Aging of a trend typically occurs in Stage 3, and it is at this stage that you can witness the fallacies of man, forex trading strategies pdf. Many times, traders are not aware that they have the power and might to shift forex trading strategies pdf odds to their favour, that they can dramatically increase their chances of success if they want to. This is especially the case when they are paired up with the US dollar — at least 80 percent of foreign exchange transactions have a dollar leg. Note: It is necessary to combine with the indicators of the purchasing power and selling power of the market to be alert to the markets that are overbought or oversold. Jan 26 All of these things are going to help you to have a successful forex trading experience.
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Translate PDF. com Website: www. com First published in Great Britain in by Harriman House. Copyright © Harriman House Ltd The right of Grace Cheng to be identified as the author has been asserted in accordance with the Copyright, Design and Patents Act ISBN British Library Cataloguing in Publication Data A CIP catalogue record for this book can be obtained from the British Library.
All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publisher.
This book may not be lent, forex trading strategies pdf, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published without the prior written consent of the Publisher.
Printed and bound in Great Britain by Biddles Ltd, Kings Lynn, Norfolk. Index by Indexing Specialists UK Ltd No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading material in this book can be accepted by the Publisher, by the Author, or by the employer of the Author.
Designated forex trading strategies pdf and brands are the property of their respective owners. Dedication I dedicate this book to my husband, forex trading strategies pdf, Pedro. Thank you for your constant encouragement, support and love. This book is also dedicated to my loving parents who have always believed in me.
She has also been featured in newspapers, magazines, newsletters and on TV. Grace is the creator of the PowerFX Course which is designed for both new and intermediate traders to jump-start their trading performance. Grace has mentored hundreds of independent traders through her PowerFX Course. Her web site is at: www. And the development of sophisticated online foreign exchange trading platforms in recent years has attracted many traders to the market — traders who seek an income in addition to their day job or those who wish to trade a new market besides stocks forex trading strategies pdf futures.
Who this book is for This book is primarily for those who are new to the world of currency trading and are curious about how they can make money from the forex market. Existing traders who are trading on forex trading strategies pdf or live accounts should also find some useful advice in this book.
Some knowledge of candlestick forex trading strategies pdf is assumed as I will be using candlesticks to display the high, low, opening and closing prices in the charts throughout the book. All you need to start is a computer with fast and stable internet access and a relatively small account with a broker. About this book This book describes seven fundamental and technical trading strategies for trading the foreign exchange markets. The purpose of this book is to show you how you can trade forex with these winning strategies.
I will share with you some new ideas, interesting concepts, and the nuts and bolts of how forex trading strategies pdf can implement each strategy more effectively. This book is quite different from traditional technical analysis books because, while those books may document the reliability of certain technical patterns, I will explain in this book why certain technical patterns do not work as well in the forex market and therefore need adapting, forex trading strategies pdf.
For example, I have increasingly noticed that in recent times the first attempt of a price breakout more often than not results in a failure. The strategies that I am going to share with you are suitable for trading the forex market in any time frame — ranging from minutes to weeks. Throughout the book I also explain certain aspects of the forex market so that you can gain an insight into how the market behaves. Flexibility is required for the trader to adapt his or her strategies to different market conditions, as well as for the trader to customise trading strategies to suit his or her own trading style and personality.
Therefore, feel free to tweak or modify any of the parameters of these strategies to suit your own preferences. The 7 strategies in this book must be applied with discipline and a huge dose of common sense. Their rules and guidelines are not set in stone. What I provide is a guide to implementing these strategies so that you can tilt the odds of success to your side. How this book is structured The book contains the following chapters.
Getting Started Find out why the forex market is constantly growing, and why an increasing number of people are turning to trade this particular asset class in their quest to accumulate wealth. For those who are new to trading, take a look at the differences between investing and trading, and the various choices of trading time frames. Spot Forex Market Structure The forex market has long been the exclusive playground of the big players, namely banks, institutional investors and hedge funds.
But the playground is no longer restricted to just them; individuals can also participate in this speculative game. It is essential to know where you, the trader, stand in the overall big picture. How To Overcome The Odds Of Trading Forex How are you going to tackle the odds that are stacked against you from the start in the forex trading business? Forex trading strategies pdf this chapter, I will highlight the three Ms that have brought me success in this field: Mind, Money and Method.
Many traders, especially the inexperienced ones, are too fixated on finding the perfect trade setup, the perfect trading system or the strategy that never fails, thus neglecting the other more important aspects that are crucial to good trading performance, forex trading strategies pdf.
Find out what defines the current market sentiment, and how you can incorporate market sentiment analysis into your trading. Strategy 2 — Trend Riding There is so much more to riding trends than simply closing your eyes and buying at any point during an uptrend or short-selling at any point during a downtrend. This chapter shows you how you can jump on a trend when the trend is the most robust, rather than when it is about to end.
This way you can ride a trend with a higher chance of success. Strategy 3 — Breakout Fading Many false breakouts occur in forex price charts, forex trading strategies pdf, and the occurrence of these fakeouts provides the perfect opportunity for fading forex trading strategies pdf, that is, trading against those breakouts. In this chapter, I explain why most breakouts fail, and how you can identify high-probability fading opportunities. Strategy 4 — Breakout Trading When currency prices break out of certain price levels, a large sustained move in the direction of the breakout may occur, giving rise to a situation whereby big profits could potentially be captured in the least amount of time.
The main problem with trading breakouts is that many of these breakout attempts fail. In this chapter I walk you through several guidelines of how you can better identify potential breakout opportunities for this strategy. This particular strategy, forex trading strategies pdf, forex trading strategies pdf, requires that the forex market registers a period of relative calm and low volatility before the strategy is to be implemented.
Strategy 6 — Carry Trade This is a fundamental trading strategy that is highly favoured by institutional investors. In this chapter, I explain how a forex trading strategies pdf trade works, and highlight some points which you should keep in mind when adopting this strategy in the forex market. Strategy 7 — News Straddling The forex market is extremely sensitive to economic and geopolitical news from around the world, especially those which relate to the industrialised countries.
Find out how you can trade news releases with a higher probability of success. Risk disclosure Trading forex involves substantial risk, and there is always the potential for loss. Your trading results may vary. No representation is made that any information in this book will guarantee profits or prevent losses from trading forex. You should be aware that no trading strategy can guarantee profits. Further information For more information about my trading strategies, the proprietary PowerFX Course and other forex market information, please visit the following website where I also host a daily forex blog — www.
This book, however, shall focus on the trading of spot forex. The most significant difference between spot forex and futures is that spot forex contracts are traded over-the-counter at no central location, while forex futures are traded on an exchange.
