The Way to Trade Forex

This book is dedicated to the loving memory of my father, Mohanlal Lakhani, who would have loved to see it in print. Forever in my heart.

I also dedicate this book to “god” as I thank him daily for all the blessings, including being directed to the Markets – And as I often pray, that “ may my knowledge on the markets pass on to you, the reader – so you do not have to go through what I had to in my early days of Trading” God Bless

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The Way to Trade Forex

THE WAY TO TRADE FOREX
Jay Lakhani

CONTENTS

• • • •

About the author Foreword by Adrienne Toghraie Acknowledgement Risk warning & Disclaimer

1. 2. 3. 4. 5. 6. 7.

Introduction to Forex Technical Analysis & Chart Patterns Trading Strategies Trading Psychology Eastern Philosophy – The Bhagavad-Gita Follow Up Service & Mentoring Recommended Reading

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he has developed unique trading systems and strategies. 4 . He also believes that more emphasis should be put on the trader psychology and having a disciplined money management. Index & Stock futures. he has a very inquiring mind. Jay was an Accountant. go to www. Jay uses Technical Analysis in his trading. For more information about his training and mentoring program. C. He has survived a number of stock market crashes. He is a professional trader and has been involved with markets since his early twenties. Jay was working as a Financial Planner specializing in Portfolio Management and Tax Planning. including the crash of 1987 – an experience that has made him a better trader today. and teaches his system to individual investors. Once he is shown a strategy. Forex. he will always look at ways at which it can be improved. which have made him into a successful trader. Later on. One would say that Jay is blessed with a mind that finds creative solutions to problems. and has never looked back. Over the years. a kind of a person that sees multiple solutions. Jay is also the Internet’s foremost Forex coach and mentor. He has extensive experience of both the US and UK stock markets – Trading in derivatives. Jay was introduced to the glory of the Stock market by the Lady Thatcher’s Privatisation programme in the eighties.Africa and came to the UK when he was 18.The Way to Trade Forex ABOUT THE AUTHOR Jay Lakhani was born in Malawi. and believes that successful trading is based on your Strategies and Techniques – your system.net Prior to becoming a full time trader.4x4u. and Commodities. having worked with large companies such as British Airways and Visionhire – a Granada Company.

The Way to Trade Forex FOREWORD By Adrienne Toghraie. USA.com 5 . Another benefit is that you can review this book with the significant other people in your life. you also are more likely to experience psychological pitfalls that bring about sabotage. trading is a learnable skill and when you apply yourself through a good success model like Jay offers you in this book. Jay takes you step by step through the process. energy and losses.com You are about to embark on a journey of how to make the Forex market work for you. It is important to note that even though you may have the best coach in the world he can only give you the flashlight. guided by Jay Lakhani giving you his experience and the knowledge necessary so that you can make trading a profitable career.tradingontarget. if you follow his mentorship and coaching. giving you your own personal trading coach in a book. With this knowledge you are more likely to want to take the steps necessary to overcome sabotage before it gets too engrained in your psychology. President of TradingOnTarget. Of course. Many traders who first pick up a technical analysis book feel overwhelmed by the “buzz words. Most traders who are not aware of the psychological pitfalls often act as if their sabotage is a bull in a room that they want to ignore. they are headed for further disastrous experiences in trading. Trading the Forex is one of the most exciting instruments to trade. The good part of having such volatility is that you can earn money quickly. you must direct it on the right path for you. The fact is. Now it is up to you to choose the best one for yourself. If they do continue to trade without first addressing these issues. unlike those who would like to wow you into thinking you will be instantly wealthy. you will not stumble quite as much as the average trader who fails his way to success. he is saving you time. By Jay passing his insights on to you. In this book. so they can realize that trading is a viable profession and not want to commit you to Gambler’s Anonymous. At this point they have lost all their capital or developed deeply rooted conditioned responses to loss. Jay is one of those traders who learned the hard way how to make the markets simple and profitable. Jay is exceptional at explaining sabotage pitfalls. When important people in your life understand the principles that make trading work. you are more likely to enjoy the process of becoming a successful trader. What Jay has done in his book is not only given you the flashlight but shows you many good paths. www. The problem for some is that with the emotional rollercoaster you can experience from volatility in the Forex. it should go without saying that you will still go through your own hurdles and learning discoveries even when he lays the pitfalls out to you plainly and clearly. which paralyses their taking action. Jay gives you a simple and powerful overview of what it takes to be a trader. so that you will recognize them. they are more likely to support your efforts in making trading your career. You will find it immediately understandable and be able to apply what is being taught. However. With Jay guiding your path. Jay teaches you realistically what to expect. Not until the bull smashes everything does sabotage get their attention. The Way to Trade Forex.” Jay holds your hand through the process of learning these words and their meaning. and then hones in more specifically on the techniques and the psychology to become a successful Forex Trader. then you are more likely to be successful in the markets in a shorter period of time. Adrienne Toghraie. What this book is not is an instant win on a lottery ticket.

We do not guarantee its accuracy. 6 . text or other items contained within these materials. Accuracy of Information. software. for any delay in or failure of the transmission or the receipt of any instruction or notifications sent through this website. and is provided for the sole purpose of assisting traders to make independent investment decisions. Please note that there are risks associated with utilising an Internet-based deal execution trading system including. Foreign currencies trading is based on highly leveraged basis (up to approximately 100 times your account equity). but not limited to. Market Opinions. and do not warrant the accuracy or completeness of the information. You are responsible for your own actions on how you use the information in this book.The Way to Trade Forex RISK WARNING & DISCLAIMER Margined trading is one of the riskiest forms of investment available in the financial markets and is only suitable for experienced traders. speculation in the foreign exchange market should only be conducted with risk capital funds that if lost will not significantly affect one's personal or the institution's financial well-being. Internet Trading Risks. and are not guaranteed in any way. and will not accept liability for any loss or damage which may arise directly or indirectly from the content or your inability to access the website. The funds in an account trading at maximum leverage can be completely lost. or omissions of information. You should carefully consider your financial situation as to the suitability to your situation prior to making any investment or entering into any transaction. the failure of hardware. and Internet connection. you should seek the advise of a Financial adviser or a broker. Any opinions expressed in this book are purely for Education and entertainment. action or inaction taken by any party in reliance upon the information provided verbally or via the Internet. Theoretically. If you are in any doubt. Given the possibility of losing one's entire investment. if the account is trading at maximum leverage and positions held in the account swing more than one percent in value. including any loss that may result from these materials. if the position(s) held in the account has a one percent swing in value. We assume no responsibility for errors or inaccuracies in these materials. errors in. an account could lose more than the equity it contains. or any delays. The content on this website is subject to change at any time without notice. In no event shall we have any liability for any losses incurred in connection with any decision made. inaccuracies. and shall not be liable for any damages.

and are based on the referenced systems as illustrated in the manuals and on the site. THIS INFORMATION IS PROVIDED FOR EDUCATIONAL/ INFORMATIONAL PURPOSES ONLY. any of the services available through this website. charts and other information on trading systems. we cannot guarantee the confidentiality of such information. Bindal FX has taken certain steps to provide a secure environment for your personal information on the website. any individual results that may be attained by the trading system in the future. Bindal FX is not responsible. This website is for informational and educational purposes only and is not an offer to sell any security or investment program. Statistics. and there can be no assurance that any specific investment will be profitable. Bindal FX is not responsible for any damages to your computer or software as a result of using this website. PAST OR HYPOTHETICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS 7 . The information provided on this website should not be construed as investment advice. due to the nature of the Internet.net Past performance is not indicative of future results Different types of investments involve varying degrees of risk. and have no bearing on. However. tables. Bindal FX is not providing personalized investment advice through the website. monthly performance or trades of the day are hypothetical. It is merely the observations of technical analysis precepts as set forth in the various texts and works about the subject. patent and trademark laws.4x4u. These results are not indicative of. at any time. Bindal FX may discontinue or change. You should talk to a qualified investment advisor or financial planner before making any decisions based on the information provided on the website. nor liable for the content or any other aspect of any websites which may be accessed from this website.The Way to Trade Forex LEGAL NOTICES This legal notice relates to the publication of this book and also the related material as part of the follow up service on our website www. This website is for personal use only and its contents are protected by applicable copyright.

mechanical. photocopying. Any unauthorized use of any material contained on these sites may violate copyright laws. "mirror" any material contained on these sites on any other server. recording.The Way to Trade Forex COPYRIGHT © Copyright 2005 Bindal FX and Jay Lakhani. republished. or the copyright owner. and communications regulations and statutes. downloaded. trademark laws. without Bindal FX's permission. 8 . without the prior written permission of Bindal FX. displayed. You may not. but not limited to. reproduced. including. Except as stated herein. or by the original creator of the material. distributed. the laws of privacy and publicity. ALL RIGHTS RESERVED. or otherwise. The copyright in all material provided in this book is held by Bindal FX and Jay Lakhani. posted or transmitted in any form or by any means. electronic. none of the material may be copied.

In my own trading career I owe a great deal to Adrienne Toghraie for her help with my psychology. the readers of this book. especially Adrienne Toghraie. but without their support this book would not have been possible. I would like to thank Ensignsoftware. of perspective-media.com. In fact. Finally my thanks to you. Psychology would be incomplete without the methodology and strategies.The Way to Trade Forex ACKOWLEDGEMENTS Many. Whilst it might be trite to thank the family members who did none of the research nor write any of the words. success in trading is 90% Psychology. and my trading success improved substantially. attending his courses and seminars-. This training in Forex was to take me a step further into success in my trading. I have met both Adrienne Toghraie and Alexander Elder. and also a number of seminars that I have attended. Jay Lakhani 9 . by purchasing this book you have resolved to become a successful trader. esignal. I am sure you will not be disappointed and soon you will be on a path to being a successful trader.has been very inspiring and motivating. First and foremost. whom I regard as my “guru”. I would not be as successful a trader without access to these excellent charts. and FXCM Marketscope for the permission to reprint the charts from their charting package. I then subsequently created my own trading methods and strategies. I also would like to mention Tony Robbins. I am thankful to the authors of many works on the markets and trading which I have read. I also would also like to thank Andrew Shearman and Norman Allen – both from Traderhouse.. And Atul Sharma for showing me low risk trading strategies using Options. In my opinion. No doubt you have taken a big step from the crowd of amateurs. many people have gone into the making of this book. I would also like to thank a number of my colleagues and friends. Adrienne was kind enough to also write the foreword.com for all his hard work for designing the web site and also the Forex E Book.com. Anand and Bindal. Once again special thanks to Alexander Elder from whom I have learnt many strategies. Beena. Alexander Elder for showing me the path to successful trading based on three Ms: Mind. since meeting both of them. but also for the inspiration and confidence that I have received from them when trading. Thank you to all those who took the trouble to read the draft of this book. who have come up with ideas and suggestions not only in writing this book. God bless. from whom I learnt the basics of Forex trading. I would like to thank my family. Method and Money. often exchanging ideas and strategies and giving each other the moral support. Trading can be very lonely at times. My Wife Jemini and my adorable children Bhavesh. Special thanks to Neha Singh who has very kindly corrected my grammar mistakes and also Kamlesh Vishwakarma.

The Way to Trade Forex

INTRODUCTION TO FOREX

• • • •

Introduction Why do Forex Traders fail? Trading System Background to Forex.

INTRODUCTION
Many traders aspire to be successful traders, but few succeed. An amateur trader looks at the Trading platform, makes a trade and loses, makes another trade and loses more. Traders lose because the game is hard and they trade with emotions, lacking a purpose and discipline. If any of these relates to you, I write the book for you, for I too was in this position once! Many traders keep making impulsive trades; they do not have any trading plans or a system, and no money management rules. To put it simply, an amateur trader will cut short his profits, and let the losses run. Professional Traders accept the importance of psychology, yet the novice traders ignore it. You have to practice sound money management and you should watch your capital. In my opinion the markets only exist because losers bring money into the market, which is necessary for the Industry. This book is unique in that it takes you the trader, to devise your own trading philosophy, build your own methodology,-; a trading system which is your own, and not fed to you by the currently “hot” guru-., It guides you to develop your own trading plan. To be truly successful you have to become intuitive, and this simply means that you become an expert in what you are doing – which will come through experience and learning from your past mistakes. You can be free, you can live and work anywhere in the world. You can be independent from routine – This is the life of a successful trader. I can give you the knowledge, only you can supply the motivation. In this book I discuss many winning strategies that are NOT unique in the world, no doubt you have come across them, but chances are that you have never considered using them, or you have never been shown how to apply the strategies correctly. I have put together strategies in this book that I have developed over time. I am sure that you will find these methods to be very profitable for you. Some of the strategies here are awesome-. DEFINITELY practice these techniques in a demo account for a while before trading real money. No doubt, you might have read many books, written by non-traders, showing you strategies that do not work; or the author himself is not an active trader. Therefore the methods shown are not really tried and tested, so how can you trust them? We are living in an era of information overkill. Amateur traders are constantly tuning in to listen to “experts” on Bloomberg or CNBC and reading and following so many emails and newsletters from many trading gurus and then often acting on these “hot tips”. Uncertainty also occurs because of too much information; having to look at so many indicators, which give conflicting signals thereby, you do not take any action. Just how can

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The Way to Trade Forex

you learn and take action using hundreds of Candlestick patterns, chart patterns, chart types and indicators? - Just too many!, no wonder 90% of traders lose money. In order to succeed in trading, you have to Keep It Simple Stupid - KISS, and that is exactly what I am going to do in this book. I will only concentrate on simple strategies, which have worked for me in the past, with actual charting examples and trades. I do not use lots of indicators or fancy trading systems. If you keep it simple, you will succeed – but if you overkill your brain with too much conflicting information, then you are destined to be a loser. In this book I will cut the crap and go straight to the point! You do not need any third party killer system, you yourself can create your OWN Killer System, using some of the strategies shown in this book. You only need to have faith and belief in yourself. Let me once again assure you that, there are NO Holy Grails, NO Secret Code, NO Killer Trading System, and NO Unique Discoveries. The only thing that is stopping you from succeeding is YOU, because you are looking for someone to show you a Secret, which does not exist! Because you do not have faith and belief in yourself. Take a look at some of the Internet marketing of “Forex Codes” and “Forex Secrets” “Are You Ready to Find Out What They Are Hiding From You?” Jay says – Let me assure you nobody is hiding anything from you! You are only hiding from yourself! “Want to learn how to make $200 to $3,000 for as little as ten minutes of work trading FOREX with only tiny risks? And do this multiple times a week?” Jay says – If only I knew how to make that much money from 10 minutes! – Just ask yourself. Is it easy to make that sort of money from “as little as ten minutes”? Else 90% of traders would not have failed! New York "Financial Mastermind" Reveals: The Biggest Online Trading, Day Trading, Investing Online, Cash "SECRET" At last!!! Jay says – Yet another Secret! You will find hundreds of them! It only makes them a millionaire – NOT YOU! 90% Traders fail to make profit! Why may I ask? Firstly, they believe in the systems sold by the Internet Marketing Cons, as above. Unfortunately these so called Gurus will not make you millionaires, but they will laugh all the way to the bank! Secondly, majority of humans believe that, anything that is simple will not make money. They want to have Secrets! And Holy Grail! – You have secrets right in front of you, just look at the Charts on your computer screen; you do not need to go anywhere! Lastly we have a tendency to confuse ourselves. Just look at the following tools available to the modern day traders. Surely a case of analysis paralysis.

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The Way to Trade Forex

The list is endless… In fact you will find hundreds and hundreds of these trader tools and indicators, and I will be not be surprised if we end up having over a thousand such tools.

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The Trading On Target home study course – Adrienne Toghraie Finally. Analysis paralysis is a very annoying and unproductive state to be in. or your career. and how easy it was to make money! If you tend to second-guess almost every decision you make. personal life. This type of irrational fear can stem from a variety of past experiences. You are virtually paralysed from the fear of making a mistake .so you analyse everything to 'just be sure'. • • • • • • Trauma from making a big mistake or having sustained losses in past. for more details kindly visit the website. The psychological reaction to such overabundance of information and competing expert opinions is simply causing confusions in traders’ minds. I myself also offer a one to one consultancy service. I cover this topic of a trader coach in detail. and I presume you may come across nothing new in this book. thus leading to a mistake. In this book.net Introduction to Forex 13 . Over analysing leads to confusion. www. Too many indicators can create confusion. I have not invented anything new in this book. Not believing you are qualified or capable to make the decision Believing you always make mistakes and can do nothing right Always regretting decisions you do make because you 'realise' the other option was the better one. or missing out from a great profitable trade. Later on. you probably aren't getting much accomplished. which you did not know! – But maybe. and most probably leads to doing a wrong trade. Whether it is making small everyday decisions in life. If this sounds like you. Having a parent or a teacher who didn't reinforce the learning potential of making a mistake. Too much analysis can create paralysis.The Way to Trade Forex ANALYSIS PARALYSIS Is it surprising that 90% of Traders lose money? The proliferation of so many so-called “gurus” has ushered in a virtual anarchy of expertise. There are many other ways analysis paralysis can affect the way you trade or indeed your life in general. or indeed the way you trade. So you need to ask yourself how you arrived at this place? What do you believe is the underlying reason for your inability to trust yourself? If you need help focusing on what is standing in your way of making small and/or crucial decisions in your life or trading. nobody told you how to use the simple strategies. then I am sure that you will greatly benefit from the services of a Trading Coach. maybe you want to digest what I have written here? You may begin with reading some of the books on psychology and personal development – 1. Awaken the Giant Within – Anthony Robbins 2.4x4u. I have kept everything simple – and have followed simple “killer techniques” that have been tried and tested. Trading without logic and a plan. your life may feel like you are in an annoying state of limbo.

Have patience – don’t trade if you don’t have to. it simply is not possible. Virtually 90% of Traders that I have coached have never had one! If you look at the advice from the world’s most successful people or traders today. You should wait for a set-up according to your trading plan and system. “Define first the level of risk you dare to assume. Why? When I went through a phase of losing trades I treated it as a temporary setback and went back to the drawing board. Adequate trading knowledge and understanding. And lastly the most important is having a Trading System and a Trading Plan. So what are the Characteristics of a Successful Trader? All we have to do is to reframe the liabilities listed above. and many very quickly give up. which are summarised as follows: 1. Adequate capitalisation – Don’t be fooled that you can earn thousands every week from a starting capital of $500 3. 4. Mentors and Coaches to put me back on the path of success and profitability. High risk aversion If we look at the list. You should seek services of good quality mentors and a trading coach. 1. I analysed the reasons of my failure and I sought the guidance of Top Traders. it becomes apparent that the failure is as a result of trading without having in place a proper Trading System and a Trading Plan– One that includes mind training. 2. and then build it up if it works” – George Soros Introduction to Forex 14 . Start with a small position. Poor Skills 2. Have Discipline to follow your rules 6. Understanding and Managing Risk 7. Setting unrealistic targets and goals 4. Realistic Goals – don’t expect 100% profit each month.The Way to Trade Forex WHY DO FOREX TRADERS FAIL? “Failure is a man who has not learnt from his blunders. Lack of Patience 5. Lack of adequate capital 3. Forex Trader It is a sad fact that 90% of traders fail. In my opinion the high rate of failure for a new trader can be related to the six major obstacles that a trader faces. If you are able to cash in on that experience you are on the path to success” – Jay Lakhani. quality Forex education and strategies and sound money management rules. Lack of discipline 6. you will notice that they follow the guidelines as identified above. 5.

