projectdroid1-blog - Tumblr blog

projectdroid1-blog · 7 years ago

Text

Trading Naked: Secrets of Top (Naked) Traders Revealed

Trading Naked: Secrets of Top (Naked) Traders Revealed https://www.projectdroid.com/wp-content/uploads/2018/04/word-image-515.png https://www.projectdroid.com/books/trading-naked-secrets-of-top-naked-traders-revealed/ Trading Naked:

Secrets of Top (Naked) Traders Revealed

Rob Booker © 2005 Rob Booker. All rights reserved forever and ever. And ever. This ebook is part of a comprehensive program to train you to successfully trade currency. Alas, you’ll probably lose money. We all do at first. Rob’s not liable if, based upon the information you read here, you lose money, make money, turn into a woodchuck, possum, or other furry creature. You have to work hard, study a lot, and dedicate yourself mentally. Don’t ever give up. There are no pictures of Rob in this ebook. Here’s what happened to me after I started trading live in my first forex account: I ended up like the guy in the barrel. It was not long after my big loss that I realized that in order to trade successfully, I needed to have an edge. Without some kind of informational advantage, I was not going to be successful. And you know what? Without an edge, you’re not going to be successful either. Perhaps you are a profitable trader. It’s possible that you already have some ferocious trading skills. One time there was this dog in my neighborhood, and he was really, really ferocious, like he could bite your leg off in one bite, and then as he was chewing on your leg while you were screaming, he would be grinning and stuff. Maybe that’s how ferocious you are as a trader. Or maybe you’re not so ferocious. Maybe that’s you. Maybe you’re not so confident in your trading right now, or you have a bunch of winners and then you lose big. I know how that feels. I want to help you become a better trader. The best trader you can be. Getting naked is the first step. Ok, I don’t mean that you should actually take off all your clothes. But if you are not yet successful in trading, you must strip down all of your pretenses, your pride, and your previous knowledge. Dump it all. Start over. Take a deep breath. Let me give you an example. I once worked with a trader who had studied technical analysis for 5 months previous to hiring me as a mentor. He was fascinated by many different indicators, including the MACD, moving averages, Bollinger bands, Relative Strength Index, and a few others. He was using all of these indicators on his charts when he first started with me. He asked if we could work together to put those indicators into a system for him. A profitable system that he could use every day. I encouraged him to delete all but 2 indicators from his charts. This would help him to focus. No longer would he be confused by the conflicting messages that all of the indicators were giving him. Instead of being excited about the prospect of reducing the information overload, he protested. What about all those months of study that he had done? All of that would be lost if he deleted the other indicators! Two months later, he relented. After crippling losses to his account, he was ready to get naked. He humbled himself. He agreed that he was taking in too much information. He was willing to admit that he needed to reduce the amount of information he was studying every day – even if this meant that he had wasted 7 months of his trading life. He deleted the other indicators, focused exclusively on MACD and moving averages, and has been trading profitably ever since. LESSON ONE: With charts, less is more. (naked charts rule) Step 2: Get Some Naked Backup I trade with a team. Granted, my team consists of me and just one other person – Maxwell Fox – but that helps me trade better than I could on my own. Team trading is a concept that I introduced in my training, because traders seemed to do better when they could bounce ideas off one another. They don’t necessarily all take the same trades, but they at least can voice their trade ideas, get feedback, plan trades together, and keep each other honest. I found that when I first started, it helped me to have another person to whom I would be accountable for all of my trading. That’s what I mean when I say you need to get some backup. Someone to get inside the barrel with you, to help you when you make a bad trade, to keep you humble when you make a good trade. That kind of stuff. Step two, in essence, is to trade naked with other people. LESSON TWO: Trade naked with others. Step 3: Make a Naked Plan Over the years, I have read at least 1,000 trading plans from traders around the world. There is one common characteristic of the best plans: They were short. They were simple. The very best were just 1 page long. Don’t run out and delete the last 5 pages of your trading plan just because I said the best plans were only 1 page long. Wait. Wait a minute. I take that back. I think you SHOULD run out and delete the last 5 pages of your plan. Make it one page, and cram everything you can into there. Tell me, in your plan,

When you plan your trades.

What money management system you use (fixed fractional, etc.)

What your primary entry and exit triggers are.

LESSON THREE: Write a Naked Plan. Step 4: 1-2-3 I have talked about this in front of groups. I have talked about this in front of individuals. By email, by phone, by fax, by instant message, by carrier pigeon, and by message in a bottle. And very few people ever listen to me. Test 1 currency pair. With just 2 time frames. With a maximum of 3 indicators. That’s it. 1-2-3. Too many traders feel that they will do better if they have more information. You know that’s not true. So, here is the plan: Test 1 currency pair, with just 2 time frames, with a maximum of 3 indicators, and test for at least 100 trades. See what your results are. Test with a small live account if you are wealthy. Test on a demo if you are not. Testing takes a long time, and no one likes to do it. Be patient. Test. Try different things. Test on historical charts by playing the candles back one at a time. Testing pays off. LESSON FOUR: Test Naked. A Bunch of Naked Rules

You are looking at too many currency pairs, too many time frames, and way too many indicators. Get naked.

You are trading live too soon. Get a naked demo.

You did not test your system extensively. Test naked.

Your forex dealer is not running your stops. You are just taking bad trades.

Support and Resistance is the greatest invention ever. Support and Resistance can make you wealthy.

Put one indicator on your charts. Make a system from just one indicator. I bet you’ll make more money.

Think about pips, not dollars or euros or pounds.

About Rob Batman's most useful weapon in his war against crime is Rob Booker, the black thunderbolt that knifes through Gotham's streets when danger threatens. The vehicle has undergone many design changes over the years: in the earliest days of Batmans career, Rob Booker was a giant armor plated sedan; advanced automotive technology has turned Rob Booker into a sleek street machine. Rob Booker’s chassis is constructed of an amazingly light experimental titanium alloy and is coated with a unique bullet proof ceramic, as are its one-way mirrored windshields; consequently, Rob Booker can easily withstand any handgun or semi- automatic weapon assault. Oops. That’s the batmobile. About Rob I trade for a living. I want to help you trade for a living, too. No matter who you are, you can probably trade for a living if you just get a handle on the mental aspect of trading. I try to give a lot of stuff away for free. Sometimes I do charge for some services. Visit me at robbooker.com, or send me an email ([email protected]). Keep in touch. How to Install and run FOREX COMBO SYSTEM On Your Metatrader4 ( MT4 ) Forex Trading Platform

Make sure your Metatrader4 platform is closed.

Download your Expert Advisor to a folder on your computer.

Locate the FOREX COMBO SYSTEM ….ex4 file. Right mouse click on the file and select copy.

Click open “My Computer” and then click open C Drive, or what ever letter drive that contains your program files, then click open the Program Files folder.

Locate your Metatrader4 folder and click it open. It will probably begin with the name of your forex broker.

In the Metatrader4 folder locate and open the Experts folder and paste the file in this folder if it is an Expert Advisor File. You can paste by selecting paste from your edit menu or right mouse click and select paste. If it is an Indicator file, then in the Experts folder locate and click open the Indicators folder and paste the file in that folder.

You can now open the Metatrader4 platform by clicking on the “Terminal” icon located in your Metatrader4 folder.

Once the Metatrader4 platform is opened you can now open a chart for a currency pair (EUR/USD) by going to File on the Menu bar and choosing “New Chart”. Then choose the time frame by going to Charts on the menu bar, then

“Periodicity” and then choose the time frame you wish to view (M5). FOREX COMBO SYSTEM is designed to work on currency pair EURUSD (M5 chart)!

Now you are ready to place the FOREX COMBO SYSTEM on the chart. Go to View on the Menu bar and choose Navigator.The Navigator window will appear. In the Navigator window expand Expert Advisors or Indicators by double clicking it. You should now see all the Expert Advisors including the one you just inserted. You can now place it on the chart by 3 different methods. You can either double click on the indicator or right mouse click on it and choose “Attach to a Chart” or you can drag it onto the chart.

Once the Expert Advisor is placed on the chart, the Settings window will pop up. Here you can view the default settings and adjust them if you need to. Make sure on the Common tab you have the “Allow live trading” box checked.

After you have placed the Expert Advisor on the chart, in the upper right hand corner of your chart you should see a smiley face. This means the Expert Advisor is running. If you do not have a smiley face but see a frown or an x, then make sure again that under Properties, the “Allow Live Trading” box is checked. If it is and still you do not have a smiley face there is one more place to check. Go to Tools on the menu bar and choose Options. A popup will appear and select the Expert Advisors Tab. Make sure the “Enable Expert Advisors” box and “Allow Live Trading” box are both checked. Your Expert Advisor is now ready to open, modify and close trades.

Important: FOREX COMBO SYSTEM will work on any broker with 4 or 5 digits price quotes. It is not necessary to change any parameters for 5 digits price quotes.

Allowing DLL Imports:

Right mouse click anywhereon the chart, select Expert Advisors -> Properties and then in Common tab select as is shown below: Click Tools->Options and then in Expert Advisors tab select as is shown below: Important: FOREX COMBO SYSTEM will work on any broker with 4 or 5 digits price quotes. It is not necessary to change any parameters for 5 digits price quotes.

You can always edit the Expert Advisor settings by right mouse clicking anywhere on the chart and choosing Expert Advisors and then Properties.

