What You Absolutely Must Know
Read this first … or at least skim it. There are things you must know here.
First, congratulations! You’ve just found something few forex (foreign
exchange or currency) beginners ever find—an ideal starting point.
CURRENCY RISK: EVERY INVESTOR’S DILEMMA
You can’t live with them, and you can’t live without them. They’re often complex, exasperating, unreasonable, and irrational, and they always want more of your time and money. I am referring to trades or investments that give you currency diversification, of course. We all need it, but few succeed in currency markets. The methods commonly used are too risky, complex, and time consuming for most people.
Unfortunately, it’s very hard to find the right guidance for getting started. Virtually all of the socalled “Beginners’ Guides” are either:
- too superficial to give you the practical skills needed to start making money, or
- too complex and detailed to provide clear step-by-step ways to actually start making money
- too focused on the usual methods of forex trading that are too risky, complex, and time consuming for most people to use successfully.
We’ve dedicated years to creating a book that avoids these pitfalls. It gives you a variety of approaches to get started via safer, simpler, more profitable ways to lower your risk and increase your returns, either as a conservative forex trader or as a more passive longer-term investor seeking exposure to assets in the best currencies.
Unlike other beginners guides, this book has the right balance of practical information and methods you use to actually make money, without burdening you with too much information or the wrong kinds of information. It provides the shortest path to actually making money as soon as your circumstances allow; or in the worst case, to avoid the mistakes and losses that drain your cash and confidence before you have had enough time to find your path to success.
Currency Risk and How to Fight It
Currency risk is today’s great hidden portfolio risk. The governments behind the most widely held currencies are trying to inflate away their debts via low interest rates and “stimulus” (technically not money printing!) programs. It’s unclear whether these policies serve the “greater good;” however, they are likely to devalue their currencies, and any portfolios denominated in them. So, for your own financial selfdefense against that risk, you obviously need to diversify into assets exposed to sounder currencies, or those currencies themselves.But it’s very tough to find solutions suitable for most traders or investors.
- For aspiring forex (foreign exchange) traders, most of the material available is about complex, demanding, time-consuming, high-leverage, high-risk methods unsuitable for the average risk-averse trader seeking steady profits rather than gambling thrills. Yet the materials aimed at beginners tend to be far too superficial to prepare anyone to actually make money. This book seeks to bridge that yawning gap with safer, smarter, and less demanding ways to trade forex, with the details and examples needed to get you ready to start trading or investing as quickly as your personal circumstances allow.
- For longer-term investors, there’s plenty out there about foreign stocks or bonds, but almost all of it ignores the prospects of the currency behind these. A falling currency can turn a good investment into a bad one. This book shows you how to identify the currencies most likely to hold their value and provides ideas about how to apply that knowledge to a longterm portfolio for both income and capital appreciation.
I’m not the only one to recognize the problem of currency risk.1 I’m just the first to offer a book with the most cost-effective solutions to the problem that will actually work for most people, not just the few who are suitable for short term high risk trading. I’m not seeking to manage your money for a high fee (typically unconnected to actual performance), nor am I trying to sell you an expensive newsletter subscription or trading system.
Here is one source to take you step-by-step straight from ignorance about forex markets to competence needed for profiting from them, either as:
- A trader: using safer, smarter techniques than those usually advocated. These will allow you to survive the learning period with your capital and confidence intact, and to become profitable sooner. Those with some background can cut straight to the parts they need.
- A longer-term passive investor: Most sensible investors practice asset and sector diversification, yet ignore this basic principle of diversification when it comes to currency exposure, and have almost all of their assets denominated in a single currency, be it the USD, EUR, GBP, JPY, and so forth.
This failure to diversify into assets in the strongest currencies is uniquely reckless. That’s because the governments behind these and other currencies are pursuing stealth inflation to cut their debt loads. They’ll never admit it, but historically low interest rates combined with repeated stimulus programs betray their true intentions—they want to slash the real value of their debt load through inflation (rather than more responsible but politically harder policies like cutting spending or raising taxes), even if they gut your net worth in the process. We’ll teach you how to identify the currencies with the strongest longterm trends, and the kinds of assets that will ride them, for lower risk and higher, for more reliable returns.
