The Psychology of the Foreign Exchange Market (Wiley Trading) [Hardcover]

Thomas Oberlechner (Author)

Book Description

Series: Wiley Trading | Publication Date: December 6, 2004

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.

Editorial Reviews

Review

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

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Product Details

• Hardcover: 278 pages
• Publisher: Wiley; 1 edition (December 6, 2004)
• Language: English
• ISBN-10: 047084406X
• ISBN-13: 978-0470844069
• Product Dimensions: 6.3 x 0.8 x 9.1 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 4.2 out of 5 stars  See all reviews (4 customer reviews)
• Amazon Best Sellers Rank: #1,910,741 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

25 of 28 people found the following review helpful:

5.0 out of 5 stars making sense of chaos and confusion, February 17, 2005

By 

Ashok Nimgade (brookline, MA) - See all my reviews
(REAL NAME)   

This review is from: The Psychology of the Foreign Exchange Market (Wiley Trading) (Hardcover)

Although the foreign exchange market is the world's largest financial market, this book will prove valuable to traders or behavioral finance scholars involved with any financial market. Oberlechner brings the perspective of a clinical psychologist/anthropologist to observe this arena of human chaos and madness. Paradoxes that confound at first, seem clearer when viewed from his lens.

For the practical-minded reader interested in financial trading, this book will hold up a mirror to help examine yourself. Much of trading, after all, is psychology! As one expert points out in this book, "traders don't just bring their money to the market, they also bring themselves!" It is chilling to read, for instance, about how market trends may just be held up by rumor. How traders use metaphors to make sense of the vast markets (eg, using likening it to warzone or to a lover or to a bazaar or to a casino, etc), is also discussed and may help sort out your own mental algorithms for simplifying financial decision-making:

But if financial markets are full of chaos and madness, human nature, when seen and understood through the social scientist's perspective is a constant. Oberlechner compares the behavior of today's traders to human behavior from prior periods: not just the tulip mania bubble but also primitive tribes. E.g., on one island, fishermen exposed to the perils of the open sea exhibited far more superstitious beliefs than those in calmer waters. Does that seem reminiscent of the belief systems of gamblers and traders compared to staid bankers? Perhaps the practical trader may get hints from reading this about how to tame the human beast within to make profits.

Academicians will benefit from the treasure of citations to relevant psychological and behavioral finance literature. Not to imply in the least that this is a dry tome! In fact, the book reads very well, combining logic with poetic flow: I found it hard to put down the book and found myself taking it with me on the subway. You can tell this is someone who has observed the market participants and isn't just an ivy tower academician.

12 of 18 people found the following review helpful:

2.0 out of 5 stars A good dissertation may be, but not a good trading book for sure, May 22, 2006

By 

ServantofGod - See all my reviews

This review is from: The Psychology of the Foreign Exchange Market (Wiley Trading) (Hardcover)

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!

2 of 3 people found the following review helpful:

5.0 out of 5 stars Essentail reading for Forex Dealers, March 2, 2007

By 

GoodKarma (Houston, Texas United States) - See all my reviews

Amazon Verified Purchase

This review is from: The Psychology of the Foreign Exchange Market (Wiley Trading) (Hardcover)

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.