This is an inventory of forex vocabulary and trading styles, not a strategy. It walks a beginner through pips, margin, and thirteen named trading methods, then spends its best chapter on risk management. No method in it is back-tested, and the author admits as much.
The one idea
The book exists to give a complete beginner a map of the forex market before that person picks a lane. Chapter 1 through 4 cover mechanics (pip values, margin, leverage, spreads), technical analysis vocabulary (support/resistance, moving averages, Fibonacci, pivot points), and fundamental drivers (interest rates, economic indicators). Chapter 5 then names and briefly describes thirteen distinct trading styles: position, swing, day, trend, range, breakout, pattern, Fibonacci/pivot, Elliott Wave, divergence, multiple timeframe, point and figure, carry, news, and contrarian trading, plus backtesting and autotrading.
None of those thirteen styles gets a tested rule set. James Chen states outright there is no 'holy grail' method, and offers each style as a general approach rather than a specific system a reader could run unmodified. The one worked trading-rule example in the book, a day-trading setup using a 5-period EMA crossing above a 20-period EMA plus RSI crossing above 30 plus a rising MACD histogram, is explicitly flagged by the author as an arbitrary illustration that was 'not actually tested as part of a trading strategy.'
The book's real payload is Chapter 6, which is about surviving long enough to find out if any of the above works: capital preservation, reward-to-risk ratios, fixed fractional position sizing, trailing stops, and a nine-point trading plan checklist. That chapter reads less like trading theory and more like an accountant's warning label, which is the most useful thing in the book.
What it actually teaches
The book's one genuinely sequential process is the risk-management build order laid out in Chapter 6, meant to sit underneath whichever of the thirteen trading styles a reader eventually chooses.
CAPITALIZE BEFORE YOU TRADE
The book's rule of thumb: keep at least ten times the margin required for your typical trade size sitting in the account, not just enough to cover the margin call. Its worked example: a standard lot of $100,000 at 100:1 leverage needs $1,000 in margin, so the account should hold at least $10,000. A mini lot ($10,000 units) needs $100 margin at the same leverage, so the account minimum is $1,000.
SET A REWARD-TO-RISK TARGET
Chen calls 3:1 the 'ideal' ratio (risking 1 unit to make 3) and 2:1 the more realistic day-to-day target, since ratios pushed toward 4:1 make losing trades more frequent than winners even though the account stays profitable overall. A 30-pip stop paired with a 3:1 target means a 90 to 120 pip profit objective on the same trade.
CAP THE STOP WITH A FIXED FRACTION
Fixed fractional money management caps the dollar risk per trade as a percentage of total equity, then backs into a stop-loss size from that. Worked example: a $1,000 account, mini lot at roughly $1 per pip, and a 3% risk cap means a maximum 30-pip stop loss (3% of $1,000 = $30, divided by $1/pip). The book recommends treating the percentage as a ceiling (it suggests 4% as a hard maximum) rather than a fixed number applied to every trade regardless of chart context.
MANAGE THE TRADE WITH A TRAILING STOP
Once in a winning trade, the book prefers a trailing stop over a fixed profit target for trend and position trades: move the stop below the last swing low (in an uptrend) as price advances, so gains lock in progressively and the position exits automatically the first time the trend structure breaks.
WRITE IT DOWN BEFORE THE NEXT TRADE
Chapter 6 closes with a nine-item trading plan checklist: starting capital, lot size and leverage used, maximum percentage of capital risked per trade, reward-to-risk target, profit goals by day/week/month, loss limits by day/week/month, a description of the strategy, specific entry criteria, and specific exit criteria. The book treats a plan missing any of these nine as incomplete.
What it looks like Monday morning
A reader who actually applies this book on Monday doesn't open a new trade, they open a spreadsheet. The concrete, immediately usable pieces are the account-sizing math (ten times margin as a floor) and the fixed-fractional stop calculation (risk percentage divided by dollar-per-pip equals maximum stop in pips). Both take five minutes to run against a real account balance and either confirm a trader is undercapitalized for their current lot size or force a smaller position.
The other real change is picking one of the thirteen named styles to specialize in rather than trying all of them. The book itself argues for this: it says beginners should use a demo account to test a chosen method before going live, and that the boundary between styles (swing versus range, position versus trend) blurs enough that trying to run several at once just produces inconsistent rules.
| Trade type | Typical profit target | Spread cost | Spread as % of target |
|---|---|---|---|
| Day trade | 20 pips | 3 pips | 15% |
| Swing trade | 60 pips | 3 pips | 5% |
| Position trade | 300 pips | 3 pips | 1% |
The book's own illustration of why shorter holding periods pay a proportionally bigger transaction-cost tax.
No individual forex trader could ever actually will the market to move a certain way.James Chen, Essentials of Foreign Exchange Trading
Where it fails
- The one worked trading rule is explicitly untested. The book's single concrete entry-rule example (5 EMA crossing above 20 EMA, RSI crossing above 30, rising MACD histogram) is flagged by the author himself as an arbitrary illustration, 'not actually tested as part of a trading strategy.' Thirteen named trading styles are described and none carry a backtest, a win rate, or a track record.
- Leverage assumptions are pre-Dodd-Frank. Every margin and capital example in the book runs on 100:1 leverage, including the core '10 times margin required' capitalization rule. The CFTC capped US retail forex leverage on major pairs at 50:1 in October 2010, a year after this edition published, so the specific dollar figures in Chapter 6's worked examples no longer match what a US-regulated broker will actually offer.
- The backtesting chapter never backtests anything. Chapter 5's Backtesting section (pages 205-208) explains the general difference between manual and automated backtesting but does not run a single one of the chapter's own thirteen trading styles through it. A reader finishes the book having been told to validate a strategy before trading it live, with no demonstration of how.
- Execution costs are acknowledged, then dropped. The book makes the sharp point that a 3-pip spread eats 15% of a 20-pip day-trade profit target versus only 1% of a 300-pip position-trade target, then never returns to spread or execution quality when covering broker selection, because it never covers broker selection at all.
- It assumes a reader with screen time and a demo account, not a finished system. Nearly every method section ends by telling the reader to practice extensively on a demo account before going live. That is sound advice, but it means the book's deliverable is a syllabus, not a strategy a reader can pick up and run; the actual work of building and testing a system is left entirely to the reader.
Who it is for
Buy it if
A complete beginner to forex who wants one book that maps the whole landscape (mechanics, technical vocabulary, fundamental drivers, and a dozen named trading styles) before choosing what to specialize in. Also useful as a glossary refresher for pip value, margin, and fixed fractional sizing math.
Skip it if
Anyone who already knows what a pip and a margin call are, or who is looking for a specific, tested entry and exit system with real performance numbers behind it. This book names strategies, it does not prove any of them.
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