This gives rise to another unique aspect of spot forex — the hour non-stop action; this is one major reason why I enjoy trading spot forex. With round-the-clock trading a person in any time-zone can trade spot forex at any time — whether during the day or night. The best career decision I have made was to trade forex full-time. Forex trading has brought me both financial and emotional satisfaction, even though my initial learning journey was long and arduous.
When I started in forex, I could only find one book on forex trading. Forex was not as popular as stocks or options trading, so there were very few articles in magazines that focused on this field.
I spent the first one and a half years learning how to trade forex and honing my skills on a demo account, before progressing to forex trading strategies pdf real account, when I became consistently profitable. The breakthrough came when I incorporated fundamental and sentiment analysis into my predominantly technical-based analysis. Even though I was able to dedicate myself to full-time trading, I found the initial learning curve to be extremely steep, as I had no mentor and forex trading strategies pdf to learn all the ways of losing in the market before I learnt how to profit from it.
I hope that through this book, aspiring and current traders are able to fast-track their learning, and greatly improve their trading performance. The forex markets have the promise of fast action and huge profits, but the risks are also great.
The good news is that most of these losses can be prevented by taking the time to learn how to forex trading strategies pdf the forex markets and by implementing careful money management. The forex market consists of a worldwide wired network of buyers and sellers of currencies, with trading forex trading strategies pdf done over-the-counter OTCwhich means that there is no central exchange and clearinghouse where orders are matched.
If you are looking for hour action, you can find it in this global trading system, where no physical barriers exist and activity moves seamlessly from one major financial centre to another. A reason why there is a veil of mystery over forex is that the market was once the exclusive playground of banks, hedge funds, forex trading strategies pdf, corporations and financial institutions, where money changed hands for commercial and speculative purposes. However, forex has now expanded and is easily accessible to all traders with the rapid emergence of online currency trading platforms.
Many of these platforms are well- equipped with free charting software, real-time news-feeds and easy-to-use order placing systems. This group of people also known as speculative traders engage in trading forex for the sole purpose of making profits. Welcome to the new world of online forex trading. The rapid fluctuations of currency exchange rates are what attract speculators to the forex market as currencies are highly sensitive, and thus react very fast to changing economic conditions of countries or regions, changing interest rates and political happenings around the world.
All these factors lead to high volatility of currency prices, which can be taken advantage of by traders who speculate on the direction and magnitude of the current and future price move, forex trading strategies pdf.
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Are you willing to accept that? If spreads are variable, how wide do they get during important news releases? The lower the margin required, the greater the amount of leverage. Once you have narrowed the broker list down to a few candidates, be sure to read the terms and conditions of the respective contracts, and understand what you are in for before you sign anything.
Later on when you have graduated to an intermediate or advanced phase in trading forex, you may then choose to spread your money among a few brokers so as to reduce exposure to a single broker. If you approach trading as a means of getting your dose of adrenaline, do yourself a favour by staying away from it — you will do less harm to your pockets by going to the latest Louis Vuitton sale or by bidding on that vintage car on eBay for the adrenaline shot.
Serious money demands serious work. Both serious and casual traders, of course, dream of making it big in the forex market, but it is not the goal that counts, it is the preparation and dedication that is important.
Forex trading should be considered and treated as a serious business, just like other types of businesses. Approaching trading from the perspective of a shrewd business person can greatly tilt your chances of success to your side. Jolted from sleep, I drag my feet — with eyes half-open — into my trading room. The time is am and the FOMC minutes have just been released. I click on the headline which summarises what the minutes say.
This statement is very similar to the previous one; hence there is not much reaction in the forex market. Morning Too soon, morning comes. I quickly scroll through the news headlines that are displayed in the news feeds, and select those which relate directly to forex.
The market seems pretty boring at this time. The lull in market activity gives me some time to write a bit more of this book, and to work on some trading articles. To make sure the trade is still sound, I quickly check the news feeds to see if any news or rumours might have triggered this move.
The market is moving up and closer to my position; it is now only one pip away. I make sure all my charts are up, and I prepare to monitor this trade. It is now 12 pips away from my opening price, a bit too late for me to get in.
And just as suddenly as the price has gone down, it is now moving up again and my order is now filled. The pair keeps moving up, 5 pips then I guess others must be going short too. After what seems like an eternity, but is probably no more than five minutes, my position is back at break-even, which means I have neither made nor lost money at this point. This bounce trade seems to be taking a while, so I call my friend to let her know we will have to postpone our lunch meeting.
Lunch will have to arrive in the form of junk food from my favorite food delivery outlet. Sometimes I watch my open trade like a hawk; other times, I simply continue with other activities. I set some price alarms and get back to writing my book while waiting for my lunch. After all, it is usually better to do something else while waiting on the market. After lunch, the alarms ring. Looks like I am close to reaching my profit target.
Institutional traders must be back from lunch and are taking profits on their long positions. End of the day With this trade out of the way, I look for upcoming trading opportunities. Trading blogs, especially those that have fresh and relevant material, can be a valuable source of useful and targeted information for busy traders who hold day jobs.
This blogging habit, which constitutes part of my market homework, has helped me in my own trading. I also take the time to interact with the online community of traders by participating in forums such as that as ForexVibes www. This means that sometimes I will end past midnight, and other times I will be done well before lunch time. This is unlike, say, stocks or futures which traded through the exchanges such the London Stock Exchange or Chicago Mercantile Exchange.
Trading of currencies is done OTC over-the-counter , in the sense that currency buyers and sellers from all over the world make a binding contract with each other after agreeing on a price — and this is not carried out through an exchange. This aspect of spot forex trading is different from forex futures trading which is carried out through an exchange.
Forex traders carry out their activities by dealing directly with one another or through brokers via telephone and internet connections. In this centrally cleared system, the CME will act as the central counterparty and guarantee the performance of all contracts for both buyers and sellers.
Unfortunately, FXMarketSpace is an institutional trading platform and is not open to retail market players. According to the website www. Therefore, as a central exchange for forex retail players is still not a reality, I shall focus on the OTC structure of the forex market in this chapter. Players of the forex market range from those who trade billions of dollars a day, to those who trade just tens of thousands of dollars. This club is known as the interbank market.
Down the hierarchy are the smaller banks, big multinational companies, hedge funds and other institutional investors or speculators, and retail forex brokers. These large speculators may also conduct currency transactions directly in the interbank market, if they deal in large amounts and have credit standings with the large banks.
Next in line are the independent retail traders who lie at the bottom of the market structure. These individual traders mainly trade through forex brokers as they generally trade in much smaller lot sizes. Central banks of countries are also market players, although they are not always involved in the market.
