FOREX TRADING

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What is forex?
Forex is the foreign exchange market – also known as forex or the FX market – is the world’s
most traded market, with turnover of $5.1 trillion per day.
Forex is traded 24 hours a day, 5 days a week across by banks, institutions and individual
traders worldwide. Unlike other financial markets, there is no centralized marketplace for
forex, currencies trade over the counter in whatever market is open at that time.
And there are synthetic indices which is commonly traded in Botswana. There are also
known as volatility indices, there are simulated markets. This means there are not affected by
world events. They are available for trading 24/7.
FOREX TERMINOLOGIES ONE MUST KNOW

Base-The first listed currency to the left of the slash. (EUR/USD). The base
is the basic currency for the buy and sell, this means that you are buying or
selling the base currency and simultaneously selling or buying quote
currency.
Quote-The second listed currency to the right of the slash.
Bid-The price at which your broker is willing to buy the base currency in
exchange for the quote currency/price for sell.
Ask-Price at which your broker is willing to sell the base currency in
exchange for the quote currency/price for buy.
Spread-Difference between the bid and ask. (Spread is the brokers way of
making money).
Margin-Money the trader needs to open a position in the market.
Pips (percentage in point)-The unity of measurement to express the
change in value between two currencies.
Lot-Number of currency units you will buy or sell.

The forex market is broad. There are many strategies used to analyze the forex market for
example, falcon trading, price action, smart money concepts and others. The purpose of this
book is to explore the smart money concepts, its impact on financial markets, how it is used
by institutional investors and other relative topics.

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 SMART MONEY CONCEPTS
INTRODUCTION
As you no doubt already know, over 90% of forex traders lose money overall and end up
quitting.

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With the market being a zero-sum game, this means that just 10% of forex traders are
profitable, taking money from the losing 90%.
In an environment such as this, it’s hard to find success, but by understanding what the smart
money is doing, you’re able to ride on their coattails toward success.
* But forex trading is primarily a game of probabilities and trading a strategy (smart money
concepts) that aligns your thinking with those with the ability to move markets definitely
pushes the odds further in your favor.

What is smart money concepts

Smart money trading refers to the practice of following the investment decisions made by
large institutional investors and other sophisticated traders, in order to gain insight into
market trends and potentially profit from their movements.

The term "smart money" is used to refer to these large investors who are seen as having more
resources, expertise, and knowledge than the average retail trader. They are often able to
move the markets with their trading activity, and their investment decisions can be seen as a
leading indicator of market sentiment.
Smart money concepts is basically the backbone of two things, market structure and liquidity.

MARKET STRUCTURE
Market structure is the behavior, condition and current flow of the market. In forex trading,
market structure refers to the way in which the forex market is organized and the different
components that make up the market. Understanding market structure is important for forex
traders as it can provide insights into how the market operates, how price moves, and how
trends may develop. A trend is a tendency for prices to move in a particular direction over a

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period. Trends can be long term, short term, upward, downward and even sideways, as we all
know that in forex there are two options (BUY or SELL), market structure helps us by letting
us know when is the perfect time to enter our buy or sell.
We have 3 types of market structures
1. Bullish Market Structure
This when the market is breaking the higher highs only showing that the buyers are in-control
of the market. In a bullish market, price is making higher highs and higher lows.
We anticipate the price will not break the previous higher low, therefore we are looking for
buying opportunities in areas of demand that are higher than the high low.
illustration

Live example

2. Bearish Market Structure

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Refers to a prolonged decline in the price of a currency pair over time. it is characterized by a
series of lower highs and lower lows on the price chart indicating that the sellers are in
control and pushing the price low.
We anticipate that the price won't exceed the previous peak, so we're seeking to capitalize on
sales opportunities in supply zones that are below the prior low.
illustration

Live example

3. Consolidation
This is when the market moves in a horizontal fashion, prices fluctuate between the support
and resistance levels, indicating that buyers and sellers are equal.
illustration

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Live example

Generally, when the price is bullish we look for buying opportunities, when the price is
bearish we look for selling opportunities and we avoid trading when the price is
consolidating.

