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Trading Book Reviews

Book Review: Currency Trading in the Forex and Futures Markets

A pretty good job of outlining the different ways one can trade the currency market, though with a strong bias

[easyazon-link asin=”0132931370″][/easyazon-link]I’ve just finished going through [easyazon-link asin=”0132931370″]Currency Trading in the Forex and Futures Markets[/easyazon-link] by Carley Garner. This is the second of Carley’s books I have read following A Trader’s First Book on Commodities. That book, and her regular article writing, motivated me to include Carley as a contributor to my Trading FAQs book and to do an interview with her in support of that. As you will soon find out, this existing relationship has little bearing on my objectivity where this new book is concerned.

On the plus side, this book does a pretty good job of outlining the different ways one can trade the currency market (spot, futures, options, ETFs). There are good explanations of the mechanics of forex trading in its different forms, as well as the primary methods used in the analysis of the market. This includes an in-depth discussion of the Commitment of Traders (COT) report as well as a limited section on forex seasonals.

My major issue with the book is the author’s bias. She is a futures broker, which puts a major lean in her perspective. This is not unexpected, but the blatantly manipulative fashion in which she casts retail spot trading in a negative light is something I find distasteful. She does it repeatedly in the early parts of the book by presenting some of the often-discussed concerns that have come up in the spot arena over the years (mainly related to forms of potential dealing-desk broker manipulations) with full commentary about how and why this could be a risk for someone getting into the market. Then, at the very end, after ratcheting up the reader’s fear level, she finishes with a line something like, “But that almost never happens.” This is the sort of thing I come to expect from politicians, not from book authors.

The casting of spot forex in a negative light, either directly or specifically relative to futures, happens throughout the conversation. I don’t mind that she has a preference, but I’d like to see a more objective discussion with less of an outright attempt to influence the reader. (I personally have traded forex through all the markets she discusses and continue to do so in different ways based on what I’m trying to do in the markets)

There’s also something of an error of omission in the comparison of spot and futures in terms of interest rates. The author rightly comments on the whole roll-over, interest carry mechanism that takes place in the spot market at the end of each trading day. She fails (as far as I saw) to note that the interest rate differential is also a factor in the futures market as it is priced in.

For me the negatives outweigh the positives, so I’m not inclined to recommend this book, though I did like her previous one.

Make sure to check out all my trading book reviews.

5 replies on “Book Review: Currency Trading in the Forex and Futures Markets”

I appreciate the honest review and respect your point of view but it is only fair to tell the whole story. I am a broker in both futures AND FOREX (and have been since early 2003). Throughout my career, I’ve had experience handling clients trading on both ECNs and dealing desks. However, we currently only offer ECN access (for reasons outlined in Currency Trading in the FOREX and Futures Markets). Our clients are free to choose to trade in either venue and can do so side by side within a single trading platform.

In many cases, I actually receive a larger payout for executions in FX relative to similar trades in the futures markets. Accordingly, any bias expressed in this book is based strictly on observations, research, experience (I’ve had a foot in the FX business since its explosion in the early 2000’s) and honest opinion. They are not due to any business driven bias.

There are certain times in which there is a clear advantage to trading currencies in FX such as margin discrepancies, etc. That cannot be denied, but neither can the destruction of client funds in the Refco collapse in which clients received pennies on the dollar. Even the tragic and highly publicized MF Global meltdown returned a majority of futures client funds to traders. This alone (regulatory segregation of client funds) is reason for me to lean toward the futures markets over the FX markets.

Nonetheless, as I say over and over in the book it is up to the trader to educate themselves and determine which venue, or both, will fit their needs.

Carley – As I noted in the review, I have no problem with you having a personal opinion about futures vs. spot vs. options vs. ETFs. I would expect that of any author. My problem was the manner in which you go after the dealing desk brokers.

I’m fine with making the case that you’re not trading in the “real” market when you’re trading with them. That’s a legitimate argument against them. It’s the fear mongering – intentional or otherwise – that you do in talking about them which I have a major problem with. Basically, your approach was similar to a politician talking at length about all the bad things that could happen if her/his opponent is elected (or if a certain piece of legislation is passed), playing on the emotions of the masses, then tossing in a line at the end saying “But that probably won’t happen.”

You may not have intended it to be the case, but your manner of presentation is highly manipulative. It really turned me off in the same way I would be turned off by any politician who employed such tactics. That happened fairly early in the book, which made my more sensitive to the debate throughout the rest of the book, even if the contrasts were less inflammatory.

I can’t apologize for being passionate about what I believe is the best advice for traders 🙂 All I can say is this…Being a broker in FX and working with dealing desks (non-ECN brokers) is a lot like being a server in a restaurant. You know that some of the food has been on the floor, prepared with dirty hands…and maybe even spit on, but unless you tell the customer, he will probably never know (and might even enjoy it). Thanks again for being candid and expressing your opinions; after all, if we all agreed on everything life would be boring…and markets wouldn’t exist!

Carley:
Don’t apologize for calling a spade a spade. Most spot forex brokers are dogshit. I can’t count the times I have been slipped by these bucket shops. ECN…no such thing unless you have a direct currenex account. Market transparency MY ASS!!!…in forex…if you are not trading at least 10 100K lots at a time…you will get screwed….end of story…….and that does include server downtime (they claim). I should of co-written this book–lol To many authors sugarcoat this badly regulated market. There was a reason prior to 1997 that you needed at least 100K 1:1 margin….then you were trading directly with banks.

Stacy – You bring up an ironic point when you talk about spot being badly regulated seeing as so many folks have done nothing but scream (mostly ignorantly from my perspective) about the regulations imposed in the US by the CFTC/NFA. I personally would love to see the whole thing become exchange-traded, but I’m not holding my breath.

As for market transparency, there has never been any in the spot market, even at the upper echelons. The company work for has one of the two big institutional dealing platforms and even we don’t have access to much more than rudimentary information about what’s going on transaction-wise if we’re not in that specific group.

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