Step-By-Step Strategy & Guidelines For Successful Forex Trading

By Maurice Perry www.slumdogforex.com Copyright © 2010

Table of Contents Table of Contents Disclaimer Introduction & Brief Overview of Forex Trading Creating OANDA FXTrade Practice Account Setting Up Chart Type: Candlestick Setting Up Indicators: SMA 20 (Simple Moving Average) Setting Up Indicators: EMAs (Exponential Moving Averages) Setting Up Indicators: RSI (Relative Strength Index) Setting Up Indicators: Slow Stochastic Setting Up Pivot Points Setting Up Trading User Preferences Adjusting Leverage Creating Multiple Time Chart Windows Time of Day/ Volume Factor Check Forex Factory Day Calendar Determining Goal For The Day Using the SMA 20 Indicator Using the EMA 5 & 12 Indicators Using the RSI Indicator Using the Slow Stochastic Indicator Drawing & Using Support & Resistance Lines Using The Fibonacci Retracement Tool How to Buy & Sell/Open & Close Trades Trading Game Plan Conclusion: Words of Wisdom Slumdog Forex Trader’s Checklist Basic Trading Terminology 2 3 4 8 12 17 19 22 25 28 36 41 43 47 51 55 62 67 71 74 79 87 92 100 105 109 110

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Disclaimer
Every individual investor’s success depends on his or her own background, instruction, devotion, dedication, perseverance, aspiration and inspiration. As with any business endeavor there is always the possibility of loss of capital and there is no guarantee the use of this book will result in profits or success. The information enclosed herein is intended strictly for instructive purposes. Nothing in this publication should be construed as an approval to buy or sell any security or to offer any investment counsel. It is possible the author of this book at this or a subsequent time in the future may own, buy, or sell securities discussed. Information provided herein has been obtained from sources believed to be reliable but no guarantee is made as to their precision or comprehensiveness. The advice of a knowledgeable legal, tax, accounting, or business professional should be sought at all times. U.S. Government Required Disclaimer – Trading foreign exchange markets on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in the Forex market, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Readers of this publication should also be aware of the following CFTC disclosure rule 4.41 regarding hypothetical performance results:
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN ACTUALLY EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS MADE THAT ANY USE OF THIS INFORMATION WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.

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So upon arrival. Japan in this instance. Forex trading is the trading or exchange of currencies. Let’s use Japan as an example. So they would go to their bank or a local currency exchange in order to exchange the USD or a certain amount or value of the USD for whatever the current value of the Japanese Yen is. sell high. we basically look to buy another currency at its lowest rate.buy low. and we wait until the value of that currency rises to a certain level before we sell it. My hope and desire is for the knowledge that I have gained over the last four years of forex trading to be shared with you within the following chapters of this book. and welcome to Slumdog Forex. 4 . Nor would they have to worry about the exchange rates changing while in mid-air! With forex trading.Chapter 1 Introduction & Brief Overview of Forex Trading Hello. they would not have to worry about exchanging currencies there. Dollar (USD) traded or exchanged for the Euro. It’s similar to if someone were to take a trip overseas to another country. forex trading is basically the exchanging of two different currencies. Some people would like to have their money exchanged before they make it to their destination. or the USD exchanged for the Japanese Yen. Whether it is the U. relax and enjoy the ride! But before we get into any serious detail. My name is Maurice Perry and I’d like to thank you for purchasing this book tutorial. It’s similar to trading stocks and commodities . So prepare to sit back. I would like to first do a brief overview of what forex trading actually is.S.

weekly. the price or value of a pair of currencies at any given moment. Economic Factors 2. when you get off at 11 PM. Let’s say that you work 3rd shift. This definitely allows for more flexibility. especially if you have a work schedule that may not be conducive for you to trade during certain trading peak hours of the day. the next major peak time of trading is typically between the hours of 12 AM and 3 AM (CST). When there is a change of 5 . and many more can have drastic impact upon the economy. Well. Forex rates. five days a week. The beautiful thing is that forex trading can be done 24 hours a day. Political Conditions 3. are determined by three things: 1. between the peak hours of 6 PM and 9 PM (CST). and thus. Also. So. monthly or quarterly. Reports such as “New Home Sales”. “Oil Inventory”. This would be in the midst of the major peak time of trading activity. will affect the value of a country’s currency as well. the good thing is the flexibility that exists with trading forex. For instance. you would get home just in time for the New York Stock Exchange (NYSE) opening bell at 8:30 AM (CST). Political conditions can affect the value of currencies when a government becomes unstable or stabilizes.One of the things that I really love about forex trading is that you have the ability to trade virtually at any hour of the day. If you can get home by 8 AM. Market Psychology Economic factors consist of the ripple effect that may occur after financial reports are released daily. let’s say that you work 2nd shift and your work hours are from 3-11 PM. from 11 PM to 7 AM. you would be able to trade in the evening time as well. “Non-Farm Employment Change”.

Or if there is indecisiveness on Capitol Hill regarding legislation that may impact the economy. Market psychology analyzes the speculative tendencies of traders as a whole. and will be aware of the political conditions of the countries of which 6 . when one administration moves in. this can affect the nation’s currency value. and another moves out. which will be taught in Slumdog Forex. or in the case of America. both Fundamental Analysis. One strategy is called Fundamental Analysis. this can also cause the fluctuation of the USD. Fundamental Analysis is the use of what was mentioned previously (Economic Factors. Political Conditions and Market Psychology) to determine the general direction a currency may be headed to. as well as when there could be a good time to buy or sell. the trader is using various indicators and different levels to determine when is the proper time to buy or sell. With the strategy that I use. With Technical Analysis. The other strategy is called Technical Analysis. We will pay attention to the financial reports that are released. based off of previous movements and indicators that they have set up. high volume usually means a greater push in one direction or the other – the more traders that trade in one direction simultaneously. you may witness the rise in volume (indicates the worth of a market move. Traders will try to guess what direction the market may go next.governmental structure of a nation. as well as volatility later on in the book. the greater the volume). I will talk more about volume. There are two strategies that are used in forex trading. are used. as well as Technical Analysis. When there is a noticeable change of directions with the forex rate.

I’m not telling you to just invest one dollar into forex trading. especially with the broker that I use. So in the next chapter. But we will also use technical indicators to assist us with our trading as well. Before we dive into the “meat and potatoes” of forex trading and our strategy. 7 . the first thing that I want to do is help get you started with creating a practice account with OANDA FXTrade. the service/broker and platform that I use to trade with. That’s not the message that I want to convey. or maintain a forex account. is that you could trade with as little as one dollar! Now granted. The point that I’m trying to make is that there is not a minimum balance that is needed in order to have.are associated with the currencies that we are trading. especially with the platform and service/broker that I trade with/through. I will walk you through the process of setting up your practice account. Probably the greatest thing about forex trading.

1 Proceed to fill out the information requested in the “Register Now” box. and in the web address bar. look to the right side of the page and you will find a section called “Get Started”.com When the web page appears. You will fill out your name and email address. you will be taken to a registration page. You will also create a username and password. Here you will find two links. type the following web address: www. 1). Open your web browser. as well as select the type of currency your want to use as your base currency. Fig.Chapter 2 Creating OANDA FXTrade Practice Account Let’s get you started with creating a practice account.oanda. The second one is for FXGame. After clicking on the link. After this form is filled out. 8 . One is for FXTrade. Click on the link that says “OPEN AN FXGAME ACCOUNT” (see fig.fxtrade. click on “Register”.

Fig. you will be taken to a web page that lets you know that your account has been activated (see fig. On my home PC. 3). feel free to bookmark this page with your web browser so that you’ll have easy access to it. you will see that the Account pull-down menu is already set for “FXGame” and the Type pull-down menu will be set for 9 . 3 When you arrive at the OANDA Login page. 2). I set this page as my Home Page. Within this email there will be a link that you will have to click on in order to activate your account. There is a hyperlink that you can click on – “Login to FXGame”. 2 Fig. You will then be taken to the OANDA Login page (see fig.You will then receive an email that says “OANDA FXGame Account Activation” in the subject heading. After doing that. When you click on the link. as well as my laptop.

in the upper-left hand corner of the platform. 10 . It may take a few seconds to verify the username and password. Here. When the platform (see fig. 4) finally appears. Type the username and password that you created. Underneath. 4 If you ever wanted to change your password (which would actually be a good idea to get in the habit of doing). then click the “Login” button. Fig. for the “New Password”. you will have to type in your current password. go ahead and maximize the window. When you click on that link. and scroll down until you see the line that says “Change Password” (see fig. 6). you will see the “Account” pull-down menu. Click on it.“Trading Platform”. in the space provided for “Old Password”. a dialog box will pop up (see fig. Then confirm your new password below. proceed to type in your new alpha-numeric password. 5).

we will begin constructing your platform. if necessary. When you are finished. Click on “OK”. and write it down. 11 . 6 Make sure that you remember your password. click on the “Submit” button.Fig. You are now finished with creating your practice account! Yeah! Next. We will start with setting your chart type. The dialog box will close. 5 Fig. and another dialog box will appear to confirm that the password has been successfully changed.

The black candlesticks are “ascending”. Click on the arrow. 7 When the “Candlestick” chart type appears. and then select “Candlestick”. 7). or “falling” candlesticks (see fig. Some of the candlesticks should be shaded black. The first thing that we want to do is go to the pull down menu that is currently set to “Close Price” (see fig. The gray candlesticks are “descending”. I will begin showing you how to set up your chart. 8). and the others should be shaded gray. Fig. 12 . or “rising” candlesticks. We will start off by setting your chart type to “Candlestick”. zoom into an area so that you can see the two different shades of candlesticks vividly.Chapter 3 Setting Up Chart Type: Candlestick In this chapter.

8 What I like to do is change the color of both of the candlesticks. 9). click on the body of a black candlestick first. Click on “Falling Colour”. Then click on the body of a gray candlestick. A box should pop up with “Rising Colour” and “Falling Colour”. To do so. I think this is a nice contrast to help you visualize the difference between the two. Click on “Rising Colour”. So now you should have purple rising candlesticks and orange falling candlesticks (see fig. No. 10). 10 . 9 13 Fig.Fig. then scroll down and select “Orange”. then scroll down and select “Purple” (see fig. I am not a Los Angeles Lakers fan! Nor am I an LSU alum! I thought I’d just clear that up really quick! Fig.

showing the date and time of that particular candlestick. you will see a gray rectangular box. the “Close” will be at the bottom.Nonetheless. The “Open” is the top or bottom of the body of the candlestick that aligns with the top or bottom of the previous candlestick (the previous “Close”). 11 Within each candlestick. There are three parts of the candlestick – The Body. The Upper Stem. and The Lower Stem. The Upper Stem is the line that rises up from the body of the candlestick. there is vital information. These values are located at different parts of the candlestick. if the candlestick 14 . let me briefly explain the components of the candlestick. you will see the Open. Fig. 11). High and Low values for that candlestick. In the bottom part of that box. The Body consists of the shaded area of the candlestick. The Lower Stem is the line that falls down from the body of the candlestick (see fig. If you hover over one of the candlesticks and look at the lower left-hand corner of the chart. The “Close” is the opposite end of the body (if the candlestick body is orange. Close.