All you have to simply do is to follow the simple ideas and strategies put forward in this manual. Penny “If you go to work on your goals. If you go to work on your plan. your plan will go to work on you.C. your goals will go to work on you. It is only YOU who is responsible for your success or failure. Forex Trader.” – Jim Rohn In this course. Introduction to Forex 15 .The Way to Trade Forex “Give me a stock clerk with a goal and I’ll give you a man who will make history. I will attempt to turn you from an amateur trader to a master trader. “I can show you the path to successful trading – but YOU have to make a choice to follow it or not.” – Jay Lakhani. Give me a man with no goals and I’ll give you a stock clerk” – J. Whatever good things we build end up building us.

and in fact I pride myself with achieving profit targets of 500 points and even 1000 points on the Nikkei. • Some traders go for large pip targets – from 100 to 500. Before I started trading FOREX. They are often position traders. In this book I have strategies for all. looking for 5 pips or 10 pips. between December 2004 and March 2005? Introduction to Forex 16 . or even more. And lastly. • • There is nothing wrong with trading with any of these objectives in mind. but my mindset is not geared up for sitting in front of the screen all day. leaving trades overnight – often for days.The Way to Trade Forex ABOUT PROFIT TARGETS Different traders have different trading philosophies about how many pips to target per trade. then gradually moving the stops as the position goes into profit. I was taught that I should aim for 20 pips. you also have another breed of traders that will trade multiple lots to catch maybe just 5 or 10 pips. It’s not for me to tell you what to do –you have to seek out a trading style that suits you. I use to actively trade the Index Futures. my targets were usually in hundreds. mainly the Dow and Nikkei. However. and when that was achieved. within minutes. Dow and also recently trading the Google stock futures. You MUST find a trading style that meets with your psychology and mindset. who could be targeting anything above 20 pips to 50 or even a bit more. They would normally start with a stop of 100 pips or more. I know many traders who make a perfect living and enjoy the thrills of day trading and are very successful at it. Can you spot an opportunity at the following “Weekly Chart” of the EURO. they each have their pros and cons. You then have other traders who focus on day trading. When I started trading FOREX. I should call it a day! I was laughed at when I talked about having profit targets of 100 pips or even 500 pips! There is disbelief when I tell some traders that I often use weekly charts on Forex – some so called city professionals thought that I was a fool! Though I cover all Trading styles in this book.

The Way to Trade Forex

TRADING SYSTEM

It seems that everywhere you look; you see advertisements for software promising accurate buy and sell signals and profits with every trade. Just have a look at some captions of the adverts I have seen! “I’ve finally cracked the Forex Code” “Make thousand pips every month” “Trade Forex with a secret formula that only a handful of Traders use” The list is endless.. These so-called killer systems don’t come cheap, costing you thousands to buy. However with just a little bit of effort, you too can “crack this secret code” yourself. Once again let me assure you, from my experience and knowledge of being a trader for the past 20 years, that there is “NO Secret Code”, “NO Killer Systems”, “NO Holy Grail”, and “No Unique Discoveries”. In my opinion most of these adverts are no more than scams. It may not make YOU rich, but it will certainly make the Vendor’s millionaires. Most of these secrets and codes or discoveries are readily available to you. The only secret is that YOU don’t know how to use these simple strategies! Or nobody has shown you how to use them correctly. This is precisely what I am going to do in my book – “ The way to Trade Forex”, I hope to hold your hand and show you step by step how to create a killer trading system of your own. However, the fact is that many traders are simply lazy and cannot make time to plan or create a system. YOU have a choice, either become a winning trader or continue to lose money!

What Is a Trading System?
A trading system is simply a group of specific rules, or parameters, that determine entry and exit points for your trade. These points, known as signals, are often marked on a chart in real time and will prompt you to pull the trigger. Here are some of the most common tools used to construct a trading system: 1. 2. 3. 4. 5. 6. 7. Chart Patterns Moving Averages Stochastics Oscillators Relative Strength Bollinger Bands Elliott Wave

Often, two or more of these forms of indicators will be combined in the creation of a rule. For example, the MA crossover system uses two moving average parameters, the long-term and the short-term, to create a rule

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Advantages So, why might you want to adopt a trading system? • It takes all emotion out of trading - Emotion is often cited as one of the biggest flaws of individual investors. By cutting down on these human inefficiencies, system traders can increase profits. Apart from going through lot of strategies in this book so that you can construct your own Trading System, I am also devoting lot of space in psychology of trading, without which a trader can simply not succeed. It can save a lot of time - Once an effective system is developed and optimised, there is little to no effort necessary on the part of the trader. Computers are often used to automate the signal generation.

Developing an effective trading system is by no means an easy task. It requires a solid understanding of the many parameters available, the ability to make realistic assumptions, and the time and dedication to develop the system. However, if developed and deployed properly, a trading system can yield many advantages. It can increase efficiency, free up-time and, most importantly, increase your profits. Designing a Trading System In my book “The Way to Trade FOREX”, I discuss many of the successful and profitable trading strategies that I have made use of from most of the Tools mentioned above. In addition as a follow up service, I am also extending a free 1 month mentoring so as to help you not only devise a Trading system, but also help you in preparing a Trader’s Plan or assist with your Trader Psychology. Here are some of the key factors to keep in mind when designing a trading system in the FOREX: 1. The liquidity and the volume in the Forex market is huge, therefore making trading systems more accurate and effective. 2. Most brokers do not charge commissions in this market, only spreads Therefore, it's much easier to make many transactions without increasing costs. Some brokers offer a very low pip spread. 3. Compared to the amount of equities or commodities available, the number of currencies to trade is limited. But because of the availability of 'exotic currency pairs'--that is, currencies from smaller countries--the range is not limited. 4. The main trading systems used in FOREX are those that follow trends (a popular saying in the market is "the trend is your friend"), or systems that buy or sell on breakouts. This is because economic indicators often cause large price movements at one time. 5. A good quality charting package, I use the eSignal and would highly recommend this package to any readers. In my long experience of Trading, I have read many books on trading and technical analysis. I have come across very few books, which focus on the importance of trading plans and trading systems and assisting their readers in creating such a system. This is precisely what this book is aimed at, i.e. assist you in creating your own killer trading system, having a trading plan, and finally a follow-up service.

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BACKGROUND TO FOREX

The foreign exchange market is probably one of most interesting markets, as due to it’s sheer size and volume, it would make it impossible for any one person, institution or government to control. You may recall that during the ERM crisis, even the British Government was unable to control the Pound. The foreign exchange market now dwarfs any other investment market, with over $2 trillion traded every day, far more than the world’s stock market and bond markets combined. The word FOREX is derived from FOReign EXchange and is the largest financial market in the world, unlike many other markets, the Forex is open 24 hours a day Structure • • • Decentralised, over the counter market, also known as the ‘Interbank Market’ Main participants: Central Banks, commercial and investment banks, hedge funds, pension funds, corporate and private speculators Online trading began in the mid to late 1990’s

Trading Hours • • • 24 hours market Sunday 5pm EST through to Friday 4pm EST Trading begins in New Zealand, followed by Australia, Asia, the Middle East, Europe and America.

Major Markets • • • • The US & UK account for more than 50% of turnover UK alone accounts for over 30% daily turnover by country. Major markets: London, New York, Tokyo Trading activity is the heaviest when major markets overlap.

Trading • • • An estimated 95% of transactions are speculative More than 40% of trades last less than 2 days Brokers research: 90% of traders lose money, 5% break even, 5% make money.

The Players • Customers – small business, individuals and Corporate. For cross border transactions

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Currency Futures – are a type of forward transaction.The Way to Trade Forex • • • Banks – Large banks can literally trade billions in a day. Swaps – A combination of a spot deal. It may also do so by selling government securities to back up its intervention. Intervention – When the central bank of a country intervenes to buy or sell its currency to influence the exchange rate. Hedge Funds – Speculative Trades Brokers – they facilitate the trades between the two parties Most commonly used Technical Analysis • • • • • • • • Chart patterns and trend lines Moving averages RSI Fibonacci retracements Stochastics MACD Pivot point Elliott Wave Currencies • The US dollar is involved in approximately 90% of all foreign exchange transaction. should he exercise the option if it is in his favour. This guarantees him to buy (call) or Sell (put) the currencies. The forward attempts to calculate the fair value for the two currencies using the interest rates of each country. it is merely a tool to allow interested parties to fix a rate in the future. They have specific contract sizes. as a Trader will mostly be using the spot market. maturity dates and are traded on a formal exchange. Currency Codes Introduction to Forex 20 . whilst at the same time making a forward deal or vice versa. with trades executed on behalf of clients. The determination of a forward rate is not a prediction of the future exchange rate. the price is for immediate delivery. Forwards – This is where the parties agree on the price of two currencies involved at a future date (forward). to sell or buy an exact amount of Forex at an exchange rate and date specified in advance. You. Different Sections of The Forex Market The Spot Market – this is the actual price of the currency at any given time. but they themselves will also speculate. Currency Options – provides the buyer with the right but not the obligation.

This might be because there simply is not enough volume due to little interest. Exotics This is the exchange of currencies that are not normally traded. For trading currencies. This means that in order to trade one million dollars. 000 by way of security.your broker may require additional funds to protect your position. A relatively small deposit is required to control a much larger position in a market.S.000 with a margin of $10. Leverage and Margin Forex trading is normally undertaken on the basis of margin trading. a margin broker may require a 2% margin deposit. As a result you will have obtained a gearing or leverage many times.Dollar.100. Why trade Forex? • • • • An outstanding opportunity to accumulate wealth – leverage (100:1) Small amount of capital required Easy market access – platforms and brokers There is always action Example Transaction Introduction to Forex 21 . you need to place just USD25. An example may be say the Malawian Kwacha.000.The Way to Trade Forex • • • • • • • • USD EUR JPY GBP CHF CAD AUD NZD = = = = = = = = US Dollar Euro Japanese Yen British Pound Swiss Franc Canadian Dollar Australian Dollar New Zealand Dollar Crosses A cross currency of transaction is when two currencies that do not involve the U. such as the CHF/JPY. If say you have a position of $1. Some brokers may also allow you a leverage of 100:1 Margin Call Margin call is something you will have to be aware of. This is commonly referred to as a cross. if your position is in danger and losing.

6% ($1000/$1322. a 50 pips change of 1.3225/28.1.3203. Thus a dollar/British pound quotation will read something like 1. In other words it buys cheaper and sells dearer a given currency in exchange for the other one. Your total profit for this transaction is $1. The bank or company. The price rises to 1.9010 and sells Pounds (buying dollars at 1.000 (100.The Way to Trade Forex Let’s assume you have a trading account and have chosen to use 100:1 leverage on your account. dollar/yen). At the same time you place a stop-loss order at 1.280 (100. Of course.3328 .3228. and your position is closed.000 * (1.000 Euros at 1. which quotes this rate.5000 is either 1. Thus the decimals are expressed either at 10th thousands or hundreds. So you are risking 25 pips with a profit target of 100 pips. you only need a margin deposit of 1% of the total. You have made a profit of 100 pips.3328/31.01). The value of this transaction is $132.4950 Understanding Forex Quote Introduction to Forex 22 .3228) but because you are using 100:1 leverage.9000). which is $1322.280 * 0.01 is called basis point or pip.0001 or 0.000 * 1. understands that it buys Pound (selling dollars) at 1. Such spreads vary in size according to market volatility. The current quote for EUR/USD is 1.9000/10.5050 or 1.80 ($132.g. and a limit order at 1. Trade Summary Bid and offer Exchange rates in practice are quoted as two-way rates. E. Each such 0. reaching your limit order at 1.3328.3228)).80).g. Basis points or pips A foreign exchange rate usually consists of an integer part and 4 decimal points (or 2 decimal points when expressed per 100 units e. the opposite is true for the person that asks for a quotation. You place a market order to buy 1 lot of 100. The difference between the purchase and the sale rates is called «spread». and the return on your investment is 75.3328. expecting the euro to strengthen.

• • • • • You will need a fast PC with plenty of RAM to run several programs simultaneously. consisting of a 'bid' and 'offer'.20 signifies that one Euro is equal to 137. a quote of EUR/JPY 137. demo to begin with. it means the dollar has appreciated in value and the other currency has weakened. quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. In these three currency pairs. meaning that one British pound equals 1. dollar are called cross currencies. dollar is not the base rate.S. USD/CHF and USD/CAD. For these currencies and many others.00 Japanese yen When the U.S. then going to live account trading.9300 U.9300. the dollar is stronger because it will now buy more yen than before. In other words. euro or Australian dollar.00 means that one U.S.S. dollars to equal one pound. this includes USD/JPY. The value of the base currency is always 1 The US dollar is the centrepiece of the Forex market and is normally considered the 'base' currency for quotes. if a currency quote goes higher. In these cases.S.20 Japanese yen. that increases the value of the base currency. Currency pairs that do not involve the U. dollar is the base unit and a currency quote goes up. If the USD/JPY quote we previously mentioned increases to 108. dollar is equal to 106.00. When trading Forex you will often see a two-sided quote. In the "Majors". the Australian dollar (AUD) and the Euro (EUR).The Way to Trade Forex Reading a foreign exchange quote may seem a bit confusing at first. For example. Trading Equipment and basic PC set-up. as it now takes more U. The first currency listed first is the base currency 2. dollars. For example. ideally 2 or 3 monitors. The 'bid' is the price at which you can sell the base currency (at the same time buying the counter currency). where the U. but the premise is the same. The 'ask' is the price at which you can buy the base currency (at the same time selling the counter currency). The three exceptions to this rule are the British pound (GBP). a rising quote means a weakening dollar. Technical Analysis Introduction to Forex 23 . it's really quite simple if you remember two things: 1. A lower quote means the base currency is weakening. you might see a quote such as GBP/USD 1. a quote of USD/JPY 106. A sound internet connection Charting package software Online technical analysis software A margin broker. However.S.

CHART PATTERNS • • • • • • • • • • Approach to Technical Analysis Support and Resistance Trend Lines Candle Sticks Charting Triangles Flags & Pennants Channel Breakouts Double Tops Double Bottoms Head and Shoulder Patterns Technical Analysis 24 .The Way to Trade Forex TECHNICAL ANALYSIS .

it will tell you where it is going. and it will project the hopes and fears onto the charts. In order to know where the price is going. Therefore to succeed you have to have a sound money management plan – cutting losses and letting profits ride. you need to listen to the market. The Technical Analysis is not always right. www. Knowing if a market is moving up or down helps investors to make an informed decision whether to go long or short.The Way to Trade Forex TECHNICAL ANALYSIS “An approach to forecasting prices which examines patterns of price change. we have to know where the price has been.eSignal. The following chart on the GBP/USD perfectly illustrates this. Chartists study the market action. and changes in volume of trading and open interest. Technical Analysis 25 . a picture is worth a thousand words. believes that the past action of the market itself will determine the future course of prices. so you can jump on the ride. The study of stock charts. the analysis of the past price action can enable to forecast the future. The chart shows the price action of the commodity. and will try and spot chart patterns. The goal is to profit from patterns that recur again and again. In order to succeed in trading. rates of change. Smart money tends to put on trades when markets are quiet and may have bottomed whereas the amateur trader will tend to trade the news. Why use Charts? It plots the price action that has occurred in the past. and it projects the hopes and fears of traders – that’s what makes a market. known as TECHNICAL ANALYSIS. Source: eSignal. which repeat themselves. without regard to underlying fundamental market factors” FUNDAMENTAL ANALYSIS seeks to determine future stock price by understanding and measuring the objective "value" of equity.com As you can see from the above chart. The chart simply show the current crowd psychology. nothing is.

Technical Analysis 26 . a breakout occurs when the price moves through the support or resistance. the price has followed in the direction of the break. www.eSignal. it eventually starts a new trend higher or lower. Chart patterns are bound by support and resistance levels.The Way to Trade Forex Support and Resistance Support is when price stops going down.com In the above chart for CHFUSD. After a market forms a pattern. as soon as there is a break. this is perfectly illustrated in the above example. Source: eSignal. you can see that there had been a trading range. This is called a BREAKOUT. and Resistance is when price stops going up.

so you will have• • • An up trend A downtrend. www. Prices however do not move in a straight line. they move by zig-zagging up-down-up-down. once the trend is in motion it will continue in that direction for some time. Apart from high volatility in the Forex market. down.eSignal. and A sideways movement Technical Analysis 27 . The topping of price action is followed by a price break.Never fight a trend.com The trend is your friend . the break of up trend is followed by a long down trend. the trend can be followed and more profit can be made. or sideways. Once the trend is determined early. Source: eSignal. up. you will also notice that it also trends well – both giving perfect opportunities to make money. The markets can only move in one of three ways. That’s it.The Way to Trade Forex TREND Technical analysis attempts to gauge the strength and direction of a trend. In the above example of AUDUSD.

and that is the main reason why traders love FOREX. If all you knew was how to follow trends properly. Sideways movement happen when traders either believe that the current price is more or less right. A good indication that the trend is ending is when the price significantly penetrates through the trend line and takes out the previous low (up trend) or the high (downtrend). Technical Analysis 28 . and all traders use it. www. whether an up trend or a downtrend. Source: eSignal.eSignal. “a trend is your friend” or never go against a trend! The trendline is the most basic technical analysis. or traders feel that the prices are too high – so you will be in a down trend as there is selling pressure. This normally happens when there is major news pending. The FOREX market trends very well. for example prior to release of say Non Farms Payroll data.The Way to Trade Forex These trends are illustrated in the following chart. All trends will eventually end. When you draw a trendline. An up trend will have a series of higher highs and higher lows. It is amazing how price repeatedly bounces off the trendline. so long as prices keep bouncing off a trendline you can keep making money. then this alone could make you a very nice income. whereas a downtrend will have a series of lower highs and lower lows. As they say. or when they are undecided.com Trends happen when traders worldwide believe that a price is either too low – so you will now be in an up trend as you have a buying pressure.

The Way to Trade Forex CANDLE CHARTING BASICS “ A good beginning is the most important of things. so will usually be RED to dark. LOW and CLOSING price for a given period.” (Japanese proverb) Candlestick charts are much more visually appealing than a standard two-dimensional bar chart. HIGH. but I like to concentrate on the few of the most important ones that really work! Technical Analysis 29 . The four elements necessary to construct a candle chart are the OPEN. Below are the Examples of Candlestick and a definition for each candlestick component The above represents when prices close higher for that particular time frame The above candle represents when prices close lower for that particular time frame. Candles can represent any time frame. You will come across probably hundreds of candle patterns.

This chart of CHF / USD perfectly illustrates a Hammer. This is followed by a positive candle.The Way to Trade Forex HAMMERS / HANGING MAN Hammers are formed after declines and hanging man after advances. When confirmed they become very powerful reversal signals. There is a large Lower Shadow and a small body. Technical Analysis 30 . You can see that the price action resulted into a big uptrend. which comes at the end of a downtrend.

a series of doji lines after a prolonged move could signal a rare and important top or bottom. if seen after an extended rally of long bodied candles (bullish or bearish).The Way to Trade Forex DOJI Dojis are powerful reversal indicating candlesticks formed when security opens and closes at the same level. Dojis become more significant. and is confirmed by the engulfing candle.DOJI Formation. GBP . a long candlestick formed over the next period that engulfs the doji body. Technical Analysis 31 . implying indecision in the price.e. Dojis can become support or resistance. usually on a short-term basis. i.

