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FOREX TRADING BOOKS

Inside the Currency Market

by Brian Twomey

Brian Twomey is a technical analyst, 8-year expert trader, 6-year freelance currency trading writer who has researched, studied, traded and written about the foreign exchange markets extensively for many years from a whole host of perspectives. He is best known as the last person to interview Welles Wilder yet the vast majority of his writings had the foundations to teach traders and market professionals a certain market perspective, a trading style or an approach such as carry trades, technical chart congestion or his professional article about Bank Maintenance Periods in the February Newsletter of the European Banking Federation. Twomey can now add author to his long credentialed list.

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His Bloomberg Press/John Wiley book Inside the Currency Market: Mechanics, Valuation and Strategies is more than an excellent resource for traders and investors, it is literally a comprehensive reference guide that expertly explains, in a clear manner, how currency pairs are affected by economic and technical factors, interest rates and monetary policies and tracks the 8 major pairs as they trade from market to market in all their various formats.

What makes Inside the Currency Market a comprehensive reference guide is the depth and detail with which Twomey approaches a vast array of topics including detailed charts - so readers can clearly see for example how interest rates, bond prices or yield curves affect currency pairs. Twomey perfectly defines what a currency pair comprises as well as their purpose.

We spoke with Brian Twomey to better understand his comprehensive approach to his book and the markets.

“In writing Inside the Currency Market my objective was to teach market participants how to become a professional trader, how to view the market from a professional context, how to truly understand central banks and to define my Know Thy Nation rule.”

Brian Twomey

FXTM

What motivated you to write the book?

BT

I’ve read about 26 trading and market books over my 8 years and not one book addressed nor defined for example the all encompassing word that drives currency pairs, interest rates and how interest rates affect each nation and respective currency pairs traded in the markets. Prior books taught a trading style or market perspective but not one book has ever been written that encompasses all the factors that drive currency pairs from nation to nation. My objective to write Inside the Currency Market was to teach market participants how to become a professional trader, how to view the market from a professional context, how to truly understand central banks and to define my Know Thy Nation Rule.

FXTM

What is the Know Thy Nation Rule? 

BT

The Japanese Yen for example was once an easy pair to trade among the majors because we knew we could easily predict its market movements. But that was when USD/JPY traded at say 118 and a 100-pip move up or down didn’t change the balance for the Japanese. Today, USD/JPY at 76, trading this pair presents a different challenge because the Yen doesn’t have the free rein movement that it once had. It became very stubborn as a pair. If a trader follows my Know Thy Nation Rule, one would know the economic factors that affect the Japanese economy, how the Yen trades in its own market as well as the various forms it takes in other markets and the opportune times to enter and exit a trade. Know Thy Nation affects trade of AUD/USD vs NZD/USD because NZD/USD always outperforms AUD/USD, yet AUD/USD is more popular among traders. It is all outlined in Inside the Currency Market.

FXTM

How did you gain your extensive market knowledge?

BT

I’m completely self taught in all my market approaches. I began trading 8 years ago and started just like everybody that enters this business. I didn’t know a Yen from a Euro, the difference between AUD and NZD or what a cross pair was or reason for its connection as a currency pair. Through many years of extensive research, study and practice, I became proficient in not only my ability as a trader but I set out early on to know and understand every facet about the currency market, currency pairs and factors that make pairs move from a fundamental and technical perspective. I’m not only quite happy with my accomplishments but I brought my many years of knowledge and research to market participants in Inside the Currency Market. What assisted in the time factor was my years as a part-time adjunct Political Science college teacher. When I wasn’t teaching class, I studied the markets.

FXTM

The book covers many topics from stock markets to repurchase agreements, to trade weight indices to Libor to forward points. What was the methodology in that nation-to-nation coverage?

BT

I would like to mention that “forward points” has never been written previously to the depth and detail that I did. I not only bring a clear discussion but I calculated forward points to a yield curve for the first time in any publication. The purpose for multi-topics was to introduce and expose traders and investors that reside in Canada for example to know and understand how the Swiss or Australian markets operate, times of trade, interest rates and Libor so a trader would understand movements of AUD/CAD or CAD/CHF. It was my hope to outline for traders the complete international financial system in order for traders to understand what they do. Secondly, many traders and commentators equate a currency pair to stock market movements because it’s easy to report and easy for traders to determine direction of a currency pair. I disagree. I believe the currency market is a self-contained market where each currency pair can be valued against another. Many pairs are US dollar pairs and can be valued against non dollar pairs.

FXTM

What would you like traders and investors to know and gain from your book?

BT

I outlined a complete guide for traders in a nation-by-nation approach to bring an understanding not only of markets but hopefully an understanding of currency pair trading on a daily basis. A chart is only one side of the currency pair story but not the complete story since other factors must be considered. Secondly, Inside the Currency Market is the guide that will hopefully live on for many years to come since rarely does anything change in the international financial system. It is a book for traders, written by a trader but also slated to academics, researchers and anybody who wishes to become more proficient in their capabilities by understanding what they do.

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