The “Low” is the lowest part of the Lower Stem of the candlestick (see fig. 12 Sometimes you will find candlesticks with no body at all. 13). Fig. 12). 13 15 . This means that the “Open” and Close” of the candlestick were at the same value (see fig.body is purple. The “High” is the top peak of the Upper Stem of the candlestick. the “Close” will be at the top). Fig.

and select “Save Current Profile”. Go to Tools. we will set up the SMA 20 Indicator.Those are the basic components of the candlestick. You should now save the profile. 16 . In the next chapter.

Change that value to 20. The first indicator that we will set up is called the SMA 20 line. 16 If you look at your chart. if you have your platform open. To insert the indicator. 14 Fig. 14). Go ahead and click on the arrow of that pull-down menu. and then click on it (see fig. This is the SMA 17 . and then click on the + sign to the right of it (see fig. After clicking on “SMA”. Then scroll up the list until you see “SMA”. next to the pull-down menu (which should now have “SMA”). there is a value (14). 15 Fig.Chapter 4 Setting Up Indicators: SMA 20 (Simple Moving Average) Now I will show you how to begin setting up the various indicators that I use. There you will see a pull-down menu that says “Add Study” (see fig. you should now see a curvy line that is somewhat following the direction of the candlesticks. 16). I’ll go into more detail later. Fig. look towards the lower left hand corner of the chart. 15). SMA stands for Simple Moving Average.

the SMA line is a moving average line. The value that we set for our line. After the color has been changed. The location of that line at the current candlestick illustrates the average price/rate over those 20 Fig. the next indicator that we will set up will be two EMA (Exponential Moving Average) lines. click anywhere on the line and a menu will pop up. And speaking of other indicators. then “Save Current Profile”. and the previous 19 candlesticks. We’re going to change the color of that line to red. go to the top of the screen and click on “Tools”. save the profile. tells the line to take the average of the current candlestick. to save the profile. 17 candlesticks. We will go into much more detail about how this indicator is used with our trading. Scroll down until you see “Red”. Again. To do so. as well as how it will be used in conjunction with the other indicators that we will be setting up. Basically. 17). 18 .20 line that we just created. and then click on it (see fig. which was 20.

and then scroll down the menu to select “yellow”. To begin. There will be two different lines that we will be setting up. then scroll down the list. Change the color of this line to blue. Your platform should now have an additional line now. red SMA 20 (created in 19 . So click on “Add Study”.Chapter 5 Setting Up Indicators: EMAs (Exponential Moving Averages) In this chapter I will show you how to set up your EMA (Exponential Moving Average) lines. you should have three lines. change the value to “5”. Fig. and then click on the “+” sign. just as we did with the SMA 20 set-up. and then select “EMA” again. 18 Now. We’re going to change the color of this line to yellow. This time. and click on “blue”. 18). So now. you will create one more EMA line. You should now see three lines. The third line is your EMA 5 line. and then select “EMA”. Change the value to “12” and click on the “+” sign. This line is the EMA 12 line. Click on the line. click on “Add Study”. You should now have a red SMA 20 line and a blue EMA 12 line (see fig. Click on the line.

19 The EMA line is similar to the Simple Moving Average line in that the location of the line is determined by the average of the current candlestick with the previous candlesticks. Thus. Go ahead and save the current profile to lock in these additions to your profile. 19). So in essence. It will always stick closest to the current price/rate. including the candlestick at its current location on the chart.previous chapter). But. and yellow EMA 5 (see Fig. more weight is placed on the latter few candlesticks. according to the value that is set for the line. the major difference is that for the EMA line. blue EMA 12. with the EMA 5 line. the location of that line is determined by the rate of five candlesticks. the curvature of an EMA line will be slightly different than that of the SMA line in that it will move a bit quicker into the direction of the current rate. all three of these indicators are called lagging indicators because all of them lag behind the current price/rate. 20 . The EMA 12 line will be the slower moving line. Fig. For instance. However. The EMA 5 line is the faster moving line. more emphasis. Its movement will always lag behind that of the EMA 5 line. or weight will be placed on candlesticks #4 and #5 than candlesticks #1 and #2.

But the next indicator that I want to show you how to set up is the RSI indicator. 21 .I will talk later about how all three of these lines are used to determine when to enter into trades and when to exit.

Chapter 6

Setting Up Indicators: RSI (Relative Strength Index)
Okay, now we will set up our RSI (Relative Strength Index) indicator. The first thing that we’re going to do is click on “Add Study”, then scroll up and click on “RSI”. Now you should see three values, 14, 70 and 30 (see fig. 20).

Fig. 20

Change the first value, 14, to 21. Change the second value, 70, to 50. And change the third value, 30, to 50 as well. Afterwards, click on the “+” sign. A second chart will appear below our candlestick chart showing gray hatched areas (see fig. 21). This is the RSI indicator.

Fig. 21

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But we want to do a few more things to this indicator before we move on. Look towards the upper right-hand corner of your chart. There you will see an icon that looks like a forward slash. This is the “Draw Trendline” button (see fig. 22). Click on it, then scroll down the menu and click on “Horizontal Trendline” (see fig. 23).

Fig. 22

Fig. 23

Your cursor should now be controlling a yellow horizontal line. Drag this line down to the RSI chart and click as close as you can to the 50.00 value (see fig. 24). Then click on the line again and change the color of that line to red. Also, we want to give the line a bit of thickness so that it’s a bit more visible on the chart. To do so,
Fig. 24
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click on the line again, and then scroll down the menu, and click on “Style”. Then, click on “Thick” (see fig. 25).

Fig. 25

After modifying the horizontal line, proceed to save the current profile. The RSI indicator compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of the forex pair that you will be trading. When the gray shaded area rises above 70.00, it is considered to be in an “overbought” range. When the gray shaded area falls below 30.00, it is considered to be in an “oversold” range. However, the way that I utilize this RSI indicator is different than the conventional way that it is used. I will cover this later when I begin to talk about how to use the indicators. In the next chapter, we will set up another indicator – the Slow Stochastic Indicator.

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25 . It doesn’t have to be exactly 50. change the 14 to 18. The Slow Stochastic Indicator is now visible below the RSI Indicator (see fig. 14 and 3. 26). it is typically used to identify overbought and oversold conditions. For the first value.Chapter 7 Setting Up Indicators: Slow Stochastic The next indicator to set up is the Slow Stochastic Indicator. Click on the “Draw Trendline” icon in the upper right-hand corner of the chart. A Stochastic value above 80 is considered overbought and below 20 is considered oversold. Then click on the “+” sign. To create the Slow Stochastic indicator. click on “Add Study”. leave it at 3. you will need to drop a few horizontal lines into this indicator. 26 Now. Similar to the RSI. 27). and select “Horizontal Trendline”. there are some values that are preset.00 mark (see fig. and then click on “Slow Stochastic”. Just like the previous indicators. Drag the yellow horizontal line down to the Slow Stochastic chart and click as close as you can to the 50. Fig. For the second value.

00 level) to green. 29 Now we have our stochastic indicator set up. Change the color of the middle line (50. Fig. 28 Fig. so go ahead and save the profile. or near the 80. Then drop the new line in at.00 levels. we want to duplicate this line and copy it to a few other levels. click on the line that we just dropped in at the 50. and then click on “Duplicate” (see fig.00 level. 28). 29). Also. Repeat the process a few more times and drop lines near the 20.00 level lines to red (see fig.00.00 level. Change the color of the 40.00 and 60. 26 . 27 Next. 40.Fig. To do so.00 and 60.

27 . I will show you how to determine critical horizontal levels on the chart.In the next chapter. These horizontal levels are called pivot points.

31 28 . When you get to the page. If you scroll down. They can be determined for any time frame. and “Close”. with the daily time frame being most common. you will need to open your web browser. “Low”.com (see fig. Pivot points are extremely important in technical analysis. or rate changes. 32). Near the top you will see the words “High”. in that they signify the points where the overall trend in price. At the web address bar. type in fx-charts. 30). Below these. Fig. You will come to a page with the heading “Forex Pivot Point Calculator”. there’s a “Calculate” button (fig. and then hit “Enter”. To start. 31). you will see a bullet point that says “Pivot Point Calculator” Fig. 30 (see fig. all followed by boxes to type values in. and you’ll find a heading that says “Traders Toolbox”. look towards the left side. I like to set up the daily and 4-hour pivot points on my charts.Chapter 8 Setting Up Pivot Points In this chapter I will show you how to set up pivot points. Go ahead and click on that.

32 on the trading platform. and the close of the previous 24-hour period. Fig. select “1 Hour” (see fig. Please be aware that if you live in a time zone that observes Daylight Saving Time. or 4 PM CDT (see fig. because the GMT time does not change. If you can recall in chapter three. 29 . 33).However.tzc to convert times to your time zone.com/cgi-bin/tzc. Low and Close to help determine our pivot points. Since I’m in the central time Fig. 33 zone. So. “Low”.timezoneconverter. I talked about the components of the candlestick. 34). Within this window of time is where I will have to locate the “High”. Each of those candlesticks represents a timeframe. Visit http://www. my daily time period will begin and end at 1600 hours. beginning and ending at 2100 GMT. we will scroll back to locate the highest point. lowest point. and “Close” (see fig. On this “1 hour” chart. then you will have to adjust the times accordingly. On the timeframe pull-down menu. before we can enter any values into this page. b & c). we must go back to our chart to find the previous week’s High. scroll back or expand the 1-Hour timeframe chart until you’re able to see the previous 24-hour period. 35-a.

Fig. 36). and then click on “Calculate” (see fig.21777. There are seven numbers that are calculated. 36 You will now see the results below. 35-b Fig. So now that I have these three values. 34 I found that the “High” for the day was 1. The “Close” for the day was 1. 35-a Fig. The “Low” for the day was 1.23449. The first number is called the Fig. I can go back to the pivot point calculator and plug in these numbers.Fig. 35-c 30 .25636.

and drag the copied line to the first Resistance Point/Level (R1). 37 Horizontal lines will now be placed on my platform at these seven levels.25463.25463. I will drop the line in. and Fig. The other three are called Support Points. and click on “Horizontal Trendline”. 38 then change the color to “Green”. There will now be a yellow horizontal line in that location. I will proceed to duplicate this R1 line to the locations of R2 (1. Next. and change the style to “Thick”. Fig. or Support Levels (fig. The next three are called Resistance Points. Once I move as close as I can get to 1.Pivot Point.27479) and R3 (1. 31 . or Resistance Levels. 1. beginning with the Pivot Point (PP). Then I would drag the line to as close as I can get to 1. I will change the color to “White”. 38). 37). So.29322) (see Fig. and click there.2362 on the chart. I now go back to my chart and click on the “Draw Trendline” icon in the upper right-hand corner of the chart.2362. which is 1. I click on this line and select “Duplicate”.

