ForexTrading

TheBasicsExplainedinSimpleTerms

PlusFREEBonusTradingSystem

Copyright2015byJamesBrown-Allrightsreserved

Thisbookisgearedtowardsprovidinginformationinregardstothetopicandissuecovered.Thepublication is soldwith the idea that thepublisher isnot required torenderaccounting,officiallypermitted,orotherwise,qualifiedservices.Ifadviceisnecessary,legalorprofessional,apracticedindividualintheprofessionshouldbeordered.

From aDeclaration of Principleswhichwas accepted and approved equally by aCommittee of the American Bar Association and a Committee of Publishers andAssociations.Innowayisitlegaltoreproduce,duplicate,ortransmitanypartofthis document in either electronicmeans or in printed format. Recording of thispublication is strictly prohibited and any storage of this document is not allowedunlesswithwrittenpermissionfromthepublisher.Allrightsreserved.

Respectiveauthorsownallcopyrightsnotheldbythepublisher.Thetrademarksthatare used arewithout any consent, and the publication of the trademark iswithoutpermissionorbackingby the trademarkowner.All trademarksandbrandswithinthis book are for clarifying purposes only and are the owned by the ownersthemselves,notaffiliatedwiththisdocument.

DisclaimerThisbookisdesignedtoprovideinformationthattheauthorbelievestobeaccurateonthesubjectmatteritcovers,butitissoldwiththeunderstandingthatneithertheauthor nor the publisher is offering individualized advice tailored to any specificportfolioortoanyindividual’sparticularneeds,orrenderinginvestmentadviceorotherprofessional services suchas legal accountingadvice.Professional servicesshould be sought if one needs expert assistance in areas that include investment,legal,andaccountingadvice.

Thereisasubstantialriskoflossassociatedwithtradingthesemarkets.Lossescanand will occur. No system or methodology has ever been developed that canguaranteeprofitsorensurefreedomfromlosses.Norepresentationorimplicationisbeingmade thatusing this informationwillgenerateprofitsorensure freedomfrom losses. The trade examples provided were hypothetical only and wereprepared with the benefit of hindsight. No hypothetical trading record cancompletely account for the impact of financial risk in actual live trading.Additionally, this book is not intended to serve as the basis for any financialdecisions, as a recommendation of a specific trading system. Your personalfinancialcircumstancesmustbeconsideredcarefullybeforeinvestingorspendingmoney.

No warranty is made with respect to the accuracy or completeness of theinformation contained herein, and both the author and the publisher specificallydisclaim any responsibility for any liability, loss or risk, personal or otherwise,whichisincurredasaconsequence,directlyorindirectly,oftheuseandapplicationofanyofthecontentsofthisbookandthebonussystem.

Introduction

I hope you find this book useful to gain an understanding of the basics of forextrading and with this information; you become a successful trader in your ownright.

Myknowledgeofcurrencytradingextendsovera14yearperiodandhasevolvedfromtheoldfashionedmanualchartingwhenI firststarted in2002, to tradingonmultiple screens and entering the arenaof automated trading. During this time, Ihavedevelopedandsharedmanytradingsystemsforfree,andIhavealsoassistedmanynewTradersthroughmyvariousblogsandforumparticipation.

Thisbook is for thoseofyouwhoare just starting toconsider tradingForexbutdon’tknowwheretostart,giventheabundanceofinformationontheinternet.ItisTHEfirstbooktoreadtohaveanunderstandingoftheverybasics.

I have deliberately kept the explanations quite simple and straightforward soeveryonecanunderstandit.

Bestregards

Jim

Contents

Chapter1WelcometotheWorldofForexTradingWhatisForex?WhyForex?AdvantagestoTradingForexWhenistheForexMarketOpen?

Chapter2WhatDoWeTradeintheForexMarket?ForexPairs-WhatdotheNumbersMean?WheredoweTradeForex?WhatAboutChoosingaBroker?

Chapter3HowDoYouActuallyTradeForex?ImportantInformationforUSbasedTradersLotSizeandEquivalentPipValueInformationonRisk

Chapter4FundamentalorTechnicalAnalysis?NewsandFundamentalAnalysisTechnicalAnalysis

Chapter5FurtherInformationonForexSpecificsRisk-RewardRatioTypesofOrdersHowManyPipsisEnough?

Chapter6TradingPsychologyTradingPsychology

Chapter7TimetoTradeDayTradingorLongerTermTrading?KeepingaJournalorDiary

Chapter8ConclusionBonusTradingSystemIntroductionTemplateandCustomIndicatorsMyThoughtsonTradingEntrySignalsTradeManagementConclusion

RecommendedReadingRecommendedForums

Chapter1

WelcometotheWorldofForexTrading

SoyouhaveheardaboutForexTradingandyouarenowcurioustocheckitout,butreallydon'tknowwheretostart.

Wellyouhavecometotherightplace,asthisbookwilltakeyouthroughthebasics,explainForexinaplainandsimplemannerandgiveyouenoughinformationtogetstartedsoonerratherthanlater,intheexcitingworldofForexTrading.

WhatisForex?

Forex is the common term used to describe Foreign Exchange. It is also calledcurrency trading, or just FX trading, and every now and then you may see itreferredtoasSpotFX.

Itisessentiallythetradingoftheworld'svariouscurrencies.Tradingcurrenciesisalittle different to trading shares or stocks, as currencies are traded against eachother.What I mean by this is that you are comparing one country's currency toanothercountry'scurrency.Itisnotasconfusingasitsounds,sobearwithme.

WhywouldIwanttotradeForex?

Goodquestion!Mostpeoplehaveheardabout trading stocks,maybeeven futuresandoptions.Theyhavebeenaroundforyearsandyourgrandparentsmayhaveeventraded them.But Iguaranteeyou that theywouldn'thave tradedForex,unless theywereexceptionallywealthyindividualsorworkedforamajorbank.

Itisonlyinthelast15orsoyearsthattheretailForexindustryhasopeneduptothelikes of you and I, where you can start trading with a very small deposit into abrokerage account.Obviously thepopularityof the internet hashelped create thisboomasabout99.9%ofalltransactionsarecarriedoutonline.

WhyForex?

Forastart,itisbyfarthemostliquidmarketintheworldthatruns24hrsadayfor51/2 days of theweek. Just to give you an idea ofwhat Imean, in early 2014 andaccording to theBankfor InternationalSettlements,Forex trading increased toanaverageof$5.3trilliondollarsaday.Toputthisinperspective,thisaveragesouttobe$220billionperhour.Infact,itwouldtake30daysoftradingontheNewYorkStockExchangetoequalonedayofForextrading.

Thesefiguresarehuge!Thereisnootherwaytoputit.Butobviouslythatdoesn'treally affect the average trader other than giving that trader very good liquidity,

whichmeans ifyouwant tobuyor sell anyof the top10currencypairs, there isneveranissueofthatpairnotbeingavailabletotrade.Alsowiththismuchvolumeonadailybasis, theaverage trader likeyouand Ihaveabsolutelyzerochanceofinfluencingmarketdirection.

AdvantagestoTradingForex

Because theForexmarket is running continuously for 24 hours during theweek,thereisverylittlegapping,whichcanbeacommonproblemwithstocktrading.Forexample you may have bought XYZ stock at $24.20 on Tuesday just before themarketclosewithastoplosssetat$23.50toprotectyouagainstanymajorlosses.During the night, when themarket is closed, there is amajor announcement thataffectsthecompanytradingasXYZ,andthemarketopensonWednesdaymorning,withXYZtradingat$22.10.Notonlyhasitgappeddown$3.10overnight,ithasalsoopened$1.40belowyour stop loss givingyou amuchbigger loss thanyou everanticipated.

ThisrarelyhappensinForextrading,buthavingsaidthatitcanhappen,especiallyovertheweekendasthisistheonlytimetheForexmarketisclosed.Butitisrare!IcangiveyouoneexamplewhereIwascaughtoutonaweekend.Late2003IwasinopenpositionsovertheweekendwhereIwasbasicallygoingagainsttheUSdollar,and thenUS troops captured SaddamHussein. Thiswas very positive for theUSdollar, which then opened much higher on theMonday inflicting some financialpainmyway. I have learntmy lesson and I am rarely in open positions over theweekend.

Asyouwillsoonsee,withregardstoForextrading,youonlyhaveasmallamountof currency pairs to choose from. This is a very small basket compared to thenumberof stockchoicesyouhave.On theUSstockexchanges, thereare literallythousandsofstockstochoosefrom.Hereyouhavetheproblemoffindinganeedleinahaystack.YouwillseethatyourForexchoicesaremuch,muchnarrower,hencethereiscertainlyalotlesssearchingandanalyzingrequired.Allofyoureffortsandconcentration can be targeted in a very narrow field, so you can get onwith thetradingsoonerthanlater.

OnceyouhavealookatafewdifferentForexcharts,whichIdiscusslater,youwillsee some very nice smooth trends that seem to occur quite often. Now this issomething that you may not understand if you have never traded a financialinstrument before, especially if you have never looked at charts. For those stocktradersout there,youwouldbeveryawareofstocks that justgetstuckinarangeforwhatseemsforever,orstockchartsthatshowplentyofgapsandageneraluglysortoflook.IamnotsayingthatForexdoesn'trange.Itdoes,trustme,butwhenitbreaksout it isnormallysomethingverygood.Youwillunderstandthisonceyoustartlookingatthecharts.

Thelowcostoftradingisalsoimportant.Mosttradingisconductedelectronicallyover the internetonyournominatedbroker'sonlineaccount.Thecost isminimalforeachtradeasthereisnormallynocommissioninvolved,howeveryoudohavetocoverthespread.Thiswillbeexplainedshortly,butitcanbeverycheaptotradeconsideringsomepairsnowhavelessthanonepipspread.

Further to the low cost, you can open an accountwith a broker for a very smallamount,and insomecases, justacoupleofhundreddollars.Grantedyouarenotgoingtomakemillionsfromthis,butitisastart.Iwillcoverbrokerslater.

SomeFurtherAdvantagesofForexTrading

Soweneedsomewheretotradeandasstatedearlier,thisisalldoneonlineviatheinternet. The good thing about this is that most brokers offer unlimiteddemonstration platforms where you can practice trading for as long as you likewithout risking any of your own money. This is brilliant if you want to try outdifferenttradingmethodsandideas.Commonlyreferredtoas'demotrading,'thereis no reason that you can't have both a 'live' and 'demo' account with the sameBroker.Justensureyoudon'tgetthemconfused.

Demotrading isquiteauseful toolwhereyoucan tryoutdifferent thingsetc,butplease be warned, trading on a 'demo' account is nothing like trading on a 'live'accountasthereiszeroriskwitha'demo'accountandthereforeyouremotionsdonotcomeintoplayatall.Itislikewalkingacrossaplankofwood6inchesabovetheground,comparedtowalkingacrosstheexactsameplankofwoodtenstoriesupintheair.I'msureyouremotionswouldbedifferent,andthesamegoesfortrading.Whenthereisrealmoneyontheline,youwillthinkandactdifferent!Trustmeonthis.

And to take this one step further,Forexdata is live and it is free.Unlike a lot ofstockdatawhereyouhavetopayamonthlydatasubscriptionfeeorstuckwith15minutedelayeddata,yourForexdataisallfreelyprovidedtoyoubyyourchosenbroker'stradingplatform.I’llhavemoreonbrokersandtheirplatformslater.

WhenistheForexMarketOpen?

HereIwilldiscussthetradingtimesandasyouwillsee,thereisampletimetotradeForex.Asstatedearlier,itisamarketthatisopenlongerthanitisclosed.Asmostpeople would be aware if you were trading stocks then you would trade thesethrough an exchange, whether it was the New York Stock Exchange or theAustralian Stock Exchange. Forex trading does not have any central exchange assuch.Alltradingisdonethroughthebanksormarketmakers,whicharebasically

thebrokersthattraderslikeyouandIwoulduse.

Forextradingfollowstheworld'stimezonesandisbrokendownintothreemajortimezones.

▪ The first to open is Asia, which includes New Zealand, Australia, Singapore,Japan etc. This is called the Asian session and is normally the quietest of thesessionswithregardstotradingvolume.

▪ This is then followed by theEuropean session. In themeantime, traders in theMiddle East are kicking in, and then all the major European centres, whereeventuallyLondonopens.TheEuropeansessionisthemainsessionasitnormallyhas the greatest volume traded. You have to remember also that London is thefinancialcapitaloftheworld,eventhoughmostpeoplethinkitisWallStreetintheUS.

▪ The last session to open is the US session, and this session can also be veryfrantic,especiallyearlyinthedaywheretherecanattimes,bemajornewsreleasesthathaveabigeffectontheUSdollaritself.Sowehavethethreetradingsessions,which do overlap each other. There are no set times, just when banks open forbusinessineachmajorfinancialcityandvolumepicksup.

FormelivinginAustralia,Iknowthatduringthedayhere,itistheAsiansession,followedbytheEuropeansessionwhichkicksoffatabout5pm,followedbytheUSsessionat11pm.Iamnormallyinbedby2amatthelatest,whichwouldbegettingclose to lunchtime in theUS. In a nutshell, you can trade at any time, but if youintendedontradingtheLondonopenandyoulivedintheUS,youmayhavetosetyour alarm clock and get up very early in themorning. Every time zone has itsadvantagesanddisadvantages.

Thereareplentyoffreeonlinetimezoneclocksavailablethatrelatetothedifferentsessiontimes,soitisquiteeasytofindasessionorsessionsthatsuityourlifestyle.Youcanalsofindfreecustomindicatorsthatclearlyputthedifferentsessiontimesonyourtradingcharts.Thisisagreatvisualtoolforsome.

Chapter2

WhatDoWeTradeintheForexMarket?

Let'sgetintoit!

Thereareseveralcurrencypairsthatcanbetraded,butthemajorityoftradersjuststickwithagroupofabout8to10pairs.Thatismorethanenoughchoice.

First up, we have what they call the 'majors'. These are by far the most heavilytradedcurrencypairs,andalotoftradersarejusthappytradingoneortwoofthese.Themajorsinclude:

EUR/USDEurodollaragainsttheUSdollar

USD/JPYJapaneseyenagainsttheUSdollar

GBP/USDGreatBritainpoundagainsttheUSdollar

USD/CHFUSdollaragainsttheSwissfranc

NoticehowtheyareallagainsttheUSdollar,thereforewhentradersdiscussthesepairs, they simply just refer to them as the Euro, Yen, Pound (or Cable) and theSwissy.

Thenwehavewhatwecallthe'2ndtierpairs'andtheseincludethefollowing:

AUD/USDAustraliandollaragainsttheUSdollar

USD/CADUSdollaragainsttheCanadiandollar

NZD/USDNewZealanddollaragainsttheUSdollar

Again,thesepairsareallagainsttheUSdollar,sotheyaresimplyreferredtoastheAussie,LoonieandKiwi.ThetermLoonieactuallycomesfromthefirstCanadiandollarcoin.