BOS and CHoCH

BOS (Break of Market Structure) is a term used in forex trading to describe a situation where
the price of a currency pair breaks a previously established structure on a price chart. It often
refers to a breach of a significant high or low which can signal a potential change in market
direction or trend.
CHOCH (Change of Character) is when price action breaks a structure and changes the trend
- as seen in the example of price breaking higher highs and then changing direction after
breaking the last higher low.
illustration

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Live example

REALITY
In reality the price moves through expansion and retracement. Expansion is when the price
moves impulsively in either an upward or downward direction and Retracement this is the
corrective action that follows an impulsive move.
illustration

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Live example

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 SUPPLY AND DEMAND
Supply zones, also known as resistance levels, are price levels where sellers are expected to
be more dominant, leading to a higher supply of the currency and potentially driving prices
lower. Supply zones are often identified as areas where prices have previously faced
resistance and reversed lower.

illustration

Live example

Demand zones, also known as support levels, are price levels where buyers are expected to be
more dominant, leading to a higher demand for the currency and potentially driving prices
higher. Demand zones are often identified as areas where prices have previously found
support and reversed higher.
illustration

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Live example

Forex traders use supply and demand analysis in combination with other technical and
fundamental analysis tools to make trading decisions. For example, if a trader identifies a
strong demand zone on a forex chart and sees other confirming signals such as bullish
candlestick patterns or positive news about the currency, it may indicate a potential buying
opportunity. On the other hand, if a trader identifies a strong supply zone on a forex chart and
sees other confirming signals such as bearish candlestick patterns or negative news about the
currency, it may indicate a potential selling opportunity.

Understanding supply and demand dynamics in forex charts can help traders identify
potential areas of price reversal, support and resistance levels, and potential trading
opportunities. It is important to note that supply and demand levels in forex markets are
dynamic and can change over time as market conditions and participants' sentiment evolve.

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Therefore, traders need to continually monitor forex charts and adapt their trading strategies
accordingly.

LIQUIDITY

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The forex market is a zero sum game, which means that for a trader / institution to buy 1
currency its necessary that there is another trader /institution with an opposite position.If
smart money(Banks)want to buy a currency pair they will need sellers in the market ,the
existing facility to place these positions in the market is called liquidity.
In simplest terms, Liquidity is defined by stop losses. Smart money need to activate the stop
losses of existing orders in the market.
Because of liquidity ,the banks control the price ,but why??Banks engage in extensive trading
and occasionally struggle to discover the other side of their transactions ,as a result ,they
manipulate prices to maintain their positions in the market.

TYPES OF LIQUIDITY

 Buy side liquidity

 Sell side liquidity

FORMS OF LIQUIDITY

 Equal highs
 Equal lows
 Flip zones
 Inducement
 Trendline liquidity

1.Buy side Liquidity (BSL)

This are stop losses of sell orders, after bsl is taken the market will reverse to the
downside because the banks use the bsl to place sell orders in the market.

illustration

Live example

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 2.Sell side Liquidity (SSL)
These are the stop losses of buy orders ,after ssl is taken ,the market will reverse to
the upside because banks uses ssl to place orders in the market.

illustration

Live example

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STOP HUNT
Is the movement used to neutralize liquidity (stop losses).its a false breakout above or below
the zone where there is liquidity.

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 ORDER BLOCKS
Order blocks are specific price levels of supply and demand in form of candlesticks where
banks and institutions have placed their positions, generally the market returns to those
candles and they are never violated. (in simple terms an order block is the last up candlestick
or last down candlestick that is opposing the impulsive move. When price moves aggressive
towards a direction it leaves traces behind which needs to be mitigated and retail traders can
use to their advantage.

Types of order blocks

 Bullish order block
 Bearish Order block

1.BULLISH ORDERBLOCK
The bullish order block is the last bearish candle before the bullish movement that break the
market structure. In this case a bullish order block represents the demand.
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Live example

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2.BEARISH ORDERBLOCK
The bearish order block is the last bullish candle before the bearish movement that break the
market structure. In this case a bearish order block represents the supply.
illustration

Live example

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CHARACTERISTICS OF VALID ORDERBLOCKS
1. Order Blocks should be near Support and Resistance levels
 Support- lowest point reached by the price before it went up.
 Resistance- is the highest point reached by the price before it pulled back.

2. Order Blocks should be at or near flip zones

FLIP ZONES
 SR FLIP
 RS FLIP

3. Order Blocks must break the market structure.

4. Order Blocks must be near Imbalances (FVG)

5. Order Blocks should be near inducement zones.

HOW TO TRADE ORDER BLOCKS?