FOREX COMBO SYSTEM settings: Use_FXCOMBO_Scalping – true/false – use or not FXCOMBO Scalping Strategy Use_FXCOMBO_Breakout – true/false – use or not FXCOMBO Breakout Strategy Use_FXCOMBO_Reversal – true/false – use or not FXCOMBO Reversal Strategy Use_ECN_Broker – true/false – use or not ECN Broker CommentSys1 – systems comment for FXCOMBO Scalping Strategy CommentSys2 – systems comment for FXCOMBO Breakout Strategy CommentSys3 – systems comment for FXCOMBO Reversal Strategy Magic1 – unique identification number for FXCOMBO Scalping Strategy Magic2 – unique identification number for FXCOMBO Breakout Strategy Magic3 – unique identification number for FXCOMBO Reversal Strategy MaxSPREAD – maximal allowed spread for position opening Slippage – maximal allowed slippage for position opening ***GMT Offset is very important parameter!!!*** GMT (Greenwich Mean Time) offset of brokers server time. AutoGMT_Offset: If AutoGMT_Offset = TRUE, the EA will calculate automatically the GMT Offset of your broker. If AutoGMT_Offset = FALSE, in this case you should chose by yourself the correct GMT Offset in GMT_Offset_TestMode field. GMT_Offset_TestMode – In this field, you should chose the correct GMT Offset by yourself, if AutoGMT_Offset=false, or if you want to make a back test. UseAgresiveMM - toggles aggressive money management on and off per single future transaction. The purpose is to make up losses from past losing transactions. Activates only if: UseAgresiveMM=true and TradeMMSys1(2,3)>0 ==== FXCOMBO Scalping MM Parameters ==== LotsSys1 - trading volume of FXCOMBO Scalping Strategy (works if TradeMMSys1=0) TradeMMSys1 - at >0 values, activates automatic ММ for FXCOMBO Scalping Strategy (traded volume as a percentage of free margin) LossFactorSys1- trading volume multiples after a loss (works only with UseAgresiveMM=true) ==== FXCOMBO Breakout MM Parameters ==== LotsSys2 - trading volume of FXCOMBO Breakout Strategy (works if TradeMMSys2=0) TradeMMSys2 - at >0 values, activates automatic ММ for FXCOMBO Breakout Strategy (traded volume as a percentage of free margin) LossFactorSys2 - trading volume multiples after a loss (works only with UseAgresiveMM=true) ==== FXCOMBO Reversal MM Parameters ==== LotsSys3 - trading volume of FXCOMBO Reversal Strategy (works if TradeMMSys3=0) TradeMMSys3 - at >0 values, activates automatic ММ for FXCOMBO Reversal Strategy (traded volume as a percentage of free margin) LossFactorSys3 - trading volume multiples after a loss (works only with UseAgresiveMM=true) ==== Main MM Parameters ==== MMMax - maximum allowable trading volumes per transaction (as a percentage of free margin) MaximalLots - maximum allowable trading volumes per transaction ==== FXCOMBO Scalping System Parameters ==== StopLoss - StopLoss for system 1 (50-300) TakeProfit - TakeProfit for system 1(5-50) TREND_STR - conditional trend strength gauge (0-100) OSC_open - oscillator value for position opening (0 to 30) OSC_close - oscillator value for position closing (0 to 30) ==== FXCOMBO Breakout System Parameters ==== TakeProfit_II – TakeProfit for system 1(50-500) StopLoss_II - StopLoss for system 1 (25-120) MaxPipsTrailing2 – maximum allowable trailing stop value MinPipsTrailing2 – minimum allowable trailing stop value Break - breakthrough intensity ATRTrailingFactor2 – trailing stops sensibility to the volatility ==== FXCOMBO Reversal System Parameters ==== BegHourSys_III - trading opening time for system 1(0-24) EndHourSys_III - trading closing hour for system 1(0-24) TakeProfit_III - TakeProfit for system 1(50-500) StopLoss_III - StopLoss for system 1 (50-150) MaxPipsTrailing3 – maximum allowable trailing stop value MinPipsTrailing3 – minimum allowable trailing stop value What you must have in mind when trading with FOREX COMBO SYSTEM:

On no account would we recommend your intervening in, or assuming control of, transactions opened and managed by FOREX COMBO SYSTEM. Each transaction is complete with StopLoss and Take Profit orders which have supplementary protective functions in case of any communications breakdowns or power outages.

Problem-free FOREX COMBO SYSTEM performance requires that the computer, the platforms (MetaTrader4) on which the expert runs and the expert itself runs, to work around the clock five days a week from market opening on Mondays to market close on Fridays. The most stable internet connection possible is required, and it is also recommended that the computer used is protected against power spikes and outages.

What you should do, when FOREX COMBO SYSTEM is started: The only thing you should do after starting the EA is to select a value for the " LotsSys1 (2,3)" or “TradeMMSys1(2,3)” parameter. If you wish, you can try FOREX COMBO SYSTEM on a demo account, or you can trade with less significant volumes at first. We recommend you to select trading volumes in which five or six consecutive losses of 60-70 pips (StopLoss) should not represent a problem for your account. We also recommend as absolute minimums USD 1000 on account for trading with volume 0.1 lot (10,000), and USD 10000 on account for trading with volume 1.0 lot (100,000). If you wish to make use of the EA’s money management, you will find this information useful: Case 1: If you set a parameter of TradeMMSys1(2,3)=0, the EA will trade with volume = parameter Lots (defaults Lots=0.1) Case 2: If you set a parameter of TradeMMSys1(2,3)=2, the EA will trade at relatively low risk = 2 per cent of your account per individual trade. Case 3: If you set a parameter of TradeMMSys1(2,3)=5, the EA will trade at relatively normal risk = 5 per cent of your account per individual trade. Case 4: If you set a parameter of TradeMMSys1(2,3)=10, the EA will trade at relatively high risk = 10 per cent of your account per individual trade. For example, if you have a USD 10,000 account, then:

In case 2 (2 per cent risk) the EA will open 0.2 lot positions (20,000)

In case 3 (5 per cent risk) the EA will open 0.5 lot positions (50,000)

In case 4 (10 per cent risk) the EA will open 1.0 lot positions (100,000).

If you open a new account and this copy of the EA does not work on your new account, please contact us and we will send you another copy of the EA. Please, remember that the EA will not function if MetaTrader 4 closes, the computer shuts down or your internet connection trips out. Important: FOREX COMBO SYSTEM will work on any broker with 4 or 5 digits price quotes. It is not necessary to change any parameters for 5 digits price quotes. Important: If your broker is ECN you should chose Use_ECN_Broker=true in the expert advisors inputs. Important: If you are not sure, that the brokers GMT_Offset shown on the chart is correct, please contact us! If you have any questions or problems with FOREX COMBO SYSTEM, please contact us at: [email protected] We wish you successful trading! Risk Disclosure: You should be aware that trading Foreign Exchange carries a high level of risk, and you can lose some or all of your investment. The high degree of leverage that is often obtainable in forex trading, can work against you as well as for you. The use of leverage can lead to large losses as well as large gains. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. Hypothetical performance results have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk. Variables such as the ability to adhere to a particular trading program in spite of trading losses as well as maintaining adequate liquidity are material points which can adversely affect actual real trading results. By using FOREX COMBO SYSTEM, you acknowledge that you are familiar with these risks and that you are solely responsible for the outcomes of your decisions. We accept no liability whatsoever for any direct or consequential loss arising from the use of this product. It's to be noted carefully in this respect, that past results are not necessarily indicative of future performance.

0 notes

projectdroid1-blog · 7 years ago

Text

4X Pip Snager Trading System

4X Pip Snager Trading System https://www.projectdroid.com/wp-content/uploads/2018/04/4X-Pip-Snager-Trading-System.png https://www.projectdroid.com/4x-pip-snager-trading-system/ # 1 # 2 Table of contents…………………………………………………………2 - 3 Introduction………………………………………………………………3 - 5 Trading With The Near Term Trend……………………………………..6 - 7 The 10 Rules YOU Must NOT Violate No Matter What………………7 - 12 The 4X Pip Snager Scalper Setup……………………………………..13 - 18 The Correct Separation Gap For The Correct Entry……………………….15 True S&R Support And Resistance…………………………………...18 - 27 How To Avoid A No Trade Setup…………………………………………27 The 4X Pip Snager Day Trader Rules………………………………...28 - 33 The 4X Pip Snager Swing Trader Rules…………………………………...33 The 4X Pip Snager Day Trader Setup………………………………...34 - 37 Buy Fake Example…………………………………………………………37 The Reason Why YOU Should Only Trade The EurUsd……………..38 - 42 Understand And follow the Daily Forex News And Analysis………..42 - 44 You’re Paid To Wait…………………………………………………..44 - 45 Use Good Money Management……………………………………….45 - 46 Lets Do The Math Fellow Traders…………………………………….46 - 50 Analyze Your Exits……………………………………………………50 - 52 Technical Analysis Verses Fundamental Analysis……………………52 - 53 # 3 Typical Scalping Trading System……………………………………..53 - 55 MT4 Installation & Demo Account Access…………………………...55 - 63 How To Setup YOUR Charts To Trade The 4X Pip Snager Systems 63-65 A Last Few Words…………………………………………………….65 - 67 Risk Disclosure Statement……………………………………………67 - 68 ************************************************************* Good day to all my new trader friends and welcome to the 4X Pip Snager Trading Systems: First of all, this eBook is NOT going to go on and on about the Forex Market which in the end won’t help you in the slightest. Instead, we’re going to get right into the heart of this amazing trading system to get you on the fast track to snagging pips out of the market. My name is Jason Sweezey and I have been a trader for over 8 years now, since May 2001 to be exact, and over the years I have seen a lot of trading systems – you name I more than probably saw it. In fact, in this eBook I plan to go over a few of the things that I learned over the years that I feel will benefit you the most. I’ll try my best to give it to you straight up – no misguided information. Just good straight to the point trading information to give you a jump start to your trading career! # 4 You see a lot of traders lose (95% they say – I say the number is more like 98%!) because they’re either told the wrong information, or they read the wrong information which in the end causes them to lose over and over again. It’s a fact that most traders are buying when they should be selling, or they’re selling when they should be buying – this is why they lose! Have you ever bought retracements all the way down, or sold retracements all the way up? If you have don’t feel BAD we’ve all done it! After you lost trade after trade have you ever went back at the end of the day and looked at the chart and said to yourself why was I buying it? It was in a down trend from the upper left hand corner of the chart all the way down to the right hand corner of the chart. If you have a 5 year old son or daughter and you ask them to take a look at your chart and ask them is that going up or down? I bet you without ever seeing a chart before in their life they will be able to identify the near term trend for that day with ease. Why? Because they have No fear of loss!!! They don’t understand what that is yet, but they sure can identify the angle of the slope of the near term trend. So why do we make the same mistakes over and over again? The answer… is Fear! We fear that if we sell in a down trend, we will sell at the bottom of the move and lose. We fear that if we buy in an uptrend, we will buy at the top and lose. # 5 So with fear of losing – instead, we try and pick the top all the way up, or we try and pick the bottom all the way down – losing trade after trade! Known as top and bottom picking! We assure you we won’t try and show you how to pick a top or bottom, but we will show you how to enter in the best place with the near term trend. If you fall into the 98% of traders who lose day after horrible day – the good news is this eBook is going to change all that… So ladies and gentlemen lets get right into the heart of this trading strategy and start to learn how to trade with the near term trend and snag some pips! ☺ I don’t know about you but I am a visual learner as apposed to a text book theory learner so there will be a lot of picture illustrations to show you exactly how to trade the 3 4X Pip Snager Trading Systems… Plus you’ll see that this system is a visual system anyway. Since there is 3 systems in this eBook we will start with the M1 Scalper System first. In fact, the M5 Day Trader System is simply the same as the M1 Scalper System it’s just up on a higher level time frame where the M1 Scalper System you look to snag 10 to 30 pips or more per trade – where the M5 Day Trader System you look to snag 40 to 100 pips or more per trade. So enough with all the “chit chat” let’s jump right in and get started!