Then there are currency pairs which are simply called the 'crosses', and theseinvolvenonUSdollarpairs.Someofthemorepopularcrossesinclude:

EUR/JPYEurodollaragainsttheJapaneseyen

GBP/JPYGreatBritainpoundagainsttheJapaneseyen

EUR/GBP

EurodollaragainsttheGreatBri tainpound

Therearequiteafewothers,butthesethreeareprobablythemostpopulartraded.Alot of traders prefer to trade their home currency as they feel they have a betterunderstandingofit.Personally,I'mAustralian,butIrarelytradetheAussieasIamverycomfortabletradingthemajorsforthemajorityofmytrades.

Sowhatdoallthenumbersmeanwhenthecurrencypairsaretradedtogether?

The first currencymentioned iswhat they call the ‘base currency' and it is beingcompared to the 2nd currency, which is called either the 'quote currency' or the'countercurrency'.

If Iwatchmy localnews,andnear theend theyhaveaverybrief financial reportwherethenewsreadermaysaysomethinglike:

"TheAussiedollarwasdowntodayagainstthegreenback,reachingalowof71cents"

Basically what they are saying is that the Australian dollar has dropped in valuecomparedtotheUSdollar,andthatoneAustraliandollarisequivalentto$0.71US.As theUSdollar is themajorcurrencyof theworld,youwill findmost financialreportswillcompareyourlocalcurrencytoit,andevensomeoftheothermajorssuchastheEuroortheGreatBritainpound.

UsingthissameexampleoftheAussieat71centsifIweretotraveloverseas,saytotheUSwhereIwouldneedUSdollars,thenIwouldbehopingforashigharateaspossiblesoIgetmoreformyAustraliandollar.Soiftheexchangeratemovedupto75cents,thenoneAustraliandollarwouldbeworth$0.75US.

YoumayseethequotefortheAUD/USDsimilartothis:0.7125/0.7128

I’llexplainshortlywhytherearetwosetsofnumbers. Butjustlookingat0.7125,this shows howmany units of the quote/counter currency are needed to buy onedollarofthebasecurrency.Inthiscase,theUSdollaristhequote/countercurrencyandtheAustraliandollar is thebasecurrency,soUS$0.7125isequal toAU$1.00.SoifItravelledtotheUS,theneachAussiedollarIhaveisworthabout71cUS.

ForexPairs-WhatdotheNumbersMean?

Let’sconsiderapairexample:

IftheAUD/USDwerequotedat0.7125/0.7128,whatexactlydoesthismean?

▪Thefirstfigureof0.7125iscalledthe'bid'price▪The2ndfigureof0.7128isthe'ask'price▪Thedifferencebetweenthesetwofiguresiscalledthe'spread'

IfIwishedtobuytheAussie,thinkingthattheAustraliandollarisgoingtogoupinvaluecomparedtotheUSdollar,IwouldberequiredtopaytheASKprice,whichinthiscaseis0.7128.Ontheotherhand,ifIthoughttheAussiewasbecomingweakeragainsttheUSdollarandIwishedtosellit,thenIwouldsellitattheBIDpriceof0.7125.

Now if Iwas tobuy theAussieat0.7128and then immediatelyclosemypositionbeforethepricehadachancetomove,IwouldhavetoclosethepositionbysellingtheAussieat0.7125.

Nowthereisadifferenceof0.0003,whichiscalledthespread,andthatwouldbetheamountI lostonthistrade.InthecaseoftheAussie,each0.0001moveiscalledapip(orsometimesreferredtoasapoint).Soonthistrade,Iwouldhavelost3pips(or3points).

AllthepairsImentionedabove,excepttheJPYpairs,normallyhavefourdecimalplaces,andtheirpipvalueiscalculatedthesameastheaboveAussieexample.TheJPYpairs usually only have the twodecimal places.An example of theUSD/JPYcouldbequotedasfollows:

97.81/97.83.

ThistellsmethatoneUSdollarisequaltoapproximately97.8Japaneseyen.

Thebidpriceis97.81andtheaskpriceis97.83,andthatthereisa2pipspread.Inthiscaseeach0.01moveiscalledapip.

Important:Most brokers these days have an extra decimal place on their quotedprices. This has come about as the result of spreads becoming tighter over theyears.

When I first started trading, a small spreadon theEUR/USDwas3pips,whereasnowadaysit iscommontoseethespreadonthispairat0.8ofapiporevenless.Hencetheadditionofthisextradecimalpointonthequotedprices.Ifyouseethreeor five decimal places and depending on how precise your trading is, I wouldsuggestyoujustignoretheverylastdigit.Thatisthesimplestway.

ForexampleifyousawaquotefortheEUR/USDas1.38641/1.38663,youwouldsimplyreaditas1.3864/1.3866bydroppingthelastdigits.Thenyoucanseethatyou have a spread of 2 pips. This is just to keep it simple. If you wanted to be

precise,theninthisexampleyouwouldsimplytake4.1awayfrom6.3togiveyouanexactspreadof2.2pips.Thesearejustthelasttwodigitsonthequotewherethe2nd lastdigit isanactualwholenumberofpips,with the lastdigit representingafractionofapip.Itcanbeveryconfusingatfirst.Me,Ijustrounditupordowndependingwhichsideof0.5Iamon,justtokeepitverysimple.

Next,I'lldiscussthedifferentbrokersandplatformsavailable.Thisisaminefieldinitself!

WhereDoWeTradeForex?

You will have to open an online brokerage account to enable you access thatbroker'stradingplatform.AsImentionedearlier,mostbrokersofferdemotradingwhereyoucanpracticetradingwithoutriskingrealmoney–it’salittlelikeplayingmonopoly.You do not need to deposit any fundswith a broker to gain access totheir demo platforms, as most are quite willing to let you try them without anyobligation.Thisalsogivesyouthechancetotryvariousplatformsandseewhatyoufeelcomfortablewith.

WhatAboutChoosingaBroker?

This is agoodquestion andyouwill get avarietyof answers if youwere to askaroundinthetradingcommunity.Firstly,Iwouldstronglysuggestthatyouchooseoneofthebiggerwellknownbrokers.Trustmeonthis!

The retail forex industry is still relatively young and it does not have the sameregulationsandrulestofollowasalotofothertradedfinancialinstruments.Thisismainlyduetothefactthattherearenocentralexchangesinvolved.Buthavingsaidthis,alotofgovernmentsarebeginningtoformulaterulesandregulationsthatdogive forex traders better protection. But be warned, there are still bucket shops(dodgybrokers)outtherewhowillripyouoffinaheartbeat.ItwasonlyrecentlyIheardofoneSwissbasedbrokerdisappearingwithalltheirclients’funds.

I certainly don't want to scare anyone off, but please be warned and choosewisely.Thereareplentyofgoodbrokersaround,so there isnoneed topanicandgetstressedaboutthis.

Another suggestion is that you do not place all of your funds into one broker,especiallyifyouhaveasubstantialamount.WhatIamtalkingabouthere,isifyouhadsay$100,000 to trade (whichyoudon'tneed!), Iwouldn'tbedepositingallofthis with the one broker. Instead, I would either spread it amongst two or morebrokers,orkeepfundsinreserveandonlydepositthemwithmybrokeriftheywererequired-youwillsleepbetteratnight!

Important: In January 2015 therewas a hugemove by the SwissNational BankwheretheSwissfrancwasdepeggedfromtheEurocatchingthefinancialmarketsby surprise. This caused an insane, huge, untradeable price spike in Swiss francrelated pairs, which basically wiped out trading accounts or made some tradersextremelyprofitable.Thisspikealsosentsomeveryreputablemajorbrokerstothewallfinancially,causingsometogobrokeorgointoliquidation. AlpariUKwasone of the major players affected and is no longer in existence. FXCM alsostruggledbutrecovered.Sobecarefulwhereyouputyourfundsandonlydepositwhatisrequired.

ManytradersalsoliketokeeptheirhardearnedcashintheirowncountryandIcanunderstand this, and again it is just a perceived safetymeasure.Me personally, Ihaven'tgotaproblemwithdealingwithoverseasbrokers.Mypastexperienceshaveproducednoproblemsatall transferringfundseitherway,soIamquitehappy touseoverseasbasedbrokers.Ididn'thaveachoicereallyasuptoacoupleofyearsago,thereweren’tanyAustralianbasedbrokersthatIfeltcomfortablewith,butthathassincechanged.

Notallbroker tradingplatformsare thesameandthis iswhere itgets interesting.Everyplatformappearstohaveitsadvantagesanddisadvantages.Youhavetofindsomething you are comfortable with. One of the most popular forex tradingplatform isMetatrader, ormore commonly referred to asMT4.This platform isthen used by a variety of brokers.How thisworks, is that youwould go to yourchosenbroker'swebsite, signupwith them,and thendownload theMT4softwarefromtheirsite.Hereyoucaneitherselectdemoorlivetradingorboth.Obviouslytheywillprovidefurtherinstructionsonhowtodepositfundsintoyourbrokerageaccount.

YoucanfindoutmoreaboutMT4bydoingaGooglesearchon'Metatrader'.

I personally find theMT4platformoneof thebest, especially for the charts. It isquite incredible what you can do with this platform. Even though the charts andotherfeaturesareexcellentontheMT4platform,Iamnotparticularlyhappywiththe way you place orders. It is not as easy as it should be and can be a littlefrustratingattimes.Butthechartsareexcellent,ordidIalreadysaythat?

Being anAussie, I useGoTrader orPepperstone formyMT4platformand I amquitehappywithbothofthem.

ThebeautyoftheMT4platformisitspopularityandtheabilitytowriteyourowncomputercodetodesignyourowncustomindicatorsorexpertadvisors.Thereareeven dedicated forums and groups that just discuss this platform. Most tradingplatformscomewithavarietyofstandardchartingindicators.ThingslikeMovingAverages,MACD,RSI,BollingerBandsetc.NowwithMT4,youcandesignyour

owncustomindicatorsanddownloadthemdirecttoyourtradingplatform,andthenontoyourcharts.Don'tworry if this soundsa littleconfusingat themomentas itdoes become clearer as you becomemore familiar with the platform. You don'tneedthesecustomindicators totrade,andifyouareinterestedintryingthemout,thereareplentyofsmarttradersouttherewhohavealreadydoneallthehardworkandmadethemfreelyavailableonline.Therearethousandsofthem.

I alsomentioned expert advisors, commonlyknownas 'EAs' or 'TradingRobots'.Thisisasoftwareprogramthatisloadedontoyourplatformandthenontoselectedcharts.AfullyautomatedEA,onceactivated,willgotoworktoidentifytradesthatfit its trading criteria, open a tradewithouthuman involvement,manage the tradewithout human involvement and eventually close the trade without humaninvolvement.Itallsoundstooeasy,doesn'tit!Againyoucandesignyourownorletsomeoneelsedoit foryou.Theyarenotasfreelyavailableascustomindicators,buttheycertainlyarebecomingmorepopular.

Again, bewarned!There are plenty of scammers out there selling trading robotsbasedonoutrageouspromisesofuntoldwealth.Doyourduediligenceandchoosewiselyifyoudecidetogodownthatpath.Thegoodonesarefewandfarbetween.

MT4isnottheonlyplatformyoucancustomizeindicatorsandtradingsystems,butitisbyfarthemostpopular.IhaveusedCMSandtheirVTPlatforminthepast,andtheytoohaveanexcellentchartingpackage.

Thereareplentyofothergoodbrokersaround.OneofmyfavouritesisOanda.ItdoeshaveawebbasedplatformavailableaswellastheirMT4platform.Thewebbasedplatformdoesn’t require any software tobedownloaded,whichmeansyoucanaccessthisplatformfromanycomputerthatisJavaequipped.Oandaisaverypopularandreliableplatformwhichoffersverylowspreadsandisverysimpletouse. There is also one other big advantage using Oanda with regards to tradepositionsizeanditisoneofthereasonsIlikethemsomuch.Theyhavealsobeenaroundforafewyearsnowandtherearerarelyanynegativecommentsaboutthem.Oandaiscertainlyagreatbeginner'sbrokerandplatform/s.

YoucanfindOandahereathttp://www.oanda.com/Asstatedearlier, thereisnocentralexchangeforForextrading, thereforepricingon different currency pairs can vary at times between the different brokers.Normallyallthegoodbrokerswillbewithinoneortwopipsofeachother,whichreallyisn'tanissue.Howevereverynowandthen,therewillbeapricespikeononebroker ’s chartsbutnotonotherbroker ’s charts.Toobad ifyouhadanorder setaroundwherethepricespiked,whetheritbeabuy/sellorderorastoploss.Thesetypesoffluctuationsnormallyhappenonthenotsowellknownbrokerplatforms.Ifyoustickwithadecentbroker,youwillavoidthesetypesofproblems.Inormallyrun two platforms together and can see the differing prices, but as they are two

reputablebrokers,thereisrarelyanissuewithpricedifferentials.

Imentionedthetermthe'spread'earlier,whichisthedifferencebetweenthebidandtheaskprices.ItwasonlyafewyearsagothatthespreadontheEURandJPYwere3 pips, and the other major pairs ranged from 4-5 pips, and this was happilyacceptedbyall.Nowadays,itisnotuncommontogetspreadsontheEURandJPYfor1piporless,andtheothermajors,forlessthan3pips,asareafewofthe2ndtierpairsandcrosses.

Thespread isyourcostofdoingbusiness.Foryou tomakeanyprofit,youmustfirstmakeup the spread.For example, if youbought theUSD/CHFat1.0774andyouhada3pipspread,thenthepricewouldhavetoriseto1.0777beforeyouareinabreakevenposition.Rememberyoubuyattheaskpriceandsellonthebidprice.Sointhiscase,whenyoubought,thequotewouldhavebeen1.0771/1.0774.Itthenhastolooklikethisbeforeyoucangetoutatbreakeven1.0774/1.0777,whichisa3pipincreaseinprice.

Some brokers maintain the same spread, albeit a little higher during all markethours,whilstotherbrokersmayvary thespreaddependingon thevolatilityat thetime. What is volatility? It can be when the market is very quiet, like when themarketopensearlyintheweek,orafterhoursattheendoftheUSsessionbeforethe Asian session has cranked up. It can also refer to when there is very highvolume, normally in anticipation of a major news release. This is where somebrokerscanreallywidentheirspreads.Theydon'tstaywideforlong,butitcanbe5minutesorso.Oandadoesthis,andthespreadscangooutto20pipsonthevolatilepairsliketheGBP/USD.Thisisnotgoodifyouarescalpingorhaveareallytightstoporotherordersclosetothecurrentprice.Somethingyouhavetobeawareof.

Youwill find that if the spreads stay constant, then there is normally a trade offsomewhereelse.InthecaseofCMS,theirspreadsremainedconstantbutduringtheveryvolatile times,youwouldhavedifficultyplacingordersorstopscloseto thecurrentmarketprice.Afewyearsago,justbeforeanymajornewsrelease,traderswouldplaceabuyorderandasellordercloseoneithersideof thecurrentpricejust a few secondsbefore, hoping to cash inon abigprice spikeonewayor theother. One order would be filled and theywould cancel the other, looking for adecent run in the original direction. Brokers didn't like this and put practices inplace like I have discussed to prevent this - a bit like the casinos banning cardcounters,eventhoughitisnottechnicallyillegal,itwasgivingthecardcountersanedge. Sothecasinoschangedtheirrulestotakeawaythatedgefromthepunters.Brokersdothesameattimes.