Since order blocks are often used by big financial institutions when they trade, it
makes sense that regular traders, like me and you, consider using order blocks as well.
By using the same ideas that the big players use, we can make more informed
decisions and improve our chances of success in trading.

They are 2 setups we can use to trade order blocks

 SETUP 1: this setup consists of stop hunt (SH), break of market structure (BMS) and
return to order block (RTO).

I. STOP HUNT: is when big banks and institutions intentionally manipulate the
market to take out the stop losses of retail traders.

II. BMS: is caused by impulsive move from an order block. The price moves
aggressively from an order block to take out previous highs and lows.

III. RTO: Usually after BMS the price has to return to an order block in a
correctional form or retracement. The price returns to an order block to
mitigate or collect unmitigated orders.

USING BULLISH ORDERBLOCK

illustration

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Live example

USING BEARISH ORDERBLOCK

illustration

Live examples

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  SETUP 2: this setup consists of SMS, BMS and RTO.

SMS: SHIFT OF MARKET STRUCTURE

BMS: BREAK OF MARKET STRUCTURE
RTO: RETURN TO ORDER BLOCK

USING BULLISH ORDERBLOCK

illustration

Live example

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 USING BEARISH ORDERBLOCK

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Live example

1. Price fails to break a higher high

2. There is Break of Market Structure

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 3. The price returns to OB

ADDING CONFLUENCE TO SETUP 1 AND 2

CONFLUENCE- an area in the market where two or more structures come together to form a
high probability buy/ sell zone. The confluence of trade signals could lead to greater accuracy
and profitability.

WE HAVE 2 CONFLUENCE FACTORS

1. 3D
2. Inducement

1.3-DRIVE
The three-drive is a rare price pattern formed by three consecutive symmetrical 'drives' up or
down. In its bullish form, the market is making three final drives to a bottom before an
uptrend forms. In a bearish three-drive, it is peaking before the bears take over.

 Example 1: Using SETUP1

SH, BOS, RTO

For bullish order block

When the price touches our third touch inside Bullish orderblock we buy.

illustration

Live example

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  Example 2: Using SETUP 1
SH, BOS, RTO

For bearish order block

When the price touches our third touch inside Bearish orderblock we sell.

illustration

Live example

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2.INDUCEMENT
Inducement is a trap before an area of supply or demand. Price will usually lure impatient
buyers/sellers into the market before the zone is met to create liquidity. Once the impatient
traders get trap[ stopped out, the true move begins.
For bullish order block
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Live example

For bearish order block

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Illustration

Live example

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 BREAKER BLOCK

A breaker block in simple terms is a failed order block, it is a type of technical analysis tool
used in forex trading to identify potential price levels where there may be a significant
change in market structure. It is essentially a price level that acts as a barrier, preventing
prices from moving beyond it.
In forex trading, breaker blocks are typically formed by key levels of support or resistance
that have been tested but have not been broken. These levels can act as significant
psychological barriers for traders, and a break above or below them can signal a shift in
market sentiment and the beginning of a new trend.
Traders can use breaker blocks to identify potential trading opportunities. For example, if
prices approach a breaker block level and begin to consolidate, traders may look for a break
above or below the level as a signal to enter a trade in the direction of the new trend.
illustration

Live example

It is important to note that breaker blocks are not infallible and can be broken in some
situations, particularly during high volatility events such as news releases or market shocks.
Therefore, traders should use caution and consider other technical indicators and market
factors when making trading decisions.
IMBALANCE/FAIR VALUE GAP

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An imbalance in the forex market can be defined as inefficiency /gaps between buyers and
sellers. There are two types of imbalances, bullish and bearish imbalance. A bullish
imbalance has more buyers than sellers, whereas a bearish imbalance is the opposite.

How to find imbalance in forex market?

Usually when we see an impulsive move to the upside or downside in the market with no
wicks overlapping full bodied candles, this is where imbalances in the market are formed.
How to trade an imbalance?
 Identify three bullish / bearish candlesticks in row.
 Mark were candlestick 1 closes in candlestick 2 then mark were candlestick 3 opens
in candlestick 2.
 The space in between the wicks is the imbalance.

Illustration

Live example

The price has to come back to fill this gaps.

