Forex Trading for Dummies in 15 minutes

5/20/2018 Forex Trading for Dummies in 15 minutes

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VOL II

BEST FOR

BEGINNERS

FOREXTRADING

in15minutes


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Trading involves risk. Leveraged trading has large potential rewards, but alsolarge potential of risk. Be aware and accept this risk before trading.

30 days after you read this e-book,your friends will notice your success!


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$100


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EST time

MON TUE WED THU FRI SAT SUN

New York

Sidney

Tokio

Best time


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USD/CHFEUR/JPYUSD/CAD

EUR/USDGBP/USDUSD/JPY

exchangeforeign

The most common currency pairs

Forex is an international currency marketwith daily deals worth $4 billion.

The trade in Forex occurs between twocurrencies, because one currency is beingbought and another sold at the sametime.

FOREX

TOP PAIR

EUR/USD

dealsof all1/3

EUR/USD

1.30011.3000

Selling price (Bid) Buying price (Ask)

BaseCurrency

QuoteCurrency

28%

EUR/USDEUR/USD

Point (Pip)The fourth unit after the

decimal point, which is the

smallest unit of an exchange rate.

SpreadThe difference between the sell

quote and the buy quote (in pips).

The smaller the spread,the more liquid the currency!

spread

po int

forex glossary


6/29Dec 12011

Nov 12011

EUR/USD

Example

Prime Minister

of Greece announces

referendum

The EU cannot

agree upon

changes in the

treaty

Central banks

agree to stimulate

liquidity of finan-

cial transactionECB announces

a new president

Berlusconi

resigns

Source: Morgan Stanley Research, Bloomberg.

Finance circulation

Interest ratesMandatory reserve funds

GDP, inflation, debt

Sales amountsInterest from investors

Stability of governments

Public statementsChange of officials

Central banks State economics Politics


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Term

Leverage

Term Lot

Stock market Forex market

Through the use of leverage, traders areable to invest a small amount of money andtrade much larger deal sizes. This is usefulbecause the movement in currency rates canbe very small, and larger trades representlarger profits/losses for every pip change inthe rate.

Leverage allows you to trade with moremoney than you have in your account,because you effectively leverage your freebalance to open a larger trade. Leverage isshown as a ratio, for example 1:100. Notethat leverage amplifies both potentialprofits and losses alike.

In Forex, all transactions can be conducted via standard, mini, and micro lots. Each lot sizeaccounts for a different measure of units of the base currency, which in turn presents adifferent pip value. Below is a simple ch art to illustrate the differences in lot sizes, mea suredin units, volume for the major pairs where the base currency is USD.

The smaller contract sizes have a broad appeal to beginner investors who do not want totake on a disproportional amount of risk. Generally speaking, mini account holders haveaccess to the same materials as the regular account holders such as charts, trading plat-

forms, support, etc. Those traders who are looking to get started in the forex market shouldconsider opening a mini account because of the smaller contract sizes.

Maximum leverage 1:2 from 1:50 to 1:400

Varying lot sizes

Standard Lot 100,000 units 1 1 pip = $10

Mini Lot 10,000 units 0.1 1 pip = $1

Mini Lot 10000 units 0.1 1 pip = $1

Units ofbase currency

Pip Value(base: USD)

Volume

Micro Lot 1,000 units 0.01 1 pip = $0.10


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You decide to buy 100,000 EUR and sellUSD at a rate of 1.4100. Do you needmore than 100,000 US dollars to openthe trade? No! With a leverage of 1:50you will need to put down only 1/50 ofthe deal size as the margin, which worksout to $2,820.

Calculate the margin:

Leverage 1:50Divide 100,000 by 50=2000 EUR2000 EUR x 1.41=$2,820Margin=$2,820

This is the amount that will be used tocover your potential losses. In other

words, the margin is the actual amountthat you are risking to lose if the tradegoes against you.

Leverage is a very aggressive investmentstrategy and only those with high risktolerance and a long time horizon shouldconsider leverage.