Thenwehave theproblemof requotesandslippage.This shouldnot reallybeanissue with Forex trading if you stick with the better brokers, but it can andsometimesdoeshappen. Keep inmind, therecanbe timesofveryhighvolatility,

whereyoujustwon’tbefilledatapriceyoumayhaveelectedtodoso.Thisisthesameforalltypesoftrading.ThisisalsowhereDemotradingcangiveyouafalsesense of security, as demo platforms will always fill trades or orders at thosespecifiedlevelsasitisonlyacomputerprogramworkingonnumbers,nottherealmarketconditions.YoumayendupwithaperfecttradefillonaDemoaccountbuttheremayhavebeena10pipslippageonthesametradeinaLiveaccount.Itdoeshappen.

Generally, the betterwell known brokers are becomingmuchmore reliable (andhonest) these days. Itwasn't that long ago, that theywere a little inconsistent andtradersdidhaveproblems thatwereplasteredallover forums, thereforeaffectingcertainbroker ’sreputations.Thisdoesn'tseemtobesuchanissuenowadaysthough.Butonceagain,IwouldsuggestyoudoyourownduediligencebygettingoutthereintoGoogle-landandcheckingthingsout.

Chapter3

HowDoYouActuallyTradeForex?

Itmayseemalittleconfusingatfirstbutreally,itisquitesimple.

Forex is a leveraged financial instrument, as isOptions,Futures,CFDs,Warrantsetc.Sothisisnothingnew.

You trade Forex in 'lots'. That is basically the industry standard, but there arebrokers out there that do things slightly different. For example, Oanda trades in'units',buttheycanbeeasilyconvertedtoalotsizeequivalent.

Lots are known by different names, depending on how much currency theyrepresent.Thereisastandardlot,aminilotandamicrolot:

Onestandardlot100,000unitsofthebasecurrencyandisnormallyexpressedas1.0lot

Oneminilot10,000unitsofthebasecurrencyandisnormallyexpressedas0.1lot

Onemicrolot1,000unitsofthebasecurrencyandisnormallyexpressedas0.01lot

Howmanylotsyoucanbuyorselldependsonafewthings:

▪youraccountbalance▪yournominatedtradingleverage,and▪howmuchyouarewillingtoriskonthetrade

ThisiswhenImentionthewords 'margin', 'leverage'and 'risk'.Allwordsthatareimportant, but there is no need to get stressed about them as they can all becontrolledandI'llshowyouaneasywaytostayoutoftrouble.

Marginreferstothemoneyyouhaveinyouraccountthatisavailabletotradewith.As stated earlier, Forex is a leveraged instrument, so if your broker offers you100:1 leverage, then for every 1 unit you have in your trading account, you cancontrol100units ina trade.Somebrokersofferup to1000:1 leverage. Ifyouareoverleveragedandatradegoesagainstyou,andyoudecidenottotakeanyaction,your broker will close the trade on your behalf to protect their interests, eventhoughyoumayhaveblownyouraccountout.Thehigher the leverage, themorecurrenciesyoucancontrol(buyorsellmore).Itisnotsomethingthatconcernsmeasmyriskiscontrolledonalltrades.Riskreferstowhatyouarewillingtoriskonanyparticulartrade,intermsofdollars.

ImportantInformationforUSbasedTraders

1. MostUSTradersarerestrictedbytheirgovernment'sregulationswherebytheydo not allow US based brokers to offer more than 50:1 leverage on theirtradingaccounts.Itis“BigBrother ’s”wayoftellingyouwhat’sbestforyou.Therearewaysaround this isyouareaUSbased trader. Itwill takea littleresearchonyourpart.

2. AnotherUSonlyregulationisnotallowingtraderstohedge,whichmeansthatyoucannothaveabuyandaselltradeopenatthesametimeonthesamepair.Alotoftradershedgetradesthataregoingagainstthemsoitgivesthemtimetoreassesstheiroverallposition.Someactualtradingsystemscallfortradestobetakeninbothdirectionsatthesametimealso.Therearewaysaroundthisalso.

3. Another US based rule is called FIFO, which means ‘first in, first out’.Basicallyifyouaretradingmultipletradesononepair,andthesewouldbeallin the same direction as you are not allowed to hedge, you have to exit thetradesinthesameorderthatyouentered.Italsodependsonthepositionsizeof each trade. Refer to your Broker for exact information on this. This isprobably one of themost frustrating rules forUS traders as sometimes youdon’t necessarily want to exit in that particular order. I’ve heard morecomplaintsaboutthisrulethantheothers.

Mostothercountriesdonothavetheserestrictions.

LotSizeandEquivalentPipValue

Justtorefreshyourmemory,iftheEUR/USDmovedfrom1.3924to1.3928,ithasmoved a total of 4 pips, and if theUSD/JPYmoved from 95.23 to 95.19, it alsomoved4pips.Straightforward,sofar.

IfIwastrading1standardlot($100,000), theneachpipisworthUS$10.SointheaboveEUR/USDexampleofthe4pipmoveandyouweretrading1standardlot,4pips is equal to US$40. The same US$10 per pip also applies to the GBP/USD,AUD/USDandNZD/USD.

Thatistheeasypart.Nowalltheotherforexpairsaren'tquiteassimpleduetothefactthattheUSDisnotthequoteorcountercurrency.Sowhatyouhavetoconsiderhere, is thecurrencyconversionbetweenthetwopairsandthemathcanbealittle

confusing.Me, I keep it simple, and consider all pairs to have a 1 pip value ofUS$10. Just aboutallof the forexpairs, except theEUR/GBPhaveapipvalueofless thanUS$10, andmost of these are just under that level, but theydo fluctuatewithcurrencyvariations.Ifyoudoneedtoknowtheexactpipvalue,thereareplentyoffreewebsiteswithabuiltincalculatortodothemathforyou.

Themajority of traders either trade standard lots or mini lots. As stated earlier,Oandaisslightlydifferenthereastheytradeinunits,whichcanbeveryusefulforprecisemoneymanagement.

So,if1pipisequaltoUS$10onastandardlot(1.0lot/$100,000),then1piponaminilot(0.1lot/$10,000)mustbeequaltoUS$1,and1piponamicrolot(0.01lot/ $1,000) is worth $0.10. Simple! And to keep it very easy and simplified, justconsidereveryForexpair thesame. IknowaUSD/JPYpiponastandard lot isn'tUS$10,butitiscloseenoughformenottoworryaboutitsexactvalue.IfyourstyleoftradingisaffectedbytheexactpriceofpipsontheForexpairyouaretrading,thenyouwillhavetousesomethinglikeadedicatedforexcalculatortoworkouttheexactvalues.TheyarefreelyavailablebyjustdoingaGooglesearch.

Let'sgetintoaTradeExample:

Ihave$2,235inmytradingaccount,andIamhappytorisk2%oneachtrade.

I'm inmy broker ’s account looking at their charts and I see a nice set up on theEUR/USDwhere I am looking at buying at 1.3928. I am going to placemy stop(stoploss)30pipsbelowat1.3898.Somyriskonthistradeis30pips.

NowIneedtoknowwhatmypositionsizewillbe,whereIamriskingnomorethan2%ofmyoverallaccountbalanceof$2,235.Thisactuallyequatesto$44.70.

Theeasywaytoworkthisoutisbyusingthefollowing:

AccountBalancemultipliedbyriskpercentage,dividedbyrisk(stopsizeinpips),equalspositionsize.

Inthistrade,themathwouldlooksomethinglikethis:$2,235x2%=$44.70$44.70/30pips=1.49

Thereforemypositionsizeonthis tradewouldbe1.49mini lots(0.149lots).Youwouldhavetoroundthisdowntoeither1minilot(0.1lot),or1.4minilots(0.14lots)ifyourplatformallowsthistradingsize.

Ifyouareunsureofthepositionsize,whetheritisinstandardorminilots,justdothemathbackwardstoconfirm.Youknowthemaximumriskis$44.70onthistrade.Ifyouwentintothetradewith1minilot,youknoweachpipisworth$1,soifyouwerestoppedout, thenyouwouldhave lost$30,which isunderyourmaxriskof

$44.70,duetothefactyouhadroundedyourpositionsizedown.

Here is another examplewith amuch larger account balance and a different riskpercentageandstopplacement.

Accountbalanceis$37,840,yourtraderiskis3%,andyouareplacinganordertoselltheGBP/USDat1.4562withastopat1.4607,whichis45pipsaway.

Let'sdothemathtoworkoutmypositionsize:$37,840(Accountbalance)x3%(riskpercentage)=$1135.20$1135.20(maxrisk)dividedby45(stop)=25.226'

Thereforemy position sizewould be 25.226'mini lots (2.5226 lots), or roundeddownto25.2minilots(2.52lots)whichisbasically2.5standardlots.

Dothemath in reverse ifyouwant todoublecheckyourpositionsize.Youknowyourmaxriskis$1135.20,andyourstopis45pips,andeachpipisworth$10onastandard lot. If youwere to lose45pipswith2.5 lots, then45x2.5x10=1125,whichisunderthe$1135.20risk.

Itmaybealittleconfusingatfirst,butitisverysimpleonceyougetthehangofit.Byusingthisformula,youshouldneverhavetoworryaboutleverage,marginorrisk.They justdon'tcome into it.Buthavingsaid that, italldependsonyour riskpercentagelevelsandyouractualtradingmethods.Youdoneedasuccessfultradingmethod,becauseifyoudon'tandyouwereonlyriskingsay2%pertrade,youwilleventuallyblowoutyouraccount.Itwilljusttakeabitlongertoachievethisthanifyouwererisking10%oneachtrade.

ThereareplentyoffreelyavailableExceltypespreadsheetsthatcandothemathforyouonceyoupluginyourownfigures.Thesearequitehandyandensureyougetthefigurescorrect.

Nowweneedtotalkaboutrisk!

InformationonRisk

I consider 'risk' to be a very important issue when it comes to Forex trading.Probablynotsomuchofanissueifyouarealongertimeframestyletrader,saytheweeklyormonthlycharts,but ifyouareaday trader, then itcertainly isan issue.TRUSTMEONTHIS!

NowIdon't reallycarewhatyourpercentage risk isper tradeas that isup to theindividualtrader.Ihavesuggested2-3%whichisquitecommonamongstsuccessfultraders,evenlessisbetteraccordingtosome.Thiswillensureyoustayinthegamelongeratleast.Ifyouwanttorisk10%onatrade,thatisuptoyou.ButIwillsaythatit isverymuchinyourinteresttohaveaphysicalstoplossinplace.Thisisapointwhereyouwillbetakenoutofatradeifsomethingdoesgowrong.

Whatcangowrongyouask?

Other thanyoupicked thewrongdirection for the trade,whichwillhappeneverynow and then. Youmay also have internet problems or the biggie, unfavourablenews comes out that completely catches you by surprise and before you know it,yourtradeisdowna100pipsorso.

Firstup,therearepotentialinternetproblems.Itdoesn'tmatterwhereyoulive,youcanneverbeguaranteedof100%reliableinternetconnection.Itonlytakesastormwithinabout100kmsofmyplacetodisconnectmeattimes,andI'mwiththebiggesttelcoin theland.WhenIwastradingfull timebackin themid2000s,Ialsohadabackupwith the old dial up tomy cable broadband. These days, you can get thewirelessmodemasabackup.OneotherthingIwouldstronglysuggestisthatyouhave your broker's phone number handy, so you can ring them direct and eitherclosetradesormovestopsetc.Ihavedonethisinthepasttogetoutoftrouble,anditisnicetoknowthatyouhavethisoptionifworsecomestoworse.Again,thismayonlybeavailablewiththebiggerwellknownbrokers.Italsohelpstoconsideranypossiblelanguageproblemsifyouhavetogetonthephone.

Potentiallythebiggestproblemisnewsreleasesorunexpectednews.Forexmovesonnews!Andthereisalwaysplentyofnewscomingout.Thegoodthingaboutit,isthatmostof thenews is releasedat set timeswhich isveryeasy tokeep trackof.Veryeasy,andI'llgointothisinanotherchapter.

SowhatamI sayinghere?MAKESUREYOUUSESTOPSONALLTRADES. Icannotbeanycleareronthis!

Nowthestopdependsonyou,butpleasedon'tmakeitamentalstop.Thesejustdon'twork inForex trading, especially if trading the smaller time frames.Even if youhavesomesortofsafetystopthatissomedistancefromyourentrytopreventtotalwipe-out,which you can adjust later once the trade is up and running, is amuchbetteroptionthanhavingnostopatall.

Togiveyouanexampleofpricemovementina24hrperiod,Ibelievetheaveragefor theEUR/USDisaround100pipsandtheGBP/USDisabout120pips,giveortake.Thatisjustanaveragemovein24hrs.WhenIsaymove,itmaystartandfinishat thesameprice,soIamreferring toapossiblerangeofmovementhere. Ifyouwere trading1 standard lot and themarketmoved100pips againstyou, thenyouwouldbe$1,000 in the red.Not good! If you arenot surewhat a stop is: it is anorder to close out your trade automatically if the trade goes against you by apredeterminedamount.

Anexample:

BoughtEUR/USDat1.3950,andobviouslywantingittoincreaseinpricetoprofit.Youdecidedyoudidnotwanttoriskmorethan30pipsonthistradeforwhateverreason,soyouwouldplaceyourstopat1.3920.Ifpricefelltothislevel,youwouldbeautomaticallyclosedoutofthetradebyyourbroker'splatformforamaximum30pip loss. Itwouldn'tmatter ifyouwereonlineorat thebeachas itallhappensautomatically.

Usingstopsisasimplepartofthewholeforextradingexperience,andanimportantoneatthat.Theyareeasytoplaceatthestartofthetradeandeasytoadjustoncethetradeisupandrunning.Istronglysuggestthatyouusethematalltimestoavoidtheunexpected.

Havingsaidallthat,therearecertainstrategiesthatdon’tusestops.However,theynormallyhavesomeothermechanismbuiltintoassistwithtrademanagementwhenpricegoesagainstyou.Generallythesetypesoftradingsystemsarenotsuitableforthosewhoarenotcomfortable trading thiswayandwhodo require some furtherexpertisetobesuccessful.Fornow,justplaceastoponalltradesandthenyoucanlookintomoreexotictradingmethodssometimeinthefuture.

ALittleMoreonRisk

JustacoupleofpointsthatIhavenotspokenabout.

Firstupis'risk'and'correlation'.IhavediscussedriskpertradewhereIsuggestnomore than2-3%per trade. Again, it isup to the individual traderhowmuch theyrisk.OnethingImustpointoutthoughistheproblemwithcorrelation.Thissimplymeansthattwopairsmaytradegenerallyineitherthesamedirectionatmosttimes,orintheoppositedirectionmosttimes.

