The Forex Trading Course TheWileyTradingseriesfeaturesbooksbytraderswhohavesurvivedthemarket’sever changingtemperamentandhaveprospered—somebyreinventingsystems,othersbyget- ting back to basics. Whether a novice trader, professional, or somewhere in-between, thesebookswillprovidetheadviceandstrategiesneededtoprospertodayandwellinto thefuture.Formoreonthisseries,visitourwebsiteatwww.WileyTrading.com. Foundedin1807,JohnWiley&Sonsistheoldestindependentpublishingcompany intheUnitedStates.WithofficesinNorthAmerica,Europe,Australia,andAsia,Wileyis globally committed to developing and marketing print and electronic products and ser- vicesforourcustomers’professionalandpersonalknowledgeandunderstanding. The Forex Trading Course A Self-Study Guide to Becoming a Successful Currency Trader Second Edition ABE COFNAS Copyright©2015byAbeCofnas.Allrightsreserved. PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey. TheFirstEditionofthisbookwaspublishedbyWileyin2008. PublishedsimultaneouslyinCanada. 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HG3853.C642015 332.4′5–dc23 2015013790 CoverDesign:Wiley CoverImage:©iStock.com/alexaldo PrintedintheUnitedStatesofAmerica 10987654321 Contents Preface vii About the Author ix PART 1 What Drives the Forex Market? 1 CHAPTER 1 The Fundamentals of Forex 3 CHAPTER 2 The Role of Inflation, Reflation, and Deflation 17 CHAPTER 3 Exploiting Information about Economic Growth 23 CHAPTER 4 The China Factor 35 CHAPTER 5 The Commodities Connection: Gold, Copper, Commodity Index, Equities, and Forex 43 CHAPTER 6 How Business Confidence and Consumer Sentiment Affect the Market 51 CHAPTER 7 Fundamental Personalities of Currencies 53 CHAPTER 8 The Personality and Performance of the US Dollar 71 CHAPTER 9 Conducting Your Own Fundamental Analysis 77 PART II Timing the Trade with Technical Analysis 85 CHAPTER 10 Mapping Price Action 87 CHAPTER 11 Finding Significant Support and Resistance 97 CHAPTER 12 Volatility in Forex and Its Dimensions 113 v vi CONTENTS CHAPTER 13 Chart Formations and Price Patterns You Should Know 139 CHAPTER 14 Trading Styles and Strategies 149 CHAPTER 15 Stops, Limits, and Tactics for Risk Control 167 PART III Putting It Together 177 CHAPTER 16 Transitioning to Real Trading 179 CHAPTER 17 Strategies and Challenges for Different Account Sizes 183 CHAPTER 18 Paths to Success in Forex Trading 199 CHAPTER 19 Test Your Forex IQ 207 CHAPTER 20 Trading Bitcoin 213 Index 225 Preface This edition is more than an update on the first edition. Since the first edition was releasedin2008,theworldofforextradinghassignificantlychanged.Thechallenges facingtheforextraderarenewandgreaterthanever.Thefinancialcollapseof2008 usheredinarebalancingoftheworldeconomy,withmonetarypolicyandcurrenciesas key instruments. The era of quantitative easing began, and with it, central bank inter- vention became and remains since a prime mover of currencies. Forex trading became subjecttogreaterspikesanddisruptionsand,morethanever,sensitivetomarketemo- tions. Expectations regarding global growth and inflation have significantly influenced currencymovement.Thesechangesunderscoretheneedforarefocusonfundamentals forforextrading. ThesignificantadvancesintheInternetsince2007havealsotransformedforextrad- ing and its technological environment. The forex trader today has the opportunity to access more information, more quickly than ever before. Also, a popular phenomenon calledsocialmediatradinghasemergedwheretheforextradercan“copy”thetradesof othertraders.TheInternetwrapsinformationflowwithrumorsandhyperbole,creating herdingbehaviorandswarmingpatterns. Since 2008, an entirely new instrument for trading currency directions and market emotions—binaryoptions—hasemerged.Itisoneofthefastest-growingmarketsinthe world.Forexfirmsareincreasinglyofferingbinariestotheircustomers. This edition shows how to use binaries in combination with forex trades to strengthenskillsinchoosingdirection,targets,andstops.Mostrecently,theemergence ofcrypocurrenciesasapotentiallyhybridcurrency/commodityhasspecialsignificance for the forex trading, because ultimately owners all need to sell their currencies and exchange themintolocalcurrency.Thiseditionalsoprovidesinsightintobitcoinasan alternativecurrency. vii