IMBALANCE CONCEPT
Add confluence using qml for sniper entries.
Imbalance concept =Qml+Imbalance

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illustration

Live example

*Enter when the price touches QML

ENTRIES
TYPES OF ENTRIES
1.RISK ENTRY

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This is an aggressive entry that needs no confirmation.
Here you identify the point of interest (POI) and wait for price to come back to your POI.
Since you do not wait for any confirmation, you execute upon contact of POI.
However, it's important to note that an aggressive entry also involves higher risk, as the
trader's stop-loss is tighter and they may have a larger position size. This can result in larger
potential losses if the trade goes against the trader.
Therefore, it's important for traders to carefully consider their risk tolerance and to use
appropriate risk management techniques such as setting stop-losses and limiting position
sizes when taking an aggressive entry.
Note that you must do a top-down analysis first!

Illustration

Live example

2.CONFIRMATION ENTRY

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This is conservative entry that require confirmation, especially from HTF (must do top-down
analysis)

THIS TYPE OF ENTRY IS IDEAL;

 With small Risk and large Reward trades
 When the range between HTF POI & Refined POI on a LTF is large.
Three entry techniques using confirmations
 Order block refinement
 Change of character
 Qml entry
Order block Refinement
Order block refinement is a technique used by traders to further filter their analysis of order
blocks, with the goal of increasing the accuracy of their trading decisions.

The time frame for top-down analysis in forex can vary depending on the trader's individual
trading style and goals, it applies for all types of traders; swing traders, day traders and
scalpers. However, a common approach in this case to identify a reduced risk entry is to use a
combination of higher and lower time frames to gain a comprehensive view of the market.
Here is an example of a top-down analysis approach using multiple time frames:
Monthly and weekly time frames: Start with a monthly or weekly chart to get a big-picture
view of the market. Identify any major trends that could impact your chosen currency pair.
Look for key economic data releases or events that could impact the market in the coming
weeks or months.
Daily time frame: Move down to the daily chart to identify any significant price levels or
areas of consolidation. Look for potential order blocks or other technical patterns that could
signal a change in market sentiment.

4-hour and 1-hour time frames: Use the 4-hour and 1-hour charts to refine your analysis and
identify potential entry and exit points. Look for confirmation of potential order blocks or
technical patterns.

15-minute or 5-minute time frames: Use the 15-minute or 5-minute charts to fine-tune your
entry and exit points. Look for short-term price movements and use technical analysis tools to
identify potential entry and exit points.

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By using a combination of higher and lower time frames, traders can gain a comprehensive
view of the market and make informed trading decisions based on a combination of
macroeconomic trends and technical analysis.

Change of Character
Is a break of structure that indicates a change in trend. Therefore, in this case you use it by
looking for a Point of Interest (POI) in a higher timeframe then diving into a smaller
timeframe to look for a more filtered POI or kill zone. That is where you will identify your
entry point.

Change of character in forex can be used as a confirmation entry because it confirms a

potential shift in market structure, and can provide additional information to help traders
make informed trading decisions.
By waiting for confirmation of a change of character, traders can reduce their risk of entering
a trade prematurely or getting caught in a false breakout. Instead, they can wait for additional
confirmation before entering a trade, which can increase their chances of success.
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Live example

Quasimodo Level(Qml)Entry

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The Quasimodo level acts as a confluence factor that can only be used in conjunction with
order blocks. Your kill zone will be where the QML intersects with the order block, more so
than not to provide a sniper entry. It's important to note that like all technical analysis
patterns, the Quasimodo level should not be used in isolation and should be used in
conjunction with other technical methods to gain a comprehensive view of the market.

illustration

Live example

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 FUNDAMENTAL ANALYSIS
Fundamental forex trading is a trading strategy that relies on the analysis of economic,
political, and social factors that influence the value of a currency. Traders who use this
approach seek to identify and exploit opportunities created by the underlying fundamental
factors that drive currency movements.

Fundamental forex traders pay close attention to economic indicators, such as Gross
Domestic Product (GDP), inflation, and employment data, as well as central bank policies,
political events, and international trade. They use this information to make informed trading
decisions based on the relative strength or weakness of different currencies.

For example, if a country has strong economic growth, low inflation, and a sound political
and economic environment, its currency may appreciate against other currencies. In contrast,
if a country has weak economic data, political instability, or high inflation, its currency may
depreciate.
Fundamental forex traders use a range of tools and techniques to analyze fundamental factors,
including economic calendars, news feeds, and research reports. The High Impact News
Events are used to hunt liquidity in the market, always pay attention to the news calendar that
is why when there are news events for example, during Non-Farm Payrolls and Consumer
Price Index, there is an aggressive spike in the market, know that it is a result of fundamental
activity. To know the pairs that will move, generally, pairs with many news forecasts ("High
Impact"), those pairs are going to move during the day or week depending on the timeframe.

