FOREX “TREND

MASTER” SYSTEM

MICHAEL SELIM,

WWW.SUPERIORFXSIGNALS.COM

Forex Trading

FOREX trading is all about trading foreign currency. The currency of one country is

weighed against the currency of another country to determine value. The value of

that foreign currency is taken into consideration when trading stocks on the FOREX

markets. Most countries have control over the value of that countries value, involving

the currency, or money. Those who are often involved in the FOREX markets include

banks, large businesses, governments, and financial institutions.

What makes the FOREX market different from the stock market?

A forex market trade is one that involves at least two countries, and it can take place

worldwide. The two countries are one, with the investor, and two, the country the

money is being invested in. Most all transactions taking place in the FOREX market

are going to take place through a broker, such as a bank.

What really makes up the FOREX markets?

The foreign exchange market is made up of a variety of transactions and counties.

Those involved in the FOREX market are trading in large volumes, large amounts of

money. Those who are involved in the FOREX market are generally involved in cash

businesses, or in the trade of very liquid assets that you can sell and buy fast. The

market is large, very large. You could consider the FOREX market to be much larger

than the stock market in any one country overall. Those involved in the FOREX

market are trading daily twenty-four hours a day and sometimes trading is

completed on the weekend, but not all weekends.

You might be surprised at the number of people that are involved in FOREX trading.

In the years 2004, almost two trillion dollars was an average daily trading volume.

This is a huge number for the number of daily transactions to take place. Think about

how much a trillion dollars really is and then times that by two, and this is the money

that is changing hands every day!

The FOREX market is not something new, but has been used for over thirty years.

With the introduction of computers, and then the internet, the trading on the FOREX

market continues to grow as more and more people and businesses alike become

aware of the availablily of this trading market. FOREX only accounts for about ten

percent of the total trading from country to country, but as the popularity in this

market continues to grow so could that number.

From the studies over the years, most trades in the forex market are done between

banks and this is called interbank. Banks make up about 50 percent of the trading in

the forex market. So, if banks are widely using this method to make money for

stockholders and for their own bettering of business, you know the money must be

there for the smaller investor, the fund mangers to use to increase the amount of

interest paid to accounts. Banks trade money daily to increase the amount of money

they hold. Overnight a bank will invest millions in forex markets, and then the next

day make that money available to the public in their savings, checking accounts and

etc.

Commercial companies are also trading more often in the forex markets. The

commercial companies such as Deutsche bank, UBS, Citigroup, and others such as

HSBC, Braclays, Merrill Lynch, JP Morgan Chase, and still others such as Goldman

Sachs, ABN Amro, Morgan Stanley, and so on are actively trading in the forex

markets to increase wealth of stock holders. Many smaller companies may not be

involved in the forex markets as extensively as some large companies are but the

options are stil there.

Central banks are the banks that hold international roles in the foreign markets. The

supply of money, the availability of money, and the interest rates are controlled by

central banks. Central banks play a large role in the forex trading, and are located in

Tokyo, New York and in London. These are not the only central locations for forex

trading but these are among the very largest involved in this market strategy.

Sometimes banks, commercial investors and the central banks will have large losses,

and this in turn is passed on to investors. Other times, the investors and banks will

have huge gains.

Forex can help you earn a lot of money. But there are certain conditions to follow

before trading in Forex. Firstly, one must have a thorough knowledge about the

trends in the stock market, the basics of trading and risk-taking ability. You will get

all the help you need for attaining these conditions very easily.

There are many sites on the internet which can help you clarify your basics and help

you brave rough weather. A good reason why Forex trading can be considered is the

fact that there are frequent fluctuations in currencies, though in percentage terms it

may be small.

You gain if the fluctuation favors you and the reverse holds true as well. No one can

accurately predict the trend of the currencies. Liquidity is another reason why Forex

trading is so popular.

Now the most important part – in Forex, you can make huge sums of money even if

your initial investment is on a lower side. You can invest as little as $50,000. Rich

people have no upper cap to the amount of investment. So remember that even with

a nominal investment, the earning ability is undoubtedly very huge.

Most of the great businesses are connected to the world of internet today, and Forex

trading is no exception. You can deal in foreign currencies right from your home. In

fact, it is fully conducted online. You have the liberty to choose when you want to

trade, and you don’t need to meet any deadlines.

