OK Debbie.
One question for you, are you more interested in the fundamental section or the technical section?
I would suggest that we could take one chapter from each simultaneously and work forward. The fundamentals are very relevant but maybe the technicals are more practical with respect to actually trading and it might be good to get stuck into those at an early stage! 
I.e. we would be starting with chapters 1 and 10? What do you think?
HI Manxxā¦Good Morning from Northern Ca. USAā¦YESā¦I would enjoy discussion Chapter by Chapter. I am just starting to read about HOW Fundamentals are the moving force of the Forex. I read arguments early in my failed attempt to trade, that technicals were the more important. If I traded my ātechnical knowlegeā properly at that time I would have used my stoploss properly avoiding such massive loss (for me)ā¦I ādefinitelyā was part of that 95% percentile of traders in loss "thinking the market would reverse"at that timeā¦and just forced outā¦my tail between my legs so to speak. Lol. I love this book. I just found out āwhyā I got caught in the selloff āfundamentally speakingāā¦and am realizing that an EXCELLENT trader uses ALL tools, ā¦ fundamental, technical,ā¦AND psychological knowledge to be successfulā¦As Steve Hanks said in the Forwardā¦about surgeons and likening it to tradersā¦more knowledgeā¦I already APPRECIATE finding Babypips.com, this thread, and you :)
Thx!!
Hi Debbie,
I guess we all hang our trust and hopes on one peg or other, or combinations of such pegs. Some swear by fundamentals, others by technicals, some by intraday trades others by several days and still others by days and weeks. In my opinion it is up to the individual trader to discover what works best for them on a consistent basis.
The main difficulty with pure fundamentals IMHO is deciding at what levels to enter trades and when to decide that the view is wrong and exit. Also, currency pairs are exactly that - a pair. So fundamentals are a relative function between the factors relevant in either of those currencies individually. Indeed, even factors concerning other currencies may well impact on the two one is focusing on. Sentiment is also very difficult to quantify as is e.g. geopolitical risk considerations. So even if one trades off fundamental factors it is still worthwhile having at least some kind of technical appraisal to give some kind of structure and bearings as to where we are, where weāve been and where we might be going.
Technicals, on the other hand, assume that it is irrelevant what others or oneself think about the direction, the only relevant factor is what others are doing. In other words the price is the consensus of all active participantsā positions and it will move in response to any change in that balance. So the current price is the net actual result of the outlook of all participants regardless of oneās own view. However, technicals can only tell us where we are relative to where weāve been and give some kind of idea about probable continuation - but how far! In some cases an understanding of fundamentals may well do the colouring within the pencil outlines, as well as adding some general interest for its own sake!
But lets see where this book takes us. I am now reading both chapters 1 and 10 and I will post my thoughts about them as I goā¦hopefully some others may do the sameā¦
HI Manxx and allā¦I am hoping I am replying correctly so that others may join in this discussion. I read Chapter 1 and learned quite a bit. Your insight regarding Fundamentals vs technicalā¦very illuminating. I was being "overwhelmed"with fundamentally keeping track of how the markets moveā¦interest rates, housing equitiesā¦The acronym MEW, besides being past tense (jokingly) of the catās meowā¦had several meanings. I glossed over Mortgage Equity Withdrawal in plain sightā¦and looked up the acronym on the webā¦which gave me a completely different meaningā¦but suffice to say I remembered āstandard of livingā. The assignments were also interesting as I learned about Canadaās, Australia, and GBās housing situationā¦a LOT of trackingā¦and good informationā¦but I think I still prefer Price Action trading. With that said, my APPRECIATION for the fundamentals is MUCH richerā¦and I will not be discounting NEWS!! I had to look up specific actions that the assignments askā¦and FINDING themā¦so my learning curve at an all time high!..On to Chapter 2ā¦and a breakā¦lolā¦Thx for all your input do far
CHAPTER 1
In Chapter 1, the author describes the forex trader as: āriding on a global wave. Some will surf the waves, jumping on and off; others will stay in much longer and face the volatility.ā
Recognising which type of trader one is, short term or long term, is surely important concerning how one deals with fundamental data.