Overall, fundamental forex trading is a popular approach for traders who want to make
informed trading decisions based on a deep understanding of the underlying economic and
political factors that drive currency movements. By monitoring economic indicators, central
bank policies, political events, and international trade, traders can identify potential trading
opportunities and adjust their trading strategies accordingly.
TOOLS FOR FUNDAMENTAL INSIGHT
1. The CNBC app is a convenient way to stay up-to-date with the latest financial news and
market developments. It provides a range of features that can help you analyse fundamentals
and make more informed trading decisions. Here are some tips for using the CNBC app to
analyze fundamentals:
Customize your watch list: The CNBC app allows you to create a personalized watchlist of
stocks, indices, and other financial instruments. By adding the stocks that you are interested
in, you can track their performance and receive alerts when there are important news or
market developments.

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Follow market news: The app provides real-time market news and analysis, including
articles, videos, and podcasts. This can help you stay informed about the latest developments
in the financial markets, including company news, economic indicators, and geopolitical
events.

Track market data: The app provides real-time data on stocks, indices, and other financial
instruments, including prices, charts, and performance metrics. You can use this data to track
the performance of individual stocks and the broader market.
Watch live CNBC TV: The app provides access to live CNBC TV, which broadcasts
financial news, analysis, and interviews with experts and analysts. Watching live TV can be a
great way to stay informed about the latest developments in the financial markets.

Use the app's tools: The app provides a range of tools that can help you analyse
fundamentals, such as stock screeners, earnings calendars, and financial calculators. You can
use these tools to research individual stocks, evaluate their financial performance, and
calculate key financial ratios.

Overall, the CNBC app can be a valuable tool for analyzing fundamentals and staying
informed about the latest developments in the financial markets. By customizing your watch
list, following market news, tracking market data, watching live CNBC TV, and using the
app's tools, you can gain insights into market trends and make more informed
trading decision
2. Investing.Com is a popular financial website that provides a wealth of information to
traders and investors. Here is what you can do to follow and use Investing.com for trading
fundamentals:
Choose an asset: Start by selecting an asset that you want to trade. You can choose from a
wide range of assets, including stocks, commodities, currencies, indices, and more. For
example, when trading USD/JPY pair, a higher than expected forecast reading should be
taken as positive/bullish for the USD whereas a lower than expected reading should be taken
as negative/bearish for the USD. If the forecast price is higher than the actual price, you buy
any currency pair that has the base currency pair USD and vice versa.

TRADING PSYCHOLOGY

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 Understanding Trading Psychology: The Role of Emotions in Forex Trading

Introduction:
Trading psychology, also known as behavioural finance, is the study of how human
emotions and cognitive biases influence decision-making in financial markets. The
forex market, being a highly speculative and volatile market, is particularly influenced
by trader emotions. The ability to effectively manage one's emotions and
psychological biases is critical to becoming a successful forex trader. This report aims
to provide an overview of trading psychology, including key concepts, common
emotional challenges faced by traders, and strategies for managing emotions in forex
trading.

Key Concepts in Trading Psychology:

Emotions: Emotions play a significant role in forex trading. Common emotions

experienced by traders include fear, greed, hope, and frustration. Fear can lead to
hesitation, missed trading opportunities, or premature exits. Greed can result in
overtrading or taking excessive risks. Hope may cause traders to hold on to losing
positions for too long, hoping for a reversal. Frustration can lead to impulsive
decision-making. Understanding and managing these emotions is crucial for effective
trading.

Cognitive Biases: Cognitive biases are mental shortcuts or errors in judgment that can
distort decision-making. Common cognitive biases that can affect forex traders
include confirmation bias (favouring information that confirms pre-existing beliefs),
overconfidence (overestimating one's abilities), and hindsight bias (believing that past
events were predictable). These biases can lead to biased analysis, flawed trade
setups, and poor risk management.

Self-Awareness: Self-awareness is a key aspect of trading psychology. It involves

understanding one's emotions, thoughts, and behaviours in the trading process. Being
aware of one's strengths, weaknesses, and triggers can help traders manage their
emotions and cognitive biases more effectively. Self-awareness can be developed
through reflection, journaling, and feedback from mentors or peers.

