Read It!
Usually, when doing my?book reviews, I?write a?bit about the?contents of?the?book, then point out the?weak and?the?strong sides of?the?piece and?then come up with a?sort of?a?suggestion of?whether it is worth your money and, more importantly, time. In?this case, I?would like to?start off by?stating that the?book is worth buying and?reading. There are only two reasons to?avoid it:
- You already know a?lot about ins and?outs of?the?modern foreign exchange market.
- You trade on?such a?short term that any fundamental knowledge of?the?market is irrelevant; basically it means that you can trade without even knowing, which market you are trading on.
The?Goodies
So, what will a?mindful reader learn from The?Foreign Exchange Matrix? Definitely, not some fancy trading strategy, and?not anything at?all about taking profitable trading decisions. Instead, a?reader will learn more about the?inner mechanics of?various factors that drive currency rates in?today?s market. Here is a?list of?the?essential points explained in?this book:
- The?currencies are moved by?a?variety of?factors and?their influence is not constant. In?different conditions the?same factors may demonstrate forces of?opposite directions on?the?same currencies. The?picture of?all these numerous factors is multidimensional (hence the?word Matrix in?the?book?s title) and?relations between these factors are not linear. The?overall matrix of?dependencies is so complex in?the?world of?FX trading that hardly any price movement can be attributed to?just one event or?just one macro indicator, or?any other single market driver.
- Risk factors have always been quite important, even more so nowadays. The?book provides some ways to?measure the?overall ?riskiness? of?the?markets. The?authors then proceed to?explaining how different types of?risk affect the?modern Forex market.
- Interest rates are the?primary drivers of?
long-term currency prices. The?book explains why, how and?what mediums to?watch in?order to?analyze currency pairs based on?interest rates. - The?possibility of?making correct forecasts in?the?Forex market is discussed in?a?separate chapter, where various market theories are dissected.
- Forex market is traded mostly OTC and?is decentralized with no total accurate volume and?positions data available. The?book describes the?way to?measure the?volume and?current positions that would at?least somehow reflect the?real situation in?the?market.
- A?lot of?blog posts, analysis articles and?journal issues are written about
inter-market dependencies and?correlations. Generally, the?correlations of?other markets with Forex are very volatile and?even when they exist they tend to?be quite weak. The?authors offer many examples and?statistics on?this matter. - It is probably a?bad book to?try to?learn technical analysis from, but Barbara gives a?short overview of?the?TA techniques employed in?FX and?talks about how traders using those techniques may affect prices. You may well skip the?technical analysis chapter if you are fluent in?it.
- The?influence of?
high-frequency trading (HFT) and?other types of?algorithmic trading is in?a?constant growth in?the?foreign exchange market. Nevertheless, it is still significantly less notable than in?equities. An?overview of?the?effects of?HFT on??normal? traders is provided in?a?dedicated chapter. - The?three final chapters of?the?book are dedicated to?one issue?? the?reserve currency status of?the?US dollar. Everything you ever wanted to?learn about reserve currency status, its nature, drawbacks, advantages, consequences and?requirements is concentrated in?the?last part of?The?Foreign Exchange Matrix. These final three chapters are highly recommended for?reading, especially if you, for?some reason, believe in?a?soon end of?the?USD as?the?base for?the?global foreign exchange reserves.
Advantage and?Reasons
The?single most important advantage of?this book is that it offers a?consolidated source of?all the?vital fundamental knowledge regarding the?modern FX market. Whether you are a?new trader, an?experienced speculator or?a?financial specialist from other industry, reading The?Foreign Exchange Matrix will lead you to?
Other reasons to?read the?book include:
Well-referenced statements. You will be able to?follow many citations and?explanations back to?the?sources for?even more useful reading and?research.- A?lot of?curious anecdotes from the?history of?world central banking and?financial trading to?learn from in?a?
non-boring way. Myth-busting . Forex industry and?global finances are ridden with myths and?delusions. Barbara and?Vicki do their best to?dismantle many of?such misconceptions.
Minor Nuisances
While it is a?great book, a?definite
- It was published in?early 2013 and?written in?late 2012, but could already benefit from some updates. In?a?few years, it will contain a?lot of?outdated information.
- The?book lacks some detailed explanations and?examples. Of?course, it cannot contain everything, but it could really get improved from a?major increase in?size.
- It does not explain any of?the?basic Forex or?
finance-related concepts and?terms, which it uses in?abundance. A?newbie trader without significant background in?economics will struggle with some paragraphs.
Conclusion
Overall, it is an?enlightening and, more often than not, exciting read. It is one of?those rare books that I?can wholeheartedly recommend to?every visitor of?this blog. Reading it is well worth those 8?12 hours of?your life.
If you have any questions, comments or?opinions about The?Foreign Exchange Matrix by?Barbara Rockefeller and?Vicki Schmelzer, please feel free to?submit them using the?commentary form below.
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