FOREX - irp-cdn.multiscreensite.com · all trading involves risk and losses can exceed deposits our services include products that are traded on margin and carry a risk of losses

W W W . S M A R T C H A R T S . N E T

A L L T R A D I N G I N V O L V E S R I S K A N D L O S S E S C A N E X C E E D D E P O S I T S

OUR SERVICES INCLUDE PRODUCTS THAT ARE TRADED ON MARGIN AND CARRY A RISK OF LOSSES IN EXCESS OF YOUR DEPOSITED FUNDS. THE PRODUCTS MAY NOT BE SUITABLE FOR ALL INVESTORS. PLEASE ENSURE THAT YOU FULLY UNDERSTAND THE RISKS INVOLVED

WE PROVIDE OUR SERVICES IN COMPLIANCE WITH FINANCIAL CONDUCT AUTHORITY GUIDELINES

As you know, all investment involves risk. That’s why we always suggest that those who are new to trading take the time to learn the skills required. When beginners jump in head-first and do not take the time to learn from experienced traders, they risk losing some, if not all, of their investment. That’s where SmartCharts comes in.

FOREX FAST TRACK

F O R E X F A S T T R A C K

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WELCOMEHello and welcome to this guide. I’m very excited to help you discover the world of trading, just as we have helped thousands of people around the world just like you begin their trading journey.

Before we begin however, let’s take a moment to be clear in our heads about exactly what trading is. These days, trading is attracting a lot of attention, because it has now become readily available to private individuals instead of just huge institutions. But despite it being glamorised in films, news and social media, you may be unsure exactly what it is that we actually do when we trade. Fortunately, the answer is very simple.

As traders we do the same thing as almost every other retail business in the world, from Amazon right down to the fruit stall in the marketplace. We attempt to buy something at a low value, and aim to sell it at a higher value. The difference is, (and it’s an important one) all the other retail businesses have to build and own stock and products. They have to paint it, or assemble it, or move it closer to the customer. However, as traders we don’t have to do all that. As traders we speculate on the value of an asset rising or falling, if we are correct we can profit, if we are incorrect we can lose money.

Let’s take the currency market for an example, (a market that trades over $5 trillion on a daily basis!) If you look at the chart, you can see that currently the British pound is trading against the dollar at 1.4000. Let’s say, based on my analysis of the marketplace, I believe the value of the pound will rise against the dollar, I can buy in at 1.4000. If I’m right, and the market does go up, let’s say to 1.5000, then I would have made a profit. However, if I didn’t read the signs properly, and the value of the British pound against dollar instead drops to 1.3000, I will lose money on the deal.

Hopefully that has set the scene for what we are going to show you. As a trader, we are looking to buy something, let the market increase its value, and then sell it.


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THE 4 SKILLS REQUIRED FOR TRADINGIn this trading playbook, we’re going to show you the most important skills you need to acquire to become a long-term trader

While we call it a playbook, its worth noting that a lot of people unfortunately don’t understand the true nature of trading. They see it as gambling, or a gimmicky way to get rich quick, and approach it in this manner. The reality is that trading is neither. Like everything trading requires skills, investment and a plan.

It is the aim of this book to give you the best possible understanding of the skills you are going to need, and how to give your trading journey the ideal start.

THESE ARE THE VITAL STEPPING STONES TO GET STARTED, AND WE WILL COVER WHAT YOU WILL NEED TO MASTER EACH ONE IN TURN.

SKILL 1: YOUR STRATEGY

• Trading plan• Trading strategies

SKILL 3: TECHNOLOGY

• Affordability• Ease of use

SKILL 2: RISK MANAGEMENT

• Account size• Your risk appetite

SKILL 4: DISCIPLINE

• Consistency• Managing fear and greed


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YOUR STRATEGYWHAT IS A TRADING STRATEGY?

A trading strategy is a set of rules that we follow with the aim of achieving our goals.

WHAT ARE THE KEY ELEMENTS OF A TRADING STRATEGY?