8950. Technical Analysis 32 . The Dojis were followed by a trendline break.The Way to Trade Forex In the above chart. based on a 4-hour chart. Once again highlighting the importance of reading the chart patterns in conjunction with other signals and indicators. with a small body. as you had a series of tops – Resistance. and may provide a good shorting opportunity. SHOOTING STAR The shooting star is made up of one candlestick (White or Black). Overall resulted in a move of over 250 pips over the next few periods. there was a topping formation at around 1. there is a high probability of a downtrend. such as a 60-minute one or 15 minutes. In this example. the shooting star is followed by an extremely bearish candle. prior to a series of Dojis. One can look for a better shorting entry by magnifying a lower time frame chart. If this is followed by a down candle. long upper shadow and small or non existent lower shadow. and a series of lower highs.

Ascending triangles are generally a bullish chart pattern. The top part of the triangle appears flat. with higher lows. which was the previous resistance. There are some traders who just trade and focus ONLY on “triangle chart patterns” – and make handsome profits. as attempts to push the prices higher are quickly met by selling. Symmetrical Triangles Symmetrical triangles are areas of indecision. and this is a good way to catch some nice price moves. Ascending Triangle.The Way to Trade Forex CHART PATTERNS Triangles frequently occur in the market. When this happens. and most reliable when found in an up trend. while the bottom part is upward moving. the price may move considerably higher. eventually the price explodes out of this formation. Prices eventually break the flat top. Each top and bottom becomes shallow. Technical Analysis 33 .

Once again a good opportunity to trade the breakout. as higher prices attract more sellers. Pennants look very much like symmetrical triangles. These patterns are usually preceded by sharp advance or decline. The bottoms are Flat – offering support. FLAGS and PENNANTS Flags and pennants are short-term continuation patterns that mark a small consolidation before the previous move resumes. and the price retests the old lows.The Way to Trade Forex Descending Triangle The Descending triangle is generally considered bearish. whereas the highs are getting lower. Technical Analysis 34 .

If price were truly random. down or sideways is underway. then why do they pause so frequently at those points? The bulls and the bears defend these levels therefore generate strong profitable countermoves. This pattern usually indicates a strong trend. Technical Analysis 35 . until a breakout occurs Trading Double Tops and Double Bottoms. Price charts simply express trader sentiments. In fact this pattern appears so often that it alone may serve as a proof that price action is not wild. No chart pattern is more common in trading than a double bottom or double top. up.The Way to Trade Forex Channel Breakout A Channel is formed between parallel support and resistance lines.

then you may want to consider a short. Your decision depends on how you feel about the pattern. between 13 Sep 2004 to 29 Apr 2005. The prices fail to make a higher low. herewith a chart for the EURUSD. which has acted as a support. it is then projected down from the breakout. the retracement from the head is likely to result in a break in the trendline. Once again it would make sense to trade in conjunction with other indicators of your choice. If you did not have any position. Two lower peaks. Once you identify the head & shoulder pattern. or sell some of the position and hold the rest with tight stops. The neckline is drawn through the lowest points of the two shoulders.The Way to Trade Forex Head and Shoulder Patterns The “Head-and-Shoulders” pattern is a trend reversal pattern. and may slope upward or downward The reason this pattern could be a reversal is due to the fact that there appears to be a momentum of falling prices. It marks the end of an up trend. The markets attempts to move up. when the neckline is broken. and a stop place above the previous high. but only result in a lower high. The target is calculated by measuring vertically from the highest point to the neckline. how would you manage your longs? You could consider to sell outright. tighten your stops so that your profits are locked in. Head & Shoulder Test your Knowledge. Can you spot the Head & shoulder? Technical Analysis 36 . and consider shorts at the break of neckline. or shoulders surround the “head”.

5. 2. Technical Analysis 37 .The Way to Trade Forex Test your knowledge. Head Right Shoulder Left Shoulder Neckline Target If you were looking to short. Feel free to email me with your answers and any queries that you may have. what would be your entry point? Was the target achieved? And what was your profit in terms of pips. 4. calculate the following values. 3. 1.

The Way to Trade Forex COMPUTERISED TECHNICAL ANALYSIS AND TRADING STRATEGIES • • • • • • • • • Introduction – Trading Strategies Moving Averages MACD MACD Divergence Trading Relative Strength Index (RSI) Elliott Wave Pivot Points Fibonacci Fundamental Announcements Trading Strategies 38 .

A good trader needs to know which indicator works in which market condition. To be successful. The secret of successful trading is to combine several indicators from different groups. MACD Histogram. let alone Trading! There are several good quality charting packages. you must understand what it measures and how it interacts with the price action. which is critical when you want to pull the trigger. channels. Often you see the so-called Forex Gurus advising to Trading Strategies 39 . both very powerful charting packages with many advanced features. you do not need to understand how the engine works. you will be able to look at many popular indicators such as moving averages. and you must learn to use them to work smarter and more efficiently. Indicators Indicators will help you identify trends and reversal points. A quality software will also allow you to write your indicators into the system. you have to invest in quality charting packages – whilst there are so many free charts you can get on the Internet. MACD. Basic Theory The most profitable way of trading the Forex market is to identify the trend and once it is identified. I have found many Traders who just concentrate on one indicator.The Way to Trade Forex INTRODUCTION – TRADING STRATEGIES For a modern day Trader a Computer is a Must. indeed many Car drivers would even struggle to change a wheel. thus giving you some confidence on how you can apply it to live data. Just like a majority of the Car Drivers. which can be used as part of your day-to-day trading and managing your positions. with so many ifs and buts. often turns ahead of prices. Oscillators – help to identify turning points. Stochastics. You are also able to back test your indicators. Most Traders divide indicators into Trend Following Indicators – these include moving averages. MACD. stay with it for as long as possible. but many have limitations. Indicators are more objective than chart patterns. It will allow you to look at multiple time frames. which I feel is very dangerous. My advise to many Traders is to Focus on the Indicators and how to read them. as opposed to what the Indicators are and what it’s formula is and try and work out it’s formula! Why invent a wheel. These indicators are lagging indicators and turn after trends reverse. as often you can end up with a false signal. RSI and momentum. yet they have been driving for years. RSI and many others. and will allow you to split screens. you are able to look at a number of complex technical Indicators. also be able to edit some of the regular indicators that are already in the system. Oscillators. in the process burning so much of their precious energy in just trying to prove a point! Clearly such people will NOT succeed in life. These softwares are great toolboxes for the traders. with chart patterns. and it will give you a better insight into the balance of power between bulls and bears. they include stochastic. They are constantly looking to prove the author or the coach wrong. I have used E Signal and also Ensign software. or indeed why change something if it works! I come across so many Traders.

Incorrect placement of stop loss can sometimes result in being stopped out just at a reversal point. stop loss and exit levels must all be logical and it must be able to produce you consistent profits. You have to have patience and only trade if your system tells you to do so. 3. trying to enter the markets too often. don’t trade – is a simple rule. price level was at 1. One of the most important lessons I can teach you is patience. If there is no trade. 4. signals for the short entry were 1. and then it eventually fell by over a 100 pips from its peak.9076. A fisherman cannot catch a fish everyday. so too a Forex trader cannot catch a trade everyday. yet you could be at a start of a big move.9050. often incorrectly identifying a trend.The Way to Trade Forex take 20/30 pip profits. and opportunities will come. Often I see that new traders end up having an incorrect entry point.? Your entry point. but this is equally followed by an equally incorrect placement of a stop loss. however if you desperately try to find a trade when none exists. you should be able to catch the big move. have a look at the following exampleA signal for a short entry. and in my early days I was not an exception. Macd divergenc RSI Divergence Resisting at R1 (not shown) Resisting at a Pivot level If say a 20 or 25 pip stop loss was put in. then briefly consolidated. Most have been taught to place no more than 20 point stop loss. Clearly with good money management and trailing stop loss. and that also just around the previous support/resistance. Markets are there every day. The cable peaked at 1. than this will only frustrate you. and than the market continues to go in the direction you first thought it would. How often have you seen that stops have been gunned. 2. the position would have been stopped out. Trading Strategies 40 . Many new Traders to the Forex market end up overtrading.

However. Most of them also recommend not to trade unless the risk reward is 1 to 3 and above. I would rather lose 60 pips on a well thought out trade with a good market direction. 15 minute. Off course. In fact if I was trading of a shorter time frame. having done my research and I am reasonably sure of the direction of the trend. and 15 minute 5 minute. I would often start with a risk reward of 1 to1. these trades had offered opportunity to bank not 20 pips but more than 50 or 100 pips. 1 minute. this has often been achieved. 4 hour and daily. It was only after I started using the larger time frame that I realised that the Support and Resistance were more relevant on say a 60 minute chart than a 1 minute or 5 minute chart On my screen I will look at four time frames. Generally. Bottom line is. then even a risk reward of 1:10 is possible. and the market could go either way. 5 minute. Often an amateur sets unrealistic stops and lowers risks to reward. On some of my swing trading positions. 30 minute and 60 minute etc In this situation. It is a fun fantasy. but ends up being stopped out and never achieving the profit target. there have been many instances where there could be a finely balanced trade. I was taught to look at 1 & 5 minute charts. and yes the books and trading seminars will sell like hot cakes! In my opinion in most cases the risk/reward ratio is a lie. With so much of volatility. what is important is are you able to steadily increase your Capital. which suits your trading style. if that means having a risk reward of 1:1 or 1:2. which will enable you to pin point your entry and exit levels. when I am trading intraday. 1 hour. That does not mean I cannot have tight stops. you are stopped out. have a stop loss of 20 pips and a target of 20 pips. and adds that a trader should only risk £25 to make £100 – a risk reward of 1 to 4 – looks great on paper. You could use any combination. than lose 3 lots of 20 pips trying to achieve the same thing. once you get experienced and can read the market accurately. To be honest a lot of these guys are not traders themselves. Take a look at the image below and see what my screen usually looks like: Trading Strategies 41 . I have even gone in with a 10 pip stop loss. One Guru at a trading seminar says “only morons will trade with a risk reward of 1 to 1. you are able to see the trend in the larger time frame. I am not at all concerned in having a tight 20 pip stop loss. which get stopped out. and the market direction should dictate where to put the stop loss. on some of those winning trades. what I focus on is I have to have the least number of trades. and if you were on the wrong side of a trade. Profits were snatched too early. which might beTick. 7 winning trades (7 X60 = 420 pips) 3 losing trades (3 X 60 = 180pips) – that still gives me a net profit of 240 pips! Thank you I would rather have that instead of so many losing trades of 20 pips! Which Time Frame to Use When I first started trading Forex. which would be 15 min. Forex can move 20 pips in minutes. You have to be flexible. Majority of trades would be stopped out and the few would have been profitable. then so be it. I am able to get a winning percentage of 70%.The Way to Trade Forex I hear lot of so called “gurus” in various books and trading seminars advising on a 20 pip stop loss. I am simply baffled by this advice.

Seeing this signal on 2 charts gives you more confidence to pull the trigger. 60 min. a 15 min. I would then turn to 60 min and 15 min charts to look for a better entry. However. looking at the 4-hour and daily chart.60 – that is a profit of 402 pips! And still in the trade. At the time of writing this book. 4 hour.20. It is this market direction that has kept me in the trade.62. Having seen this divergence. As you can see there was a MACD divergence (to be explained later) first on a daily chart. The 15 min charts are turning bullish. you can see that we are still in a strong down trend. as you can see I have 4 screen. if I were looking for a trade using macd divergence. but a strong resistance at 135. Trigger pulled and short at 139. The market direction has kept me in the position on the short side from an open entry level of 139. Trading Strategies 42 . the system issued a short signal on the EURJPY.The Way to Trade Forex I would use the above format. currently the price is 135. so my stops have been moved to 136.62. together with the moving average system (discussed later) that I use. then followed by a divergence on the 4-hour chart.80. Stops losses are continually being moved to lock in the profits. and a daily chart.

Warning to sell short This is the Exact opposite to the buy signal. thereby offering you a better entry point. In order to reduce the lag in simple moving averages. this would indicate that the currency is in a downtrend ENTRY ORDER You should wait to see the price action after the crossover. The market consists of huge crowds. as there will be numerous false signals. This indicates that the currency pair is in a up trend. this indicates that the currency pair may be in a downtrend. The system that I have successfully used is based on the following rulesUSE a 5. following the crossover of EMA. If however. 20 and 60 period EMA. It gives greater weight to the latest data and responds to changes faster than a simple MA. Moving averages will help us trade in the direction of the trend. One of my favourite one is the use of 5. exponential and weighted. Confirmation to sell short This is when the EMA5 crosses the EMA60 moving downwards.The Way to Trade Forex MOVING AVERAGES Introduction There are three types of moving averages: simple. then you may wish Trading Strategies 43 . 20 and 60 PERIOD EMA WARNING to Buy When the 5 EMA crosses the 20 EMA moving UPWARD. Moving averages are one of the most popular and easy to use tools available to the technical analyst. When prices are trending. it indicates that the currency is on an up trend momentum. They smooth out the price action and therefore it makes it easier to spot a trend. Often the next 2 or 3 bars will retrace. this will work well in a strongly trending market. A successful trader does not forecast the future – he monitors the market and manages his trading position. Like all other mechanical trading methods. and this is particularly helpful in volatile and trending markets. Confirmation to Buy When the 5 EMA crosses the 60 EMA moving upward. Currencies trend very well. there is an aggressive price action. No doubt there are literally hundreds of variations on various trading systems using the crossovers of moving averages to initiate a trading position. and the moving average identifies the direction of mass movement It must be noted that all moving averages are lagging indicators and will always be behind price. I have often used the crossover of Exponential moving average (EMA) this strategy will not work well in a sideways market. so be ready to short and continue to monitor the price action. A moving average is the composite photograph of the market – it combines prices for several days. They also form the building blocks for many other technical indicators and overlays. so they fit well with trend following indicators. moving averages work very well. When the EMA5 crosses the EMA20 moving downward. I tend to use the EMA Exponential Moving Averages (EMA) EMA is a better trend following than a simple MA.

Trading Strategies 44 .8760.The Way to Trade Forex to consider a market order to fill your trade. therefore you will be able to catch a bigger move. Because currencies trend well. having entered short at 1.8790. GBP – Short Trade. the first such signal would have been at 1. than let your profits run. See the following examples.8935 leading to the lowest point at 1. I would let this trade run until I saw a significant turn on the 20 period EMA. – Not a bad trade. The above trade at best could have produced a profit of 175 pips. or the crossover of 20 period EMA with the 60 period EMA – this would have produced a profit of 125 pips. producing 145 pips. but how many traders would have had a patience to hold on to this trade! Patience is the key – Wait for the signal.

The Way to Trade Forex JPY – LONG Trade – 14th April 2005. Just relying on one indicator is dangerous and risky. DAILY CHART Trading Strategies 45 . you would also look at other signals in addition. a higher low. then breaks out of the triangle pattern. If we look at the above chart. CHF – SHORT trade – 4th Oct 2004. the certainty of a profitable trade is much higher. then consolidates. This coincides with the EMA crossover. When you have such confluence of events. Obviously when using the crossover of moving averages. you have a double bottom.

In addition to the EMA crossover signals described above. There are 4 basic stages to this cycle. when there was a double bottom –that is a profit of 1300 pips. One could have taken profits at 1.The Way to Trade Forex Using the Daily chart. as illustrated above. such as the double bottom.1500 – that still produced a profit of 1101 points! If however. Once again this illustrates currencies trend well. you can also use the MACD (Explained later) to confirm the trend. you could have closed the trade at around 1. using other signals. obviously chances are that you would have taken profits much earlier. This simple system can work on all time frames. you had waited for the crossover of the 20 and 60 period crossover. which you follow strictly. Would you have had patience to hold on to this trade for long? It is possible if you have a set of rules. a Short signal at 1. If you had waited for the turning of the 20 period moving average.2601. Trading Strategies 46 . Always use the default settings of 12 and 26 to calculate the MACD on your charts. for as long as the trend is in your direction. off course you would have a trailing stop loss so that your profits are locked. that would have produced a gain of 800 pips.1300. and EMAs can be used to stay in the trade.

it verifies the confirmation of a buy signal. Trading Strategies 47 . 4. as the markets were range bound. 3.The Way to Trade Forex 1. If MACD is in Phase 1. As you can see that prior to the signal there were few trades where you would have been stopped out. See the following example. what you are looking for is a confluence of events.- Using the EMA crossover signal in conjunction with MACD means that likelihood of a false signal is reduced. and if MACD is in phase 3 it verifies the confirmation to sell short. 2. Therefore once again. The The The The MACD MACD MACD MACD crosses the zero line moving upwards continues to increase until it reaches the maximum value then starts to decrease until it passes Zero continues to decrease moving downward to the minimum value From the above. as illustrated in the above trade.

Get ready to buy – EMA5 crosses EMA20 moving upwards Confirmation to buy – EMA5 crosses EMA60. on 14th April 2005 Trading Strategies 48 .8935. MACD should be in phase 3. An example of a Short Trade GBP USD – Short at 1. 4.The Way to Trade Forex RECAP OF SIGNALS 1. 2. 3. MACD should be in phase 1 Get ready to sell – EMA5 crosses EMA60 Confirmation to sell – EMA5 crosses EMA60 moving downwards.

if this pattern is not repeated then you have a divergence. it gives a buy signal. and it is simply a method of identifying the potential for two exponential moving averages to cross. You could probably make a living trading the divergences only! MACD should be a copycat of the price action. Trading Strategies 49 .Histogram and prices identify major turning points. but MACD traces lower. but when they do. In other words. When the fast line closes below the slow line.HISTOGRAM and PRICE DIVERGENCES Divergences between MACD. In my opinion the MACD divergence is probably the strongest signal in Technical Analysis. Trading in the direction of a crossover means going with the flow of the market When the fast MACD line crosses above the slow signal line. and places a protective stop above the latest minor high. Go long. a signal line is derived by calculating an exponential moving average of the MACD. this shows that the bulls are getting weaker. this would identify a price weakness at market tops. In my opinion one of the best tools. the bears are losing the momentum. You can also have the MACD displayed as a histogram – a series of vertical bars above and below a zero line Crossovers of the MACD and signal lines identify shifts in the balance of power of bulls and bears. In the above chart. See B above. and therefore macd will also make a higher high same as a price action. they often let you catch major reversals and the beginning of a new trend. you can see that just before point A. When prices rally to a new high. this is a bearish divergence. The following is an example of a Bearish Divergence. and tells us if the bulls and bears are getting stronger or weaker. Normally. MACD is calculated using a short length and a long length exponential moving average (defaulted to 12 and 26) and calculating the difference between these two averages. MACD. it gives a sell signal.The Way to Trade Forex MOVING AVERAGE CONVERGENCE DIVERGENCE (MACD) Gerald Appel developed the MACD indicator. These signals do not occur often. it is the spread between the two averages. See A above. and place a protective stop below the latest low. MACD HISTOGRAM The MACD Histogram gives a more in-depth guide to the balance of power between bulls and bears.