I have to do the same for the Support Points/Levels. and 0500-0900 GMT (to convert these times to your time zone. draw horizontal lines at the appropriate locations on the chart. These pivot points will have to be updated more frequently than the daily pivot points because they are determined by the previous 4-hour block of market activity. 0100-0500 GMT. 1300-1700 GMT. 39). the style will already be set to “Thick”. The 4-Hour pivot point blocks are as follows: 0900-1300 GMT. Use the same color scheme as the daily pivot points (greenresistance lines. Fig. To calculate these pivot points. 1700-2100 GMT. I now have all of my daily pivot points in place (see fig. When the values are given. purple support lines). I’ll start by copying the PP line to the first Support Point/Level (S1).com/cgi-bin/tzc. use the following website: http://www.17745). I will now save my profile to be sure that these lines are locked in. When finished. When the line is dropped in place.timezoneconverter. white pivot point. but change the 32 . which is 1.tzc. change the color to “Purple”. “Low” and “Close” of the previous 4-Hour block and plug those values into the pivot point calculator.Now. take the “High”. 39 Then I would repeat the process to show the pivot points for the 4-Hour time frame. Afterwards.19761) and S3 (1. I will continue to duplicate this S1 line to the locations of S2 (1. 2100-0100 GMT.21604.

Fig. 41). 40). pivot points can be a good indicator to use to identify where a trend change may occur. it will either retrace back. Another website that you can utilize to get the pivot points is www. to determine the proper times to be on the look-out for trend changes. along with our other technical indicators. When you get to the site. But basically you’ll find that the price or rate of a forex pair will bounce between two pivot point lines. 33 . These pivot points will be very instrumental. and then select “Pivot Points” (see fig.actionforex. I will talk about support and resistance in more detail. 40 As mentioned earlier in this chapter.line type to “dotted” (see fig. hover over the “Markets” button at the top of the page. When a line is broken. Later on.com. They act as “floors and ceilings” for the chart. or it will make a push to get to the next line. After these points are in place. save the profile.

Click on the “Daily” tab. Fig. Underneath this heading. there is a series of hyperlinks to different pivot point types. 42). you will see the heading. “Standard Pivot Points”. 41 When the next page pops up. there is a chart with the tab “Hourly” highlighted. click on the tab that says “4 Hours” (see fig. For the 4-Hour pivot points.Fig. 42 34 . The daily pivot points for EUR/USD pair are listed on the top line. Below this area.

low and close and insert them into the calculator on www.com. you can check out the following site: http://www. If you want to use the chart on www. So.There may be a slight difference in the values of each of the levels.investopedia. if you want to learn how to calculate the pivot points on your own.fx-charts.com/ask/answers/forex/forex-pivotpoints. but they are still in very close proximity and are valid for the purpose in which we use them. that’s fine as well. if you want to find the high. a fourth support and resistance line is given. I will show you in the next chapter how to set up your User Preferences. Or. that’s fine.asp Another website that you can use to determine pivot points is http://www.actionforex. Now that you have learned how to set up your trading platform by creating the key indicators that we will be using. With this site.com/.com. 35 .pivotpointcalculator.

Chapter 9

Setting Up Trading User Preferences
Since you should have your indicators set up, now it’s time to show you how to set up your User Preferences. To start, click on “Tools” and then scroll down and click on “User Preferences” (see fig. 43). The User Preferences box will pop up with a variety of tabs. The first tab is the “Chart” tab. There will already be boxes checked for the first three items. This will remain as is. Click on the next two boxes to turn the Auto-Extend Trendlines Left/Right on. Everything else on this tab is okay as is (see fig. 44).

Fig. 43

Fig. 44

Click on the next tab, “Quotes”. Since I trade primarily with the EUR/USD pair, what I like to do is move that pair to the top of the Quote List. To do this, look at the right side, underneath the term “Quote List”. Scroll down until you find the pair, EUR/USD. Click on that
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pair, and then using the “Move Up” arrow towards the bottom of the box, click on that arrow until the EUR/USD pair is moved all the way to the top of the list (see fig. 45). Click on the “Apply” button. Now, if you look at the left side of your platform, you’ll see two tabs – “Quote List” and “Quote Panel”. The “Quote List” tab should be highlighted. You will now see that the EUR/USD pair is at the top of the list (see fig. 46). If you click on the “Quote Panel” tab, you will also see that the EUR/USD pair is in the top left-hand corner of that list as well (see fig. 47). By the way, I Fig. 45 use the Quote Panel for my platform. I’ll talk more about this later on when I talk about the different ways to buy and sell. Sometimes I trade the USD/JPY pair also. So if you want to, you can find that pair in the Quote List and move it up, just beneath the EUR/USD pair, and then click on “Apply.

Fig. 46
37

Fig. 47

The next tab is the “Trading” tab. (see fig. 48). Here, we will insert values and create parameters that will be preset in our trading orders. The pull-down menu at the top, for “Market”, will remain as “Default”. We want all of the changes that will be made below to be valid for all trading pairs. Therefore, it will remain. For “Default Order Size”, click on the arrow for the pull-down menu, and select “%”. Then, for the box on the left, type “76.4”. The order size on every trade that I make is 76.4% of the total margin that is available. Margin is “borrowed money”. Using a lot of margin can be extremely risky because Fig. 48 both gains and losses are amplified. While the potential for greater profit exists, great losses can occur as well. However, one of my main goals is to show you how to limit any losses that may occur, and teach you how to always be in situations to make gains the great majority of the time. We will talk about this later. The next three lines can remain as is. Jump down to the “Default Stop Loss” line. The current setting for this in the pull-down menu is “% Price”. Change this to “% Balance”. Then, change the value to the left to “2”. For “Default Take Profit”, change this to “% Balance” as well.

38

change the pull-down menu to “PIPS”. For “Default Trailing Stop”. 39 Fig. So. I selected “America/Chicago” (see fig. for the pulldown menu next to “Time Zone”. make those selections. Then click on “Apply”. Then. I selected “GMT-6”. “Locale”. for instance. 49). Whatever is appropriate for you. place checks in the boxes of the following:  Enable Stop Loss By Default  Enable Take Profit By Default  Enable Trailing Stop By Default Remove the checkmark from “Confirm One-Click Trades”. For the items at the bottom of the “Trading” tab. is for you to identify what time zone you are located. Set the value to “15”. which we will discuss later. The next tab. I currently live in the Central Time Zone. to the right. 49 . Depending on your daily goal. This is important because the time on the charts will be according to what you set it as here. “Default Limit Order Duration” can remain as is.Then change the value to “5”. Click on “Apply” afterwards. Therefore. this value may change.

For the “Sounds” tab. 40 . you can have different sounds assigned for the price hitting your “Take Profit” and “Stop Loss lines” so that if you were in another room. everything can remain as is. you can click on “Apply”. now. In the next chapter. I will show you how to adjust the leverage setting for your account. So. “Misc”. here you can upload any compatible sound files to your account to assign to various events/actions that will take place. For example. then “Save”. For the last tab. you will know when one of the actions takes place.

you can go back to your platform and look at the top left-hand corner of that window.Chapter 10 Adjusting Leverage In this chapter. A browser window will pop up. and then click on “Change Leverage” (see fig. prompting you for your username. change the leverage to 50:1 (see fig. password. 53). 41 . 52). To start. and the six-digit account number. It is a ratio of the amount used in a transaction to the required deposit. you will see a six-digit number that follows your username and the active window (Primary) (see fig. Leverage is when the investor only funds part of the amount traded. password and account number (see fig. 50). Fig. Now you can go back to the account leverage ticket and type in your username. 50 Fig. 51). or saved with your confirmation email when you first set up the practice account. I will show you how to adjust your leverage setting. 51 If you don’t remember your account number written down somewhere. click on the “Account” pull-down menu. Afterwards. There.

Fig. A confirmation page will pop up. click on “Submit”. 52 Fig. 42 . Click on the “Close” button. 53 Next.

Fig. After clicking on it. The wavy lines on the stochastic charts are lagging lines. RSI indicator and Slow Stochastic indicator (see fig. On the price chart. the dashed line delineates the current relative strength for that particular pair. select “Show Average Price” (see fig. 55). 54). change the time frame on the base chart to “5 min”. they will always trail the movement of this dashed line. 43 . the first thing that I want to do is turn on a dashed horizontal line that moves with the current rates on our chart. To start. For the Stochastic indicator. 54 You should now see horizontal dashed lines on your price chart. pan over to the upper right-hand corner of your chart and click on the “Chart Options” icon. Next. as well as the indicators below (RSI and Slow Stochastic). The icon is just to the right of the “Sell” button.Chapter 11 Creating Multiple Time Chart Windows Before creating any new windows. For the RSI indicator. Therefore. the dashed line shows the real stochastic value. the dashed line follows the movement of the average price for that particular time frame/candlestick.

Fig. Stretch the sides of the window to make it half the size of the main chart. and click on “Save Current Profile”. 57). For this new window. it will read “Open graph in new window” (see fig. 56).Fig. Next. You will see a duplicate of the base chart pop up in a new window. furthest to the right. pan over to the upper right-hand corner once again. 55 To create a new window. go ahead and go to “Tools”. change the time frame to “1 Hour” (see fig. Click on the icon. find the overlapping boxes/windows icon. 56 44 . When you hover over that icon. This time.

So I already have an idea of what’s happening with the 1H chart indicators. and leave the base chart window as the “5 min” time frame (see fig. or second duplicate to “15 min”. 57 If you would like to. and a new window will pop up.Fig. The reason why I change the 1H chart is because the trend for this chart is slow in changing. 45 . 58). However. You can resize this window. you can create another window so that you will have three windows. Just click on the overlapping boxes icon on either of the charts. Usually. along with the first duplicated window. without overlapping the account summary on the left side. instead of creating another timeframe chart. You can change this middle window. in order to be able to fit both of the new windows comfortably within the platform. I use the 1M chart to determine the entry points for trades. showing three different time frames. I change the 1H chart to the 1M timeframe.

58 I will talk about how to use all of these windows in conjunction with one another later. But in the next chapter. I will share information about the proper times to trade.Fig. 46 .

It’s near the opening bell of the New York markets 2. it is only 47 . Therefore.Chapter 12 Time of Day/ Volume Factor There are certain times of the day that are more conducive for successful forex trading than others. either up or down. be using indicators and systems that are similar to yours. If the markets have made a strong price move. it is helpful to trade at the same time as many others. is between the hours of 6 AM and 12 PM CST. a signal to trade in one way or the other will be followed by a strong rush of traders hopping on board and riding the “trend-train” to their destination! The best time to trade. So. who may in fact. It’s the evening in Asia and Australia. Because many traders use some type of lagging indicator to dictate when to open and close trades. The higher the volume during that price move. but there are people in Europe. While it is 6 AM CST/9 AM EST in New York. The hours around the opening bell (8:30 AM CST) is usually where you will be able to find the most market activity. not only are there people in North America that are trading at this time. I typically trade between the hours of 7-11 AM CST. the apparent force of that move depends on the volume for that time frame. This is a peak time for trading because the volume is the greatest during this period. When trading. the more important the move. The reason why this is such a critical time to trade. Asia and Australia that are trading as well. in my opinion. is because of the following reasons: 1. Volume is a significant gauge in technical analysis as it is used to determine the value of a market move. especially the early hours of this range. It’s near the closing bell of the European markets 3.

The Asian and Australian markets open at 6 PM.  NEVER enter a trade five minutes prior to financial news releases/ economic reports Before news releases/reports. The third best time to trade is between the hours of 6 PM and 9 PM CST. traders in Europe. Meanwhile. So Asian and Australian traders are also influencing the direction the forex rates go. Some will think that the price/rate will go down. there will be a lot of speculation. once again. Some will hedge their bets that the price/rate will go up. as well as America are still awake and may look to make quick gains as well. in my opinion. The next best time to trade. the Asian and Australian Markets are preparing to close. and of course. Volatility refers to the amount of indecision or risk 48 . the European markets are opening. So. This period of uncertainty creates what is called volatility. At this time.8 PM CST/9 PM EST in Japan. there is an overlapping of trading markets that will affect currency rates. There are a few things that you must be aware of when trading. is between the hours of 1 AM and 3 AM CST.