Just as in most aspects of life, a well thought out strategy is one of the most important aspects of trading. When it comes to trading there are usually 2 parts of strategy:

1. First is the trading plan. You certainly wouldn’t start a business without some sort of plan. A business plan would include elements such as your marketing, the features of your product, and ways to monitor your profit and loss. It’s exactly the same with trading.

2. Second is the trading strategies, whilst these have similar features they focus more on the information you will use to take each trading decision.

So let’s dive in and have a look at what they are.


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YOUR STRATEGY

TRADING PLANThis is our roadmap, our high-level view of where we want our trading to take us, and what investment we are going to make to support that vision.

For example, it is essential for us to decide how much money we are going to invest in our trading at the beginning, and also what regular instalments we are prepared to commit over time. (Make sure that the account capital you start with is capital that you can afford to lose. If it’s not, this will have an impact on your psychology further down the line, but we will cover that in a later section)

Of course, because trading is speculative, it’s impossible for us to predict exactly what income we may make, or what losses we may incur.

The point of the trading plan is to provide you with an understanding of your starting point, and where you hope to get to, thus enabling you to track your progress and take action if you believe you are drifting off track.


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YOUR STRATEGY

TRADING STRATEGIESWe have seen that our trading plan is our long-term goal. A trading strategy however, is a lot more detailed and specific, and its role is to help us with our individual trading decisions, the stepping stones to that long-term goal.

To help us understand the difference, consider a football team. The trading plan represents the manager’s vision for that particular season - transfers, budgets etc, whereas the strategy represents the coach’s plan to win the next upcoming game.

It is vital to our success that our trades follow a strategy. Not only does that manage a lot of the emotional uncertainty, it provides us with an invaluable baseline to allow us to track and tweak our trading approach.


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RISK MANAGEMENTWHAT IS RISK MANAGEMENT?

Risk management is the way that traders attempt to reduce risk of losing their capital.

WHY IS RISK MANAGEMENT IMPORTANT?

Risk management is the unsung hero of trading. It sounds like a very dry topic, but it is probably one of the biggest factors in a traders survival, and is one of the biggest gaps between the amateur punter who will lose his account quickly, and the long term trader who manages risk and thereby avoids the basic mistakes that overwhelm his amateur counterpart. Risk management generally comes in 2 forms:

1. The first is your account size ie. making sure you only risk an amount you can afford to lose.

2. The second level is your risk appetite ie. the amount of your total account you are prepared to risk when trading.

So with that in mind, let’s take a few moments to examine the basic components of your new best friend, risk management.


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RISK MANAGEMENT

ACCOUNT SIZERemember the key thing here is to make sure you don’t invest more than you are prepared to lose. Whilst funding with large amounts can increase your potential returns, it can also increase your potential losses.

There are no absolute right or wrong answers here, it’s very much down to your personal situation, which is one of the reasons why having personal coaching helps when starting off as a professional trader!


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RISK MANAGEMENT

YOUR RISK APPETITEOnce we have decided on the correct account size to begin with, we then need to decide how much of that we are going to commit to each trading opportunity.

When we train our delegates, we usually recommend a maximum of 2% risk per trade.

To someone unfamiliar with the world of trading, that might seem quite small. But it’s worth remembering that trading is a numbers game. We will have losing trades as well as winning trades - there is no trader on the planet, however successful, who does not have a significant number of losing trades.

SUCCESSFUL TRADING IS NOT ABOUT THE SINGLE BIG WIN, IT’S ABOUT HAVING MORE WINNERS THAN LOSERS OVER TIME.

So let’s have a look at an example:

Let’s say that you start off with a £10,000 account, and you decide to risk 2% per trade. That means that your maximum risk per trade is £200.

Now remember that as a trader you may place more than one trade at a time. For example you may have a few trades open at the same time, each with 2% risk.

For instance, with our £10,000 account example, if we have three trades open at once, that means that our exposure is three times £200, or £600.


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TECHNOLOGYWHAT IS A TRADING PLATFORM?

A trading platform is a piece of software that allows traders to analyse the markets and place trades.

