The Psychology of the Foreign Exchange Market

Product Description

This book demystifies the foreign exchange market by focusing on the people who comprise it. Drawing on the expertise of the very professionals whose decisions help shape the market, Thomas Oberlechner describes the highly interdependent relationship between financial decision makers and news providers, showing that the assumption that the foreign exchange market is purely economic and rational has to be replaced by a more complex market psychology.
Product Details

* Amazon Sales Rank: #478859 in Books
* Published on: 2004-12-07
* Original language: English
* Number of items: 1
* Binding: Hardcover
* 278 pages

Editorial Reviews

Review
“…there are enough gems in there to keep you reading on.” (The Technical Analyst, March/April, 30th March 2005)

"...a fascinating and entertaining read..." (Economic Issues, June 2006)

From the Inside Flap
The Psychology of the Foreign Exchange Market.

This book offers a fascinating understanding of the decisions that determine exchange rates. It sheds light on the psychology behind spectacular market phenomena as well as on subliminal processes in daily trading decisions.

In an understandable and engaging analysis of his research with many of the world's leading market participants, Thomas Oberlechner draws on the first-hand expertise of the professionals whose decisions shape the market. Expanding the field of behavioral finance, The Psychology of the Foreign Exchange Market incorporates new insights from a variety of psychological perspectives - ranging from social market dynamics; the role of affects and intuition in trading decisions; cognitive biases of traders; psychological risk-taking phenomena; subjective attitudes in market expectations; the interdependent relationship between trading institutions and the financial news media; the dynamics of market rumors, and personality characteristics of successful traders; to the role of metaphors in the decisions of participants and the nature of the market.

From the Back Cover
This book offers a fascinating understanding of the decisions that determine exchange rates. It sheds light on the psychology behind spectacular market phenomena as well as on subliminal processes in daily trading decisions.

In an understandable and engaging analysis of his research with many of the world’s leading market participants, Thomas Oberlechner draws on the first-hand expertise of the professionals whose decisions shape the market. Expanding the field of behavioral finance, The Psychology of the Foreign Exchange Market incorporates new insights from a variety of psychological perspectives - ranging from social market dynamics; the role of affects and intuition in trading decisions; cognitive biases of traders; psychological risk-taking phenomena; subjective attitudes in market expectations; the interdependent relationship between trading institutions and the financial news media; the dynamics of market rumors, and personality characteristics of successful traders; to the role of metaphors in the decisions of participants and the nature of the market.

"Economists propose elegant theories and sophisticated models to explain exchange rates, but to no avail. Traders, however, enjoy uncommon success in these markets. The difference is psychology. Economists deny it. Traders exploit it. And Thomas Oberlechner explains it – very skilfully. Whether you want to be a better economist or a better trader, read this outstanding book!"
—Mark Kritzman, Windham Capital Management Boston, LLC

"Finally, a book that helps us to understand the dynamics of the largest market in the world. As petrodollars and financial trade foreign exchange transactions gave way to pure trading for profit and speculation, it was often difficult to ascertain the dynamics of trading. Thomas Oberlechner has provided an excellent understanding in this book."
—Marshall N. Carter, Chairman/CEO (retired), State Street Bank and Trust Co., Boston

"Financial markets, with their interaction of economic and psychological mechanisms, increasingly attract researchers’ and practitioners’ interests. Thomas Oberlechner brilliantly examines financial markets by taking a psychological perspective. This splendid book impresses by its detailed research and provides a thorough understanding of the complex yet attractive mechanisms of financial markets."
—Professor Erich Kirchler, Institute for Psychology, University of Vienna

"Thomas Oberlechner has pulled together an astonishing array of first-rate research on how financial markets are shaped and shifted through all-too-human interaction and decision. Moreover, he has contributed a good deal of highly original research into the workings of the foreign exchange market and on the people who build and sustain this market. The Psychology of the Foreign Exchange Market summarizes in a most readable way what we know about the people - traders, analysts and journalists - who make markets and whose everyday decision making has, to say the least, far ranging social consequences. A ‘must read’ for anyone who wonders about the seemingly unfathomable mysteries of exchange rates and the making of markets."
—John Van Maanen, Erwin Schell Professor of Organization Studies, MIT
Customer Reviews

Essentail reading for Forex Dealers5
I am a veteran forex dealer and in-house trainer of our dealers; this book is required reading. From the opening quote in the introduction of the book you are introduced to the concept that "psychology" is everything in dealing. Believe it! Though the book provides no canned solutions to dealing, it does give you the essential foundations to begin to build your own dealing models.

A good dissertation may be, but not a good trading book for sure2
If you are interested in the result of a survey done through over 300 FX traders in 5 countries or over 200 bibliographies for your own thesis, you will be absolutely delighted. If you want to sharpen your trading edge or simply to have fun (like what Fiasco, Pit Bull, Liar's Poker and Wall Street Meat do), you will be very disappointed.

I would like to give you an example. In page 154 the author listed a table of importance ratings of successful trader characteristics (n=291, 1=unimportant, 4=very important) of 23 items ranging from Quick Reaction Time (mean=3.71, sd=0.50) & Discipline (mean=3.65, sd=0.55) to Computer Literacy (mean=2.54, sd=0.78) & Social Skills (mean=2.52, sd=0.74). Some might find it helpful. As a veteran pro FX trader and trading book lover who read to sharpen my edge in one of the most competitive market, I dont.

Perhaps the author had just tried too hard to post the findings of his survey into a book that the chapters and thus content are quite disoriented (I strongly suggest you to take a look of the content page available on Amazon). Sorry to say that there are plenty of much better trading psychology books in the market (though not dedicated to FX, but still relevant and applicable). IMHO, "Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing" by Hersh Shefrin and "The psychology of Finance by Lars Tvede" should be better choices.

p.s. I had overlooked the fact that the two five star reviews (this should be the third review of this book) were written by two one-review-only readers. Shame on me!

A Must Read for Any Trader or Investor5
This book is valuable to any person trading any market. It enforces the thought that you bring yourself to the market, be it currencies, futures, stocks, or bonds. A person is the product of their environment, culture, parents, education and experiences which influences their perception of the markets. It is very difficult to observe what the market is doing without observing what it is doing to you. All markets are a mind game.