THE FIRST BATTLE, Forex Art of War

Copyright 2011, www.forexartofwar.com and Vance Williams All Rights Reserved questions: vance@forexartofwar.com


THE FIRST BATTLE, Forex Art of War
Most traders don't recognize their first battle. But since it is a battle of vision, it must be won. If you are going to win in trading, you have to understand how the game is really played. The Forex culture fosters the belief that “if you have enough information, if you manage your risk well, and if you are disciplined, you will win.” That is absolutely TRUE. But it’s also like telling someone who is overweight “if you eat right and exercise, you will lose weight.” Is that a STRATEGY for losing weight? No. When an objective is truly important, you will take the time to consider everything that can affect your success. Even when you have a good plan, it is a “starting point.” As you put your plan into practice, you discover critically important information about yourself. Such as, you will find it’s better to not go to the store hungry. You might also discover that you continue to eat after you are no longer hungry. Personally, I discovered that even though I won’t jog, I won’t walk, I won’t stretch, I will get beat up for an hour in Muay Thai Kick Boxing. Go figure. When I moved from my former residence and could no longer practice the same discipline, I had to find something else that I “would” do. “Eventually” I discovered that I’ll walk endlessly on the treadmill if the TV is on. Bingo. When I came to Forex trading in 2004, my advantage was my experience with selfdiscipline. How do I get myself to make good choices? How do I consistently make good choices? If our goal is to lose weight, our greatest difficulty is going to be dealing with “how we feel.” We want something that is not good for us. The same is true with Forex trading. You are going to find out sooner or later that your emotions will prevent you from making money if you don’t have a strategy for making good decisions in spite of your emotions. So this is your first and most important choice. “Do what you feel like doing.”

Copyright 2011, www.forexartofwar.com and Vance Williams All Rights Reserved questions: vance@forexartofwar.com


Or… “Learn to make good decisions regardless of the emotions you experience.” I also like to think of this as operating proactively instead of reactively. Those are your two choices. One is easy and results in no profit and the loss of all of your money. The second requires an effort and can enable you to reach your goal. Make the right choice and you move forward. Make the wrong choice, and you end up repeating the same activity over and over again for months or years. This was Einstein’s definition of insanity, but people do it anyway. If you are ready to make the right choice, I wrote this book for you. The Forex "culture" encourages an ineffective vision of Forex trading. For this reason it is vital for your success that you begin by reading the eBook: 8 Things They Don’t Tell You About Forex Trading. In that book, I explain why the Forex culture is the way it is, why traders lose their money, and that it is totally unnecessary.

A Brief Overview of Forex Art of War
Forex Art of War is a holistic strategy that takes into consideration all variables that have the potential of affecting your success. While my work began in 2004, that part of the strategy began in October, 2009. In March 2010, I began testing the strategy with traders with great success over the next year. That strategy and what happened became documented in my 232 page book, Forex Art of War. Shortly after publishing my book, I recognized the need for more of a step by step process, and divided the strategy into three levels. Those have now developed into THE FIRST BATTLE, followed by SEIZE THE HIGH GROUND, followed by Sun Tzu – RULES OF ENGAGEMENT. There are three levels. The first level (where you are now) is about becoming proficient with tools, language, and basic logic. The second level is about what determines your probability of winning, how to control those elements, balance them with your personality and end up with a great entry and exit strategy. The third level is about how high risk decisions are made and focuses primarily on
Copyright 2011, www.forexartofwar.com and Vance Williams All Rights Reserved questions: vance@forexartofwar.com

just practice the basics. Don't wait for Facebook to tell you when I write something.4 a process of separating your emotions from your decisions.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. I will answer any question that you write to me there.forexartofwar. Be sure to check in regularly with me on Facebook. we provide those for free. To write words you must first learn the letters and basic rules for spelling. so that you can build a solid foundation for high probability trading. The information is presented in the order it will be used. To illustrate: Before you can express an idea in a sentence.com . If you need charts or a trading platform. trading platform and video tutorials at our download page. Forex Art of War is a holistic strategy for winning that takes into account everything that affects your ability to make consistent profit. So I suggest you bookmark my page. and application. Feel free to email me at vance@forexartofwar. For now. Even traders who regularly interact on my page often do not get notified of my posts on their newsfeed. I consider this book (The First Battle) to be the first level of knowledge. Each morning. you will find me on Facebook talking about how I trade. and you can learn as you go. Instead. you must be able to write the words. It’s fine if you already have your own charts and trading platform. Getting Started The goal of this book is to provide you with the tools and basic knowledge. and working with traders that are brand new and traders that are very skilled. I am always applying the same logic and waiting for the same setup. skill. You will find charts. I now have reopened the Sun Tzu members site where I assist those who would like a little more structure and guidance in the process. I’m not going to explain trading in a traditional sequence.com with any thoughts or questions! This guide is intended to show you the fastest and most efficient way to get started trading the Forex. we are going to get right into the charts. Here are the specific learning goals of Level 1: · Tools such as charts and trading platform Copyright 2011. We include videos that explain their use. As I publish the 4th Edition of this book. Mon-Thur 8AM-11AM ET. I refer to it today as "good execution. www.

