While most books on trading deal with general concepts and shy away from specifics, Forex Patterns and Probabilities provides you with real-world strategies and a rare sense of clarity about the specific mechanics of currency trading. Leading trading educator Ed Ponsi will explain the driving forces in the currency markets and will provide strategies to enter, exit, and manage successful trades. Dozens of chart examples and explanations will guide you each step of the way and allow the reader to "look over the shoulder" of a professional trader hard at work at his craft. This book provides traders with step-by-step methodologies that are based on real market tendencies. The strategies in this book are presented clearly and in detail, so that anyone who wishes to can learn how to trade like a professional. It is written in a style that is easy to understand, so that the reader can quickly learn and use the techniques provided.
Table of Contents:
Preface xv
Acknowledgments xvii
About the Author xix
Part I The World’s Most Dynamic Trading Market 1
Chapter 1 Getting Started in Forex 3
From Stocks to Forex 4
Getting to Wall Street 4
Welcome to the Jungle 5
Football and Forex 5
Stock Market Headaches 6
Welcome to Forex 9
A New Beginning 10
Chapter 2 All About Forex 11
The Canadian Dollar and the U.S. Dollar 11
The Euro and the U.S. Dollar 12
Trading Terminology 13
An Easy Way to Understand the Exchange Rate 23
Chapter 3 Questions and Answers 25
Why Does the Big Money Trade Forex? 25
Why Is Forex Suddenly So Popular? 26
How Do Traders Make Money in the Forex Market? 26
Why Do Currencies Trade in Pairs? 27
How Can I Trade Two Currencies at One Time? 28
How Is 24-Hour-per-Day Trading Possible? 28
How Is the Trading Day Structured? 29
Greenwich Mean Time 30
Chapter 4 Technical Analysis and the Forex Market 33
The Theory behind Technical Analysis 33
Statistical Survey 34
Fear of the Unknown 34
Trading Patterns and Technical Indicators 35
The Psychology behind the Market 36
Moving Beyond Technical Analysis 38
Trends 39
Proper Order 39
Fibonacci Techniques 41
Chapter 5 Things You Need to Know Before Trading Forex 43
The “Triple Threat” Trader 43
Gaining Experience 44
Which Pair to Trade? 45
Commodity Currencies 46
Don’t Limit Yourself 47
Trading and Karma 49
Schadenfreude 50
Part II Trading Strategies for Trending Markets 51
Chapter 6 Understanding Trends and Tendencies 53
Trading Conditions 53
The Importance of Maintaining Objectivity 55
Begin with a Tendency 57
Putting the Trend to Work 59
Self-Fulfilling Prophecy 59
Take Me to the River 60
How to Determine If the Market is Trending 61
Chapter 7 The Anatomy of a Trend 63
Why Trends Form 63
Don’t Fight the Trend 66
Chapter 8 Forex Multiple Time Frame Strategy 69
Why Does It Work? 70
Combining Fibonacci and Trend 71
Overbought Does Not Equal “Sell” 73
Picking Tops and Bottoms 75
The Entry Signal 76
Placing the Stop 76
Getting Out 77
Welcome to the Real World 79
Tweaking the Exits 79
Executing the Plan 81
Second-Guessing 82
Bringing It Home 83
The Devil’s Advocate 83
When to Stay Out 84
Reloading the Trade 85
Fantasy versus Reality 87
Phantom Signal 89
Temporary Success and Failure 89
The Stop Run 91
Chapter 9 The FX-Ed Trend Technique 99
Trends Are Self-Sustaining 99
Difference of Opinion 100
Big Money at Work 100
The Common Denominator 100
Long or Short 101
Identifying the Trend 103
Filtering the Trend 104
The Catalyst 107
Placing the Stop 107
Volatility Stop 108
Comparing Apples to Apples 109
ATR Calculation 110
The Entry 110
The Stop 112
The Trade 112
Don’t Fish for Minnows 117
Back to the Trade 118
Denouement 120
The News versus the Trend 120
Appearances Can Be Deceiving 121
More Than One Chance 124
Partial Exit Exercise 125
Discretionary and Strategic Exits 126
Faulty Wiring 126
Partial Exit Technique 127
Reloading 128
Important Points to Consider 129
Final Thoughts 130
Part III Nontrending Trading Techniques 131
Chapter 10 The Ultimate Indicator 133
The Price Is the Key 133
Why Support Becomes Resistance 137
The Pleasure Principle and Trading 137
Price Action 139
Don’t Stand in Front of a Freight Train 140
Chapter 11 Keys to Intraday Breakouts 145
Ascending and Descending Triangles 145
Trend Filter 147
Time-of-Day Filter 148
Summary 152
Chapter 12 Flags and Pennants 153
Pennants 154
Flags 162
Filtering Entries 164
Summary 168
Chapter 13 The Squeeze Play 169
The Cycle of Volatility 169
Perception Moves the Market 170
Volatility Breakout Strategy 176
Chapter 14 The Round Trip 181
Why Round Numbers Capture Our Attention 181
Why Round Numbers Are Effective 182
Round Numbers and Forex 182
The First Bounce Is the Best Bounce 183
Using the Moving Average 184
The Strategy in Action 186
Chapter 15 The Interest Rate Edge 193
Think Like the Big Boys 193
Interest Rate Differentials 194
Here’s How It Works 194
Changing Differentials 195
What’s the Big Deal? 196
Collecting Interest 196
U.S. Dollar/Japanese Yen 197
Long-Term Play 198
Looking Ahead 199
Chapter 16 The Boomerang 201
Fading False Breakouts 201
The Strategy 202
Setting the Parameters 202
Entering the Trade 203
Simple but Effective 205
Part IV Take Control of Your Trading Destiny 207
Chapter 17 How to Achieve Spectacular Gains 209
Keep Your Eyes on the Road 210
Proper Goal Setting 210
Breaking Down Your Goals 212
Consistency Is the Key 213
What Happens When I Reach My Goal? 214
Chapter 18 The Forex Playing Field 215
Evening the Odds 215
The House Has the Edge 216
Make the Playing Field Bigger 216
But the Other Trading Instructor Said 217
Let’s Do the Math 217
Changing the Equation 218
Why Doesn’t Everyone Do It? 219
Huge Gains with Minimal Effort! 220
What We Can Learn from the “Smart Money” 221
Now Get Out There and Win 221
Chapter 19 Trading Lessons from Life 223
Panic at the Beach 223
The Endless Tournament 224
Summary 225
Chapter 20 What You Don’t Know Can Hurt You 227
Sarcasm Alert! 228
Know When to Retreat 228
The “95 Percent Winners Strategy” 229
Beware the Back Tester 230
Hypothetically Speaking 230
Chapter 21 A Tale of Two Traders 233
Individuals versus Institutions 233
The Difference Between Amateurs and Professionals 234
Chapter 22 Some Final Thoughts 237
A Good Trade Is Not the Same Thing as a Winning Trade 237
Proper Execution Is Critical 238
Take Responsibility for Your Actions 238
Keep It Simple 239
Physical versus Mental 239
In Closing 240
Glossary 241
Index 247
About the Author :
ED PONSI is the President of FXEducator.com and is the former chief trading instructor for Forex Capital Markets. He is an experienced professional trader and money manager who has advised hedge funds, institutional traders, and individuals of all levels of skill and experience. Ponsi is featured on the FXEducator.com DVD series, Forex Trading with Ed Ponsi. He is a dynamic public speaker who has appeared on numerous television and radio programs, and is a frequent guest lecturer at trading conventions and seminars around the world.
For more information, please visit www.edponsi.com and www.fxeducator.com.