The need for currency diversification is one of the most important lessons of the Great Financial Crisis that began in 2007. Ignoring it involves some toxic combination of ignorance, foolishness, laziness, or recklessness.
I can help cure the ignorance, though if you’re reading this book the other three probably don’t apply to you.
Decades ago, while settling in as a U.S.trained accountant and new immigrant to Israel, I started teaching English to earn some extra money. Teaching anything I understood well always came easily, but I was frustrated because the available textbooks were neither especially clear nor efficient. Teaching with them just made the whole process more painful and time consuming. I kept finding so many shortcuts and better ways to organize the learning process that I soon started writing my own materials. Over the years these evolved into a full set of courseware.
With these in hand, I was able to take absolute beginners to a sixth-or seventh grade level (per standards of the Israel Ministry of Education) in under 30 hours, instead of the hundreds of hours typically required by our local school system or private teaching companies, and had a successful and fun teaching practice.
Years later, while working with forex traders, I found the same situation but worse. There was no Education Ministry to certify the materials, no structured program of what to learn in what order. There were plenty of training materials, some quite good, but most would just waste your time and money spent acquiring, studying, and applying them without success.
Even if you were lucky enough to catch some of the better materials, after countless hours, books, articles, courses, you got some useful information and trading techniques, but you still had to figure out how to integrate it all into a plan of action. You still lacked a clear step-by-step roadmap toward actually making money, or at least not losing much while you learned and practiced.
Figuring out how to get started with forex, either as a trader or as a longterm investor looking for conservative ways to profit from forex trends, can be frustrating.
Still, you’ve got to start somewhere. Welcome to somewhere.
WHY ANY TRADER OR INVESTOR NEEDS THIS BOOK
The following expands upon, and at times repeats, what I’ve said above. The repetition is intentional because it’s needed to get the message through.
As governments sacrifice the value of their currencies, and your savings, to further their own policy goals, currency diversification is no longer optional for prudent investors; it’s critical for your financial survival. With both the U.S. dollar and Euro suffering wild swings over recent years, this lesson is beginning to reach mainstream investors.
You have to do something. Unfortunately, most forex materials focus on time consuming, complex, high-risk, high-leverage trading strategies. The majority of forex traders fail with this approach within a matter of months, while an elite few prosper.
So where to turn? There are so many books, courses, blogs, and webinars, but most will waste your time and money because they’re either too complex or too superficial.
Relax—you don’t have to become another lamb to the slaughter.
If you’re serious about succeeding in forex, you just need the right guidance toward the trading or investing style that best suits you. Welcome to that guidance.
Finally, here’s a sane, conservative approach to forex for rational adults interested in gains, not gambling, either as traders or even just longer-term investors with no interest in directly trading currencies.
Unfortunately, forex’s reputation has been tarnished by too many books and brokers pushing high-risk, reckless trading methods that are unsuitable for most of us. While most new traders fail within months, the elite 20 to 30 percent enjoy a lucrative, stimulating part-time or full-time career. Most of them aren’t geniuses or connected insiders. You can join them, but you need the right start.
Welcome to that start. You’re going to need it. Do one or more of the following sound like you?
- I’m a short-term forex trader seeking to lower my risks and improve my profits.
- I’m an aspiring forex trader but I’m uncomfortable with the time-consuming, high-leverage, high-risk day trader methods and mentality that permeate most of the forex world. I want guidance on how to trade longer-term positions that ride the exceptionally stable longer-term trends with less risk and less need for constant monitoring.
- I’m a conservative, longer-term traditional equities or income investor with less interest in short-term trading. I’m seeking to diversify my currency exposure in order to lower my risk and boost my capital gains and income by having my growth-and income-oriented assets in the currencies most likely to appreciate over the long term.
- I’m too busy to waste weeks on books that are unclear, lack detailed explanations, or bury me in too much information to use. I just want that one book that provides:
- What I need to get started actually making money while controlling risks.
- Fully detailed, well-illustrated explanations.
- Explanations of the different ways to profit in forex markets in addition to the standard methods.
- Guidance about how to continue my education and development as a trader.