How do we do this? There is a simple logic in trading. we have difficulty changing a behavior even when we make a conscious effort. I’m referring to information from the past that can be used to anticipate what is likely to happen in the future. When I refer to logic. We know when traffic will be congested on our roadways. I’m talking about patterns throughout the entire decision process. When I talk about repetitive patterns.forexartofwar. I believe that you cannot make “more” profit until you learn to make “some” profit. suffice it to say that not only do we repeat the same behaviors over and over again. and had the privilege of working with some truly great traders. So that is an important principle applied in this book and the subsequent training. We tend to shop at the same places. That is why we can rely on historical information to anticipate what is “likely” to happen in the future. head and shoulders. we are anticipating what will happen in the future.5 · Vocabulary such as PIPs and Stop Loss · Basic trading logic that teaches trends. setting the trade on auto-pilot and leaving it alone I have been trading and training others for more than eight years. I love what I do because it is challenging and because I can help people to improve. People who strive to reach further in their life inspire me. and buy the same food.. I have worked with thousands of aspiring traders. While I have written extensively on this subject. candle patterns. I’m only going to focus on the essential things that you "need" to learn. There are literally tens of thousands of pieces of information you “can” learn about the Forex market. I’m not just talking about patterns you hear about like trends. The same mathematical sequence we see everywhere in nature is also in us. Grocery stores even set prices based on your behavior. www. Human behavior is repetitive. Basic Logic As traders. you see it everywhere.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. When you look. I like to keep things simple. We know traders like to trade trends. Logic can be viewed and defined in many ways. etc. etc. entry and exit · Implementing a simple trading plan. Just remember your struggle the last time that you set out on a new diet or exercise program. Copyright 2011. There is a deeper reason for our human frailty. barrier. double tops.com .

In 2001. they create patterns. You can get everything you need from my download page. we know what is likely to happen again. It is a stream of data (for real). Most brokers are willing to supply these to you in hopes that you will eventually trade a live account with them. The price is determined using the principle of supply and demand. www. The Forex I’m going to be brief in my explanations because there is so much that you “don’t need to know. No one is in charge. What is the Forex to me? A stream of data. So as buyers buy and sellers sell in the Forex market. Copyright 2011. If there are more sellers.” Forex is short for Foreign Exchange. These should be free of charge. It is a network of 1000’s of banks around the world with no central location. platforms became very stable so that we were able to trade from our personal computers. These patterns show us what traders are doing over and over again.forexartofwar.6 Where do they like to get in? Where is the best place for you to get in? Where is the best place to put your stop loss and profit target? There are patterns (logic) for all of these decisions.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. What else do I need to know? Not much. The purpose of the Forex market is to determine a fair price of exchange between two currencies. I think of money as the life blood of business and the Forex as the circulatory system. price is moving down.com . price is moving up. So the industry or retail Forex trading (you and me) is still in its infancy. Brokers or dealers provide most of the data feeds. that’s all it is. To me. Trading Software Trading software takes in the data feed about buying and selling around the world and can be used in many different ways. So when we see the pattern next time. Do not open a real money account until you “actually” know how to trade. NOT a live account. If there are more buyers at any given moment. It’s the largest market in the world. charting software and trading platforms. Be sure you only open a practice account. That data comes into my software and tells me what price is doing.

I prefer to have my charting software on my desktop and execute my trades using the web based trading platform. Once again. You can also get the same GTS Pro platform I use for free on our download page. Until you are more skilled. I recommend a desktop trading platform for new traders because it has functions that enable you to learn details you don’t know. Charts usually display military time as 00:00-23:00. just subtract 12 hours. you can execute trades directly from your charts. Keep in mind that you will need to register for a user code in order to open the trading platform and charting software. It’s okay if you already have your own software. Later. So if you see it is the 14:00 candle and you are not familiar with military time. you will need to use Windows Parallels or a program like it to take full advantage of the tools available to a Forex trader. I have regular hours on Facebook. subtract 12 hours and you know that is 2PM. With modern software.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. so those who write software write it for the bigger market first. You can use web based software on MAC but functions will be limited. My suggestion for MAC users would be to get an inexpensive stand-alone PC. Again. Please make a note that user codes expire every 30 days.com . They are the same charts I use in my trading. make sure you read my free eBook. I recommend you set your charts to GMT -4:00 in the Spring and GMT -5:00 in the Fall (when US changes time). For those of you who are MAC users. but MAC is only 10% of the PC market. To calculate the time. The good news is that programs work pretty well using Parallels.forexartofwar. www. I prefer Accucharts. all you will need to do is execute orders. 8 Things They Don’t Tell You About Forex Trading. and you are good to go again. Simply register for a new user code. there is a 90% chance (at least) that you will trade it and that you will lose all of your money. So your charts and trading platform will become inaccessible when a code expires. use that new code to login to your charts and trading platform. Metatrader is also a good charting software program. we do not benefit financially from you trading a live account with a broker. even if you intend not to trade it. so it is easy to find me or a member of our team and ask us questions. You can get free charting software at our download page. and you can move to a web based platform where execution will be even faster. This will make it easier for you to read Copyright 2011. I know MAC users don’t like to hear it.7 If you open a live account prematurely.