See Figure 2. Figure 2. Hedge funds and companies are not included in this illustration as the retail trader Small Small will usually not deal directly with Banks Banks any of them. Without a central exchange, currency exchange rates are made, or set, by market makers — they make the bid and the ask prices based on the currency movements that they anticipate will take place.
The largest banks are the major market makers, and they handle very large forex transactions — often in the billions of dollars — on behalf of their clients, such as other institutions or companies, and also for themselves. Many banks have traders dedicated to trading speculatively for the bank. The resulting massive flows of money handled by these large banks are what primarily drive currency prices. This big money-laden network forms the interbank market where large banks deal with one another, and is where most of the trading activity takes place.
The transactions carried out by these major banks amount to the greatest bulk of the total daily forex volume. These big banks include Citigroup, Barclays Capital, UBS and Deutsche Bank. Brokering platforms The banks deal with one another directly, or through electronic brokering platforms like the Electronic Brokering Services EBS or Reuters Dealing Matching. These brokering systems get the best available exchange rates for the various currency pairs, and match buying and selling requests from bank dealers.
Between these two competitors, they connect at least banks together. Smaller banks that trade smaller amounts also get access to these brokering platforms. Large companies Companies and businesses are involved in the forex market because of their need to pay for products and services which are denominated in other currencies.
Since these commercial entities deal in smaller quantities, compared to that of large banks, they usually trade through banks instead of directly accessing the interbank market themselves.
Large overall trade flows can have a significant impact on the forex market, as they play a role in the supply and demand of currencies. Sometimes companies may also be involved in currency speculation for the purpose of generating additional revenue. Central banks Central banks hold the key to controlling the supply and demand of national currencies; hence they play a very important role in the forex markets. Examples of some prominent central banks include the US Federal Reserve Bank the Fed , the European Central Bank ECB , the Bank of England BOE and the Bank of Japan BOJ — with the Fed undoubtedly being the most influential among all the other central banks in the world.
Issues that are of most concern to central banks are those relating to: inflation price stability , economic growth and the unemployment rate. One of the ways that central banks control these factors is through the setting and adjustment of interest rates, which will affect the valuation of many currencies.
Sometimes central banks intervene directly in the forex market when they are not satisfied with the current exchange rates of their currencies. That is, they may find that the current exchange rate is either too high or too low for the overall benefit of the economy. The Bank of Japan is well-known for its intervention in the market.
Hence, when the BOJ deems that the Yen is getting much stronger against, say, the US dollar or the Euro, it may step into the open market to deliberately depress its currency by selling Yen against US dollars and Euros. This act of central bank intervention may cause other institutional players to follow suit, and further drive the currency exchange rate towards the rate that is favoured by the intervening central bank.
Most of these institutional speculators have international portfolios that consist of both domestic and international assets like stock or bonds to diversify their holdings. They tend to be very aggressive participants of the spot forex market as they often facilitate currency transactions when purchasing or selling foreign assets.
For example, an investment manager who is in charge of an international stock portfolio will be required to buy and sell foreign currencies so as to pay for any purchase of overseas stocks. Hedge funds, being largely unregulated, often practise very different styles of wealth generation from investment management companies; they tend to adopt more aggressive forms of trading with the aim of generating a high return on investment.
Sometimes, a portion of their assets under management may be allocated specifically for currency speculations, with the objective of maximising their overall profits. Large hedge funds and investment management companies are capable of moving the forex market in their transactions. Forex brokers The emergence of sophisticated online forex brokers made forex trading feasible for private individuals. In the past, only wealthy individuals could speculate in the forex market, but now things are very different.
Anyone can simply open a trading account with a retail forex broker and trade currencies online with little money upfront, as forex brokers tend to offer highly leveraged margin accounts for individuals. There are basically two types of forex brokers: 1.
market makers: who set the bid and the ask prices themselves, and 2. Electronic Communication Networks ECNs : consolidate various bid and ask prices from market makers and other participants connected to their platform, and display the best available prices.
These are explained in some detail below. Market Makers Market-making is a lucrative business for banks and brokers, and forms the backbone of market liquidity. By quoting the bid and the ask prices on the screens of electronic brokering platforms, or through telephone calls, they are essentially providing liquidity and inviting other qualified parties other banks, hedge funds, corporations or retail customers like individual traders to deal with them.
In doing so, market makers must be prepared to buy or sell from other market participants. Some market makers may have established credit links with banks that trade on the interbank market, or they access electronic brokering platforms like EBS or Reuters for pricing. the price at which the market maker will buy bid price , and the 2.
price at which it will sell at ask price from a customer. During periods of high liquidity in which there is a great deal of trading activity, spreads of the actively traded currency pairs are usually kept quite narrow, between pips.
When the market is very quiet with little trading action going on for a particular currency pair, for example just prior to the New York close on Fridays or during news releases, dealing spreads tend to widen, sometimes by a huge margin, as a way for market makers to protect themselves when they feel that they may have to carry additional risks. Market makers usually operate a dealing desk, which refers to the market maker trading with the customer, and the presence of dealing desks means that the market maker may potentially trade against the customer.
They may move their currency quotes pips away from the interbank rates. Independent traders should always be sceptical of claims by some market makers when they say they do not operate a dealing desk. Electronic Communication Networks ECNs ECNs are electronic trading platforms that match buy and sell orders automatically at the specified prices. Traders tend to be more aware of their existence in stocks or futures markets.
An ECN broker gets its currency pricing from several liquidity providers such as banks, market makers or other traders who are connected to the system. When an order is placed, it is routed to the best available bid or ask price in its system. Unlike the case of some market makers, spreads on ECNs are variable rather than fixed.
Although ECN-type brokers typically charge a small commission, you can usually get tighter spreads on many currency pairs due to the large liquidity pool available. Risks of trade manipulation are also minimised when using genuine ECN brokers as compared to brokers that operate dealing desks. This aspect of OTC shifts the odds of success against individual traders, especially if the forex broker acts as a market maker.
Since traders have to deal directly with their brokers, the latter will usually hold the opposite side of the transactions. Because of the inherent conflict of interest that exists, this arrangement does not sit well with many individual traders as they fear that the market maker will trade against them, and that is not an uncommon practice in the market making industry. No information on volume Since buy and sell transactions are not cleared by a central system, there is no way of knowing the total volume of trade.
Lack of volume data can pose a challenge to stocks or futures traders who have made the switch to currencies as they may have become used to checking volume. No singular exchange rate at any one time Exchange rates do differ from place to place, screen to screen, depending on which parties are offering what. Cash transactions take place between countless parties at any one time, and there is no exchange which records all these transactions.