At this point. A higher volatility means that a pair’s (i. sometimes it will continue in the retraced direction.. but instead. A lower volatility means that a pair's value does not rise and fall severely. EUR/USD) worth can probably be spread out over a larger range of values.  WAIT five to ten minutes after financial/economic news releases Usually. Again. But just as a word of wisdom.e. there is usually a lot of volatility in the markets. and then begin to retrace (reversal in the movement of a pair's price. It will then move strongly in that direction for a minute or two. listen to what is being said. you’ll find that the price/rate will actually retrace all the way back to where the price was before the news report. relax. changes in value at a stable pace over a period of time. simply wait for the extreme volatility and noise of the pair to calm down before thinking about entering a trade. 49 . it will move side-ways for a while after returning back to its previous location. the price of the pair can fluctuate considerably over a short time period in either direction.  NEVER trade while the Fed Chairman is speaking… EVER!!! Something that I’ve noticed is that whenever the Fed Chairman speaks. A lot of times. Then the movement will slow down. Sometimes. just wait five to ten minutes before you resume trading. or it may rebound and go back into the direction that it took after the news release.about the size of changes in a security's value. the market drastically reacts to news releases. The price/rate will take off into one direction or the other. but do not react to it. Meaning. countering the prevailing trend). just sit back. Market psychology begins to affect the stability of the rate when traders try to decipher every word that comes from the mouth of the chairman! In this instance.

the forex trader.A website that I utilize to let me know when important financial/economic news reports will be released is www.forexfactory. I will cover this site in the next chapter and will talk about its value to you.com. 50 .

or reports that will be released for the current day (see Fig. I usually filter out the yellow flags. 60 . A red flag means potential high impact. 59 Each line shows a financial report that will be released at a given time of the day.Chapter 13 Check Forex Factory Day Calendar In this chapter. and then remove the checkmark from the box next to the 51 Fig. Open your web browser. the first thing that you’ll see is a calendar of events. I will show you how to utilize the tools on Forex Factory’s website. you can click on the green link to the right that says “Filter On” (blue when not activated). Fig. and go to http://www. which will directly impact a certain currency. The probable impact of the report is delineated by a flag color system underneath the “Impact” heading. a yellow flag means low impact. 59). When you arrive at the site.com.forexfactory. an orange flag means medium impact. To do so.

general notes about the report. more information will be given in regards to that particular economic report. what the report measures. the next release date. 62 The specifications (Specs) of a particular report will show the Source (authors of the report). along with results from previous release dates (see fig. why traders should care about 52 . If you click on the blue folder to the right underneath the “Detail Heading” (see fig. Fig. 62).yellow flag (see fig. 61). the usual effects of that data. 61 Fig. how frequently the report is given. 60).

you will see the results of that same report in the past. Fig. I highly recommend checking some of these threads out. 64 At the bottom of the page. Fig. If the actual numbers are below the forecasted number. the text will be red. the font color will be green. There are people that have been trading forex for much longer than I have that share good advice and tips. 63). To the right of the “Details” icon. if you want to see the schedule for the remainder of the week. 64). If you want to see the next day’s schedule of economic reports. underneath the “Chart” header. when the released data exceeds the forecast. 63 If you click on the icon furthest to the right.the report. you will find a bunch of discussion threads and forums that have been created for different subject matter regarding forex trading. In the “Actual” column. the previous report’s numbers. and other names for the report. a window will pop up which shows the results of that report over the last few years. click on the hyperlink just in the upper right-hand corner that says “Tomorrow”. you can click on the hyperlink “This Week” (see fig. Under the “History” heading of the details. as well as post 53 . you will see the forecasted numbers. and the actual numbers that are released on that day (see fig. Also.

So definitely visit some of those forums. you may have to update the time with each visit to the site. Just browse through some of them. click on the year as well.images of charts. 54 . But also. you can save the changes. So. You can click on the arrow to the left of that week to show the entire week’s worth of reports that will come out. To view the next week’s activities. 65 This site is extremely useful to let you know when the reports are coming out so that you can stay away from trading during those times. In the next chapter. I will show you how to determine your goal for the day. You don’t even have to say anything. there’s a calendar in the top left-hand corner of the page. If not. demonstrating their trading strategies. 65). you can click on single days just to see that day’s reports (see fig. There is one last thing to be mindful of – make sure that you change the time that is located at the top of the page to reflect your time zone. To look at dates in the next year. If you can recall from the previous chapter. definitely utilize this tool for the purpose of knowing when not to trade. You can also look at future months by clicking on the month and arrow in the upper left-hand corner of the calendar. If you create an account. take time to browse the site and check out some of the information that is shared in the forums as well. Fig. Or. I talked about times when you shouldn’t be trading at all – 5-10 minutes prior to a news release and 5-10 minutes after a news release.

66 For the sake of learning how to use the chart. 5%. you’ll see “Starting Money”. and under column ‘C’. you’ll see the first line. So click on that tab right now. I will show you how to utilize the Excel Projection Chart that I created to help you determine your goal for each day that you trade. If you had a chance to see the video that was on the web site. Day 1. If. 2%. 4%. or when you have downloaded the file. This starting amount can be 55 Fig. Look at the top of the chart. Each tab represents different amounts of increases per day. 67). we will start off by using the “3% Increases tab”. but this is actually a very true statement. 67 . Fig. Then as you go from left to right. you’ll see tabs for daily gains of 1%.5% and 10%. Below this. proceed to open it. you may remember me talking about the possibility of turning an initial investment of $100 into over $160K in 12 to 16 months. you will see a series of tabs (see fig. with a starting amount of $100 (see fig. or on a social networking site. 3%. If you have not downloaded the Projection Chart. 7. It seems kind of outlandish. please do so at this time.5% Increases” tab. The tab furthest to the left is the “. If you look at the bottom of the Excel window. 66).Chapter 14 Determining Goal For The Day In this chapter.

This isn’t a monthly chart because the months have different amounts of trading days in them. So. If you take a look at fig. and breaks the chart down. Just click on that cell and then type in the correct amount. and hit ‘Enter’. there are only 20+/. you may have noticed an odd color scheme with the cyan. leave it as $100.94. For example. I just wanted to show this to you to let you know that I wasn’t making that up! It’s just the power of compound interest/numbers! Scroll back to the top.922.trading days in a month.12 (see fig 68). you’ll see that at consistent gains of 3% daily. you will end up with more than $160K for the year. I just want to show you that if you started with only $100 on Day 1 of trading. your starting amount will be $157. The cyan lines are the beginning of a 20 day trading cycle (remember. 68 will finish the day with $161. There is a method to my madness! This just visually helps me recognize weeks of trading. So the easiest thing for me to do was create divisions of weeks. 68. The magenta lines are always Fridays. You Fig. Now. let’s say that you begin trading on a Thursday.changed to whatever amount that you start with. Do not start with the first cell on column ‘B’. But for now. magenta and white rows. 69). The rest of the chart will update. on the day that you trade. But rather. type the date into the appropriate cell in this column.205. start with the cell just above the magenta line. and you make 3% gains daily for an entire year (which is approximately 250 trading days per year). on the 250th day of trading. this is the “Date” column. 56 . If you take a look at column ‘B’. which indicates a Friday (see fig.

you will type in your “Actual Finish” amount. starting with $100. When we adjusted our user preferences. due to compounding numbers. Trade Amount” column.5% and make a net total of two positive trades to equal 3%. you may end up with a little more than 3% when you’re finished. if you are trading for 1. Most likely. Each column shows a 1. we placed a value in the Market Order Size box so that when we do trade. you can set your Take Profit for 3%. or even typing it into your order ticket when triggering a trade (which we will get into later). So. This is just a ballpark estimate of what the order size may be. However.5%.34. For instance. When you hit 57 . a 3% gain for the day will allow you to finish the day with $103. In the next column. the order size will be preset accordingly. or set it for 1. The next two columns show what the individual trade goals would be for two trades. let’s assume that you actually finish with $105. This is what the Target Projection will be for that day.5% gain. you don’t have to worry about adjusting this. The next column is the “Approx.Fig. The next column shows the “Target Projection” for the day. 69 The next column to the right is the “Starting Money” column. Seeking a small amount such as 3%.

if you gained $5.34% (see fig. 70).‘Enter’. Fig. your “Actual % of Increase” will be 5. 72 58 . The next column to the right will show the actual percentage change for the day. since you started with $100. Fig. and I have either hit my goal or exceeded it. 70 Something that I like to do. If it has been a positive trading day. the “Balance Difference” column. in the column to the right. 71 Fig.34 for the day. which also helps me to visually be able to see what I’ve done over a span of days is shade in the “Actual % of Increase” cell. it will show the difference between your “Actual Finish” amount and your “Starting Amount”. 71 & 72). I would shade the cell in with a green color (see figs. Therefore.

73 The column to the right. You may have noticed that the tabs are different colors (green. but I did end up with a positive gain. as long as you abide by the trading rules/parameters that I 59 . or withdraw from your forex account. and you hit ‘Enter’. yellow and orange). The yellow tabs may take a little longer to achieve your goal. a little longer. “Interest/Added Funds”. tallies the amount gained over a 20-trading day period. based on various trading factors such as volume and time of the day. 73). The orange tabs. I didn’t meet my daily goal of 3%. The green tabs. Friday. Everything that I’ve just covered is similar to all of the other tabs that you may use. I would then shade the “Actual % of Increase” cell with a lighter shade of green (see fig. the following rows will be updated according to the new value. let’s assume that on the next day. with all of these tabs. I consider extremely easy to achieve your personal goal. “Weekly Gains”. “Monthly Gains” (which are not always monthly gains).Now. But honestly. tallies the amount that was gained throughout that week. The next column. When a number is plugged in. The only thing that changes between all of them is the percentage of gains. And the last column. allows you to plug in dollar amounts that you either add to. Fig.

I’ll try to get an even smaller gain.5% left to gain. fine. I’ll gain all 7.5% per day. If you make more than your goal. two years and five years (some of the larger percentage gains don’t go past two years. like 2%.5% mark daily. If you can catch a trend right when it’s beginning. no matter what the percentage may be for the day. I’ll gain half of it in the morning. So if I’m up late at night. That’s all that matters – small. and get out with small gains. So that leaves me with 2.will share with you in the next few chapters. you should have no problem achieving your goals.5% in just one trade. AND STICK WITH THAT TAB! Do not get into the habit of switching tabs/goals. decide which tab will work best for you and your own personal goals. period. consistent gains for an extended period of time! Take some time to plug in dollar amounts on each tab to help you identify a goal that you think you’ll be able to achieve. fine. so you may need to copy and paste to enlarge the chart). See what you can make after half of a year (125 days). it may be very easy to hit 7. And even if I don’t meet my goal of 7. Or.5% everyday. 4% per day. So. And even 10% with one trade is doable at times! There have been times when I’ve gained between 16%-18% with just one trade! In terms of a strategy that I use. This can be detrimental to your overall efforts of making your goal. sometimes. I’m happy to end the day with more than I started the day with. when I know there’s going to be a major run.5% in the morning. The way that I do this is by trading in the morning between 7 and 10 AM CST to get a small gain of 3%. 1% per day. and the other half in the evening. Just stick with your goal! 60 . this is an example of how you really don’t have to stay in front of the computer forever to trade. one year. All it takes is a few minutes at the right time to get in. especially in the morning. Whether it’s . I personally try to hit the 7. Then in the evening time. If you make less than your goal. I’m happy with a gain. However. I’ll gain the remaining amount after 1 AM.