8 and 76. that's okay. So when we trade.forexartofwar. we trade a pair such as the EUR/USD. one of our traders writes that they entered the trade at 13:00. You don’t really need to know that to trade. a familiarity with the vocabulary we traders use. I recommend Fibonacci retracement tool settings of 23. For example. I’m going to give you a specific method (rules) in this guide so that you can practice. So that chart is telling you how much US Dollars it takes to buy one Euro. Give yourself time to practice and become familiar with the charts and trading platform. you make money.4. because what I'm showing you will work for any time zone or charts. 38.com . and make it easier for others to review something you share. Copyright 2011. you lose money. So that means when you look at a EUR/USD chart.8 other trader posts. and will be important later. though. and you’ll be going through the motions of applying good trading logic. You find out quickly what you don’t know or are not sure about. If you buy and price goes down. The price on the right side of the chart is the USD. That is very different from stocks where price could be plummeting and you cannot close the trade because there are no buyers. and price goes down. The currency on the right is the “quoted” currency.6. Currencies are traded in pairs. If you sell. unless your charts are set to the same time zone. www. I’ll briefly define most of the words and terms that are important. If you do prefer a different time zone. Buying or selling is the exact same thing because of the great liquidity in this market. This will help you develop proficiency with the tools. you lose money. All you need to know is this: If you buy and price goes up. When you come across a word or term you don’t know. you make money. 61. a few words and terms.2. I think the fastest way to learn is to begin using the charts and trading platform. 50. you won’t understand or see what they are seeing. you are “seeing” the Euro value move up and down on the chart. These are used to measure the natural retracement areas of price waves.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. That just means that there are always buyers and sellers available. If you sell and price goes up. Market Language There is definitely a vocabulary or language to trading. The currency on the left is the “base” currency. just ask or look it up.

a PIP is one 10. It used to represent Price Interest Percentage. In US Dollars. Keep trading as simple as possible! I think it is useful for even a new trader to know that most of the volume in the Forex market is the US Dollar. I recommend practicing with EUR/USD. Great British Pound. and Yen 8%. Just think of it as a currency measurement just like quarters. So when you are new. Another thing you need to know is that price movement is measure in PIPs.3882. there is no US Dollar in the pair. That means that the exchange rate is one dollar. It has become popular to call it Percentage in Point.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. www. thirty eight cents. and Yen. Setting up Your Charts For a new trader. Only it is even smaller. The Yen tends to be a little more erratic. we are only watching the value in PIPs. with much greater volume with the EUR and USD. So as Forex traders. While you are new. It will save you confusion. a group of central banks. we just got in the habit of calling it a penny). USD 40%. I would have liked to Copyright 2011. You don’t even need to know what PIP stands for.forexartofwar. if you are trading the EUR/GBP (called a cross pair). An intervention is when a central bank. or policy makers take action to alter the price of a currency. stick with US Dollar pairs.9 What you need to know is this: buying and selling is the same exact action. avoid that currency. Euro. focus on only the essentials .000th of a cent (it was pointed out to me there are actually no pennies in the US. the EUR/USD is at 1. No need to concern yourself with that now. For example. You don’t need a lot of pairs to practice. Euro 20%. All you need to know is that a PIP is the last two digits (decimal places) on the chart.com . nickels. and then minor pairs AUD/USD and NZD/USD. But if you want to learn fast. Then learn the other stuff as you go. and eighty two pips for one Euro. As I write this. Currently there are some intervention issues going on around the Yen. If you were from the US. Pound 12%. you would need to determine the actual PIP value in US Dollars. Keep in mind that there are so many things that you can learn about this market. dimes and pennies. Those are approximate enough to show you that 80% of all movement in this market is in those four pairs. Now you don’t need to know all of that. GBP/USD.

