Forex Hacking Book - Introduction

First of all, "hacking" is a twist of Paul Graham's definition1 - it's about being talented at something. Just so you don't think it has to do with breaking into computers.

Over the last six years I have been involved with the foreign exchange market, and it has been a very interesting period. I have been in every single corner of this industry, trying hundreds of different systems and trading strategies, read a dozen of books about it, tried different expert advisors, signal services, etc. I have seen brokers open one day just to close down their operations a month later. I have seen people get scammed in every way imaginable. And most of all, I have spoken with people who have lost lots of money. The forex market is often referred to as the slaughterhouse, and with good reason! The typical expectation of a person starting a journey with forex trading is often sky-high, but it only takes a short period before the initial account balance is blown, and the anticipation of fast money is reevaluated.

Getting good at forex trading requires you to approach the market in a proper way. We want to remove the gamblers mindset and used good money management. New traders tend to prioritize technical analysis. I did the same thing when I started out. Funny enough, this is only a fraction of the whole game. When you want to become a good forex trader you need to take a lot of different aspects into consideration. Starting out in forex trading with a very limited amount of knowledge is a dangerous practice, and when the first account has been blown, people often try to overcomplicate things, and shortly after they will end up with a cluttered chart showing too much and often contradictory information. Finding a balance is difficult and comes with experience. With this book I will do my best to give you a head start, so you can avoid some of the mistakes I have made throughout the years I have been trading the forex market.

It is not only the practice of trading which requires a solid approach but your entire understanding of the fx industry as a whole. Unscrupulous brokers make trading even more difficult where the odds surely are not in your favor. New stories about broker fraud appear every day. Even with reliable brokers you will be prone to increased spreads, slippage, variation in quotes and high leverage levels which will help you blow your account even faster. Recently we have seen a new proposal from the CFTC (Commodity Futures Trading Commission), as they would like to see stronger restrictions on leverage. This has caused a lot of turbulence among retail forex traders, claiming this will have fatal consequences for the retail forex industry. Just keep in mind that there is a reason for this proposal. I am sure that many traders would actually benefit from a regulated leverage of 10 to 1. (Editor's Note: Lower leverage did become the rule in the US. Most pairs permit higher than 10:1.)

Furthermore there are a bunch of so-called gurus trying to promote new products every single day. The majority of these people have never taken their time to learn anything about how to actually trade the forex market. Most of these commercial systems and strategies are nothing but hot air. I have seen a simple MACD crossover strategy being sold for more than $500. Of course it is being marketed like some kind of magic secret. Promises of rags to riches are a very common element when new forex products are being promoted. You might as well realize that this is not what forex trading is all about. In addition to this, you do need a decent account balance in order to make a return which will make it worth your time to learn how to play the game.

I am not trying to promote myself as a guru or expert in any way. I still have a lot to learn and in my opinion the learning process will be never-ending. The forex market is a dynamic environment where adaptation is a key-element, for long-term success. However, I have been in this game for six years, and during this period I have lost my fair share to the market, and learned a lot in the process. I made many mistakes which I sure would like to have been saved from. This book is my attempt to share some of these thoughts, as well as to supply you with specific trading strategies that I use to trade the forex market.

I believe that this book contains material suited for the beginning trader as well as the more advanced ones. However, if you have no experience with forex trading whatsoever, you will need another source of information to understand the basics. I use a bit of terminology that is rather forex specific so if you are unfamiliar with the basics, I recommend you first go to the Forex Peace Army's Traders Glossary.

Although I try to pinpoint certain strategies and actions which you should apply in order to develop and optimize a strategy, you should keep in mind, that everything should be used in conjunction with one another. When you see a possibility for a trade, always look for confirmation, and always apply sound money management. Too much leverage can be tempting but this is one of the most important aspects to control. We want everything to fit our trade plan perfectly before we enter a trade. If one element is missing, we stay out.

We start out with some information about trading logs. Keeping a journal of all the trades taken is the foundation for a successful trading journey. Afterwards I will share some of my thoughts on the limitations and possibilities when using technical and fundamental analysis, getting advice from new forex traders, how to properly get the most of risk-free trades, etc. In the last part of the book I will share the exact strategies I use to trade the forex market.

Let's get started!