Basically, you can be your own boss. The process of online trading is fairly simple for

anyone to understand. You just need to open an account for Forex trading with a

recognized broker and they will complete the rest of the formalities. The only bit you

need to do is get ready with your investment amount.

So, it is thus clear that Forex trading can be one of the best businesses to earn money.

Though there is a level of risk attached to it, but it can be avoided with due care and

an alert mind!

Being a forex or foreign exchange trader no longer means you have to work for a

bank in one of the world's financial centers. These days you can trade on your own

behalf, from anywhere.

Since the rise of the internet many people are doing this from their own homes,

making money in their spare time or even making a full time income. But what is

forex trading and how does it work?

A foreign exchange trader deals in currencies. He or she will sell one currency that

seems to be falling in value, to buy another that seems to be rising. There are always

two currencies involved in a trade (a currency pair) because when you want to buy

dollars you have to have another currency to exchange for them.

In the beginning it is best to be involved with just one currency pair. Most people

start out trading in the EUR/USD market, that is the euro against the US dollar. This

is the biggest forex market. There is plenty of information available for this market

and it tends to have lower costs and be relatively stable.

Nevertheless forex is a very volatile market. This means that the prices can rise and

fall steeply and quickly. The risk is high. It is easy to lose money. In fact, some losses

are inevitable, so you should manage your account so that you never risk too much

on one trade. You can use stop losses so that your broker will automatically sell if the

price goes a certain way against you. The aim is not to have no losses, but to make

sure that your profits are higher than your losses so that you end up with a net gain.

You will need access to a computer with a high speed internet connection any time

that you want to trade. Unless you use a robot to control your currency trading, you

will also need time where you can concentrate on learning a profitable system and

then on trading itself. You pretty much need to be able to lock yourself away in a

room to do this, at least for a couple hours a day. It is no good trying to trade from

your desk at your day job with your boss interrupting you, or using a computer in the

family den with kids climbing on your knees wanting to play games. You must be

fully concentrated on the movements in the market or you could miss the right

moment to either open or close a trade.

If you are a cautious person who likes a solid investment with predictable low

returns, you should not become a currency trader. Forex traders are people who

enjoy risk and love the challenge of trying to turn a profit in a fast moving market.

It helps if you are strongly focused on your goals and not easily swayed by emotion. It

is important not to let fears of losses or dreams of huge wealth divert you from your

strategy. You also need to stay aware of financial news, not only in your own country

but in all of the major world powers, because this will affect the forex markets. With

these characteristics and a good trading system in place, a foreign exchange trader

can reap substantial gains from his or her investment.

About The System

This system is an Intraday trading system, works best on the 1 hour chart for all

currency pairs. However, it would give best results with trending pairs ( currency

pairs with strong trend, like JPY pairs ) .

In this system we are going to use moving averages to identify the trend – visual

guidance only – and we are going to use price/candle patterns to enter the market.

Our exit strategy will be based on support and resistance levels.

It’s very important to pay attention to news releases and economic announcements

and STOP trading until the market reacts to the news. Usually after 15 to 30 minutes.

As an intraday trader, it’s also very important to know what time of the day is best for

trading and NOT to trade anytime of the day, any day of the week.

If you’re not an experienced trader, please do not make any changes to this system.

Test it on demo account for at least one month and more than one currency pair.

Always to remember that Forex trading like any investment is not a sure thing. Just

like any type of investment or investment vehicle there are risks involved. No matter

how much you research your data or how much thought you put into your trading,

you can always lose money.

There are many people that sign up to trade Forex that don’t understand or take the

time to learn how and why to trade Forex.

There are many risks involved in trading any kind of asset, whether it is stocks,

bonds or currencies. If you are interested in trading, make sure you understand

Forex risks.

One of the biggest Forex risks is a leveraged buy. Some Forex brokerages allow you

to hold a certain amount of money in your account but leverage that amount to up to

200 times its worth. While this can be good if you are on the winning side of a trade,

this can be devastating if you lose your entire accounts worth plus many times more.

Many Forex brokers have special features that can limit your risks such as stop loss

and limit orders and no negative balances. If you are interested in trading Forex,

before you start to trade, learn and understand the Forex risks involved.

