For active foreign exchange traders, there are thousands of forex trading books available in hardback, soft cover, or digital format. No matter if you are looking to become a technical analyst or brush up on your market history, rest assured that there are a myriad of works addressing almost any trade-related topic.
In this article, we'll cover how to select reading material that is helpful to beginners and experienced traders alike. Also, we've listed several of the best forex trading books in circulation. Read on for some tips and titles that may enhance your journey as a forex trader.
Narrow Down Your Field Of Study
With so many choices available, choosing the best forex books for your unique area of study can be overwhelming. A great first step in conducting research of any kind is to identify your goals.
In the case of forex trading, your primary objective(s) will be directly related to a few personal attributes. Your experience level, analytical base and market perspective will play into your chosen area of study. For instance, an intro to fundamental and technical analysis is essential reading for new traders. On the other hand, more experienced traders may find books on history and advanced analytics more useful.
Your experience level is a key element of selecting useful materials for learning about currency trading. The forex is filled with complexities, both structural and strategic. If you are a beginner, then it is a good idea to start with introductory material before moving on to more advanced concepts. There's no shame in starting with a beginners guide like "Currency Trading For Dummies"—the important thing is to build your forex IQ as quickly as possible!
Fundamental and technical analysis are very different methodologies, each with distinct applications. While studying both disciplines is a good idea, it helps to know which analytical camp you are in before dedicating time to the other.
For instance, the value of a book on central banking policy is limited if you are a strictly technical trader. If this is the case, a thesis on the process of price discovery is a must read.
Gaining the proper perspective on the forex is an important undertaking, regardless of experience level or analytical bent. Reading up on general market history, as well as personal anecdotes, is a great way to enlighten yourself on the breadth of the marketplace.
At the end of the day, your position in the market will largely determine which areas of trading are worthy of focus. If you are a novice currency trader interested in technical analysis, then the best forex books are those that introduce technical forex trading strategies. In contrast, expert traders may find more value in gaining a broader perspective by scrutinising the experiences of others.
Below, we take a look at some of the top forex trading books available to readers today. These selections examine a cross section of topics including forex basics, market history, trader psychology, technical analysis and advanced strategies. By no means is this list mutually exclusive; there are countless other titles written on each subject. Nonetheless, these selections provide a top-to-bottom look at the trade of foreign currencies.
Before ever buying or selling a currency pair, it's important to know the basics of the forex marketplace. The following two forex books are designed to give the reader a solid jumping off point into the global currency markets. Although the titles are elementary, don't be fooled; they are treasure troves of essential information.
1. Getting Started In Currency Trading, Michael D. Archer and Jim L. Bickford
Getting Started In Currency Trading is a basic look at all things forex, circa 2005. Created by two 25-plus-year veterans of the financial markets, this book addresses the basic elements of currency trading. It was written with the forex beginner in mind, and it offers a comprehensive backdrop of the modern forex market. Getting Started is an invaluable tool for new traders entering the forex for the first time. It covers basics such as PiPs, interest rates and major forex pairs.
To fully unpack the subject of forex trading, Archer and Bickford address a variety of relevant subjects. Among them are a brief history of the currency markets, basic trading mechanics, winning psychology, as well as more advanced strategic concepts. If you are a financial market or forex newbie, Getting Started In Currency Trading is a great place to begin.
2. Getting Started In Chart Patterns, Thomas N. Bulkowski
A pioneer of technical analysis, Thomas N. Bulkowski introduces many elemental concepts in Getting Started In Chart Patterns. Although the title suggests that chart patterns are the focus of the discussion, chapter headings range from "The Truth About Trendlines" to the "Art of Trading." In addition, it includes topics such as support and resistance levels, short-term price action, psychology and even a pictorial index of tried-and-true chart patterns.
What makes Getting Started In Chart Patterns one of the best forex trading books is that it is intuitive and relatable. Bulkowski uses a fictional stock market narrative to highlight key terms and points. Even though equities are the focus, the methodologies outlined for stock trading are also applicable to currencies, futures and debt instruments. For those interested in learning more about technical analysis and how it may be used to potentially generate profits, Getting Started In Chart Patterns is a worthwhile read.
A positive mindset is perhaps the most important part of a successful trader's approach to the forex. Of course, developing the proper trading psychology is no easy task. Unless you are one of the chosen few who is not subject to the human element, taking a few tips from the market pros can help you consistently align risk to reward.
3. Fooled By Randomness, Nassim Nicholas Taleb
A crucial aspect of personal trading psychology is being comfortable with risk. As an active trader, it is easy to forget that risk exists in every facet of life, not just the next forex buy or sell. In Fooled By Randomness, Taleb examines risk management, reward and the role that chance plays in each. Fooled is nothing short of a masterwork on the more obscure underpinnings of success and failure.
Having a thorough understanding of risk is an important part of being able to manage it effectively. Examining its impact on society, as well as the role that luck often plays in risk, is the primary focus of Fooled. Although aimed at the broader financial world, Taleb's Fooled By Randomness ranks among the top forex books on the market.
If you don't have the time to read Fooled, you should at least consider listening to it as an audiobook.