This is a Bullish divergence. it would mean that bulls are ready to gain control.8670. so some of you may want to carry on with the trade.The Way to Trade Forex Another example of a perfect MACD Bearish Divergence A possible entry at 1.7760 – giving a total of 910 pips profit. At this stage the 20 EMA has not crossed over the 60 EMA.7970 when the 20 EMA starts to rise. from divergence.8295 will still keep you in this trade. and this would identify strength at market bottoms. at this point the profit from the trade was 375 pips. If you did so then you would have had a perfect opportunity to close the trade at the Double bottom on 7/10/04 at 1. this giving a profit of 700 pips. You could consider closing the position at 1. The EMA crossover at 1. MACD BULLISH DIVERGENCE If the prices fall to a new low but MACD traces a more shallow low. They give buy signals when most traders feel fearful about a breakdown to a new low! The following chart illustrates a perfect MACD Bullish divergence on a EURUSD Chart Trading Strategies 50 . Not a bad trade.

2850 – thereby giving an overall gain of 600 pips. while prices are at a new low. In this instance your entry points were much earlier than the EMA 5/60 day crossover All the above strategies will work in any time frame. 1 minutes or 5 minutes.e. For example in the above chart. place a protective stop below it’s latest low. i.2250 the peak of that rally had been 1.The Way to Trade Forex You could consider longs when the MACD Histogram ticks up from its shallower bottom. this may result in a larger move. Determining the true value of an oscillator depends on the understanding of overbought or oversold positions. so unlike me. if you enjoy the thrills and excitement of watching your screens for every second to catch 20 to 30 pips per trade. at around 1. Relative Strength Index (RSI) The relative strength Index (RSI) is a momentum-based indicator. The higher the time frame of a chart in which the MACD divergence occurs. then you can certainly switch the charts to a lower time frame. The basic formula for calculating RSI is as follows: 100-(100/(1+U/D) U = average upward price change D = average of downward price change Trading Strategies 51 .

At the bottom of the chart below. It is important to understand that an overbought or oversold position can remain in an extended up trend or downtrend for some time. Failure swings – when RSI breaks out.The Way to Trade Forex RSI as an indicator is front weighted i. on a scale of 0 to 100. so try and use other methods combined with RSI. the RSI. Support and Resistance – RSI may show levels of support and resistance. Trading Strategies 52 . as they do not want to pull the trigger too fast! Some traders also use the short term moving average crossovers. 2. this will also indicate a shift in direction. sometimes more clearly than the price chart itself. this may indicate that a breakout in price is coming.e. 1. 3.e. Your software should be able to do the work for you. it gives more importance to more recent price action. and when this occurs when the RSI is at extreme levels then it could be a powerful setup to pull the trigger. it surpasses previous high or low. i. There are 5 different uses for RSI. it also tends to filter out lot of noise. rather than using it on its own. It gives a better velocity reading than other oscillators. but the RSI does not follow price action. Chart Formations – Patterns such as double tops and head and shoulder may be more visible on RSI rather than on price charts 5. Some traders use the 80/20 range. Tops and bottoms – overbought and oversold conditions are usually signalled at 30 and 70. indicates that the overbought position is at 70 and oversold position is at 30. Divergences – when a pair makes new highs or lows. 4. this usually indicates that price reversal is coming.

Having a closer review of the above 5-minute chart. which covers a two-day period. The GBP has not moved much. yet there were few opportunities to trade both from the long side as well as short. and a divergence on the RSI. This was around the price level 1.The Way to Trade Forex In the above chart. RSI was useful in detecting a short trade after a divergence and also a crossover of the 70 “ overbought” level. notice the RSI bouncing just around the 30 oversold. Trading Strategies 53 . The above chart is a 5-minute time frame. subsequently there is a double bottom. with a gain of more than 100 pips. On the long side. There are at least 2 good short trades.880.

Wave "1" – is the changing of market opinion from bearish to bullish. a stock market speculator. The diagram below shows how an eight-wave cycle advances in five waves and declines in three. labelled with letters). Elliot.is a retracement of wave "1". As with the waves on the ocean. A contrary movement must follow a price movement up or down. Trends show the main direction of prices. the bargain hunting has begun. while corrections move against the trend. It often is driven by a rebound from depressed prices and is the shortest of the rising impulse waves. a five-wave advance (impulse waves) and a three-wave decline (corrective waves. This cycle of eight waves can be seen in all time frames from intraday to what Elliot called the "Grand Supercycle" of over 200 years. Each wave in a cycle can be subdivided into smaller cycles. The same goes for the financial markets.The Way to Trade Forex INTRODUCTION TO ELLIOT WAVE The Elliot Wave Theory was proposed in the early 1930s by R. Basically. as the saying goes: “ What goes up must come down” (and vice versa) Price actions can be divided into trends on the one hand and corrections or sideways movements on the other hand. The theory states that markets move in repetitive patterns. if not all of the gains from wave "1" are erased because market participants have used this rally to sell their losing positions at slightly Trading Strategies 54 . market activity ebbs and flows in cycles that repeat and can be subdivided into smaller cycles. One of the rising impulse waves has been broken down into five smaller waves According to physical law: “Every action creates an equal and opposite reaction”. In Elliott terminology these are called impulsive waves and Corrective waves. Elliot focused on classifying market activity according to a set of cycles and ratios of movements.N. Most. Wave "2" .

This wave may never drop below the peak of wave "1".The Way to Trade Forex better prices. Wave "b" . Trading Strategies 55 . at least in the financial markets. Wave "4" . Wave "3" . Here. sub-waves. A market move in five waves indicates a new dominant market direction. Identifying waves is often a difficult activity because there are a number of exceptions and variations in the waves.is the reversal patterns completed by the first two waves break into the new trend.at first appears to be a normal correction to the rally. not three. Wave "a" . This wave often presents itself as the right shoulder of a head and shoulders pattern.is the bear market correction allowing a second chance for sellers to sell. Wave "5" . Elliot Theory says that wave "a" will break down into five. This is the longest and strongest of the impulse waves. as most technical patterns have signalled the new trend and market participants now rush in to follow it.is final stage of the advance and often shows a divergence with such technical indicators as cumulative volume and relative strength (RSI). Its structure is also fairly complex. These deserve a separate discussion for themselves. many technical indicators confirm that the original rally is over. yielding many common continuation patterns such as triangles.is the consolidation phase of the advance. Wave "c" typically breaks support and the peak of wave "3".

e. and ET of 0 shows that the market may be flat or sideways. Elliot Wave Trend (ET) Elliot Wave Number (EN) Elliot Wave Oscillator (EWO) Elliot Wave Trend (Abbreviated ET) ET will measure whether the trend is positive. when these principles are combined with the Elliot Wave indicators. TREND WAVE COUNT MOMENTUM Trading Strategies 56 . Elliott established three simple rules that. ET trend of 1 will mean that the trend is positive. However. Wave 3 can never be the shortest impulse wave. Many traders do use these studies. goes long and then sells or shorts the position as the pattern runs out of steam and a reversal is eminent. They are: • • • • • • • • • Grand Supercycle Supercycle Cycle Primary Intermediate Minor Minute Minuette Sub-Minuette To use the theory in everyday trading. if not observed. or supercycle. Most charting software will have these Elliot Indicators as part of their advanced packages. HOW CAN YOU USE ELLIOTT WAVE TO PREDICT TRENDS Everything you have read so far is the background in brief to the Elliot Wave principles. negative or neutral. Wave 2 can never exceed the start of Wave 1. the trader determines the main wave. Rules of Wave Labelling Correctly labelling waves is at the heart of wave analysis. and are indeed profitable. you have a powerful and unique trading technique. which can be extremely profitable. cross into the same price area).The Way to Trade Forex The Elliott Wave Theory has assigned a series of categories to the waves in order of the largest to the smallest. Wave 4 can never overlap Wave 1 (i. 3. The three Elliot Wave indicators that I often use are.. 2. and so it is important to observe the rules of labelling. Incorrect labelling can prove very costly to a trader. will invalidate a wave count: 1. ET of –1 means that the trend is negative.

then you should cancel your entry order. either you have missed the trend or the trend will be reversing. Therefore you can place an entry order when EN changes.The Way to Trade Forex In the above chart the trend changes to negative on the 11th May 2005. For this you should try and use the default ET settings on your chart – which will be 70. It is important that your order is filled at the early trend start.4 & 5. and 20 of the most recent periods to calculate this number. on a 60-minute chart – GBPUSD.3. The Entry order is for the open price in the new EN.2. A move of 349 pips. say EN changes from 3 to 4. As after 4 periods. These numbers correspond to the Elliot Wave. Trading Strategies 57 . This basically means that the software needs 70% match of the Elliot Wave profile.e. Elliot Wave Number (EN) The Elliot Number can read 1. i.8393. The candle closes at 1. as described above. This is one of the most important indicators.8742. if your order is not filled within the next 3 or 4 periods.20. The Trend stays negative until 18th May 2005 and the candle closes at 1.

2065. Trading Strategies 58 . The total movement between the two numbers was 156 pips. the candle closed at 1. Any EWO greater then +. how fast or slow the trend is splitting apart or coming together. 001 is a strong positive signal and an EWO of less then -. The EN Indicator changes to 4 on the 16th May 2005. If this number drops below 0. the EN changes to 3 on the 11th of May. you may want to close your long position. the candle closed at 1. which would be getting the wave 3. In the above example of CHFUSD. i.The Way to Trade Forex I find that this indicator works brilliantly in an up trend.2221. which is the longest. This indicator is either positive or negative. or if the number goes above 0 then you may want to close your short positions.e. Elliot Wave Oscillator (EWO) This indicator measures the momentum of a trend.001 is a strong negative signal.

e. was 352 PIPS. Trading Strategies 59 . i. On 11th May EWO moves from a positive number to a negative number. So if you were short at this stage. A New EN of 3. The EWO moves to above zero on the 18th May 2005. to 18th May when the EWO turn positive. between 5th May 2005 and 22nd May 2005. to exit you have to SELL to close your original position. An ET of 1. LONG POSITION – i. then the change in this indicator would have kept you in the trade. If at this stage you were already short. this trade is where there is1.8380. therefore by following all three indicators. i.e. since this being a positive A positive EWO – the more positive the better. The candle closed at 1. when you will be buying the stock. Your most profitable trade This would simply be the strongest trade indicated by this method. you could consider closing shorts and taking profits. below zero. and sell it to close your position. So you buy when you expect the price to go up. moving from 2 to 3. Since wave 3 would be the longest of all cycle this will produce you the most gain. The move between 11th May when the EWO turns negative.8732. then the certainty of forecasting the trend becomes difficult. up or down. If all the indicators do not line up. The fact that the indicators do not line up does not necessarily mean that the trend will not move in the direction.e. you will miss out on some of the trends. The candle closed at 1. When all these indicators line up. 3. 2. there is a very high probability of predicting the trend. which was anticipated.The Way to Trade Forex The above chart represents a 60-minute time frame on GBPUSD.

i. then when you are looking for trades. To Buy back we just look for EWO to rise above 0. So if you were trading several currencies or stocks. This is opposite to the Buy signal.e. and EWO must be positive. you need to find trades as they develop. go down. for example if you are long than look at the last three candlesticks on your charts. Once these 3 indicators line up you should look for a good opportunity to go long. An EWO decline to below 0 is enough to tell us that the price may retrace. and EWO should be negative. so concentrate initially on those charts that have EWO close to 0. Always have a stop loss and monitor your trades. and say you were using a 15 minute time frame. consider to raise your stops to lock in profits. The price to close your position is the open price of the first period where EWO first became negative. then it would be difficult to look at each chart every few minutes. You are expecting the price to go down so that you may buy it back at a lower price. The price to Buy-back is the open price of the first period where EWO first became positive. Once these 3 indicators line up you should look for a good opportunity to go short. Here you are looking for an EN of 4 (downswing). and see if they are forming consecutive higher lows. ET must be 0 or 1. These 3 things must happen simultaneously. How to look for trades If you are day trading. Do an initial survey of all stocks that you are looking at in your watch list. when you sell the stock that you do not own.e. These 3 things must happen simultaneously. and make a note of the highest and lowest EWO. whilst also keeping and eye on the other charts. As your position goes into profit. You should also look to see the chart patterns. ET must be –1 or 0. IMPORTANT NOTE Always have strong money management rules.The Way to Trade Forex For Long positions you are expecting EN of 3 or 5 (remember UP waves). this is enough to tell us that we are headed up from here. Trading Strategies 60 . When EWO is negative it means that the trend should diverge away from 0 in a negative manner. so you should book your profits! SHORT POSITION – i.

Trading Strategies 61 .3400.2300. You have a perfect BUY signal at around 1. You can also consider taking profits by closing half the position. I would normally close 25% position when 250 pips are achieved and then move the stops on the rest of the position to a breakeven. lets look at the following trade. you would move your stops to lock in your profit.The Way to Trade Forex TRADE EXAMPLES – Using the Elliott Indicators EUR/USD DAILY CHART Using the Daily Chart on the EUR. I would further close another 25% position by taking 500 pips.100 pips. This trade using a daily chart has given a profit of 1. you will no doubt be using wider stops – taking into account your risk profile. it would have kept you in the long position. when all the 3 Elliott Indicators are positive for a Long signal. If I am using a Daily chart. until the EWO turn 0. Obviously using the daily chart. and also at the same time moving my stops to lock in profit. when you have achieved a certain target. and then as the position moves into profit. This was around 1. Does the System work in a lower Time Frame? Well. Just using the above indicators. or negative.

Long Signal at 1. and finally the Elliot signal. but then you will be cutting out some of the risks and will end up having a higher win/loss ratio. – 235 pips Analysing the above trend. 20th April 2005.The Way to Trade Forex GBP/USD – 60 minutes. in this instance the Double bottom at 1. from 15th April 2005. may mean that you are missing out on few other trades. the crossover of the 5 & 60 periods EMA. Using other indicators. As I keep repeating.8780. On the above chart. by combining 2 or more signals you will increase the certainty of a profitable trade. which also confirmed the bottom.8860. Overall this gives a strong signal when you have confluence of events. Trading Strategies 62 .8890 Close position at 1. you could possibly have entered on the trade earlier. Total profits from the trade. The second signal also came at 1.9125. when the EWO turns negative. the three indicators were not in conformity till the 15th April 2005 that is when the Trend moves into a positive mode. This of course.

Let’s face it nobody is going to catch the tops and bottoms. How many opportunities can you spot on the following chart? Feel free to email me with any queries.net Trading Strategies 63 . 20th April 2005. Let’s examine a trade on the CHF on 20th April 2005. So you can see that this signal will work in all time frames. info@4x4u. when the EWO turns positive.1890. on 20th April 2005 Close position at 1.1825.The Way to Trade Forex USD/CHF Using a 15 minute time Frame The Elliot system will work in any time frame. From the top at 1. when combined with other strategies discussed in this course. Often I am able to achieve up to 90% accuracy Elliot Indicators – Test your Knowledge. – 75 pips. GBP/USD – 5 minute Chart Date: 22nd April 2005. Total profits from the trade. We get a signal to turn short at 1. CHF starts falling.1750. the currency falls by 50 pips before there is an Elliot signal.

These Pivots are valid for the next 24 hours. A series of points are delivered. and yet they are not commonly taught at Forex Courses and also the average trader does not generally understand them. Pivot levels can become very powerful You can easily develop a Pivot calculator. These points can be critical support or resistance levels. but when a trading strategy is devised in conjunction with other indicators or chart formations. and you have to calculate them on a daily basis. Since much of the volume on Forex depends on these techniques. Whilst no system is perfect. so I guess they become accurate by definition. using the previous 24 hour “session” days high. where large part of FOREX volume is based. Pivot points can be calculated using few simple arithmetic calculations. Using pivot points as a trading strategy has been around for a long time and was originally used by the floor traders. using an Excel spreadsheet.The Way to Trade Forex Pivot Points as a Support and Resistance Tool Pivot points are one of the primary tools used by many Forex Traders. pivot lines then become the focal points for the battles between buyers and sellers. Pivots are also widely used by the bank and institutional traders. low and a close. One formula that is widely used is as followsOpen Price High Low Close Trading Strategies 64 .

Adding trend lines is also very important. spinning tops etc). S3 the market will already be overbought or oversold and these levels should be used for exits rather than entries. By the time the market reaches R2. 3 support levels and the actual pivot point. Confirmation with technical indicators such as RSI is also useful. as when you have confluence of events. R3 or S2. you eventually finish with 7 points. In determining when to enter a trade you will also look for the usual candlestick formations indicating reversals (Hammers. Trading Strategies 65 . you could expect a price explosion. Railway Tracks. then kindly email me and I will send you one by return. 3 resistance levels. The general idea behind trading pivots is to look for a reversal or break of R1 or S1. The three most important pivots are R1. S1 and the actual pivot point.The Way to Trade Forex If you need a spreadsheet calculator. From the above formula.

In the space of 2 hours a nice long and a short trade. but is quickly followed by Railway Tracks in the next candle. After the Doji the market starts to turn higher. producing at least 100 pips.The Way to Trade Forex On the above chart the Canadian Dollar was nicely trending up. clearly time to close your shorts and consider longs. Sit back and enjoy the ride! The downtrend stalls precisely around the pivot point! – Who could have guessed? It is unable to close decisively under the pivot point. This is then followed by a crossover of moving averages.2490. then you could have gone short at 1. If you were watching the charts. pierces through R1. Trading Strategies 66 .

The Way to Trade Forex Another good Trade on the USDCHF on 27th April 2005. – producing at least 60 pips.3.21. and introduced the ‘ Fibonacci sequence’ The Fibonacci sequence is the sequence of 1. look at the pattern. It now starts consolidating.618.1875.55. but that is not the point of this lesson.1.382 1.236.382. by comparing the relationship with each number. On the way back up. Fibonacci had also learnt accounting. and each alternate number and even number to the one to the four places to the right. It stalls precisely at R2! – Who could have guessed! – Yet another trade producing 50 pips On the above examples I have not gone deeply into patterns around the pivot levels.34. 4. 2. but the pivot is now acting as a strong resistance. As soon as the Pivot is breached decisively.618. or looked at other indicators. then the Pivot level at 1.89. As a trader you do not need to go into the mechanics of working out the numbers.13. as your charting program will work all this out for you.764.1936. The important ones are .382.5. Fibonacci Fibonacci is a massive subject and there are a lot of different areas you could investigate. in Pisa. On its way down it passes through R1. Italy. . . . Leonardo Pisano (Nickname Fibonacci) was a mathematician.8. it now acts as a support. I just wanted to introduce another possible way for you to trade.144 etc every next number is the sum of preceding two.618. Fibonacci contributed to the science of numbers. For example if you divide 34 by 89 = 0. Price pierces through R2 at 1. born in 1170. however.50. having gone through the R1.236. It Trading Strategies 67 . Guess time to close the shorts and consider longs. we shall only be concentrating on a few specific points. There are also fibonacci ratios.2. we arrive at some fairly consistent ratios. for the purposes of the method to be used in this training material. . 1. but stalls just short of S1. followed by a doji then the slide began.

so what you may ask is how come one should apply the fibonacci techniques to the trading environment.The Way to Trade Forex turns out that the Fibonacci ratios are prevalent in nature around us. in plants etc. Traders study the charts. and Fibonacci ratios can be applied to the price scale and also to the time scale of the charts. I will show you some examples below. Trading Strategies 68 . and if you normally look at the price patterns they tend to retrace in Fibonacci proportions often enough. GBPUSD on a 4 hour chart. in the universe. they advance then retrace. Prices never move in a straight line.