and focuses on a setup that give you more opportunity. AUD/USD. It get proficient. as I see it. I believe that your best read on the “entire” market is going to be the 4hr charts. I recommend 30 minute candles because they will give you more opportunity to practice. logic and language. I think the most important thing to do is practice. There are also videos at our download page that show you how to operate your charts and trading platform.10 recommend the USD/CHF. You need to develop basic market proficiency with tools. If you have the “workspace” file. A workspace tells your charting software “what” to load. This is what you will click on to launch your charts each time. I’m going to give you something to practice. When we have a four hour trend. When you are newer. you can choose to get involved with Seize the High Ground. you need lots of practice. you can download a “workspace” at our download page. but recently the Swiss central bank began to intervene on behalf of their currency. barrier. I show you a method that uses primarily longer term charts (4hr and daily). Having said that. All pairs and moving averages are already installed on the charts. · Tools such as charts and trading platform · Language such as PIPs and Stop Loss · Basic trading logic that teaches trends.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. First setup your charts so that you have EUR/USD. To accomplish this.com . Forex Art of War. Set each chart to be 30 minute candles.forexartofwar. as well. and NZD/USD. which is the second level. Be careful not to take on too much at once or you will be easily overwhelmed. I suggest downloading the workspace file on your desktop. Always keep in mind that a trader does not look for a way to enter a trade. entry and exit This is what you need to “get down” in the first level. you are ready to go. helping you to master the exact trading setup and conditions you are looking for. As soon as you have the basics down. Just focus on getting proficient at those three areas first. If you are using the same charts I use. GBP/USD. This is why I give you a method in the back of this book that relaxes the rules a bit. A trader Copyright 2011. www. trading the 4hr and daily charts are difficult for most traders because they come to the market expecting more opportunities than the market offers. In my book.

you might be limited. Place a 21 and 55 EMA on each of the charts (already done for you in the “workspace”).com . you are going to be applying much of the logic that does make you profits.” They are the most common charts being used.com and Vance Williams All Rights Reserved questions: vance@forexartofwar.forexartofwar. I have important reasons for recommending the following. So if most traders are using candlestick charts. Here are the reasons I ask you to setup your charts in this way: · · · · · More trading opportunities Learn to follow a trend Learn to see a pullback Learn to see a barrier Learn to enter and exit trades If you are ever going to make profits trading Forex. So even though we are not focusing on making profits right now. Copyright 2011. It doesn’t really matter how or why they work. that’s what I want to be using. If you are using web based charts. I recommend 2500 candles to begin with. www. These are called exponential moving averages. I form high probability conclusions. I recommend “candlestick charts. That’s simple logic. Make this a part of your mindset at the very beginning. There is a very big difference.11 waits until the right opportunity presents itself and then strikes. Now you have four 30min charts with 21 and 55 EMAs. Once you get to know me. Your chart should look something like this. you have to be able to successfully execute this logic. and based on what they do. watching what everyone else is doing. which is ok. All that matters is how we are going to use them. you will see that I’m always just watching what the trend is doing. too.

low. Some traders prefer to use different colors for candles. We could make these candles represent any time frame. wicks. About Candles The time of the chart is on the bottom. www.12 You can adjust the colors however you like. The blue candles represent buyers and the red candles represent sellers. that is the tail (vertical line extending from the body down). and tails. it really doesn’t matter what the colors are. When you see a completed red candle. and the lowest point of that tail is Copyright 2011. open and close prices. Candles have bodies. I have a black background for both panes. you see blue and red candles. On my chart. but you can use whatever you want.forexartofwar.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. left to right. So at the arrow. Some need to use different colors because of the unique way their eyes (brains) process information. that means there were more sellers than buyers in that 30 minute period.com . Whatever the case. A candle is created by the high. as long as you know what they represent.

then price opened on the highest part of the body and closed at the lowest part of the body. low. If there were three blue candles in a row.com and Vance Williams All Rights Reserved questions: vance@forexartofwar.forexartofwar. The vertical line on the top of the candle is the wick. It will also tell you the positions of moving averages and other indicators. www. a box will pop up. Copyright 2011. On most charts. and ended (closed) at the highest part of the body. You can eye ball this.13 the lowest price that candle reached during that period. and line up the vertical axis on any candle.com . Sometimes it will be necessary for you to find out what the high. These are quite a few details that I am throwing out at you. That box will tell you all of the specific information you might want about that candle. The inverse is true of red candles. open or close is. So let’s think about some of that. then the candle began (opened) on the lowest part of the body. The rectangular part of the candle is called the body. but the more accurate way to do it is to use the cross hairs and Display Data Box. If the candle is red. which way does price have to be going? It can only be going up. If the body is blue. but it is information you need to know. when you left click.