4. Trading In The Zone, Mark Douglas
Where Fooled By Randomness favours the philosophical over the empirical, Trading In The Zone focuses on the latter. It is one thing to recognise the risks involved in active trading, but how do you successfully navigate the many pitfalls it presents?
From day trading to long-term investing, Douglas takes a hands-on approach to trader psychology. In fact, Trading In The Zone could be named Trader Psychology: The Basics Explained In Simple Terms. The book is that easy to read.
Throughout Trading In The Zone, Douglas provides a step-by-step tutorial on how to develop a rock-solid psychological approach to the markets. In doing so, three types of analysis are scrutinised at length: fundamental, technical and mental. Douglas makes a strong case that mental analysis is the most valuable to performance. For anyone struggling at being profitable in the markets, Trading In The Zone is a powerful tool for building an attitude conducive to success.
There are thousands of books on the history of the financial markets, from Edwin Lefevre's 1923 classic Reminiscences of A Stock Operator to Michael Lewis' 2015 high-frequency trading expose Flash Boys.
No matter what type of trader you are, gaining a historical perspective on the financial markets is a worthwhile exercise. Make no mistake, this genre doesn't tell you how to build a trading plan or operate a trading platform. However, it does shed some light on the trading methods of several of the most successful traders of all-time.
5. The Education Of A Speculator, Victor Niederhoffer
An autobiographical account from one of the world's largest currency traders, The Education Of A Speculator is a timely look at markets and wealth as well as what drives them. From the opening pages detailing a massive USD/JPY trade, Niederhoffer chronicles his life, opinions and adventures in the markets. A disciple of legendary currency trader George Soros, Niederhoffer takes a provocative look at all aspects of trading and market theory.
However, perhaps the most instructive element of Education is the time in which it was written. Niederhoffer penned and published the work amid a late-1997 Thailand financial crisis that led to his fund becoming insolvent. While Education is an exhaustive look at global finance, it may be more useful as a cautionary tale of hubris, success and downfall.
The beauty of self-directed study is that your curriculum can be as advanced or as simple as you deem fit. Nonetheless, after completing the introductory and historical lessons, it is time to move on to forex books that are more advanced.
6. The Misbehavior Of Markets: A Fractal View Of Risk, Ruin & Reward, Beniot Mandelbrot and Richard L. Hudson
The Misbehavior of Markets by Beniot Mandelbrot and Richard Hudson is a thesis on the applications of fractal geometry to nature and finance. So, what exactly is fractal geometry? It is a form of mathematics invented by Mandelbrot himself. Essentially, never-ending patterns (called fractals) are identified and used to understand the world around us. Mandelbrot illustrates a collection of ways in which fractals relate to nature, active trading and challenge traditional financial theory.
While the concept of fractals is on the abstract side of academia, Mandelbrot and Hudson present the topic in an extremely readable format. If you are up for the challenge, Misbehavior is a thought-provoking examination of fractal geometry and the financial markets from the field's premier authority.
7. Trading Systems: A New Approach To System Development And Portfolio Optimisation, Urban Jaekle and Emilio Tomasini
The advent of the digital marketplace has given rise to the rapidly expanding field of trading systems. Forex robots, black-boxes and algorithmic trading systems are a few examples of how retail currency traders use technology around the globe. But, how do you actually build an effective system? In Trading Systems, Jaekle and Tomasini shed some light on the subject.
For simplicity, Trading Systems is broken into three parts: a basic guide to systems, a step-by-step illustration of the development process and a treatise on combining multiple systems for portfolio optimisation. The ideas addressed in Trading Systems are complex in nature; however, the presentation of the material is intuitive. For any currency systems trader, this work is among the top forex trading books available.
No matter your trading style, Trading Systems is a worthwhile read. It provides an in-depth look at how data scientists attempt to navigate market volatility. Although it doesn't give you a list of "holy grail" technical indicators to use, it does illustrate just how scientific building a reliable system really is.
These seven titles are not the end-all-be-all to trading literature. In fact, there is a vast catalogue of financial tombs that may be considered useful forex trading books. The following a few more worth taking a look at:
- The New Market Wizards, Jack D. Schwager
- Currency Wars, James Rickards
- What I Learned Losing A Million Dollars, Jim Paul and Brendan Moynihan
- The Black Swan: The Impact Of The Highly Improbable, Nassim Nicholas Taleb
- Elliott Wave Principle, A.J. Frost and Robert Prechter
Regardless of your strategy, size or experience level, the books mentioned in this article can add value to your operation. Of course, for a discipline as nuanced as forex trading, it helps to stay abreast of the current marketplace. Be sure to regularly supplement your reading with expert blogs, webinars and the financial news of the day. In doing so, you will be able to stay in the present while engaging the forex from an informed and educated perspective.
FXCM Research Team
FXCM Research Team consists of a number of FXCM's Market and Product Specialists.
Articles published by FXCM Research Team generally have numerous contributors and aim to provide general Educational and Informative content on Market News and Products.
Retrieved 20 May 2020 https://markets.businessinsider.com/index/ftse_100