“Trading With The Near Term Trend”

# 6 Trading with the near term trend is so critical that, that alone can reduce your overall losses by 60%! Just think of going from losing 80% of the time to winning 70% of the time? If you use a 2 to 1 take profit ratio you’ll be profitable in no time! Meaning if you use a 30 pip stop and shoot for a 60 pip take profit, you’ll be making more pips than you’re losing with a 70% win loss ratio. But let’s get back to the topic of this section – The Trend. “The Trend Is Your Friend Until It Ends.” Let’s take a look at this chart: # 7 As you can see in this illustration above the 4X Pip Snager Filter at the bottom of the chart kept us out of trouble. When you see RED in the 4X Pip Snager Filter you can only enter into Sell Trades with price moving downward away from the 4X Pip Snager Trend & Trigger line. When in a up trend you’ll see BLUE diamonds in the 4X Pip Snager Filter which we would do the exact opposite where we would only be allowed to enter into Buy Trades with price moving upward away from the 4X Pip Snager Trend and Trigger line. That’s How You Trade With The Trend. ☺ “The 10 Rules You Must NOT Violate NO Matter What!”

4X Pip Snager M1 Scalping System Rules:

Note: This is a more in depth explanation of the rules but we promise we will simplify this for you later on… #1. You must only trade this system on the EURUSD or if you’re a Futures Currency Trader then you can trade this on the EURO Futures Contract also. (Will this system work on other instruments? Probably yes but we like to trade it on the EURUSD ONLY!) If you’re so inclined to trade it on another pair, the # 8 USDCHF for the most part moves in the opposite direction of the EURUSD so YES it’ll work on this pair, too! But the way that I look at this is – why trade a pair with a higher pip spread and a lower pip value? Makes NO SENSE to me… #2. The correct time to trade: There are 2 two and a half hour blocks of time to trade. Times are set in EST (Eastern Standard Time) 2:00 AM to 4:30 AM United Kindom Session. And 8:00 AM to 10:30 AM United States Session. If you want to avoid the news then from 10:05 AM to 12:00 PM EST. If you

trade the 4X Pip Snager Scalper System at any other time – Then You

broke rule #2! Why? Because this is when the 3 different markets (2:00 AM Dublin 3:00 AM UK and 8:00 AM USA opens) open, and the open nearly always causes some fear resulting in a 30 to 50 pip move for us to cash in on. Plus, at this time is when we see lots of volume. We need some force behind the move for it to work. THE BEST TIME TO TRADE IS THE UK SESSION – 100%!!! The US session is too choppy!!! I also want to note that there is times of the year where you might not want to trade and enjoy # 9 life… July and August and December are month’s that are thinly traded. The huge institutions and hedge funds usually don’t trade as much in these months so at times it’s best to NOT TARDE THESE MONTHS. January & September are real good months to trade as all the BIG DOGS are coming back to play the trading game. #3. If you are trading from 2:00 AM Dublin Open you need to find & draw true support and resistance lines on your chart…the high and the low where price meets more than once. You need to have at least 12 to 15 pips from your entry point to your nearest support or resistance point where you will look to take profit. No worries we will show you an example later on... #4. If you’re looking to sell the market short the 4X Pip Snager Filter must be Red. If you’re looking to buy the market long the 4X Pip Snager Filter must be Blue. When you see no Blue or Red below in the 4X Pip Snager Filter this means there is no “True Trend” at this time meaning to stay out of the market until it starts to paint Red or Blue again. # 5. In a sell trade the 4X Trigger Line must cross below the 4X Trend Line with price below both of them. In a buy trade the 4X Trigger Line must cross above the 4X Trend Line with price above both of them. In a sell trade the 4X Trend Line will be Red when price is closed below it, and in a buy # 10 trade the 4X Trend Line will be Blue when price has closed above it. I know this all sounds confusing but once you see an example of the setup it’ll be so easy to see and understand. # 6. To make certain the setup is good you need to see a separation gap between the 4X Trigger Line & the 4X Trend Line. I’ll explain this in better detail in the chart and video illustrations. # 7. To scalp successfully you need to use a broker with a spread no bigger than 2 pips. 1 pip is even better! Oanda is .09 of a pip. You see, the broker is one step ahead of you all the time, as soon as you pull the trigger they made money. You on the other hand, are sitting in a loss – the lower the spread the better! 3 and 4 EURUSD pip spreads will Kill YOU before you even pull the trigger! Trust me I have been there and done that. Never again! Just in case you don’t know what a pip stands for…it means: Point In Percentage. My very first Forex account I asked this guy at a NY brokerage and he never knew what a pip meant…it was a year later when I found out the meaning. # 8. You need 1 click super fast execution! Oanda lets me out of a trade in about 10 milliseconds with no delay and no slippage or games whatsoever. I know if you’re with Oanda’s 50 to 1 leverage and this is a total turn off to you, if you really think about it that’s the correct amount you should have # 11 access to because if you try and trade with 200 to 1 or even worse, 500 to 1 you’ll be over trading and there’s a good chance you’ll blow out your account in a very short time. If you use a broker who requotes you or sends you off quotes you need to find another broker – ASAP! Apparently there is a new NFA regulation that Hedging is no longer allowed so I guess the traders who use hedging strategies either have to use 2 separate accounts or stop hedging all together. This system requires NO Hedging so this won’t effect us in any way whatsoever. ☺ # 9. Buying and selling the retracement when entering a trade: When looking to buy or sell, you want to sell when price is moving up and you want to buy when price is falling down. I know you’re shaking your head on this one right now but trust me this is how the professionals trade. I know that for most this would be very uncomfortable to sell when the market is going up or buying when the market is dropping down but it’s the true “Sure Fire!” way to trade with minimal drawdown. I will show you a special example of this in a chart below. (Note: There will be times where you won’t see a pullback to enter and all the other criteria will be met and you’ll… either have to pull the trigger or sit on the side lines and # 12

watch the trade take off in your anticipated direction. Don’t worry if you miss a few trades. Trading is like buses or trains another one will come along soon enough… ☺)

# 10. Stop loss and take profit I don’t use when scalping – as soon as I pull the trigger to get into a trade (Before I get into a trade I have the trade window open and ready to execute to buy or sell.) I open up the trade window to exit the trade so I am ready to take the pips as fast as I possibly can! Or, close the trade for a small loss. If price stalls & doesn’t look like it’s going to go in my favor or if the 4X Trigger line crosses back up on the opposite side of my trade then I get out! Another thing to look for is if the 4X Trend Line changes the opposite color and price is above it in a sell trade or below it in a buy trade, this is yet another warning that the trade maybe turning sour. Don’t Wait – GET OUT NOW! And Get Out FAST!!!!

Scalping you must be able to react on the spot!!!

“When All Else Fails Go By The Rules…” Now lets sum up the rules one more time but this time we will simplify them: # 1. EURUSD ONLY! # 13 # 2. Time to Trade: 2:00 to 4:30 & 8:00 to 10:30 AM EST. If you want to avoid the news 10:05 AM to 11:30AM EST. This is my favorite time to trade because a lot of the time there is a nice move after the 10:00 AM EST news, and between 8:00 AM and 10:00 AM you get a lot of buy/sell fakes! # 3. Find major support and resistance. # 4. 4X Pip Snager Filter must be RED to Sell or Blue to Buy. No color –

No Trade!

# 5. 4X Trigger Line must be below 4X Trend line to Sell or above to Buy. # 6. Correct separation gap between 4X Trigger Line & 4X Trend Line. # 7. Spread no bigger than 2 pips 1 pip is better with NO commissions!??? # 8. 1 click instant execution! 10 milleseconds at most. # 9. In a Sell trade look to sell at a better price – higher. In a buy trade look to buy at a better price – lower. # 10. When using the 4X pip Snager Scalper System always be ready to enter/exit the trade just as fast as you possibly can – have your open/close trade window open immediately before and after entry. Let’s go ahead now and show you a few examples of a 4X Pip Snager Scalper Setup: # 14 Here is an actual picture of the setup as it happens with the correct Gap Separation: # 15 Below is another example of how we look to sell when price is retracing back up to have the correct optimal entry point with next to nothing for drawdown. Please take note that if you enter into trades with hardly any drawdown you’ll become a more confident trader because the fear of loss # 16 will be removed more so and in some cases all together. Here is an example to show you how to avoid the Sell Fakes and Buy Fakes that occur from time to time. In this example we show you the correct “Gap Separation” needed for a correct entry setup. I did these live trades and made 10 pips on each trade. In fact, in the second setup below I sold it 2 times Making a quick 7 pips on the second trade. Once you get the feel of selling # 17 When price is going up you can easily do 2 and sometimes 3 sells in your initial trade setup. Please don’t try this until you have lots of experience under your belt. Getting comfortable buying and selling when price is going the opposite way will take some time – take the time to master it then the rewards will be fruitful… ☺ As you can see this illustration is in the USA session as I trade the US session as I live in the EST Zone. By far the 2:00 AM to 4:30 AM block of time is the best time to trade as it tends to trend better than the US session + there is no news to worry about. Trading the US session is a lot harder with news releases at any given time. Don’t forget other unannounced news that happens on TV that when it happens you see a spike come out of nowhere and if you’re on the wrong side of it at the time it can hurt you quickly! These unannounced news announcements tend to happen at 12:00 PM and late afternoon EST. # 18

“True Support & Resistance.”

