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Title: Forex for Beginners: A Comprehensive Guide to Profiting from the Global Currency Markets
Author: Adam Kritzer
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Get Cash For Surveys
Forex for Beginners: A Comprehensive Guide to Profiting from the Global Currency Markets
Copyright © 2012 by Adam Kritzer
All rights reserved. No part of this work may be reproduced or transmitted in any form or by any means,
electronic or mechanical, including photocopying, recording, or by any information storage or retrieval
system, without the prior written permission of the copyright owner and the publisher.
ISBN-13 (pbk): 978-1-4302-4050-1
ISBN-13 (electronic): 978-1-4302-4051-8
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of a trademarked name, we use the names only in an editorial fashion and to the benefit of the trademark
owner, with no intention of infringement of the trademark.
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To Lili and Ethan
About the Author
Chapter 1: Historical Background
Chapter 2: What Are Your Options?
Chapter 3: What Makes Currencies Move?
Chapter 4: Forex Analysis
Chapter 5: Fundamental Analysis
Chapter 6: Technical Analysis
Chapter 7: Trading Strategy
Chapter 8: Opening an Account
Chapter 9: Account Management
Chapter 10: Pitfalls and Risks
Chapter 11: Successful Investing
Appendix: Online Forex Resources
About the Author
Adam Kritzer is a professional writer, investor, and former investment banker. He first began analyzing
currencies in 2004, as the inaugural writer for the Forex Blog (www.forexblog.org). His goal was to
provide an alternative method for analyzing currencies. What began as a basic overview of relevant news
stories has since evolved into what is the web’s premier source for fundamental analysis of the currency
markets. His work has been cited by Dow Jones, and his articles have been published in media outlets as
diverse as the Wuhan Evening Post and Mergers & Acquisitions Journal. A native of Philadelphia,
Pennsylvania, Adam holds a BA in Economics and East Asian Studies from the University of
Pennsylvania. He is fluent in Mandarin Chinese and currently resides in Yunnan, China, with his wife Lili
and son Ethan. When he’s not analyzing currencies, he’s probably out hiking or gardening.
It’s a pleasure for me to acknowledge the contributions of many people to this book. From my parents and
teachers, I first developed an interest in economics, which ultimately guided my approach to analyzing the
currency markets. I am indebted to Andy Hagans for taking a chance and hiring me as the inaugural writer
for the Forex Blog, and to Aaron Wall for continuing to invest in the website and support my approach in
the years that followed. I’d like to thank Jeff Olson of Apress who first proposed that I write this book,
and to Morgan Ertel, Rita Fernando and the rest of the team at Apress including Jill Balzano, and Joanna
Meekins for shepherding this book through the writing and editing process. Finally, I am eternally grateful
to my wife Lili for her patience and support during the lengthy period I spent laboring on this book.
A friend recently asked for my advice; his multinational employer was temporarily relocating him from
the United States to the Netherlands. Furthermore, his salary would no longer be paid in US dollars, but in
euros. His quandary was such that, while his long-term finances were denominated in dollars, he would
still need to maintain a local supply of euros to fund living expenses. What would be the best method, he
wondered, for minimizing any foreign exchange losses upon his eventual return to the United States? The
answer to this question, I informed him, could easily fill a few hundred pages.
This book is albeit less concerned with personal money management and is really about a type of
financial investing. My interest in writing it—and certainly, your interest in reading it—follows from the
idea that it is possible to actively profit from fluctuations in exchange rates. Nonetheless, the fact of the
matter is that foreign exchange is an integral component of the global economy and its influence is felt
daily by businesses, governments, and individuals such as you, me, and my perplexed friend. I firmly
believe that the principles upon which I will expound in the following pages can be applied not only to
forex trading, but to issues as mundane as the foregoing one.
I’ll begin by offering an overview of how the forex market has historically operated and explain how it
differs from some of the other financial markets, in both positive and negative respects. After a brief
discussion of history, I will move directly into the forces that cause exchange rates to fluctuate. There will
be an overview of trading strategies and an in-depth discussion of the various analytical tools that
investors can use to develop such strategies. I will explain how to choose a broker and open an account,
and conclude with some commonsense wisdom on avoiding certain pitfalls and maximizing your odds of
success in the forex market. Throughout the entire book, examples are both abundant and topical to make
the presented concepts more concrete. Given that this book was written from 2011 to 2012, there will be
a special emphasis on the credit crisis, as well as on the years that preceded and followed it.
Before I get into the nuts and bolts of forex, I want to offer a brief caveat: this book should not be filed
under the domain of get-rich-quick schemes. There is no undiscovered opportunity and certainly no free
lunch in forex. There are no magic formulas, no risk-free trading systems, and no guarantees of instant
profits. The global currency market is by far the largest financial market in the world. Participants are
savvy, and competition is fierce. To achieve success in forex trading requires the same dedication and
hard work that it takes to succeed in one’s normal professional life.
That being said, there are many aspects of forex—to be explained in great detail—that distinguish it from
other asset markets and make it an attractive alternative for jaded stock market investors.
This book is intended to fill a void in existing financial literature. Most forex primers tend to devote
tremendous space to technical analysis—the study of charts and price patterns—and are almost
completely lacking in context. They posit that high-frequency, short-term trading is the only viable method
for generating enough profit to sustain oneself as a full-time trader. For a number of reasons, however, the
chances of succeeding with this strategy are extraordinarily low, and the majority of such traders tend to
fail fast and fail big.
This book, in contrast, will probe more deeply into the currency markets and introduce a broader-based
approach to forex trading. Readers can expect to obtain both a concrete understanding of what makes
forex different from other financial markets and the ability to craft specialized strategies to profit from it.
To the silent majority of readers that are interested in forex for the potential to earn supplemental income,