Use leverage appropriate to yourcomfort level: Using 1:50 leverage means

that a 2% adverse move could wipe outall your equity or margin. If you are arelatively cautious investor or trader, usea lower level of leverage with perhaps 1:5or 1:10 leverage.

The leverage available on positionscarried over the weekend may vary.

Maximum leverage limits vary in

different countries, varying from 1:10 to1:400.

Example Tips & Warnings

LeverageLeverage simply means borrowed funds.While the high degree of leverage used inforex trading magnifies returns and risks, afew safety precautions used by professionaltraders may help mitigate these risks.


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1.dec20111.nov2011

1.3500

1.3000

1.4000

EUR/USD

Going short on euroYou expect the euro to fall against the US dollar.

Open @ 1.3800

Close @ 1.3108

Case B: Leverage 1:200

You open a position of 1 lot, whichrequires an initial deposit of(100,000*1.3800/200) $690.

You were right. Euro depreciates againstthe dollar to 1.3108 and you decide toclose your trade and take your profits.

Result: The euro fell by 692 pips (1.3800- 1.3108 x 10000). Your profit is 692 x 1(lot) x 200(Leverage) = $138,400

Investment: $690Profit: $138,400

Case B: Leverage 1:50

You open a position of 1 lot, whichrequires an initial deposit of(100,000*1.3800/50) $2,760.

You were right. Euro depreciates againstthe dollar to 1.3108 and you decide toclose your trade and take your profits.

Result: The euro fell by 692 pips (1.3800- 1.3108 x 10000). Your profit is 692 x 1(lot) x 50 (Leverage) = $34,600

If the trend moves against the investor, leverage magnifies losses the same way itmagnifies returns in the examples above.

Investment: $2,760Profit: $34,600


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Creating a people based portfolioUsing Social Trading platforms.

Rudolph Boyle

Alex Slovacek

Daniel Lanham

Rudolph Boyle

Alex Slovacek

Daniel Lanham

Follow

Follow

Follow

Follow

Follow

Follow

TOP traders

Even if youre new to Forex, there are

beginner friendly platforms likeeToroor

Zulu Trade (Accepts US traders) that

offer you an interesting opportunity to

follow the best traders and copy their

transactions.

1

After you choose a top trader whose

actions you wish to copy, decide upon an

amount of money to invest into copying

his transactions and press copy.

3

Start following the best traders and

watch their activities.

2

Choose a platform

Follow the leaders

Now you can sit back and watch a

professional make transactions for you.

This is also a good way to learn Forex

strategies in a real-life trading

environment.

4 Profit

Copy their ideas
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timeX

time

X

Let us look at a daily graph.What do most traders dowhen they see such a curve?They assume that its thebeginning of a downwardtendency and bid on the dropof the currency exchangerate. And theyre wrong!

Now lets look at the samecurrency over a longer periodof time.

We see that the daily shiftwas inconsequential to thelong-term tendency as it isupward and not the otherway around.

MULTIPLE TIME FRAME ANALYSIS

The market can be analysed in several time frames: 10 minutes, hours, days, weeks.It may often seem that these indicators are contradictory. However, they arent, you

just need to co mbi ne thei r reading s. Analyses of lon ger time per iods sh owtendencies, ignoring accidental changes, whereas daily and hourly graphs help inchoosing the moment to open and close positions.

For successful and precise market analysis, you must use at least 2-3 time frames!

Example

Conclusion

November

3 10 17 24

1500

1550

1600

Aug Sep Okt Nov Dec

1300

1600

1900


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8FOREXSTRATEGIESYOUNEEDTOKNOW


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The double-red strategy is a short-termreversal system based on price action andresistance. The trade is planned on a5-minute chart and is signaled when twobearish candles form following a test ofresistance.

1. Choose an asset and watch the marketuntil you see the first red bar. Then waitfor a second red bar.

2. If the second red bar closes lower thanthe first red bar, then its a jackpot.

3. Usually, what happens i s that the thirdbar will go even lower than the secondbar. This is the point where you shouldopen a short position.

Not suited for volatile markets Do not use it when big news events

are taking place

Watch outDescription

Resistance level

Sell

1.

2.