ThemostobviousandhighlycorrelatedpairsaretheEUR/USDandtheUSD/CHFastheybasicallymoveprettywelloppositeeachother,undernormalcircumstances.SoifyouhadboughttheEUR/USDononetradeandsoldtheUSD/CHFonanothertrade, risking2%oneach trade, in realityyouareactually risking4%becauseofthehighcorrelation.

TheEUR/JPYandGBP/JPYcanalsomoveprettymuchinthesamedirectionoften.Whenyou thinkabout it, if thepairshaveacommoncurrency involvedandnewscomesoutthataffectsthatcurrencyinabigway,thenitdoesn'treallymatterwhatinvolvementtheothercurrencyhas,asthemarketwillmovethedominantcurrency.

Thisissomethingyouwillhavetobeawareofwhenitcomestototalriskonyourtrades.Thebestwaytocheckouthowdifferentpairsmoveinrelationtoeachother,istothrowupthe1hrchartsofallthepairsyouareinterestedintradingontheonescreenandseehowtheymoveoverafewdays,especiallywhennewsisreleased.

Ialsospokeaboutplanned 'newsreleases' thatmayormaynotmovethemarkets.

Today for example, as I amonly trading theEUR/USDand I amonly concernedabout possible high impact type news, I have checked theForexFactory calendarand now know that I have to be on my toes at 7pm my time, for news out ofGermany,andespeciallyalertat10.30pmmytimefor3majoritemsofnewsoutoftheUS.Hopefullymytradingwillbefinishedby10.30pm,soitwon'tbeanissue.IwilldiscusstheForexFactoryEconomicCalendarlaterinthebook.

NowsometimesthereisunplannednewsthatmayaffecttheForexprices.ExamplesofthisincludeterroristattacksonUSsoil(Sept11),captureofahighlysoughtafterindividual(Sadam)orevensomedopeyTreasuryofficialmakinganoutofthebluecommentduringwhatshouldhavebeenadullandpredictablespeech.Lotsofthingscanmovethemarketwhenyouleastexpectitanditdoeshappenonaregularbasis!

I have been sitting at my computer, quite aware of all news coming out, whensuddenlyapairmayjustshootup50-100pipsinaminuteortwo-itgetstheheartpumpingasyouquicklycheckallthenewsreleasestoseewhathascausedtheblip.Itmaybesomethingsimple likearumorofaplannedattack incentralLondon. Itdoesn'tmatterifitisfalse,asthemarketwilleventuallycorrectitself.

Just be aware that news can come out unexpectedly andmove themarket, whichleadsbacktomypreviouspointofmakingsureyouhavesomesortofphysicalstopinplaceatalltimes.

FurtherDiscussionaboutRisk

Thissubjectseemstobeneverendingbutasalreadystated,itisveryimportanttofullyunderstand riskandhow it affectsyourtrading.Youdon'twant toblowyouraccountinoneortwostupidtrades.Justgoingbacktomyexampleofonlyrisking2%oneachtrade.Onethingthatdoescomeup,thatdifferentpeoplehavedifferentopinionson,ishowlongyoumaintainthesamepositionsizebeforeadjustingittosuityouraccountbalance.

Sayforexample,youonlytradedtheEUR/USDandyourstopwasalways30pips.Youdecideyourpositionsize,enterthetradeandendupmakingaprofit.Thiswillobviouslyincreaseyouraccountbalance,andifyouweretomaintainyour2%riskonthenexttrade,thentechnicallyyourpositionsizewouldbeslightlylargeronthistrade.Thismaynotalwaysbepossible,dependingonyouraccountsizeandifyourparticular broker allows you to trade micro lots you may be forced to round itdowntotheprevioussizeanyway.

Now some traders would suggest that you stay on the same position size for asession, some say theweek, and otherswould suggest amonth. Nomatterwhathappens,ifyoustartedthatparticulartradingsequencewitha2lotpositionsize,youwouldcontinuetotradethatsame2lotpositionsizeuntil theendofthesequence,

andthenreadjustitforthenextsequenceaccordingtoyournewaccountbalance.

Othertraderswillsuggestyouadjustyourpositionsizeaftereverytrade.Thiscanget a little confusing, especially if you are trading different currency pairs withvariousstopsanditcanalsogetalittleugly.Somesaythisdisadvantagesyouifyouaretryingtorecoverfromlossesduetothefactyouwillbeenteringtradeswithasmallerpositionsizeifyouhadafewlossesinarow.Notsureaboutthattheory.

AsIhavesaidmanytimes,Iamtryingtokeepitsimple.Personally,IdecideonapositionsizeatthestartofmyweekandIstickwiththatsamepositionsizefortheentireweek.Comethefollowingweek,I'llhavea lookatmyaccountbalanceandmake adjustments if necessary. This works for me and certainly makes my lifeeasierasthepositionsizeisstoredautomaticallyinmyplatformforeverytrade.

Nowsometradersmaynotmakethatmanytradesinaweek,ortheymayrattleoff30tradesinasession,soeveryonewillhavetheirownwayofdoingthings.Sometraderswillscaleinorscaleoutoftrades,whichthenputanotherspinonrisketc.ThereisnowayIcancoveralltypesoftradingscenarios,nordoIintendtodoso.Thisinformationisjusttogiveyouideasorperhapsmakeyouthinkofsomethingyouhavenotpreviouslyconsidered,andthenI throwmythoughts inonhowIdothings.There is no right orwrongway, and at the endof the day, if youmake aprofitanddon'tgettoostressedorwornoutdoingit,thenyouaredoingsomethingright.

Chapter4

FundamentalorTechnicalAnalysis?

NewsandFundamentalAnalysis

When it comes to trading,whether it beForex,Stocks orDaffodils,most tradershave a plan that they base their own particular trading method on. With Forextrading,themajorityofsmallretailtraderslikeyouandI,wouldprobablyusesomesortoftechnicalanalysis,whichisbasicallytradingoff thecharts,usingwhateverindicators,patternsorsetupsyouchoose.Oryoumayevenjustwingitandtradewithoutanythingonthecharts.StillamethodforsomeIguess.

Then there are traders thatwill ignore the charts and tradeoff and aroundmajornews releases,which is basically the fundamental side of trading. I have alreadytouchedon this above, but I’ll goover it again.There are traders that use this astheirsolemethodoftradingtheforexmarket.HerewearetradingbasedonatheoryonhowyouthinkthemarketwillreacttoaparticularnewsitemlikeanInterestRatecut or something similar. Or you may have some long term thoughts on theJapanese economywhere youmay decide to buy or sell the yen against anothercurrency. There is some sort of news released every day that will affect somecurrencyinsomeway.Thetrickistoworkoutwhichwaythenewswillaffectthecurrenciesyouaretrading.

Theproblemwiththenewsreleasesis thatalthoughtheyarejustaboutallsetatacertaintime,ifyouarenotawareofthem,theycancatchyouout.Forexample,thebiggestnewsreleaseis theNon-FarmEmploymentChange(usetobecalledNFP)figure which is released at 8.30am New York time on the first Friday of everymonth.Depending on the numbers that come out, this baby canmove themarket100+pipsinaheartbeat,andifyouareonthewrongsideofit,lookout!Within2minutes, themarketmayhavemoved200+pips.Itdoeshappen!Imaginehowyouwouldfeelifyoujustleft theroomtogotothebathroomwithoutastopinplace,only to return 2minutes later to find your trade so far in the red, you feel sick.Havingsaidthat,itcouldhavealsogoneinyourfavour,butdoyouwanttotakethatchance?

Whatismypointhere?BeawareoftheNEWS!

Nowthegoodnewsisthatthereareplentyoffreenewscalendarsavailableontheinternet,buttheoneIusecanbefoundatForexFactory.Itisverysimpletouseasyoucanmodifyittosuityourownrequirements.ForexampleifyouonlytradedtheEUR/USD and you were only concerned about news that had a medium or high

impacton thosecurrenciesonly, thenyoucansetup thefilter toshowthesenewseventsonly.Justclickonthe'Filter'tabonthetoprighthandsideabovethetitlebar.Thereisplentyofinformationonwhatthenewsisaboutandhowitmayaffectthemarket,ifyouareinterested.Itisalsosetinyourlocaltime,sothatmakesiteasieralso.At the beginningofmy tradingday, Iwill open this site first and check fornewsreleasesthatmayaffect thepairsIamtrading.Iwillwritethesedowninmyjournal,andif it issomethingbig,I'llnormallysetanalarmtowarnmeabout10minutesprior.Thiswillthenputmeinapositiontoeithertightenupstopsonopentrades,closethemornotenteratradeuntilthenewsreleasehaspast.Itiscrucialthatyouareawareofthesenewsreleases,especiallyifyouareashorttermtrader,andmakesureyouhaveaplaninplaceifyouaretradingthroughthem.

TechnicalAnalysis

I've coveredFundamentalTrading (newsevents), sonow it is time toget into theother commonwayof trading, and that is calledTechnicalAnalysis.Most of thistradingisdoneoffthecharts,hencetheexpression'chartists'or'technicalanalysis'etc.ThisisthewayItrade,anditisthewayalotofotherstradealso.

Earlier I discussed howmost Forex brokers offer a charting package with theirplatform,andhowthelivedatawasfree.Thisisgoodasitkeepscostsdown.Someoftheseplatformshaveexcellentcharts,liketheMT4platform,NinjaTraderorVT.This iswhere theOandaFXTradeplatformisabitofa letdownas theirchartingcapabilities justdon't compare.Havingsaid that,youcanstill tradeoff theOandachartsnoproblemsatall;theyjusthaven'tgotallthebellsandwhistles.

Withtechnicaltrading,youcanbeassimpleorcomplexasyoulike.Iamnotgoingtogo intoall thevarious indicators, fibs,pivots,breakouts, trend linesetc.ThereareliterallythousandsofwaystotradeandtheForexTradingforumsareswampedbythem.Soyoucandoyourownresearchhereandfindsomethingthatsuitsyou.

The standard MT4 platform automatically comes with a large basket of variouspopular indicators that can easily be loaded onto any chart with the settings youchoose and this is more than enough to get started. You can also add customindicatorstotheplatform.Thisisaverysimpleprocessandtherearethousandsofthese custom indicators freely available online. Jump in the trading forums orGoogleit.IfyouneedtoknowhowtoloadtheseindicatorsontoMT4,that’swhereYouTubeisagreathelp.Theresourcesavailableonlinethesedaysareincredible,butifyouarehavingproblems,youcanalwayscontactme.

Iwilldiscusstimeframes.Aswealreadyknow,theForexmarketruns24hrsadayduringtheweek,sothereisplentyofopportunitytotrade.Rememberthepreviousdiscussiononthedifferentsessionsalso,whichhelpswithregardstoidentifywhentheactionismorelikelytooccur.

On the trading platforms, most brokers offer 1 minute, 5 minute, 15 minute, 30minute,60minute,4hour,daily,weeklyandmonthlycharts.That'sthemajorityofthem.Somealsooffertick,10minute,2hourand3hourcharts.Rememberallthisdataisliveandit'sfree.

Everyonewants to be aDayTrader!Myself included. I think it is just a romanticnotionthatisbuiltintothehumanmakeup.Itisespeciallycoolifsomeoneasksyouwhatyoudoforaliving,andyoureply"I'maDayTrader".Itsoundsimpressive.Iwishitwasthateasythough.Becausethechartsandthedataaresogood,youarealwaystemptedtokeeponshorteningthetimeframe,whereeventuallyyouwillbetryingtoscalpoffthe1minutecharts.Thisallsoundsgoodintheory,butitisverydifficulttodo.

Look,I'mnotsayingitcan'tbedoneasIamsurethereareafewsuccessfulscalpersoutthere.NotmanyIwouldimagine,butenoughtoshowthatitispossible.Ihavetried all time frames, and even though I have probably had most success on thelongertimeframeslike4hoursandabove,IamstillaDayTraderatheart.

Again, this isadecisionyouhave tomake,whetheryouwant tobe ina trade fordays or minutes. Trading the longer time frames will obviously give you lesstrades, butmore than likely larger profits, and spendmore timemonitoring thanactually trading. Trading off the shorter time frames will give youmore action,more spreads tomake up andmore than likely smaller profits. Then youwouldhaveconsiderationslikestopsize.TradingonaDailychartmayrequireyoutohavea stop 120 pips away fromyour entry price, andwhen you consider the 2% riskrule,youwouldendupwithamuchsmallerpositionsize.Now,ifyouweretradingoffthe5minutechartandhada15pipstop,andusingthesame2%risk,youcanseethat your position size would be much larger. The trade of being the possiblepotentialprofitasI'dexpecttodragalotmorepipsfromaDailycharttradethana5minutecharttrade.Bitofacatch22here.

Thenyouhave todecidewhichpairorpairsyouwant to trade. Ifyouare tradingmultiplepairsonthelargertimeframes,itisquiteeasytodoso.Thismayalsohelpwithgivingyoumoreaction,ifthatiswhatyouareafter.Buttradingmultiplepairsonthesmallertimeframescanbealittlestressfulandsometimesdifficulttokeepcontrolofwhen things startmovingquickly. It alsoplayswithyourminda little,especiallyifyouhavealosingtradeononepairandtrytomakeupforitonanotherpair,whichmaycauseyou to ignoreyournormal exit rules. I think theycall thisrevengetrading.

If you aregoing to tradeoff the smaller timeframes,may I strongly suggest youconcentrateononepairtostart?Thisjustmakeslifealoteasierandyoucanputallofyoureffortsandconcentrationintothisonepair.

Mybreadandbuttersetup,istheEUR/USDonthe5minutechart,witha60minutechartnexttoit,justtogivemeanideaofthegeneraltrend.Ihaveacoupleofbasicindicatorsonbothcharts.IchosetheEUR/USDforacoupleofreasons.OneithasthelowestspreadonOanda,droppingdownaslowas0.5pipduringnormaltradingtimes,andtwo,itisbyfarthemostpopularcurrencypairtraded.Ithinkitaccountsfor close to 70%of total Forexvolume.Don't quotemeon that though! I have atargetamountofpipsforthedayandthenIamdone.Iclosedownmychartsanddootherstuff.IsleepbetterwhenIhavenotradeson.

Theabove iswhat Ido,andwhatworks forme. ItmaynotworkforyouandI'mcertainly not trying to convince anyone to follow my path. If you have hadexperienceattradinganything,youwillknowthattherearethousandsofdifferentwaystotrade,andForexisnodifferent.

If youwere after agoodbookonTrading ingeneral, thenmay I suggest abookcalled'HighProbabilityTrading'byMarcelLink.Itcoversallthemajortopicsandis quite informative considering it is such a huge topic. He does a great job ofcovering the understanding and use of the majority of the most used technicalindicators.Itisabookthatwouldbewellplacedinanygoodtradinglibrary.Theother“book”Iwouldsuggestis 'Google'asitistheworld'sbiggestlibrarybyfarbutpleaseremember,youhavetosortoutthegoodfromthebad.

