FOREX FOR BEGINNERS

"Rapid Quick Start Manual"

By Brian Campbell
© 2004-2005 Infinite Limits Inc.
Welcome to the Forex

Congratulations on your
decision to become a Forex
trader! There are very few
investment opportunities that
provide the profitability of the
Forex market (using the
methods you are about to learn
through RapidForex.com). In
the next few paragraphs I am
going to explain in a simple
way what the Forex is and how it operates. I have made it as short
as possible to give you the key concepts you will need to master
the 4xtrend trading style. I do not want to fill your brain with
excess information that you will not need.

The Foreign Exchange (Forex) market is where banks, investors

and speculators exchange one nation's currency for another. The
Forex has been around since the early 20th century, but it was not
until well after the beginning of the computer revolution of the
1990,s where independent investors (like you and I) had access to
invest small amounts of money in the Forex.

The Forex is like the stock market in one critical way (among
others); to make money you must buy low and sell high. You may
do this in two ways. In the stock market, the traditional way is to
buy a position and sell it after it goes up in value. The second way
is to sell-short a stock and then later try to buy it back at a lower
price. In stock market investing there are severe restrictions and
dangers to selling short. The beauty of the Forex market is that
there is no distinction between buying and selling short. This is
because all transactions are dual-faceted.
Currencies are always traded in pairs. A typical pair is EUR/USD
(Euro over US dollars). The first currency is the base currency.
The second currency is the counter or quote currency. The first
currency is the base. So you must view it as the amount of the
second currency needed to buy one unit of the first currency. If you
want to buy the currency pair you are actually buying the EURO
and simultaneously selling the USD. If you were going to sell the
pair you would simply be selling the base currency (EURO) and
buying the USD. Whether you are buying or selling the pair is just
a matter of which one you are buying or selling.

The good news is that you don't have to remember which one to
buy or sell, simply think of the whole pair as one item and you are
buying or selling the whole pair. An open trade or position is one
in which a trader has either bought/sold one currency pair and has
not sold/bought-back the equivalent amount to effectively close the
position.

Pips

Currency pairs are carried out to 4 significant digits. The change of

the currency pair by one one-hundredth of a percent is called a pip.
So if the currency was trading at 141.53 — a one-pip increase
would be 141.54. Similarly, an increase of one pip could also be
1.6138 to 1.6139. A fall of one pip would be a move from 1.2345
to 1.2344. This is just lingo, in the stock market a point is when the
stock increases or decreases by $1.Trading

Volume

In the other Capital Markets (such as the stock market, options &
futures exchanges), trading volume is usually monitored by traders.
Trading volume measures how much "money" is being traded.
There is always high volume in the Forex market. The Forex is the
largest market in the world, and on its slowest day it still dwarfs
the trading volume of the largest exchanges combined. Obviously
the volume is somewhat higher during some types of news breaks
and when New York's exchange is open. The only thing Volume
tells us is that more things can change. I haven't seen a strong
correlation for Volume. Good trades develop even when the Forex
volume is relatively low compared with its busier, higher-volume
times.

Buying and Selling Short

Throughout the 4xtrend trading systems, we will refer to "buying"

and "selling-short." By "buying", we mean that we are buying a
currency pair to open a trade. The term "selling-short", refers to
when we sell a currency pair to open a trade. Both terms "buying"
and "selling-short" refer to things we do to open a trade.

Once you have opened a trade, you will eventually need to exit the
trade. To undo buying, you simply sell, to undo selling you simply
buy. To avoid confusion about what type of trade we are referring
to, we have developed the terms "selling" and "buying-back". The
term "selling" refers to what we do to exit a trade that was started
by "buying". The term "buying-back" refers to what we do to exit a
trade that was started by "selling-short".

Please notice that the terms with the hyphens go together, and the
non-hyphenated terms also go together. So "selling-short" is
undone by "buying-back", and "buying" is undone by "selling".

