Here you can read a review of Forex Patterns & Probabilities by Ed Ponsi — a book for the novices in Forex trading. It is an introductory book, which, although includes some strategies and interesting points, was written to teach a trader-wannabe the ABC of the foreign exchange market. That is why it should be judged from a rather different point of view compared to some other books we reviewed previously.
The purpose of the book is to offer an easy study material that will be understood easily by readers who completely lack any financial trading knowledge. A secondary mission is to show them some trading strategy examples that have a potential (at least according the author's words) to be profitable. The theses outlined in the book can be summarized to the following:
- Forex market is much better than some other financial markets (e.g., a stock market).
- To profit from Forex, it is a good idea to follow the "big money".
- The market behavior is based on human psychology and so the various cycles and patterns will be repeated.
- Never trade against the trend.
- A losing trade that was executed according to plan is better than a winning one that was executed without any plan.
- If something is overbought/oversold, it is usually a bad idea to sell/buy it.
- Round numbers form nice areas of support and resistance in Forex.
- A simple strategy can be profitable.
- It is better to trade rarely but for bigger numbers of pips than to trade frequently but for smaller numbers.
Despite the fact that this book is kind of useless for an experienced trade, it is definitely possible to highlight some advantages of Ed Ponsi's work:
- The book is very simple. If you have no problem reading newspapers, this book won't be a problem for you too.
- Some Forex trading strategies are offered. Newbie traders pay hundreds of dollars for similar strategies online.
- A volatility-based (ATR) stop-loss is introduced. Even experienced traders sometimes fail to understand the importance of this simple technique.
- Warnings against some kinds of popular scams and errors.
- The author promotes a proper organization of the trading process.
Of course, the book has its disadvantages, which aren't many if you don't consider the main disadvantage of being a book for novices:
- Inadequate representation of the Forex market (No slippage? Really?).
- Repetitions. The book is full of them. Of course, they can help the learning process, but they are quite annoying.
- Partial exits. It is another way to "cut the winners short" and Ed seems to be a fan of partial exits.
- Chart fitting. When Ed presents his strategies, he only shows the successful outcomes, he doesn't show the chart examples of the trades gone wrong. It can create a false sense of "surefireness" in the minds of the readers (especially the inexperienced ones.)
Overall, it is a nice book (as one of several) for a prospective Forex trader who enters the path of learning and has some money to spend on books. If you are a somewhat experienced trader, you will still probably learn something useful from it, but it will be barely worth your time and money.
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