2% fibonacci level. Support and resistance levels are there to be broken. you must develop the skills to filter out bad trades. but only to be stopped at fibonacci 61. but trading within a channel. – Obviously with tight stops. It takes some skill to determine which Fib level is likely to cause the market to turn.2% and pivot point. and improve the odds of finding better trades. Look at the way the price slide was halted at the Pivot point. rising by 60 pips. No technical study is perfect. it is on a steady up trend.8%. even though the cable moved only 60 pips. Do not blindly anticipate the market to turn at a Fib level.8%. Once again this further illustrated how you can have an easy trade when combining two or more studies together. Who would have guessed? Having bounced from the 38. Many attempts were made for higher prices. Trading Strategies 69 . which also coincided with the 38. which also coincided with R1. On the above example. on a day when there was not a great deal of price action.The Way to Trade Forex Have a look at the above chart – GBP/USD on 05th May 2005. therefore you should experiment with as many charts as possible. but the rally repeatedly stopped at R1 & 61. but an active trader could have easily made over 100 pips – just trading off the pivot and Fibonacci levels.

Consider this. 95% of new FX traders lose and 95% of new FX traders rely solely on technicals. the key fundamental announcements for the next day. but after practicing for some time you should get a feel of what to expect. The time spent planning on such matters separates you from the novice traders. and then trade your plan. and this will sometimes offer you the best trading opportunities. This kind of holistic view is essential for FOREX trading success in my opinion. Set your plan in advance and you should have better success. Always review the night before. Today I consider fundamental. If there is uncertainty about the announcement. you will see some extreme volatility. then there will be a drastic effect on the Forex market. if not then please email us and we will be able to provide the best websites to look for this information. and a great number for the USD is being released. until such time as the technically strong currency was crushed following release of FAs.The Way to Trade Forex Fundamental Announcements. off course at this I will also consider the charts. Keep an eye on the time when the numbers are being released. of Michigan confidence and the Tankan Survey. following the release of FA’s and a lot more can be made going with the move as it kicks into high gear. It is really difficult to anticipate what will create strong reactions. Your broker’s website should be able to provide the calendar of fundamental announcements. On the fundamental announcement (FA) days. For example. This will result in the best breakout days. it looks good and the news says it will be good. showing that you are a professional quality trader who takes time to properly plan your trades. each one provides important clues. making good profits from this. There are certain FAs that are much more likely to result in strong movements. if I think the market sentiment is changing to USD positive and it’s starting to look good on the charts. That’s enough of a reason for me not to rely exclusively on technical analysis only! My experience has been that once a strong move is generally underway. in a game of probability I can’t imagine a better trade set up. Looking at the calendar. So how do you trade the FAs? Early in my FOREX career I was 100% technical. as sometimes the prices may move by 100 pips or more within a few minutes of announcements. technical. and market sentiment simultaneously. The most important to watch areUnemployment reports Interest rates Consumer price index (CPI) Inflation Gross Domestic Product (GDP) M2 Money supply Producer Price Index Various surveys – U. Release of key economic data seems to generate more price action than say speeches. this to me is a perfect buy signal. and the support and resistance levels GBPUSD – 4 hour chart Trading Strategies 70 .

being Dollar negative.The Way to Trade Forex On the above 4-hour chart release of FAs. Before the release of FAs I will always sit down and look at the charts. On the failure of a breakout – I was quite happy to go short for over a hundred-pip ride south. GBP USD 5 minute Chart Trading Strategies 71 . also look at the pivot points for the day. sees the Cable making an explosive move initially. in all time frames and look at the trend lines. with support and resistance levels. This is where doing your homework will help you tremendously. but the rally stops precisely at a double top – Who would have guessed? Then followed by the pound getting crushed.

before the release of the FA.The Way to Trade Forex As you can see from the above 5 minute chart. On this basis you can only lose on one – not both – yet with volatility like the above chart – you can win on BOTH the trades. He targets 75 pips from each trade – and has a stop of 150 pips. Overall gain of 150 pips – not bad! Just for a few minutes’ work. that it works majority of times. another example of Technical analysis and breakout pattern on the FA days. there is a move south of nearly 200 points. So in the above chart. and see it for yourself. he goes long on one account. but the price action failed to follow through and the price went back through the pre-release start point! Example of a trade based on the above strategy would be . One of my Forex trader friends does a straddle trade on the day of a major FA. Once again. before the release of FAs Trading Strategies 72 . I have so far done 4 trades. won 2 (300 pips) and lost 2 (150 pips).Refer to the chart of GBPUSD on the previous page. This strategy works so well when there is a big price move. and then also goes short on the other account. If fact with this system – you are in profit if you were wrong 50% of time. A good short entry would have been at the break of the channel. The Cable moved up nearly 100 pips on the 5 minute chart – then settled in a rectangle channel for a 30 pip range. the Dollar got crushed. Simultaneously do the following trade. Once this range is broken to the downside. Surely a case of free money for 10 minutes work! Paper trade. and he swears on it.

The Way to Trade Forex On Account A Go Long at 1. Overall you have come out with a net gain of 150 pips. With so much volatility. B has been filled with a profit of another 75 Pips. not a bad way to trade. You should however appreciate that this strategy seems to work in the current very volatile markets. and you were risking 75 pips. Target 1. during the next 2 hours subsequently the Cable moves down by over 200 pips.8885.8740 (150 Pips) On Account B Go Short at 1.8880 (assuming a 5 pip spread) Target 1. the Cable moves up nearly 100 pips.8960 (75 pips) Stop 1. That is a risk reward of 1: 2. At this stage your shorts on Acct. However. than this strategy will not work. stay with it – and the day it stops working.8810 (75pips) Stop 1.9030 (150 pips) May seem a silly trade to most. the behaviour and the pattern of currencies change. Try it out and paper trade it. If however. Trading Strategies 73 . As soon as the FAs are released. look for something else. If it works. at this stage your long would have been filled for a 75-pip profit. but tends to work time after time on most occasions.

Indeed lack of proper money management is a major cause of failure among new traders. the market moves in the direction you wanted. I recollect a “Trading Guru” telling his audience – “ it is not entry which is important – it is exit” – I choose to differ. the market keeps going in the direction further and further! 4. 2. and the makeup of your portfolio and how you will diversify between different investment types. Most so called gurus tend to put lot of stress on the exit (stops). how you will allocate funds to your trades. but have to add that exit would be totally meaningless if the entry itself was not at a right level. as “risk management” is absolutely critical to successful day trading on an ongoing basis. However. what you don’t want to happen to your position is the following. Many traders regard it as the single most important aspect of trading.The Way to Trade Forex TRADING PSYCHOLOGY • • • • • • • • Money Management & Risk Management Money Management Rules Trading Commitment Determine Your Trading Style Overcoming Fear Discipline. when your position is stopped out Money management becomes key after you have pulled the trigger. take a small profit. The position goes against you.e. and you keep moving the stops. If the entry price was not the best price. counting your profits. and just as you close. having got a good entry level. hoping that the price will eventually turn in your favor. it wipes you out. in my opinion entry as well as exit levels are both important. Discipline. size of the trades. At a Trading seminar I went to some years ago. 1. Discipline A Trading Coach? Secrets of Highly Successful Traders Money Management / Risk Management Money management also referred to. Money management covers the allocation of funds to your trading. OR The market moves in your favor. Trading Psychology 74 . and you close your position at a massive loss. based on the entry price which would be according to your trading system (this is covered separately under trading system and entry methodology) . which I agree. then you will have a quick exit. you are happy with a big smile. i. 3. just in case your profit evaporates! You chicken out. risk reward ratio – if you apply that. and go to the pub in the evening to celebrate! Then next day the market keeps going further in the direction that you had intended. but what’s the point – you have already snatched your profits! In the subsequent days and weeks. you are in fear. The loss gets too much to bear. stop loss management. or profit to trade and your trading style. For money management rules to be profitable to the trader. The entry and exit points.

Preserve Capital One of the main ideas behind money management is living to trade another day. what is important is that this trader has a set of rules and he abides by his rules and has an exit strategy on hand. There is no get rich quick scheme in trading. the master trader opens his position. taking the above example a person making 3 trades and losing on 2 and winning the third will still make a net gain of 20 pips. the professional trader turns greedy” A real professional trader does not get too excited about his wins or losses. Looking at it.The Way to Trade Forex Have you ever experienced this? Do you ever say. Once again you should trade according to your risk tolerance and your own trading style. He will not change his stop losses. The key is to take moderate risks with good stop losses to steadily increase your capital. Whatever works for you. and it is not an easy game. Entry price Stop loss target Stop profit target The resulting risk/reward ratio. an amateur trader finds it difficult to cut his losses but does not find it difficult to snatch the profits. you have to work very hard. WHY Does it happen to me? – This is money management. Preservation of capital should be the first rule for trading and investing. Risk Reward Profit to Trade What is risk? It simply means losing money.e. but this strategy and system has consistently worked for him – so why change. i. A very disciplined trader indeed. A close look at his last 20 trades gave me the following statistics Total Trades: Trades stopped out: Trades with profit: Net Gain: 20 3 Loss of 225 pips 17 Gain of 850 pips 625 pips Trading Psychology 75 . when a frightened trader closes. risking £1 to earn £3. The professional trader uses his trading system for entry and for the exit strategies. So. On the other hand. and that is trading. for example some traders will only risk 20 pips to gain 60 pips. even though he is right only a third of the time. Why do trends reverse? Because most losers think alike. You should avoid unnecessary risks. That would be a risk/reward ratio of 1: 3. How do you calculate a risk/reward? The simplest form of calculation involves nothing more than the following. A lot of people talk about risk/reward ratio. One of my students who started trading Forex few months ago. has consistently averaged over a thousand pips every month. He risks 75 pips to make 50 pips! Most traders would say he is crazy. He will stick to his rules. “ When the amateur trader is fearful. stick with it. as there is no point in having a good risk/reward ratio only to be stopped out all the three positions. he simply concentrates on the task at hand. Too much risk on a trade is not worth it. However you must have realistic expectations. as that can wipe you out. if that risk can knock you out of the trading game.

It is also interesting to see from the trades. most of his trades could have generated more than 50 pips. Reinvesting Profits Compounding means earning interest on interest is best described by an ancient story A Maharaja ruled the Indus Valley. Trading Psychology 76 . but when I have a few losing trades. I personally believe it is difficult to start trading with a small account size. the amount of dollars you have now vs. Most traders tend to work with 2%. By comparing the risk to the account size. I believe you need at least £5. Bored. you change and look for something else. suggested that you could start trading from as little as $300! In my opinion an outrageous advice. he asked his court gamesman to develop a new game for him. i. What is the correct ratio? It all depends on your personal tolerance for risk. then he would have been stopped out on further 11 trades. That would have meant that 14 trades stopped out for a loss of 560 pips. in northern India. you have to have a system in place. and he is consistently laughing all the way to the bank! So the bottom line is. As I have said previously. His main focus was on finding good entry points and avoiding gambling with risky trades. Risk/Account Ratio This is the amount that you are risking to the amount in your account. in the sixth century. so for example if I have a £10. they are hoping to comeback with double his trade size after a loss. and was willing to place a wider stop loss. The Maharaja was delighted and asked the gamesman what he would like as a reward.The Way to Trade Forex When I looked in detail at the 17 profitable trades. the number of dollars after you lose. I will trade aggressively if my system is making money. One Forex website selling a “hot System” for $500. that works for YOU.e. he would have lost overall. This is a very poor method of money management.000 than I would allow myself to lose £500 on a trade that would be 5% of my capital. but it works wonders for this trader. Amateur traders often trade heavily after a big drawdown. So long as a strategy consistently works and is steadily increasing your bank balance. Because of good entry points. I generally work with 5%. risk/account. that this particular trader waited for a good setup and that he was able to profit from 85% of his trades. not a great way to trade. So by trying to improve on a risk/reward ratio on paper. To some. The best futures traders make money on 30 to 40% of their trades. but this may not be enough. He will NOT trade unless he finds 3 good reasons. as this can only kill an aspiring trader with one or two losses. The gamesman created chaturanga. which is the oldest known form of the chess game. had he placed a stop loss of less than 40 pips.e. they are aiming of a risk reward ratio of at least 1:3 – letting profits run and cutting losses. i. unless the bet size is very low and higher stop loss. you are comparing apples to apples. as he only pulled the trigger if his system allowed him to do so. The day it stops to work. not what is written in a book or what a guru tells you to do. majority of their trades end up as losers. I will reduce my bet size. This game is played on a board of sixty-four squares. But he is happy with 50 and smiles all the way to the bank. Some traders would rather work with a risk/account ratio as opposed to a risk/reward ratio. patience in this case paid. due to a well thought out strategy.000 account ideally to have a realistic chances of having consistent profits. then you stick with it.

and most books on trading are full of it! In fact attending various seminars on trading. he owed the gamesman more grains of wheat than existed in all of India. so with a start up capital of £100. Check the following chart for other percentage return of investments. the Maharaja discovered that. I bet they make more money from their seminars and presentations.if you stick with your system.000 you will be a millionaire in no time! Compounding looks great on paper. The position is left for many days. Trading Psychology 77 . You have set yourself modest and realistic targets that you are able to achieve. but targeting at least 500 pips.The Way to Trade Forex The gamesman replied. and diversify your portfolio. Many traders I have met set themselves unrealistic targets. However. remove some of your winnings on a regular basis. opens an account and expects it to run it to a million! Many want action and thrill unable to wait for a good entry. and trades this in a separate account. The gamesman was earning interest at the rate of 100% per square. If you can manage to make 50% a year in your trading. even before he was halfway across the board. because they have just been to a seminar. reinvests half of his profits on long-term Forex positions. some want to achieve 500% or a thousand percent. and leave the other to trade. far beyond what we can expect. eight on the fourth. and continues to trade in his normal way using his system. the principle of compounding interest remains the same. The positions start with as much as 200 pip stop loss. Leaving some of the profits will allow him to make money faster and will also start using long term positions." In calculating the gamesman's reward. "Just one single grain of wheat on the first square. than they do on their trading. Once again. and a Guru talks about achieving these sorts of returns! – The gurus make it sound so easy. and so on across the board. forget 30 0r 40% annual return. if you are comfortable with. A professional trader calmly removes some of his profits from his account. An amateur trader comes into the market to get rich quick. Time and compounding your money will make you rich . Wonderful! Looks so easy. else stick with the current strategy and trade sizes. and he will leave some in the account. this style works great for this particular trader So don’t be greedy.000 in just seven years. using wider stops. two grains on the second. using weekly and daily charts. One of my students.000 account to over £170. Earning interest on interest can add up over the long term. they make it look so easy and the amateur trader gets excited. wanting to be on the move all the time. four on the third. Only increase your trade size. you can grow an initial £10.

It takes time to accumulate wealth. look for opportunities to enter long. always use actual stops. according to your trading system. time or money to a particular principle. Do not move your stop. and it greatly affected my trading confidence. Close the positions for profit when your targets are achieved Always. not 100 lots – the whole experience was a disaster. Finally. in my opinion these are the important time tested Money Management Rules. You should limit the loss and let your profits run. then you cannot trade. but also an equal chance that you will be wiped out never to fight again. don’t try and outsmart the market. or 100 lots? Reinvesting can turn a winning account into a losing account. but it can disappear fast if you do not follow your trading rules. The optimum is somewhere in the middle.The Way to Trade Forex Position Size Professional traders know the importance of money management. I ask traders. My focus is in steady increase in my capital. It was an experience never to be forgotten. Commit – to promise or give your loyalty. will your psychology cope with say 10 lots. don’t get too hung up on risk reward. if however you have a streak of losing trades. my psychology was used to trading 5 and 10 lots. you win little. a balanced trading approach is necessary. Trading Commitment What is commitment? – The state of being bound emotionally or intellectually to a course of action. In a bull market. would you double your bet size if you had doubled your capital? If you are successful trading 1 lot. a big drawdown can wipe you out. If you risk too much. In a bear market. but what’s the point if your 3 positions are stopped out. Preserve Capital – Survival first is the first goal. I had to stop trading for some time. Money Management Rules To summarise. If you risk a little. “Trend is your friend” – Always trade in the direction of the trend. Always consider bet size and diversification. At that time. which are necessary to survive as a Trader over the long term. if your psychology cannot cope with trading big sizes. if the price gets closer to the stop. Risk Reward Ratio – I have written enough on this. then take time out from trading. look for opportunities to enter short. and started trading with a mini account. It looks nice having a risk reward of 1 to 3. if you have no capital left. When on a winning streak – trade aggressively. I was requested to trade 50 and 100 lots. Once again use the stop levels that you are comfortable with. person or plan of action. I was once asked to trade a big account for an American investor. Trading Psychology 78 . 100 lots would be approximately $10 million. A bold trader placing huge trades feels the pressure and will get emotional the moment he is losing few pips. then there is a chance that you could become a millionaire soon.

in the end. commitment to some will come naturally. it's challenging. funds. who enjoys doing it in a fun way. with precision. A trader must build up skills so that they are able to take actions effortlessly. often times doing 10 or more trades each day. over and over again. Have a strong commitment to study the markets and identify good set-ups. Trading requires commitment and persistence. and objectives. When you trade often and for small profit and loss targets the disadvantages of using on-line FOREX brokers are magnified and a declining account balance is almost a certainty. the first step in formulating a trading plan is have a heart to heart with yourself and determine what kind of trading suits your unique character. there is always a way to turn things around if you are committed. bid/ask spread are a killer when there are so many transactions. so that you can pull the trigger effortlessly. but you will be working toward something important with every step you take in that direction. focus on how enjoyable the process of trading is. they buy and sell very quickly. during the Trading Psychology 79 . However. Staying committed to your goals and trading plans does not guarantee that you will have easy success. and off course you may have heard the term “ stops being gunned”. If you worry about profits. You've got to want to trade with a passion. closes all positions by the end of each day. you'll never make them. Although excellent for long-term trading and swing trading. and goals. Long-term trader – holds positions for long periods of time. and when you devote enough time and energy to it. Stay committed to your goal. FOREX day trading is expensive. Rather than considering how trading profits can change your life. Determine your Trading Style – What Kind of Trader are you? No two traders have the exact same personality. bid/ offer spread is a relentless adversary that should be examined closer. It takes great commitment to make money from the Forex market. Brokers provide a service and are entitled to charge for it but the question is how wide a spread is justified. It's fun. you simply have to have great amount of passion to succeed and want to be a trader. This can be a recipe for disaster in most cases. Once this passion is created. Most new FOREX traders begin as day traders. which is the end product. often making 10 or more trades a day and closing all positions at the end of each day. in addition stop loss orders are executed when the price level is reached not breached. which is of course vitally important to traders. Of all the drawbacks the retail investor faces. may be less important than the fulfilment that trading offers. normally weeks to months. here is why. Most traders fall into one of the following categories: 1) 2) 3) Day trader – buys and sells very quickly. It is essential to enjoy trading because it is your passion. it can be fulfilling. Traders will always experience ups and downs in their trading career. holding period is generally hours to days.The Way to Trade Forex To translate it to trading Forex. The monetary benefits. resulting in premature closing out of positions. Money may not necessarily be the main objective. Commitment is an absolutely necessary quality if you are going to be a successful trader. bankroll. Swing trader – holds positions for bigger moves and a longer period of time than day traders. it's worth it. You will want to leave the game before you've really started. limit orders may not be filled. however when they are going through a rough patch. Most brokers provide a consistent spread and ostensibly a constant source of liquidity. successful FOREX day trading is infinitely more difficult.

while not assessing their performance as "a probability game" that they are playing over time. it implies anxiety and usually the loss of courage." This definition of fear is useful in helping define the issues that traders face when coping with fear. Trading Psychology 80 . but the key is how we prepare to address our concerns related to taking on risk as a trader. I recommend experienced day traders take a rational look at their performance to date in light of their direct cost of doing business (mark ups).The Way to Trade Forex past 6 months it has become standard practice among most on-line FOREX brokers not to provide dealable bid/ offer rates during volatile times. what’s key to realize is that a substantial portion of these revenues are re-invested in advertising and other aggressive strategies for securing new clients. Let me leave you with this thought. they don’t rely on retaining client relationships. they gain when clients lose. ‘Trading in the Zone’. with excessive fear or greed after a series of losses or wins. they overcompensate for the risk / service provided. 1) 2) 3) 4) Currency traded Amount traded P&L on each trade. As a result. This causes traders to put too much weight on the outcome of the current trade. All traders will encounter fear at some stage. You should now determine and record the mark up on each trade. once traders are made aware of its potent negative impact on performance results. Two of the greatest fears that a trader will encounter can be. Mark Douglas. this seems inevitable. Winners take positive action in spite of their fears. This manifests itself in investors getting too high and too low and causes them to react emotionally. no matter whether you are a professional or a novice trader. Make a line graph with three lines: 1) cumulative P&L. while losers are controlled by it. and to succeed and fight fear. brokers are generating more revenue than ever. and 3) cumulative P&L plus mark ups. Overcoming Fear How do you define fear? "A strong emotion caused by anticipation or awareness of danger. in his book. What’s not obvious but happening behind the scenes is a steady flow of existing clients dropping out and new clients replacing them. such as around news announcements and when price volatility increases for technical reasons. The reality is that all traders feel fear at some level. says that most investors believe they know what is going to happen next. Next to the P&L column add a column titled mark ups. The reason I spend a lot of time on mark ups is because it’s a variable trading expense that can be controlled. Winning traders manage their fear. the on-line FOREX brokers websites are filled with reasons why clients make money trading foreign exchange (practically all half truths or self serving theories) but have you ever seen a single word on their clients’ actual results? In summary. traders will have to work through this positively. such as often occurs at key price levels. Download from your broker website all trades you have ever done in chronological order onto an excel spreadsheet. I am fairly certain that the bid/ offer spread is the root cause of this very high attrition rate as existing clients lose their stake and also the root cause of the very high rate of replacements as monies generated from prior clients is used to secure new clients. Simply put. Most clients lose and most clients loose quickly. most on-line FOREX brokers are a typical of brokers. Bottom line is bid/offer spreads are too wide. such as paying referral fees on every transaction to third parties for signing up new customers. 2) cumulative mark ups. Eliminate all columns except.