Common Emotional Challenges in Forex Trading:

Fear of Loss: Fear of losing money is a common emotional challenge in forex

trading. It can cause traders to hesitate, avoid taking trades, or close profitable
positions prematurely. Fear of loss can be managed by developing a solid trading
plan, setting appropriate stop-loss orders, and accepting that losses are a part of
trading.

Greed and Overtrading: Greed can lead traders to take excessive risks, overtrade, or
chase profits. Overtrading can result in impulsive and emotional decision-making,

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 leading to poor trading results. Managing greed involves setting realistic profit
targets, sticking to a trading plan, and practicing disciplined risk management.

Emotional Attachment to Trades: Traders may become emotionally attached to

their trades, especially when they are in a losing position. This emotional attachment
can cloud judgment and lead to poor decision-making, such as holding on to losing
trades for too long. Managing emotional attachment involves detaching from trades,
using objective criteria to exit positions, and not letting emotions drive trading
decisions.

Euphoria: in forex trading refers to a state of excessive excitement or extreme

optimism that traders may experience when they achieve significant profits or when
their trades are performing exceptionally well. It is a psychological state where traders
feel an intense high or elation due to their trading success, leading to a heightened
emotional state that can impact their decision-making and risk management.

Euphoria in forex trading can have both positive and negative effects. On the positive
side, it can boost a trader's confidence and motivation, leading to a positive feedback
loop where they continue to make profitable trades. However, on the negative side,
euphoria can lead to irrational decision-making and overconfidence, which can result
in impulsive trading decisions and increased risk-taking. This can potentially lead to
losses or reversals of gains.

It's important for traders to be aware of the potential impact of euphoria in forex
trading and to manage it effectively. Here are some key points to keep in mind:

Strategies for Managing Emotions in Forex Trading:

Develop a Trading Plan: Having a well-defined trading plan that includes entry and
exit criteria, risk management rules, and profit targets can help traders stay disciplined
and focused. Following a trading plan can reduce emotional decision-making and
provide a structured approach to trading.

Practice Risk Management: Implementing proper risk management techniques, such

as setting appropriate stop-loss orders, using position sizing based on risk tolerance,
and not risking more than a certain percentage of trading capital per trade, can help
traders manage fear and greed. It provides a systematic approach to managing risk and
can help traders avoid emotional trading decisions.

Cultivate Emotional Intelligence: Emotional intelligence involves understanding

and managing one's emotions, as well as recognizing and empathizing with others'
emotions. Cultivating emotional intelligence can help traders regulate their emotions,
make better decisions, and communicate effectively with others.

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 Stay Grounded: It's important to stay grounded and not let euphoria cloud your
judgment. Recognize that trading success can be temporary and that markets can
change quickly. Avoid making impulsive trading decisions based solely on the
excitement of a winning trade.

Stick to Your Trading Plan: Stick to your established trading plan and risk
management rules, regardless of whether you're experiencing euphoria or
disappointment. Your trading plan should be based on a solid strategy and risk
management principles, and should not be altered impulsively due to emotional highs
or lows.

Practice Discipline: Practice discipline in your trading approach, even when

experiencing euphoria. Avoid overtrading, taking excessive risks, or deviating from
your trading plan due to emotional excitement. Stay focused on your long-term
trading goals and stick to your strategy.

Manage Risk: Proper risk management is essential in forex trading, regardless of

whether you're feeling euphoric or not. Set appropriate stop-loss orders, use position
sizing based on your risk tolerance, and avoid risking more than a certain percentage
of your trading capital per trade. Managing risk can help you mitigate potential losses
and protect your trading account.

Cultivate Self-Awareness: Be aware of your emotional state and how it may impact
your trading decisions. Cultivate self-awareness through reflection, journaling, and
feedback from mentors or peers. Recognize when you're experiencing euphoria and
take steps to manage it effectively.

RISK MANAGEMENT

Risk management is a tactic that enables you to establish guidelines to reduce the
effects of unfavorable conditions that affect forex trade to a more manageable state.
This consists of discrete actions that traders might use to hedge against a trade's

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 potential downside. This can require a lot of work and planning prior to ensuring the
risk management strategy is made. More risk means higher chance of sizable returns,
but also a greater chance of significant losses.