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Copy the trades of experienced traders.This is the best solution for beginners who dont have muchfree time.

1. Choose

network

2. Choose

traders to copy

3. They make

money for you

Social trading networks likeeToroorAyondooffer an opportunity to follow the best tradersand copy their trades with a click of a button. Choose the traders you like, and then sit backand watch them make profit for you. This is also a good way to learn Forex strategies in areal-life trading environment.

EASIESTstrategy

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Preferable timeframe: 1H Stop-loss is put outside the channel

Key elements

Support is the level at which the priceseldom falls below; resistance is the levelthe price seldom exceeds. Each time theprice hits the resistance or support, the

price appears to hit a wall and reverses. Atsupport levels, the number of buyers gen-erally exceeds the number of sellers; thispushes the price back up. At resistancelevels, the number of sellers exceeds thenumber of buyers causing the price to goback down.

Description

Resistance level

Support level

Buy

Sell Sell Sell

Buy


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Preferable timeframe: 1H. To confirm the trend, wait until at least

one price bar closes below/above thesupport or resistance.

Stop-order should be above the supportline or below the resistance, but not tooclose to avoid common movements andflat widening.

Key elements

When a price trades within a range forsome time, sooner or later, there will be abreakout either up or down. This breakoutis usually very fast and vola tile. Therefore,

it is possible to open a trade in the samedirection.

Description

Resistance level

Support level

Buy


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2. Upper shadowat least 2x the sizeof the real body

3. Confirmationof a downtrend.

A Pinocchio bar is a candlestick bar thathas a very small body and a very long wick(nose). It is also called Shooting Star,Hanging Man, Hammer and Inverted

Hammer. You may remember thatPinnochios nose grew long when he waslying. The same happens with thisstrategy: when the wick is longer thanthe body, this tells us that the market isdeceiving us and that we should trade theopposite wa y.

The entry point varies: some tradersprefer to wait for the next candle toretrace to the 50% Fibonacci level of thePin bar, while others enter immediatelyafter the Pin bar closes. A long wickindicates strong selling pressure; a longtail suggests intense buying power.

Time-frame for analysis: 1h, 4h

Do not trade in a neutral market! A truebearish Pinocchio signal must come afteran uptrend (see image above). Trying totrade the bearish Pinocchio pattern inneutral market conditions can be risky.

Key elements

Watch out

Description

Bearish Pinnochio Sell 68%

win

rate


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1. After an uptrend or, at least, a strongmove up, look for the 1 2 3 pattern to

form, starting, of course, with the firstpeak (1).2. If a counter-move starts, mark thebottom of that move with (2).3. If the new move up does not surpasspoint (1) and starts turning down, markthe highest point of this new move upwith (3).

4. The pattern is now complete. There isstill a very important rule that must be

observed: the price must move down tobreak the low created at point (2). If thathappens, all of our conditions are met andwe enter the trade with a short position.

Description

If a peak is not surpassed,it becomes point 1.

1

Point 2 marks the endof a counter move.

2

Point 3 does not gohigher than point 1.

3

Sell


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A sell signal is indicated when the spotrate crosses under the moving average.

The fact that the "double-top" chartpattern occurs at roughly the samepoint, reinforces the sell signal.

A buy signal is indicated when the spotrate crosses over the moving average.The "reverse head and shoulders" pattern(as seen in the chart above) confirms thebuy signal.

Key elements

Using moving averages to determinetrend direction is the oldest form of

technical analysis and remains one of themost commonly used indicators. Movingaverages "smooth out" fluctuations andhelp distinguish between typical marketfluctuations and actual rate reversals.

Description

Sell

Buy

Moving Average


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Preferable timeframe: 4h It is wise to use a fixed stop losswhen working with oscillators to avoidbigger losses if a breakout should

happen.

Key elements

Oscillators can provide clues when themarkets momentum is slowing down,which often precedes a shift in the trend.

Momentum shifts directions when the twolines (blue and red) cross. Therefore, atrader takes a signal in the direction ofthe cross when the blue line crosses thered line.

