Brent Donnelly - The Art of Currency Trading: A Professionals Guide to the Foreign Exchange Market

1. Chapter 2
2. Chapter 3
3. Chapter 4
4. Chapter 5
5. Chapter 6
6. Chapter 7
7. Chapter 8
8. Chapter 9
9. Chapter 10
10. Chapter 11
11. Chapter 12

Brent Donnelly

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Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress CataloginginPublication Data:

Names: Donnelly, Brent, 1972 author.

Title: The art of currency trading : a professional's guide to the foreign exchange market / Brent Donnelly.

Description: First Edition. | Hoboken : Wiley, 2019. | Series: Wiley trading | Includes index. |

Identifiers: LCCN 2019001704 (print) | LCCN 2019011822 (ebook) | ISBN 9781119583585 (Adobe PDF) | ISBN 9781119583578 (ePub) | ISBN 9781119583554 (hardback)

Subjects: LCSH: Foreign exchange market. | BISAC: BUSINESS & ECONOMICS / Foreign Exchange.

Classification: LCC HG3851 (ebook) | LCC HG3851 .D66 2019 (print) | DDC 332.4/5dc23

LC record available at https://lccn.loc.gov/2019001704

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To CnD
Thank you for holding down the fort
11:11

The title of Brent Donnelly's book is The Art of Currency Trading. He did not call it The Science of Currency Trading. He also did not call it the Practice of currency trading, the Study of currency trading, or the Discipline of currency trading. Currency trading is an art, much like painting or drawing or playing music. And the people who are really good at it are like artists.

In recent years there have been several attempts to turn trading and investing into a scientific discipline. The proponents of finance as a science call this evidencebased investing. Get into an argument with one of the evidencebased investing people and they will bury you under an avalanche of data and charts. Thing is, the data and charts are contradicted by the market within a matter of days, and rendered useless. You can pretty much find any piece of data to support your conclusion. They have conferences on this stuff. I am not big on evidencebased investing.

There are no immutable physical laws in finance. No e=mc2. No mathematical certainties. You may learn a technique, it may work for a while, and then it will stop working. The market, as a whole, exhibits a property known as nonstationarity, which is the idea that you are playing a game where the rules constantly change. A science can't function under these circumstances, unless it is an adaptive science, which would mean that it isn't really a science. So we're back to square one: trading is an art.

The funny thing about Wall Street is that even though it is filled with the archetypal lax bros from Ivy League schools, the people who really succeed on Wall Street for a long period of time are the creative types. People who are outofconsensus thinkers. Onedimensional linear thinkers don't have a long life expectancy on the Street. Wellrounded people who are also divergent thinkers are survivors. Whenever the tsunami hits, which is usually once every couple of years, they just happen to be halfway up a tree. It's not luck.

I've known Brent since we were both traders at Lehman Brothers, and we have a couple of things in common. We are both creative types with an interest in writing and music, and we both have a curiosity about the financial markets that extends beyond the tiny house that we trade in. Brent says in his book that before 2008 he was the only one on the desk watching things like gold and oil. At the same time, I happened to be the only resident bond market expert on the equity derivatives desk. Crossasset trading is more common these days, and Brent's work in this area is better than anyone I know. Still, most people are content to live in their silo, wholly ignorant of what is going on around them and oblivious to the macro factors that affect the product that they trade.

A trading book like this has been needed for some time: a book sophisticated enough for professionals to understand, but simple enough for retail investors to take advantage of. Brent is honest about his techniques. He doesn't say that they work all the time for all people; his techniques are what has worked for