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- From Best Practices to Best Processes -

Brett N. Steenbarger, PhD

1. Stocks—Psychological aspects.  2. Speculation—Psychological aspects.  3. Investments—Psychological aspects.

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Book Details
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 3.00
 Pages
 451 p
 File Size 
 2,338 KB
 File Type
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 ISBN
 978-1-118-93681-8 (hardback) 
 978-1-118-93682-5 (epub)
 978-1-118-93683-2 (ePDF)
 Copyright©   
 2015 by Brett Steenbarger  

About the Author
Brett N. Steenbarger, PhD, is a Clinical Associate Professor of Psychiatry
and Behavioral Sciences at SUNY Upstate Medical University in
Syracuse, New York. He has worked since 2004 as a performance coach
for proprietary trading firms, investment banks, and hedge funds. The
author of three previous books on trading psychology and the popular
TraderFeed blog, Dr. Steenbarger has written over 50 peer-reviewed
journal articles, book chapters, and books on the topic of short-term
approaches to behavior change. He also writes a blog for Forbes that covers
the field of positive psychology as it relates to peak performance.

POST SCRIPT
It is March 5, 2015, nearly four months since Mia Bella and I sat together
as I constructed a new way of charting. Price remains on the y-axis,
but the x-axis represents events—not time. The simplest example of
looking at markets through event time rather than chronological time is
point-and-figure charting. In a P&F chart, it is price movement that is the
event: You create a new bar every time the market moves by a certain
threshold.
But there are many potential events that can anchor the x-axis. Price
change is an event, as is relative price change. Volume traded is an event;
so are upticks and downticks and trades transacted. Once we free ourselves
from the clock and define time in event terms, fresh relationships
become clear.
The stock market does not spend the same amount of days, months,
and years rising and falling. Those who watch the market know that it
typically falls quickly and rises more gradually. Suppose, however, we
measure time in terms of price movement or transacted volume. Rises
and declines begin to show more similarity in duration. Cycles appear
with greater regularity.
When Mia came home after having been rescued from the high-kill
shelter in Kentucky, she spent a good amount of time exploring. She
learned that standing on her back legs and placing her front paws on
a door would open the door. So now, if I’m in a room with the door
partially closed, Mia simply stands, opens it, and walks in. She explores,
she tries things, and she learns. We as traders are not so different. On
my to-do list is a new measure of implied volatility that removes the
impact of realized volatility; a new measure of sentiment that combines
readings from equity and index options; and a revised way of looking
at the buying activity and selling activity of separate groups of market
participants. Some will pan out, others won’t. All I know is that if we
explore enough places and look at enough things, eventually we’ll be like
Mia and figure out how to open doors.

Table of Contents
Preface ix
Introduction xiii
Prelude xvii

CHAPTER 1 Best Process #1: Adapting to Change 1

CHAPTER 2 Best Process #2: Building on Strengths 95

CHAPTER 3 Best Process #3: Cultivating Creativity 199

CHAPTER 4 Best Process #4: Developing and Integrating Best Practices 277

Conclusion: From Best Practices to Best Processes 411

Postscript 415
References 417
About the Author 423
Index 425

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EPIGRAPH

If you don’t have time to do it right, when will you have time to do it over?
John Wooden

Market structure, Price Action, and Trading Strategies

Adam Grimes


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Book Details
 Price
 4.00
 Pages
 3425 p
 File Size 
 13,415 KB
 File Type
 PDF format
 ISBN
 978-1-118-11512-1 (cloth)
 978-1-118-22427-4 (ebk)
 978-1-118-23814-1 (ebk)
 978-1-118-26247-4 (ebk)
 Copyright©   
 2012 by Adam Grimes

About the Author
Adam Grimes has nearly two decades of experience in the
industry as a trader, analyst, and system developer. He
began his trading career with agricultural commodities, a
reflection of his roots in a Midwestern farming community, and traded
Chicago Mercantile Exchange (CME) listed
currency futures during the Asian financial crisis. Later,
he managed a successful private investment
partnership focused on shortterm trading of stock index
futures, and swing trading of other futures and options
products. He spent several years at the NYMEX, and has
held positions for a number of firms in roles such as
portfolio management, risk management, and quantitative
system development. Adam is the CIO of
Waverly Advisors, LLC, an asset management and
advisory firm specializing in tactical allocation and risk
management in liquid markets. Adam is an expert in
applying quantitative tools and methodology to market
data, particularly in modeling volatility and complex intramarket
relationships. In addition to his ongoing
research and trading, Adam is also a prolific writer and
educator. His personal website and blog
extends the work of this book with examples and
applications to live market data. He has been a
contributor on CNBC’s “FastMoney,” and his work
and research have been quoted in major media outlets
such as the Wall Street Journal, Investor’s Business
Daily, TheStreet.com, SmartMoney.com, SFO
Magazine, and many others.