Now we going to show you some support and resistance examples so you are clear on how to enter with major support or resistance near by to our # 19 entry of our trade setup. Then below that we will show you how to find and draw “True Support & Resistance Lines” so stay tuned this is critical to your success trading all 3 4X Pip Snager Trading systems… Below this we show you how to find true Support & Resistance so when entering a trade you don’t get into trouble. You see professional support and resistance traders “Buy Off Of Support & Sell Off Of Resistance.” # 20 Amateur traders do the opposite. And if anybody has ever told you different tell them to go fly a kite! We use support and resistance in a completely different way, in fact, our way is so much more effective because we don’t risk trying to buy (Guess) or sell off of any major support & resistance levels which can be very risky when support or resistance is violated. Instead we look to take profits at these major levels like the pros do. In a sell position we look to close our trade at the nearest major support level. In a buy position we look to close our trade at the nearest resistance level. This is the safest way you could ever use support & resistance in my honest opinion. ☺ Www.ForexWinners.Net # 21 Here’s some more examples of S&R BAD trade setups you must avoid at all costs.

Www.ForexWinners.Net

# 22 Www.ForexWinners.Net # 23 And here is more examples for you to learn from…these examples show you how to avoid a No Trade Setup! # 24 www.4XPipSnager.com # 25 www.4XPipSnager.com # 26 And last but not least here is an example of a choppy going nowhere ranging market… # 27 Just one more example to show you how amazing the 4X Pip Snager Filter keeps YOU on the right road to successful trading opportunities. Take a quick look at how it keeps YOU Safe 80% of the time. # 28 “Let’s go ahead now and show you a few examples of a 4X Pip Snager Day Trader Setup.” Although the 4X Pip Snager Day Trader System is very similar to the 4X Pip Snager Scalper System there is some different rules to abide by. Let’s start off with the rules first: #1. The best pair to trade this on is the EURUSD but since this is on a higher time frame the GBPUSD is also very good as well… And so is the USDCHF but… I myself would rather trade the EURUSD – your choice? It also will work very well on the USDX Futures (United States Dollar Index.) Euro, Great British Pound and Swiss Frank and who knows maybe a whole bunch of other instruments. I was looking at it on Sweet Black Crude oil on the M5 and it works good on that, too… So when you think about it the possibilities are endless folks! #2. The correct time to trade: There is no set time to trade the Day Trader System because setups can happen at any time of the day or night, however, when you see a trade setup between the UK and US session this would be the ideal time to look to enter into a position. Sometimes you’ll see the start of a huge move occur in the Asia session, and sometimes you’ll see it setup at the close of the day around 4:00 PM EST. We feel that the best time # 29 to look for trade entries is between the hours of 2:00 AM EST to 11:30 PM EST. BETTER YET! THE UK SESSION IS BEST HANDS DOWN!!! So when you see the setup start between 2:00 and 4:00 AM EST This is your best bet you will catch the bulk of the move before the US session opens… #3. Always take support and resistance into consideration when entering into a position. You never sell into support and you never buy into resistance. So you need to find & draw true support and resistance lines on your chart…the high and the low where price meets more than once of that day and if needed a few days in the past since we are looking to enter into a longer term position than the Scalper System. So you need to have at least 40 to 70 pips cushion from your entry point to your nearest support or resistance point where you will look to close your trade & take profit. #4. If you’re looking to sell the market short the 4X Pip Snager Filter must be Red. If you’re looking to buy the market long the 4X Pip Snager Filter must be Blue. When you see no Blue or Red in the 4X Pip Snager Filter

below this means there is no “True Trend” at this time meaning to stay out of the market until it starts to paint Red or Blue again.

#5. In a sell trade the 4X Trigger line must cross below the 4X Trend line # 30 with price below both of them. In a buy trade the 4X Trigger line must cross above the 4X Trend line with price above both of them. In a sell trade the 4X Trend Line will be Red when price has closed below it, and in a buy trade the 4X Trend Line will be Blue when price has closed above it. I know this all sounds confusing but once you see an example of the setup it’ll be so easy to see and understand. As they say: “Plan The Trade – Trade The Plan.” #6. To make certain the setup is good you need to see a separation gap between the 4X Trigger Line & the 4X Trend Line. We’ve already explained this in great detail in a chart illustration. #7. To day trade successfully you don’t need to use a broker with a spread smaller than 2 pips, 3 or even 4 pips is fine because we are going for a bigger profit target of say 40 to 100 pips. #8. You don’t need 1 click super fast execution either! Slow execution is not an issue. #9. Buying and selling the retracement when entering a trade: When looking to buy you want to buy when price is dropping down, and when you want to look to sell you want to sell when price is rising up. I know your shaking your head on this one right now but trust me this is how the # 31 professionals trade. I know that for most this would be very uncomfortable to sell when the market is going up or buying when the market is falling down but it’s the true sure fire way to trade with minimal drawdown. As they say: “Buy The Dips – Sell The Rallies.” (Note: There will be times where you won’t see a pullback to enter and all the other criteria will be met and you’ll either have to pull the trigger or sit on the sidelines and watch the trade take off in your anticipated direction. Don’t worry if you miss a few trades, trading is like trains another one will come along soon enough… ☺ #10. Stop loss we most certainly use when trading the 4X Pip Snager Day Trading System. We simply find the nearest swing high if we are selling or the nearest swing low if we are buying. If we’re buying set SL 5 pips below the nearest swing low in a buy trade. If we are selling set SL 5 pips above the nearest swing high in a sell trade. Let’s get to it and show you some examples… Oh darn I have to sum up the rules once again for you first… “When All Else Fails – Go By The Rules…” Now let’s sum up the rules one more time but this time we will simplify them again:

Www.ForexWinners.Net

# 32 #1. EURUSD & GBPUSD & USDCHF. #2.Time To Trade: Ideal time is between 2:00 AM EST to 12:00 EST. #3. Find major support and resistance. #4. 4X Pip Snager Filter must be RED to Sell and Blue to Buy. No color –

No Trade!

#5. 4X Trigger Line must be below 4X Trend line to Sell or above to Buy. #6. Correct separation gap between 4X Trigger Line & 4X Trend Line. #7. Spread is no issue. #8. Slow execution is no issue. #9. In a Sell trade look to sell at a better price – higher. In a Buy trade look to buy at a better price – lower. #10. When using the 4X Pip Snager Day Trader System we always use a stop loss but never a take profit. Why? Because you’ll limit yourself to that amount! But for those of you who want to use a take profit we’ll explain how to do this effectively in a later chapter. Once you see a nice profit you can move your SL to break even then once you see some more profit you can move your SL (trail your SL 3 or 4 bars behind) again to lock in profit until you feel you want to close the trade. For those of you who just have to

Www.ForexWinners.Net

# 33 have a Take Profit set in place do a 2 to 1 ratio so if you have a 25 pip stop use a 50 pip take profit. 3 to 1 is even better 4 to 1 – better yet! “4X Pip Snager Swing Trader System” This was written on the spur of the moment as we just developed the 4X Pip Snager Swing Trader system on October 31st. Halloween of all days lol… Anyway, we are so pleased to share this NEW system with all of you… I forgot to mention which pairs are best to trade this on in the Video. Since this is a “Trending System…” we want to trade it on instruments that trend like the GBPUSD, GBPJPY, EURJPY and USDJPY. Since the EURUSD is so choppy you’ll quickly see that the M5 Day Trader is more fine tuned to work than the Swing Trader. You may find other pairs that will work well and you may even find other markets like Crude Oil or even Soybeans to trade this on… the possibilities are endless! However, we want to stress that the rules are the same as the 4X Pip Snager Day Trader System and that under NO CIRCUMSTANCES MUST YOU EVER ALTER the chart TPL file in any of the 3 systems. If you do you will see different incorrect GAP SEPARATIONS on the chart resulting in false trade setups.

Note: We encourage you to take your time to learn the setup - trade it in

# 34

demo for a few weeks before you decide to go live then you’ll have a better feel of the entry of the setup, and how to recognize the perfect 4X Pip

Snager Setup. Www.ForexWinners.Net Ok now we can go ahead and show you some nice 100 to 200 pip winners! Hold onto your hat – because here we go!!! # 35

Www.ForexWinners.Net

Check out this 170 pip winner! A buy trade with all the same wining criteria. Let’s look at one more example just for fun ☺ 200 pips Woo Hoo! ☺ # 36 Now we want to show you that no single trading system is perfect. All trading systems have losses…but if you go by the rules set out in this eBook you will have an edge in the market to be successful. Please go look at the chart below. # 37 # 38

“The Reason Why YOU Should Only Trade The EURUSD With This System”