- I need a clear introduction to forex basics and the different ways to play this market, and enough analytical and risk management tools that are sufficiently explained so that I know how to combine them into simple trading systems that I can quickly start applying without too much complexity.
- I’m intimidated by forex, though I know I should tap into it somehow. I hear a lot about how most people lose money in online currency trading, and how it is riddled with brokers who just want to push you into risky, high-leverage trading before you’re ready, so before you know what you’re doing you’ve already lost everything. I’m looking for low-risk ways to break into forex, but don’t know:
- How to get started.
- What trading styles are right for me.
- How to locate the right online broker and sources of further training and market analysis.
- I want currency diversification before the @# %*! government destroys the purchasing power and value of my dollars/yen/euros through endless money printing and inflation, but I don’t want to trade.
- I’m seeking an asset that isn’t correlated to all the other markets, and where there’s always a playable trend or trading range regardless of what stocks or bonds are doing.
If any of these needs are yours, then you’ve come to the right place.
What This Book Offers
Here’s what you get.
- An intelligent introduction to forex. Instead of time-consuming, high-risk methods unsuited for most people, this book provides:
- Focus on a variety of lower-risk, simpler, less time-consuming trading methods, styles, instruments, and time frames to suit different personalities and needs.
- Detailed coverage of the key aspects of trader psychology, risk, and money management that are in fact the real foundation of trader success.
- Unique, exclusive, in-depth coverage of new, alternative ways and instruments for forex traders that are less risky and demanding—social trading and binary options.
- Ways for longer-term passive investors to identify the most stable, reliable longterm forex trends and the best assets for riding them for higher returns and lower risk via currency diversification.
- A practical introduction to forex. Going beyond simplifications and theory, it provides a practical, well-illustrated, step-by-step guide to actually identifying, planning, and executing lower-risk, higher-yield trades and investments for a variety of traders and investors.
Why Listen to You, Cliff?
The short answer is: As trader, writer, advisor, and chief analyst in one form or another for over 30 years, I’ve been both ringside seat spectator and combatant in the markets. You can find further details through a simple online search from various online profiles.
Rabbi Noach Weinberg once told me that a fool learns from his own mistakes, but a wise man learns from the mistakes of others.
Here’s my offer to help you learn like a wise man, from my mistakes and experience. Credentials aside, let the ideas speak for themselves.
What This Book Will Not Do
- Pretend to teach you hidden secrets of trading.
- Suggest that forex trading or investing is a likely road to fast riches requiring little effort.
- Focus on the high-risk, overly complicated, or very short-term hyperactive trading styles typically advocated in so many forex books. These strategies alone virtually guarantee failure for all but the few with exceptional experience, powers of concentration, temperament, risk tolerance, and capital. The only positive thing these strategies reliably produce is high trading volume fees for the brokers. In one recent survey, most online forex brokers reported that only 20 to 25 percent of their traders were profitable.
- Burden you with interesting but unnecessary historical background information about forex.
- Overload you with more kinds of fundamental and technical analysis tools than you can use, and leave you without guidance about which tools to start with and when to add or use others. That, in turn, risks causing traders to:
- Abandon attempts to learn how to methodically combine different kinds of indicators into simple systems and how to test them. Instead, they attempt random combinations of analytical tools without any controlled method for evaluating which work and which don’t.
- Succumb to paralysis from analysis, unable to act under the weight of a vast flow of often conflicting information.
- Include long tracts of pages repeating information that’s been said better elsewhere and is easily available. Where possible I’ve tried to strike a balance between comprehensiveness and brevity, referring you to quality, free, online resources when appropriate.
- Focus exclusively on leveraged spot market trading. From other forex books, you’d think there’s no other way to play forex. Hardly. For both traders and longer-term investors, there are worthy alternatives to consider in the right conditions, like forex binary options for simple shorter-term trend trading, and forex exchange-traded funds (ETFs) for those seeking exposure by means of an un-leveraged instrument that behaves like a stock and can be accessed via a standard equities account.
What This Book Will Do
- The short version is pretty much the opposite: It will provide an alternative introduction to forex, one aimed at the sensible, rational investor and trader, instead of the madcap gambler or get-rich-quick sucker.
- Virtually every investor needs this kind of guidance, because today, the hard fact is that everyone needs currency diversification.