Okay! Now it’s finally time to get into the good stuff! I will begin to show you how to use the various indicators in the following chapters! 61 .

62 . The first indicator that I will talk about is the SMA 20 indicator. a lagging indicator that illustrates the average price of the previous twenty candlesticks. The upper section is what I call the “Buy Only” section. The lower section is the “Sell Only” section (see fig. 75).Chapter 15 Using the SMA 20 Indicator I will now start going over the various indicators. an upper section. 74). If you can recall when we set up the SMA 20 indicator. and a lower section (see fig. For our purpose. it was the red line that was on our main chart (see fig. 76). 74 chart into two different sections. Next. It is a simple moving average line. this line divides our Fig. I will talk about how each of the indicators are used in conjunction with the others.

if 63 . 78). 76 For instance. when the price or rate falls below the red SMA 20 line.Fig. and exit that “Buy” order at the exit point of Fig. Fig. this is where you would enter into a “Buy” trade (see fig. 78. 77). Then. 77 Fig. 78 Let’s assume that you were able to enter a “Buy” order at the entry point of Fig. 77. when the price or rate breaks above the red SMA 20 line. For example. If this were the case. then you would close this trade out with a gain of approximately 16 PIPs (a PIP is the smallest unit by which a forex quote can change. you would exit that “Buy” trade (see fig. 75 Fig. using the SMA 20 line only.

Fig.4769) (see fig. 79). 81). we will have close to a 7% gain (see Fig. Fig. it will be quoted at 1. and combining it with the gain of the “Sell” order of 8 PIPs.4767 and it moves up 2 pips. you would have closed the “Sell” order with a gain of 8 PIPs (see fig. how about entering a “Sell” trade after the price dropped below the red SMA 20 line? You would then close the “Sell” order when the price crosses back above the red SMA 20 line. 80). If this were the case.EUR/USD is now quoted at 1. 80 Considering the gain of the previous “Buy” order of 16 PIPs. and the principle of compound numbers/interest. 64 . 79 Now.

the price/rate never hits the TP line (see fig. if our first trade would have hit the TP line. then we would have finished that first trade with a gain of 19 PIPs (see fig.Fig. what happens when we sell? How does the TP line come into play? Well. 81 Something that we must also keep in mind is where our Take Profit (TP) line is located. 82 So. 82). then it would be placed nearly 19 PIPs away from our entry point. That being said. 65 . in this case. Fig. if our TP is set for 5%. For instance.

66 . the SMA 20 line divides our chart into two sections. the “Buy” section and the “Sell” section. In the next chapter. Fig. If you keep in mind that you are to only enter “Buy” orders when the price is above the SMA 20 line. 83 To summarize. it will help you in regards to validating the other indicators that you will use.83). and only enter “Sell” orders when the price is below the SMA 20 line. Therefore. I would have ended up with the same amount of PIPs as I did previously. I will show you how to use the EMA indicators in conjunction with the SMA 20 line.

The second line that we created was the EMA 12 line. 84 Fig. which is the blue line (see fig. For example. 85). Now I will talk about how the EMA lines are used in conjunction with the SMA line. at the point where the blue EMA 12 line crosses beneath the yellow EMA 5 line. a “Buy only” half. The first line that we created was the EMA 5 line. this signifies a “Buy” entry point (see fig. Fig. 84). and a “Sell only” half. which is the yellow line (see fig. Fig. 86). 85 The key to the usage of the EMA lines is identifying where the two lines cross. 86 67 .Chapter 16 Using the EMA 5 & 12 Indicators In the previous chapter I talked about how the SMA 20 line divides our chart into two halves.

87 Something that we want to see before entering into a “Buy” trade is if in fact there is a cross of the blue EMA 12 line beneath the yellow EMA 5 line.Adversely. To determine our “Buy” exit point. then we do not enter a “Buy” trade. 87). 68 . 88). if both don’t agree. we look for the blue EMA 12 line to cross above the yellow EMA 5 line. Fig. so far. then we do not enter a Fig. we want to make sure that the current rate at the cross location is above the red SMA 20 line (see fig. while the rate crosses below the red SMA 20 line (see fig. Remember. this signifies a “Sell” entry point (see fig. 88 trade here. when the blue EMA 12 line crosses above the yellow EMA 5 line. Therefore. 89). we are using both indicators to positively confirm each other. If this is not the case.

5% gain. while utilizing the EMA lines and SMA line on the 1Hour chart. 89 So. if we were to enter and exit trades as shown in the illustrations above. 90). Granted. this would be the case if we were trading longer term. for only close to 72 hours of trading. This would be a super huge gain. This example illustrates how great of an opportunity there is to make a lot of money with trading 69 .Fig. we would have closed out with a gain of approximately 192 PIPs (see fig. 90 A gain of 192 PIPS is roughly a 50. Fig.

 CLOSING “SELL” ORDER: Blue EMA 12 line crosses beneath Yellow EMA 5 line. So. while rate of pair is below Red SMA 20 line. 70 .  CLOSING “BUY” ORDER: Blue EMA 12 line crosses above Yellow EMA 5 line. and how it is used with the EMAs and the SMA. to summarize the usage of the EMAs see the bullet points below:  FOR “BUY” ENTRY POINT: Blue EMA 12 line crosses beneath Yellow EMA 5 line. As long as we use our indicators to allow us to enter and exit trades properly. while rate of pair is below Red SMA 20 line. In the next chapter.  FOR “SELL” ENTRY POINT: Blue EMA 12 line crosses above Yellow EMA 5 line. while rate of pair is above Red SMA 20 line.forex. while rate of pair is above Red SMA 20 line. I will talk about the RSI Indicator. we will be successful.

and the way that it is set up graphically. However.Chapter 17 Using the RSI Indicator In the two previous chapters. To close this trade out. Just as the SMA 20 line divides the chart into two halves (a “Buy” half and a “Sell” half) (see fig. is a bit different than normal. 91 Fig. along with the previous two indicators. Now. The first thing to be mindful of in regards to the RSI indicator is that it is an indicator that determines when the rate of a pair is overbought or oversold.00 red line. the “Buy” exit point would be at the location where the gray 71 . the way that I use it.00 red line on our RSI indicator divides that indicator into two halves as well. a “Buy” half and a “Sell” half (see fig. the 50. I talked about how to use the SMA and EMA indicators. Fig. 92 On the RSI indicator. 91). when the gray shaded area crosses above the 50. this signifies a “Buy” entry point. 92). I will talk about how to use the RSI indicator.

the rate dropped beneath the red SMA line. Take a look at illustration 93. 93). Also. But as you can see. Looking at the right edge of the green shaded area.00 red line (see fig.00 line. 72 . and the rate jumped back above the red SMA line as well.shaded area crosses beneath the 50. and that it would be the perfect time to enter into a “Buy” trade. the gray shaded area crossing above the red 50. 93 three indicators assist us in making that decision as well. Therefore. Utilizing all three of the indicators in this instance gives us a pretty dependable sign that an up-trend has just begun.00 line on the RSI indicator coincides with the crossing of the blue EMA line underneath the yellow EMA line. the blue EMA line crossed beneath the yellow EMA line. The indicators are verifying each other. this was a very shortlived closing of that “Buy” order because the gray shaded area popped above the red 50. In addition. we would enter another “Buy” order at this location. all Fig. we see that the gray shaded area of the RSI indicator has briefly crossed below the red 50. as well as the rate being above the red SMA line. Notice how near the left edge of the green vertical shaded area. the blue EMA line has crossed above the yellow EMA line as well. Meanwhile. To exit the trade.00 line again.

00 line. The exit point is confirmed by the other indicators (the blue EMA line crossing beneath the yellow EMA line. and also the rate falling below the red Fig. This entry point is verified by the blue EMA line crossing above the yellow EMA line.00 line. 95) Fig. SELL! (see fig.00 line. 95 73 .00 line on the RSI Indicator. Our “Sell” exit point is located where the gray shaded area of the RSI indicator crosses back above the red 50. this signifies a “Sell” entry point (see fig. 94 SMA line. When the gray shaded area crosses beneath the red 50. see the following bullet points:  When the gray shaded area is above the red 50.Just the opposite occurs when we are looking for a “Sell” entry point. and the rate crossing above the red SMA line). So just as a re-cap of the information given regarding the RSI indicator. 94). BUY!  When the gray shaded area is below the red 50.

When the value falls beneath the 20. The two lines that let us know when the rate is overbought or oversold are the two yellow lines (80. Fig. and the RSI indicator.00 line. as well as collectively.Chapter 18 Using the Slow Stochastic Indicator The final indicator that I want to cover is the Slow Stochastic Indicator.00) (see fig. 98 74 .00 line. the rate of the pair is nearing an overbought threshold. 97 When the slow stochastic value (which is determined by the moving white dashed line) is above the 80. Now I will show you how to use the Slow Stochastic Indicator in conjunction with the previous indicators to assist you in identifying the appropriate time to enter trades. I have shown you how to use the SMA 20 line. 98). It consists of two lagging lines that fluctuate in a vertical range between the values of 0 and 100. Fig.00 and 20. individually. the rate of the pair is nearing an oversold threshold (see fig. EMA 5 & 12 lines. The stochastic indicator is a tool that is used to identify the overbought and oversold conditions of a pair’s rate. 97).

99). Here. This range is between the values of 0 to 50. the line of last resort! (see fig. in regards to our slow stochastic indicator. you see that the rate has crossed above the SMA line. at the very least. First and foremost. 100).00 (anywhere below the green line) (see fig. when the rate crosses above the red SMA 20 line. the gray shaded area has crossed above the red 50. Fig. The white arrow is pointing to the “Buy” entry point. and the EMA lines have crossed. make sure that the slow stochastic value is below the red 60. the blue EMA 12 line crosses beneath the yellow EMA 5 line. before we even think about triggering a “Buy” order. 101 .00 line. Or. 100 Take a look at fig. I have drawn a blue vertical line on the chart that cuts through the candlestick chart. we want to make sure that a few things happen.So. On the slow stochastic 75 Fig. and the gray shaded area of the RSI crosses above the red 50. RSI indicator and slow stochastic indicator.00 line. 101.00 line. On the RSI indicator. we want to make sure that the current slow stochastic value Fig. 99 at that time falls within a “Buy” range.

00 to 100. Likewise. 102). at the very least.00 line.00 (anywhere above the green line) (see fig. 102 Fig. 103). This range is between the values of 50. which was below the red 60. Thus. the white dot denotes the current location of the slow stochastic value. our second line of last resort! (see fig.indicator. We have to make sure that the current slow stochastic value falls within a “Sell” range. Fig. the beautiful bright green checkmark that you see! What about “Sell” orders? Well.00 line. the exact opposite has to take place. we must make sure that the slow stochastic value is above the red 40. 103 76 . All of the indicators are telling me that this would be a good time to enter a “Buy” trade.