The top chart is the EURUSD and the bottom chart is the USDX also known as the United States Dollar Index. Since the USDX is made up of 60% Euros the price movements are identical but in an opposite way. I have studied both the Euro and the USDX for a very long time and I have come to the # 39 realization that they run an algorithm between the 2 of them. When you see the USDX move 2 points…at the exact same time you’ll see the Euro move 3 to 5 pips in the opposite direction. A lot of traders swear that volume is the key to price movement and I do agree with them for the most part, but... I myself have come to the conclusion that volume in this particular situation has absolutely nothing to do with it! That’s my theory and 2 pips worth! A lot of people think that the EURUSD currency is a very choppy instrument. # 40 This is true but the cause of these choppy market conditions is from the USDX making the EURUSD have a lot of choppy retracements. Because the EURUSD is the most liquid pair thus makes it even easier for us to trade with the high liquidity. Have you ever heard the saying “Jack Of All Trades – Master Of None?” Master the EURUSD and you have mastered the market. You see a lot of traders feel they have to trade 10 different pairs and this is why they lose. Master one instrument and you will win over and over again! It’s also a fact that traders who win trade after trade find that boring so they go and find another market to give back all the profit they just made. It’s a lot more exciting to win some then lose some and then try and make back what you just lost – than it is to win most of the time. Sound strange? But it’s TRUE! When a trader wins his/her first trade then loses the second trade, and then loses the third trade, then the adrenalin starts to run rapidly! The trader gets even more excited and keeps trading desperately trying to get their money back that they just lost, so then they lose even more money until they give up for the day. I know this may not make any sense to you whatsoever but it’s a 100% True Fact that traders find more joy and excitement Losing than # 41 winning – even if their subconscious thought process isn’t aware of it. People eat too much… people drink too much… people drive to fast… Plain and simple – people are impulsive! And this is what causes them to lose! You need to be patient and wait for the setup. And no matter how boring winning becomes you have to put yourself in an “I am going to win attitude!” state of mind, because if you don’t you’ll start to lose again! Just follow the rules set out in this eBook and you’ll win 80% or more of the time. Also, be smart and trade the EURUSD and win all that money back you gave to the market if indeed you have lost some pips in the past. I myself had to delete all my other pairs on my platform to stay true and loyal to the EURUSD - I am married to that pair. 100%!!! Pip Snager is an amazing trading system, but will it catch every turn in the market? Of course not, and no other trading system will either. Will it catch the move right from the bottom up or from the top down? No it won’t do that either. We aren’t trying to capture the whole move – just part of it. We don’t want the whole Cow just some of that sweet cream… However, the good news is: 4X Pip Snager is accurate over 80% the time and that’s all we need to have an edge in the market. Have you heard of Meta Trader 5? This is the new platform that should be available in the near future which will # 42 eventually replace Meta Trader 4… MT5 will have capabilities far superior to MT4 which in turn will present more advanced trading system development. So stay tuned 4X Pip Snager V2 maybe just around the corner…

“Understand And Follow The Daily Forex News And Analysis”

Even though the 4X Pip Snager system is based off Technical Analysis, you must also learn the effects that news has on the Forex Market. I suggest avoiding times of major news announcements as they can have major effects on prices. It is not uncommon for news announcements that can cause 100 to 200 pip movements in a matter of minutes. While this may sound appealing in a profitable trade, if it goes against you, it can cost you equally! I typically recommend waiting at least 5 to 10 minutes after the announcement to allow the markets to choose a direction and then consider placing a trade if you see the correct setup. Practice this heavily with a demo account before ever entering with real money. If you are in a trade right before the news, it is suggested either shortening up your stop or just closing out your trade. Do be warned that it is very common that stops and entries are not respected by # 43

Www.ForexWinners.Net

many brokers during these times. It is much safer to avoid them completely. # 44 FOREX NEWS WEBSITES: I recommend the following websites for your Forex Market news sources: www.Forexfactory.com www.dailyfx.com www.bloomberg.com and www.fxstreet.com

“YOU ARE PAID TO WAIT!”

Most of your time trading is waiting for a correct setup to occur. There will always be money left on the table. You will never catch 100% of a move. Once you realize that, you’ll be miles ahead. You are waiting for those perfect setups. The better the setup, the greater chance of a winning the trade. If you are not winning between 70 and 80% of your trades, you need to step back and start waiting for better setups. The greater amount of indicators that agree with your potential trade, the higher the chances you have of winning a trade. Remember, you are mainly paid to wait. The better you are at waiting for the perfect setups, the more money you will make. But you also must understand that after all that waiting for the ideal setup to occur then you have to be even more patient than ever once you get into the trade. If you’re scalping the market for a quick 10 pips, sometimes it can happen in just a few minutes, but other times it can take 15 to 30 minutes for # 45 that trade to develop and trust me that can seem like hours has past by. And, if you’re day trading it can take even longer for a trade to turn into a BIG winner! It can take hours upon hours to fully bloom into a nice win. And that will seem like a whole lifetime flew by you! So patience is such a critical factor in all aspects of trading that without patience you’re more than likely to get out of trades that in other words would have turned into a profitable trades for you. You have to try your best to put your impulsiveness aside and put your discipline in full force, as discipline is the key element to becoming a successful trader.

“USE GOOD MONEY MANAGEMENT!”

Do not over trade. One of the most common mistakes that traders make is leveraging their account too high by trading too much of their account at one time. In other words, over – leveraging.

Leverage is a Doubled – Edged Sword!

Just because one lot (100,000 units) of currency only requires as low as $250 as a minimum margin deposit (400 to 1 leverage), it does not mean that a trader with $5000 in his/her account should be able to trade 20 lots. One lot is $100,000 and should be treated as a $400,000 investment and not the # 46 $1000 put up as margin. Most traders analyze the charts correctly and place sensible trades, yet they tend to over leverage themselves. As a consequence of this, they are often forced to exit a position at the wrong time or become too emotionally charged to be in a constructive frame of mind to trade profitably. Another form of over trading is to get in and out of too many trades in 1 session. If you’re using the Scalping System you should only look to do 3 trades maximum. If you are using the Day Trader system you only should be looking to do 1 trade a day but NO MORE than 2 setups. If you use this trader mentality you’ll avoid over trading known as gambling when you try and trade 5 to 10 trades in just a few hours… However, a good rule of thumb is to never use more than 5% of your account at any given time, especially with a leverage of 400 to 1. Particularly for new traders or when learning a new system such as this one, I recommend using an account with a more conservative level of leverage of no more than 100 - 200 to 1 and you might want to risk even less like 2% or even less 1%.

Let’s Do The Math Fellow Traders:

Say on the 4X Pip Snager Day Trader System we use a 1 to 1 ratio? So in this case we will use a 10 trade scale with 80% wins and 20% losses: For # 47 the sake of this explanation let’s say we are using a 100 pip stop loss and a 100 pip win ratio. So on 8 of the trades we win 800 pips then on 2 of the trades we lose 200 pips. So think about this now…is this actually an 80% winning average? It is in the terms of actual trades won but is it actually 80% in the terms of pips made? If you answered no to this question you are 100% correct! You see, in reality, you made 800 pips but you lost 200 of those 800 so what are we left with? The answer is 600 pips…so doesn’t this sound more like a 60% win loss ratio than an 80% win rate? Indeed it does folks! Okay let’s try a 2 to 1 ratio where the stop loss is 200 and the take profit is 100. The same applies just the numbers are different. So on 8 of the trades we win 800 pips then on 2 of the trades we lose 400 pips. So think about this now…is this actually an 80% winning average? It is in the terms of actual trades placed but is it actually 80% in the terms of pips made? If you answered no to this question you are 100% correct! You see, in reality, you made 800 pips but you lost 400 of those 800 so what are we left with? The answer is 400 pips…so doesn’t this sound more like a 40% win loss ratio than an 80% win rate? Indeed it does folks! So now let’s do this the best way possible and let’s reverse the win loss ratio. Instead, now we are going to use a 100 pip stop loss and a 200 pip take profit and see what we # 48 end up with. So on 8 of the trades we win 1600 pips then on 2 of the trades we lose 200 pips. So think about this now…is this actually an 80% winning average? It still is in the terms of actual trades placed but is it actually 80% in the terms of pips made? If you answered no to this question you are 100% correct! You see, in this example you did far greater than the last 2 examples above, in fact, you made 1,600 pips but you lost 200 of those 1,600 so what are we left with? The answer is 1,400 pips…so doesn’t this sound more like a 140% win loss ratio than an 80% win rate? Indeed it does folks! There is so many ways people have tried to fudge the numbers over the years trying to make it look more appealing than it really is. I just laid it out for you in an easy to read format with no BS! In the end it’s not the percentage of wins you make it’s how many pips did you make… It only makes sense that if your win to loss ratio is greater than your lost pips you’re going to be ahead of the game. So many traders alike try to twist money management theories that it isn’t funny! Stick with the last example I showed you for this system as it’s traded on a 5 minute time frame and if you try and shoot for 3 to 1 or 4 to 1 in the terms of pips made like for example 50 pip stop loss to a 200 pip take profit this may not be achievable on a daily basis trading this on such a small time frame. On the EURUSD # 49 we certainly don’t have 200 pip ranges on a daily basis do we? So now that we covered the win loss ratio as far as stop loss and take profit is concerned lets now take a look at what happens when we add more positions as we progress when our account size grows. This is yet another part of money management that a lot of traders either fail to understand and or take seriously. Let’s say we have 8 wins in a row and we make 1,400 pips like stated above. Let’s say we were trading 100,000 worth of currency which equals to $10.00 a pip. So let’s say we had a starting balance of $10,000 and we told our self that for every $1,000 gained we were going to add another $10,000 to our position. So when we reached the $11,000 level we now are going to trade $110,000 which equals $11.00 a pip so for every pip gained on each trade we will be making an extra $1.00 so as you can see as time goes on if we made another 100 pips we also would have added another $100 and say we were successful and we were winning 80% of our trades with a 2 to 1 win loss ratio in no time we would double our account and make 100%. But! And this is a BIG BUT! What if we had a bad streak of trades which happens from time to time, but now we are trading $200,000 worth of currency which equals to $20.00 a pip. Can you see the horrific consequences this can cause? For example, we will be losing double the # 50 amount of money on a single trade which can cause all your profits to be eaten up quicker that you can say oh NO! What took you 20 trades to accumulate $10,000 can wipe out all your profits made in just a handful of bad trades. So please be careful when adding on lots and remember to decrease your lot size as you lose so the impact won’t be so painful! To avoid a situation like this, simply trade the same amount of lots from start to finish – yes it will take longer to grow your equity but you’ll be practicing strict money management practices. Especially, when learning a new system like 4X Pip Snager…

Please read the bottom disclosure statement in full as these examples are all only to be used as a guide and we at 4X Pip Snager and our affiliates aren’t responsible for actions taken on your part.