Preface
The book you are holding in your hands is the product of nearly two decades of my
study and experience as a trader, covering the full span of actively traded markets
and time frames. I owe much to authors and traders who have come before me, for no
one produces anything significant in a vacuum. I would not have been
successful without the help and guidance of my mentors,
but I learned many of the lessons here from my own
mistakes. In some ways, this work represents a radical
break from many of the books that have preceded it, and I
hope it encourages you to question much of the
traditional thinking of technical analysis.
This book does not present a rigid system to be strictly
followed, nor a set of setups and patterns that can be
assembled at the trader’s whim. Rather, it offers a
comprehensive approach to the problems of technically
motivated, directional trading. The book is
structured to be read from beginning to end, but
individual sections and chapters stand on their own.
Through the entire work, deliberate repetition of
important concepts helps to build a complete perspective
on many of the problems traders face. The tools and
techniques must be adapted to the trader’s personality and
business situation, but most will find a firm foundation
between these covers. There are some underlying themes, perhaps not
expressed explicitly, that tie this work together, and they
may be surprising to many readers: Trading is hard.
Markets are extremely competitive. They are usually
very close to efficient, and most observed price
movements are random. It is therefore exceedingly difficult
to derive a method that makes superior risk-adjusted profits,
and it is even more difficult to successfully apply such a
method in actual trading. Last, it is essential to have a
verifiable edge in the markets—otherwise no consistent
profits are possible. This approach sets this work apart
from the majority of trading books published, which
suggest that simple patterns and proper psychology can
lead a trader to impressive profits. 
Perhaps this is possible, but I have never seen it work in actual practice.
This book is divided into four parts:
Part One begins with a look at some of the probability theory
supporting the concepts of successful trading.
Next comes an in-depth look at a specific approach to chart
reading that focuses on clarity and consistency lays the foundation for
building and understanding of price patterns in markets. This
section concludes with an overview of the Wyckoff market cycle,
which is already well known in the literature of technical analysis.
Part Two focuses on the details of trends, trading
ranges, and critically, the transitions from one to
the other in considerable detail. This is a deep
look at the underlying  foundation of price
movements, and there is information here that, to
my knowledge, has never appeared in print before.
Part Three might appear, at first glance, to be the
meat of this book, as it includes specific trading
patterns and examples of those patterns applied to
real markets. It also advocates a way of
looking at indicators and other confirming factors
that requires a deep understanding of the
nuances of these tools. One of the key elements
of any trading plan is how the trader sizes the
trade and manages the position as it develops;
these elements are also covered in considerable
depth. Much attention is devoted to the many risks traders will
encounter, both from the market and from
themselves. Though most traders are going to
be tempted to turn directly to this section,
remember that these patterns are only the tip
of the spear, and they are meaningless unless they
are placed within the context provided by
Parts One and Two. Part Four is specifically written for the individual
trader, and begins by focusing on elements of
psychology such as cognitive biases and
issues of emotional control. Chapter 11 takes
a look at many of the challenges developing
traders typically face.
Though it is impossible to reduce the trader
development process to a one-size-fits-all
formula, the majority of traders struggle with the
same issues. Most traders fail because they
do not realize that the process of becoming a
trader is a long one, and they are not prepared to
make the commitment. This section concludes
with a look at some performance analysis
tools that can help both the developing and the
established trader to track key performance
metrics and to target problems before they
have a serious impact on the bottom line.
Last, there are three appendixes in this work.
The first appendix is a trading primer that will
be useful for developing traders or for managers
who do not have a familiarity with the
language used by traders. Like any
discipline, trading has its own idioms and lingo,
an understanding of which is important for effective
communication. The second expands on the
some specific details and quirks of moving
averages the MACD, which are used
extensively in other sections of this book.