Here. 104 indicator. A blue vertical line is drawn on the chart. 105 77 . I like to call this range “The Sweet Spot” (see fig. The white arrow is pointing to the “Sell” entry point. RSI indicator and slow stochastic indicator. All of the indicators are telling me that this would be a good time to enter a “Sell” trade. and the EMA lines have crossed. 105). On the slow stochastic Fig. the white dot denotes the current location of the slow stochastic value. Fig. 104.00 line.Take a look at fig.00 and 60.00 line. What you will inevitably notice is that the majority of your trade entry points will have a slow stochastic value that falls within the range of 40. On the RSI indicator. which was above the red 40. the gray shaded area has crossed below the red 50.00. cutting through the candlestick chart. you see that the rate has crossed below the SMA line.

It prevents me from entering into “Buy” trades when the rate is close to being overbought. this is how I use the slow stochastic indicator in conjunction with the other indicators. the staple of trading with all known markets. which will help me get to my final destination.So. In the next chapter. I don’t want to enter trades when they’re half-baked. I’m going to discuss something that is absolutely critical for all traders to understand. It is the concept of Support and Resistance. when momentum is first building for the new trend/direction. I always want to enter trades at the precise time. It also prevents me from entering into “Sell” trades when the rate is close to being oversold. 78 . I wait until I know there’s “enough gas in the tank” of the slow stochastic indicator. or near burnout/exhaustion. my Take Profit line! I hope that makes sense! Okay. Therefore.

The two low points are support points #1 and #2. Support is a level at which a rate has had difficulty falling below. Fig. The two high points are resistance points #1 and #2. It is also thought of as the level at which many traders consider entering into a “Buy” trade. Resistance is a level at which a rate has had difficulty breaking above. 79 . Click on the “Draw Trendline” icon in the upper right hand corner of the chart. 106 I like to start off by drawing support and resistance lines on the 1 Hour (1H) chart first. It is also thought of as the level at which many traders consider entering into a “Sell” trade (see fig. Maximize the 1H chart and locate the previous two high points and previous two low points on the chart. 107).Chapter 19 Drawing & Using Support & Resistance Lines A foundational principle of any type of trading that you may do is the concept of Support and Resistance. 106). and then select “Trendline” (see fig.

108). 107 Draw a trendline that connects the two high points. Then repeat the process to draw a trendline through the two low points. support points #1 and #2 (see fig. 109). resistance points #1 and #2 (see fig. Fig. 80 . the angled support and resistance lines are created (see fig. 108 Fig. These two lines will act as two barriers that withhold the movement of the pair’s rate. 110).Fig. 109 By connecting those four points. The rate will oscillate between the two lines until one of the lines is finally broken.

111 This image shows a “Limit Buy Order” box (I will discuss Market and Limit Orders in chapter 21). For instance. Fig. in anticipation of the current rate falling towards that line. 81 . and then retracing back to the resistance line. However. and then continue to the next line of support. there is a chance that the price/rate could break through that support line. take a look at fig. It is placed a few PIPs above the support line.Fig. 111. 110 Some traders that use support and resistance lines as a primary tool for their trading will place Limit Orders near either the support or resistance line in anticipation of a retrace/rebound into the opposite direction.

I draw my trendlines on the chart. I will more often than not move my TP line about 3-4 PIPs above the next line of support (in the case of a resistance line.I use Support and Resistance lines in tandem with the other indicators that I covered in the previous chapters. In the instance where a known barrier may be (either support or resistance). there is something that I must do – check the indicators.00. Now. 2) the RSI value is under 50. If no Pivot Point would have been in 82 . 3-4 PIPS below). But before entering a trade. there are two locations where we may encounter support. In the illustration. The first location is the white Pivot Point line. and then use the indicators to determine the proper time to enter a trade. and 3) the slow stochastic Fig. 112 value is within our “sweet spot”. Take a look at fig. You’ll see that the support and resistance lines are drawn in on the chart (I usually change the color of them to cyan). The reason for doing this is because I do not want to jeopardize my gains if a retrace occurs at that next line of support (the white Pivot Point). Therefore. 112. The second location is the cyan Support line. all of the indicators give the “okay” for entering into a “Sell” trade (order location identified in illustration). you’ll notice that 1) the blue and yellow EMAs have crossed and the current rate is below the red SMA line. in regards to the Take Profit (TP) line.

You will be hard-pressed to find a breakout during an uptrend. you will hardly see a breakdown during a downtrend. 83 . A sign of a potential break of either a support or resistance line is when the price/rate has trouble reaching the next line in the oscillating period (see fig.00 on the shorter timeframe chart. When the price/rate breaks through the resistance line. it is called a “Breakdown”. So. The retrace from the previous line becomes so weak that it barely makes it half-way to the next line. Keep in mind that these lines will have to be drawn in every day before you begin to trade. Meaning. You would also want to draw Support and Resistance lines on the 15M chart. 113 & 114). what happens when the price/rate breaks through either the support or resistance line? Well. It will only take a minute to draw them on all of the charts. The reason for this is because the stochastic value at these lines is so overbought or oversold that running any further is typically out of the question. if the general direction of the price/rate is moving down. Usually. and whether it has enough momentum/strength to continue. or when the RSI crosses back above 50. as well as any other charts that have been created. The trade will be closed out when either the rate hits my TP line. the first thing that has to be determined is if it was a true break or not. Just repeat the process. And just the opposite happens during an uptrend. before the stochastic value has bottomed out. hits the adjusted Stop Loss line. or hit the ceiling. it is called a “Breakout”.this location. When the price/rate breaks through the support line. the support line will hardly ever be broken or penetrated for an extended period of time. then I would have moved my TP line 3-4 PIPs above the Support line.

the price/rate will move to the next line of 84 . you see how after the breakout. the previous high or low points act as lines of resistance or support. 114 Something that you may notice from the illustrations above is that after a breakout or breakdown. 113 Fig. 113.Fig. For instance. in Fig.

This is what’s called a “Fake-out”. the rate could break back through the original resistance line and continue the previous downtrend. Then they would place limit orders just above or below the offset lines (see fig. what happens after R1 is reached. Stick with trading 85 . which now will act as a support level. You do not want to develop a habit of anticipation and speculation. once again. Or. R1. Sometimes.resistance. which was the previous high peak. 115 However. I must reiterate the importance of using the indicators to determine when to enter and exit trades. 115). This is why it is extremely critical to use the indicators to determine trend changes. eventually breaking through R1 and heading to the next point of resistance. Fig. R2. Some traders would actually offset (duplicate) their support and resistance lines outward around 10 PIPs to make sure that they don’t get caught in a false break situation. or “False Break”. This is a critical juncture. the price/rate will retrace back to the previous resistance line. It could bounce off of this former resistance line and continue moving up.

86 . the better! In the next chapter.what you see. Nonetheless. I’m going to briefly talk about another useful tool that you can use. in regards to the indicators. It’s called the Fibonacci Retracement tool. Support and resistance lines are extremely useful tools that can forewarn you of potential trend changes. The more tools/indicators that convey the same thing. I believe that it would not be wise to use these lines exclusively.

38. You may need to squeeze the chart using the horizontal adjusters.6%. 116 point). 61. To utilize the Fibonacci retracement tool. maximize your 1H window and then change the timeframe to 3 Hours.8% and 100%. with the rate moving up (see fig.Chapter 20 Using the Fibonacci Retracement Tool Fibonacci retracement is a popular device used by numerous technical traders to assist with the recognizing of calculated locations for market/limit orders. TP lines and Stop Loss (SL) lines. fig. The peak will be located above and before the location of the crossing EMAs and RSI.2%. The levels are created by drawing a trendline between two extreme (high and low) points and then dividing the vertical distance between those two points by the key Fibonacci ratios of 23. 117). calculated Fibonacci levels. This will allow you to see the last major peak and trough (low Fig. You could probably take a look at your indicators to help determine where those two points may be. The trough will be located below and before the location of the crossing EMAs and RSI. 87 . The tool helps demonstrate the likelihood that a pair’s rate will retrace a significant amount of an original move and find support or resistance at key. with the rate moving down. 50%. 116). located at the lower-right hand corner of the platform (see.

118). Fig. Before I continue.Fig. When inserting the Fibonacci retracement overlay. 117 To draw the Fibonacci retracement tool onto the chart. Meaning. the first click that you will make is on the high point or low point to the right. In the example that you will 88 . or low point to the left. and then select “Fibonacci Retracement” (see fig. click on the “Draw Trendline” icon. 118 You would then drag the overlay to the high point. I want to make this point clear. always remember to go from right to left.

see in the illustration. You will then notice that there are a series of lines tethered to the mouse cursor. Proceed to click as close as possible to the low point (or high point) to the right. So. the overlay will be dragged from the low point on the right. Fig. 119). I like to use blue for the overlay because it seems to stand out a bit more. you’ll notice that the Fibonacci Retracement overlay consists of two solid horizontal lines drawn through the high point and low point. to the high point on the left. 119 You can change the color of the Fibonacci Retracement overlay by clicking on the diagonal line that is drawn through the high point and low point. The menu will pop up where you can choose your color. Click on the high point (or low point) to the left. The Fibonacci retracement overlay is now in place (see fig. There are also four dashed horizontal lines between the two 89 .

2% level. 120).8% and 100% levels. So. These Fibonacci levels are simply additional horizontal levels that you must be cognizant of while trading. if a pair’s rate can break through the 23. Fig.solid lines. The levels that are considered to be most common are the 38. there’s a good chance that the 61. Now. The rate will bounce between the Fibonacci levels until there is a breakout or breakdown. the rate will possibly run to the next line of support or resistance. Likewise. if either the 0% or 100% levels are ever broken with good momentum.8% level will be reached. 61. 90 .2%. for instance. I talked about the significance of understanding support and resistance in the previous chapter. if the rate breaks through the 50.0% level with momentum. 120 The Fibonacci ratios / levels act as support and resistance lines.6% line with enough momentum. All of these lines represent the Fibonacci ratios that I talked about earlier in this chapter (see fig. there’s a good possibility that it will continue to rise until it hits the 38.

you’re probably thinking. change the timeframe back. I usually only draw it onto the 3 Hour timeframe. In the next chapter. or the horizontal level of a previous high or low point. then I’d suggest changing the timeframe on those charts to 3 Hour. “This chart looks a mess right now!” It’s not as bad as you may think. So. sell.whether that is a pivot point line. 91 . Now. and then save the profile. open and close positions. and then drawing it in. if you wanted to have this on your 15 Min and 5 Min charts. I will show you the various ways to buy. Keep in mind that although you can draw this Fibonacci Retracement overlay on any timeframe. Afterwards.

or. which will be discussed in further detail later in this chapter.Chapter 21 How to Buy & Sell / Open & Close Trades Now that I have shown you in previous chapters how to use the various indicators and tools to determine when to open and close trades. 121 Buy or Sell – Under “Account” pull-down menu Fig. 122 Buy Button/Sell Button – Located at the upper right-hand corner of the platform on any of the multiple time chart windows that were created Fig. open and close positions. I will now show you the various ways that you can buy and sell. The following diagrams display the various methods you can use to open the Order Box. 123 92 . Buy/Sell button – In the upper left hand corner of the platform Fig.

unless you designated opening a sell position by either clicking on the Sell button on either the Quote 93 . shows left side-sell) Fig. there are two tabs – one for Market Order. 126 After you click on any of the above. a box will pop up with the option to open a market order (buy/sell) or a limit order (buy/sell) Fig. click on the right side for a market buy (illus. 127). you will see two radio buttons – one for “Buy” and one for “Sell”. The “Buy” radio button should be marked.Click on Chart – If you click anywhere on the chart. the order box will appear in the middle of the platform (see fig. Below the tab heading. 125 Quote Panel – Click on either the Sell or Buy buttons to open the order box Fig. The Market Order tab should be highlighted. You will notice that at the top. the other for Limit Order. 124 Quote List – Click on the left side of the third cell for a market sell.