WHAT TO CONSIDER WHEN CHOOSING A TRADING PLATFORM

When we talk technology in trading, it’s very easy to get caught up in the latest gadgets, bells and whistles. So it’s worth remembering that what we really need from our technology is the best way of placing trades that works for us. It needs to be solid, stable and easy for us to understand.

The choice of platform is important to make sure that you are able to place and control trades once you have uncovered the opportunities for them, and that in essence boils down to 2 key things:

1. The first is affordability ie. making sure you chose a platform that is within your budget.

2. The second level is ease of use ie. making sure the platform is suitable for your skill level.

We will explain more about both of these on the next 2 pages:


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TECHNOLOGY

AFFORDABILITYAffordability is an important part of a platform, as to begin with it will represent a large part of the costs of running your trading business.

As with most things in life, there is a wide spectrum of tools available for use, ranging from completely free to professional grade tools such as Bloomberg, which will cost you thousands of pounds a month. For someone just setting out, the right choice is an affordable platform at the low-end of the market which does a good job of the 5% of trading functionality you will actually use.

ALL TOO OFTEN, WE SEE PEOPLE SPENDING LOTS OF MONEY ON PLATFORMS WITH HUNDREDS OF FEATURES THAT YOU WOULD ONLY EVER LOOK TO USE YEARS DOWN THE LINE, IF AT ALL.

A useful analogy here is cars. If someone has just passed their test, the best thing for them to do is to get an economical runabout, one that works well on the public roads.

Buying an F1 supercar that is more at home on the Nürburgring, as your first car is a clear mistake. Aside from it being ludicrously expensive for your needs, the complex technology will actually get in the way of you performing basic tasks well.


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TECHNOLOGY

EASE-OF-USEContinuing on the theme of doing the basics well, it is very useful for the beginner to have technology that assists in the simple tasks needed to place trades, and which also helps to prevent them from making simple errors. (something that more complex platforms fail at, as they are often designed for professional traders by serious trading geeks)

We will take risk management as an example here, as we have just seen how important that is to get right.

The industry-standard way of calculating risk seems to be to get the trader to do complex sums either on paper or in their head, along the lines of:

Risk = 2% account/ points at risk = £/$’s per point.

In our opinion, it’s a bit pointless to ask the trader to do that, as it’s actually all information that the computer already knows, therefore it should do the hard work for you, not only making sure that your life is easier, but also removing the possibility for mistakes in mental arithmetic.

(That’s just one example of how technology can make a new trader’s life easier. And with this in mind, when building our own platform we ensured that we can offer a product that will automatically calculate risk in % for you, amongst many other clever and useful features)


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DISCIPLINEWHAT IS TRADING DISCIPLINE?

Trading discipline is how closely we stick to our trading plans and strategy.

WHY IS DISCIPLINE IMPORTANT TO TRADING

One of the reasons we emphasise the fact that trading should be treated like a business, is that most people have a slightly more disciplined approach to their work than they do to their hobbies.

Hobbies are things you do as and when, in your own style, and based on how the mood takes you.

When it comes to trading, we want to have two levels of discipline:

1. The first is at an operational level, making sure that we are doing trading and analysis on a regular basis according to our plan. We call this consistency.

2. The second level is an emotional one, more specifically how you let your emotions affect your trading decisions. Along with risk management, this is one of the key areas where most new traders struggle at. We call this managing fear and greed.

To help you get started we will explain more about both of these on the next 2 pages:


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DISCIPLINE

CONSISTENCYNow trading can be attractive to people, as it has the potential to create a passive income, where you do your work and leave your trades to then either come good or bad. However, like everything you will need to put in time and effort.

The time and effort you need to initially put in, will consist of learning strategies, how your software works and what all the indicators mean. Whilst this may take a bit of time, it is extremely important, after all we are not doing a hobby here. We are managing our money and should treat it seriously. You will of course also be learning on the job so to speak, as you learn from your trading wins and losses.

We often find people get caught up with trading at the beginning, start trading 16 hours a day, only to burn out and end up trading sporadically thereafter. Generally, this approach isn’t the best, remember trading is a marathon not a sprint, we want to aim to be consistent. We recommend that from as little as 30 minutes a day, keeps you updated on your trading and the markets but also sets a great sustainable habit for you to continue throughout your trading journey.