Chapter5

FurtherInformationonForexSpecifics

Risk-RewardRatio

Therisk:rewardratioissomethingthatyoumayhearafairbitabout. Somewillsaythatyoushouldnevertradewitharisk:rewardratiooflessthan1:1,or1:2,or1:3etc.Allitisdoingiscomparingyourrisktoyourreward.Hereisanexampletomakeitveryeasytounderstand.

Ifwehadarisk:rewardof1:2,thenforeveryoneunitwearerisking,wewouldbelookingfortwounitsinreturn.Ortoputitintradingjargon,ifwehadatradeonwitha30pipstop,wewouldbelookingforaprofitofatleast60pipstogiveusour1:2risk:reward.Ifitwasarisk:rewardof1:3,thenwewouldbelookingfora90pipprofitonthesameexample.

Nowwhy is risk:reward important?Well it is and it isn't. It all depends on yourtradingsuccessrate.

Ifyouhada tradingsystem,whereyouhadafixed20pipstopandafixed40pipprofit targetonall trades, thenyour risk:reward is1:2. Ifyouwere successfulon40%ofyourtrades,theninthelongrunyouwouldbeaprofitabletrader.Sothatisnotaproblem.Butifyoursuccessratedroppedbelow35%,thenyouwouldstarttohaveproblemslongterm.

Whereatradermayhaveatradingmethodwheretheyusea20pipstopanda10piptargetonalltrades,whichgivesyouanegativerisk:rewardof2:1,whichinalotoftradersopinionwouldbeconsideredasurefirewaytoruin.Butifthatsamemethodhadasuccessrateof70%,thenthistraderwouldbeprofitableoverall.Andthereareplentyofsuccessfultradersthattradelikethis.

Totakethisfurther,atradermayhaveamethodwheretheyhavea20pipstopanda100piptargetonalltrades.Greatrisk:rewardat1:5.Here,theywouldonlyneedasuccessrateofjustunder20%tobeaprofitabletrader.Whetheryoucouldstandthehighnumberoflosersisanotherissue.

Don't be scared off bywhat others say about risk:reward.There is nothing set instone here, but just make sure you have a fair idea of the success rate of yourtradingmethod, soyoucan seewhereyou shouldendupover the longer term ifthingsweretoremainconstant.Ifyouarelosinglongterm,thensomethinghastobechanged.

This is where keeping good trading records helps, and this is a subject I'll becoveringlater.

TypesofOrders

Trading Forex and placing orders is very similar to other types of trading. Notmuchchangeshere.ButI'llgooverthemorecommonordertypesforthosethatarenewtotrading.

Marketorder - this iswherewe jump straight in or out of a trade at the currentmarketprice.Thisiswhereyoumayexperiencesomeslippageonsomeplatformsifthemarketismovingquickly,whichissomethingtobeawareof!Ifyoumissthepriceyouhitthebuyorsellbuttonat,youwillbeaskedifyouwanttogowiththenew price. It will give you a couple of seconds to decide, and if you don't doanything, the order is cancelled. This is called a re-quote and it can be a littlefrustratingattimes.

Buy Stop or Sell Stop - this iswhere you enter themarket goingwith the trend.That'sprobablytheeasiestwaytoexplainit.InthecaseofaBuyStoporder,youareplacinganordertobuyabovethecurrentmarketprice,sowhenthemarketmovesup,yourorderisfilledonthewaythrough,whereyouwantthemarkettocontinueto rise. The Sell Stop order is the opposite. You set an order to sell below thecurrentprice, andwhen themarket falls,yourorder is filledon theway through,andyouarelookingforthemarkettocontinuetofall.

BuyLimitorSellLimit - this iswhereyouare looking fora reversal andgoingagainstthecurrenttrend.WiththeBuyLimitorderyouareplacinganordertobuybelowthecurrentmarketprice,lookingforthemarkettodropdowntoyourentrylevel,whereyouwillbefilled,andthenhopefullythemarketwouldturnaroundandheadup.AtradermayusethisiftheyaretradingoffFiblevelsorPivotpointsetc.Theywouldhaveaspecificreasonastowhytheywouldthinkthemarketisgoingtoturnaroundneartheirentrypoint.DareIsayit,butaSellLimitorderistheopposite.Youwouldbeplacinganorder to sell above thecurrentmarketprice,whereyouwouldbe lookingforprice tocontinue toyoursellorder,befilled,and then turnback down. Again, there may be some resistance level, Bollinger bands orsomethingelsethatmakesthetraderthinkthatpriceisgoingtoreverseneartheirentrypoint.

Atthetimeyouplaceyourtrade,alotofplatformsallowyoutosetyourstoplossandprofittargetatthesametime.Thisisuptoyou,butIwouldstronglysuggestatleastastoplossissetassoonaspossible.Itdoesn'thavetobeyourdesiredstop,butaslongasoneisset,oncethedustissettledandyouareinthetrade,youcanquiteeasilyadjustthestoptothepreferredposition.

ThisiswhereOandaisgoodasyoucansetdefaultsforentrysize,stopandprofit.Oncetheseareset,andthenitisquitesimpleandquicktoplacethetrade,thenyoucanjustgobackandadjustanythingyouwish,andthiscanbedonedirectlyoffthechartalso.PositionsizeonOandacaneitherbesetas'unitsize','USdollaramount'ora'percentage'.Thereisalsoanoptionofsettingatrailingstop,whichcanalsobesetasadefault.Youwouldusethisjusttotrailyourstopatacertainlevelbehindthecurrentpricetolockinprofitasatradedevelops.ItisnotsomethingIuse,soIcan'treallycommentonthebenefitsofusingatrailingstopbutsomemayfindithandy.

Keepinmindthatalotofthesedifferentbrokersordifferentplatformshavetheirrules forhowcloseyoucanplace stops,profit targetsetc.Thiscanvaryonwhattimeofdayyouaretradingalso,andif thereismajornewscomingout.Youwillfind thatbrokerA isgood for something thatbrokerB isnot,howeverbrokerBmayofferanotheritemontheirplatformthatisfarsuperiortobrokerA.Thereisalwaysatradeoffwhenitcomestobrokers.Thetrickistofindanicebalanceofhonesty(veryimportant),reliability,spreads,execution,charts,supportetc.Doyourhomeworkhere.

HowManyPipsisEnough?

Thisissomethingthatmaygetyourattention,asyoumaybesurprisedonwhatlittleprofitisactuallyrequiredtomakeasuccessofForextrading.

PreviouslyIhavespokenabouttheaveragedailymoveofthemajorpairsliketheEUR/USD and the GBP/USD, which is normally around the 80 - 120 pipsmark.Remember this is not necessarily from the low to the high or vice versa, as themarketmaystartandfinishonthesamepriceinthatperiod.Soasyoucansee,thereis normally a fair amount of movement in the day, and therefore plenty ofopportunitytograbsomeofthataction.

Idon'tknowwhatyourlifestyleislikeorwhatyouwouldconsidertobeadecentincomefromtradingtomaintainyourpresentlifestyle,solet’sjusttalkingeneralterms.

YouareanaverageMonday toFridayworker,andmaybework theoddSaturday.That's typical here in Australia. Your wagemay be in the vicinity of AU $800 -$1000 perweek. Sowe are looking at roughly a 40hrweek plus travel time andexpensesetc.

Inyoursparetimeafterwork,youdabbleintheworldofForexandyouaren'ttoobadatit.Youtradeforafewhoursonyour$10,000account,keepingyourriskpertradeatthe2%mark,keepingyourstopsniceandtightandlockinprofitsquickly.Afterafewhourseachnight,youcanconsistentlytake20pipsoutofthemarketandthencallitquits.

Itdoesn'tsoundlikemuchanditalsodoesn'tseemtobetoohard.Yeahright!

20pipsaday.

Nowonthe$10,000accountwith2%riskandtightstops,tradingone(1)standardlotwouldbequitepossible.RememberIgenerallysaythatone(1)piponastandardlot isequal toUS$10. Ifyouwere trading theEUR,GBP,AUDorNZD, then thatwouldbeexact.

Now20pipsxUS$10=US$200.ForusAussies,thatisaboutAU$220(dependingontheexchangerateatthetime).Iknow,itdoesn'tsoundthatimpressiveyet.Dothisfor 5 days however, and you end up with 100 pips or US$1,000 or AU$1,100.Already,Icanseeagoodimprovementonmyaverage40hrworkingweekhereinAustralia.

Idon'tknowaboutyouguys,butUS$1,000perweekisahandysuminanyman'slanguage(orwoman's).SomewillbeusedtomoreandmayconsiderUS$1,000notworthgettingoutofbedfor. If this is thecase, thenI'msureyoucanstart tradingwith amuch larger account sizeor I can showyouaway to increase the amountwithoutanyfurtherriskusingthepowerofcompounding!Ifyoucanmake20pipson a daily basis, youwould be crazy not to try and improve your profitwithoutincreasingyourrisk.Howdowedothis?

Usingourabove$10,000accountandtradingone(1)standardlotfortheweek.Wemake the 100 pips for the week; therefore end up with a profit of $1,000. Nowassumingwehaveanormaljobandwedon'tneedthe$1,000forlivingexpenses,soweleaveitinourtradingaccount.Thefollowingweekouraccountbalanceisnow$11,000,andwiththesame2%riskpertrade,wecannowtrade1.1standardlots(or11minilots).Ifwemakethesame20pipsperday,wearethenmaking$220profitforthedayor$1,100fortheweek.Wherethefollowingweek,ouraccountbalancewouldstandat$12,100andourpositionsizewouldbearound1.2standardlots,andsoon.

Asyoucan see,ourprofit is10%perweek, and that is averygood return.Nowsomeofyoumaythinkthatthisispieintheskystuffandalittleunbelievable.Thisisprobablyunderstandableas that is thewaywehavebeentrainedto think,wherewebelieveanythingover20%profitfortheyearisagoodresult.

I can assure you that 10%perweek is not that spectacular in theworld of Forextrading.Mindyou,mosttraderswouldkillforthoseresults,butIknowofonechapwhoiswellknownamongsttradersthattargets5%perday,andhedoesthisallbychasing20-25pipsperdayon2%risk,justtradingtheEUR/USD.

Theabovemaybepossible toachieve inaperfectworld,butwho lives inoneofthose?We all know that it isn't that easy as there is something about traders that

seemtojuststuffitallup.Ithinktradingpsychologyhasalottodowithit,andthatisanotherchapterinitselfandcomingupnext.

Most of the above revolves around a day trading typemethod.Obviously if youwere trading off the 60min, 4hr or daily charts, youwould have different dailytargets etc. But there is nothing to stop you from aiming for the $1,000 weeklytargetandadjustingyourpositionsizeaccordingly.

Theaboveexamplesaresimplytogiveyouanideaofwhatispossibleandrealisethatyoureallyonlyneedtomakeasmallconsistentprofitonaregularbasis.Youdon'thavetogoforthebigkilleverytrade.Controlthelosses,hityourtargetsandthencallitquitsfortheday.20pipsprofitadaywilldoit!

ItoldyouForextradingiseasy!!

Chapter6

TradingPsychology

Nowhere is a subject thatyou love tohate!Even thougha lotofpeoplewill justglossoverthisandthinkitisreallynotanissueintheirtrading,theycouldnotbefurtherfromthetruth.

Itisimportant,anditisimportanttoknowhowitaffectsyourtrading.Themajorityofthehumanracehasemotionsandtheseemotionscertainlycomeintoplaywhenyouhavesomerealhardearnedcashontheline.I'msureifyouhavebeentradingforawhile,youwouldhaveexperiencedavarietyofdifferentemotions,somegoodandsomenotsogood.IknowIhave.

I'mnotsurewherethefigurescomefrom,buttheystatethat90-95%oftradersfail!Iguessifitwasthateasy,we'dallbedoingitandmakingakilling.Noonewouldhave towork, and if thatwas the case,wewouldn't have any financialmarkets totrade.Thesuccessrateislow.Sowhatmakesyouthinkyoucanbeoneofthe5-10%thatcanmakeagoofthistradinggame?I'mnotjusttalkingaboutForexhere;I'mtalkingaboutalltrading.

Now,inmyhumbleopinion,Ibelieve'Fear'and'Greed'tobethemainculpritsthatholdusbackfromachievingourdreams.ThewayIlookatitisthatyouarefearfuloflosingoutonthebigmove,soyoustayinthetrade,oryouaregreedyandwanteverythingfromatradesoagain,youstayinthetrade.

Let’shavealookatasimpleexample.Saywearelookingatthe5minutechartonthe EUR/USD. It is normally a chart that has a fair bit of action,moving up anddownthroughouttheday.Nowthemarketcanonlydooneofthreethings.Itgoesup, goes down or goes sideways. Now if you had gone long and bought theEUR/USD, and it heads up, you are awinner. If it goes sideways, you don't loseanythingandif itgoesdown,youlose.Sotokeepthingssimplehere,youhavea33%chanceoflosingmoney,whichmeansyouhavea66%ofnotlosingmoney.

Okay I'massuming thatbeforeyoubought theEUR/USD,you thought that itwasgoingtogoupaccordingtotherulesofyourtradingsystem.Itdoesn'tmatterwhatmethodyouusetotrade,astherearethousandstochoosefrom,whichinyoureyeswillgiveyouahigherprobabilityofthetrademovinginyourpreferreddirection.

Thisiswaytooeasyaswehavea66%chanceofnotlosingandwehaveamethodthat puts the odds well and truly in our favour to choose the correct marketdirection.Whyisthissohard?

Humanemotionsmakeithard.It’sassimpleasthat!

Assoonasyouenter,anyofthosethreedirectionscanhappen,keepinginmindthemarketrarelymovesinastraightline.Justbecauseitlooksliketheperfectbuysetupatthetime,thismaynotbethecasewhereyouactuallyboughtattheexacthighfortheday.Thishappensandthemindgamesbegin.Oneofmyfavouritesayings,whichIsayaloudtomyselfseveraltimesaday,is'Patience,courageanddiscipline'.Thismainlyreferstomytrading,butIguessyoucouldapplyittoalotofeverydayeventsinyourdailylife.

Patienceisobvious.Youwaitforthecorrectsignaltoenteratrade,orexitforthatmatter.Don'tbeafraidofmissingoutona tradeas therewillbeanotherpotentialopportunitysoonerthanlater.Ifyouareindoubt,stayout.Sure,youmaymisssomenicemoveseverynowandthen,butsobeit.Youcan'texpecttocatcheverytradeoreverymarketmove.

Courage refersmore tohaveconviction inyour tradingmethodand following itthrough,duringbothgoodandbadtimes.Youknowthesystemworksasyouhavetesteditandtesteditagain.Youstickwiththeplanandseeeachtradethroughtotheend.

Discipline is the whole package. You have a tested tradingmethod and you havecertainruleswithinthismethod.Youhavetobedisciplinedtofollowtherulestotheletter.Withoutdiscipline,youwillbetemptedtochangetherulesmid-stream,whichwillfurtherconfusetheemotionsandleadtofurtherproblems.

