INTERVIEW
In foreign exchange, because you are looking at the big picture, the relationships get complicated.
What Happens With The Dollar Drives It All
Boost Your Forex Trading Results With John Forman
John Forman is a senior forex analyst for Thomson Reuters Ifr Markets, where he provides real-time intraday and longer-term market analyses from both a technical and fundamental perspective. Forman, who has more than 20 years of trading experience and has been a contributor to Stocks & Commodities, focuses on the foreign exchange and equity markets, but also follows interest rates and commodities. An active educator, Forman’s first book, The Essentials Of Trading, came out of his experience teaching trading and financial markets in the university classroom. His latest book in progress, New Trader Faqs, takes a collection of the most common new-trader questions and has them answered by a collection of experienced traders and market professionals. John Forman’s thoughts on trading can be found on his blog at www.TheEssentialsOfTrading.com.
S&C Editor Jayanthi Gopalakrishnan and Staff Writer Bruce Faber interviewed John Forman via phone on August 6, 2010.
John, why don’t we start by having you tell us how you got into trading.
The Wall Street crash in 1987 was the thing that got me interested. I was only 17 when that happened and it really spiked my interest. It was shortly thereafter, probably early 1988 or so, that I opened my first stock trading account.
Was that because you were intrigued by how much of a change could happen in one day, or at least in a short period of time?
Well, it was two things. It was certainly the volatility and what that represented, but it was also looking at things like Ibm losing half of its value in a single day. I realized there had to be an opportunity there. If I had had money available, I could have made a profit as the stock rebounded. There was an opportunity there that I couldn’t take advantage of, because I wasn’t in the market. That’s when I decided that as soon as I was 18 and I could open my own account, I was going to do it.
Did you start by trading your own account, or did you work for an organization?
I was trading my own account and learning along the way.
Did you start with equities?
Yes. We are talking 1988 and I did not have a lot of funds, so commodities and futures were beyond me at that point. The stock market was pretty much the only game. I dabbled in corporate bonds and things like that, but that was not my focus. It was definitely equities.
How did you transition into trading other things like commodities and forex?
As I started to get an understanding for the markets through books and magazines I read — Stocks & Commodities was one of the early influences in my development, especially as a technical analyst — I started looking at different markets through charts in The Wall Street Journal or Investor’s Business Daily and began to understand the macro impact on the markets, interest rates and foreign exchange, and commodities and how they were all coming together. At that point the markets were much less linked than they are now. They tended to trade discretely, or at least market participants looked at them discretely.
These days, everything is so much more integrated. I started working as a professional analyst in 1993 on the fixed-income side, covering mostly the Treasury market. From a trading perspective, that was a big push for me to get into other markets. Up to that point I was playing around in futures, but I was still focused on equities.
I would like to go back to what you just said about the markets being interrelated. When it comes to forex trading, what are some of the other markets that you need to look at? What are the important fundamental variables?
The nice thing about forex is that it is driven by the big picture. Those are things that are very easy for everybody to keep track of because they are public figures. It is not like in stocks, where you are relying on what can be very detailed and very obscure financial reports. In forex, you are looking at things like what the Gdp is doing, where inflation is right now, and today’s jobs report. These are all high-level reports.