We have 5 fundamentals of risk management which includes;

 Appetite for risk

The key to effective forex risk management is determining your level of risk
tolerance. How much am I willing to lose on a single deal is a question you should ask
yourself as a trader. If you don't know how much you can afford to lose, your position
size may end up being too large, which could lead to losses that make it difficult for
you to execute the following trade or even worse.

 Position size
Selecting the right position size, or the number of lots you take on a trade is important
as the right size will both protect your account and maximize opportunities. Start
trading with a minimum lot size until you are confident enough to increase the lot size
depending on your trading skills.

 Stop losses
Using stop loss orders, which are placed to close a trade when a specific price is
reached is another key concept to understand for effective risk management in forex
trading. Knowing the point in advance at which you want to exit a position means you
can prevent potential significant losses. Stop losses can be replaced at the bottom of
bullish order block and at the top of bearish order block. We use lower timeframes
order blocks for placing stop losses e.g.,1 minute, 3 minutes, 5 minutes and
sometimes 15 minutes.

 Leverage
Did you know? Forex traders can borrow money to increase their exposure to the
forex market by using leverage. They can manage a higher trading size with a less
amount of capital. Due to the fact that they are based on the whole value of the
position, this could result in greater profits and losses. Leverage in forex allows
traders to gain more exposure than their trading account might otherwise allow,
meaning higher potential to profit, but also higher risk. Leverage should, therefore, be
managed carefully.

 Controlling your emotions

In forex trading, it is always important to be able to manage the emotions of trading
when risking your money in financial market. Letting excitement, greed, fear or

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 boredom affect your decisions may expose you to undue risk. To help you take your
emotions out of the equation and trade objectively, maintaining a forex trading journal
can help you refine your strategies based on prior data and not your feelings. The
main objective is to remove fear so you can play the game over and over without
hesitation and without any kind of doubt, because when we have an edge all that
remains is to take each trade as it comes without prejudging whether it is going to be a
good or a bad trade.

TRADING PLAN

Creating a trading plan is an essential step for any trader who wants to be successful
in the markets. Here are the steps to create a trading plan:

Define your goals: Before you start trading, you need to define your goals. What do
you want to achieve? How much money do you want to make? What is your risk
tolerance? Your goals should be specific, measurable, achievable, realistic, and time-
bound.

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 Choose your market: Decide on the market you want to trade. Will it be stocks, forex,
commodities, or options? Choose a market that you are familiar with and have a good
understanding of.

Develop a strategy: Once you have chosen your market, you need to develop a trading
strategy. Your strategy should include entry and exit rules, risk management
guidelines, and a plan for how you will manage your trades.

Create a risk management plan: Risk management is an essential part of any trading
plan. Determine how much you are willing to risk per trade, how you will set stop-
loss orders, and how you will manage your trades to minimize losses.

Set your trading rules: Create a set of trading rules that you will follow consistently.
These rules should include things like when you will trade, how much you will risk
per trade, and how you will manage your trades.

Keep a trading journal: Keep a record of your trades in a trading journal. This will
help you identify areas for improvement and track your progress over time.

Review and revise your plan: Your trading plan is not set in stone. Review it regularly
and revise it as necessary. This will help you adapt to changes in the market and
improve your trading results.

Remember, a trading plan is only as good as the trader who follows it. Stick to your
plan, be disciplined, and don't let emotions cloud your judgment. With time and
practice, you can develop a successful trading plan that suits your trading style and
helps you achieve your goals.

SMC DISCLAIMER

Trading the smart money concept can be highly speculative and involves significant
risk of loss. Therefore, it is important for traders to fully understand the risks involved
before they start trading.

The smart money concept involves analysing the behaviour of large institutional
investors and using that information to inform trading decisions. While this approach
can be useful, it is important to keep in mind that there is no guarantee that these

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 investors will continue to act in predictable ways or that their actions will result in
profitable trades.

In addition, trading based on the smart money concept may involve using advanced
technical analysis tools and other complex trading strategies. These strategies can be
difficult to understand and implement, and may require significant time and effort to
master.

Furthermore, as with any type of trading, there is always the risk of market volatility
and unexpected events that can cause sudden price movements and losses. Traders
should always be prepared for the possibility of losing some or all of their investment.

It is important for traders to read and understand the risks involved in trading the
smart money concept before starting to trade, and to take appropriate measures to
manage their risk, such as using stop-loss orders and not risking more than they can
afford to lose. Traders should also seek advice from an independent financial advisor
if they have any doubts or concerns.

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