ForexSpirit

Over the weekend I decided it was time I got back to catching up the small stack of trading books I have sitting on the shelf. Unsure as to which one to read first I picked out two and read the first 30 pages of each to see which piqued my interest more.

The two books battling it out were Day Trading the Currency Markets by Kathy Lien and Mastering the Trade by John Carter.

Kathy Lien’s book did not get off to the most promising start. In the first chapter, the forex market is explained and then compared to equities and futures. Somehow the forex market is better in every way; those pesky equity and futures markets are only open for a few hours a day. Examples are given of how expensive the spread and commission can be in a potential stock or future trade while nothing is mentioned about the large variety of spreads that exist on different currency pairs.

To my tough and cynical eyes the unbalanced comparison of forex to other tradable markets was nothing more than thinly veiled hype. What makes the cynicism all too easy to believe in is that Kathy Lien works for FXCM, one of the largest retail forex brokers around.

Statements of supposed fact are also uttered that had me raising my eyebrows in slight disbelief. For example:

“Most futures traders are technical traders, and as mentioned in the equities section, the FX market is perfect for technical analysis. In fact, it is the most commonly used analysis tool by professional traders.” (p. 12)

How exactly was that fact arrived at? Where’s the evidence? To me it just seemed to be a set-up: let the reader know that most of the pros make their money using technical analysis techniques, and then later in the book I’m sure there’s plenty of technical systems for them to try out.

The subtlety and sneakiness of this leapt out at me when I switched over and started to read John Carter’s Mastering the Trade.

John Carter kicks off Chapter 2 on Psychology 101 (always a good sign when trading psychology is placed way before any mention of markets or systems), with a section titled: Show me a guy with a system, and I’ll show you a guy who is welcome in my casino.

Any trader who is not 100% confident in their trading system ends up tweaking and modifying it when they experience a run of bad trades. The market has changed so I’d better re-jig my system parameters. This introduces the risk of making a mistake, such as by over-optimizing the system or getting flustered and over-riding your system’s signals.

“In the casinos, as in trading, it only takes one stupid bet to blow the whole wad. Casino owners know this, and this is why they sell the strategy books right there on the property, prominently displayed in their own gift shops. This elevates the concept of the fox guarding the hen house to a whole new level.” (p. 19)

While I’m sure Kathy Lien is a lovely lady, I think I’m going to stay clear of the foxes for now.