The market does not know that you. the more likely you will start to experience a better run of trades. the traders exists. Tendulkar or Richards – But they all come back with a bang. winning means being unafraid to lose. who regularly lectures at seminars. A professional Trader is more concerned about avoiding a big loss. even when they have a great trade! To a professional trader. yet his overall monetary record is of having a massive loss. had many. can look forward to another trade. Your success or failure in trading depends on your attitudes towards your gain as well as losses – and how you handle them. I see that even a world-class cricketer goes through a lean patch. but finally he went short at $179 and at the time of writing this book. before you finally learnt to ride a bike? Or how many times did the baby fall down before the child went from crawling to walking to running? So for most novice traders. you or for that matter any trader cannot do anything to change the market or influence it. He likes trading stock futures. but it is how you handle the loss. and less concerned about small losses. This position has stopped him focussing on new opportunities. he has failed miserably in his trading. A trader. Fear of Loss 2. for he will look at that as a way to learn from that loss and he will always ask the question. Imagine how many times did you fall down. having blown his account many times – now he just concentrates on teaching trading to others! Fear of losing is not a problem. Trading Psychology 81 . who is relaxed. Why? – Overcoming fear of losing money. The longer you can stay in the game with a sound trading plan. where he records his trade. he will pull out the chart. that will always serve you well in times of temporary trading slumps. He had many opportunities to come out with a small loss. so it should not be different for a trader. they are so afraid of losing that they simply do not pull the trigger. a professional trader uses his head to stay calm and will look for his new trade. once admitted that despite being brilliant in his study of technical analysis. and study it carefully. I know of one leading “guru” on charts and technical analysis in UK. why the trade made a loss. One trader that I had recently coached had an overall winning trade of 80%. I have never met a trader who really likes losing money – at the same time I have never come across any trader who has NEVER lost any money.The Way to Trade Forex 1. One of the greatest reason for a lack of success in trading is because most traders played it safe. or a good profitable trade. particularly the stock Google. Fear of Letting a profit turn into a loss Fear of a Loss No matter how skilled you may be in your technical analysis. or your study of fundamental analysis. many successful trades on the long side. You are simply wasting your precious nervous energy! The primary difference between a professional trader and a novice trader is how they handle a loss. Only a novice trader will become excited and depressed. but “he did not want to take a loss”. Whether it is a big drawdown on an account. how can I profit the next time? The winning trader will have a trading journal. Only YOU can control your behaviour. Being a cricket follower. he was still short with the price at $198. on the other hand losing inspires a professional trader. or your having devised some brilliant trading strategies – but you may still face roadblocks on becoming a successful and a profitable trader. be it Botham. the reason they do not win in their trading is because the pain of losing money is far greater than the joy of being a winning trader.

I were trading a longer-term time frame. In so many years of my trading experience. with discipline to follow your goal and a lot of patience! One of my goals is to target a point gain of 5. it is vitally important to have some sort of consultancy from experienced traders or have a trader’s coach to guide them. for all the help that I have received from her during workshops. which you will action decisively and not hesitantly. i. after it broke out of its long downtrend. for a novice trader. This page is dedicated to Adrienne Toghraie – of ‘Trading on Target’. I was so confident that the bottom was made here. I would like to give credit where credit is due. Discipline. so that as soon as I am say 30 points in profit. Yet now he is close to getting wiped out. having started of with a wide stop I was now hoping to ride this all the way up! The position was broken down into 4 parts. One thing is for certain. 25% each portion. I moved my stop to a Breakeven point in money terms. This way I am guaranteed that I will not lose! I will let the second lot run and I am seeking to ride the position with a trailing stop on the remaining portion of the position.The Winning Edge Series. 500. and at the same time trying to catch the big move. to have achieved a thousand points.I simply say. This strategy has given me the most confidence.e. but imagine if only 2 out 10 trades you catch are a “big move” –what would that do to your bank balance! – The key is patience. He is now saving money from his full time job. and only YOU. consultations and also reading her books. I would break the trade in 4 parts. when I achieve it So just how do you achieve the faith in your system. So lets say If I am trading a shorter term time frame. “Go with the trend! – Let the profits run. You will know of it. depending on what time frame I am trading. With a good trading plan you should be able to have an entry and exit strategies. and cut the losses short” But what do most Traders do? They SNATCH PROFITS and let the losses run! Too many traders want to lock in a quick profit to guarantee that they feel like a winner. he would have quadrupled his equity. had he just followed the above rule. I move my stop to break even. If however. the discipline and patience? In my opinion. can make that decision Discipline. All you need is faith in your system. Fear of letting a profit turn into a loss I am often asked when do I take my profit? . and stay focussed with ruthless discipline.The Way to Trade Forex What is important is how well you execute your trading plan. 750 and finally 1. Quite often I get stopped out. In 2003 I went long on the Nikkei Index. will more than be paid for not only from the profits that you will make as a result – but also the losses you will not sustain. I have yet to come across anyone. or 4 lots. I close 50% of my trade and then for the remaining. unless they have not told me. This changed my life as a trader! Trading Psychology 82 . Few thousands spent on being mentored. taking 25% profits gradually. The target for each portion was 250 points. You have a choice. then a limit order to take profits as the Index went on a run! One of my Trader friends said “ I was crazy” – subsequently he ate his words.000 points. Discipline. As soon as my 250 points were achieved.000 points on Google. of letting the profits run and cutting short the loss. Refer to the section “A trading coach” for more information. I break my trade in 2 lots. to fund his account to have another go! So when do you take profits? For example I tend to break my trade into 2 lots. either on a short side or Long. In the above example of a trader who was trading Google.

to bring under control so as to act systematically. So for example a trader who has 70% of winning trades. The most important of all.The Way to Trade Forex Though I had been a profitable trader for many years. if you implement your trading system. and 2. In my opinion a successful trader needs three things. i. mostly due to fear. you have to make plans and have patience. to go through all areas of trading. The key word in the above definition is “habit” – so discipline in trading is the practice of making what you do a habit. Discipline – To be accustomed to regular and systematic action. for example a certain task to one person may require tremendous amount of self control and discipline. Discipline and Discipline! – Trade the signals as they occur. Once again here. Trading System – a system. for example if you were trading stocks. and more shocking statistics are that 10% of traders go bankrupt. patterns. and equally important you should not snatch your profits. So what is Discipline? One of the reasons why many traders are unable to be disciplined is because they have not defined it. Discipline will involve the need to act consistently. then the system you may have used will not be relevant for the Forex market.e.Discipline. and will only act. yet overall loses more on the 30% of trades – is a loser. so your trading system should reflect what products you are trading. You have a set of rules that you will follow.Must have discipline to follow sound money management. which you set forth in your trading plan. but I feel that my elevation to a “consistently successful trader” has only been made complete by the tremendous assistance I have received from Adrienne either directly or indirectly. from which he can profit. Trading System – You have to regularly monitor your trading systems with the changes in the market and also your style of trading. because the behaviour. Fear of profit or fear of loss. two things are most important. It is also important that the stop loss is not moved further when the price gets nearer the stop. and in accordance with your trading strategy. if your system says so. whereas the same task to another person may not require any effort. which will allow the trader to pull the trigger. 1. Having designed a system you must ensure that you implement it – Many traders fail to implement the system. The bottom line is what you take home! Small losses should not turn into large losses. To practice discipline in trading. It is said that 90% of traders lose money. which are. Money Management . in a reliable manner. “ The habit of obedience. fear is also the most important aspect in the psychology of trading and I have written a full chapter on fear as it relates to trading. volume etc are totally different in a Forex market. Money Management techniques – Having pulled the trigger. In order to devise a trading system. If there were changes in the products that you trade. you need to place the stop to limit the risk of any loss.” Trading Discipline – To pull the trigger when your trading system gives you the signal followed by a stop loss. No signals then no trade should be one of your golden rules. so why would this be the case if say most of the traders were aware of discipline or were exercising discipline? All individual traders have their own needs and it will vary from a person to person. then large losses can be contained – the ability to do this is discipline! Trading Psychology 83 .

thereafter I would be using trailing stops for the rest of the position. I have a full-page trade journal. but how much you take home. The company will measure its performance against the budget and will attempt to take action on any variances. However. Overall. The chart with all my trend lines and indicators Reasons for placing the trade. they will have budgets prepared in which they will detail the sources of its revenues and against it there will be a budget of its outgoings – the net of these are profits. Once again. Without having a trading discipline. why is it different? Why did you not follow the system? Did you have a loss. which should not have occurred if you followed your system? I am regularly comparing my performance with my Trading System. which will record full details of my trade together with a copy of the chart. so for 7 trades that would be 70 pips. I keep a trading journal. so how have I coped with this? Well. In the case of your trading you have to compare your actual performance with your system. so for 3 trades that is a profit of 540 pips. stop. do they mirror the system? If not. In the comments section. then another 25% for 75 pips+. and initial target Exit date & time. to what extent your capital is increasing. I will examine the position in detail. as soon as I pull the trigger to open a new position. Until you know the cause.g. is your performance better than the system? The losing or winning trades you had. Price. Therefore. it should not be a hobby. that would be a net gain of 470 pips for 10 trades. and when I do I need an “iron clad” signal – I have patience to wait. He starts with a 50-pip stop loss then will gradually have a trailing stop. for a start. for the 30% of winning trades he has averaged a profit of 180 pips per trade. it is no good having a great system if you do not have the discipline to follow it. Trading Psychology 84 . My trading journal will have the following information. Profit/Loss Comments & lessons learned. and will look at reasons why the performance is positive or negative. Trading discipline should be your number one priority. and on each page I have various inspiration quotes to motivate myself. price. I immediately put a stop loss. often I will start closing some of the positions gradually.e. How can you improve your discipline? Your trading should be treated as a business. e. you are doomed to fail. i. this 70% of trades has averaged a loss of 10 pips per trade. I would close at least 25% of my position for a profit of 20 to 50 pips. Your trading should not be any different. using the moving averages and other indicators to keep me in the trade. he has 70% of his trades being stopped out between a loss of 50 pips to gain of 50 pips. I discuss some of these strategies in my weekly Forex newsletter. I don’t trade that often. and determine the reasons of the loss. Any business organisation will have goals. the bottom line is not how many losing trades you have. nothing less.The Way to Trade Forex As part of my trading system. this illustrates the power of letting your profits run. Looking at his trade record for the past 3 months. Using this method I have been able to pocket several hundred pips from the final trade! As I keep saying currencies trend very well – so ride the trend. One Forex trader I am mentoring “never” closes any of his position – he uses trailing stops and all his trades get stopped. Depending on the market conditions. on which I will write notes. at least 3 reasons Entry date & Time. you will not be able to change it. Once the position is in profit.

but also they enjoy reading the charts. the most important negative mental attitudes or delusional emotions is anger. then you simply cannot trade profitably. learn to be a happy person. In my opinion. Discipline involves controlling your mental state. Imagine what this does to the trading result. For example my son says to me. Mistakes You have to analyse your mistakes. then you must consider giving up trading until such time as you are able to control your mental state. “A man is only truly great. the target gets nearer. What is the point of being disciplined if you do not enjoy the process. you can trace it to a negative mental state. when he acts from the passions. mindfulness. I learn winning from coaches” -Harvey Penick Trading Psychology 85 . I learn golf from golfers. Most succesful traders have true love or passion about their trading. which is the end result. You should seek professional guidance in this matter. his goal – By having this passion built in your physiology. If you are unable to control your mental state. tends to relax your mind and body. A TRADING COACH? “I learn teaching from teachers. designing the trading system. People seem so angry all the time. ‘I don’t care how much money I make trading. this will do wonders for your bottom line. I always start my day with prayers and meditation. the mistakes you make are in some way related to the negative mental states – whether it is an inability to pull the trigger or compulsiveness. pulling the trigger. we have to decide it and feel it. So how do we get passion? The same way we get love & warmth. to him that is his driving force. but what is important is How can I become greater than Warren Buffet’ . but it also has a calming effect.” Passion is defined as having great deal of emotion or feeling. so if anything goes wrong you take responsibility and not blame anyone else. requiring study. you have to have love for trading. it will not only give you insight into what anger is and what happens to oneself when feeling angry. they are in for the money. reflection and honest observation of one’s mind. In my opinion if this applies to you. To begin with meditation is an ideal way to try and conquer the negative mental attitudes. Smile and the world smiles back at you. So you have to set yourself free by taking control over the rest of your life. Ok. Passion This gives you the driving force to enjoy the process. relationships and businesses than all the illness in the world. It must be emphasised that to completely eliminate negative emotions from your mind is a lengthy psychological process. In the same way. Anger is an emotion that destroys more people.The Way to Trade Forex Tips to Give you More Discipline Take responsibility of your actions Only YOU determine what to do & how to do it. and certainly there are few good quality Trader Coaches who specialise in such areas.

The Way to Trade Forex The naked truth is that the markets prey on your fear and ignorance around trading. a relationship with a mentor helps you to utilize two of the quickest methods for personal development: modelling and emulation. Trading Psychology 86 . Most people are more comfortable talking about their sex life than their trading success or failures. as you model and emulate the desired behaviour(s) of your mentor. Therefore. you will not master the art of trading.” Without having discipline you will never have the consistency necessary to improve your technical skills. yet very few traders take on a coach or a mentor to help them. guide.back to increase performance. many people are downright embarrassed that they don’t know all about investing in stocks. Oscar winning actors use Acting Coaches. steer clear of common pitfalls and serve as an unbiased beacon with your best interest at heart. Additionally. Your mentor can also help you to avoid mistakes many young professionals make. Another reason a trader’s coach is valuable to a trader is when a trader wants to break out of the comfortable level of good performance to be a trading master. It’s time to come out of the dark ages and realize that these are learned skills like any other skill that you’ve already mastered and that all you need is the right coach. you will quickly improve your skill set. There is no reason to stumble and fall when you have someone guiding you around the blocks on the road. If you want to become financially free you must reject conventional ways of thinking and follow proven methods that work. A trading coach is a trusted counsellor. All professionals. They are someone whose work or accomplishments you admire and would like to model in your own career. If you do not have a good foundation of technique. so too can a trader benefit from top performance coaching as well Do you want to become a better trader without losing your entire trading account in the process? Trading coaches are not cheap. Just like top athletes have coaches to observe and feed. Award winning singers use Voice Coaches. The success principles that work for one person will usually work for another. but in my opinion it is a lot cheaper than the losses that many traders make in the markets. How can you benefit from a Trader Coach? A Trader coach often is familiar with the trading environment and has years of experience from which to draw. It is not difficult to make money from the markets. yet traders fail to do this. I consider trading skills to be one of the most difficult to acquire. A trader’s coach helps you to develop the ability to achieve higher levels of success in all areas of your life. Every part of a trader’s life will affect his performance. expand your professional and business knowledge and jump-start your results. or a tutor. In fact. And Successful Traders use Trading Coaches. Top athletes like Tiger Woods and Andre Agassi use Performance Coaches to stay at the top of their game. The mentor relationship is one that is built on respect and is exclusively focused on your professional development and success. but first you have to learn the mechanics of how you go about doing it. He or she can offer unbiased advice and share wisdom that will allow you to grow and reach your full potential. The ability for a trader to follow his trading system for entering and exiting a trade is what traders call “the discipline of trading. in every field get the best coaches these days. What good is the best system in the world if you cannot follow it? This is one of the reasons why traders need coaching. The real key to wealth is your thinking process.