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DISCIPLINE

MANAGING FEAR AND GREEDWhen training people to be traders, we have learned that most people consider the term psychology to be a little wishy-washy. People go little glassy eyed when you talk about emotional discipline, and seem to think that the real secret lies in finding the right strategy.

The truth however, is that a trader psychology is the underlying rock on which their performance is built.

IN FACT YOU CAN HAVE A TRADER WITH A GOOD SKILLSET BUT POOR PSYCHOLOGY, AND THEY OFTEN FIND A WAY TO SABOTAGE THEMSELVES.

This is because how we approach the task mentally is as important as the skills that we have for it.


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Let me give you an example: public speaking. We are all taught to speak from an early age, and most of us get quite good at communicating with friends and family, colleagues, even people we’re meeting for the first time.

But there is a lot of emotional fear in most of us attached to speaking in public. We end up fumbling our words, and nervously giving a shadow of the performance we could give to our best friend if it was just him or her in the room.

We haven’t lost any ability, but our emotions have overridden our skills.

And the same is true when it comes to trading. New traders can view losses as personal insults from the market. They see it as being proved wrong.

Whereas an experienced trader often views trading losses as the unavoidable costs of doing business. But more to the point, they have trained themselves to be detached, and to emotionally view it as such.

This is why it’s essential to have support when you are setting out on the road to becoming a professional trader.

WE HOPE YOU HAVE ENJOYED THIS PLAYBOOK SO FAR.

AS AN EXTRA THANKYOU WE HAVE INCLUDED A FOREX FACT SHEET TO GIVE YOU SOME EXTRA INFORMATION ON

HOW THE FOREX MARKETS WORK.

A QUICK AND EASY GUIDE TO FOREX TRADING

FOREX FACTSHEET

F O R E X F A C T S H E E T

1 9

Forex Means “Foreign Exchange” or is another term for ‘currency market’

WHAT IS

FOREX?

season tickets for the most expensive seats for every football team in the English Premier Division.

5.3

87 81,53843,946,932OR

trillion TRADED ON THE FOREX MARKET

EVERY SINGLE DAY

MILLION PRIVATE G650 JETS

Thatis enough

to buy

R8S

$


2 0

DO WE

RISKWHY

A PIP?

MANAGE?

WHAT IS ∏=3.1415

pip

WHAT’S THE BEST

STRATEGYFOR TRADING FOREX?

Managing risk ensures you’re always protecting the majority of capital in your trading account. We suggest you only risk a maximum of 2% on any trade to protect your account from unforeseen market volatility factors.

For example, only risking 2% of a £10,000 account means you’re limiting your exposure to £200 per trade. Using a low-risk strategy means that if a trade goes against you, you’ve only risked a small percentage of your ‘capital’.

The unit of measurement used to express the change in value between two currencies is called a “pip”. If EUR/USD moves from 1.1050 to 1.1051, that .0001 USD rise in value is ONE PIP. A pip is usually the last decimal place of a quotation. Most pairs go out to 4 decimal places, but there are some exceptions, like Japanese Yen pairs (they go out to two decimal places).

Historically, the best way to trade the Forex markets is when they are trending up or down - rather than trading ‘sideways’. But with the correct strategy, both trending and sideways markets can be traded successfully. If you learn to interpret technical charts and to understand the behaviour and direction of the currency pair you’re focused on, you can trade successfully in any market condition.


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IS CORRELATION

BETWEENC U R R E N C Y

WHAT

PAIRS?

WHAT IS A

STOP LOSS?

Always remember, currencies are traded in pairs. None of which are ever entirely isolated. So even when you’re trading one pair at a time, it’s vital you understand how they move in relation to each other - ESPECIALLY if you’re not familiar with how currency correlations can affect the amount of risk you’re exposing your trading account to.

A stop-loss is a designated trade exit point you decide via your trading platform - it determines the amount of money you are willing to risk on any particular trade. If a trade goes against you, you merely exit your trade at the stop-loss point and pay your broker a percentage of what you were risking.

