Artificial intelligence, neural networks, chaos theory — these are all part of the discussion when talking forex with Bill Reid, manager of the Algorithmic Currency Fund (www.algorithmictradingadvisors.com). But along with these concepts, Reid shares some pretty basic ideas about trading currencies.

"I often tell people forex is the equity of one country compared to the equity of another country," he says. "How that country is positioned in the world market determines its relative equity, and the value of this country’s equity at this instant makes the market very interesting. That makes it a fun market to learn about and participate in."

Reid’s Fairview, Texas-based fund has posted 12 winning months out of 18 since its launch in September 2005 (Figure 1), and its performance — while off its explosive early pace — has nonetheless outperformed both the S&P 500 index and the general universe of professional currency traders — which, as represented by the Barclay Group’s Currency Traders Index, posted negative annual returns in both 2005 and 2006.