The last appendix simply contains a list of trade
data used in the performance analysis of
Part Four. This book is written for two
distinct groups of traders. It is overtly addressed to the
individual, self-directed trader, either trading for his
or her own account or who has exclusive trading
authority over a number of client accounts. The selfdirected
trader will find many sections specifically
addressed to the struggles he or she faces, and to the errors
he or she is likely to make along the way. Rather than
focusing on arcane concepts and theories, this trader needs
to learn to properly read a chart, and most importantly,
to understand the emerging story of supply and demand
as it plays out through the patterns in the market.
Though this book is primarily written for that selfdirected
trader, there is also much information that will be
valuable to a second group of traders and managers who do
not approach markets from a technical perspective or who
make decisions within an institutional framework. For
these traders, some of the elements such as trader
psychology may appear, at first glance, to be less
relevant, but they provide a context for all market action.
These traders will also find new perspectives on risk
management, position sizing, and pattern analysis that may
be able to inform their work in different areas.
The material in this book is complex; repeated exposure
and rereading of certain sections will be an essential
part of the learning process for most traders. In addition,
the size of this book may be daunting to many readers.
Once again, the book is structured to be read and
absorbed from beginning to end. Themes and concepts are
developed and revisited, and repetition is used to reinforce
important ideas, but it may also be helpful to have a
condensed study plan for some readers. Considering
the two discrete target audiences, I would suggest
the following plans:
Both the individual and the institutional trader
should page through the entire book, reading
whatever catches their interest. Each chapter
has been made as selfcontained as possible,
while trying to keep redundancy to an absolute minimum.
After an initial quick read, the individual trader should carefully
read Chapters 1 and 2, which provide a
foundation for everything else. This
trader should probably next read Part Four
(Chapters 11 and 12) in depth, paying particular
attention to the elements of the trader
development process. Next, turn to Chapters 6
and 10, which focus on often-misunderstood
aspects of risk and position sizing. Two
important aspects of the book are missed on this
first read: in-depth analysis of market
structure and the use of confirming tools in
setting up and managing actual trades. These are
topics for deeper investigation once the
initial material has been assimilated.
For the institutional trader, Chapter 1 is also
a logical follow-up to a quick read. Next,
Chapter 2 would provide a good background and
motivation for the entire discipline of technical
analysis. Chapters 8 and
9 will likely be very interesting to this trader.
For managers who are used to thinking of risk
in a portfolio context, there are important
lessons to be learned from a tactical/technical
approach to position and risk management. Last,
many of these readers
will have an academic background. Chapters 2
through 5 would round out this trader's
understanding of evolving market structure.
Following both of these study plans, it is advisable to
then begin again from the beginning, or perhaps to turn
to the parts of the book not covered in these shorter plans
and pick up what you have missed. Intellectually, the
material can be assimilated fairly quickly, but flawless
application may remain elusive for some time.
Additional materials supporting this book,
including a blog updated with examples and trades drawn
from current market action, are available at my web site
and blog, www.adamhgrimes.com. The title of this book is The
Art and Science of Technical Analysis. Science deals
primarily with elements that are quantifiable and testable.
The process of teaching a science usually focuses on the development of a body of
knowledge, procedures, and approaches to data—the
precise investigation of what is known and knowable. Art
is often seen as more subjective and imprecise, but
this is not entirely correct. In reality, neither can exist
without the other. Science must deal with the
philosophical and epistemological issues of the
edges of knowledge, and scientific progress depends on
inductive leaps as much as logical steps. Art rests on a
foundation of tools and techniques that can and
should be scientifically quantified, but it also points
to another mode of knowing that stands somewhat apart
from the usual procedures of logic. The two depend on
each other: Science without Art is sterile; Art without
Science is soft and incomplete. Nowhere is this
truer than in the study of modern financial markets.
 ADAM GRIMES
September 2011
New York, New York

