The Sensible Guide to Forex, written in 2012 by trading expert Cliff Wachtel, is exactly what people would expect from a book with such a direct title. The tome is pleasant and easy to read on the one hand, yet very detailed and explanatory on the other. In close to 400 pages, Wachtel provides:
• Keen insights on the inner workings of the Forex market and provides the foundation critical for any new currency trader
• A number of unique features for those seeking safer, simpler ways to use Forex markets, whether they are aspiring traders, experienced traders, or even just long term investors more focused on diversifying their currency exposure
For those in a rush, here is a quick list of what we liked and disliked about the book.
1. Explanation of a variety of ways to profit from Forex markets, whether as an active trader or passive investor using safer, often simpler methods than those found in similar publications.
2. Step by step examples of how to identify, plan, and execute trades that minimize risk and maximize returns
3. The first and currently the only book to provide information for long-term traders who normally wouldn’t consider trading the currency markets in this way
4. Offers a lucid beginners guide to inter-market analysis--using clues from forex markets to forecast moves in other markets like stocks or commodities, useful for all investors or traders.
5. The first and only book to cover the detailed pros and cons of the latest innovations in forex: social trading (accounts that mimic the moves of chosen expert traders) and binary options. Used wisely, both [can shorten the path to success with lower risk and better returns / offer simpler, safer, less demanding ways earn exceptional returns with controlled, better defined risk.]
6. Provides a detailed roadmap of low risk ways to get started, and continue your development as a savvy Forex trader or investor.
7. Exceptional focus and detail on how to develop the key skill that separates the winners from the losers, risk and money management. Discusses both the theory and provides numerous step-by-step trading examples of how to we minimize risk.
8. Companion website packed with bonus materials, including a more detailed look at the pros and cons of binary options, a powerful trading tool when used wisely.
1. It’s long. The Sensible Guide to Forex is not for those seeking a quick start guide, but rather for the more serious trader or investor who understands the need to do his homework first. The good news is that the table of contents is exceptionally detailed, so it’s easy to skim it and find what parts are of interest before you start reading.
2. Typos: There are more typographical errors in this book than usual. Not a huge deal, but at times a minor irritant.
3. Charts would have been better in color. They are readable, but color would have made them clearer.
The book breaks new ground in a number of ways, and so provides some refreshingly new perspectives that even experienced traders will appreciate. Below are some things that stood out for us in particular during our The Sensible Guide to Forex review.
Virtually all forex books, even those for beginners, focus on assorted styles of day-trading or other short term, highly leveraged trading that many believe too risky and demanding in terms of time and skill for most investors or new traders until they’ve had years of experience. That may explain why about 70% fail at forex.
In contrast, this book offers a range of solutions that avoid these disadvantages so that the vast pool of mainstream investors, who’ve never tried forex, can feel comfortable using at least a few of them that fit their needs. They’ll have a much easier time surviving the learning period with their confidence and capital intact, and so have a much better chance of being profitable once they gain the requisite experience on practice accounts and with small positions when they first graduate to trading with real money.
For both traders and investors, the book’s emphasis on playing longer term currency pair trends is extremely insightful. The book covers many reasons, in different sections, why one should focus on longer term charts and trends. For example, it’s much harder to change the fundamentals of a country than of a company, so forex markets have some of the most stable long term trends. This point is not new, but what is new is the emphasis (found in a few places in the book) on using these trends for longer term trading or for determining how to allocate what percent of one’s portfolio should be in assets linked to a given currency.
Social Forex trading allows those with minimal background and capital to have an expert trade for them, with better transparency and lower costs than with traditional managed forex accounts. That alone is a big deal. The book discusses how social traders can use the system to profit, rather than falling prey to inappropriate trades.
Binary options trading is slightly older than social Forex trading, but it is generally acclaimed by authors looking to profit, rather than approached in an objective manner. The Sensible Guide to Forex is the only book to date that addresses both the pros and cons of binary options as well as when and how to use them in a prudent manner.