the more you will appreciate the value of good definition. they are going to give you an accurate read on the trend direction. We can also just look at the moving averages and see that they are apart and down. The more experience you get. Note that the “faster moving average” changes direction faster. and even other not so well known patterns. candle patterns. That logic is the result of a study of historic patterns that are created by buyers and sellers. you only sell. So we can see in this picture that price is making a steady move down. The most repeated pattern on the charts is what we call a “trend. it is “sideways. Even some of the most skilled and successful traders use moving averages. That’s good enough when you are learning how trading works. the less you will need to rely on indicators. Why? Because it gives them something “definitive” on which to base decisions. price is “trending” down. I want to bring your attention to something else. So trending is easy for you. We are now building a trading method for practice that will consist of Copyright 2011.” In trader speak. So YOU should be looking to trade in the direction of the trend.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. They are moving averages.14 The TREND As I mentioned in the beginning. The more experience you get. 90%+ of the time. If the faster moving average is on the bottom. A trend is any clear price move up or down. In this picture on the left. price is not trending. you only buy. There are chart patterns. indicator patterns. That’s all we need to see for now.com . In this picture (right). all of our decisions are based on logic. If the faster moving average is on top. The yellow lines are the 21 and 55 EMAs. www.” In this picture to the left. The reason we want to know about the trend and learn to recognize it first is because MOST traders want to trade in the direction of the trend.forexartofwar. Don’t overcomplicate this. a trend is when you see price moving in a particular direction.

” you will see a pullback. You will see a “trend. Follow the white lines.com and Vance Williams All Rights Reserved questions: vance@forexartofwar.com .” We also know from repeated observation that traders like to enter that trend when price “pulls back. Look at the picture below. trends and pulls back… So the next key is “how do we know WHEN” to get back on in the direction of the trend? We see this happening over and over again. www.forexartofwar. We said that “traders like to trade in the direction of the trend.” Because of this market psychology. you will see a pattern repeating over and over again. so the question is this: where will we get in? Copyright 2011. and then you will see price push again in the direction of that trend. Price trends and pulls back.15 · · · · Trend Pullback to barrier Entry and exits Sticking with your plan So far we have explored “trend". Pullbacks The barrier is just as important as the trend.

” I’m going to share one more technique that you will need to practice for identifying barriers. When price trends and then goes sideways. this is called “consolidation.16 Barriers We know from looking at charts for years and tens of thousands of hours that traders like to enter a trend at a good barrier. Remember to visit our forums we have created for you for help with all of these lessons.” This refers to a price “area” where price has trouble going below or above. both are support or resistance.forexartofwar. but a “range” of support or resistance.” There is another type of barrier (support or resistance) that is called “historic barrier. Our goal is to anticipate where price is likely to “bounce. and Support is a barrier that is below price.com .” This takes some practice. Historic Barriers: As you can see. both are barriers. Resistance is a barrier that is above price. Whether it is a historic barrier. www. So you will need to know how to draw horizontal lines on your charts (guidance on drawing tools is available in our videos from our download page). Barrier is also called support or resistance. I write “price area” because it is usually not a specific price.” You are looking for “multiple touches.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. Copyright 2011. I can still remember how nice it was to have community when learning these techniques. So practice. as you see on the left. or consolidations. I am using a rectangle to show this “area” where price has struggled to get above or get below “in the past.

A pullback can refer to any reversal of price.6. The word pullback is also called “retracement.com .17 The Fibonacci Retracement Tool Once you see your trend.2. and 76.forexartofwar. 50. and that trend “begins” to “pullback. We start at the beginning of the trend. I gave you Fibonacci settings of 23. too. This is what that tool looks like all by itself. In the beginning of this book.” this is where we will look for our trade.4. This tool can help us to identify a good barrier. 38. and then draw it to the end of the trend.8. It is extremely valuable because there are repetitive patterns here.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. Copyright 2011. 61. www.” Retracement refers specifically to the Fibonacci Retracement Tool levels.

www.” In a downtrend.” and then it begins to “trend down.” that’s when you can use the Fibonacci retracement tool.” But we want to sell when price pulls back to a good barrier (green). The Fib can be one “confirmation” that we have a good barrier. I’ll refer to it as “Fib.” Once we draw it. Copyright 2011.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. we would want to “sell.18 First you need a trend. When that trend “starts to pullback. From here on out I’ll refer to it as the “Fib tool.” As you can see if you follow the arrows. price is going “sideways.com .forexartofwar.