Some independent traders are not even aware of this peculiar aspect of OTC dealings. Since there can be a few different prices for a currency pair at any one time, you may not be able to see what is the best available price if you trade through only one market maker. Generally, though, the rates provided by market makers to retail traders are quite close to the pricing quoted in the interbank market.
No standard data Exchange rates differ from one market maker to another because there is no consensus specified by a centralised market.
Different market makers have different rates at the same time although usually not differing by more than a few pips. A trader would have to accept what is being quoted by his broker unless he compares prices with other brokers. Price charts from different price feed vendors will also look slightly different as they each have their own data source. Although, in general, the currency prices are quite similar. The forex trading day Also, being a hour market, boundaries of a trading day are blurred.
Traders from around the world are in various time zones. Traders from, say, Singapore would display a different timing from their US counterparts — who tend to display EST Eastern Standard Timing on their price charts.
While the trading arena has had a boost from the CME-Reuters joint venture of a central forex exchange, it remains to be seen if that can benefit independent traders. Trade manipulation by some market-making brokers is something that is difficult for traders to prove, and something that is easy for the culprits to dismiss. However, despite the limitations that come with the OTC territory, spot forex trading can be extremely financially rewarding for those who are aware of the limitations and know how to deal with them.
And trading forex is not one of the easiest ways — despite what many new traders believe. Many traders fail, and they empty their trading accounts before they learn how to exploit the forex market to their advantage.
Although there are also traders who are successful in forex trading, their numbers are small compared to the majority of losers. Many times, traders are not aware that they have the power and might to shift the odds to their favour, that they can dramatically increase their chances of success if they want to.
The main reason why many traders get defeated by the market can be attributed to their lack of knowledge. In this 21st century, where the buzzword is knowledge, it is not just a matter of working hard, but also a matter of working smart. Knowledge is the key that can open many doors — if you have an intimate knowledge of how something works, you can then come up with ways to exploit what you know to your advantage. This applies to forex trading as well. You need to know how to identify high probability trade setups and how to manage your money wisely.
For every transaction in the forex market, there are winners and losers. Your goal is to make more overall profits than losses over a period of time, and to emerge an overall winner. My approach to consistent trading success lies in three main pillars, or the 3Ms: Mind, Money and Method. It is often said that we are our own worst enemy. Human beings are emotional creatures, and most of our decisions are guided more by emotions than logical thinking.
Our mind is capable of playing tricks on us; we can get seduced into unfavourable situations by our emotions. Emotions can work for us or against us. Sometimes they can save us from landing in a pile of sticky mess, but sometimes they can land us in it. We can also turn the tables around by playing tricks on our mind, making it believe whatever we want it to believe. Do you have the mental strength? Whether you are new to trading currencies or a forex trader who has some experience, here are some questions to ask yourself: Do you really have a strong desire to succeed in forex trading?
Sure, every one wants to succeed in something, but do you have the desire to want to succeed in forex trading? First of all, this field is not for every one, for you must have the passion for it. If you just want to try your luck, or dabble, in trading, you will just end up among the majority who lose their money. You must have the deep desire to want to accomplish your goals, because without this desire, your thoughts will not materialise into action, and it is action that could transform your goals to reality.
To be a successful trader, you must be highly self-motivated, have a concrete plan of action, and not be afraid of failure. Are you prepared to devote a lot of time and effort into picking up trading skills and knowledge? To be really good at anything, you need skills and knowledge in that field. A huge amount of time, effort and money is required for a trader to attain consistent success in forex trading.
Despite the availability of forex trading-related resources on the internet, and in the bookstores, traders can find it quite daunting to learn about trading on their own as they do not know what there is to be known. I recommend that you check out those which are offered by skilled and practising instructors. Note: Be wary of signing up for courses or seminars that are full of hype, for they can be very misleading.
Avoid those that give you the impression that you can attain consistent profits after two days of intensive learning, or those that require you to purchase expensive software.
While there are some shortcuts to gaining knowledge via courses or seminars, there is no substitute for honing your trading skills in the market. Are you willing to accept losses as part of trading? Every one makes mistakes, and mistakes are inevitable. Got a trading loss? Then whip out your trading log to record what your mistakes are and what you have learnt from that losing trade.
Always have something positive to take away from your losses, and treat it as a learning experience. Know that there will be other trades coming your way. Are you willing to take sole responsibility for your trading decisions? You read some market analysis, and then trade according to what the analyst is saying. That trade turns out to be a loser, and you turn around to blame it on that market report.
It is dangerous to blame losses on other people, the forex market, or the stars, for you are the only person responsible for pulling the trigger. And if you blame others you will never be able to find out how you can improve. Fear and greed Fear and greed are the two dominant emotions that affect not just the state of our mind, but also the currency market.
In fact, the fluctuations of these two emotions are the main drivers of the currency market. There are, of course, other emotions that exist in the market such as disappointment, regret and so on, but fear and greed are the principal forces that tilt the scales of supply and demand of currencies.
When traders feel overly optimistic about a country or its currency, they become consumed by the great hope that the currency would appreciate in value against another currency. They are then guided by this hope and greed to buy the currency pair now so that they could hopefully sell it at a higher price in the future. Greed then grows into euphoria, as traders continue to buy and buy, thus taking currency prices to newer highs.
When people are buying a currency with great hope, they are also selling the other currency in the pair with great fear. On the other hand, when currency prices go down, fear and greed are also the main drivers of the move. All in all, fear and greed are behind the steering wheel of the currency market.
So, while you must learn to recognise these emotions in the market, the problem comes when you allow them to distort your logic when it comes to making trading decisions, as most of these decisions will turn out bad, and are likely to cause you to regret your actions later. Since there is no way of banishing these emotions for good, the best thing to do is to control these emotions, instead of letting them control the way you think and act.
Face and control your fears Since greed can be categorised as a kind of fear, which is the fear of missing out, I will discuss the primary types of fears relating to trading, and how they can be overcome. The first step to preventing fears from ruining your trading performance is to recognise the various forms of fear that is connected to trading. And once you recognise the type of fear you are experiencing, the easier it is for you to handle that emotional obstacle so that you can trade better.
That is the key to emotion-free trading. It is not about pretending that those fears do not exist, but how you handle them that matters. Here are some common trading-related fears. Fear of missing out Why do so many people rush to departmental store sales, or rushed to buy technology stocks during the dot-com boom?
Any kind of buying mania stems from a very strong emotion that is commonly invoked in people, and that is the fear of missing out. In trading, this fear manifests itself especially during a sharp rally or decline of a currency pair. Your heart begins to pound really fast, and you have a million thoughts zipping through your brain, with most of the thoughts urging you to buy now, now, now.