- We can’t afford to ignore currency markets any longer, so we need to learn sensible ways to benefit from them.
For traders or aspiring traders, that means it will:
- Teach you how to find and execute only the lowest-risk, highest potential yield trades via relatively simple tools and easily available information. In other words, you’ll learn to be a successful beginner with the right tools for your level, rather than a failed imitation of an experienced, prepared professional.
- Show how to use forex to profit in bear markets more easily than with other asset classes like stocks.
- Counteract the get-rich-quick day trader mentality that pervades so many other forex books and leads most traders to failure. Instead, we’ll set you up to succeed by showing you how to keep losses low relative to your gains so you make money even when most of your trades don’t. We’ll push you to make defensive trading your top priority.
- In place of purported secrets, give you the best of what’s been said distilled from over 30 years of experience and a small library’s worth of study.
- You’ll get enough details and tools so that you can identify, plan, and execute relatively simple, low-risk, high-potential yield trades, while avoiding information overload. These include plenty of step-by-step examples of each step of the trading process, including the critical risk and money management so you avoid fatal damage to your capital or confidence. The idea is to give you enough information to make smart but simple trades with relatively low risk and high reward so, in the shortest time possible, you’re trading and, if not making money, at least not losing much while you are learning.
- Give you more than enough of the core skills you need to get started, and then offer guidance on how to continue your education—what to cover next and where to learn it.
- Focus on trading styles, methods, and time frames that are best suited for less experienced traders, the kind that increase the odds of keeping your capital and confidence intact while you gain skills and suffer the normal setbacks.
- Provide a full toolbox of technical and analytical tools and guidance on how to combine them into a variety of simple trading systems that you can back test before risking your cash.
- Show how to combine your analytical risk and money management (RAMM) tools into a complete trading plan.
- Demonstrate how to record and organize your trading plans so you can review every trade and learn from your successes and failures.
- Offer alternative ways to benefit from forex markets beyond the usual leveraged spot market trading of most online forex brokers. Even those who ultimately don’t have the inclination or time for forex trading will find there are multiple ways a more passive, longterm investor can benefit from non-leveraged forex exposure.
- In what may be the most important section of the book, present the first widely published objective look at the two newest ways to profit in forex:
- Forex social networks and social trading: Use a community of fellow traders and ranked experts with published performance data to improve your skills. Or even better, let the best traders trade for you and earn better, more reliable returns with far less work. This is probably the most reliable way for those new to forex to get started actually making money, because you’re using proven pros.
- Binary options: We present the pros and cons of a new, little known, and potentially very useful new forex trading instrument when used properly, binary options. In the right circumstances, these simplify your trading, give you more control over risk, and can up your odds of success.
For longer-term investors with little interest in trading, we show you how to use your knowledge of currency markets to:
- Enhance your capital gains and income.
- Reduce the risks from lack of currency diversification.
- Achieve all this without ever needing to directly trade currency pairs.
For both traders and investors, the book will:
- Guide you to some of the best free online sources of information on a wide range of forex topics, like trade advice, continuing trader training, broker reviews, and daily and weekly fundamental and technical analysis of specific currency pairs and overall markets.
- At the end of the book, leave you with specific ideas on what to do next to get started trading forex.
Yes, I’m offering you a lot. If you’re investing your valuable time to read this, I owe you no less.
In sum, this is the forex book for:
- Profit-maximizing, risk-averse traders: Those seeking a sensible introduction to forex trading, who are more focused on steady monthly profits rather than gambling, via safer, easier, more profitable ways to trade than the short-term, high-leverage, high-risk methods most people associate with forex trading.
- Long-term investors with little or no interest in trading forex: Those seeking to lower currency risk and increase returns by diversifying into assets denominated in the currencies most likely to hold their value and appreciate over the long term.
- Anyone seeking an asset class that works in any market condition: Unlike stocks or bonds, the very nature of forex markets means there’s always a bull market in some currency pair.
Whether you’re a trader or a traditional, conservative, longterm investor seeking capital gains or steady income, this is the one forex book written specifically for you, not the wild-eyed action junkie day trader so beloved (and quickly fleeced) by many in the forex industry.