personal and totally confidential. "The decision to work with a coach is intimate. I met Adrienne at one of the Trading Expos in New York. so why should the traders be different?. of Trading On Target. on how you can improve and implement your trading plan. and to accomplish your goals. motivation. this course changed my life as a trader. These mental barriers can be subtle. honest and to offer complete disclosure. I was impressed with Adrienne’s The Winning Edge books." Driessen said. Trading Psychology 87 .to achieve success. Your personal coach will help you see perspectives you didn’t even know existed. Most importantly. and will help you overcome the inevitable bumps and hurdles that develop along your journey to financial freedom. discipline. THE SECRETS OF HIGHLY SUCCESFULL TRADERS One of the most important things that affect trading has to be self-discipline. and insidious. The coach's guidance is more personal and specific and the results are often quick and dramatic. I myself do some coaching. the results can be staggering. rather than focus on the money. so that they keep pace with the new market environment.The Way to Trade Forex What can a coach do for you? A coach. There are many trading coaches today who can offer you the quality guidance. but as my main focus is trading the markets I only do a limited amount of coaching each year. small. you will improve your trading performance. Stay focused on what you need to learn. Coaching is a powerful partnership that can save you time and money by helping you avoid dangerous pitfalls and dead-end paths while accelerating your financial journey. You need to focus on education.g. Self-discipline is simply a mental technique to stay focussed on the trading skills that you need to acquire. Your coach will provide support and accountability for your goals while mentoring you with valuable insights. author of "Ultimate Success: Seven Secrets to Spiritually-Based Leadership." "It is based upon the integrity of both people involved. I had a consultation with her and followed it by purchasing the Trading on Target Home Study Course. If you are a successful trader then you will have the money. Every professional has to have a continuous professional development. I myself have used the services of Adrienne Toghraie. As I mentioned earlier. I would have no hesitation in recommending the services of other successful Trader Coaches. Your coach is paid for one thing – to help you reach your goals and live the life you dreamed about. to take actions to implement your trading system. If the client is willing to be absolutely open. self-confidence. Your personal coach isn’t biased by commissions or advertising dollars. But their impact can be extreme. on the other hand. The difference between your current level of success and the level you desire to reach is largely – perhaps almost entirely – psychological. You should always keep learning and improving." said Anneli Driessen. e. is a professional whose work is focused on helping you manifest your inner self -. which is the by-product of your success. The course is realistically priced and Adrienne has tapes aimed at specific trading problems. and a trading plan.your needs. passion and desire to contribute -. A trader coach will isolate your deficiencies and then help you find ways to help you break through to a much higher level of profitability.

otherwise you are doomed to fail. Before all else. and within minutes will know if he sees an “iron clad” pattern. This may mean that you may let go other opportunities that arise. This is a critical step in understanding how to become a successful trader because until you take complete responsibility for all of your trades. which even a professional trader will envy! And to add to the divergence he will add a few candle chart patterns.The Way to Trade Forex Take Complete Responsibility You and only you alone are completely responsible for whatever you end up with. you will never feel comfortable with your system and you will never reap the rewards. The trader who takes responsibility will try and determine what went wrong and what needs to be done in order to avoid similar mistakes in the future. such as Pivot point trading and moving average crossovers at a later stage. you are not trading from the position of fear. Dealing With Losses You should strictly follow your money management rules. You will simply accept the loss and move on to the next trade. He has become an expert in this. then you can try and move on and learn other patterns. and has a great success rate. leading to confusion – paralysis by analysis. Once you put your money down then you no longer can control what happens. Become an Expert with One Market Behaviour Lots of traders tend to confuse themselves with too many conflicting indicators and tend to overanalyse the trend. He intends to learn other areas of market behaviours. Presently he is earning several hundred pips each month just trading divergence. To become an expert. Additionally. So make sure that your system plans for everything. The trader who does not take complete responsibility will simply say "the market wasn't right" or "my broker is an idiot". the traders who take complete responsibility for their actions will look at those "failures" as learning experiences. You won't know what the prices will do so you can't worry about anything except following your plan. One of my students. but what you will be doing is building a base of confidence from concentrating on a small area and you will be able to trade with more confidence. choose one simple trading system that identifies a pattern on a chart. What will your entry be? What will your exit be? What happens if the price gets close to your stop order? Do you see what I'm getting at? You don't want to have to answer these questions AFTER you put your money down! You want everything to be automatic by that point. what will be the amount you will lose and what impact it will have on your trading capital? Therefore when you confront losses. As a result. You will never meet a successful trader who is looking to blame someone or something else for his or her losses. once you think that you are trading successfully with this pattern. When you enter the trade you should confront with the possibility that you could be wrong. This step is critical. Obviously. as a result the possibility of a losing trade will not create any pain. when something goes wrong with a trade. That trader will likely make the same mistakes again and will never understand why he/she cannot win in the stock market. you are going to focus just on that pattern for the time being. virtually makes a living out of trading MACD divergence on all currencies. You want to understand every aspect of this pattern and it’s behaviour. and if you were wrong. you must accept everything that you do as your responsibility. your plan must be able to cater to every eventuality. Trading Psychology 88 . Plan the Trade and Trade the Plan The point of this rule is that once you have developed a system that is right for you then you must stick to it no matter what.

Once you have spent a lot of time developing the system and rules you should stick with it and don’t try and out guess the system. activities that allow them to follow their rules without stressing about every move. which is an art that most traders find it so difficult to learn. But even if you do follow all your rules. you must have faith in your system and try and follow it if it is successful. It's Monitor your performance can think of all have in and leisure amazing! You should be disciplined to have an audit of all your actions. and look at the successes and failures of these trades. families. On the other hand if you are not believing in yourself then there may be a problem with your system. Following your rules is the most important aspect of successful trading. Trading Psychology 89 . Many successful traders have discovered and developed a system that fits them best.a profit & loss account with a balance sheet. All trades once closed must be analysed. so do everything you to eliminate this stress. have a trading journal for all trades. as it will lead to extreme frustration and possibly losses in the long term. you should maintain a set of accounts . I have met many successful traders and one thing they common is their lack of stress. If you are not comfortable with your system then you will always be tempted to break it. Most good trading systems will make consistent money from the markets over the long term. Your profits should be after you have paid yourself.The Way to Trade Forex Execute your Trading System Confidently The proper execution of your trades is one of the most important aspects of becoming a successful trader. friends. Just like any business. it may not be suited for you. plain and simple. They all have hobbies. Only then you can have a true picture of your success.. and with reasons on why you entered the trade. If you do not believe in yourself and your system then you are going to have difficulty following your rules. for your trading activities. sports. Have fun and have a life outside of Trading. Trading is stressful. if you are constantly doubting yourself then you aren't going to have any fun at all. Keep Trading as part of a Balanced Life.. Focus on the failures and see what could have been done to improve upon it. Positive Self-Belief The successful traders know that it is the discipline displayed in following their rules that makes all the difference.

and I mean NEVER EVER EVER trade without a protective stop loss. take lots of breaks. If you see a nicely defined trend line. Also during the day. But the bottom line is ALWAYS HAVE A STOP that suits your trading style –and only YOU know what to do. you may end up losing an opportunity. and stop trading for the rest of the day. I may even have a stop of even 100 pips or more. and to catch. shut the computer and take a break. often I could have a trade with just 10 pips stop and sometimes when I am using. you have to do what suits you. There are no hard rules on this. Markets are there everyday – Trading for the sake of trading is plain stupid! Be Flexible Don’t marry a trade. be willing to change direction. In fact my day in the office starts with prayers and listening to devotional music – once again this is what suits me. and I have found success and relaxation. Trend Line Bounces This is one of the easiest trading opportunities to spot. either UP or DOWN. If you see that it is not going your way. I also meditate in between. Throughout each time frame I am looking for various chart patterns. Forex Trading Tips 90 . I personally tend to have an open mind. I personally have never moved my stop – that is breaking the first rule of discipline! – NEVER DO IT! Don’t Trade if you don’t have to When in doubt stay out! Key to higher profits is to have patience. When ‘reasons’ change or signals change – go with the change rather than insisting to go “ your way”. DON’T TRADE MONEY THAT YOU CAN’T AFFORD TO LOSE! Take a break If you did have a streak of losing trades.The Way to Trade Forex FOREX TRADING TIPS Money Management Rules Please remember to exercise good equity management in all your trades. You can place your stop below the trend line or just below the previous low (for a long trade) or previous high for the short trade. this will apply to any trading strategy. Wait for a good trading set-up. you should do what suits your trading style rather than do what I tell you or what a socalled “Forex Guru” says. and you are close to your stop. Also if the position is moving against you. Multiple Time Frames At the start of the trading session. Yes. then. Stop Loss Never. Whilst most books talk about 2% of your margin account on a single trade. say a weekly chart. drawing my trend lines and gradually moving down. and look to catch the move once you have a confirmation. this enables me to figure out the overall trend. but often targeting hundreds of points in profit. do your stretches. but you are far more likely to save yourself from losses. and offer my prayers to God for making me successful. drink lots of water and trade in an environment with fresh air. and my stops will be based on the trading opportunity which is presented to me. Lastly. or 20 pips. I always start looking at the longer time frames – taking a “big view” of the charts.

The Way to Trade Forex Trading Session Moves Forex is one market. for example the non-farm payroll days. What Kind of Trader are you? No two traders have the exact same personality. bankroll. There are three major markets that trade FOREX. but have been extremely successful using the options 2 and 3. Don’t look for excuses to take profit. Some trader’s will only trade FOREX during these overlap periods. which meets with your risk attitude and size of the Capital. holding period is generally hours to days. I have known some Traders to work with 5%. There are trading strategies in this manual to suit all traders. and also the Europe afternoon and North American Open. You should be disciplined to take action and STOP Trading. Forex Trading Tips 91 . through many FAs. Swing trader – holds positions for bigger moves and a longer period of time than day traders. and objectives. once your limit has been reached. including New Zealand and Australia The European Market The North American Market. and goals. Please refer to the main section covering the Fundamental News – where I discuss the trading opportunities. The Asian market. therefore even when you are asleep. I personally love the volatility. the markets are moving. Often the best moves to catch are the market overlap. in my case the day trader does not suit my personality and trading style. closes all positions by the end of each day. but you have to have a limit. I have successfully held on a position for weeks. apart from weekends. funds. often times doing 10 or more trades each day. Long-term trader – holds positions for long periods of time. i. as these offer huge moves. Most traders fall into one of the following categories: 1) 2) 3) Day trader – buys and sells very quickly. Most traders will work with 2% of Capital. Fundamental News Many “Forex Gurus” advise not to trade around or on the days of Fundamental News.e. and if you catch the move. Use trailing stops based upon a systematic formula for locking in profits. This is not for me to tell you. Asian close and Europe open. which trades 24 hours. the first step in formulating a trading plan is have a heart to heart with yourself and determine what kind of trading suits your unique character. Often I have seen people try to get it back – only to lose more! Give time for your trades to work Be patient with winning trades. then probably you could achieve your week’s target in just a few hours. finally coming out with a profit target of 500 pips! – How many day trades will I have to do to make 500 pips? Daily Loss Within your Trading Plan you should have a maximum daily loss limit. normally weeks to months.

don’t waste your time predicting where it will go. When your trend is up. in order to protect profits you can employ a trailing stop in order to protect your profit. Often the markets may do totally opposite to what you expect. Also look at the hourly chart to get an overall picture. often it creates a move much greater than the news itself. Currencies trend very well. Don’t try and be clever and fight the trend. I would only use this when there is huge volatility. Forex Trading Tips 92 . in my view there is simply too much noise. You should get used to it. sometimes when they are in a trend. allow the trend to gain a foothold and then join the move. Trend Don’t try to enter the market tops or the bottoms. Which Time Frame to use? I often see many traders using 1-minute and 5-minute charts. then definitely you must regularly review the daily and even weekly charts. Get used to fundamental News When the Fundamental News is released. or closing at least half of your position for 20 pips.The Way to Trade Forex Forex Trend Trade active currencies and only when significant price change is occurring. you as a trader will also have a trend. listen to the market. Traders Trend Just like the trending market. initially aim to achieve a target of 20 pips. Once you become a master trader you can set your eyes on bigger targets. Obviously. Follow the market wherever it wants to go. and in my opinion is a useless indicator as a trigger. Stops for Insurance Purpose That does not mean that you should snatch the profits. By having many lots of 20 pips profit will boost your confidence levels. if you are looking to hold positions overnight or for few days. Take it easy when there is a trend change. Target 20 When you are just starting out in Forex. When the divergence strategy is used in conjunction with the Pivot levels. Trade in the direction of the Trend. and jump hundreds of pips within minutes. You will also have an UP trend and a DOWN trend. the more indicators the more ambiguity. That’s why I say markets can be crazy. KISS Keep it simple stupid. trend lines and Candle formations – This can be one of the most powerful triggers. Otherwise you want to focus on 15-minute charts. MACD MACD is a lagging indicator. trade aggressively and when it’s down tread lightly. I mostly use MACD for divergences to make a trading decision. it may be worth hundreds of pips.

Trade the trend Currencies trend very well. Successful trading requires an elimination of emotions. Be Patient Don’t trade if you do not see any set-ups. If the trend is DOWN then think down. and let it issue a signal and then take action. Focus on your success. my trading records have improved significantly. then only start to look at other traders. forget it and than move on. and start having a look at longer chart time frames. don’t look to buy. always make a record of all your trades. oscillator patterns. You will always have a losing trade – but don’t beat yourself.The Way to Trade Forex Become an expert When you are starting out. Once you feel that you have more experience. Meditation / Relaxation Traders love patterns – chart patterns. So have patience. your confidence will grow with more winning trades. 15 Minute Charts Be sure to draw the Pivots and Fibonacci points. you can also draw trend lines. Be careful what you think about. I would strongly recommend that you pick one currency pair and get to know its patterns and how it behaves. You will see these charts will offer a clue as to where the prices are likely to go next. BECAUSE THEY WILL DRAG YOU DOWN. that is crucial and that is their emotional patterns when they trade. the luckier I get” . However. sell rallies.e. and historical patterns. Your Psychology For new traders to Forex. STAY AWAY FROM NEGATIVE PEOPLE. Traders can learn to become their own therapist – just how can you do this to help you? I have noticed that ever since I started relaxation and meditation. Look at the wider time scale I would always recommend that you take a step back from the intra day action. Don’t try and be clever and second-guess the tops and bottoms –believe in your system. close your ears when you are trading. wait for the signal. don’t buy too soon in a downtrend and don’t sell too soon in an up trend. most traders always loose sight of one pattern. don’t just pull the trigger because you think it’s time to do so. Never listen to anyone. Trading Journal When ever you trade. this could be very powerful evidence that the price is going the other way. 4 hours. i. daily or weekly charts. and often the trend could last for hundreds of pips. Analyse the trades –both profitable as well as losing trades and learn from it. make your own decision based on your system. “The more I practice. and learn from it. for this will lead you to greater success. When prices break a trend at a juncture with a pivot or fibonacci point. no matter now many –and of course cutting your losses. as your thoughts will mould your actions and outcomes.Wayne Gretzky. learn from it. I spend at least Forex Trading Tips 93 .

You have to keep at it.The Way to Trade Forex 20 minutes each day in meditation. and also go to the gym. persistence is the key. also take time off from trading to relax. the more better you will get. Don’t get glued to your monitors for too long. Repetition is mother of all skills The more you practice good trading skills and disciplines. Forex Trading Tips 94 .

Whilst a trading plan will not guarantee a success. Your answers should not be vague and a simple one liner. However. it could be that one of the components of the trading plan is not working or you are not following the plan. you have eliminated a major roadblock. as the success would depend on a Trading strategy and a trading system that you use – which itself is a component of a trading plan. or you fail. If your plan uses flawed techniques. so that monitoring of your trades becomes easier. you should follow these eight words as if they were written in stone. Ask any trader who makes money consistently. the more it will A Trading Plan Introduction A trading Journal Trading Plan Template Trading Plan 95 . Many amateur traders do not have any plans at all. Whilst it is still no absolute guarantee to success. Patel writes. it is time to review. It should be your plan and unique to your style of trading. and he will tell you that you have two choices. You will be able to monitor your performance. your success will not come immediately.” If any of you are really serious about succeeding in Trading. It is a list of strategic responses to events beyond your control. either you automatically follow a trading plan. ability and resources. If you have written a trading plan. It will act as a road map for your trading journey. Relaxed and emotional free trading. You control the only thing you can control – yourself”. than congratulations! You are in the minority. A trader with a plan starts with an edge. This is why a plan is essential. Alpesh B.The Way to Trade Forex ORGANISING A WINNING TRADING PLAN • • • TRADING PLAN What is a Trading Plan? A trading plan is a complete set of rules that covers very aspect of your trading life. which is followed by the trader. The plan will instil a measure of discipline in your trading. “ While a plan cannot predict the future. will surely have a chance of greater success and he will be able to review the plan if any of its components were not working the way it was anticipated. At the end I have provided you with a template. In his book `Trading Online`. If you are having a string of losses. it can lay down how you react to the possible outcomes. a good plan. as he will perform a lot better than someone without one. and when they enter the market they have absolutely no clue whatsoever about what they have done and why? There is an old saying in business: “Fail to plan and plan to fail. but at least you are in a position to review and modify the course. The plan will enable you to control yourself! Building the Perfect Master Plan The trading plan should be tailored to suit your personality. Benefits of a Trading Plan It will make trading simpler as you have rules to follow before you pull the trigger. and you could use this as a starting point to create your own trading plan. the more you expand with relevant information.

be honest with yourself when creating your trading plan. 6. Your trading area should not offer distractions. Trading Plan 96 . it means you were wrong. when. monthly and annual goals in monetary value. or what is your risk/capital ratio? You should also set weekly. The real pros are prepared and they take their profits from the rest of the crowd who. Do not pretend to be some one you are not. Throughout the day I drink a lot of water and do regular stretches. And before the computers are switched on. Set goals – Before you enter a trade. 2.otherwise. and distractions can be costly. Set exit rules – Most traders make the mistake of concentrating 90% or more of their efforts in looking for buy signals but pay very little attention to when and where to exit. they still end up making profits. set alerts for entry and exit signals and make sure all signals can be easily seen or detected with a clear visual or auditory signal. 3.The Way to Trade Forex help you in your trading. Get over it or you will not make it as a trader. I start my day with prayers followed by meditation for at least 20 minutes. You should compare the actual results achieved with your goals set at the beginning of your financial year. but by managing money and limiting losses. Set risk level – How much are you prepared to risk on any one trade? It can range anywhere from around 1% to as much as 5% of your trading capital. Whatever trading system and program you use. Pros trade based on probabilities. Create one that puts you in the trading zone. For example if you were trading the EUR. I am totally refreshed. it is better to take the day off . Don't take it personally. Trade preparation – Before the trading day. 1. This usually means posing questions – what. Mental preparation – How do you feel? Did you get a good night's sleep? Are you ready to face the challenge of trading? If you are not emotionally and psychologically ready to do battle in the markets. First. it is better to wait until the report is released then take unnecessary risk. Once you get there. what is your stop loss if the trade goes against you? Second. reboot your computer(s) to clear the resident memory (RAM). this is a business. always define and qualify your statements. By the time I get back to my trading desk. 4. If your stop gets hit. give their money away through costly mistakes. Professional traders lose more trades than they win. and also what is going on around the world – both politically and economically. Have you got the skills to be a Trader? Have you tested your system by paper trading it and do you have confidence that it works? Can you follow your signals without hesitation? Trading in the markets is a battle of give and take. and re-assess them regularly. There are at least two for every trade. Find out which important economic reports are due and at what time. 5. you risk losing your shirt. What are the components of a good trading plan? Here are some essentials that every Trading plan should include. I take a two-hour break during the late morning. you should know where your exits are. Before you enter a trade. For most traders. sell a portion of your position and you can move your stop loss on the rest of your position to break even if you wish. lacking a plan. Also where possible. Many traders cannot sell if they are down because they don't want to take a loss. and decide if you will want to trade ahead of an important economic report. There is no room for ambiguity in your plan. where. each trade should have a profit target. why or how. 7. Why the EUR and not the GBP? Take into account your emotional and psychology side of you. going to the gym or a swim. label major and minor support and resistance levels. I will read my Trading mantra and visualise the success. Research – Before you start the day always review the previous day. Many traders have a market mantra they repeat before the day begins to get them ready. They don't gamble. set realistic profit targets and risk/reward ratios. Remember.

