Archer discusses the two major schools of thought – fundamental analysis and technical analysis; covering the advantages and disadvantages of each as well as offering ideas to the reader on how to select trading tools from these different approaches to assemble a basic personal trading system. Finally, this part finishes with a preview of the various FOREX products and services available from third-party sources to assist with sorting through the vast array of information available to the budding currency trader.

While parts two and three cover a lot of theory – the reader has almost finished reading two/thirds of the whole book by the end of part three – I found the content easy to read as well as being comprehensive and interesting. Archer uses a lot of diagrams, graphs and calculations throughout the text, as well as providing “Tips”, “Rules” and “Do’s and Don’ts”. Additionally, he provides websites to direct the reader where to conduct his or her further research into the particular topic being discussed. End-of-chapter summaries highlighting the most important points are also provided.

Despite spending so much time discussing theory and analysis up to this point, several times during parts two and three, Archer points out to the reader that “your analysis of the market is only one component of your trading system” and that “most traders who fail (and most traders do fail) tend to spend all of their energies on developing a trading system at the expense of money management and trading psychology.” So it is in part 4, “The Complete FOREX Trader” that Archer discusses money management and trading psychology, as well as various FOREX tactics and strategies, how and when to regroup when things don’t go as planned and how to keep good records for tax purposes and trading performance reviews.

Finally, in part five Archer discusses options and exotics and their use in advanced strategies such as rollovers, hedging and arbitrage. Archer points out that while this section is optional for novices, all traders should at least be aware of ongoing market research and the advanced FOREX techniques available. Following the final section are the appendices, a list of resources (periodicals, books and websites) and a comprehensive glossary of terms.

At the beginning of the book, it states that “the author’s attempt has been to make Getting Started in Currency Trading an all-in-one introduction as well as a handy computer-side reference guide”. I feel that Archer has done an excellent job at this. Despite the book being aimed at the American reader, Australian readers will also gain a lot out of his book, but will have to conduct their own research to determine whether the FOREX markets and trading have a place in their portfolio.

Vimal Mehta is a member of the AIA.