com . You know it is time to think about drawing a fib because price begins moving back up. All too often it moves to 38. Sticking with your plan Once you have the basics down. You’ll see the opposite color candles like the one at the white arrow. and 76.8 are correction levels. 61.6 barrier as a potential place for a trade. 1. 50.4 can be barriers indicating where price will turn. Your second level can be accomplished in a single month if you know what your job is at that second step. making the mistakes of thinking that "if I just know enough about the market. The previous candle was blue at one point. www. You start the Fib where the trend begins down. but the historical pattern is this: 38." This is just a mistake.forexartofwar.8.19 The Fib is always drawn from the left to right. So I would like to see price move back to 38.2% are natural profit taking levels. No need to get more into it than that at this time. A Fibonacci retracement level 2. I don’t pay attention to the 23. 23.6% and 38. I suppose I could write a book on why this works. your next focus should be "defining the right high probability setup for you." Most traders spend years of wasted time at this level. I will succeed. you are learning these key things · · · · · Proficiency with Charts and Trading Platform How to see a trend How to see when price is “pulling back.2 anyway.2 before I consider a trade.2. and 50% and 61. He's exactly what you should do next: Copyright 2011.com and Vance Williams All Rights Reserved questions: vance@forexartofwar.” How to enter and exit a trade. A historic barrier. Keep in mind that at this level (in this book). Now you have two things to look for as a barrier.

What you are learning in this book are the “building blocks” of what I am writing about every day.forexartofwar. We'll address any questions when we are there.com . You can certainly review and ask questions at different hours. www. 3. 4.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. See new price waves clearly Understand all of the parts of a high probability setup Choose a setup that has the potential of winning 70% or more Balance each part Define your setup completely That's what you want to learn to do after you have mastered the content in this little eBook.20 1. Be sure and ask any questions on my Forex Art of War Facebook page. and answer any question that is asked of me. Copyright 2011. I tend to focus on this exact information on my Facebook page Monday-Thursday 8AM11AM ET. Let me give you an example of the trend. 5. pullback and barrier in an uptrend. 2.

As it does.forexartofwar. I draw a fib from the start of the trend to the top of the trend. in the next level. When you are ready. I can buy.21 Look at how the trend moves up (faster moving average is above).com and Vance Williams All Rights Reserved questions: vance@forexartofwar. Just do the best you can drawing your Fib for now where you think the trend starts up. Copyright 2011.com . When price reaches my barrier.2 Fib level. www. Now I’m looking for price to come down and reach at least the 38. I’ll give you rules that will enable you to draw your Fibs with even greater precision. and then begins to a pullback the other way (back down).

For now. Do your best not to focus on winning trades right now. Then you can see at the green arrow that this barrier coincides with the former barrier. notice the barrier with the three white arrows. When two barriers coincide.22 The best barrier is when you get “two” barriers lining up at the same time. and then look at this picture below.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. You are just learning to “swing the bat.” This is something that you will consider at the second level. www. we’ll practice getting on base. Copyright 2011.4 Fib level). In the picture below. Comparing this to baseball.com . because confluence can increase your probability of success.forexartofwar. you are not attempting to “get on base” right now. this is called “confluence. just look for a historic barrier like you see at the three white arrows OR a 38.” Once you get the basics down. In other words. So take a look at the picture above again.2-76. you only need “one” barrier to practice (at this time). This was the former resistance area that price broke above. It is “easy” to see.

61. simply buy or sell 10 contracts (also called lots).com and Vance Williams All Rights Reserved questions: vance@forexartofwar. 76. At this level.com .8. www. We will be entering right at our barrier. just buy or sell 10 contracts in your practice account. I’ll keep entry and exit very simple so that you can move very fast to the next level of trading.23 Entry and Exits Entry is about where you enter the trade. We will ignore 23. and I suggest you just use a green line from now on to illustrate your buy point. 50%.2. That is the green line.6% at a place for entering a trade. So when you see price trending. you will look for the 38. the moment price pulls back to 38. we’ll learn how to limit our risk by a specific percentage. Copyright 2011.forexartofwar. In the next level.2. we buy.4 or a former barrier to enter. As you see here. For now.

If you were selling. You must always be in the habit of doing this. at any given moment. This is reality. A bank can make a surprise announcement. We don’t have to monitor everything that is happening in the world.com .24 An “exit” is your profit target and stop loss. This is just how it is. So you MUST ALWAYS trade with a stop loss limiting your risk.” so to speak.forexartofwar. but it will change.” No matter how smart or knowledgeable we get.” not a single trade. your stop loss is placed 30 PIPs below your entry price. “Each trade must be thought of as a random event. Again. An oil pipeline can get attacked.” What that means is that “anything can happen. It will be a while. your stop loss would be placed 30 PIPs above your entry price. www. For now. The most important reason is this. and I suggest you write it down and pin it up on your wall. Copyright 2011. anything can happen. The stop loss limits your overall risk in every trade. do not be concerned with winning or losing. It is important that you enter your stop loss immediately on the trading platform. I’m teaching you good form for “swinging a baseball bat. First let’s discuss your stop loss. The possibilities are endless. But in time. It is only natural to be disappointed when we lose and excited when we win. as in this picture. We just have to trade our plan and always know that there is no way we can ever prepare for every possibility.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. simply place your stop loss 30 pips away from your entry. We make money from a “series of trades. Nor do we need to. So if you are buying. It is crucial you do this for many reasons. this will change. Fears of a bank collapse can emerge. We are just practicing good form while learning the basics. no matter how great our trading setup is.