Theycertainlyalltieinwitheachotherandcanbelookedatasathreeleggedstool.Withoutoneofthelegs,thestoolisuseless.That'showimportanttheyallare.ThisisjustmylittlesayingthatkeepsmefocusedastheyarewordsIuseeveryday.Youmay wish to come up with your own way of thinking or dealing with tradingpsychology.

Hereareafewexampleofhowthemarketplayswithyourmind.Youhavejustgonelongbutas soonasyouenter the trade, themarket falls away,and it appearsyouhavebought right at the top.You thenget stoppedout to the exact pip,where themarketreversesandheadsbackinthefirstchoicedirection,pastyouroriginalentrypoint and beyond. This happens all the time, and no there isn't some sort ofconspiracybyyourbrokertocleanoutyourstops.Thissortofthingwillfrustrateyou,butifthemarketdroppedandcamewithin1pipofyourstopandthenreversedback in your first choice direction, giving you a very successful trade, then youwouldconsideryourselfluckythatyourstoplossheldbyonepip.Again,thissortofthinghappensallthetime.Oneresultwillhaveyoufeelinglikethewholeworldisagainstyouandtheotherresultwillhaveyoufeelinglikethekingoftheworld.

Youmaybetradingmorethanonecurrencypairwhereyouhavetakenabitofahiton one of your trades.You are down 20 pips and you now have a nice trade onanotherpair.Your rules state thatyouhaveaprofit targetof15pips,butbecauseyouweredown20pipsonaprevioustrade,youignoreyourrulesandgofor20+pips tomakeup for your loss.The tradegoeswell, gets up to+18pips and thenturnsaroundandheadssouthquickly,stoppingyouout.Nowyouare20pipsdownfrom the previous trade, and also down for whatever this trade cost you. Youremotionsarebeingtested,becauseifyouhadfollowedyourrules,youcouldhavetakenthe15pipsprofitasperyourrules,andonlybeendown5pipstodate.Thissortofrevengetradingisnotrecommendedasyoumoretimesthannot,youwilldigyourselfintoadeeperhole.

There are many examples of what can go wrong like removing a stop or evenmoving a stop further away, adding to losses, ignoring your target, ignoringreversalorexitsignals,cuttingyourprofitstooearly,notconcentrating,forgettingabout news releases, trading while sick (or after a few drinks), letting your egodecidemarketdirectionetcetcetc.Therearemanyreasonswhythingsgowrong,andwhentheydo,yourstateofmindwillbeaffectedindifferentways.

Thereisnosimpleanswertoallofthesepotentialproblems,youjusthavetoworkonyourowndisciplineandworkoutyourownwayofdealingwiththesesortsofissues.Getusedtohavinglosingtradesandacceptthemastheyarejustapartofthebigger picture.Also get used to seeingpotential trades come andgowithout youbeingon them.Youcannotexpect tocatcheverymove in themarket. It isalsoanadvantageifyoucancontrolyourownemotions,bytreatingeverytrade,whetherawinnerorloser,thesame.Ofcourse,thedesiredoutcomeistobeprofitable,soitshouldalsobe taken fairly seriously. Ifyouwant tobeprofitable, stickwithyourrules,concentrateandkeepyouremotionsincheck.

RememberPATIENCE,COURAGEandDISCIPLINE!

ABitMoreonPsychology

Most traders start off in this business from, what most people would consider anormalbackground.BythisImeanthatyouwouldhaveanormaljobwhereyouarerequiredtowork38,40,50orwhateverhoursaweek.Attheendoftheweek,youreceiveyourpaycheck,knowing that for everyhouryouhaveworked,youhaveearned$25(exampleonly).Soyoumayhavethispsychbuiltintoyouthatyouhavetowork your 40hrweek to be entitled to your $1000 pay check. I'm just talkingaboutMrorMsAveragehere.Nowwithtrading,thingsarealittledifferent,anditdoestakealittlegettingusedto.Traderstradeinavarietyofwaysonavarietyofdifferenttimeframes,withdifferentobjectivesinmind.

So first upwe'll goback tomyDayTrader example,where Iwas chasing the20

pipsadayscenario.SayIstartedtradingat2pmlocal,andhadachievedmy20pipsby2.30pmlocal.Thisdoeshappenquiteabit.Soithastakenme30minutestohitmydailytarget.Nowwhat?Thesmartandthedisciplinedthingtodowouldbetoshut downyour tradingplatformandwalk away.What doyou thinkmost traderswillactuallydo?Theythink,wellthatonlytookme30minutestohitmytarget,soimaginewhat Icanachieve ina fewhours. Ihave to justifymyprofitswithsomeeffort! Guaranteed the next trade will be a loser. Then you have the problem ofchasingyourtailforthenextfewhoursjusttryingtogetbacktothe20piptarget.Atleastyouwillgetyour8hourstrading,andstillendupwiththesameresult.Ididthisafewtimesinthepast,asIwasabitofaslowlearnerbutnow,assoonasIhitmytarget,stopsarebroughtinrealtighttolockitin,andifthemarketcontinuesinafavourabledirection,thengoodlucktome,butonceI'mstoppedout,Iwon'tenteranothertrade.Walkaway.

AnotherexampleIexperienced,wastradingwithagroupoff the60minutechartswherewewereinthemarketatalltimes.Basicallyyourpositionhadtobecheckedat the topofeveryhour.Wewere trading3pairsandouroverall targetwas+200pipsfortheweek.Onceweachievedthe200pips,wecalleditquitsandthenwaitedforthefollowingMonday.Asyoucanimagine,monitoring3pairseveryhourcanleadtosleepdeprivation,marriagebreakdowns,lackofsociallifeetc,butthegoodnews was, that most weeks we were finished by Tuesday evening. So we startedMondaymorning and done by Tuesday evening, with our 200 pips safely in thebank.Itwasverytemptingtocontinuetradingfortherestoftheweektogoforthebigkill,andinitiallyweusetodothis,andlikethe20pipadayexample,wewouldendup losing a few trades draggingus back towherewe startedon theMonday.Therewastheoddtheweek,wherehadtoworkright throughjust togetustothetarget (or closeaspossible) and theyweren't pleasant at all.Onagoodweek,wewould only enter a couple of trades and be done within a few hours. You don'trealizejusthowharditistositonyourhandsfortherestoftheweek.

WhatIamgettingathere,isjustbecauseitonlytookyouafewminutesorhourstoearnwhat youwould normally earn in a day or aweek, don't think you have tojustifychasingmoretradestoaccountforyourtime.Oneofthemainreasonsweallget into this, are for financial rewards and time to enjoy those financial rewards.Trytoavoidthegreedfactorandjustconcentrateontakingsmallconsistentprofitsovertimewithoutwearingyourselfout.Onceyoucanachievethis,thenitisjustamatterof letting thepowerofcompoundingdo its thing. Itmaybe slowgoingatfirstandyoumaythinkitwill takeforevertoachieveanyrealsignificantreturns,butonceitcranksuplikethesnowballexample,youwillberollinginit.

Lookingfor20pipsona$1,000accountisexactlythesameaschasing20pipsona$500,000 account as long as your risk percentage remains constant. It is only the

mindthatplaystricksonyouwhenyoustartdealinginbiggernumbers.Ifyouarenotusedtothebignumbers,thenitissometimesalittledifficulttowrapyourheadaroundthem.Theplanistobuildupslowlybutsurely,andwhenyougettoalevelyouarecomfortablewith,thenitmaybeagoodideatostartenjoyingyourprofitsand reinvestingmoney into other ventures such as charities, education, family orevenanAstonMartin.Whateverfloatsyourboat.

Well, that's enough of the deep and boring, albeit very important, stuff. The nextchapterswillgointoafewtradingideasandwherewecanfindtheseideas,whichshouldbealittlemoreexciting.Butpleasebeveryawareoffearandgreedandhowitcanaffectyourtrading!

Chapter7

TimetoTrade

Okaytimetogetintothetrading.Todate,IhaveexplainedwhatForexisallaboutso you should have a reasonably good idea of the basics. It is now a matter ofgetting your hands dirty by actually doing a bit of trading.Asmentioned earlier,thereareplentyofbrokersouttherethatofferyouthechancetodemotrade.Thisisa great idea, but please don't be fooled into thinking that you can replicate yourdemo trading intoyour live tradingwithoutmissingabeat. It is justnotpossible!WhatIwouldsuggestisthatyouopenaliveaccountthatallowsyoutoenterwithmicro lots (1pip=10c), soat leastyouare tradingwith realmoney.Notmuch Iknow, but enough to keep you interested. Anyone can successfully trade a demoaccountasthereisjustnoactualriskoremotionsinvolved.

Asyouhaveprobablyguessedbynow,Iamatechnicaltrader,whichmeansIlookatthechartstodeterminemytradeentriesetc.Idon'ttradethenews,simplybecauseIdon'tunderstandit,butIamveryawareofwhenmajornewsisbeingreleased.

WhenIsayItradeoffthecharts,itbasicallymeansIamusingtechnicalanalysis.Ilike the whole visual thing with charts. Now there are thousands of technicalindicatorsandtradingmethodsoutthere.Theyareeverywhere.JustlookinanyofthebigForex trading forums,andyouwill findplentyof free informationonallsorts of methods on trading from tick charts to the monthly charts. Someinformationisgood,butmostofitisrubbish.

Youhavetoremember,whatmayworkwellforonetrader,maynotworkatallforanother.Also, youmayhave two traders trading theEUR/USD.TraderAmaybelong,andTraderBmaybeshort.Nownaturallyyouwouldthinkthatoneofthemmustbewrong,butwhatifTraderAwastradingoffa1minutechartandTraderBwastradingoffadailychart,thenitisquitepossiblethatbothofthemarecorrectintheiranalysis(orbothmaybewrong).Differenthorsesfordifferentcourses.

Therearesomanytechnicalindicatorsouttherethatitwouldbedifficultformetocoverthemall.Iamawareofalotofthem,havingtriedmostofthemout.Iknowquite quickly whether something works for me or not. I do have my favouriteindicators,andIhaveonesthatIhavenoideaofhowanyoneworksthemout.

OnethingImustsayisthatabout99%oftechnicalindicatorsarelaggingindicators.That is, they only reallymove after themarketmoves, and their position is onlyobvious after themarketposition isobvious.Anyonecan lookat thehistory (lefthandside)ofachartandseesomebeautifulmovesbasedonanindicatorofyour

choice.Thathindsightisagreattool!IfigureallIneedisatimemachinethatputsmeabout1hrintothefutureandthenlookoutForex.Gettingabitsillynow,butyoucanseewhatImean.Whenyouaretradingliveusingyourindicatorsandwatchingthe very far right of your chart (the current price), you only have an opinion ofwhichwaythepriceisgoingtomovenext,asyoudonotknowforcertainwhichway itwill go.Nobodydoes!All technical indicatorsdo aregivingyouahigherprobability of something happening in a particular direction based on yourinterpretationoftheindicator/satthetime.

Theysayalotoftechnicalindicatorsareself-fulfilling.WhatImeanbythisisthatalotoftradersusethesameindicatorsandthereforeexpectthesamethingtohappenataparticularpoint.AnexamplewouldbeusingPivotPoints.ThepriceisheadinguptowardstheR1(1stresistancelevel),hitsitbrieflyandbouncesbackdown.WasittheactualR1levelthatstoppedpriceorwasitthecasewheremanytradersknewaboutthislevelandsetsellordersatthatlevel,forcingpricetobouncedownoffit?Whoknows?ThesameappliestopopularMovingAverageslikethe50or200,alsoFibLevels,BollingerBandsetc.

Onethingyouhavetokeepinmindis:PRICEISKING.

Period!

You can have all the indicators in the world on your chart, with all the planetsaligned,whereyouthink100%thatpriceisgoinginacertaindirection,onlytoseetheexactopposite.Thereisnocertaintyintrading,soyouhavetobepreparedfortheworstatalltimes.PRICEISKING!

Asatrader,Imuchprefertoopenatradeinthedirectionofthemarketatthetime,or tosay itanotherway, Igowith the trend.Some traderswillprefer to lookforturningpoints,wheretheywilltradetheoppositedirectiontothecurrenttrend.GobacktomyaboveexampleofthePivotPointswithpriceapproachingtheR1level.IwouldbemoreinclinedtoridethetradeuptothatlevelandlookatgettingoutnearthatlevelifIhadbeenlong,whereasanothertradermayhaveplacedanordertosellat the R1 level, looking for that bounce down even though pricemay have beenheadingupthereforthelastfewhours.ThereisnothingtosaythatthemarketwillstopandreverseatthatR1level,asitmaycontinuerightthroughwithoutskippingabeat.Istillcan'twrapmyheadaroundlookingforturningpoints,butithasprovedquitesuccessfulforothertraders.

Ihaveseenquiteafewdifferentsystemsovertheyears,andhavecometoappreciatetheamountofeffortandimaginationthatgoesintosomeofthem.Alotofthesearedone by taking a standard indicator or idea, and slightly twisting it a bit so youaren'tdoingwhateveryoneelseisdoing.Thetrickisfindingsomethingthatworks

foryou.

I use technical indicators, and I look at both short term and long term trading.SometimesIliketobedoneforthedayquicklyandothertimes,Ihavenoproblemsbeingconstantly in themarket. If Ihadachoice, Iwouldmuchprefer to trade thelonger time frames just to cut out the noise.Also I don'twant to be sitting atmycomputerforhoursonend,butthenagain,Ienjoythethrillofthechase.SometimeswaitingforsetupsonthelongertimeframesgetsabitboringformeasIlikeabitmoreaction.IguessIhavetofindabalancelikeeveryoneelse,hencethereasonIhavetwoaccountstocoverbothtypesoftrading.Thebeautyofdaytradingisthatitdoesn'treallymatterifyoumissadayortwo,butifyouaretradingthebiggertimeframes,youarequitecommittedtothemarkets.

DayTradingorLongerTermTrading?

Iwillcovershorttermtradingfirst.MostwouldcallthisDayTrading.IfyouareaDayTrader,thatmeansyouwillbeinandoutofthemarketwithinthesamedayorsession. Onceyouhavefinishedfortheday,youwouldhavenoopentradesleft.Theycallthis‘beingflat’intradingjargon.IwouldprefernottobesittingatmycomputerforhoursonendifIcanhelpit.YouhaveprobablygatheredbynowthatIhaveaspecifictargetfortheday,andthisisnormallyaround20pipsprofit.Ihavebeenthroughthemathandthepowerofcompounding,soyouknowmythoughtsonthisalready.

Withthedaytrading,Isticktotradingjusttheonepair,theEUR/USD.Itisbyfarthemost popular pair to trade and it consistently has the lowest spread. On Oanda,which ismyday tradingplatform, thespread isnormally less than0.8pip. Ifyouweretradingapairthathadaspreadof5pips,thenassoonasyouenter,themarkethastomoveatleast5pipsinyourfavourjusttogetyoutobreakeven.Tradingtheonepairalsoallowsyoutoconcentrateallyoureffortsintothatpair.