Bid/Ask Spread

There is an important notion of bid/ask spread. The bid price is the

price at which you may sell your currency pair for. The ask price is
the price at which you must buy the currency pair. The ask price is
always higher than the bid price. The market makes its profits from
charging the ask price for a currency pair and buying it from
someone else at the bid price. The bid ask spread can range from 5
to 20 pips (or more in rare cases or exotic currency pairs). The bid
ask spread increases when there is uncertainty about what is going
to happen in the market.

Forex Orders
There are two types of Forex orders. The first is the market order
and the second is the entry order. When you access the trading
platform, you will be able to choose either a market or entry order.

A market order is an order to buy or sell a currency pair at the

market price the instant that the order is processed. When a market
order is placed, you are simply saying "I'll buy the currency pair, at
whatever price it is at when my order gets processed." This is too
risky. Market orders should be avoided entirely with the 4xtrend
method. Market orders tend to compel the trader to act on impulse
instead of according to their plan.

An entry order is an order to buy or sell a currency pair when it

reaches a certain price target. This can be any price in theory. You
could set an entry order for the low price of a time period, or the
high price of a time period. Forex Sailing shows you how to set an
entry order (or you can follow any of our entry order techniques).
The open price is explained in the next few pages. You should
exclusively use entry orders. When you place an entry order, you
are simply saying "I want to buy this currency pair at a certain
price, if it never reaches that price, I don't want to purchase the
pair." An entry order allows you to pick a price and place an order
to buy at that price. This is what you want to do. Do not worry that
you are going to miss a trade; new trades are constantly developing
and if your entry order doesn't get filled you can't lose any money.
Lear not to get upset when an entry order is not filled. You are
saved most of the time the order isn't filled because the currency
pair did the opposite of what you thought and you would have lost
money if it got filled. Do not get upset when orders are not filled.
When orders are not filled, it means you never risked any money!

Stop/Limit Orders

After your entry order is placed, you can set a stop and limit order
if you desire to. Stop and limits are both ways to exit a trade after
the trade is entered. You may also not place a stop or limit order if
you are going to monitor the trade (recommended for the 4xtrend
trader). Stop and limit orders are used if you have entered a trade
and cannot monitor it afterward. A stop order is used to stop losses.
A limit order is used to redeem profits. Stops and limits depend on
the direction of the entry order. Assume that you placed an entry
order to BUY EUR/USD for 1.6100. An example of a stop order
would be an order to sell at 1.6081. If the stop order were executed
you would lose 19 pips. The limit order for the same trade could be
for somewhere around 1.6171, if the limit order were executed you
would have made 71 pips. Now assume that you placed an entry
order to SELL EUR/USD for 1.6500. If the stop order was for
1.6530, you would buy back the currency at a loss of 30 pips if the
currency traded at the stop price. If the limit order was 1.6420,
then the EUR/USD would be purchased back when it traded at
1.6420 for a profit of 80 pips. Here is a diagram of where the
appropriate stop/limit orders are placed in relation to the type of
trade you are placing. The green represents buying and the red
represents selling. Notice how the stop/limit orders undo the entry
order.
Trade Intervals

While the Foreign exchange market is open, the prices are

constantly fluctuating. The charting software interprets this data by
dividing the continuous (constantly changing) data into various
time intervals. For each interval, the chart software lists an open
price a low price, a high price, and a close price. The open price is
the price at the beginning of the period. The low price is the lowest
price achieved during the period. Similarly the high price is the
highest price achieved during the period. The close price is simply
the last price achieved during the period. To view the data just
click on the spot on the chart where you would like to view the
time frames data. To the right you will see the open/low/high/close
info. You can scroll to different time frames by using the right/left
keyboard arrows to view the data for other time intervals.