Table of Contents

Series
Title Page
Copyright
Dedication
Preface
Acknowledgments
Part I: The
Foundation of
Technical
Analysis
Chapter 1: The
Trader’s Edge
DEFINING A
TRADING EDGE
FINDING AND
DEVELOPING
YOUR EDGE
GENERAL
PRINCIPLES OF
CHART
READING
INDICATORS
THE TWO
FORCES:
TOWARD A
NEW
UNDERSTANDING
OF MARKET
ACTION
PRICE ACTION
AND MARKET
STRUCTURE ON
CHARTS
CHARTING BY
HAND
Chapter 2: The Market
Cycle and the Four
Trades
WYCKOFF’S
MARKET CYCLE
THE FOUR
TRADES
SUMMARY
Part II: Market
Structure
Chapter 3: On Trends
THE
FUNDAMENTAL
PATTERN
TREND
STRUCTURE
A DEEPER
LOOK AT
PULLBACKS:
THE
QUINTESSENTIAL
TREND
TRADING
PATTERN
TREND
ANALYSIS
SUMMARY
Chapter 4: On Trading
Ranges
SUPPORT AND
RESISTANCE
TRADING
RANGES AS
FUNCTIONAL
STRUCTURES
SUMMARY
Chapter 5: Interfaces
between Trends and
Ranges
BREAKOUT
TRADE:
TRADING
RANGE TO
TREND
TREND TO
TRADING
RANGE
TREND TO
OPPOSITE
TREND (TREND
REVERSAL)
TREND TO
SAME TREND
(FAILURE OF
TREND
REVERSAL)
SUMMARY
Part III: Trading
Strategies
CHAPTER 6:
Practical Trading
Templates
FAILURE TEST
PULLBACK,
BUYING
SUPPORT OR
SHORTING
RESISTANCE
PULLBACK,
ENTERING
LOWER TIME
FRAME
BREAKOUT
TRADING
COMPLEX
PULLBACKS
THE ANTI
BREAKOUTS,
ENTERING IN
THE
PRECEDING
BASE
BREAKOUTS,
ENTERING ON
FIRST
PULLBACK
FOLLOWING
FAILED
BREAKOUTS
SUMMARY
CHAPTER 7: Tools
for Confirmation
THE MOVING
AVERAGE—THE
STILL CENTER
CHANNELS:
EMOTIONAL
EXTREMES
INDICATORS:
MACD
MULTIPLE TIME
FRAME
ANALYSIS
CHAPTER 8: Trade
Management
PLACING THE
INITIAL STOP
SETTING PRICE
TARGETS
ACTIVE
MANAGEMENT
PORTFOLIO
CONSIDERATIONS
PRACTICAL
ISSUES
CHAPTER 9: Risk
Management
RISK AND
POSITION
SIZING
THEORETICAL
PERSPECTIVES
ON RISK
MISUNDERSTOOD
RISK
PRACTICAL
RISKS IN
TRADING
SUMMARY
CHAPTER 10: Trade
Examples
TREND
CONTINUATION
TREND
TERMINATION
FAILURE TEST
FAILURES
TRADING
PARABOLIC
CLIMAXES
THE ANTI
TRADING AT
SUPPORT AND
RESISTANCE
SUMMARY
Part IV: The
Individual, Self-
Directed Trader
CHAPTER 11: The
Trader’s Mind
PSYCHOLOGICAL
CHALLENGES
OF THE
MARKETPLACE
EVOLUTIONARY
ADAPTATIONS
COGNITIVE
BIASES
THE RANDOM
REINFORCEMENT
PROBLEM
EMOTIONS: THE
ENEMY WITHIN
INTUITION
FLOW
PRACTICAL
PSYCHOLOGY
SUMMARY
CHAPTER 12:
Becoming a Trader
THE PROCESS
RECORD
KEEPING
STATISTICAL
ANALYSIS OF
TRADING
RESULTS
SUMMARY
Appendix A: Trading
Primer
THE SPREAD
TWO TYPES OF
ORDERS
CHARTS
Appendix B: A Deeper
Look at Moving
Averages and the
MACD
MOVING
AVERAGES
THE MACD
Appendix C: Sample
Trade Data
Glossary
Bibliography
About the Author
Index

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 Strategies and Tactics

Abe Cofnas

Subjects: LCSH: Options (Finance) | Prices—Forecasting.