I am losing out! Traders suffering from this type of fear are usually the ones who get onto a trend too late. Be disciplined and hold off that mouse whenever you sense that this type of fear is creeping up on you. Think instead of all those traders who are pouring dumb money into the market, and be glad that you know better than them not to join in the craze. Fear of losses Trading is a game — there will be winners, and there will be losers.
Sometimes you win some, sometimes you lose some. Losses are bound to happen, no matter how accurate a trading system may be.
The fear of losing is most prominent in new traders as they do not yet have adequate trading skills and knowledge to help assess and evaluate trading opportunities with a high level of confidence.
This can lead to trading paralysis, whereby traders become afraid of pulling the trigger when it comes to entering or exiting trades as they fear losing money or a big portion of their trading capital. However, if you have a reasonable stop-loss order in place, that is in accordance to your money management rules, you should have no reason of being fearful of damaging the trading account based on just one trade.
That is what stop-loss orders are for — to guard against huge losses. When you do encounter hesitancy in pulling the trigger, evaluate if you have valid reasons for doing so or if you are simply held back by fear. Traders just have to get used to the reality that losses are inevitable. The trick is to ensure that your losses are kept small so that you do not harm both your trading account and your state of mind.
A trader does not have to be right. It does not matter at all whether he or she is right or wrong; what counts is whether he or she is profitable in the long run. Traders should not be hung up on the outcome of single trades, or even a few trades, as trading performance has to be assessed over a period of time.
What matters is that you end up profitable over a period of time. Once you place less emphasis on being correct on a current trade, your fear of making wrong decisions should abate, thus enabling you to make better trading decisions without feeling burdened by the overwhelming pressure to be correct in that trade. Remember that there will be times of losses and times of profits, which is why it is so important to enter only trades that have a high probability of success.
Focus on the big picture Do not get caught up in feeling invincible or pessimistic after a win or a loss. As trading is a very highly charged and emotional activity, it is very easy for traders to oscillate between emotional highs and lows. The outcome of just one trade should not affect your overall performance, unless you have violated proper risk management guidelines by betting the farm on a single trade or by over-leveraging.
A trade is just one of many trades. When you are wrong on one trade or several trades, try not to beat yourself up or feel regret. Instead, analyze to see where and how you could have done better in those trades or what mistakes you may have made, and record what you have learnt from them. If there was really nothing that could have been preventable, just accept that the market is unpredictable.
The outcome of one or a few winning or losing trades should not be magnified. Other trades will surely come. I strongly believe that once a trader has honed his or her trading skills, the ultimate factor that will affect his or her overall profitability is money management skills.
Money management is all about managing the possible risks, and it is the defining factor that separates winners and losers in forex trading. Novice traders think of how much they can harvest from the market; experienced traders think of how much they can lose to the market.
Many traders are so eager to trade to make big money that they completely overlook money management. Poor money management also explains why so many traders get wiped out by the market. Money management is about fully optimising your trading capital.
It allows you to be proactive in managing risks, and to cope with trading losses — which are part and parcel of the game. It is an essential tool to ensure that you will have more than enough to last another day in the trading game.
No matter how good a trading system may be, there will be times when you will experience a series of losses. Success comes to those who have set down rules for money management, and have the discipline to follow them through their trading. Preserve your capital The shining light that attracts all traders to the forex market is the prospect of being able to grow their money by tapping into the online trading platform as their own in-house money tree. In almost any field, it is true that most people are drawn to short-term benefits, but are myopic when it comes to long-term planning.
Trading is no exception. When risk capital is put aside for trading, you are hoping that this amount of money could be transformed into a much bigger amount; otherwise, what would be the point of risking it?
But if this capital runs out, what can you bank on to make your desired profits? After all, money begets money. To drive home the importance of capital preservation, I will discuss the concept of drawdown, and how that is relevant to money management. In other words, it is the amount of money that you lose — it is usually expressed as a percentage of your total trading equity at any given time.
Drawdown is not an indication of your overall trading performance, as it is calculated when you have a losing trade against your new equity high or your original equity, depending on which is higher. Recovering from drawdown As drawdown gets bigger and bigger, it becomes increasingly difficult to recover the equity. Many people are not aware that in order to recoup the percentage of equity that they lose, they will need to gain a bigger percentage just to break even. The answer is no. It will require an Let me show you with numbers.
OK, that is not scary yet, but if you start losing more and more of your capital bigger and bigger drawdowns , the faster you will go down the rabbit hole. While many traders hope for that One Big Win that will magically transform them into millionaires overnight, they are more likely to be confronted with the One Big Loss that will threaten their survival in the forex market if they do not exercise careful money management.
If a trader has a big loss, he or she will have to spend more time to get back to where he or she was before, instead of using the time to make profits. Traders who burn out quickly in the market are those who do not show respect for risk. On the other hand, traders who have flourished are those who fully understand the importance of stringent money management and incorporate that into their trading approach. There is no way around to recouping slowly, unless you want to drive yourself to total destruction by risking more and more of your equity to try to make back your losses.
Holding on to a losing trade for too long is the biggest cause of a big drawdown. Be well-capitalised Most new traders run out of money even before they see any profits in their trading account.
Indeed, those who are new to trading most likely do not have a good understanding of the risks and dangers that are lurking in the market, and few even know what drawdown means or have even heard of this word. Many of them do know that trading can be very risky if they do not know what they are doing or how things work in the currency market and, to them, one of the obvious but incorrect ways to limit this risk is by allocating just a small amount of money to their trading account.
There are also many new traders who begin their trading business with little initial capital as they simply do not have enough money. Whatever their reasons may be, being under-capitalised will be more than just a mistake; it is often the prelude to trading failure. Forex traders who want to set themselves up for success must be well-capitalised.
Never mind that some retail brokers are offering a minimum account deposit of just a few hundred dollars — a paltry amount that almost every one can afford. Sufficient initial capital must be available to cushion the impact of a string of consecutive losses, so that you do not wipe out your trading account. A series of losses is really not that uncommon in trading, and all traders must be financially prepared for it. Those with insufficient trading capital tend to set really tight stops, which will naturally then lead to a higher probability of being stopped out.
They also tend to have a good chunk of their account eaten away by unreasonably large losses in relation to their trading account, if they do not set tight stops. So it seems that whichever way they turn, they are setting themselves up for failure, unless they are willing to trade smaller lot sizes.
Looking outside of trading, many other businesses fail because the owners often do not have enough capital to tide them over the initial starting phase. For example, a new restaurant owner must set aside enough money to pay the rent of the restaurant for at least a few months to a few years, assuming that the restaurant would not make any net profits in that period of time.