Yon may choose a desired time interval to trade under. Depending

on the hading software, you may look at charts with trading
increments of tick, 1 min, 5 mill, 10 min, 15 min, 30 min, 60 min,
and daily. If you would like to enter a trade and monitor it for a
few hours and get out of the trade you should use 15 min charts. If
you would like to enter a trade that could last 12-24 hours, use the
30-min charts. If you would like to enter a trade for a few days use
hourly charts. If you would like to enter a trade for a few months
use the daily chart info. The length of the trade can vary; the chart
interval is only a rough estimate of how long the trade will last

The larger the time interval, the wider the price movement will be.
You should expect to see a higher price gain from a trade entered
using daily charts, than you would see from the 15 min charts. The
daily chart based trade may take weeks or even months to run its
course. Per trade the 30 min charts will have a higher profitability
than the 15 min charts. However, you can hade more trades using
the 15-min charts, they will compound to more profits.

Here is a loose example that was created to be used as an

illustration. Suppose the average profit per trade (average of profits
and losses) for the 30 min charts is $35. The average profit per
trade for the 15 min charts might be $23. But the 15 min charts
have trades develop twice as often, so you can trade 2 trades using
the 15 min charts for every trade you use with the 30 min charts.
So the two 15-min trades would yield $46, >$35. {Please do not
rely on these numbers; they are only for illustration purposes.}

When to look for trades

Trades develop when there is heavy trading volume. Heavy trading

volume occurs when the big markets are open. Here are some good
times to look for trades (although trades can happen at any time).
Trades actually develop with relatively the same frequency,
regardless of time. As long as the Forex is open, there is about the
same chance that you will find a trade, whenever you look. If you
want to take a chunk of time where you might find more trades,
look at the market during the time frame of 9am EST-12pm EST.
 New York Market trade turns 8am-lpm EST.
London Market trade times 1am-5am EST.
Tokyo Market trade times 5pm- 10pm EST.
Canada Market trade times 10am - 3pm EST.
Australia Market trade times 7pm - 12am EST.

Investment size

A margin is a small amount of money required as a deposit to

ensure against trading losses. The smallest margin required for
Forex trading is $50. By having a $50 margin, you are able to trade
$10,000 worth of currency by buying or selling a currency pair.
This is how leverage comes into play. You only need to put up $50
to invest in $10,000 worth of currency, if the currency goes up 14
percent; you make $50 or 100% profit (or loss if it goes down).
This can only be done in a mini account. We suggest all traders
trade a mini account for an extended period of time. If you open a
full size account you must put up $1,000 margin to trade $100,000
worth of currency. In the event that funds in the account fall below
margin requirements, the Dealing Desk will close all open
positions. This prevents clients accounts from falling below the
available equity even in a highly volatile, fast moving market. This
is to your benefit because you cannot lose more money than is in
your account. In the futures and commodities markets you can lose
everything you own.

When placing a trade you are effectively borrowing $10,000. You

may have an open trade for up to 2 days interest free. You must
then pay interest on the $10,000 at a rate determined by your
trading account. With the 4xtrend system the interest is negligible
because when trades are profitable they dominate over the interest
payments. This is the reason we ignore interest. We also provide
the most examples for 15 min increments because these trades
almost never last 2 days (I have never seen it).
Technical Analysis

There are two classical theories to any types of investing.

Fundamental analysis looks at economic facts along with news
reports, public opinion and government policies. To effectively do
fundamental analysis you must have a college degree in
economics. This course does not teach Fundamental analysis.
Institutional investors are the typical proponents of Fundamental
analysis because they employ economists, bankers, and consultants
that deal with fundamental data.

The 4xtrend methods of trading are based on Technical analysis.

Technical Analysis assumes that everything you need to know is
already recorded in the price charts. Technical Analysis looks at
patterns that repeat themselves and pinpoints when to trade based
on recurring chart formations. The Rapid Forex trading techniques
show you many different entry signals. The most common
indicators are the Exponential Moving Average (EMA) and the
MACD.

© 2004-2005 Infinite Limit Inc. - All Rights Reserved

This eBook is licensed to Abundant Freedom LLC for distribution.
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