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The Forex Trading Course: A Self-Study Guide to Becoming a Successful Currency Trader

by Abe Cofnas (2007)

Quick summary -- an in-depth PhD-level extended summary (10-30 pages) for this book is coming soon.

The Forex Trading Course: A Self-Study Guide to Becoming a Successful Currency Trader (2nd Edition)

By Abe Cofnas

Quick Summary

Abe Cofnas delivers a comprehensive second edition of his forex trading course that integrates fundamental analysis, technical analysis, and practical trading strategies for the post-2008 financial crisis world. The book uniquely emphasizes the interplay between macroeconomic fundamentals and technical chart patterns, covering interest rate dynamics, central bank policy, currency personalities, volatility analysis, risk management, and the emergence of binary options and bitcoin trading.

Detailed Summary

Part I: What Drives the Forex Market

The book opens with a thorough examination of the fundamental forces driving currency movements. Cofnas argues that separating fundamentals from technical analysis exposes the trader to avoidable losses and great distortions. The five-minute trader who trades in the direction of the longer fundamental trend is likely to be more profitable than one who ignores fundamentals entirely.

Interest rates and interest rate expectations are identified as the primary driver of forex prices. The book traces the pre-2008 rate-hiking cycles (the ECB raised rates eight times from 2005-2007; the Fed raised 17 times from 2004-2006) through the collapse into near-zero rates and quantitative easing, and forward into the post-QE divergence era where different central banks move at different speeds. The carry trade mechanism is explained in detail, including the February 27, 2007 episode when unwinding carry trades in yen caused a correlated sell-off in the Dow Jones Industrial Average.

Housing data receives special attention as a leading indicator. Mortgage equity withdrawals (MEWs), new housing starts, and housing sentiment surveys are presented as tools for anticipating currency direction. The relationship is clear: housing strength translates to consumer demand, which translates to higher probability of interest rate increases, which strengthens the currency.

The book covers the "China Factor" and the role of commodities (gold, copper, commodity indices) in forex analysis, the fundamental personalities of eight major currencies (USD, EUR, GBP, JPY, AUD, NZD, CAD, CHF), and methods for conducting independent fundamental analysis including monitoring trade-weighted indices and central banker communications.

Part II: Timing the Trade with Technical Analysis

Technical analysis coverage spans mapping price action through candlestick charts, three-line break charts, and renko charts; identifying significant support and resistance through Fibonacci ratios, pivot points, and psychological levels; and measuring volatility through multiple dimensions including moving averages, momentum indicators, RSI, stochastic oscillators, and Bollinger Bands.

Cofnas introduces the concept of "market emotions" -- restlessness, uncertainty, surprise, and other emotional states that can be detected through price patterns and volatility indicators. This sentiment-based analysis is integrated with traditional technical tools to create a more nuanced approach to timing trades.

Trading styles covered include scalping, trend trading, set-and-forget approaches, news trading (with sub-categories of "prophets" and "post-news" traders), volatility trading, and reversal trading. Each style is matched with appropriate time frames, risk parameters, and personality types.

Part III: Putting It Together

The final section addresses the practical transition from demo to real trading, strategies for different account sizes (emphasizing that small accounts face unique challenges), paths to success including measuring emotional intelligence through a trader scorecard, and -- new to this edition -- trading bitcoin as an alternative currency/commodity hybrid.

Risk management is woven throughout: stop loss strategies, profit limit strategies, trailing stops, sentiment-based stops and limits, and multilot trading tactics for managing positions are all covered in detail.

Categories

  • Forex
  • Technical Analysis
  • Fundamental Analysis
  • Beginners

Key Takeaways

  • Interest rates and interest rate expectations are the primary driver of forex prices
  • Fundamental and technical analysis must be integrated for optimal results
  • Currency "personalities" reflect their underlying economies and should be understood before trading
  • Market emotions can be detected and exploited through combined sentiment and technical analysis
  • Risk management, position sizing, and stop placement are as important as entry signals
  • The post-2008 era of divergent central bank policies creates unique forex opportunities