The author, in chapter 1, is only considering two key areas of economic data (others come in later chapters), i.e. interest rates and housing. This is an interesting selection as these tend to also reflect the same short term/long term characteristics as traders themselves.
Currently, Central Bank interest rate policies carry a very high profile and the market watches the various statements and releases from Central Bank personnel very closely, and react very fast to them. Interest rates are a very important and effective tool for controlling both economic growth and inflation. Low rates press on the accelerator, high rates on the brakes. As the author puts it:
āInterest rates are the ādoughā of the fundamental forex pie. They are one of the most important factors that affect forex prices, as interest rates are the modern tool that central banks use as a throttle on their economies. The central banks of the world do not hesitate to use this important tool.ā
But interest rate levels are not just about economic growth. They also affect huge flows of investment capital into and out of various currencies. In this sense, matters can start to get quite complicated. The actual level of interest rate is not the only factor that impacts investment decisions, the interest rate level goes hand in hand with the level of risk associated with the investment vehicle, whether it is equities, industries, or nations. For example, investing in Venezuela would offer a much larger return than investing in US govt bonds but the risk is very different!
It is generally considered beneficial economically for individuals, businesses and countries to borrow money. But the questions are, in each borrower category, how much is being borrowed, what is it being used for, and how well can they repay the debt. Bailing out a bank or a country like Greece is a very different scenario to financing business and infrastructure development in the US or Germany, for example.
This is reflected in the country and business ratings from companies like S&P and Moodys. Public spending by a nation can be a very effective and positive driver of economic progress, but it can also reach excessive levels where the cost of repayment drains the economy, puts pressure of taxation, reduces consumer spending, and can lead to a painful need to borrow more just to fund the public debt when interest rates increase noticeably.
As the author says:
āInterest rate increases do much more than slow down an economy; they also act as a magnet to attract capital to bonds and other interest-bearing instruments. This has been called an āappetite for yield,ā and when applied globally the flow of capital in and out of a country can be substantially affected by the difference in interest rates between one country and another.ā
Therefore, forex traders have to consider what impact interest rate policy may have on actual flows of capital into and out of countries as well as the longer term impact on economic growth, wealth and health.
Regarding housing, this is a longer term factor. A healthy housing market suggests and reflects a high level of confidence in an economy as well as creating jobs. When people move house they tend to spend on furnishings, household goods etc which is a big factor in overall consumer spending. But from a traders point of view, maybe retail sales in total is the more important data release that just housing stats.
Chapter 10 is the first chapter dealing with technical analysis and considers Support /Resistance levels, trendlines and reversals. Iāll post something on that later.
CHAPTER 10
The author starts off the TA section with a general āwarningā that:
ātechnical analysis provides a snapshot of market moves that have already occurred. The resulting snapshot is a picture that is always lagging and limited in resolution.ā
Which is rather strange as he later describes S/R as:
āWhat is most significant about horizontal support and resistance lines is that they are not lagging. In contrast to indicators, they are projectionsā
But maybe the key question is whether lagging actually matters or not! Is it a benefit or a hindrance to projecting where price might go next? Certainly, S&R levels are greatly concerned with where price has been before and has paused. Similarly MAs are a moving window designed to highlight where the current window of ave prices are in relation to earlier windows.
I like the authorās description of TA, and in particular PA, as āmappingā the price and thereby determining its ālocationā.
He says about S/R levels:
āThe basic technical measurement of horizontal support and resistance provides the ground floor of technical analysis. Whenever you look at a currency pair, you have to ask where support is and where resistance is. The answers provide the first mapping of the market.ā
I am sure that S & R levels are a major exhibit on most traderās charts but I have to confess that I have some difficulties understanding just why S/R levels form in forex markets. Much of the technical analysis approach was developed for trading equity and commodity markets and I can see logical reasons why there might be S/R levels in these markets but forex is a bit different.
For example, share values reflect the actual/potential worth of a company. As such, it is possible to envisage where share prices can be considered ācheapā or āexpensiveā with respect to that company. Similarly, commodities like coffee, copper, wheat, oil, etc have a market affected by supply and demand. Supplies cannot be rapidly increased and demand is a factor of price. Therefore, again, areas of price can be observed as reflecting this factors.