Then there’s the material that involves new applications of existing ideas to forex. For example:
A. Emphasis On Using Longer Term Time Frames And Trends
There’s nothing new about trading or investing based on longer term time frames, but go find a forex book that gives more than a passing treatment about using them. This book goes in depth in multiple places on the why and how of using longer term trends and time frames, and explains the much ignored dangers of the popular day trading methods, in which the big institutional traders have huge advantages over the inexperienced individual trader.
The book also is the only one I’ve seen that integrates use of these long term currency pair charts into long term investing in stocks, bonds, and other assets. I imagine someone has done this somewhere, but go find it in a forex book or book on long term foreign investing.
I could go on, but for the sake of brevity, here’s just a listing of a few other fairly unique features
B. The Exceptional Emphasis And Detailed Explanations Of RAMM (Risk and Money Management), Trader Psychology, And How To Apply It
In addition to specific chapters on this topic, there are numerous step by step trading examples that show how to apply the theory. Per Wachtel, it’s this relentless focus on minimizing losses that separates the winners from the losers.
C. Rare Balance Between Comprehensiveness And Brevity
Most the forex books for beginners tend to be either too superficial to actually get you ready to make money, or to overburden readers with so much detail that they don’t know where to begin and what information to start using in order to actually start trading. This one gives you a defined toolkit of analytical (both fundamental and technical) and risk/money management tools.
In sum, you may not know it all after reading this book, but you will know enough to have a clear path to actually making money.
In the first chapter, called "Three Must-Know Forex Facts", the author not outlines three driving forces required for successful trading, but explains in great detail why some trading risks should not be ignored. In the second chapter, aptly called "Forex Basics", Wachtel quite impressively relates fundamental issues (what is a currency pair, what do short and long mean, etc) in a way that is entirely easy for even novice traders to digest. Each chapter is divided into shorter subsections which enable the reader to relate to the complicated topics as approachable rather than overwhelming.
The beauty of the publication, however, lies not in Wachtel’s explanation of basic principles, but in the ‘heavier’ chapters of the books where he explains more complicated concepts such as technical analysis, charting techniques and indicators, in straightforward ways. There are hundreds of charts included in the book, and it seems that Wachtel chose each one judiciously for its educational value. Unlike some Forex educational materials whose charts are complicated and overwhelming, those included in The Sensible Guide to Forex are, not surprisingly, entirely sensible. Wachtel focuses not only on traditional trading of currency pairs, but on how to trade commodities and binary options, how to use autotraders (and when not to use them), and the risks and rewards of social Forex trading platforms. Though we would strongly recommend reading the book from cover to cover, an organized table of contents makes it possible to find specific topics or chapters instantly.
At the end of the book Wachtel includes seven appendixes. The first one is a list of recommended Forex related sites and some general financial websites that traders can use as a backup resource or a source for current market updates. The other appendices provide specific frames of reference and guidance for practical issues not directly related to placing trades, such as "How to Calculate Pip Value", 'Choosing a Forex Broker" and more.
The byline of the book is "Safer, Smarter Ways to Survive and Prosper from the Start". This is what Wachtel attempts to do in this book and in our view, he definitely reaches this goal. He takes the reader from the very basic of Forex trading to having a well-rounded perspective about this complicated investment method, without sounding superior, overly intellectual or unnecessarily complex. When encountering The Sensible Guide to Forex for the first time, we had high expectations since we’ve been reading Mr. Wachtel’s analysis for years. The book, however, surpassed expectations and showed us an entirely new side of its author, which is the ability to cater to traders at all skill levels, not just those looking for specific technical analysis. The Sensible Guide to Forex is highly recommended for first-timer traders as well as more experienced traders who want to begin trading new pairs or instruments. You can buy the book for $60; in our opinion, it’s well worth the money.
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