Iwilllookatstartingmytradinganytimeafter2pmlocal.ThisisthetailendoftheAsiansession,whichisthenfollowedbytheLondon(European)session,andifIamnot doneby then, it is into theUS session.As previouslymentioned, Iwill checkwithForexFactorybeforeIstart toseewhatmajornewsreleasesaredueout thatmayaffect theEURor theUSD. Ineed tobeawareof these so I canbepreparedaroundthosetimes.Veryimportant!

I won’t go into specific set ups that Day Traders use; as there are just so manyvariationsIcouldnotdothemjusticeinthisbook.Sometraderslooktotradeoff1mincharts,whileotherswouldlookatthehighertimeframes.AnexamplecouldbeaDayTraderusingthe5minchartforentriesandexits,butbasesallthesetradesonthedirectionofthe1hrchart,whichactsafilterofsorts.Ifyougointoanyofthepopulartradingforumsyouwillfindthousandsexamplesofdaytradingsetups.

Withdaytrading,youhavetoreallygoall-outeffortwise,withtotalconcentration.Youhavetobepreparedtotakesmalllossesandkeepchippingawayatthemarket.Justabouteveryday,thereareoneortwodecentmovesonthe5minchartthatwillmakeitallworthwhile.Don'tbegreedy,goingforthebigkilleverytrade.Perhapsstartyourdaywitha small trade looking for5pips just togiveyou thatwinningfeeling. There is a lot of discretion involved in day trading also, as it is verydifficultjusttorelyonindicatorstogetyouinandoutoftrades.Theycertainlyhelpbut there are plenty of times where you would just look at the chart and seesomethingdoesn'tlookquiteright,andinthatcase,youmaygiveitamiss.Youmayregretthatdecision,butthat'strading.Therewillbeplentyoftradescomingalongsoonenough.

NowIwanttotalkaboutlongtermtrading,whereyoucanbeinthesametradeforhours, days or even weeks. When I say long term, I am normally referring totradingoffthe1hr,4hrordailycharts.Sometradersmaylooktotheweeklychartoreventhemonthlychart,butthat'snotforme.Somemayevenreferusingthe1hrand4hrchartsasSwingTrading.Ifindtheproblemtradingoffthe1hrchartsisthatyoutendtoendupalsodoingafairbitofscreenmonitoring,henceIleantowardsthe4hranddailycharts.

Withthedailycharts,Inormallycheckmytradesatleastonceaday,possiblytwice.Mydailychartstickovertoanewdayat8amlocal,soIcheckthemwhenIgetupfirstthinginthemorning,andeventhoughthenewcandlehasnotyetopened,IwillhaveafairideaofwhatishappeningasitisafterthecloseoftheUS,andAsiahasn'treallykickedin.Abitofadeadzonereally,whichsuitsmejustfine.Thenmaybeintheeveningsometime,justtomakesuretherehavebeennodramaticchanges.Thatwilldome.The4hrchartsobviouslyrequirealittlemoremonitoringbutcanstillfitnicelyinwithanormaldayjob.

Tradingoffthedailychartsallowsyouplentymorefreetimetodotheotherthingsinlife,likegotothebeach,walkthedogs,playchessorwhateverblowsyourhairback.Becauseyouhavemuchmoretimeandyourtradingdecisionsaren'trushed,youcanaffordtofollowseveralpairsatthesametime.Noneedtolimityourselftothe one pair here. Also spreads are not such an issue, because of the bigmovesinvolvedwhereevenabiggishspreadwillbewellandtrulyabsorbedintheaction.

Butpleasebewarned,youcannottakethesamepositionsizeinyourtrades.Thereareacoupleofreasonsforthis.Oneisthatitwillbehighlyunlikelyyouwillusethesametightstopsasyouwoulduseonadaytrading(5min)method.Youmay,butIdoubt it.Keep inmindyour riskper trade. Ihavediscussed risking2%oneachtrade,andifyouweretousethisfigure,thenthat2%mustbemaintainedonthesetypesoftradesalso.Soitonlymakessensethatifyouuseda15pipstopona5min

charttradeandwereusinga150pipstoponadailychart,yourpositionsizeonthedailychartisgoingtobealotsmaller.

And secondly, as you are more than likely trading several pairs at once, youroverall risk will be higher, especially if the pairs with open trades are highlycorrelatedliketheEUR/USDandtheUSD/CHF.Againitisariskissue,butmoreofanoverallrisk.Ifyouweretorisk2%onalongEURtradeandalso2%onashortCHFtrade,becauseoftheirveryhighcorrelation,youractualriskismorelike4%,becauseifonegoeswrong,thenmorethanlikely,sowilltheother.Justbeawareofyouroverallriskwhenyoucombineallyouropentrades.Itmaybeagoodideatolook for the least correlated pairs to tradewhen several good signals appear onyourradar.Abitofcommonsenseisrequiredhere.

Nowyoumustkeep inmind thatyouare tradingoff thedailycharts, soyoumayexperience some huge moves against you, and a lot of traders may not becomfortablebeingacoupleofhundredpipsorsodowninamoveagainstthem.Itjustdoesn'tsitwellwiththemasit isplayingwiththeirmind.Remembersomeofthesemajorsmoveonaverage100+pipsaday.Youhavetolookatthebigpicturethough,becauseassoonasyounailthestartofagoodmove,yourprofitcanbeinthemany hundreds or even thousand plus pips. These are themoves youwant tocatchandtrustme,thereareplentyofthem.

Tradingseveralpairsmayalsohelpwithanoverallresult(aslongasyouarenotwrongon every trade).Youdohave to look at the big picture andnot just judgeyourresultsonadailyorweeklybasis. Iwouldsuggestyoulookto themonthtomonth results, as thiswill giveyouamuchbetteroverall indicationofhowyourdailycharttradingisperforming.Youhavetogiveitsometimetoproveitselfonewayortheother.

Tradingoff the4hrorDailycharts isa laidbackwayof tradingandmaysuit thetrader that may have a normal day job or family duties that prevent them frombecomingazombieandsittingatyourcomputerforhoursonend.Theoptionsarefairly unlimited, and the trading forumswill give you plenty of ideas if you arehavingproblems comingupwith your own systemormethod. Youhave to findsomethingthatworksforyou,andsomethingthatyouarecomfortablewith.Notalltradingsystemsarethesame,norarealltradersthesame.

KeepingaJournalorDiary

BeforeIgetintotheactualtradingsideofthings,onethingIdowanttomentionisthe use of a Trading Journal or Diary. This very important to me as it keeps adetailedrecordofnotonlymytradingresults,butalsootherusefulinformationthatIcanrefertolaterifrequired.

A journal or a diary can be as simple as an exercise bookwhere you handwriteeverything.When I put pen to paper, it actuallymakesme think aboutwhat I amdoingandhelpsmeconfirmmythoughtsatthetime.Youmaydecidetokeepyourinformationonlineviaanongoingworddocumentorsomethingsimilar-justmakesureyoukeepcopiesandbackitupasyougo.

Ialsouseexcelspreadsheetsattimes,toprovideanoverviewofresultswhenIamtrialling different systems.One glance at these can giveme a quick and accurateoverviewofhowaparticularmethodisperforming,especiallyifyouaddcolourtoit.

A Journal or Diary is not simply a place where you keep your trading resultsrecorded,itismuchmorethanthat.Ifyouaretradingaparticularmethod,youmaywishtodescribehowitworksindetailforfuturereference,andalsotorecordanymodifications to themethodasyougo.Youcouldalso record thedetailsofyourmoneymanagementplanalongwithadjustmentstotheplanasyougo.

Once you have traded a particular method for a while, you could make somecommentsonhowitisperforming,andhowitmaybeimproved.Anymistakesyouhavemadeshouldalsobehighlightedtoensureyoudon'tmakethosesamemistakesoverandover.

Maybeyouwouldliketocommentonhowyouarefeelingatthetime,orifyouhadany technical problems, or any other outside interference that disrupted yourtrading.

ThereissomuchyoucanputintoaTradingJournal/Diary,anditisuptoyouhowsimpleorcomplexyouwishtakeit.

HereisanexampleofmyJournalentries.TheseareallhandwritteninalargebookinhandwritingthatIthinkisalittlehardtoreadandseemstobegettingworsewithage!ButIdigress.

BeforeIstarttradingatall,IwillgotomyTradingJournal,writeinthedayandthedate,followedbymystartingaccountbalance.IammainlyaDayTrader,soeverydayisanewstartformesoIdon'thaveanyopenpositionstoworryabout.Ialreadyknowmymoneymanagementrulesastheyareloadedintomytradingplatform,butIwouldhavewrittenthisdownpreviouslyintheJournal.Directlyunderthedayanddate, Iwould put another subheading called 'News', and after checking the ForexFactory Economic Calendar, I would note the time of any major news and thecurrencyitwillaffect.Idon'tcarewhatthenewsis,justwhenitiscomingoutsoIcanbepreparedforit.

Somynewsinfomaybesomethingsimplelikethis:10.30pm–USD

Thistellsmethatat10.30pmlocal,thereismajornewscomingoutthatmayaffect

theUSDollar.SimpleasthatandIwillsetanalarmonmymobilethatactuallyhasavoicerecordingofmesaying'CheckthechartsJim,asthereismajornewscomingoutsoon'.Itmightsoundstupid,butmyfamilyknowswhatitisallabout.ThenI'mintothetradingifIknowIhaveaclearcoupleofhours.IfIhadtopickuponeofmykidsinanhourorso,Imayjusthangbackuntilthattaskiscompleted.

Okay,sothefirsttradeison,andhereisanexampleofhowIwouldwriteitup.Idouseabitslangandabbreviatewords,butI'llexplainitalltoyou.

EURB1.2@1.4215@6.01pm.Stop-20,target+20

Mkt had turned up nicely with all signals on 5 min chart bullish. Also 60 minconfirmed this with price having recently bounced up off the MPL, after pricerangingformostoftheday.

Wentupto+15,sostopmovedupto1.4205(-10).

ClosedatB/Eat6.23pmasmkthadturneddownandwaslookingalittleugly.

AgainIwasupover10pipsandletitslip.

ThatisanactualentryfrommyjournalonTuesdaythe21stJuly.Myfirsttradefortheday.Soyoucan see Ibought theEUR/USD,withposition size, time, stopandtargetallnominated.Thepositionsize,stopandtargetareallpre-setinmytradingplatform,sotheyjusthappenautomatically.IthengavemyreasonswhyItookthetradeasallmysignalswerebullishonmy5minutechart.Ithencommentonthe60minutechart,withMPLstandingforthemainpivotline.Thiswasfollowedbysometrademanagementbymovingmystopupandreducingmyriskasthetrademovedinmy favour. I thenexplainwhy Iclosed the tradedue to the fact Ididn't like thelookofthe5minutechartastheindicatorsmusthavestartedtoturnbearish.Thisincludesthetimeofcloseandtheresult,andinthiscaseitwasatthepointofentryorbreakeven(B/E).IthengoontostatethatIshouldhavetakensomeprofitatleastoutofthistradeasIwasupover10pipsinprofit.

Aseachtradeisclosed,Ikeeparunningtotalofpipswonorlostintheleftmargin,soIcanseeataglancewhereIamatfortheday.Oncemytarget ishit,stopsaretightenedrightuporIjustcloseout.Thereisnobetterfeelingthangettingatradeintoa'nolose'situation.

Soyoucanseeitisfairlybasic,butitdoesgivemesomethingtogobackoverattheendofthedaytoseewhatIdideitherrightorwrong.Youmayenduptryingafewdifferenttradingmethods,andinafewmonthsgobackthroughyourJournaltoseewhatworkedforyouandwhatdidn't.TheJournalwillcoveralotmoredetailthanjustasimplespreadsheetwithresults.

That’sallIhavetosharefornow,soit’stimetogetyourTradingJournalorganizedandgetreadytostarttrading…

Chapter8

Conclusion

ThisbringsmetotheendofthisbookonForexTrading.

Thankyouagainfordownloadingthisbook!IhopeithashelpedyougainagoodunderstandingofhowthewholeForexmarket is setupandhowitworks. Ihavedeliberately kept the explanations simple and straightforward so everyone canunderstandit.

Youdonotneedtobebamboozledwithtechnicalandcomplicatedjargon.Justlikedrivingacarwhereyoudon’tneedtoknowhowitallworks,aslongasyouknowhowtodriveitandunderstandtheroadrules.ThesameappliestoForexTrading.Somepeopletrytomakeitsoundharderthanitis,buthavingsaidthat,itisnotassimpleasitlookstobeaconsistentlyprofitabletrader.Therearesomanyfactorstobetakenintoconsideration,butlikeanything,ifyoupracticeenoughandlearnbyyourmistakes,youcangoontobeapartofthesmallgroupofsuccessfultraders.RemembermymottofromearlierPATIENCE,COURAGEandDISCIPLINE.

BonusTradingSystem

DownloadMT4andindicatorsHEREAfterprovidingyourpreferredemailaddressontheabovelink,youwillreceiveanemailwithaDropBox"zipped"folder.Pleaseopen(unzip)thisfoldertoaccessthefollowing:

1.Instructions.pdf(alsoprovidedbelow)

2.TemplateModifiedMACD.tpl

5xCustomIndicatorsMACD_Complete.ex4MACD_Platinum.ex4PIP-F_AFTRStop.ex4QMPFilter1.01.ex4QQEADV.ex4

IntroductionThissystemwillworkontheMT4TradingPlatformonly.

Version 2 of this presentationwas put together inDecember 2015 therefore; anyMT4versionclosetothisdatewillworkwell.

MT4istheMetatrader4platformwhichisofferedbymanybrokersforfree,eitherin demonstration or live accounts. It is owned by the Metaquotes SoftwareCompany.AninternetsearchofMT4,willprovideseveralreputablebrokersinthefirstfewresults,whereyoucandownloadtheMT4platformforfree.Itissimpletouseandifyouarehavinganydifficulties,GoogleandYouTubealsoprovideaccesstomanyfreetutorials.

YoushouldhavebynowprovidedyouremailaddresstoautomaticallyreceivethemodifiedMACD template and a number of custom indicators. Youwill need touploadallof these indicatorsontoyourMT4platformfor the template todisplaycorrectly.

TemplateandCustomIndicatorsInstructions on how to upload a template or a custom indicator onto your MT4platformandhowtodisplaythemareavailablehere:

http://bit.ly/MT4-load-indicators-and-template

▪ There is no mention of the ATR Stop indicator on the video and this will beexplainedlater.

▪ Indicators required are QMP Filter, MACD Platinum, QQE Adv and MACDComplete.

▪ With regards to the MACD Platinum and QQE Adv indicators, there is norequirementforthemtobedisplayedonthechart,buttheydohavetobeuploadedontoyourMT4platformastheyarethetwoindicatorsrequiredtomaketheQMPFilterwork.Itmaysoundalittleconfusingnow,butitwillallbeclearshortly.