let’s also keep this really simple. Don’t worry about your “total risk” at this time.forexartofwar. We’ll discuss “the spread” on the next page. for example. then 15 more PIPs to 1.3871 (blue line) to reach the target. Later we will limit our risk to 2-5% maximum of our equity when we trade.3856. On my trading platform. Your plan would be to overcome the spread.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. and then make 15 PIPs. price must move 3 PIPs to 1. For now. just buy or sell 10 contracts (lots). So if my entry price for this buy trade is 1. This adds more complication to your practice. www. the fixed spread is 3 PIPs.3853 (green line). Copyright 2011. when you trade.25 For our target.com .

www. When you execute a trade. That’s how outrageous it is. On the right. Notice the floating EUR/USD box I have in the front of the trading platform (green rectangle). The “spread” is the difference between the bid and ask price. To reinforce how ridiculous it is to trade without a stop loss. If anyone tells you different.com .forexartofwar. It offers many helpful functions when you are newer to trading. or the difference between the sell and buy price. They mean the same thing. On the left you have the “bid” and “sell” price at 1. be very sure to enter your stop loss in the trading station as quickly as possible.26 The trading platform I recommend for practice is called the GTS Pro (you can use any trading platform you like). You would need to Copyright 2011. price will need to first move the amount of the spread before you get to zero (breakeven. the trading platform will not allow you to enter an automatic stop loss (usually the amount of the spread or closer). Bid and Sell mean the same thing.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. you now know how absurd they are. Or a parent leaving their two year old to play by the street while they go in to make tea. written as BE by many traders). You will observe a price on the left and the right side.3595. imagine a NASCAR driver speeding around the race track without wearing a helmet. you have the “ask” and “buy” price at 1.3598. If price is “too close” to your stop loss. When you are actually taking trades.

In the trading platform. I’ve been doing this for many years. I know. So we don’t do anything at all. The rule doesn’t apply to buy trades. and then show how we would do things differently for our stop loss and limit in the trading platform.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. The same is true for the profit target. but you absolutely must use it or you will wonder what is happening to you at times. Read carefully and pin it to your wall: This illustration above is a buy trade. Now I’m going to give you a rule you do not need to understand at this time (might hurt your head to try).com . and you will be wondering what happened. Let’s walk through a trading setup again. The rule only applies to sell trades.forexartofwar. Trades will close. www.27 manually close the trade when the stop price is reached. a profit target is called a “limit”. Copyright 2011.

2 barrier. What does that mean? First of all. So the stop loss you type into the trading platform would be 1.28 The fast moving average is on the bottom. Make sure you know the rule and know what to do. a Fib always starts at the top of the chart and is drawn down and to the right]. What is our rule? WHEN IN A SELL TRADE YOU MUST ADD THE SPREAD TO YOUR STOP LOSS AND LIMIT WHEN TYPING IT INTO YOUR TRADING PLATFORM. you can sell ten contracts (green line). your contracts are going to close at the buy price (3 pips Copyright 2011. [For a sell. This difference is also what is known as our “total risk.forexartofwar. don’t change anything on your chart – only on your trading platform. so we can only sell.3569 +3 or 1.3608.3569). www.3572. We draw the fib from the top to the bottom of the trend (what I refer to as a price advance). When price “pulls back” to your 38. The reason for this is because if you are in a sell. The spread [in this case] is 3 PIPs. Your limit order would be 1. The total risk is the difference between the stop loss price and the breakeven price (18 PIPs).3587.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. That’s what you type in the trading platform.3605 +3 or 1. We now must enter the stop loss and limit order in our trading platform.” Price must move now in the direction of your trade 18 PIPs in order to reach your target (1. Your stop loss is placed just above the next barrier (in this case next Fib level). so your trade reaches breakeven price at 1.com .