List (see fig. which is the current pair that you are trading. Remember. there are two radio buttons – one for Price and the other for PIPs. The next two boxes will be left unchecked. Do not change this at all. 123). how much money will be used to open the position.. The “Take Profit” and “Stop Loss” boxes should be checked. i. or. CHF/JPY! The next section is the “Units”. and you can check the Trailing Stop box as well. This number will Fig. how much you will be trading in 94 . 125) . Below the Quote. that this value is predetermined by our settings in the User Preferences. These values are also predetermined because of the amount of PIPs we designated for each of these in the User Preferences. clicking on the platform and selecting “Market Sell” (see fig. The values that are to the right are the prices at which the position will be closed for a profit or loss. At that particular time. 126).e. or clicking on the “Sell” button in the upper right-hand corner of the platform (see fig. it gives you the value in USD per PIP. you’ll be trading another pair. 124). 127 change until the order is submitted. or else. The “Quote” is the current rate of the pair. Quote Panel (see fig. At the bottom of the window there is some information that is given regarding the ramifications of the order. Below the “Buy” radio button is the “Market” line. You can leave the Price button marked.

Just select either “Limit Buy” or “Limit Sell”. or opened. If it was a Buy Limit Order. except for designating when the Limit Order will expire. a small blue box will be placed in the location you clicked on. as well as the amount that will be gained or lost over a certain amount of PIPs. In the information section at the bottom of the box. 128 up. Like the Market Order. Limit trades are triggered. If you do want to use Limit Orders. the trade will be closed when either the rate hits the Take Profit line. when the rate of the pair touches. 95 . When you click on “Submit”. I highly suggest clicking on the chart itself in the location that you want your Limit Order to be placed. 128). 124 will pop up. you will see the date and time that the order will expire. We preset this for 1 week in the User Preferences. Click “Submit” to start the trade. a small orange box should be in the location you clicked on if it was a Sell Limit Order. or crosses those limits.USD. Then the Limit Order dialog box will pop Fig. everything is similar to the Market Order tab. The options similar to Fig. the amount of margin used. For the Limit Order tab (see fig. or the Stop Loss line.

The “Cancel” radio 96 .The limit trade boxes can be moved up or down by clicking on the box. and then clicking where you want the Limit Order to be moved to. 131). If there are multiple Limit Orders that have not been activated. The Order can be canceled by clicking on the box. 130). you will see the ticket information (see fig. If you hover over the small limit order box and then look to the upper left-hand Fig. and click on it. and then clicking on “Cancel Order” (see fig 129). a Limit Order ticket box will pop up. fig. Afterwards. 129 You can also cancel or modify the parameters of the Limit Trade order by clicking on the “Orders” tab at the top of the page (see. Fig. Fig. 131 corner of the chart. 130 you can find the one that you want to modify by finding out the ticket number. clicking on “Modify Order”. Simply find the line that matches the ticket number of that Limit Order box.

I’m able to maximize the amount of PIPs that I’m able to gain. It’s just 3-5 seconds quicker. a trade will be triggered instantly. If you look just to the right of the “Quote Panel” tab. click on the “Modify” radio button.button will be marked. There is a feature available that allows you to click only once on either the “Buy” or “Sell” buttons on the Quote Panel. while that ticket is up. I use this because sometimes when opening a market order. you will see an icon that shows a finger pushing down on a button. and with trading 97 . Thus. Fig. 132). This is the “One-Click Mode” icon (see fig. you could lose out on a few PIPs. If you would like to modify the parameters of that limit order. 132 After clicking on the “One-Click Mode” icon. With One-Click Mode. if you hover over either the “Sell” or “Buy” buttons. To proceed to cancel. There is a reason for this. and a trade is triggered immediately. But once you click on either button. the price continues to move in the direction that you want to trade. and adjust the parameters as necessary. simply click “Submit”. I primarily use the Quote Panel when I trigger trades. the information that would normally be located at the bottom of the Market Order ticket will be displayed in a manila dialog box.

Fig. 1) Rate hits Take Profit Line 2) Rate hits Stop Loss Line (or trailing stop loss line) 3) Manually Closing Order To "manually" close the order (regardless of "Buy" or "Sell").5%1% gain at times. and the Ticket Order line is the white line with information regarding that active trade) (see fig. a Ticket dialog box will pop up (with the order number). 133). 133 After clicking on that Ticket Order Line.forex at peak times. There are three ways that the Buy or Sell Order can be closed. click on the Ticket Order line under the "Trades" tab at the top of the screen (Trade tab should already be the active tab. 134). those 3-5 seconds could mean missing out on . You will see that the "Close" radio button is already active (see fig. 98 .

Decide which way works best for you. If you want to utilize Limit Orders. 134 To close the trade. 99 . you may do so. is acceptable. that’s fine as well. closing either manually. In the next chapter. So. In regards to closing the trade.Fig. or allowing the rate to hit the Take Profit Line or Stop Loss Line. If you want to trade using Market Orders only. I will layout a basic trading game plan that you will be able to use at virtually any time of the day. I’ve covered all the ways that you can open trades and close trades. The trade will then be closed out. click on the "Submit" button at the bottom of this dialog box.

and then insert another one. Retracement Tool. Check Forex Factory for Upcoming Financial News Reports – It is important that you check to see what economic data will be released before you start trading. the actual workout itself. The same thing will apply to your forex trading. Modify Fibonacci Retracement Tool (If Necessary) – If you insert the Fibonacci Retracement Tool into the 1H chart (after changing it to 3H). then after a true retrace (trend change determined by the indicators). the game isn’t the only thing that happens. utilizing tools such as Forex Factory. and “Post-Trading Analysis”. there’s a warm-up time. just like with any type of sports event. I want to give you a very simple game plan that you can utilize every time you trade. then you may not have to modify it for a while. This will prevent you from being caught with a position open and it being pre-maturely stopped by a sudden increase of volatility in the market.Chapter 22 Trading Game Plan Alright! Up to this point I have laid the foundation in regards to understanding the various indicators. “Execution”. But. It is imperative that these lines of potential support and resistance are accurate. There’s “Pre-Trade Preparation”. However. you will have to delete the previous Fib. Now. and the excel projection chart. PRE-TRADE PREPARATION Modify Daily/4-Hour Pivot Points – Make sure that the pivot points have been updated before trading. the pivot point calculator. if either the upper bound or lower bound is broken. There are pre-game warm-ups and post game interviews too! With aerobics. 100 . then a cool-down period.

in comparison to just using the 5M chart indicators to determine entry.00). which could be an additional 7-10 PIPs. 101 . change one of the charts to the 1M time frame. whether going long (buying) or short (selling). If this is the case. Adjust TP According to Trading Strategy for Day’s Goal – If your daily goal is only 2%. then make sure you change the Take Profit amount to 2% of Balance in the User Preferences. and then wait until all of the indicators signify the appropriate time for entry (see fig. Never trade without a specific goal in mind.00 mark.5% with each trade. 135). Something that I take into consideration is what the trends. Look for just the opposite when preparing to enter a “Sell” position. RSI and Slow Stochastic values are on the 5M and 15M charts. The benefit of using the 1M chart for entry is it allows you to be able to “ride the wave” of a trend change as close to its beginning as possible. EXECUTION Entering a Trade – You will want to utilize the 1M chart to enter trades. Draw Support and Resistance Lines on 1H. Identify your target. If your daily goal is 5%. decide whether you want to set the TP amount to 5%. and the Slow Stochastic values are within the “sweet spot” (between 40. The ideal scenario for entering into a “Buy” position is when the 5M and 15M chart RSI values are below the 50. You will need to know where all areas of support and resistance are on these charts. 15M & 5M Charts – This is a very critical step that you must take before trading. or gain that 5% in two trades.00 and 60. gaining 2.Check Projection Chart for Day’s Goal – The projection chart is like the road map to your future financial freedom. Then determine how many trades it will take to reach your target.

or close that position until I see the RSI value of the 15M chart cross below 50. then I wouldn’t exit. you may be able to do so with just one transaction. For example.Fig. if the 15M chart crosses in favor of a “Buy” position. a tactic that I sometimes use is starting off by entering a position on the 1M chart. if the 1H chart eventually crosses in favor of a “Buy” position. especially if your TP line is closer to your entry point than the next line of support or resistance. but if the indicators on the larger time charts begin to cross in the direction of the trend as well. 135 How long you keep a position open is dependent upon your daily goal and your personal strategy. then I would use the RSI value of the next smallest timeframe chart to determine my exit point. then I would use the RSI value of the 5M chart to 102 .00. Likewise. If your goal is to gain anything below 5%. If you are thinking about trading more long-term.

before moving the SL line just above your entry point (for a sell position. when the rate hits your SL line. Talk about the difficulties of the day. while at the same time. be sure to update the trendlines. This is a critical part of limiting any losses and managing your money. what you could have done differently. regardless of retracement. wait until the rate moves 8-10 PIPs away. just click on it. Of course. make sure that you plug it into the projection chart so that you’ll have your goal for the next day. You will then be able to drag it to its new position. you won’t lose money. continue to manually drag the SL line along the red SMA 20 line. This will help you finish with a positive gain. Redraw Trendlines if Necessary – If a trendline is broken and a new peak or trough is set. lagging 3-4 candlesticks behind the current/active candlestick. allowing some “wiggle room” for any volatility or price action that may take place so that your trade won’t be pre-maturely stopped. or recognized. POST-TRADING ANALYSIS Type results Into Projection Chart – Whatever your final result is. and click on “Modify Stop Loss Line”. move SL line just below entry point). If your TP is more than 10 PIPs away (3%). or any new things that you may have learned. Journal About Your Trading Experience – It’s good to write about how your trading day went. This can prove to be helpful in regards to 103 . Afterwards.determine the exit point. Moving the Stop Loss (SL) Line Above or Below Entry Point – THIS IS VERY IMPORTANT! Something that you want to get into the habit of doing is moving the red SL line just above or below your entry point so that if there is a sudden retracing of the rate. towards your TP line. the opposite applies for all short positions. To move the line.

mentally recalling situations that worked for you. and identifying situations that could be detrimental. 104 . I will conclude by sharing some very important things to keep in mind while trading. In the final chapter.