If the owner only has enough to pay for two months rent from his or her own pocket, and the restaurant is still not making enough to cover the rent and other expenses in the third month, how do you think the business is going to sustain itself? The entire business could fail, not because of the business model, but because of the lack of sufficient capital to keep the business running while the customer base builds up. Trading, as I have mentioned before, must be treated just like any other business, not a frivolous casual pursuit.
The point is this: by starting off sufficiently capitalised, you are more likely to adhere to your money management rules and, by doing so, you are really giving yourself a good fighting chance in the market. Losses are really just part of the trading game.
If trading losses are kept manageable and reasonable, they should not dent your trading account too much, provided that you are well-capitalised. Knowing when to get out of a losing position in the currency market is a very important tool of risk management.
Stop-loss orders allow traders to set an exit point for a losing trade, and are the best weapon against emotional trading. While I recommend that traders place a stop-loss order at the time of placing their entry order, mental stops may also be used — but preferably by traders who are more disciplined. From experience, it is much wiser to have a wider but reasonable stop than to have an unreasonably tight stop. Generally, a stop-loss order should not be shifted in the losing direction while a position is opened.
A good trader should know beforehand when to cut his or her losses, and also when to get out of the market with profits. It is indeed the elusive factor that courts the relentless determination of its seekers. Want to know where it lies? It only exists in the creative part of the mind — together with fairies and gnomes. There is no perfect formula or strategy that can achieve that unrealistic goal because people who are involved in the financial markets evolve with changing market circumstances, even though certain old habits die hard.
Despite the non- existence of the magic formula, there are certainly high probability ways of trading the forex market. While the bulk of this book is focused on the Method part, you need to combine Method with both Money and Mind in order to attain success in the trading business. The old question: technicals or fundamentals? There are generally three broad categories of forex traders pertaining to what they base their trading decisions on: 1. the technical trader, 2.
the fundamental trader, 3. the trader who combines both technicals and fundamentals. Each type of trader has a distinctively different way of interpreting the currency market based on his or her own opinions. Technical trading A technical trader believes that historical data has a big role in the forecasting of future price action, and is thus devoted to currency price chart analysis, making use of various charting tools such as support and resistance levels, trendlines and a myriad of chart indicators to understand past price behaviour so as to predict what the market will do next.
Most forex traders employ some kind of technical analysis to help them make trading decisions. Technical traders assume that everything that is to be known about the market has already been factored into the current price. Fundamental traders believe that the exchange rate of currencies are largely driven by economic and geopolitical conditions, aside from central bank interventions, and will keep track of economic data such as trade balances, inflation, Gross Domestic Product GDP , unemployment rates, interest rates and so on.
They are also concerned about what policymakers have to say regarding the monetary policy of the country, and will keep on top of these when speeches are scheduled. Combing technicals and fundamentals Since there are advantages of analyzing the forex market from these two different fields, it would be too restrictive to just side with one area and ignore the other.
The most effective traders tend to make trading decisions based on a combination of both technical and fundamental factors in order to get a feel of the overall market sentiment, and then decide to either trade that sentiment or to trade against it taking a contrarian approach.
The strategies taught in this book must always be combined with the prevailing market sentiment, which is influenced mainly by fundamentals. Some strategies may work well for some traders, but may not have the same results for others over a period of time. This may seem puzzling for some people who are wondering that if something works for someone, then it should work for other people as well. In trading, there are so many other factors specific to each trader that can influence the overall trading performance — his or her emotions, psychology, trading time frame, money management rules, lifestyle, trading capital and so on.
The strategies included in this book are open to customisation according to your own personal preference. Many traders do not give themselves the fighting chance and time to stay in the game as they are prone to getting wiped out very quickly. The Ten Rules For Forex Trading I list here ten rules that I think are important for trading forex. Dos 1. When trying out a new trading strategy, always test it in a demo account, or with a small amount of money, before you commit more money to it.
Always keep a record of each of your trades, with details of: why you got in, how you got out and why it turned out the way it did.
Have a personalised trading plan and update it as you learn from the market. If you are unsure of a trade, stay out. It is better to miss an opportunity than to have a loss. When trading, keep up-to-date with both the fundamentals and technicals affecting the market.
A trader in the dark is a trader in the red. It will affect you emotionally, and you will most likely lose it to irrational trading. Always know why you are getting into a trade, and how you are going to get out of it. Just be concerned about being profitable. Chances are that your account will be decimated before you can recoup your losses and go into profit.
Vent your frustrations elsewhere after a loss. Do you see it as a big mechanical matrix which is devoid of emotions?
Or do you think of it in mathematical and probability terms? Perhaps, you may even view it as just a vast network of computers which are designed to cheat the trader sitting in front of his or her computer and trading electronically.
Most traders I know have a love-hate relationship with the forex market, thinking that the market is, in turn, either against them or for them.
To me, the forex market is nothing more than the compressed display of emotions at any one time emanating from currency speculators around the world. It is similar to a big living organism, like a human being, which is made up of numerous cells, with each cell carrying out its own function and interacting with other cells of the body, working to keep the body alive with round-the-clock chemical and biological processes.
The forex market is alive as a macro living organism, which comprises a vast number of market participants acting out their perceptions and emotions, thus driving the blood around the invisible entity. The participation of each player, whether the player is an institutional dealer or an independent trader, is akin to the individual functioning of a cell, which collectively will constitute the whole organism — the forex market in this case.
Knowing what the market thinks and how it thinks is crucial to trading success because, ultimately, the trader is dealing with other traders out there, and needs to know what they are thinking.
Even if you see the market as an enemy, what could be better than knowing the weak points and being able to read the mind of your adversary? In this chapter, I shall focus on how you can better understand the market, and use that knowledge as one of your trading weapons.
Market sentiment is simply what the majority of the market is perceived to be thinking or feeling about the market — it is the most important factor that drives the currency market. This is so because traders tend to act based on what they feel and think of certain currencies, regarding their strength or weakness relative to other currencies.
Market sentiment sums up the overall dominating emotion of the majority of the market participants, and explains the current actions of the market, as well as the future course of actions of the market.
The trend adopted by the forex market is actually a reflection of the current market sentiment, which in turn guides the trading decisions of other traders, whether they should long or short a currency pair.
In the process of making educated trading decisions, traders have to weigh a multitude of factors which could influence the bias of a currency, before making up their minds about the current and future state of certain currencies. There are three main types of sentiment when it comes to forming opinions in the forex market: 1.
bullish, 2. bearish or 3. just plain confused. If the majority of the market wants to sell that currency, the market sentiment is deemed to be bearish; if the majority wants to buy that currency, the market sentiment is bullish; and when most market participants are unsure of what to do at the moment, the sentiment ends up being mixed. Market sentiment acts like a fickle lover, capable of changing its mind based on certain incoming new information which can upset the existing sentiment.