" I believe that you cannot make "more" until you first learn to make "some. So when you take a trade here using the information in this book. the buy price will be at 1. focus on something else. The final piece is "sticking with your plan. you set the timer. just follow the rule if you don’t understand. and come back when the timer goes off.forexartofwar. If you find yourself making changes during the trade.29 higher)." One day." Focusing only on consistent profit.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. You need to train yourself that once you place your entry and exits points. You are training your mind to understand that there is nothing for you to do.3569). Fixed spreads usually do not change without notice from your dealer. the I suggest that you turn your computer off and come back later. your job is over. So practice this over and over. your job is over.com . The mind thinks that there is something to do. Price is either going to hit your stop. Copyright 2011. or hit your target. The goal of the Forex Art of War program is "developing the skill to make consistent profit. If the noodles take 13 minutes. Be sure to check the spread each time you trade if you are not trading with fixed spreads. Keep in mind that different currency pairs have different spreads. you want to be so detached from the outcome of the trade that trading is just like setting a timer. The spread might even change for the pair you are trading. www. You'll see what I mean. you want to set your stop loss and profit target in the trading platform.3572. WHEN IN A SELL TRADE YOU MUST ADD THE SPREAD TO YOUR STOP LOSS AND LIMIT WHEN TYPING IT INTO YOUR TRADING PLATFORM. Easy really. and knowing how to do that is the fastest path to real success. So when your chart price is at your target price (1. and once you do that.

forexartofwar. Learn to let the trade come to you. www. We do not email you every day. we also added you to our mailing list.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. it’s about what you do.com I wish you the very best on your journey! Vance Williams Copyright 2011.” Always keep in mind that your success depends on your ability to make good decisions.com . Do not chase trades. basic tools. not a sprint. our goal is to provide valuable information that will help you reach your goal of consistent profit. trading is a marathon. You must become proficient at language. Once you do. Email me with any questions: vance@forexartofwar.30 In summary. When you downloaded this free eBook. then you will be ready for more. Always remember “it’s not about what the market does. not on what you see happening in the market. and basic logic. but when we do.

31 Level 1 Trading Plan Trend If faster moving average is above slower moving average.4 Can use historic support or resistance Entry Enter when price reaches your barrier.com and Vance Williams All Rights Reserved questions: vance@forexartofwar. (See next page for charts and trading software) Copyright 2011. only sell. www. Conservative exits: price must have room to reach target prior to breaking trend high or low Aggressive: target can exceed high or low of trend Take one trade at a time Trade 10 Contracts (Lots) Remember: when in a sell trade. Target 30 PIPs. Stop loss 60 PIPs.com . Barrier Need only one barrier Can use Fibonacci retracement levels 38. Stop Loss 30 pips below your buy price.” Do not change any prices on your chart. Profit Target: 15 PIPs after spread 4 hour or Daily Chart: Range of movement 40 PIPs.2-76.forexartofwar. or 30 pips above sell price. Exits 1 hour chart or under: Minimum range of movement 20 PIPs. add the spread to the stop and limit order price “when typing them into the trading platform. If faster moving average is below. only buy.

you will find all of the tools I have mentioned in this book. You can find me there Monday-Thursday 8AM-11AM ET. Copyright 2011. It is titled “What Will Price Do?” It is very helpful to our team for you to click “like” on any information you find useful there. You can use web based software if it is your only options. you will need to acquire a program like Windows Parallels or get an inexpensive stand-alone PC. though functionality will be somewhat limited (MAC is only 10% of the PC market). Be sure to ask us any questions on Facebook.com . as well as interact with questions and comments. you need to have the basic tools. By 8:30AM I provide some analysis about what I see. to take full advantage of Forex trading software. Whether you use my charts or someone else's.forexartofwar. www. At the download page you will find: · · · · · Charting software Trading platform software Instructional videos Workspace that tells your charts what to load Demo codes to run your charts and trading platform Note: If you are a MAC user.com and Vance Williams All Rights Reserved questions: vance@forexartofwar.32 Tools and Resources Page At the download page.

Seeing new price waves clearly Understand all of the parts of a high probability setup Choose a setup that has the potential of winning 70% or more Balance each part Defining your setup The third step. Copyright 2011. I divide this into three levels because each level has a specific focus. you need to learn the following: 1. Sun Tzu said. based on the teachings of Sun Tzu. with all three sharing the common goal of consistent profit. Create a great trading plan Learn to trade that plan. Basics 2." and the third step as "you. and through the process. 3. 3. From there. "if you know yourself and you know your enemy.com if you have any questions. 2. and your third step is to master execution. you will never be in any danger. 4." This is all part of the Forex Art of War principles. your second step is to master high probability trading. High Probability Trading 3. 5.forexartofwar. in 100 battles.com .33 The Next Step Where to go from here? After you learn the basics. experience with your method will teach you "when" you can get "more. you will be able to make consistent profits. 1. regardless of what you are thinking or feeling Document your trades well Evaluate what you are seeing well and where you are prone to mistakes Adjust your plan When you are trading the right setup for you. Execution At the second step. You can think of the second step as "the market.com and Vance Williams All Rights Reserved questions: vance@forexartofwar." Here are a few thoughts about what you will need to learn in the future." Write to me vance@forexartofwar. know yourself and your method well. 2. www. you need to learn things like: 1. 4. 5.

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