the notes really helped me stay focused and remember the many little things while trading. I know that with this information. That way. So. I’ve taken my lumps. to proper execution of trades. I would read each note every day before trading. something that I use to do is write down some lines and clichés onto post-it sticky notes. bumps and bruises. While trading. From learning how to set up your practice account and platform. You’ll find yourself getting into a lot of trouble if you make a habit of fighting against the current trend. However. to understanding your daily goal. like most beginners and novices.Chapter 23 Conclusion: Words of Wisdom All good things must come to an end! Hopefully. understanding and wisdom that I’ve gained over this period of time. to understanding the proper steps to take before trading each day. you will be well on your way to future prosperity! But before I close. those reminders would be fresh in my mind. I was able to clearly lay the foundation for successful forex trading. you can do the same! Just jot the following bullet points down on post-it notes and apply them to your monitor! It just may help you also!  THE TREND IS YOUR FRIEND! – Probably the most important thing to keep in mind while trading. if you want to. This is a very famous cliché in the realm of trading. I count it all joy. to being cognizant of economic factors that could affect the movement of a forex pair. 105 . in regards to the amount of knowledge. These notes would literally cover the outside edges of my monitor! Though it seemed weird to my wife at the time. I would like to share some “Words of Wisdom” with you. Throughout the years of forex trading.

and the RSI value crossing above or below 50. Only trade what your indicators tell you to trade. you may want to chop your goal in half for the day.00. do not open a position.e. NO TRADING! – If it seems as if there is little movement. Use discretion.to alert you when a trend has truly changed. the EMA 5 & 12 lines crossing.  TRADE WHAT YOU SEE. stay away from speculation! If there is not a definitive signal from all of the indicators.. do not speculate. i. 106 . If you do trade during these times. I cannot reiterate this enough. This is the basic element of compounding interest or compounding numbers. DISCIPLINE! – When you develop your game plan or determine your goal for the day.  DON’T SPECULATE! USE THE INDICATORS! – You have created the various indicators for a reason . Wait until a definite “floor or ceiling” has been determined.  DON’T TRY TO CATCH A FALLING KNIFE! WAIT UNTIL IT HITS THE FLOOR BEFORE YOU PICK IT UP! – Do not try to predict or assume that there will be a retrace or turn-around in the market.  BE CONTENT WITH THE CROSS! – Be comfortable with waiting on the various indicators to cross.  PATIENCE! – Rome wasn’t built in a day. the pair’s rate crossing above or below the SMA 20 line.  LOW VOLUME. stick with it. and your forex account balance won’t be built in a day either!  LITTLE BY LITTLE! – Understand that little gain upon little gain equals big gains over time. you may want to think about not trading at all. especially in the evening time or non-peak hours. Once again. NOT WHAT YOU THINK! – Again.

at worst.  TIGHTEN STOP LOSS LINE! –I usually move my SL line above or below my entry point when the rate of the pair moves 8-10 PIPs away from the entry point. and towards my Take Profit line. PLEASE 107 . be able to close out a trade breaking even. and try again the next day. If you achieve your goal for the day. walk away. and a general direction for the pair is determined.  WAIT 5-10 MINUTES AFTER ECONOMIC NEWS REPORTS! – You do not want to get caught in the craziness that happens immediately after a lot of the news reports. NO TRADING 5 MINUTES BEFORE ECONOMIC NEWS REPORTS! – You will want to stay away from the speculative volatility before the financial/economic news reports are released. I then move the SL line to the point on the SMA 20 line that is 3-4 candlesticks behind the current candlestick. So the safest bet is to be still until the “noise” of the pair has diminished. You may lose a battle. or with a positive gain in the event of a sudden retracement. if your percentage gained reaches 20%. This will allow me to. if you so happen to lose 8% or more for the day. Some people try to take advantage of the potential major swings. YOU’RE DONE FOR THE DAY! – If you are not trading to hit your TP line. But this can eat you alive as well. This is a critical tactic to use to make sure that losses do not occur. but it doesn’t mean you’ve lost the war!  REGARDLESS OF DAILY GOAL.  KNOW WHEN TO FOLD ‘EM! – Another key element of managing your money is to know when to walk away from trading for the day. 20% OR GREATER. Contrarily.00. but you are waiting for the RSI on the shorter timeframe to cross above or below 50. walk away. After this.

a 1-2% gain may be all that they can do. Feel free to email me at any time at feedback@slumdogforex. to prevent you from making the same silly mistakes I made. I would love to get some feedback as you utilize the information that I’ve shared with you in this book. With the strategy and margin that we use.com. For others. once again. So. and happy trading! 108 . Be attentive during your trading time. 5-7% may be the daily goal. The truth is that the longer you trade in one session. and then some. please take heed of this advice! It’s easy to get sucked into believing that you can continue to make that type of gain throughout the rest of the day. The most important thing to remember is to make sure that you are making positive gains daily. allow 20% to be your cap. there you have it! Some words of wisdom to propel you and keep you on track for financial freedom! Practice using these indicators in the practice account for a few months.  STAY FOCUSED!!! – Understand what your goal is.close the position and enjoy the rest of your day AWAY FROM THE PLATFORM! I had times where I’ve gained 20%+ in one day. So. So. the more dangerous it can be for you. a 20% gain is approximately 76 PIPs. but lost it all back. Thanks. Know what your strategy is to achieve that goal. Discover a comfortable daily goal for yourself and determine the amount of time that you will be able to trade. and limit the amount of distractions around you as best as possible. For some.

15M & 5M charts Identify prevailing trends on all charts Use indicators to enter trade on 1M chart Exit trade at TP Line.SLUMDOG FOREX TRADER’S DAILY CHECKLIST Modify Pivot Points (Daily and 4-Hour) Modify Fibonacci Retracements (If Necessary) Check Forex Factory for upcoming financial news reports Check Projection Chart for day’s goal Adjust TP according to trading strategy for day’s goal Draw Support and Resistance lines on 1H. moved SL Line. RSI cross Type results into Projection Chart Stop trading! Be content with the gains! Enjoy the day! 109 .

e. This usually indicates the highest price a purchaser will pay. The Ask (or offer) rate is the rate at which you can buy. which is usually followed by heavy volume and sharp declines. 110 . EUR in EURUSD). Base Currency: The currency that the investor buys or sells (i. it is regarded as the next level of support when the asset experiences a pullback. Traders will buy the underlying asset when the price breaks above a level of resistance. Bid Price: The price offered by the trader. Breakout: A price movement through an identified level of resistance. Bid/Ask: The Bid rate is the rate at which you can sell. This usually indicates the lowest price a seller will accept. Breakdown: A price movement through an identified level of support.Basic Trading Terminology Ask Price: The price requested by the trader. Most traders use chart patterns and other technical tools such as trend lines to identify possible candidates that are likely to break through a support/resistance level. Once a resistance level is broken. which is usually followed by heavy volume and increased volatility. Technical traders will short sell the underlying asset when the price of the security breaks below a support level because it is a clear indication that the bears are in control and that additional selling pressure is likely to follow.

Leverage: The investor only funds part of the amount traded. Cross: When trading with currencies. while the potential for greater profit exists. the investor buys one currency with another. but the signal or movement never develops and the asset moves in the opposite direction. That is. except that more weight is given to the latest data.Channel: The technical range between support and resistance levels that a stock price has traded in for a specific period of time. Fakeout: term used in technical analysis to refer to a situation in which a trader enters into a position in anticipation of a future transaction signal or price movement. The exponential moving average is also known as "exponentially weighted moving average". Moving averages are generally used to measure momentum and define areas of possible support and resistance. EURUSD. (MA): An indicator frequently used in technical analysis showing the average value of a security's price over a set period. Long: To buy. Exponential Moving Average (EMA): A type of moving average that is similar to a simple moving average.the potential for 111 . this comes at a hefty price . Margin: Buying with borrowed money can be extremely risky because both gains and losses are amplified. Exchange Rate: What one currency is worth in terms of another. for example the Australian dollar might be worth 69 US cents or 85 yen. These two currencies form the cross: for example.

100 / 1 + RS RS = Average of x days' up closes / Average of x days' down closes The RSI is best used as a valuable complement to other stock-picking tools. PIP: The smallest unit by which a Forex cross price quote changes. 112 . Margin Used: The amount of your account balance and Unrealized P&L that is reserved for margin. So if EURUSD bid is now quoted at 0. Relative Strength Index (RSI): A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.02 margin ratio.greater losses. It is equal to your Net Asset Value minus Margin Used.9767 and it moves up 2 pips. Resistance: The price/pair stops rising because sellers start to outnumber buyers. The margin ratio is the inverse of leverage.9769. It is calculated using the following formula: RSI = 100 . 50:1 leverage equals a 0. Margin also subjects the investor to a number of unique risks such as interest payments for use of the borrowed money. This amount is equal to the Position Value multiplied by your margin ratio. it will be quoted at 0. for example. Margin Available: The amount of your Balance and Unrealized P&L available as margin for new trading transactions.

Short Position: A position that benefits from a decline in market prices. These two lines fluctuate in a vertical range between 0 and 100.e. Stochastic: Typically used to identify overbought and oversold conditions. Reversal: A change in the direction of a price trend. which is a series of lower highs and lower lows. Readings above 113 . "rally" or "correction". An uptrend.Retracement: A reversal in the movement of a pair's price. Sideways Trend: Describes the horizontal price movement that occurs when the forces of supply and demand are nearly equal. Short: To sell. On a price chart. Spread: The difference between the bid and the ask rate. the indicator consists of two lines: % K and %D. which is a series of higher highs and higher lows. A sideways trend is often regarded as a period of consolidation before the price continues in the direction of the previous move. A sideways price trend is also commonly known as a "horizontal trend". A downtrend. It is also referred to as a "trend reversal". reverses into a downtrend by changing to a series of lower highs and lower lows. Scalping: Opening and closing a position in seconds or minutes for a few pips of profit Secondary Currency: The currency that the investor trades the base currency against (i. countering the prevailing trend. reverses into an uptrend by changing to a series of higher highs and higher lows. USD in EURUSD). reversals undergo a recognizable change in the price structure.

80 are considered overbought and readings below 20 are considered oversold. Trading Forex: A currency trade is the simultaneous buying of one currency and selling of another one. yields. If you can identify a trend. a stock has had difficulty falling below. meaning that if the general trend of the market is headed up. historically. because you will be able to trade with the trend. Trendlines are a visual representation of support and resistance in any time frame. A trend can also apply to interest rates. it is best to trade with trends. A higher volatility means that a security's value can potentially be spread out over a larger range of values. to long term. As a general strategy. equities and any other market which is characterized by a long-term movement in price or volume. you should be very cautious about taking any positions that rely on the trend going in the opposite direction. A lower volatility means that a security's value does not fluctuate dramatically. Trend: The general direction of a market or of the price of an asset. It is thought of as the level at which a lot of buyers tend to enter the market. Trendline: A line that is drawn over pivot highs or under pivot lows to show the prevailing direction of price. This means that the price of the security can change dramatically over a short time period in either direction. to intermediate. 114 . it can be highly profitable. but changes in value at a steady pace over a period of time. Volatility: Refers to the amount of uncertainty or risk about the size of changes in a security's value. Support: The price level which. Trends can vary in length from short.

The higher the volume during that price move the more significant the move. 115 .Volume: Volume is an important indicator in technical analysis as it is used to measure the worth of a market move. If the markets have made strong price move either up or down the perceived strength of that move depends on the volume for that period.

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