One moment everyone could be buying the US dollar in anticipation of a stronger dollar; the next second they could all be dumping it as they fear the dollar would start to weaken due to the impact of some new piece of information, which is almost always some fundamental news. Interest rates Trends in interest rates are one of the most significant factors influencing market sentiment, as interest rates play a huge role affecting the supply and demand of currencies.
Every currency in the world has interest rates attached to them, and these rates are decided by central banks. Some currencies have higher interest rates than others, and these are usually the currencies that attract the most attention from savvy international investors who are always looking across the global landscape in the continual search for a better interest rate yield on fixed-income investments.
This, of course, also depends on the geopolitical or economic risks of that particular currency. Just like when a bank lends money to a higher-risk borrower, high-risk currencies require a significantly higher interest rate for investors to consider keeping money in those currencies. What causes fluctuations in interest rates? The value of money can and does decrease when there is an upward revision of prices of most goods and services in a country.
The nice word for this erosion in value is, of course, inflation. Controlling inflation Central banks are responsible for ensuring price stability in their own country, and one of the ways they employ to fight inflationary pressures is through the setting of interest rates.
If inflation risks are seen to be edging upward in, say, the US, the Fed would raise the federal funds rate, which is the rate at which banks charge each other for overnight loans.
When the overnight rate is changed, retail banks will change their prime lending rates accordingly, hence affecting businesses and individuals. An increase in interest rates is an attempt to make money more expensive to borrow so that there will be a gradual decrease in demand for that currency, thus slowing down an overheated economy. Interest rates and currencies The most important way in which interest rates can influence currency prices is through the widespread practice of the carry trade.
A carry trade involves the borrowing and subsequent selling of a certain currency with a relatively low interest rate, then using the funds to buy a currency which gives a higher interest rate, in an attempt to gain the difference between these two rates — which is known as the interest rate differential. The trader is paid interest on the currency he or she is long in, and must pay interest on the currency he or she is shorting.
This difference is the cost of carry. Therefore, a currency with a higher interest rate tends to be highly sought after by investors looking for a higher return on their investments. The increased demand for that particular currency will thus push up the currency price against other currencies. For instance, in there was a strong interest among Japanese investors to invest in New Zealand dollar-denominated assets due to rising interest rates in New Zealand.
The then near-zero interest rates in Japan forced a lot of Japanese investors to look outside of their country for better yields on cash deposits or fixed- income instruments. See Figure 5. When forex traders anticipate this kind of situation, they become more inclined to buy that high-interest-rate currency as well, knowing that there is likely to be massive buying interest for that currency. So, in general, rising interest rates in a country should boost the market sentiment regarding the currency of that country.
The opposite is true too: when interest rates are cut in a country, that would result in quite a bearish sentiment regarding the currency of that country, and traders would be more willing to sell than buy that particular currency. Economic growth Besides interest rates, economic growth of countries can also have a big impact on the overall currency market sentiment. Since the United States has the largest economy in the world, the US economy is a key factor in determining the overall market sentiment, especially of currency pairs that have the USD component.
A robust economic expansion, coupled with a healthy labour market, tends to boost consumer spending in that country, and this helps companies and businesses to flourish. A country with a strong economy is in a better position to attract more overseas investments into the country, as investors generally prefer to invest in a solid economy that is growing at a steady pace.
Forex traders, expecting this consequence, will put on their bullish cap to buy that currency before the investors do.
Gross Domestic Product GDP , 2. the unemployment rate, and 3. trade balance data. These are explained below. Unemployment rate The unemployment data reports the state of the labour market of a country. Trade balance data Another widely watched economic indicator is the trade balance data.
Trade balance measures the difference between the value of imports and exports of goods and services of a country. If a country exports more than it imports, it has a trade surplus. For example, if the US imports an increased amount of goods and services from Europe, US dollars will have to be sold in exchange to buy euros to pay for those imports.
The resulting outflow of US dollars from the United States could potentially cause a depreciation of the US dollar against the euro or other currencies, and that can affect market sentiment surrounding the USD. The opposite scenario is true for a country that is experiencing a trade surplus. Global geopolitical uncertainties such as terrorism, transitional change of government or nuclear threats can cause investors to lose faith in some particular currencies, and they may prefer to shift their assets into a safe haven currency when these circumstances arise.
Market sentiment is very sensitive to such geopolitical developments, and can cause a strong bias towards a particular currency. For example, during periods of high tension in the Middle East in , the market formed a very bullish sentiment towards the US dollar, which became the preferred currency to hold in such turbulent times, replacing the traditional status of the Swiss franc as the safe haven currency.
Forex traders should be keenly aware of the current geopolitical environment in order to keep track of any potential change in market sentiment, which could impact currency prices. But how can you get an idea of the overall sentiment of the market? You can do so by reading reports by analysts and financial journalists in news wires or by visiting online trading forums to see what other traders are discussing.
However, these ways of getting a feel of the current market sentiment are not too accurate; you may think that other traders are in a buying or selling mood, but that may not be what is really happening in reality.
Here are some of the more effective ways of gauging market sentiment: 1. The Commitment of Traders COT report 2. Commitment Of Traders COT report What is the COT? The COT report provides traders with detailed positioning information about the futures market, and is, in my opinion, one of the most underrated tools that forex traders can make use of to enhance their trading performance.
It is commonplace for forex brokers to give their customers access to leverage see above. In order for you to lower your risk of exposure and offset your balance, you might consider hedging. This is a procedure which involves traders selling and buying financial instruments. When there are movements in currencies, a hedging strategy can reduce the risk of disadvantageous price shifts. The protection of this technique is often a short term solution. Traders often turn to hedge in a panic as a result of the financial media reporting volatility in currency markets.
This is usually down to huge events like geopolitical turmoil conflict in the middle east , global health crisis COVID and of course the great financial crisis of To counteract negative price movements, market players will tactically take advantage of attainable financial instruments in the market.
This is hedging against risk in its truest form. Hedging will give you some flexibility when it comes to enhancing your forex trading experience, but there are still no guarantees that you will be totally protected from any losses or risks.
While it can take some time to get your head around heading in the forex markets, the overarching concept is that it presents both outcomes.
That is to say, irrespective of which way the markets move, you will remain at the break-even point less some trading commissions. More specifically, the spot trade is a spot transaction, with reference to the sale or the purchase of a currency. Essentially, spot forex is to both sell and buy foreign currencies. A good example of this is if you were to purchase a certain amount of South African rands ZAR , and exchange that for US dollars USD.
If the value of the ZAR increases, you are able to exchange your USD back to ZAR, meaning you get more money back in comparison to the amount you originally paid. CFD is basically a contract which portrays the price movement of financial instruments. So, without having to own the asset, you can still make the most of price movements, whilst also avoiding the need to sell or buy vast amounts of currency.