Description

Extremum

Extremum

Buy

Sell


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An essential mistake beginners makeis closing the transaction too soonand thus not taking advantage of thefull profit potential. Trends lastlonger than they might seem at first!

6 Dont stop the profit

Transactions against a trend usuallyresult in loss. Wait for a beneficialtendency and then make your move!

7 Dont play against

the trend

If you still arent confident aboutyour decisions, choose a platformthat lets you follow leaders and copytheir transactions.

8 If in doubt, follow

the leader

Dont hold unsuccessful positionsopen for a long time. Experienceshows that its best to close themearly and move on to others.

Close the unsuccessful

Beginners often dont know thatwhen trends start, they develop

quickly beca use they are increased bythe number of traders followingthem. Use trends in your favour!

9

10

Trends have momentum

Dont open many positions at thesame time. Its better to choosefewer positions, but weigh each ofthem carefully.

1 Start gradually

People often forget to limit their lossand therefore have to step out of thegame very soon. With the Stop-LossOrder, you will be able to control thesituation even if the rates changeunexpectedly.

2 Stop-Loss order

Specialists advise against riskingmore than 1/6 of your free capitalwhen you arent completelyconfident.

3 Rule of 1/6

Differentiate the time frames ofanalysis. Weekly graphs are used toobserve trends while daily and hourlygraphs are best used to observe thebest time to open and closepositions.

Multiple time frames

Each good trader has their own plan,and the best traders make an effort

to hold onto it. Those who have thetime, make daily transactions, otherschoose long-term strategies. Keep itsteady!

4

5

Stick to the plan


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There are many companies that offer margin-trading (Forex) services. Without theknowledge of the essential criteria, its easy to get lost in the details of a large offer and

choose an unsuitable or, as a worst-case scenario an unreliable service provider. What ismost important when choosing a platform provider, and how does one orientate themselvesin so many offers? Below is a compilation of some advice from several professionals in theForex market, which can be narrowed down to four basic criteria:

Reputation of the company

Evaluate the popularity of the platform provider whetherthere are any complaints about the services and what thosecomplaints are, what the customer service is and whether ornot profit payments are ever delayed.

Convenience of the user interface

You have to evaluate how easy and convenient it is to use theplatform and what analytical options and extra tools it uses. Itis best to check the user interfaces by opening demo accountsoffered by the best platforms.

Commission for paid transactions

The commission paymen ts for transactions are described by thespread, which is the difference between the bid and offer priceof the currency. The bigger the spread, the more you will haveto pay the service provider. Commission payments are usuallyhigher for independent platforms rather than commercial bankForex platforms.

Money transactions

The best platforms provide the opportunity to use wiretransfers or other online payment operators such as PayPal orMoney Bookers, which are the most convenient and easymethods of receiveing funds.

1 2 3


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* eToro is a Social Investment Network.

**Plus 500 is a CFD only Service. Your Capital may be at risk.

Easy Forex

eToro*

Platform Min. Deposit Max. Leverage Rating

$50 1:400

$25 1:200

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2

1

4

3

5Ducascopy

$100 1:300

Plus 500**$100 1:200

For optimum results

recomended to

invest at least $250

FxPro $500 1:500
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Huge and active community Super friendly yet powerful interface Follow & Copy feature Between 80 -90% ofcopied trades are profitable. Guru traders are obliged to write

about their strategies to their followers Great stock investments: Google,Facebook, Amazon, Apple etc.

Founded in: 2006 Registered in: Cyprus Regulators: CYSEC, MiFID Minimal deposit: $50 Leverage: up to 1:400 Spreads: EUR/USD 3 points

Payments: Credit card, Paypal,BankWire, MoneyBookers, Webmoney Commissions: No* Contacts: + 1-866-350-0881,[email protected]

Platform pictures

FactsPros

* Overnight commissions might be applicable

visit site

beginners

best for

Spreads could be tighter The trader filter could be more advanced Trade history features need improvement

Cons

eToro is the world's leading social investment network with over 3 million registeredusers from over 200 countries. The eToro platform is considered to be the most userfriendly and intuitive for beginners. eToro is known for its unique social tradingtools that let you see, follow and copy the best performing traders in the network.You don't need to be an expert to invest like a top performer.
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A popular platform which has proven itself since 1999. Plus 500 is one of the rarebrokers listed on the London Stock Exchange. This platform has an app available formobile devices including the iPad, which allows you to make transactions whereveryou are (Highest rated broker in UKs app store). Plus500 is suitable for experiencedtraders and not beginners. Plus500 is a CFD service. *Your Capital is at risk.