Stop-losses are not always guaranteed - if a market moves quickly on the back of a significant news event, ‘slippage’ can occur. Due to volatility or sheer trading volume, your broker’s dealing desk may not get you out of the trade precisely at the price you designated. This is rare though, and most of the time your stop loss will be honoured by your broker.


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WHEN DO I TAKE

PROFIT?

WHEN TRADING?WHAT IS LEVERAGE

HOW CAN YOU GOLONG & SHORT, RECESSION PROOF?

WHAT’S

WHEN TRADING? “MARGIN”

A margin is a deposit that a trader uses as collateral to hold open a position (or trade). It is not a fee or transaction cost, but a portion of your account equity set aside when you want to control a more substantial position than you’d otherwise be able to with your own invested capital.

When trading with margin, it is essential to bear in mind that the amount of margin required to hold open a position will ultimately be determined by trade size. Therefore, as trade sizes increase, margin requirements do so too.

Where a stop-loss helps to minimise the loss of an unsuccessful trade, a take-profit provides traders with an opportunity to take their money at the peak of a deal. The art of optimising profits is to pick the opportune moment to close a deal right before the trend is about to reverse. Good traders should ensure that their take-profit is higher than their stop loss to secure a good risk to reward ratio.

Leverage is a byproduct of margin which enables a trader to control larger trade sizes. Individuals will use this tool as a way to amplify their returns. However, it’s important to stress that losses are also amplified when leverage is used. It is therefore essential to understand that leverage needs to be controlled.


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HOW DO I READ

OPEN

CLOSE

LOW

HIGH

OPEN

CLOSELOW

HIGH

CANDLESTICKS?

WHAT DOES IT MEAN TO HAVE A

POSITION?'LONG' OR 'SHORT'

WHAT IS COMPOUNDING? Compounding is the process in which the value of an investment increases because the earnings on that investment, both capital gains and interest, earn interest as time passes. This exponential growth occurs because the total growth of the investment, along with its principal, makes money in the next period.

For example, if you invest £2,000 and earn interest of 4% per month, you’ll earn £80 on your investment. That £80 is added to your invested capital by the end of month 1 - so, you now have £2,080 earning you 4% in month 2. Rather than making another £80 in interest, you’ll gain £83. The numbers can start to get very big as your previous earnings begin to provide returns. In fact, £2,000 invested at 4% monthly for 5 years would grow to over £21,000 - and that’s without adding any money to the initial investment.

In Forex trading, you’re speculating on the value of a currency in relation to another. If you think a currency will rise in price, you ‘go long’ (buy). If you think a currency will fall against the other half of its pair, you ‘go short’ (sell). For example, in EUR/USD, if you believe the Euro will fall against the US Dollar you’d hold a short position to sell the Euros.

Used for around 300 years, the candlestick is a chart variant that discloses more information than your standard line chart. The candlestick features a thin vertical line, which shows the currency’s value at open, high, low and close on a specific trading period (usually a day). It also features ‘wicks’.

These ‘wicks’ represent the range between the open and close of that period’s trading, with the opening wick to the left of the bar and the closing wick on the right. When the candlestick is filled in black or red, it means the close was lower than the open. If the candlestick is blue or green, it means the opposite: the close was higher than the open.

W W W . S M A R T C H A R T S . N E T

DO ILEARN TO TRADET H E M O N E Y M A R K E T S ?

HOW

A QUICK AND EASY GUIDE TO FOREX TRADING

FOREX FACTSHEET

WE PROVIDE OUR SERVICES IN COMPLIANCE WITH FINANCIAL CONDUCT AUTHORITY GUIDELINES

Over 250,000 people just like you, have attended our free workshops and webinars across the globe.

Visit www.smartcharts.net to book your complimentary seat on one of our award-winning Forex webinars today.

A L L T R A D I N G I N V O L V E S R I S K A N D L O S S E S C A N E X C E E D D E P O S I T S

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FOREX - irp-cdn.multiscreensite.com · all trading involves risk and losses can exceed deposits our services include products that are traded on margin and carry a risk of losses