▪Whenyouloadyourtemplateyoushouldseeagreybackgroundchartwitha25SMAand240LMAoverprice,andalsotheQMPFilterwiththeredandgreendots.Below that youwill have amodifiedMACDwith the settings of 6,12,1. This isrepresentedbythedarkbluelineandalsothezerolevel.OntopofthatMACD,thereisanorangedottedlinewhichisactuallythestandard12,26,9 MACD (explained later). Below these 2x MACDs, you will have a 3rdstandardMACDwiththehistogramhighlightedalso.

▪ If you have used my template, your chart should look something like thefollowingonyourMT4tradingplatform:

MyThoughtsonTradingOnceyouhaveloadedthe indicatorsandhaveyourchartssetupthewayyoulikethem(orusemytemplate),itistimetostarttrading.HereareafewideasregardinghowIliketotradeandofcourse,itisentirelyuptoyouwhetheryouchoosetodothistoo.

Iliketotradeoffthe4hrorDailycharts.Imaydropdownto1hror30mchartsifIdohavescreentimeavailable.ThereasonItradeistomakemoneysoIdon’thaveto work in a “normal” job. Trading givesme a lifestyle, which doesn’t includesittinginfrontofmycomputerstaringatchartsforhoursonend.IdokeepitverysimpleandgenerallytradewiththetrendasIamnotahugefanoflimitorders.IlikethepricealreadyheadinginthedirectionIamtrading.Youwillseethiswiththechartexamples.

Ikeepthepositionsizeverysmall,forexampleImayuse0.02lotsonaccountswithbalancesof around$5-$10K,especiallyon theDailychartswhere theremaybeahugestop.Withthe4hrchartsandlower,Igenerallyconsiderapositionsizeof1to2%riskoneach trade, alreadyknowingapproximatelywheremystopwouldbe.TherearefreeExcelspreadsheetsavailable,whichhavebeendesignedspecificallyforforextradingtoassistyouwiththesecalculations.However,pleasebeawareofcombinedcorrelation(risk)whentradingmultiplepairs.

Anexample: youare longon theGBP/USD,GBP/JPYandGBP/AUDat the sametime,andthereissomemajorGBPnewsreleased,whichwillgreatlyaffecttheGBPonly. Sure it may go in your favour, but it also may not, and with 3x trades on

involvingtheGBP,itcouldgetpainfulveryfast.InormallykeepmychartsloadedwiththesametemplatenomatterwhattimeframeIamtrading. Newseventsdonotworrymetoomuchwhentradingoff theDailycharts,butIwillkeepaneyeonthemwiththesmallertimeframes.

EntrySignals

ForabuyorsellsignalIlookforatleast3of4thingstohappen,preferablyall4.

TheabsolutecriticaloneisthattheModifiedMACD(6,12,1)musthavecrossedthezerolevel,andthismusthavebeenconfirmed.Inormallytakeallmytradesattheclose/openofwhatevertimeframeIamtrading.RarelydoItrademidcandleunlessIhavesetabuyorsellstoporder.OnceIhavethatModMACDconfirmedcross,Iwillneedeitherofthefollowingtohaveoccurredatthesametimeorprior:

1.AsamecolorQMPFilterdot.IftheModMACDcrosseddownthroughthezerolevel,thenthisrepresentsasell,thereforetheQMPFilterhastohavehadareddotfor sell also. If theModMACDhad crossedup through the zero level, then thissignifies a buy and therefore you would need a green dot on the QMP Filter.Normally,butnotalways,theQMPFilteristheleadingindicator.Thismeansthatyouwillseeared/greendotonthisbeforeanythingelsewhichgivesyouawarningthattheremaybeachangeofdirectioncoming.

2.Pricehastohaveclosedeitheraboveorbelowthe25SMAdependingonwhetheryouarebuyingorselling.Obviouslyaboveforabuyandbelowforaselland;

3.ThebottomstandardMACDhastohavehadacrossofthetwolinesinthesamewayas thebuy/sell signal above. It doesn’tmatterwhere this is compared to thezerolevelonthisMACD. Anditdoesnotmatterwhat thehistogramisshowing.AllweareinterestedinisthecrossofthetwoMACDlines.

Following,aresomeexamplesofentries.

In the above screenshot, you can see the redQMPFilter dot appeared firstwhichwasthenfollowedbythecrossofthebottomMACDlinesalsoindicatingasell.Itwasn’tuntil the fast6,12,1MACDin thecentercrossed thezero level that thesellentrywasthenconfirmed.

Remember,thereisnotradeuntilthatMACDcrossesthezerolevel,andthatcrossisconfirmedbyacloseofthatcandle.Thetradeisenteredontheopenofthesmallwhitecandlejusttotherightofthereddashedline.Thepricealsoclosedbelowthe25SMAwhich just helped confirm it all and as you can see, itwas quite a goodtrade.

Theabovescreenshotalsoshowsnumerousentriesacrossachartwithbothbuyandsell.Allentrieswouldhavebeenontheopeningofthecandletotherightofeachverticalline.Asyoucansee,upuntilthelastsellentry,theothersallhadtheQMPFiltergiveanearlyindicationofimpendingreversaltrades.Thesecondbuytradewouldhavebeenaloserbutyoucanseethattheothertradescertainlymadeupforit.

Intheabovescreenshot,Iamusinganexampleofwhereyoumayonlywishtotaketradesthataregoingin thesamedirectionas the240LMA.Hereall theactionisbelowthe240LMA,andyoucanseethat the25SMAisalsobelowit,soIwouldonlybetakingselltradesandignoringanybuysignalsaltogether.IwouldtendtodothisstyleoftradingifIwastradingoffthesmallertimeframecharts.Youcanclearlyseethat4xselltradesweretakenhere.No.2wasdefinitelyaloserbutitwasclosedoutquicklywhenthefastmiddle6,12,1MACDcrossedbackupoverthezeroline.Iexplainthatinfurtherdetailbelow.Butagain,thewinningtradeswouldhavemorethanmadeupforthat loss. Youmayevenwishtoconsidertradingwithinacertain time ifyouwere say, tradingoff the5mcharts eg the startof theLondonsessionfor3hrsonly.Itisentirelyuptoyou.Anotherpossibilitywouldbetolookatahighertimeframeandidentifyamajortrendandthendropdowntothelowertimeframechartsandonlytaketradesinthatsamedirection. Thereareplentyofoptionsavailabletoyou.

Another option would be to consider re-entries if already stopped out, or evenadditionalentries.TheremaybeadecentmajortrendinonedirectionwiththeMAsflaringout,andyouhavehadaninitialentryintothistrendbutnowthefastMACDisstayingwellandtrulyawayfromthezerolevel,buttheQMPFilterisproducing

newsignalsinthesamedirectiononpullbacks.Greatopportunitytoenterfurthertrades in the samedirectionhowever, be careful of position size andoverall riskwhendoing this as eventually that trendwill end. It canbe a cleverway to tradethough.

In the above screenshot you can see a nice trend up. The initial buy trade wassignalledjusttotherightoftheleftverticalline.AsthetrendprogresseduptherewereacoupleofpullbackswhichwereindicatedbytheredQMPFilterdots.Thesepullbackswerenotenoughtopushthefast6,12,1MACDbackdownoverthezerolevel,whichthenresultedinfurthergreenQMPFilterdotsappearingonthetrendresumption.Takefurtherbuypositions?It’suptoyou.

TradeManagementItisyourdecisionwhereyouplacestops.Inormallygoneartheprevioushigh/lowarea,oron theother sideof theMAs if theyare close. Imayevenconsider justabove/below the candle the QMP Filter signal was given on or the actual entrycandle.YoucanalsoaddtheATRStopindicatortothechartatthistimeandusealeveljustontheothersideofit,ifinfactpriceisonthecorrectsideatthetimeofentry.Itsometimesisn’twhichisfine.Iwouldstilltakethetradeanyway.

In the above screenshot I have added theATRStop to the chart on this same selltradeIhavebeenusingasanexample.Thisistheindicatorwiththesteppedlookingredandbluelinesaboveandbelowprice.Youcanseehowitkeptmeinthetradenicelyonthisbigdowntrend.Itendtokeeppriceeitherjustaboveitinaselltradeorjustbelowitinabuytrade. TherearetimeswhenpricewilljustpokethroughtheATRStopandthenresumetheoriginaltrendsoitisbesttogiveyourselfasmallbuffer.Hereyoucanseehowitwouldhavehadmestoppedoutnearthebottomofthetrend. Itdoesn’talwaysworkbut it ishandytoaddtoyourchartonceatrendbeginsforming.IkeepitoffthechartsuntilIneedit,asitdoesclutterupthechartsomewhat.

Iusethe240LMAasapossibletargetiftradingtowardsit.Atleastclosehalfmypositionifithitsthisarea.Italsogivesmeagoodideaoftheoveralltrend,whereImayonlytaketradesheadingawayfromit,ignoringtradesbackintowardsit.

Takingprofitsortrailingstopsisuptotheindividual.YoucouldusetheATRStopIsupplied.Thisworkswellonthebiggertimeframes.ThedottedstandardMACDlineoverlaidtheModMACDcanalsobeuseful.ThesetwoMACDs,eventhoughinthe same window, actually work independent of each other and can be verydynamic.Therearetimeswhenthetwolinescrossafteryouhavebeeninadecenttrend for a while, that may indicate the trend is either over or losing steam. Itdoesn'thappenallofthetime,butyouwillseeitoften.Thisisagoodtimetotake

someprofitortightenupstops.ThehistogramalsogivesmeanideaofmomentumanditissomethingIkeepaneyeonforanearlyindication.

Thescreenshotabovedisplaysoneof thesametradeexamplesfromabove. HereyoucanseethatthecenterMACDshavehadalinecrossmarkedbythearrow.NowrememberthatthesetwoMACDsworkindependentofeachotherandthatcrossingpointmaychange if you shift the chart acrossyour screen. Butgenerally, if thisappearsontherightsideofyourchartinlivetime,thenconsidertighteningupyourstoporclosingoutapartofyourposition(orboth).YoucanalsoseethehistogramonthebottomMACDstartingtorunoutofmomentum.Thenthereisthegreendoton the QMP Filter, which is another early warning that price could be changingdirection. Andnow looking at the screenshot, I can also see divergence betweenpriceandthefast6,12,1MACD.Sothereareplentyofsignsshowingyouthatthereismorethanlikelyapossiblepricereversalontheway.

Whentoexitatrade?IwillalwaysexitiftheModMACD(6,12,1)crosses(andisconfirmed)backtotheothersideofthezerolevel.Always!

TheONLYexceptionwhichImayconsideriswhenmajornewsiscomingoutsoonandIaminatradealreadythathaseitherasmallloss,orissittingonasmallprofit.Ifthereisanewsignalintheoppositedirection,ImayenterthattradealsosoIhavebothdirectionscoveredwhenthenewsisreleased.Both,withstopsinplace. This

would not be possible for those that aren’t permitted to hedge (mainlyUS basedclients),sointhatcaseIwouldgowiththeconfirmedtradedirectionandclosetheother.NowyoumaygetachangeofdirectionwithanewQMPFiltersignal,whichisquitecommon,buteverythingelseremainsintact.HereIwouldstayinthetradeandmayeventightenupmystop. ButifthebottomstandardMACDalsochangesdirectionandpriceisgettingugly,Imaybailoutofthetradealtogether.

Theabovescreenshotshowswherethismethodcangetreallyugly.Thisnormallyoccurs in sidewaysmarkets, especially in the lower time frames during the veryquiettimesofthetradingday.TheaboveexampleisofaGBP/JPY15mchartandbetweenthosetwoverticallinesisthetailendoftheUSsessionandintotheAsiansession.PlentyofredandgreendotsontheQMPFilter,butremembertowatchthefast6,12,1MACDinthecenterandhowthatmovesaroundthezerolevel.Thisisactuallyaverygoodpairtotradeonthistimeframe,butitisgenerallymuchbetterinthebusytradingsessions.Thebestway to check this out is by putting the template on a fewdifferent pairsoverafewdifferenttimeframesandmanuallybacktestingittoseehowitworks.Use your MT4’s Data Window feature to check to confirm if certain lines hadcrossedifindoubt.Alsousingthecrosshaircanbeaveryusefultooltoassist.Iam in the process of having a new MACD indicator built that has a somethingsimilar to theQMPFilterwithgreen/reddots to indicate crosses,but thismaybesomeweeksoff.

I have prepared a YouTube video with some tradeexamples, along with some discussion on trademanagementhere:http://bit.ly/mod-MACD-trade-examples

ConclusionDonotbethrownbythesimplicityofthissystem.Itissimple,verymechanicalandcanalsobeveryprofitableifyouremaindisciplined.WhatIhaveprovidedshouldgive you an excellent framework to develop your own systemwith your chosenindicators, fibs, pivots, support/resistance levels etc.which you can add to suit asappropriate.Likealltrading,thehardestdecisionisdeterminingwhentotakeprofitand there isno simpleanswer to this. As I statedearlier,keepyourposition sizereasonablysmall,yourrisksmallandscaleoutofwinningpositions.Ifthereisatrendreversal,exitthetrade.Youdonothavetowaitforastoplosstobeactivatedifyoucanseeorsuspectareversaliscoming.UsetheATRStoptotrailatasafedistance.EveryTraderlovesitwhenyouhaveatradeonwithzeroriskasyourstopisonthegoodsideofyourentry.

TakewhatIhaveshownyouhereandmodifyittosuityourowntradingstyle. IwishyouallthebestwithyourforextradingandifyouneedtoaskanyquestionsorwouldjustliketotalkForex,thenyouarewelcometoemailmeat:

jagfx33@gmail.com

AmazonReview

Ifyougainedvaluefromthisbook, itwouldbereallyhelpful ifyoucould takeamoment to leavea ratinganda reviewonAmazon, ifyouhaven’talreadyhadanopportunitytodoso.

For your convenience, the link here will take you directly back to where youpurchasedthebooktodothis.Alternatively,thefollowinglinkcanalsobeused:

InternationalAmazonLink:http://lrd.to/Forex-Trading-Basics

Allthebest,

Jim

RecommendedReading

Highprobabilitytrading:takethestepstobecomeasuccessfultrader1stEditionMarcelLinkTheLittleBookofMarketWizards:LessonsfromtheGreatestTradersJackD.SchwagerAdventuresofaCurrencyTrader:AFableaboutTrading,Courage,andDoingtheRightThing(WileyTrading)RobBookerInventory Trading: How I Run My Trading Account Like a Retail InventoryManagerShonnCampbell

TradingintheZone:MastertheMarketwithConfidence,DisciplineandaWinningMarkDouglas

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TableofContentsChapter1WelcometotheWorldofForexTradingChapter2WhatDoWeTradeintheForexMarket?Chapter3HowDoYouActuallyTradeForex?Chapter4FundamentalorTechnicalAnalysis?Chapter5FurtherInformationonForexSpecificsChapter6TradingPsychologyChapter7TimetoTradeChapter8Conclusion