“ANALYZE YOUR EXITS!!!” The reason trading with a system is the #1 tip is because most objective analysis is done before the trade is executed. Once a trader is in a -10 pip -25 pip position he/she tends to analyze the market differently in the "hopes" that the market will move in a favorable direction rather than objectively # 51 looking at the changing factors that may have turned against their original analysis. This is especially true of losses. Traders with a losing position tend to marry their position, which causes them to disregard the fact that all signs point towards continued losses. In this system, you will be shown exactly where to place your stops. No more allowing your emotions to control your decisions. Once that decision has been made, STICK WITH IT. If the price action turns around and goes back to the original direction you can always re enter the trade when the trading guidelines have been met again. However, once in a trade we have to try out best to mange it so the way I like to do it is to do the 50% move stop profit management technique. Say we have a stop loss of 50 pips and we use a 2 to 1 win loss ratio just like I explained above so then when we see 50 pips profit which is 50% we move our stop loss to break even, or even better, we move our stop loss to + 10 pips so then for sure we are managing our trade + once we do that we are in a FREE trade as traders like to call it. So let’s say after we move our stop loss to either break even or for a small profit would if we are in a buy trade and price moves up another 15 pips in our favor but now we are at a major resistance level – so what do we do? We analyze the situation and may consider taking 65 pips or so instead of risking giving back all those pips we just have accumulated. # 52 Remember now just like I have said in my video tutorial my friends…we look to take profits at major support and resistance levels, and we will let the “High Risk Traders” (support and resistance traders) trade off of these levels where we will have taken our profits and be long gone – safely! Also, you may want to trail your stop loss with either a trailing stop or a good old 3 bars back strategy, however, this may cause you to be stopped out prematurely resulting in lost profits or even losses. I myself like to use the 50% money management strategy. “Technical Analysis Verses Fundamental Analysis.” A lot of traders say they’re either “Technical or Fundamental” when it comes to trading. The fact is, we’re all 100% fundamental traders it’s just that some of us don’t realize it yet. I myself used to like to say that I was 70% technical and 30% fundamental until I had it explained to me by a very prominent and well respected Grain Futures Broker by the name of Mr.Tim Hannagan which has over 40 years trading experience in the markets. You see, a technical trader uses technical tools available on a chart, where a fundamental trader uses news elements. Before a major news element comes out which could be days, and sometimes weeks before the market fears the # 53 worst or the best to happen – known as “Fundamental Analysis.” You’ll see a 3 or 4 day move before the news takes place, it will show up as a technical pattern on your chart but the whole reason in the first place why this happened was due to the “Fear” of what “Could Happen” from a fundamental element about to enter in the market. Known as… “Buy The Rumor – Sell The Fact.” So in essence, we’re all “Technically 100% Fundamenatl Traders.”

“The Typical Scalping trading System…”

As you can see this system is real simple and easy to use. They say that the most successful things in life are simple. Have you ever heard the saying K.I.S.S? Keep It Simple Stupid. No we aren’t calling you stupid. However, we want to show you how people think that if something is complicated or extremely complex that it will work better. Here is an example of the typical trading system you see on those forums that use like 10 different indicators to make a solid trade decision… My good old trader friend calls them Christmas Trees… They sure are colorful and pretty to look at aren’t they? If you have kids and they saw this chart they would say what game are you playing? Can I play Daddy? Or, can I play Mommy? I don’t know about # 54 you but when I see trading systems like this I laugh my head off! ☺ The brain can get distorted so easily when it’s trying to compute more than 3 things at one time so trying to look at 10 different things at one time can cause a meltdown – causing you to make the wrong trading decision ending with a loss. # 55

Www.ForexWinners.Net

Here’s an indicator I came across that has to be the funniest one ever! When the orange and the green and the blue and the RED cross SELL! Sell Now!!!

MT4 Installation & Demo Account Access.

I have used so many MT4 brokers over years and have only found a few that I prefer. ForexMeta certainly is one of them. They offer a very reliable data feed which is a definite necessity in today’s trading activites. Lets show you how to install this platform now: First we go to www.forexmeta.com and then we will see their home page just like this then we simply click on the FREE DEMO link below: #56 Then we fill in our personal information as follows: # 57 Then it thanks you for your information and you’ll be prompted to the next step which is to click the download link: Then you click Run to proceed to setup the software: # 58 Then you choose the Country of your choice and click next: Then you click next: # 59 Then you check off that you agree to all the terms and click next: Then you choose the Hard Drive you want to install MT4 on then click next: # 60 And now you’re ready to install ForexMeta MT4 to your computer: You’ll now see it starting to install the files to your HD… # 61 Once that is done simply click Finish then you’re done. Now the platform will open and now we want to open up an account: # 62

Www.ForexWinners.Net

Simply fill in all your information and make sure you check off the newsletters then click next. Then you’ll see this window then choose the appropriate demo server then click next: Then you’ll see this window below then you just click Finish and you’re all done and ready to learn how to to install the 4X Pip Snager Charts using the 4X Pip Snager Indicators… # 63 Here is a picture of the Icon you’ll see on your desktop that you click on to open up your platform each time you go to use the 4X Pip Snager system:

“How To Setup Your Charts To Trade all 3 4X Pip Snager Trading Systems…”

The M1 Scalper System & Day Trader & Swing System consists of 3 indicators each and a template for each of them and they are: 4X Pip Snager Filter… 4X Pip Snager Trend… 4X Pip Snager Trigger… 4X Pip Snager Scalper M1 TPL… 4X Pip Snager Day Trader M5 TPL… 4X Pip Snager Swing Trader M30 TPL… We use Meta Trader 4 for our charts so these indicators are for MT4 only. You simply load the 3 indicators in your indicators folder through your Program Files folder. Some MT4 charts don’t display the 4X Pip Snager Filter properly I strongly recommend you use Forex Meta, FXDD or IBFX # 64 to load the system. I use Forex Meta. #1. Click Start. #2. Click on My Computer. #3. Click on Disc_0 (C:) or whatever drive you have your Meta Trader 4 platform saved in. #4. Clink on Program Files. #5. Click on Meta Trader 4. #6. Click on on the templates folder then copy and paste or drag and drop your 3 TPL files into your templates folder. DO NOT install them into your templates folder inside your Experts/Indicators Folder that is the wrong place to install them. #7. Then click on your Experts folder then click on your Indicators folder and copy and paste or drag and drop the 3 indicators into that folder. Then you simply restart your platform and you’re all ready to go! There is many MT4 brokers all over the world to choose from as we like to use MT4 charts providers. www.forexmeta.com is my personal choice. Here Is The 4X PipSnager Video Links To watch… To click on the links simply hold down your Ctrl button.

Www.ForexWinners.Net

# 65 http://www.4xpipsnager.com/pipsnagertools/Videos/4X_PS_Setup.avi http://www.4xpipsnager.com/pipsnagertools/Videos/4X_PS_Beginner-Intermediate.avi http://www.4xpipsnager.com/pipsnagertools/Videos/4X_PS_Advanced.avi http://www.4xpipsnager.com/pipsnagertools/Videos/4X_PS_Swing_Trader.avi Note: Once you have loaded the indicators please DO NOT REDUCE/INCREASE the chart size as This Will Alter The Setup and you will not see the correct GAP SIZE for trade entry! Also when starting a new chart with the software please toggle from one time frame to another so that the proper data will load properly. Click on the M1 then M5 for either the 4X Pip Snager Scalper or Day Trader or Swing Trader System, as incorrect data sometimes will appear in the 4X Pip Snager Filter. I do it each day to make certain I have the correct data in the main Filter. People who take the fast way to starting to trade this system and fail to read the paragraph above will FAIL!!! It’s so critical that if you fail to abide by it – you’re # 66 doomed to fail!!! No ifs! No Ands! Or Butts About It!!! PLEASE READ THIS ENTIRE eBook??? This message was for those of you who decided to NOT read from the TOP! I want to thank you for taking the time to read my eBook. I hope you enjoyed reading it as much as I’ve enjoyed writing it. Like I said at the top of this eBook, I have seen a lot of trading systems and to be honest with you some of them are just down right silly… I myself would not feel good about myself sharing a useless system that won’t make me or YOU any pips at the end of each day. The people who sell them should feel ashamed of themselves who sell such useless Trash! And even worse, some of them sell these useless methods/systems for thousands of dollars! Shame on YOU!!! When you see a system selling for more than $197 Run!!! No Refunds – Run Even Faster!!! To date I honestly feel that this is one of the best systems on the market today. In fact, I’ll even go as far as saying it’s:

“The Best Of The Best!” So…

# 67 From Jason’s trading desk… Yours for more pips, Jason Sweezey. Now here’s a message for those who think that there’s some “Holy Grail” coded into my indicators. Do you want to pay money to decompile it? That’s up to you pal, but… you won’t find any holy grail here. Why? Because there’s no such thing – it doesn’t exist! The only reason why we # 68 don’t send you the source code is because curious people will go fooling around with the parameters in the inputs tab and ruin how the system is suppose to work. It isn’t broke – don’t try to fix it! Okay pal? READ THIS BEFORE CONSIDERING ANY INVESTMENT RECOMMENDATIONS All forms of trading carry a high level of risk so you should only speculate with money you can afford to lose. You can lose more than your initial deposit and stake. Please ensure your chosen method matches your investment objectives, familiarize yourself with the risks involved and if necessary seek independent advice. NFA and CTFC Required Disclaimers: Trading in the Foreign Exchange market is a challenging opportunity where above average returns are available for educated and experienced investors who are willing to take above average risk. However, before deciding to participate in Foreign Exchange (FX) trading, you should carefully consider your investment objectives, level of experience and risk appetite. Do not invest money you cannot afford to lose. 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 actually been 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 being made that any account will or is likely to achieve profits or losses similar to those shown. 4X Pip Snager is only in good faith "sharing information" and is not making any recommendations to invest in any currency or any other investment. Nor is 4X Pip Snager responsible for any losses incurred by sharing any information and is only sharing this information in good faith. 4X Pip Snager and its affiliates are not responsible in any way for losses incurred. 4X Pip Snager © 2009 all rights reserved. NOTICE: All information contained in the 4X Pip Snager’s Trading System is subject to copyrights of 4X Pip Snager and its affiliates and are protected by the Copyright Law of the United States (Title 17, United States Code) and by the Berne Convention. Reproduction, storage or transmittal by any means, of any material in this eBook, whole or in part, is prohibited without express prior written # 69 permission. If you wish to publish or reproduce the materials in any physical or digital form or use them for any commercial purpose, including display or Web page use, you must obtain prior written permission from the 4X Pip Snager. Be warned that every copy of the 4X Pip Snager’s Trading System has been digitally signed and has been uniquely formatted for easy identification in the event that any copy has been marketed, distributed or shared on any peer-to-peer network without my permission, 4X Pip Snager can quickly identify the guilty party. 4X Pip Snager retains the rights to pursue both legal and civil retribution and will exercise those rights in the event that any unauthorized copy is distributed without the written permission from the author of 4X Pip Snager. Www.ForexWinners.Net 4X Pip Snager Trading System, Best Indicator Forex, Best System Forex, binary options brokers, binary options trading, forex signals, forex trading, Free Download