with a balance sheet if possible. which will show you the net worth of your business. software. Daily Review – After each trading day. adding up the profit or loss is secondary to knowing the why and how. The more information you provide. For example what use is a stop (Exit) if you decided to go long on a falling market. Set entry rules – Entry rules are just as important as the Exit. some traders will only trade if they can find 3 good enough reasons to do so. Write down your conclusions in your trading journal so that you can reference them again later. which continues to keep falling. etc. I hope you find it as helpful as I do! Trading Journal Please make sure you fill in every field. the more it will help you when reviewing your logs. areas you may need to work on. 9. Record keeping – this is one of the most important aspects of trading success. You should have a simple profit & loss account. in whichever time frame you are comfortable with. and there were no good enough reasons to go long. Most traders would do it on a weekly. monthly and an annual basis. It is essential that you get in at a right level. what you felt you did correctly. systems. office costs and not to forget your salary In addition all successful traders will have a trading journal.): ATTACH A SEPARATE PRINT OUT OF ALL RELEVANT CHARTS.The Way to Trade Forex 8. You should be able to compute your accounts showing your net profits. In the profit & loss you should divide it between 2 sections – Your income and your expenditure.e. Trading Plan 97 . The following is a very simple outline that I use. traders often forget how much they are paying in overheads – i. 10. you have to have reasons to pull the trigger. You should not lose track of your costs of running the business. I get tons of questions on how to set up a Trading Journal. In this you record in detail every time you trade. DATE: Time: Currency: Long / Short (circle one) Entry Price TYPE OF SETUP: PROS: CONS: CURRENT MARKET CONDITIONS: EXPECTATIONS: PRICE TARGET: REASON FOR PRICE TARGET: ANTICIPATED RISK TO REWARD: ANTICIPATED RISK LEVEL (rate 1 to 10 with 10 being high risk and 1 low risk): STOP PRICE AND WHY IT'S SET AT THAT PRICE (also note when the stop was adjusted and why): EXIT TIME(S): EXIT PRICE(S): REASON FOR EXIT: OUTCOME OF TRADE: EXPECTATIONS MET? YES/NO (circle one) TRADE ANALYSIS (Include thoughts on the trade such as what could have been improved. training.

and review it ongoing throughout the trading year. which is appropriate to your style of trading. however you should do your own research so that you have a Plan. Example – Format of a Trading Plan Cover Sheet Table of Contents – Core Plan You – know yourself & your purpose Your Trading Name Your Business Philosophy Mission for The Business Business Goals Which Markets will you trade Your Resources . You should prepare your trading plans each year.The Way to Trade Forex Trading Plan Template I have summarised as follows an overview and a template of a business plan that I use.technology Homework & Research Money Management Trading Strategies Follow Up & Review Financial Information Golden Trading Rules Trading Plan 98 .

and don’t be afraid to have 5 yearly trading goals. For example what are your daily trading goals. for example the range and nature of the instruments you trade. Our motto is: Together. the disciplines comprising logic and ethics of your trading. so you should start off by giving it a name.and short-term goals. Business Goals A clear vision of what you want to accomplish will help you achieve your dreams. The date it was prepared. Our mission is to help people create innovative solutions and make informed choices to improve their lives. monthly yearly. technology. Challenge yourself. Sure. What does success mean to you? How would you feel if you failed? Examine what motivates you and why do you want to become a trader. are there any other alternatives to you than trading. Trading Plan 99 . This is just an idea. But to reach new heights.The Way to Trade Forex Trading Plan Cover Sheet This page would contain your business name. growth potential. Mission for The Business Why not have mission statements for your business? A mission statement helps to clarify what business you are in. Your Business Philosophy The analysis of your beliefs for the way you trade. You – discover yourself In my opinion it impossible to draw up a successful trading plan without getting to know the psychological make up of yourself. this task is often the difference between goals that remain dreams and those that become accomplishments. and community. Distinguish between long. and operate exactly like any other business. They should not read like a to-do list. you must always be true to yourself. Every Trader should have goals. then weekly. Consider the statement one entrepreneur developed for his consulting business: "Raj Consultancy is a company devoted to developing human potential. you have to push beyond your previous limits. The mission statement reflects every facet of your business. the period that the trading plans covers. your goals and your objectives. we believe that the best in each of us enriches all of us. But do you know how to effectively accomplish them? Put them in writing. trading is not easy as 90% of traders don’t make it. What are your strengths and weaknesses? How can you keep yourself mentally relaxed? What do you expect from trading? Is it financial passion or some other reasons? Your Trading Name You should treat trading as a business. to get your brains ticking on how you could put up a mission statement for your Trading. probably the highest failure rates in business. Short-term goals are the building blocks for your long-term vision. for example how you would react to profit or loss. Though it sounds simple. We motivate and encourage others to achieve their own personal and professional fulfilment.

So why should trading be any different? You need to start the day by reviewing what you did yesterday. By contrast. but firstly you must establish a track record of successful trading a few or maybe just one currency. Also consider real time data feeds. I am not saying that it is not possible to do it. What are the general market conditions. is there any economic news coming out on the day. also be sure to factor in time for breaks. not the journey. Your Resources – technology Put your goals in perspective by using quality software and data feeds. your business’s survival depends on it. and never expect your goals to happen the way you planned. and currency pairs the next day etc! Success in trading requires that you develop absolute clarity about which instruments you will trade with. Trust your intuition. If your trading strategies are based on technical analysis. It's too easy to lose sight of your goals when life has a nasty habit of interfering. Too many traders rely on free software packages. Sometimes many traders trade too many instruments or in case of Forex. if you are able to do so. Sometimes it helps to post your goals where you can see them often. You would also check the road maps and decide which route you will take. Trading Plan 100 . would you not plan the journey? You would check the oil and fuel levels of the car. As a general rule of thumb.The Way to Trade Forex Focus on the goal. Review the charts that are on your watch list. review your open positions. which many times tend to be unreliable and have limited features. if so when? Plan your day. which have the features that you want to use. then you must ensure that you are equipped with good quality charting packages. If you are serious about trading you should consider subscribing to a package that provides you with all the tools. professional traders tend to restrict their focus to a limited number of markets and instruments. This should be away from the computer. Which Markets will you trade Successful traders are clear on which markets they want to trade. the tyre pressure before setting off. Face the worst trading nightmares and prepare yourself. Be flexible about how you will achieve your goals. commodities like cotton and oil the next day. Risk & Money Management You need a real disaster plan. that does not stop you from adding more products in future. off course it is. review your trading journals. If you were embarking on a journey to a destination you have never been before. too many currencies. a novice trader tends to trade index futures one day. Homework & Research Before you start you need to do your homework. lunch etc.

Follow Up & Review Always have regular ongoing reviews built in your plans. Did you record all your trades and have a detailed trading journal? How were the trades. monthly and annual for example. Trading Plan 101 . How will you find the set-ups – most software has scanning features. and a ledger. which bounces strongly off a pivot point and also a Fibonacci retracement level. i.e. I strongly recommend that you maintain a set of books. you could see a confluence of events. if so what back ups have you got? What would be your risk reward ratio. the only exception being that they have a registered business for tax purposes. or an alert when a crossover happens. What set-ups will you use? These are the set of characteristics that enable you to identify a highprobability trade. So having gone through the strategies in this book. forming a double bottom. you can also program in certain features i. or where will you put the stop loss orders? If you are having a bad day. You should not be scared of numbers. like a 9/11 terrorist attack or the Tsunami? Risk against system failure? Either your own or the broker’s? When you are unable to trade. for example at the end of a downtrend. end of the day. a candle pattern. which records the regular transactions taking place within the account headings. but not for their own benefit. Choose the rules that fit your personality and you must ensure that you keep it simple and not complicated. What is your risk per trade. Financial Information Scared of numbers? I have rarely seen traders having detailed financial information. but should maintain strict accounting records. you should identify how you would minimise loss and maximise profits. it is time to analyse these and see which ones can work for you. then when will you stop trading? Or if you have achieved your targets.The Way to Trade Forex In this section. will you continue or will you stop.e. and also alert system. did you trade according to your system? Having a trading plan enables you to discipline to a set of rules. will you use a trailing loss and lock in your profits? And how will you determine the position size? Trading Strategies Strategies are a result of meticulous analysis – it gives you the upper hand. weekly. which records all your income & expenditure for the business. What is your risk attitude and your trading style? Also identify your overall market risk and ask if you have got any hedge of a market crash or any sudden world events. So in some ways they have been forced to maintain records for the taxman. or your risk capital ratio. Seek the services of a professional accountant in this matter. such as a Hammer at the end of a run. Once the position is in profit.

Golden Trading Rules Have top strategies and rules. Your rules should be ones that are pertine nt and meaningful to you.The Way to Trade Forex Your accounting records should comprise of the following. Having read this book. so follow your golden rules to make your trading more bankable. excitement alone will not guarantee success. Balance sheets Cash flow statements Before the year starts. but you should ideally get a short list of at least 10 rules. sell at resistance! The list is endless. For example one of your golden rules could be. No Trade! Or Plan the trade – Trade the plan!. Trade with the trend: No Trend. most professional traders will have projected statements for the above. Buy at support. you should be able to get TEN golden rules that you may want to follow. and read it every day. They set themselves a set of goals. Actual financial statements – profit & loss account. Trading Plan 102 . Display your golden rules in your office or trading area.

The original text was in Sanskrit and it is believed to be one of the world’s longest epics in world literature. then you should focus the lens of your mind so it can only see that and not the tree." Somebody else said. Mental toughness depends on the ability to concentrate and focus.The Way to Trade Forex AND FINALLY • • • • • EASTERN PHILOSOPHY THE BHAGAVAD GITA You may ask what has the Bhagavad-Gita and Eastern Philosophy got to do with success in trading? You will no doubt agree that trading requires mental toughness. "What do you see there?" Arjuna replied. the tree and the branches it is three. Become more creative Learn faster and have a stronger memory Eastern Philosophy & Bhagavad-Gita Appendices Follow Up Service Consultancy Service Recommended Reading And Finally 103 . He called them one by one and asked them all the same question: "Tell me what you see on the tree?" One of the Princes said. "Shoot it!" Arjuna shot and hit it. the hero of the Bhagavad-Gita. which is an ancient epic in India. If you see the bird. I believe that the capacity to enter this state of consciousness may allow us to efficiently process information. If you have to shoot the eye of the bird. which I heard once again at the Traders Expo in New York . the branches or leaves. only one thing is visible. Faulty concentration will sabotage your success as a trader." Dronacharya said. It is said “whatever is here is found elsewhere. not even the bird. but only the eye. But whatever is not here is nowhere else” In this story about concentration." The second Prince said. When you focus the lens of your mind. The benefits could be immense. "I see the tree. "I can see the bird on the branch of the tree. improved concentration would have on your trading results. That was archery. "I can see the colour of the bird. Think more clearly. and that is ekagrata." Finally Dronacharya called Arjuna. the eye of the bird. and asked him. it can minimise the impact of emotional interference. How can you say that to be aware of many is concentration? Applying this to trading. There was a Hindu story about concentration that I heard in my childhood. This particular story was told from the Mahabharata. the branches and a bird. "The small black spot. the leaves. just imagine the profound positive effect that a more powerful mind. Eka means only one. I was surprised to hear this story being narrated by a successful American entrepreneur when I had attended the New York Trading Expo. the twigs. thus avoiding losing trades Be smarter instantly – thus jumping as soon as you see a trade with good set-ups.The Guru Dronacharya was teaching archery to his disciples. four or five. Any of you practicing meditation or relaxation techniques will have noticed that after each session the state of mind is totally focussed and is relaxed. the twig.

It has become my bedside reading. but with it we can accomplish a great deal. no doubt you were shown a fascinating experience. I would strongly recommend reading Trader’s Secrets. the more you think or worry about concentration. were very much aware of the benefits of some of the ancient Hindu teachings. which has been in existence for thousands of years! What further inspired me to learn more about Eastern Philosophy and of course my roots. the less you are actually concentrating on the task at hand. Ironically. One of the decisions I made when I was in New York was to read the Bhagavad-Gita. Meditation techniques have been practiced for thousands of years. Without it our efforts are dissipated. the authors have interviewed many successful traders in this book. thereby helping them becoming exceptional traders. Variations of meditative practice are found in all of the world's religions. One of the most remarkable books I have ever read is the Bhagavad-Gita As it is by A. And for many. Concentration is an elusive state of mind. which caught my eye. The fire could start only when the rays were concentrated to a small point. meditation continues to be a spiritual and religious practice. What was also surprising to me was that many of the extremely successful traders of American & European descent whom I had met. whereas I see that the West is now more and more getting to know about Ancient India. was Scott A Krieger. For the full interview. the more I came to the conclusion that what you read in so many motivational and personal development books is all in the Bhagavad-Gita. he enjoys pursuing the ancient Vedic literatures. although I had listened to some of the discourses. but what I did not expect was to hear this story at a Trader’s Expo in New York. When the magnifying glass was moved too far away or too close. Power of concentration can be achieved through yoga and meditation techniques. And Finally 104 . Some of them had incorporated these as part of their daily living. Whilst it was nice to be told one of my favourite childhood stories. Developing concentration is essential to anyone who aspires to take charge of his life. as it has interviews with so many other successful traders. how a magnifying glass could burn a piece of paper when the rays of the sun were focused through it. not only the Curry. but the more I read. find inner peace. but the Vedic teachings of ancient India. He adds. Originally the goal was to help individuals deepen their understanding of the sacred and mystical forces of life. Though I have not finished reading it. He also says that he learnt Sanskrit when he was in India. and also an author of a book “ How to Become a RealTime Commodity Futures Trader” Scott says that most of his fundamental beliefs came from Eastern Philosophy. and as a one pointed mind. This experience demonstrates the tremendous power of concentration. Today I see that most Indians are leaving behind these teachings. the rays were not focused and nothing happened.Bhaktivedanta.The Way to Trade Forex And lastly and more importantly. “I became very interested in translations of the ancient Vedas.C. When you were a child. the ability to pay attention to one single thought or subject to the exclusion of everything else. Concentration can be described as focused attention. When our mind is focused we do not dissipate our energy on unnecessary activities. who is a full-time trader. was when I read the book “Trader’s Secrets” by Murray Ruggierro and Adrienne Toghraie. It is required in order to succeed in all walks of life. but I had never read the Bhagavad-Gita or the Ramayana. This is a great book. One trader. I come from a Hindu upbringing.

” He further adds. It is divine power. I wonder what would I do without the Candle patterns! Steve Nisson. by Clifford Bennett . Yang is bullish and Yin is bearish.” The understanding is that money is innocent. Talking of Eastern Philosophy. And Finally 105 . “ I do not get a rush out of just having money any more. Reading Scotts interview inspired me to make good use of money.” In ’The Warrior Trading’. spent lot of time reading and coming to understand the philosophy of the East. Money is a divine gift of power. We get the word “lucky” from the Sanskrit word “Lakshmi. “ I am not Mother Teresa and I am not Donald Trump. Clifford draws on his own experience in the ‘battlefield’. he had the following to say.Clifford views the market as a battleground upon which only a few great warriors stand. when researching into the candlesticks. Lakshmi is the name of the Goddess of Fortune. It is not bad or good. I started to regularly sponsor children from developing countries. including the principles of Yin and Yang. Hopefully I can make some kind of difference and do some lasting good before I disappear. And it is these warrior traders who truly make the level of profit we all desire from the markets. Money is called “ Lakshmi” in India. The Japanese have a saying that states that when Yang reaches an extreme. Soon after I started meditation and yoga. How you use this power determines your karma (cause and effect) and ultimately your destiny. Reflecting a mixture of both Eastern and Western philosophy. The stillness gives rise to Yin. It gives great pleasure when I receive letters from the children that I sponsor.The Way to Trade Forex for example one interview with a Canadian trader who took his $100k account to $3 million in 1998! It could not be a coincidence that my trading took me to a next level. Apart from cutting down waste. I started reading the Bhagavad-Gita. but it is how you use it that determines its morality for you. Steve Nisson says “The Eastern philosophy of Yin and Yang is at the very base of Japanese Candlestick charting. When Scott was asked about money. The Japanese Candlesticks came from the East. The proper use of money is what excites me. we have stillness. I am someplace in the middle.

but few to offer you the above follow up services. Email address is info@4x4u. We will discuss actual trades with Charts. which not only offers a money back guarantee.The Way to Trade Forex APPENDICES Follow Up Services I doubt if you will ever come across any Forex training programme. And Finally 106 . You will receive a free one-month mentoring programme. This will further assist you in your trading. For a limited time period only. There are indeed so many training courses offering you a goldmine.net We will assist you in preparing a Trading Plan. feel free to send us a copy of the Plan. but also at the same time offers you a follow up service! Too often. but few to offer you the above follow up services. we are offering a bonus service to readers of this book. Free Email Newsletters for 1 month. you have programmes. Please feel free to ask any questions relating to your Forex trading education. but then there is nobody to hold your hand and guide you. by email. There are indeed so many training courses offering you a goldmine. Once you have followed the step-by-step guide on how to prepare your Trading Plan. which promise you easy success. and we will do a free evaluation report for you.

net.4x4u. Below is a primary structure used as a guideline of our Training Course. kindly go to www. Analysis of multiple time frames – monthly. daily and intra day chart analysis. price targets. look out for confluence of events. Wedges Technical Indicators Moving averages Momentum Oscillators Fibonnacci analysis Elliot wave theory Risk Management Understanding risk Elements of risk Money management Stops Planning & Managing your trade Proper entries. As I am a full time trader.The Way to Trade Forex CONSULTANCY SERVICE A number of clients want more direct contact with a trader’s coach/mentor. so I only limit to a number of clients that I take for the consultancy. I am offering a one to one training. to help out with the markets and Forex trading. weekly. Overview Developing an “edge” Learning to spot what the “market is telling you” Putting the odds in your favour Picking trades to match your style Creating your own trading system Technical analysis Pattern recognition Trend lines and channels Consolidation – rectangles Support & resistance Triangles & continuation patterns Head & Shoulder. risk/reward Trade management – trailing stops and protecting profits Stops Trading Skills Putting it together – using multiple indicators. Trading breakouts Trading reversals And Finally 107 . however. For more information. exits. your mentor customizes and tailors the process to meet your individual needs as well as support materials.

Buying too early Pre-Market analysis And Finally 108 .The Way to Trade Forex Shorting strategies Price behaviour Quality of setups and follow through Developing your own system Executions Proper use of trading platforms Order entry and limit orders Automatic trailing stops Automatic executions Trading Psychology Crowd psychology Fear and greed Common traps Creating a Trading Plan Tracking personal patterns Overtrading undertrading.

C. There are many opportunities to succeed and be profitable in this business. You have to seek out those opportunities and then follow your plans with discipline.” Jay Lakhani And Finally 109 . Bhaktivedanta Napolean Hill Steve Nisson Robin Sharma Deepak Chopra Viktor E Frankl Get guidance from your Guru or trainer And Finally. “ I wish you good luck with your Trading.The Way to Trade Forex RECOMMENDED READING The Disciplined Trader Trading For A Living Awaken the Giant Within The Winning Edge Series Bhagavad-Gita As It Is Think & Grow Rich The Candlestick Course The Monk Who Sold His Ferrari How To Know God Man’s Search For Ultimate Meaning Yoga & Meditation Mark Douglas Alexander Elder Anthony Robbins Adrienne Toghraie & Jake Bernstein A.

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