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Book Details
 Price
 3.00
 Pages
 243 p
 File Size 
 8,267 KB
 File Type
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 ISBN
 978-1-119-19417-0 (cloth)
 978-1-119-19419-4 (epub)
 978-1-119-19418-7 (ePDF)
 Copyright©   
 2016 by Abe Cofnas 

About the Author
Abe Cofnas is considered a leader in the field of currency trading, analysis,
and training. He founded learn4x.com (www.learn4x.com) in 2001 as one of
the first online training programs for currency trading. He has been the Forex
trader columnist for Modern Trader magazine since 2001, writing over 100
columns on Forex events.
He has authored three previous books on trading: The Forex Trading
Course: A Self-Study Guide to Becoming a Successful Currency Trader (now in
its second edition); The Forex Options Course: A Self-Study Guide to Trading
Currency Options; and Sentiment Indicators—Renko, Price Break, Kagi, Point
and Figure: What They Are and How to Use Them to Trade. He is also the editor
of Binary Dimensions newsletter, which specializes in binary option alerts.
He brings extensive understanding of trading from all perspectives,
including advanced fundamental and political analysis. Cofnas holds two
master’s degrees from the University of California at Berkeley—a master’s in
political science and a master’s in public policy analysis. He is Senior Fundamental
Strategist for the Market Trader’s Institute.
Cofnas can be reached at abecofnas@gmail.com.

Preface
Are you interested in trading, but don’t like to wait weeks and months for a
return? Are you following news events and want to financially benefit from
your knowledge? Are you new to trading and want to participate but avoid
the long learning curve for mastering trading skills? If these questions are on
your mind, this book is for you.
Binary option trading provides excitement and opportunity for achieving
unusually large returns in less than a week! While there are many variations
to this type of trading, this book focuses on the regulatory-approved weekly
binary option trades of the North American Derivative Exchange (Nadex).
Trades have limited risk to the cost of a position. There is no margin. The
trade is a bet on the direction of a market by the end of the week. If the trade
is correct, the payoff is $100 per lot. If it is wrong, the payoff is $0. Simply
put, it’s a yes-or-no proposition. One can open an account with as little as
$100 and start trading. This simple structure allows anyone to trade in over
20 different underlying markets, from currencies to indexes to commodities.
This book takes the reader through the basic features of the binary option
instrument. But it does more. It provides a detailed review of fundamental
and technical analysis useful to making trading decisions. Beginners, as well
as more experienced traders, will be able to build upon their core trading
knowledge. More importantly, new online tools and techniques for detecting
market sentiment are presented, because trading can no longer be separated
from the Internet and the social media it has generated. The web itself is a
force on trading decisions and outcomes, as emotions are propagated through
the web. This phenomenon has made sentiment analysis a major challenge for
traders. For the binary option trader who is shaping a decision for a weekly
outcome, or even an intraday outcome, the critical factor will be the actionable
knowledge that is applied.
This book provides real-world examples of how to scan the political
and economic news and formulate appropriate binary option trading
strategies. Key trading strategies are reviewed with examples. These
include: at-the-money; out-of-the-money; in-the-money; deep-in-the-money;
and deep-out-of-the-money. Also reviewed are case studies of binary option
trading in relationship to key news events that we have lived through.
These include: The U.S. congressional elections; the Greek sovereign risk
crises; turmoil in the Middle East; and the Japanese earthquake. The reader
will see exactly how these events shaped trading strategies that worked.
This book is also designed to provide a self-directed performance audit
capability to the trader. Specific training challenges are provided, including a
test of your knowledge (see Appendix A).
No other book provides a comprehensive get-started approach to trading
binary options. It is my hope that Trading Binary Options: Strategies and
Tactics makes a difference and improves your ability to get started in binary
option trading, but most importantly, to do it the right way!

Table of Contents
Preface vii
Acknowledgments ix
About the Author xi
Introduction
What Are Binary Options and Why Are They Important? 1
Chapter 1
Key Features of Binary Option Types 7
Chapter 2
Identifying Profit Return Potential in Binary Option Trading 19
Chapter 3
Sentiment Analysis: New Predictive Tools 27
Chapter 4
Tracking Fundamental Forces That Impact Markets 43
A Primer for Binary Traders
Chapter 5
Basic Technical Analysis 69
Chapter 6
Advanced Technical Analysis: Volatility Tools 97
Chapter 7
Binary Option Trading Strategies 127
Chapter 8
Analyzing NFP Data for Binary Trading 163
Chapter 9
Risk Management in Theory and Practice 179
Chapter 10
Metrics for Improving Binary Trading Performance 185
Chapter 11
Performance Tools and Training for Improving
Binary Option Trading 199
Afterword 205
Appendix A: Test Your Knowledge 207
Appendix B: More Training Tools and Tests 217
Index 219


