Forex Patterns & Probabilities

07/01/2007 12:00 am EST


Edward Ponsi


If one wants to get an idea of how popular Forex trading has become, they can just look at the number of Forex trading books that have been released in the past year. Leading up to the NASDAQ bubble there was also an explosion of books and courses on Level II Trading, but the switch from fractions to decimals caused many traders to look for alternative methods. Will Forex trading be just another passing ‘fad’? The trading of foreign exchange is a gigantic, worldwide market that is used by all of the major corporations around the world as part of their business strategy. Many are not aware that most multinational corporations have their own currency hedging departments, so unless the world switches to just one currency, I feel that Forex trading will continue to be important and popular. However, the public’s tremendous interest in Forex trading is likely to spur increased regulation or oversight in the future.

Ed Ponsi’s book “Forex Patterns & Probabilities” begins with his reasons for switching from stocks to Forex and in the first four chapters he gives the reader a good, basic introduction to the world of Forex trading. His introduction to technical analysis is brief, and I think would have been stronger if it had been combined with his chapters on chart analysis that comes towards the end of the book. Though most of the book seemed appropriate for both the beginning or experienced trader, others were not. In particular, I found that Ponsi’s recommendations that one learn as much as possible about the fundamentals is not a realistic goal for a beginner in a trading environment. The reason I say this is that you can take two graduate-level economists, give them the fundamental data on a country and get two diametrically opposed views on what direction they feel the associated currency will move. Furthermore, it is my opinion that economic analysis does not give the individual trader the discipline necessary to succeed on a consistent basis.

Criticism aside, my favorite chapters deal with trending markets, which include Ed’s recommendations to look at multiple time frames and how he uses the ADX line to spot trending markets. More charts combining the ADX and his favorite moving averages might have provided further evidence to convince the reader that his approach was valid. The introduction of volatility stops based on average true range will definitely assist the reader in developing a precise, well-reasoned method for stop determination. I feel that the risk management and psychological aspects of trading could have received more emphasis, as that is where many beginning traders fail. As I have commented in reviews of other FX trading books, I believe that focusing on spectacular gains does the beginning trader a disservice as they generally end up wiping out their account. Though I am sure Ed is a successful trader and an excellent teacher, it does not consistently come out in his book. Nevertheless I am sure some readers will find nuggets of information that they can successfully incorporate into their trading.

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