Carley Garner - Currency Trading in the Forex and Futures Markets

Carley Garner

Vice President, Publisher: Tim Moore
Associate Publisher and Director of Marketing: Amy Neidlinger
Executive Editor: Jim Boyd
Editorial Assistant: Pamela Boland
Operations Manager: Jodi Kemper
Senior Marketing Manager: Julie Phifer
Assistant Marketing Manager: Megan Graue
Cover Designer: Chuti Prasertsith
Managing Editor: Kristy Hart
Project Editor: Jovana San Nicolas-Shirley
Copy Editor: Bart Reed
Proofreader: Mike Henry
Indexer: Larry Sweazy
Compositor: Nonie Ratcliff
Manufacturing Buyer: Dan Uhrig

2012 by Pearson Education, Inc.
Publishing as FT Press
Upper Saddle River, New Jersey 07458

This book is sold with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services or advice by publishing this book. Each individual situation is unique. Thus, if legal or financial advice or other expert assistance is required in a specific situation, the services of a competent professional should be sought to ensure that the situation has been evaluated carefully and appropriately. The author and the publisher disclaim any liability, loss, or risk resulting directly or indirectly, from the use or application of any of the contents of this book.

There is a substantial risk of loss in trading futures and options.

FT Press offers excellent discounts on this book when ordered in quantity for bulk purchases or special sales. For more information, please contact U.S. Corporate and Government Sales, 1-800-382-3419, .

Company and product names mentioned herein are the trademarks or registered trademarks of their respective owners.

All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher.

Printed in the United States of America

First Printing January 2012

ISBN-10: 0-13-293137-0
ISBN-13: 978-0-13-293137-3

Pearson Education LTD.
Pearson Education Australia PTY, Limited.
Pearson Education Singapore, Pte. Ltd.
Pearson Education Asia, Ltd.
Pearson Education Canada, Ltd.
Pearson Educatin de Mexico, S.A. de C.V.
Pearson EducationJapan
Pearson Education Malaysia, Pte. Ltd.

The Library of Congress cataloging-in-publication data is on file.

This book is dedicated to DeCarley Trading
and its wonderful clients, those by my side
with every key stroke (Tracy, Maggie, and
Bailey), and those with big dreams as well as
the motivation to make them reality.
Dream until your dream comes true!

Im grateful for my friends and family that exude support and positivity regardless of the circumstances or the geographical distance the pursuit of life has driven between us.

Id like to thank the crew at FT Press for consistent efficiency and innovation; without their support and entrepreneurial spirit, none of this would be possible.

Most of all, I am humbled by those that sacrifice so much to ensure Americans are provided freedom of expression, the opportunity to seek happiness, and the liberty to chase success without limits.

Carley Garner is an experienced futures and options broker and co-owner of DeCarley Trading in Las Vegas, Nevada. She is also the author of A Traders First Book on Commodities and Commodity Options published by FT Press. She has contributed to the FT Press Delivers line of digital products, Insights for the Agile Investor. Her e-newsletters, The DeCarley Perspective, The Stock Index Report, and The Bond Bulletin have garnered a loyal following.

Carley is a Magna Cum Laude graduate of the University of Nevada Las Vegas, where she earned dual bachelors degrees in Finance and Accounting. She jumped into the options and futures industry with both feet in early 2004 and has become one of the most recognized names in the business.

Throughout her fast-paced career, Carley has been featured in the likes of Stocks & Commodities, Futures, Active Trader, Option Trader, Your Trading Edge, Equities, Expiring Monthly, and Pitnews magazine. Carley is often interviewed by news services, such as Reuters and Dow Jones Newswire, and has been quoted by the Investors Business Daily and The Wall Street Journal. She has also participated in radio interviews and can be found on the speaking circuit. Carley is also proactive in providing free trading education; for details, visit www.DeCarleyTrading.com.

The concept of currency in civilization dates back to the ancient Egyptians, but the ability for the average individual to participate in the speculation of currency is a relatively new concept. As technology improves, so does the ease of access to the markets; compliments of lower barriers to entry, popularity in currency trading has soared.

Whether or not the inflow of currency speculators to the financial markets throughout the previous decade has had a positive or negative outcome on valuation is still up for debate. Some argue the added market liquidity enables markets to discover pricing more efficiently(liquidity is simply the ability to easily enter and exit a market efficiently and is the result of more market participants and higher trading volume).

Others claim overzealous speculators teaming together create illogical, and often unsustainable, price moves. Two things are clear: This is a completely different game than it was 20 years ago, and volatility should be expected. Simply complaining about how things were in the good ol days wont make a dime for anyone; in fact, if you are an Internet FOREX chat room groupie, you might find yourself the target of hate e-mail. A wise trader once told me, you cant control what happens in the markets but you can control how you react to them. I believe that becoming a successful trader means being nimble to changes in market conditions, including the ability to adapt to various shifts in participant psychology and behavior.

As an industry insider who makes a living from retail speculation in both the currency and commodity markets, it is apparent that speculators do have the power to drive market prices beyond equilibrium. Although this has always been the case, it seems to be exaggerated now that there is widespread access to the markets by both the sophisticated and unsophisticated retail traders. That said, prior to the door being opened to retail speculation, dramatic price moves still occurred; however, the cause was likely light volume rather than a bandwagon mentality that now dominates trade. Accordingly, the financial markets will never be perfect because the primary driving force behind them, humans, will never be. Instead, we are emotional and irrational creatures with a tendency to run with the herd toward the slaughterhouse.

As you begin to navigate the currency markets, it is imperative that you understand the difficulty of the task. If using the currency markets as a personal ATM machine were easy, people would quit their day jobs and prepare for a life of luxury. In reality, the statistics suggests that most active currency traders will leave more money in the markets than they walk away with. Similarly, reading a shelf of FOREX books will lay the groundwork for successful trading but certainly doesnt guarantee it. Unfortunately, the most valuable lessons along your journey will be expensive, and will be taught to you by the markets themselves.

As we will cover in detail, low barriers of entry into the currency markets are relatively new; as a result, this particular trading arena has experienced lagging levels of regulation. Consequently, the FX markets have been a hotbed for money laundering, Ponzi schemes, and other types of investor fraud. Whether it is promised trading profits, highly priced educational software that isnt worth the disc it is recorded on, or platforms with flashing green (go) and red (stop) lights indicating easy profits from buying or selling currencies, there are plenty of landmines that the average retail currency trader will be forced to tip-toe around. Those who arent proficient and alert enough to separate truth from fiction could discover the misery aspect of trading before finding success.