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Abe Cofnas

Palgrave Macmillan


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Book Details
 Price
 2.00
 Pages
 107 p
 File Size 
 2,239 KB
 File Type
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 ISBN
 978-3-319-92912-5
 978-3-319-92913-2 (eBook)
 Copyright©   
 The Editor(s) (if applicable)
 and The Author(s) 2018

Preface
This book is about the intersection of fundamentals, sentiment, and technical
analysis in the currency markets. It is written for people who are
interested in gaining an edge in forex trading. In particular, for traders
who are beginning to test the waters in currency trading, it provides guidance
on how to integrate fundamental knowledge to better assess price
action. For the more experienced trader who has focused mainly on technical
analysis, our objective is to supplement technical analysis trading
with insights into which fundamental forces are impacting price movements.
This book aims to assist traders to develop and apply a fundamental
and sentiment mind-set to trading currency markets.
Let us think back to just before the year 2000. That was the era of dedicated
phone lines and green screen monitors at brokerage firms. Markets
were slow. As a result, the prevailing strategy was “buy and hold.” In this
era, traders were at the mercy of their brokers. Information was in asymmetrical
pockets of knowledge. Then the rise of computers and the internet
destroyed the old order and changed the world of trading. Today,
information is now everywhere and mostly free. But the data flow is often
unreliable and mixed with rumors and hyperbole. Yet trading execution
is lightning fast and as a result markets move equally fast in reaction.
In today’s fast-paced globalized world of information, integrating fundamental
analysis with technical analysis is more important than ever
before. The digital era has made trading at the same time easier, as data
acquisition and trading can be done anywhere, from the beaches of
Miami, to the streets of Mumbai. Smart devices enable instant trading.
Yet, trading is also more complicated because markets are more complex
than ever before, and more volatile as news acts as information shocks
and cascades quickly through cross market asset classes. John Netto, a
leading trader states:
Globalization has created a swath of financial news sources, social media
outlets, and inexpensive research available on the internet. This information
has created a new balance, changing global macro investing from a
long-term strategy focused on large thematic bets to being woven in the
day-to-day price action of every asset class at every price level. The markets
eat, breathe, and run on global macro themes … The interconnectivity of
the world has melded global macro investing philosophies into all other
investment philosophies to the point they are inseparable.1
In the age of the internet, trading experience presents many challenges to
traders and one is reminded of the ancient saying in the Book of
Ecclesiastes that “there is no wisdom without pain.”
Currency traders experience several pain points in their journey into
trading. The first is selecting the wrong pair to trade. A second pain point
is putting on a trade in the wrong direction. Having targets that are based
on belief rather than on evidence is a very important third pain point.
Finally, after achieving a profitable trade, many traders get out too early.
These pain points are very much the result of a false dichotomy that postulates
there is a difference between fundamental and technical analysis,
or that all one needs is technical analysis to trade currency markets.
A goal of this book is also to provide forex traders with what they need
to know to reduce the time it takes to become good enough at forex training
to treat it as a profession. Malcom Gladwell famously referred to
10,000 hours as the amount of time necessary to become an expert. In
chess, Garry Kasparov has referenced 10,000 patterns or 50,000 positions.
For forex traders, this book on trading fundamentals and sentiment patterns
will hopefully build the skills for successful trading in far less time.
Ultimately, a successful trader is one who is not only profitable, but is
able to adapt to a changing global landscape. In today’s digital trading
environment, the attributes of trader fitness must include an understanding
of fundamental forces, sentiment patterns, and technical analysis.
FL, USA 
Abe Cofnas


Table of Contents

1 What is Fundamental Analysis? 1

2 Core Fundamental Forces and How to Monitor Them 13

3 Understanding Central Banks and their Role in Moving Currency Markets 33

4 How to Decode Central Bank Statements 41

5 What is Sentiment? 51

6 Sentiment Trading Set-Ups 65


7 Cryptocurrencies 79
8 The Future of Forex Trading: Algorithms, Artificial Intelligence, and Social Forex Trading 91
C onclusion 97
Appendix: Resources for Sentiment Trading and Training 99
Index 101

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Cover image © Creative-Touch / Getty Images
Cover design by Thomas Howey

Printed on acid-free paper

This Palgrave Macmillan imprint is published by the registered company Springer International Publishing AG part of Springer Nature.
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

The Complete Guide for International Sales, Finance, Shipping and Administration

Anders Grath

Subjects: LCSH: International trade. | International finance.


