FX Bootcamp's Guide to Strategic and Tactical Forex Trading
08/01/2008 12:00 am EST
In the past year, the dollar has spent quite a bit of time on the front pages and needless to say has not slowed the exponential growth in FX trading. This interest should increase the demand for Wayne McDonell's new book, FX Bootcamp's Guide to Strategic and Tactical Forex Trading. One of the steps I always take when reviewing a book is to read the preface or foreword to understand the author's goal as this helps me better assess the book. Wayne shares an interesting perspective in the preface of his book, pointing out the fact that 90% of FX traders fail may be a good thing since it means 10% make all the money. It is his opinion that traders fail because "they are not willing or able to do the work required to become an amazing trader." Additionally he points out that "patience and discipline are just as important as technical and fundamental analysis."
The book is divided into five parts and starts off with a discussion of both lagging and leading indicators. In these chapters, Wayne covers the MACD, stochastics, Fibonacci, and pivot point analysis. The latter two he thinks of as leading indicators since both are looking for future price points as opposed to analyzing past data with the MACD or stochastics. Part Two focuses on what Wayne calls strategic analysis, where he teaches how to develop a bias in a currency pair that will help you stay with the longer-term trend. In order to achieve this, Wayne feels you have to look at global money flow, economic performance, and central banking operations. I am not sure personally whether understanding this is essential for successful FX trading, but he gives a nice explanation of why these concepts are important. Included is an in-depth description and explanation of the carry trade, as well as an itemization of the key fundamental reports that influence interest rates and, therefore, the value of the dollar. In the last two chapters of this part there is an interesting discussion of the correlations between various commodities and currency pairs as well as the correlations within the pairs themselves. Though the broad relationships will not come as a surprise to many FX traders, looking at the relationships in terms of hard numbers should add some additional insight.
Part Three entitled "Rules of Engagement", which covers a wide range of topics, including: market analysis, fundamental analysis, technical and risk analysis. An important part of Wayne's market analysis seems to center around determining the speed of the market. Trending markets are high speed while range-bound ones are low speed. He recommends using Fibonacci and pivot point analysis in trending markets and favors indicators along with Bollinger bands in non-trending markets. To determine the speed, he uses the 21 and 55 period EMAs, but points out that other combinations of a short and a longer term EMA will also work well. Additionally, Wayne advises that one should adjust their trade expectations based on the speed of the market. There is quite a bit of solid, well thought-out advice and trading techniques in these chapters. This includes how to exit trades at price levels where Fibonacci levels and pivot points coincide at what Wayne calls "Fibots". The section of risk analysis also includes some good advice on risk and trade management as well as one of the better treatments of the advantages of making and following a trading plan.
The last two sections are titled "Tactical Planning" and "Psychological Warfare", both of which I found enjoyable. Tactical planning, from Wayne's view includes candle formation, trading on news, range trading, and more. The concluding section is designed to help you grow to become a successful trader with a long-term future. The focus is to help one better understand their own trading through the use of a trade journal, which Wayne suggests you use to significantly increase your trading experience. This process, he believes, will help you become a more selective trader, which in turn should lead to better results. There are some good tips about the process he uses that the reader should find helpful. He shares quite a number of trade examples but I feel these would have been more effective if he had provided the detailed journal entries for each trade. He also suggests developing a long term plan for your trading career but emphasizes repeatedly warns "don't focus on the money, focus on the risk."
Overall this was one of the better FX books I have read in some time and one I can whole-heartedly recommend. Wayne does mention quite a few trading tools throughout the book that a trader might want to use, but the reader should note that these are just a part of the member's package. Though a one-week trial is only $99, the yearly fee is fairly steep. The primary purpose of the Wayne's FX Bootcamp is so that FX traders will have a community to keep them alive and trading during their first year. Though I can't speak to whether they are able to achieve this or not, the book is well worth the time and money for both the novice and experienced traders. If you have been trading for some time and are not satisfied with your performance the book may help you fine-tune your trading, and I would bet that the book will be a good re-read in future years.