Bonus of $20 - $10,000 Low fixed spreads Listedon the London Stock Exchange Fastaccount verification Available in 35 languages

Accessible everywhere (web, iPad,iPhone, Android and Windows phone)

Scalping not allowed Very basic charting for the mobile app

Founded in: 1999 Registered in: UK Regulator: Financial ConductAuthority. Minimal deposit: $100

Leverage: up to 1:50 Spreads: EUR/USD 2 points Payments: Credit card, Paypal,Skrill, Bank Wire Commissions: No* Contacts: +44 203 002 7290,[email protected]

Pros

Cons

Platform pictures

Facts


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Very easy & fast sign-up Low minimal deposit Free market analysis

High overnight fees Relatively high spreads

Founded in: 2003 Registered in: Cyprus Regulators: CYSEC, MiFID

Minimal deposit: $25 Leverage: up to 1:200 Spreads: EUR/USD from 3 points Payments: Credit card, Paypal,Bank Wire Commissions: No* Contacts: [email protected]

Platform pictures


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all-in-one

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Cons

Pros Facts

A user friendly, yet professional and trustworthy platform that has trained manyprofessionals. This platform offers one of the easiest sign-up processes as well asmultiple payment receival options. A pleasant feature is the super low minimaldeposit - just $25. With one trading a ccount, you can trade from your desktop, smartphone, iPhone, BlackBerry, or PDA. The variety of market reviews and analysis toolsoffered by this platform is remarkable, all of which will help you make the right

decisions.
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FxPro has been a major player in retail FX since it was established in 2006, and hasquickly risen through the ranks to become one of the largest and most influentialbrokers in the world. Regulated by both the UKs FCA and the CySEC FxPro is a trulyglobal broker serving clients in over 150 countries worldwide. FxPro has been a forcefor change in the industry, leading by example it continues to campaign forincreased levels of transparency and for the eradication of any and all conflicts ofinterest between broker and client. When FxPros clients take a position on theworlds markets they receive the very best bid and ask prices, executed rapidly, and

with no intervention from a dealing desk. FxPro offers also a true ECN trading withspreads from 0 pips on the major pairs.

No Dealing Desk intervention Insured Client Funds Negative Balance Protection Commission-less trading

Leverage from 1:1 to 1:500 Offers also ECN trading Best tools in the market

$500 minimum deposit

Founded: 2006 Headquarters: Limassol, Cyprus Regulated by: FCA, CySEC Minimum Deposit: $500

EUR/USD spread: 1.5 (averagespread) Max Leverage: 1:500 Money Withdrawals: Processedwithin 1 business day Commissions: No Commissions Payment Options:Vi sa/MasterCard,Bank Wire, Skrill, Neteller, and more.

Pros

Cons

Platform pictures

Facts

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High security Low spreads Scalping, hedging etc. allowed

Slightly longer registration process Trading commissions

Founded in: 1998 Registered in: Latvia (Europe) Regulators: Swiss Financial

Markets Authority Minimal deposit: $100 Leverage: up to 1:300 Spreads: EUR/USD ~ 1.4 pip Payments: Credit, Debit Cards Commissions: from 10 USD /

1million USD deposit Contacts: [email protected]

Platform pictures

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Cons

Pros Facts

Ducascopy is one of the most reliable and secure brokers out there. DukascopyEurope is a European subsidiary of Dukascopy Bank of Switzerland. It is a heavilyregulated broker and secured by governmental regulations up to 20000 EUR percustomer. Ducascopy Europe is one of the safest places to trade and also provides

the lowest spreads and highest liquidity.
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Forex Trading for Dummies in 15 minutes