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Book Details
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 Pages
 265 p
 File Size 
 3,129 KB
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 ISBN
 e-ISBN
 978 0 7494 7598 7
 978 0 7494 7599 4
 Copyright©   
 Anders Grath,
 2005, 2008, 2012, 2014, 2016 

Preface
This handbook was originally published more than 40 years ago, and has since
been expanded and updated in new editions. Originally it was published as
separate country-specific editions in different European countries where it soon
became a reference handbook for companies, banks and other institutions
involved in international trade, irrespective of their size or the nature of their business.

However, for practical and logistical reasons it was not possible to cover
more than a handful of countries in this way, thus the idea for a completely
new and country-neutral edition that could be marketed in most countries
involved in international trade around the world. The only drawback with
this approach is that it is then not feasible to describe the specifics for
every country; on the other hand, the basic aspects of international trade,
payments and finance are almost the same all over the world, which is also
the basis for this handbook.

Furthermore, there is great advantage in being able to combine this basic
description with detailed references where such country-specific information
can be found. This information is nowadays readily available from internet
sites from a variety of domestic institutions in most countries. It has then
been possible to create a situation where this book provides the foundation
but also gives readers the possibility to add whatever detailed and countryspecific
information they require from other sources. There is another
advantage in such an approach: that the basics of this handbook should
be relatively stable over time, whereas detailed information from local and
domestic institutions will certainly change over time.

All editions published over the years have been based on the same concept,
which is their practical nature. They contain no theoretical elements,
just information based on the author’s payment and finance experience
gained from managerial positions as head of international departments in
a number of European banks. In such positions you are necessarily involved
in thousands of trade transactions each year, and the advice and comments
given in this book are based on that experience.

I am very pleased with this fourth international edition now published by
Kogan Page which contains considerably more examples and illustrations
in a new book format. I thus feel confident that it will continue to be the
reference handbook of choice in numerous countries around the world, for
many years to come. It will certainly be of significant benefit to international
traders in the daily work of expanding their businesses or when entering
new markets, but the book will equally be increasingly used in trade education
and as a practical tool within international departments of commercial
banks and other trade-related institutions.

The author would like to thank the companies and institutions that have
contributed with support, advice and comments when creating this new
edition. This help has been greatly appreciated.
Anders Grath

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Table of Contents
Preface viii
Introduction 1
01 Trade risks and risk assessment 9
Business beyond borders: trade risks 9
International trade practices 10
Product risks 16
Commercial risks (purchaser risks) 20
Adverse business risks 24
Political risks 26
Currency risks 30
Financial risks 31
02 Methods of payment 35
Different methods of payment 35
Bank transfer (bank remittance) 38
Cheque payments 47
Documentary collection 49
Letter of credit 56
Counter-trade 77
03 Bonds, guarantees and standby letters of credit 81
The use of bonds and guarantees 81
Common forms of guarantee 89
Demand guarantees 94
Standby letters of credit 98
The structure and design of guarantees 100
v
vi Contents
04 Currency risk management 105
Currency risk 105
The currency markets 108
Currency exposure 113
Hedging currency risks 117
Practical currency management 125
05 Export credit insurance 129
A mutual undertaking 129
The private sector insurance market 132
Export credit agencies (official export credit institutions) 137
Investment insurance 146
06 Trade finance 149
Finance alternatives 149
Pre-shipment finance 151
Supplier credits 154
Refinancing of supplier credits 159
Buyer credits 169
The international money market 174
07 Structured trade finance 179
International leasing 179
Lines of credit and local currency finance 185
Project finance and joint venture 187
Multilateral development banks 191
08 Terms of payment 195
Terms of payment and cash management 195
Contents of the terms of payment 196
Structure of the terms of payment 200
Composite terms of payment 205
The final design of the terms of payment 208
Contents vii
09 The export quotation 209
Appendix I: Electronic documents in international trade 217
Appendix II: International transport documents 221
Glossary of terms and abbreviations 227
Index 245


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Introduction
First published in Great Britain in 2005 by Nordia Publishing Ltd for The Institute of Export as
International Trade Finance
Published in Great Britain and the United States in 2008 by Kogan Page Limited as The Handbook
of International Trade and Finance
Second edition 2012
Third edition 2014
Fourth edition 2016
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