TREND INDICATOR

SMA ( smooth moving average ) :

Period 200

Shift -5

Apply to : weighted close

Yellow

SMA :

Period 50

Shift -20

Apply to : weighted close

Red

Targets and Stoploss

Support and resistance. If you don’t know how to work with support and resistance

levels, please take some time to read about it and understand it before you start using

this system.

Support and resistance levels are identified based on the price patterns and price

turning points that took place in the past. Support levels try to stop falling price as it

attempts to drop even further. Resistance levels resist to the rising price that

attempts to go even higher.

Support or resistance levels that were tested by the price and sustained the pressure

by not allowing market to surpass them, are considered as strong levels. If Support

level is broken it becomes future resistance level. If resistance level is broken it plays

a role of support for future market moves.

Entry Points

We are going to use pin bars to enter the market.

The pin bar means that the price is going to move in the opposite direction to

where the nose is pointing. In screen above, the nose is pointing up so the trader

should expect prices to move down.

A pin bar must:

• have open/close within the first eye,

• protrude from surrounding prices (‘stick out’ from surrounding prices); it

cannot be an inside bar.

A good pin bar has:

• a long nose (and a long nose relative to the open/close/low),

• a nose protruding a long way from the prices around it (it ‘sticks out’),

• the open / close both near one end of the bar.

System Rules

The first thing to do is to know the direction of the trend according to the trend

indicator. If it’s a down trend, then we only enter sell trades. If it’s up trend then we

only enter buy trades.

The next thing to do is to draw the support/resistance levels. We are going to use

those levels for targets.

BUY SIGNAL

1 – Up Trend

2 – Pin Bar Pattern ( pointing downwards )

Stop Loss : 30 pips below the low of the pin bar.

Target : Next resistance level.

SELL SIGNAL

1 – Down Trend

2 – Pin bar Pattern ( pointing downwards )

Stop Loss: 30 pips above the high of the pin bar.

Target: Next support level.

Examples

USD/JPY – 2009/07/08

Down Trend – Sell signal

Notice that the pin bar pattern takes 3 bars to complete. So we enter the market

when the 4th bar opens.

In the example above there was 2 patterns, we don’t have to open 2 trades here if we

don’t need to. So we opened a trade according to the first pattern and ignored the

second.

EUR/USD – 2009/17/07

In the example above we notice a pin bar pattern while the main trend is up trend.

We enter the market according to the buy signal. Placing the stop loss 30 pips below

the pin bar. and placing our target at the next resistance level.

Our entry point was the next candle open, right after the 3 candles of the pin bar

pattern were closed and the pattern was confirmed.

Entry Filter

To get the best out of this system, you could add a filter to separate false pin bar

setups and true pin setups.

This filter is Stochastic indicator, settings are :

%K : 5

%D : 3

Slow : 3

MA method: Simple

Levels : 30 – 70

Colors: Main=None Signal=Red

Ho to use the Entry Filter ?

The Pin bar setup must happen when Stochastic signal line is at the level 30 or the

level 70. Or at least just turning from one ( 30 line means overbought level – 70 line

means oversold level)

With Buy signals, the setup must happen when Stochastic is at/or just turning from

the level 70.

With Sell signals, the setup must happen when stochastic is at/ or just turning from

the level 30.

Reversals

Sometimes, price would move in the opposite direction of the current trend for a

while before it reverses back.

Usually, it’s not recommended to trade in this case and just wait until price reverse.

But .. for experienced traders there is another option: trading reversals!

Example:

EUR/USD - 1 Hour Chart

This kind of trades are risky, and only recommended for experienced traders only.

It’s also recommended to follow other strong reversals signs besides the pin bar

pattern, like double tops/bottoms or heads and shoulders.

Easy Targets

I know that sometimes it not easy to spot support and resistance levels or set them

correctly, especially for new traders.

So here is a way to get this done automatically for you, even if you don’t know the

difference between a support a resistance!

Here is how to do it:

When you set the trend indicator, SMA - Period 50, open ‘’levels’’ input window and

enter those levels:

100 and -100 200 and -200 400 and -400 600 and -600. Do this for only the

SMA 50 indicator, not the SMA 200.

Here is how your chart should look like:

How to use those levels ?

The SMA 50 and the levels of support/resistance are slow, they will only point to the

last – strong - support/resistance, where price touched one of those levels and

reversed.