CFDs are also accessible in bonds, commodities, cryptocurrencies, stocks, indices and of course — forex. With a CFD you are able to trade in price movements, cutting out the need to buy them at all. This section of our forex trading PDF is all about forex charts. When it comes to a MetaTrader platform, traders can use bar charts, line charts and candlestick charts.
You can usually toggle between the different charts, depending on your preferences, fairly easily. The first record of the now-famous candlestick chart was used in Japan during the s and proved invaluable for rice traders. These days, this price chart is without a doubt one the most popular amongst traders all over the world. Much like the OHLC bar chart see below , candlestick charts provide low, high, open and close values for a predetermined time frame.
Live forex traders love this chart due to its visual appearance and the range of price action patterns utilised. This allows you to gain a better understanding of how live trading works before you take any big financial risks in the market. As the title suggests, this one is a bar chart, and each time frame a trader is looking at will be displayed as a bar.
In other words, if you are viewing a daily chart you will see that every bar equates to a full trading day. With this price chart, traders are able to establish who is controlling the market, whether it be sellers or buyers. OHLC analysis was the starting block for the creation of the ever-popular candlestick charts please further down. It is a great tool for looking at the bigger picture when it comes to trends.
The line chart arranges the close prices at the end of that time frame; so in this case, at the end of the day, the line will connect the closing price of that day. In this section of our forex trading PDF, we are going to talk about the different ways in which you can sell and buy a forex position as well as things to look out for. When it comes to forex trading you can trade both short and long, but always make sure you have a good understanding of forex trading before embarking on trades.
After all, forex trading can be a bit complex to begin with, especially when mixing long and short trades. In a nutshell, going long is usually a term used for buying.
So, when traders expect the price of an asset to rise, they will go long. When forex traders expect the price of an asset to fall, they will go short. This means benefiting from buying at a lesser value. To achieve this, you simply need to place a sell order. The current exchange rate of a forex pair is always based on market forces. This will change on a second-by-second basis. As we noted earlier, you also need to take the spread into account, so there will always be a slight variation in pricing.
For instance, if you exchange 1 USD for 17 ZAR, the sale and purchase price offered by your forex broker will be either side of that figure. The currency pairs with the most notable supply and demand attached to them will be considered the most liquid in the forex market.
The supply and demand aspect is thanks to the investment of importers, exporters, banks and traders — to name a few. The most liquid currency pairs are therefore the ones in high demand. When you feel you are ready to take the plunge and begin live trading, you need to select a forex trading system. There is a vast amount of trading strategies for you to pick from. This is because investors, speculators, corporations and banks have been trading for decades. In this part of the forex trading PDF, we are going to explain a few of the strategies available to you.
If you want to buy and sell currency pairs from the comfort of your home or even via your mobile device , you will need to use a trading platform.
Otherwise referred to as a forex broker, there are literally hundreds of trading platforms active in the online space. This makes it extremely difficult to know which broker to sign up with. In the below sections of our forex trading PDF, we explain some of the considerations that you need to make.
You should also look out for analysis tools available to you. In some cases, this might be embedded, while some offer tools such as technical analysis and fundamental analysis. This is because it will save you a lot of leg work having to move between different sites and sources of information.
Some of the fastest and easiest trading platforms are MetaTrader 5 MT5 and MetaTrader 4 MT4. Crucially, both MT4 and MT5 are fast and receptive trading platforms, both providing live market data and access to sophisticated charts.
It is essential before you begin trading seriously that you fully trust the trading platform you intend on using. This is especially the case if you intend on using a scalping strategy, for example. However, if you like to trade, it is vital for your peace of mind and your finances that you are fully confident with the fast execution of data transfer. This is also the case with the precision of quoted prices, and the speed of order processing.
All of these things are going to help you to have a successful forex trading experience. To enable you to make the most of new opportunities, the ideal forex broker will be available to you 24 hours a day and 7 days a week, in line with the forex market opening hours.
To save you from having to request that your broker takes action for you, your forex broker should enable you to manage your account and your trades separately. By doing this, you will be in a much better position to quickly react to any shifts in the market, and hopefully, make the most of potential opportunities.
This will enable you to gain better control over any open positions as and when they arise. It is important to ensure that your forex broker of choice is a reputable company, who will ensure that your personal information and trading funds are fully protected and backed up. Segregation is frequently used amongst forex brokers as a way to separate your funds from the funds of the company i. e their daily costs, debts and running costs.
So, no matter what happens to the forex broker, your money is safe and segregated. If you find that a forex broker is unable to do this, we would suggest you find a better broker as it is standard practice these days. All of the brokers listed towards the end of this forex trading PDF are regulated by at least one reputable licensing body. In terms of getting set up as an online forex trader, the steps remain constant regardless of which broker you decide to join.
Below we list some of the steps that you will need to take. In order to open an account, you will need to enter some personal information. Standard details requested by the broker will be things like your name, residential address, and contact details.
Some brokers will also require your tax status and will ask you to provide more financial details such as employment status, net worth and any regular income. In this instance, you will usually need to answer some multiple-choice questions based on your experience.
This is usually a fairly simple process. Known as KYC in the industry Know Your Customer , this simply means that the forex broker is going to need you to prove who you are.
Some brokers will verify this using scanned copies of documentation. Now you need to select your payment method of choice usually from a drop-down list.
Bear in mind that how long this takes to go into your trading account will largely depend on the payment method — so always check this before parting with your cash. Some brokers even support e-wallets like Paypal and Skrill.
After reading our forex trading PDF you should now be feeling confident enough to begin trading. However, we do recommend that you always try out a free forex trading demo first. This will allow you to test out your newly formed trading strategies before risking your own capital. In the next section of our forex trading PDF, we explore some of the more important technical indicators and market insights used by seasoned traders.
First invented by Richard Donchian, the donchian channels can be adapted as you like, in terms of parameters. Should you choose to view a day breakdown, for example, the indicator will be created by taking the lowest low, and the highest high of that period so in this example 30 periods.
When observing the moving average on a donchian channel you can look at averages stretching from 25 days to the last days. The direction which is permitted is determined by the direction of the short-term moving average. With this in mind, you should think about opening one of the following two positions:. You will need to sell your pair in order to exit your trade if you open a long position and visa-versa. This is another commonly used forex indicator.
The simple moving average aka SMA operates at a slower rate than the present market price known as a lagging indicator. Furthermore, it uses a lot of historical price data. In fact, more so than most other strategies. A good indication that the latest price is higher than the older price is when the long-term moving average is below the short-term moving average. This could be considered a buy signal due to an upward trend in the market.
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