Spread Betting the Forex Markets
There are those of you out there that, like me, probably feel an urge to be elsewhere when you hear the words ?spread betting? or ?technical analysis?. I will get my position out of the way now; I am somewhat sceptical of spread-betting as a whole, viewing it as inimical to long-term investing, and am certainly unconvinced as to the merits of spread-betting such a volatile and fast moving market as foreign exchange, or ?forex?, to give its 1980s-style contraction.
Having said that, there are those that will take an opposite view, and that is no bad thing. It is for these people that David Jones has written this book. In it, he sets out to offer an overview of the ideas behind spread-betting as a whole, and forex in particular. In this, he succeeds admirably; the book does not contain pages and pages of strategies and tactics. Instead, he opts to take a rounded look at the operation in order to make it accessible to all, wryly noting that for those of his readers who are making vast fortunes via forex, then the book will be an entertaining diversion in between sports cars and supermodels (or should that be lingerie models?).
Jones himself began working in the City in an IT capacity, before becoming a currency analyst after taking the diploma of the Society of Technical Analysts (yes, these types have their own society). He now also provides commentary for various media outlets, including the bbc and cnbc, and has undertaken a number of educational programmes in client education. This book stems from those experiences.
After dissecting spread-betting and forex, he moves on to discuss the vital concept of risk. Sensibly, he notes that too few traders consider risk, believing that spread-betting is easy, or that they possess a special talent for it (when actually, very few do). It is this part of the book that I consider to be the most important, since poorly thought out trades can rapidly decimate a trader?s funds.
Jones recommends a number of effective strategies, that may seem obvious in the cold light of day, but which always bear repeating. These include not risking more than 3% of your funds on any trade, always have a stop-loss and a plan for getting out if the market moves against you and always examine each trade carefully, weighing up the risks and the rewards before taking the plunge.
In the final section, he runs over the beginnings of technical analysis and trading strategies, looking at the use of support and resistance (with the active employment of stop losses), the idea of following a trend and then rounds off with a discussion of the emergence of indicators and mathematical approaches.
In his conclusion, Jones suggests that the best way to learn is to ?get stuck in?; in this I agree. Too many people stay out of trading and investing, hoping to find a perfect system, when in reality experience is their most valuable guide. The dummy trading platforms now offered make this a simple proposition. Perhaps his most sensible suggestion is the idea that everyone should keep a record of all their trades, with their rationale and exit points noted. In reviewing performance, traders will become better at realising when to become involved and when to stay out.
This book does not promise vast and immediate wealth, but rather offers a sensible and measured introduction to this fast-moving and volatile arena. Perhaps the nicest thing I can say about it is that it even made me think about getting involved, if only for a while.
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