Example ( USD/JPY - 1Hour ) :

Please note that forex is not an exact science, sometime price would get really close to

one of those levels and turn around before touching it. That’s a valid

support/resistance level! .. here is an example:

Trading Examples

Let’s now use what we know to make some money from forex market with a simple

trade, and using support/resistance levels.

EUR/USD – 4H chart:

The major trend was up, we got a buy signal setup ( Pin bar + Stochastic ).

We opened an order @ 1.3931 right when the 3rd candle was created. Then we placed

our stopl loss @ 1.3860

From the last resistance level we set our target @ 1.4028

Profit = 97 pips

Another Example, a trade on the EUR/USD – 1 hour chart. Using the

Support/resistance easy targets method:

Trend was Up, we spot a buy signal ( pin bar pattern + Stochastic oversold ). And if

you noticed, you will find a divergence! .. that means this is a good trade to take.

We opened a market order @ 1.4106 and set our stop loss level @ 1.4055

This time we used the easy targets method to set our targets, Price hit target @

1.4166

Profit = 60 pips

Another Example, EUR/USD – 1 hour chart:

The good part is, you are free to choose the support/resistance targets. You can

choose a small target ( latest support/resistance ) or aim at big targets ( major

support/resistance ). Here is an example of a major target.

Entry @ 1.4015 - Stop loss @ 1.3972 – Target @ 1.4144

Profit ? 129 pips!

Before taking major support/resistance as your main target in all trades, you should

understand that the more you are risking to take, the more you are risking to lose.

Play it safe.

Dangers of Getting Emotional

Getting emotional in the stock market is the worst thing that can happen to

investors. The same goes for Forex traders as well. Seeing paper losses in everyday

trade is pretty common.

Once to take a decision to buy something and make losses, you still hold on even if

situations turn from bad to worse, only because you feel that things might turn back

in your favor once again. The main problem here is that, the decision to stick to a

losing trade for a long time is an emotional one, since you are in no mood to accept a

loss and get out of the trade.

Forex market is largely influenced by the general market and you must always trade

on what the indications based on the market are, and not just initiate one since your

heart tells you to. At times, you might be so emotionally attached to a given currency

in the Forex market, that most of your exposure to the Forex market would be in that

particular currency.

Nothing wrong with it, as if you have reasonable grounds to believe that the currency

will do well, then you will actually profit from the exchange. The ‘wrong’ thing is

opening up a trade in a currency just because your heart tells you to.

In the case, if you strongly feel about any given currency, then it’s better to check the

reality by having the look at what the market is indicating. That will give you a clear

picture of whether or not you should trade in that currency.

The basic thing that is needed to be remembered is that once you have initiated a

trade, and are incurring paper losses, and by all indications, things are likely to get

even worse for you, then it is much better to book losses and come out of it rather

than sticking to it till a time you ultimately are able to see some gains from it.

Remember, the markets have little room for emotions.

Forex trading is not a win-win situation. Be prepared to lose on some trades as well.

That’s the precise manner in which the market works. It is not really a question of

whether you are right or not, the fact remains that markets move in an unexpected

way and they have a knick of surprising people when they least expect it. All the

fundamentals and even experience may be thrown into the air when the markets

decide to do something.

So just follow the indications that the market gives you. If you feel that after

initiating a trade, things are not going the way you had foreseen, book your losses

and get out of it. You can invest the amount in some other trade and make good gains

rather than sticking to your losing trade.

It is difficult for Forex traders to realize that the currency market is extremely

unpredictable. As new traders spend a long time trying to learn the mechanics of the

foreign exchange trade and focus their time and energy on trying to find a method for

predicting movements, they naturally expect there to be rules governing the

movement of the market. This not being the case, many traders find themselves at a

disadvantage.

While Forex traders have a number of tools at their disposal, which allow them to

judge the right time to open or close a position, many prefer to rely mostly on one

tool. So, having opened a position, they watch their favorite indicator and, to a large

extent, base their trading decisions solely on it, ignoring the others.

This works well enough until that indicator starts telling them something different

from what the others are. Traders caught in a open position which their favorite tool

is telling them to hold, will often do so, despite the fact that other tools are telling

them to close and get off the market, and end up losing money.