0 notes

projectdroid1-blog · 7 years ago

Text

Dream Signal V3 Trading System

Dream Signal V3 Trading System https://www.projectdroid.com/wp-content/uploads/2018/04/Dream-Signal-V3.png https://www.projectdroid.com/dream-signal-v3-trading-system/

DESCRIPTION

Get ready forex world because it is the return of Dream Signals! The one series that started it all and was a super hit. For people who don't remember our Dream Signals software's will get a chance to witness how great it was. From Dream Signals version 1.83 to 2.0( also known as the Ultimate Forex Mastersystem) to 2.5 (Alphon-Omega), and now it is Dream Signals 3. It has been years since we have taken Dream Signals off the shelf. We decided to bring back a totally new state of the art version of Dream Signals. For people who love and depend on indicators, this software contains a good amount of indicators that will SHOCK you, if you use it like you are supposed to. They are EXTREMELY easy to use and very powerful. The confirmations are what makes this system\software so powerful. It is not the signal of just 1. It is a successful combination of high powered multiple calculations that are combined to give you a BUY\SELL signal. This is also what will make your forex trading very very safe. By just looking at the pictures, you will easily offhand probably already know how to use it. YES! Its that simple. Its basically only signals you have to follow. You do not need to analyze. Its already done for you. You will see how easy forex can be when you stick with the best indicators available. We have been trading forex for years and have accounts with numerous brokers and will caution you that if you don't equip yourself with the right tools, forex trading can be very risky. It is software's like Dream Signals, that provide easiness and great results for any trader with any level of experience. As you can see from our other forex software's, ours is much different then other peoples. It is more classy and far more professional with much much more special features! The FX-Agency Advisor software's are much more expensive, so that is why we now have a cheaper and possibly a better solution for traders like you who do not want to or cannot afford to pay for high priced forex software's. Especially when they don't need certain features. You now can make some good money without having to spend a good amount of money for the necessary forex software\system.

Dream Signals Scalper

•(3 confirmations in one signal) Lets take a look at the first tool in the Dream Signals software called the "Dream Signals Scalper". This is one of the best scalping tools ever! Look to the top far right of the chart below. You will see 3 check marked boxes, and below will be an actual signal given to you, when the conditions are met. In this case, we only see one box checked which means only one condition is met. This is a good sign, but not enough for us to enter a scalp trade. Until all 3 conditions are met, you will clearly see a message that says the exact warning DO NOT TRADE. We are looking for all 3 boxes to be checked and awaiting a Buy or Sell message....

EXAMPLE BUY TRADE

Look at this example of a perfect scalp trade. All 3 conditions were met and a message alerted us with a SCALP BUY NOW !. At this point, we would enter a Buy trade, and start scalping....

EXAMPLE SELL TRADE

Another example of a prefect scalp trade. Once again all 3 conditions were met and message alerted us with a SCALP SELL NOW!. At this point we would enter a Sell trade, and start scalping....

Buy-Sell Zone

An excellent indicator especially on lower time frames. This tool literally plots the Buy/Sell shades right on your chart. The green area is a good area to Buy and the red area is a good area to Sell. With this one, its better to confirm the trade with other signals. You will learn about that as you go along with these descriptions. Look at the chart below. There are 2 ways of trading the Buy-Sell Zone however, the best way is wait for a bounce and reversal from the top or bottom line, and enter as the market crosses the middle line. If you are to BUY, then wait for the market to bounce off the bottom line and enter when the market crosses the middle line and enters the BUY ZONE. If you are to SELL, then wait for the market to bounce off the top line and enter when the market crosses the middle line and enters the SELL ZONE....

EXAMPLE TRADE

•(LIVE TRADE SCREENSHOT!)

This screenshot was taken while we were actually in a LIVE Sell trade! Look at the chart and see where you should be entering, placing your stops and taking your profits. This was a perfect trade....

Confirmation Arrow Signals

•(non-repainting)

A wonderful way of confirming your trades, is using Arrow Signals. These are excellent to use even alone. The formula behind these are different than what you might have used in the past. One other feature is that they do not repaint, which is what 99% of people want. These are very fun to use especially when using a M5 to M30 chart. Of course all time frames will work just as well. The red arrows signal Sell and Blue arrows signal Buy.... External W.S Omnipotence Signal A unique and highly desirable indicator. You can also use this alone, or it can be great addition confirmation to any of your other previous favorite forex setups that you use or wish to improve to make better. It can be used for correlation trading and trend trading or even basic confirmation. This is nice and clean to look at, and very easy to understand and use.... How to use 1.A Sell trade: Wait for at least 5 "consecutive" green candles to form, and SELL as soon as you see a red candle forming. 2.A Buy trade: Wait for at least 5 "consecutive" red candles to form, and BUY as soon as you see a green candle forming. Below is a picture of exactly what your screen should look like before entering a Buy and Sell trade....

Price Trend Candlesticks

If you cannot notice this indicator, look closely at the chart below. If you are a seasoned trader, you would have probably already realized something unique about it. The "Candlesticks". These are not the same candlesticks that the charts have. The candlesticks are the indicator! These only show candlestick colors based on PRICE TREND. Look at the top of our chart. As you can see It is set to "Line Chart". So this means that the candles you see are100% the indicator. This one is guaranteed to be one of your favorites....

OUR SUGGESTED STRATEGY

(LIVE TRADE SCREENSHOT!)

There are hundreds of ways of using Dream Signals, but here is a suggested strategic combination of indicators we advise you to use. Make sure at least 2 of the signals match. The more the better. Look at the chart below. In this case, 3 signals confirmed a BUY trade! The Price Trend Candlesticks, External W.S Omnipotence Signal and the Arrows confirmed it. Now the trade is more powerful and the probability of success got higher. We took a trade on this, and you can see our profit so far at the bottom right of the screen....

[timed-content-client hide="0:31:0" display="div"] [/timed-content-client] [timed-content-client show="0:31:0" display="div"]

OPTION 1OPTION 2

[/timed-content-client] Best Indicator Forex, Best System Forex, binary options brokers, binary options trading, Dream Signal V3 Trading System, forex signals, forex trading, Free Download

0 notes

projectdroid1-blog · 7 years ago

Text

Forex Intro

Forex Intro https://www.projectdroid.com/wp-content/uploads/2018/04/word-image-138.jpeg https://www.projectdroid.com/ebook/forex-intro/ INTRODUCTORY MANUAL The 10 Keys to Successful Trading A Forex Tutorial

Authored By: Jared F. Martinez

Visit Market Traders Institute’s - Forex Home Study Courses (link) Legal Notices: The 10 Keys to Successful Trading © 1998, 1999, 2000, 2001, 2002 and 2004 ALL RIGHTS RESERVED: No part of this manual may be reproduced or transmitted in any form by any means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval systems, without the express written permission from the author and publisher. All materials contained herein have been copyrighted. Reproduction will be in violation of all Copyright Laws. Violators will be prosecuted. While attempts have been made to verify the accuracy of information provided in this manual, neither the author nor the publisher assumes responsibility for errors, inaccuracies or omissions. There are no claims by the Author, Jared F. Martinez, or Market Traders Institute, Inc., ForexTips.com or any of its directors, employees, and affiliated instructors that the trading strategies or methodologies in this manual will result in profits and will not result in losses. This manual is not a guarantee to produce profits. Currency trading on the FOREX and trading results in general vary from individual to individual and may not be suitable for everyone. All strategies, techniques, methodologies and trades contained in this manual should not be construed as an invitation to enter and trade in the market. Each trader is responsible for his or her own actions. Your downloading of this manual confirms your agreement with the Statement of Risk, constitutes your agreement to this disclaimer, confirms and exempts the author, publisher and Instructors from any liabilities or litigation. © 2000, 2001 Market Traders Institute, Inc. Market Traders Institute, Inc. 250 South Park Av. Suite 605 Winter Park, Florida, 23789 (407) 740 0900 | US Toll Free (800) 866 7431 | Fax (407) 740 0201

I am your constant companion; I am your greatest helper or your heaviest burden. I will push you onward or drag you down to failure. I am at your command. Half of the tasks that you do you might just as well Turn over to me and I will do them quickly and correctly. I am easily managed; you must merely be firm with me. Show me exactly how you want something done. After a few lessons, I will do it automatically. I am the servant of all great people and the regret of all failures as well. Those who are great, I have made great. Those who are failures, I have made failures. I am not a machine but I will work with all its precision Plus the intelligence of a person. Now you may run me for profit or you may run me for ruin. It makes no difference to me. Take me, train me, be firm with me and I will lay the world at your feet. Be easy with me and I will destroy you. I am called Habit! Author Unknown INTRODUCTION TO THE FOREX TABLE OF CONTENTS

Chapter 1: What is the FOREX?

Chapter 2: Reading Candlestick Charts. Chapter 3: Types of Orders. Glossary of terms A Traders Mission and Goal It is the mission of the trader to become a financially successful long-term trader. This can be achieved when the trader adopts and accepts The 10 Keys of Successful Trading. A trader must commit to live by three disciplines to become a successful trader.