But what underlying factors might cause a currency pair to pause and reverse at the same levels. Here, there are two currencies and each is the price of the other. There are outside factors impacting both currencies separately and which vary all the time. Certainly, investment funds and import/export companies will identify levels that āworkā for them but a) do these levels always remain the same, and b) are these particular interests sufficiently large to dominate the forex market as a whole tothe extent that they form turning points?
Personally, I suspect the forex S/R is more a technically-based phenomenon driven by a) many speculative traders identifying and observing the same levels, and b) a sufficiently large volume of speculative interests to be able to drive the price, albeit sometimes only temporarily.
The reasons for S/R are, however, maybe not so important as realising how to use them!
The author states:
āWhen price establishes support or resistance, the market recognizes that location as a zone or hurdle that has to be overcome. The immediate future price movements need to probe and penetrate a support or resistance line. One of the first principles of trading forex is to locate a trade near support or resistanceā
One major issue here is recognising that S/R lines are not precise lines but zones. It is the broad use of charting that tends to focus attention on these points and condense them to very precise levels. But price can often fall short or protrude through these levels and that should always be taken into account when considering entering or exiting at these levels. Decisions need to be made whether to enter above or below the level, and whether when the level is reached or when it rebounds/breaks through.
The author also draws attention to the importance of forming an opinion concerning the strength of the S/R lines. Here he highlights two factors. The first concerns how many times the level has previously turned prices, i.e. the more times it is hit the more relevant it is! The second concerns the time frame on which it is recorded , i.e. S/R levels noted on longer time frames such as monthly and weekly can be considered more significant than, say, hourly charts. It is certainly hard to figure out an underlying cause for hourly chart S/R other than purely technical - and therefore these are surely more susceptible to failure than with the longer term charts.
'
The author then moves on to trends and trend lines, but this post is already far too long. So time for a break.
Coming: Trendlines and multiple timeframes
Not coming: The author also talks in this chapter about using three-line break or renko charts to reveal trend changes. I donāt use either of these so I am not going to comment on them.
CHAPTER 10 - trend lines and multiple timeframes
Continuing the authorās description of āmappingā price,he moves on from S/R lines to trendlines. He does not actually cover these points in very much detail and talks about them on quite a general level.
His main point is in recommending trading with an identified trend because:
"The main benefit of trading with a trend is one of probabilitiesā¦ A prudent trader will seek opportunities that provide a higher probability of success. Trading with a trend meets this condition. "
I guess the detail of actually drawing trend lines is pretty obvious to all traders. But, as with S/R lines, the same cautions apply regarding whether to enter on the approach to a trend line or wait for the bounce off it to confirm its ongoing relevance. Equally, one should remember that trendlines are also zones rather than precise lines.
Regarding the drawing of trend lines, some traders join the extremes of the candle wicks (if using candle charts) whilst others prefer to use the extremes of the candle body, claiming that the extremes of the wicks do not necessarily reflect the real value change during the candle as well as the open/close. This goes to demonstrate that all chart lines need to be interpreted with a dose of commonsense and not with purely mechanical reaction.
Perhaps the most interesting and valuable issue raised by the author concerning trends is the question:
āThe question arises: Which trend should the trader align himself withāthe week trend, day trend, 4-hour trend, and so on?ā
It is clear just by comparing, say, a daily and a 15m chart that an ongoing trend on the daily chart will include many small trends in both directions on the 15m chart. So a trader has to be clear which kind of trend is being traded:
āEach choice has advantages and disadvantages. The basic trade-off is the increase in price volatility and range when a larger trend time frame is selected. Trading in the direction of the weekly trend means that a trader will see periods of time and maybe days when the price is moving the other way, threatening losses. But in this case, if the day trends are also moving in the same direction as the weekly trends, it represents more confidence that the trend is stable. For intraday traders trading off a 15-minute chart, when the 15-minute trend direction is aligned with the 4-hour trend direction and also confirmed by the 5-minute trend direction, there is a high level of robustness to the trend. The concept of three time zones confirming trading decisions will apply in many areas.ā
There are trading methods such as the ā3 Ducksā which work on this basis of multiple timeframes and seeks for alignment of the same trend indicator on, in this case, the 4H, 1H and 5M charts. Trades are entered only when these three timeframes are in the same direction.
