Foreign Exchange Markets

Foreign Exchange Markets is an excellent resource book for anyone interested in the foreign currency exchange market, regardless of how much or how little experience they have in this volatile but potentially very profitable market.  This book is part of a wide ranging series on managing currency risk, with the focus in this instalment being a comprehensive understanding of all aspects of the foreign exchange markets.  The approach is very logical and thorough, taking the reader through the foundational information and on into the more complex and specific details of the foreign currency exchange market.  By the end of the book, the reader will have a solid understanding of the topic at hand.          

A few topics included in Foreign Exchange Markets

Before moving on to a more detailed look at the table of contents from Foreign Exchange Markets let’s take a closer look at a few of the informative and important topics covered in this excellent resource:

  • Foreign exchange markets – Why are foreign exchange markets important to understand?  What exactly are they all about?  Why would or wouldn’t you want to participate in the foreign exchange markets?  What kind of people tend to participate in the foreign exchange markets and what kind of people tend to avoid them?  What are the key features of the foreign exchange markets?  What are the advantages and disadvantages of trading on the foreign exchange markets?
  • Currency trading transactions – What exactly is a currency trading transaction?  Are there different kinds of transactions and if so, what are they?  What is the process and procedure for completing a trading transaction?  What are the potential risks and potential gains for executing trading transactions on the foreign currency exchange markets?
  • Forward transactions – What is a forward transaction in the foreign currency exchange market?  How does the process of executing a forward transaction work?  What are the different types of forward transactions?  What are the potential risks and potential gains of engaging in forward transactions in the foreign currency exchange market?

It’s easy to see why Foreign Exchange Markets is such a highly recommended book.  It covers a solid range of important topics related to the foreign currency exchange market, providing the reader with easy and ready access to the key information they need to understand and participate in the foreign exchange market.

Table of contents from Foreign Exchange Markets

The table of contents of a book can give you a good understanding of the information contained in and the likely worth of a book.  Foreign Exchange Markets is no exception, so let’s take a look at the table of contents to get a better sense of the book:

  • Introduction – This section is a solid overview of the foreign exchange market, helping the reader understand what it is, where it came from, and why it is important in the modern financial world.  It discusses some of the foundational concepts such as different types of currency market, exchange rates, currency risk, and hedging your exposure to currency risk.
  • Market structure – This section explains the actual structure of the foreign currency exchange market, including how trades are executed and the multiple locations of foreign currency exchange markets around the globe.  It also discusses how the market has traditionally been dominated by large banks and other financial institutions, but in recent years has become much more open and accessible to average individual traders. 
  • Spot transactions – This section discusses in detail the spot transaction, or trading in foreign currency where the buying and selling are completed immediately.  This is the most basic kind of transaction that takes place on the foreign currency exchange market, and as such should be well understood by a trader as part of their foundation of knowledge.
  • Making spot transactions – This section does a good job of explaining the factors and influences that must be considered when making a spot transaction, as well as the process by which a spot transaction is executed.  It includes an excellent discussion of differences between interbank trading and an outside company or individual working with a bank to execute a trade.
  • Guidelines and practical applications – This section contains user friendly guidelines and practical applications of trading strategies for spot transactions.  It offers some excellent real world examples that make it easy to understand the underlying decision making process that goes into choosing and executing a spot transaction on the foreign currency exchange market.
  • Forward exchange contracts – This section focuses on explaining the details of a forward exchange contract on the foreign currency exchange market.  It defines the concept of trading at a future date but based on the current market price of a currency.  Additionally, it clarifies how and why forward exchange contracts are different from futures contracts.
  • Extensions and closeouts – This section discusses the mechanics behind and situations in which a trader might choose to either extend a forward exchange contract or closeout a forward exchange contract.  It included information about relative advantages and disadvantages of these choices.
  • Swap and short dated forward transactions – This section explains the details of swap transactions and short dated forward transactions, two very common types of forward transactions.   It also discusses why each of these transactions might be used in a given situation, and what their relative advantages and disadvantages are in the foreign currency exchange market.
  • Making forward transactions – This section explains the decision making process of making a forward transaction, followed by a good look at the actual process of executing a forward transaction.
  • Guidelines and practical applications – This section very thoroughly discusses some of the best guidelines and strategies to consider when making a forward transaction.  It also includes real world examples and practical applications to enhance the reader’s understanding of the concepts presented.

Foreign Exchange Markets goes beyond these content chapters, however, also including a comprehensive appendix section with additional valuable information.  The appendix is devoted to defining and explaining the currencies traded on the foreign currency exchange market as well as identifying their liquidity. 

Final thoughts

The foreign currency exchange market is the topic of hundreds, if not thousands, of books, manuals, and guides.  These publications range from being very superficial and basic to being very detailed and technically advanced.  Foreign Exchange Markets falls squarely in the middle of this spectrum, offering the reader a good balance between foundational information to increase understanding and specific information to help the actual trading decision and process.  The content of the book is complete and the structure makes it easy to read, understand, and refer back to when necessary.

Foreign Exchange Markets is a good, solid resource to consider adding to your library of books and manuals on the foreign currency exchange market.  However, it is not intended to be a definitive resource to be the sole source of information and guidance on participating in the foreign currency exchange market.  The information it contains is excellent and quite practical, but for the best opportunity to trade successfully you should also have on hand one or more resources with more technical information.  Overall, this book is a worthwhile resource to have on hand as a quick reference and guide.

Remember, too, that Foreign Exchange Markets is part of a very good book series on currency risk management.  It is intended as one part of the whole picture the reader should have before embarking on trading activity in the foreign currency exchange market.  Some of in this complete series on currency risk management include:

  • Hedging Currency Exposures
  • Introduction to Currency Risk
  • Currency Futures
  • Foreign Exchange Markets
  • Currency Swaps

On the whole, the books in this series are affordable and well worth purchasing if you are interested in learning more about the foreign currency exchange market.  We recommend them as an excellent resource to add to your library.

 

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