The New Sell and Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines, Expanded Second Edition

FOREX

Whereas the sections on futures and options began with lists of recommended books, I cannot offer such a list here. There is not a single book on trading forex that I can confidently hand to you and say “It is good; read it.” You will have to pick bits and pieces from among the stacks of books on forex.

The forex market has several distinct segments, and your choice of where to trade will have a huge impact on your chances of winning or losing. The differences between traders in the forex market remind me of the class system in a Third World country. There are a few rich citizens, the great unwashed masses of poor people who are not likely to ever get a fair shake, and a tiny middle class, trying to hold on to its tenuous gains.

The big money plays in the interbank market, where dealers trade tens of millions of dollars at a clip. The middle class is in forex futures, getting battered by gap openings because futures trade almost 24/7. Down at the bottom of the pyramid are the poor folks with small trading accounts at forex houses.

Gamblers, losers, and poorly capitalized beginners are always on the lookout for the next big chance to get rich quick. Years ago they used to trade odd lots on the stock exchange, and then moved to buying options. After they lost their shirts and many other garments, the getrich-quick crowd migrated into the forex market.

The trouble with forex is that most forex houses operate as bucket shops. When you place an order to buy or sell, they ...