But there are also other methods which can be considered as indirectly incorporating multiple TFs without that specific intention. For example, if one takes trade entries from both 5 and 20 period MAs on a 1H chart, one can consider that the 20 period MA on the 1H is actually a close approximation of a 5 period on the 4H chart. Therefore when the price is above both the 5 and 20 periods on just the 1H chart is can also be described as being above the 5 period on both the 1H and 4H charts, i.e. a multiple TF approach.
In general, I have to say that this chapter is extremely thin concerning these very basic technical analysis techniques and that there is a very limited value in reading it. I am not sure that the following chapters are any better either and so, since I have no personal interest in this basic level of generalisation, and there also seems to be little or no interest from others in studying this book, I will leave it hereā¦ unless others wish to continue and join in?
Continuing to build on my knowledge of fundamental and technical knowledgeā¦which is still very lacking, I appreciate your insights, Manxx. I decided to read Chapter 10ā¦ and catch up on Chapters 2 thru 9 later. I guess others who have expressed an interest may be waiting for the 22 of Sept. until they get the book or PDF. I am still reading Chapter 10ā¦and will comment soon. Just wanted to thank you, Manxx your input. One day I will be able to talk intelligently about technicals. I do appreciate all there is learn about Fundamentals. Trading for profit seems a long way off, but, with one foot in front of the other, and a LOT of studyā¦I know I will get thereā¦that is my DEFINITE goal. Be back soon.
Hi Debbie,
My original thoughts were to suggest covering both the fundamental and technical Sections simultaneously, i.e. chapters 1 and 10 and then 2 and 11, then 3 and 12 etc. Then after that to go on to Part 3 which concerns āPutting it all togetherā That way technicians (probably the majority) wouldnāt get bored with having to plough through the fundamentals first.
But letās see first if there is actually anyone out there even interested in this. The level in the book is rather basic but it gets richer with added value if and when others add their own thoughts and experiences!
However, apart from the routine sales and blogs, the current interest here on BP at present seems to be more with verbal pugilism rather than trading, so Iām taking a sideline position here for now and see what happens next - if anythingā¦
Iām definitely interested in joining , I love book clubs/groups.
Iām currently reading Naked Forex for the 5th time. Iāll check out the other books in your collection as well 
consider me in, please.
Hi Manxx : Sorry, have been away this week. Thanks for picking up the mantle. It seems that you have got quite a way through this book already. Will you be starting the next one soon (as it is already 22/09)? Iwas not sure if you had created a sequential list of the books you will go through, so that I might be somewhat better prepared.
Regards,
Kris
Hi Kris,
Actually, we havenāt done very much at all yet from this particular book. I have only written about chapters 1 and 10, which are the first chapters from the fundamental and technical sections respectively.
I had suggested now looking at chapters 2 and 11 but, apart from Debbie, no one else has shown any interest beyond saying āIām interestedā!
I think the idea here is that anyone interested also reads the chapters and posts here what ideas, thoughts, enlightenments, doubts, personal experiences arise from it or are related to the topics.
But its a bit thin so farā¦
I would love to join
I am highly interested , recently I have finished Relay on your MM , now I am looking for another book about same subject.
Price action scalping from Bob Volam is my favorite than others. Right now I am spending on this.
Hi Guys
I am new to trading schema at the age of 24 I know itās quite late but I really want to learn quirky things of trading because without learning things are Fatal.
and your suggestions for book is one of contribution towards my learning process, So do quote a reply from where and in which should I trade,.
What???
ā¦its never too late for forexā¦
I donāt think so itās quite late; by the way you look too hurry to learn Forex trading by bookish knowledge or others. Just keep relax and focused. Bookish knowledge can be useless if you donāt have real trading practice in demo or micro. So, besides ensuring top Forex book it is more appropriate to make sure practice environment. good luck
Nice message. I admit that , if there is anyone who want to learn Forex within very short time of course he will get nothing. Because , learning in Forex is a long term process , I have passed 5-6 years in here. Still sometimes I feel immature in trading and can never calculate the real market faction for all time. this is the reality about learning. so , just keep patience and go forward.