The basic problem, of course, is that the trader is not looking at the market as is, but

through the lenses of his own expectations about it and further using his favorite

indicator to reinforce those ideas instead of looking at the bigger picture. And,

encouraged by the fact that his chosen indicator is forecasting the profit he wants,

the trader is focusing more on money than on the market.

If the Forex market was not unpredictable, it would collapse because all traders

would profit all the time. There are many tools that can help traders predict the

direction of the market and they usually do an efficient job. But even in the hands of

the most experienced traders, the best tools occasionally fail to predict the market’s

movements correctly.

Losing in trade because of predicting the market wrongly is an innate part of Forex

trading and traders need to accept it. Besides, they need to learn to avoid getting in a

position where they do not have many choices.

For this, the trader needs to accept the fact that the foreign exchange market pretty

much has a mind of its own and the traders have to follow its movements instead of

trying to make it go in the direction they want it to.

Forex Market Hours

The forex market hours stretch from Monday morning in Sydney, Australia to Friday

afternoon in New York. During that time the market is open somewhere around the

globe at all hours of the day or night.

However it is not a 24/7 market because it does shut down on weekends. 24/5 would

be more accurate.

If you need to know the exact times that the markets open and close, you have to take

time zones into consideration. It is very simple when expressed in UTC. This is

Universal Coordinated Time, formerly known as Greenwich Mean Time. This is the

standard (winter) time in Greenwich, London which is the point of zero longitude on

the globe.

So, the normal forex market hours are 22.00 Sunday UTC to 22.00 Friday UTC. This

is 10 pm in the UK in winter time.

New York is 5 hours behind the UK so the global forex market opens and closes at 5

pm Sunday/Friday in New York, 2 pm on the US west coast, 11 pm in Germany, 8 am

Monday/Saturday in Sydney.

Things get a little complicated when you start to try to take summer time daylight

saving into account. This makes one hour difference in countries that observe it. But

daylight saving operates in a different way in the southern hemisphere countries

such as Australia which have summer time from September to March instead of

March to September.

The hours of the different major national markets are as follows:

Sydney: 10 pm to 7 am UTC

Tokyo: 12 midnight to 9 am UTC

London: 8 am to 5 pm UTC

New York: 1 pm to 10 pm UTC

Or we can express that in EST (Eastern US time):

Sydney: 5 pm to 2 am EST

Tokyo: 7 pm to 4 am EST

London: 3 am to 12 noon EST

New York: 8 am to 5 pm EST

You can see that these correspond to 24 hour cover.

However, this does not necessarily mean that trading will be good at all of these

times. Just after a major market opens, the prices can be very volatile and

unpredictable. Many traders will stay out of the forex market for up to an hour four

times a day when the financial markets are waking up in these major cities.

The US dollar is the most traded currency by a long way, involved in 2.5 times as

many trades as its nearest rival the euro. This means that events in the USA have a

greater impact on the financial markets than events in other countries. The New York

market tends to slow down around 3 pm local time (8 pm UTC) and if you are

involved in a US dollar pair, this can be a good time to stop trading for the day.

So theoretically you can trade 24 hours a day from Sunday night to Friday night.

Automated software in the form of a forex robot can even make this physically

possible. However, a cautious trader will choose his times and will not be active

during all of the forex market hours.

Thanks & Happy Trading...

Michael Selim & Superior FX Signals Team

www.SuperiorFXSignals.com

0BDISCLAIMER

U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures

and Options trading has large potential rewards, but also large potential risks. You must be

aware of the risks and be willing to accept them in order to invest in the futures and options

markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an

offer to Buy/Sell futures or options. No representation is being made that any account will or

is likely to achieve profits or losses similar to those discussed on this web site/ebook. The

past performance of any trading system or methodology is not necessarily indicative of

future results.

CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE

CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED

RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE

NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED

FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF

LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO

THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO

REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO

ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

No representation is being made that any account will or is likely to achieve profits or losses

similar to those shown. In fact, there are frequently sharp differences between hypothetical

performance results and the actual results subsequently achieved by any particular trading

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record can completely account for the impact of financial risk in actual trading.

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purposes only and is not intended to provide financial advise. Any statements about profits

or income, expressed or implied, does not represent a guarantee. Your actual trading may

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