A trader must believe in The 10 Keys to Successful Trading and merge them into his personality. Success is depends on creating a trading plan, and maintaining the discipline to TRADE THE PLAN!

A trader must be committed to continued education. Study technical analysis and the psychology of successful trading. A trader must make logical decisions, void of emotions while trading. Learn to trade in control, not out of control!

A trader must map out a sensible equity management plan to insure a return on investment. Trade no more than 20% of a margin account and expose no more than 5% of that account on any single trade.

Levels of Traders

LEVEL ONE: Beginner Trader - Studies and paper trades for a minimum of one month with pretend currency, gaining the experience required to establish a track record of profitable performance. (see MTI’s - demo trading account) LEVEL TWO: Advanced Beginner - Trades one or two lots with real money, learning to overcome emotions and at the same time establish a track record of making money. LEVEL THREE: Competent Trader - Trades with control over his emotional distractions, utilizes proper equity management and achieves a financial return. LEVEL FOUR: Proficient Trader – Trades are made utilizing confidence, education, experience and the trader achieves financial returns. LEVEL FIVE: Expert Trader - Instinctively executes profitable trades without emotion.

CHAPTER 1 - WHAT IS THE FOREX?

FOREX = FOReign EXchange

You can trade 24 hours a day

The FOREX is larger than all other financial markets COMBINED

The Foreign Exchange (FOREX) market is a cash (or “spot”) interbank market established in 1971 when floating exchange rates began to materialize. This market is the arena in which the currency of one country is exchanged for those of another and where settlements for international business are made. The FOREX is a group of approximately 4500 currency trading institutions, including international banks, government central banks and commercial companies. Payments for exports and imports flow through the Foreign Exchange Market, as well as payments for purchases and sales of assets. This is called the “consumer” foreign exchange market. There is also a “speculator” segment in the FOREX Companies, which have large financial exposures to overseas economies participate in the FOREX to offset the risks of international investing. Historically, the FOREX interbrain market was not available for small speculators. With a previous minimum transaction size and often-stringent financial requirements, the small trader was excluded from participation in this market. But today market maker brokers are allowed to break down the large interbank units and offer small traders the opportunity to buy or sell any number of these smaller units (lots).

Commercial banks play two roles in the FOREX market:

They facilitate transactions between two parties, such as companies wishing to exchange currencies (consumers), and

They speculate by buying and selling currencies. The banks take positions in certain currencies because they believe they will be worth more (if “buying long”) or less (if “selling short”) in the future. It has been estimated that international banks generate up to 70% of their revenues from currency speculation. Other speculators include many of the worlds’ most successful traders, such as George Soros.

The third category of the FOREX includes various countries’ central banks, like the U.S. Federal Reserve. They participate in the FOREX to serve the financial interests of their country. When a central bank buys and sells its or a foreign currency the purpose is to stabilize their own currency’s value.

The FOREX is so large and is composed of so many participants, that no one player, even the government central banks, can control the market. In comparison to the daily trading volume averages of the $300 billion in the U.S. Treasury Bond market and the approximately $100 billion exchanged in the U.S. stock markets, the FOREX is huge, and has grown in excess of $1.5 trillion daily. The word “market” is a slight misnomer in describing FOREX trading. There is no centralized location for trading activity (“pit”) as there is in the currency futures (and many other) markets. Trading occurs over the phone and through the computer terminals at hundreds of locations worldwide. The bulk of the trading is between approximately 300 large international banks, which process transactions for large companies, governments and for their own accounts. These banks are continually providing prices (“bid” to buy and “ask” to sell) for each other and the broader market. The most recent quotation from one of these banks is considered the market’s current price for that currency. Various private data reporting services provide this “live” price information via the Internet.

There are numerous advantages for parties wishing to trade in the FOREX. They include:

Liquidity: In the FOREX market there is always a buyer and a seller! The FOREX absorbs trading volumes and per trade sizes which dwarfs the capacity of any other market. On the simplest level, liquidity is a powerful attraction to any investor as it suggests the freedom to open or close a position at will 24 hours a day. Once purchased, many other high-return investments are difficult to sell at will. FOREX traders never have to worry about being “stuck” in a position due to lack of market interest. In the 1.5 trillion U.S. dollar per day market, major international banks a “bid” (buying) and “ask” (selling) price Access: The FOREX is open 24 hours daily from about 6:00 P.M. Sunday to about 4:00 P.M. Friday. An individual trader can react to news when it breaks, rather than waiting for the opening bell of other markets when everyone else-has the same information. This allows traders to take positions before the news details are fully factored into the exchange rates. High liquidity and 24 hour trading permit market participants to take positions or exit regardless of the hour. There are FOREX dealers in every time zone, in every major market center (Tokyo, Hong Kong, Sydney, Paris, London, United States, etc.) willing to continually quote buy and sell prices.

Since no money is left on the market “table,” this is what is referred to as a “Zero Sum Game” or “Zero-Sum Gain.” Providing the trader picks the right side, money can always be made.

Two-Way Market: Currencies are traded in pairs, for example dollar/yen, or dollar/Swiss franc. Every position involves the selling of one currency and the buying of another. If a trader believes the Swiss franc will appreciate against the dollar, the trader can sell dollars and buy francs (“selling short!’). If one holds the opposite belief, that trader can buy dollars and sell Swiss francs (“buying long”). The potential for profit exists because there is always movement in the exchange rates (prices).

FOREX trading permits profit taking from both rising and falling currency values in relation to the dollar. In every currency trading transaction, one of the sides of the pair is always gaining and the other side is losing.

Leverage: Trading on the FOREX is done in currency “lots.” Each lot is approximately 100,000 U.S. dollars worth of a foreign currency. To trade on the FOREX market, a “margin account” must be established with a currency broker. This is, in effect, a bank account into which profits may be deposited and losses may be deducted. These deposits and deductions are made instantly upon exiting a position.

Brokers have differing margin account regulations, with many requiring a $1,000 deposit to “day-trade” a currency lot. Day-trading is entering and exiting positions during the same trading day. For longer-term positions, many require a $2,000 per lot deposit. In comparison to trading in stocks and other markets, which may require a 50% margin account, FOREX speculators excellent leverage of 1% to 2% of the $100,000 lot value. The trader can control each lot for I to 2 cents on the dollar!

Execution Quality: Because the FOREX is so liquid, most trades can be executed at the current market price. In all fast moving markets, slippage is inevitable in all trading (stocks, commodities, etc.), but can be avoided with some currency broker’s software, which informs you of your exact entering price just prior to execution. You are given the option of avoiding or accepting the slippage. The huge FOREX market liquidity offers the ability for high quality execution. Confirmations of trades are immediate and the Internet trader has only to print a copy of the computer screen for a written record of all trading activities. Many individuals feel these features of Internet trading make it safer that using the telephone to trade. Respected firms such as Charles Schwab, Quick & Reilly and T.D. Waterhouse offer Internet trading. They would not risk their reputations by offering Internet service if it were not reliable and safe. In the event of a temporary technical computer problem with the broker’s ordering system, the trader can telephone the broker 24 hours a day to immediately get in or out of a trade. Internet brokers’ computer systems are protected by “firewalls” to keep account information from prying eyes. Account security is a broker’s highest concern. They have taken multiple steps to eliminate any risk associated with transacting on the Internet. A FOREX Internet trader does not have to speak with a broker by telephone. The elimination of the middleman (broker salesman) lowers expenses and makes the process of entering an order faster and has eliminated the possibility for misunderstanding.

Execution Costs: Unlike other markets, the FOREX does not charge commissions. The cost of a trade is represented in a Bid/Ask spread established by the broker. (Approximately 4 pips)

Trendiness: Over long and short historical periods, currencies have demonstrated substantial and identifiable trends. Each individual currency has its own “personality,” and each offers a unique historical pattern of trends, providing diversified trading opportunities within the spot FOREX market.

Focus: Instead of attempting to choose a stock, bond, mutual fund or commodity from the tens of thousands available in those markets, FOREX traders generally focus on I to 4 currencies. The most common and most liquid are the Japanese Yen, British Pound, Swiss Franc and the new EURO. Highly successful traders have always focused on a limited number of investment options. Beginning FOREX traders usually will focus on one currency and later incorporate one to three more into their trading activities.

Margin Accounts: Trading on the FOREX requires a margin account. You are committing to trade and take positions today. As a speculator trader you will not be taking delivery on your product that you are trading. As a Stock Day Trader, you will only hold a trading position for a few minutes to a few hours, and then you need to close out your position by the end of the trading session.

All orders must be placed through a broker. To trade stocks you will need a stockbroker and to trade currencies you will need a Forex currency broker. Most brokerage firms have different margin requirements. You need to ask them their margin requirements to trade stocks and currencies. (MTI Broker Information) A margin account is nothing more than a performance bond. All traders need a margin account to trade. When you gain profits, they place your profits into your margin account the same day you profited. When you lose profits, they need an account to take out the losses you incurred that day. All accounts are settled daily. A very important part of trading is, taking out some of your winnings or profits. When the time comes to take out your personal gains from your margin account, all you need to do is contact your broker and ask them to send you your requested dollar amount, and they will send you a check. They can also wire transfer your money.

Chapter 2 -READING CANDLESTICK CHARTS

In the Seventeenth century, the Japanese developed a method to analyze the price of rich contracts. This technique is called “candlestick charting. Steven Nison is credited with popularizing the candlestick chart and has is recognized as the leading authority on the interpretation of the system. Candlesticks are graphical representations the price fluctuations of a product. A candlestick can represent any period of time. A currency trader’s software can provide charts representing anywhere from five minutes to one week per candlestick. (MTi’s Charting Software) There are no calculations required to interpret Candlestick charts. They are a simple visual aid representing price movements in a given time period. Each candlestick reveals four vital pieces of information, the opening price, the closing price, the highest price and the lowest price, which are the price fluctuations during the time period of the candle. In much the same way as the familiar bar chart, a candle illustrates a given measure of time. The advantages of candlesticks are they clearly denote the relationship between the opening and closing prices. Because candlesticks display the relationship between the open, high, low and closing prices, they cannot be used to chart securities that have only closing prices. Interpretation of candlestick charts is based on the analysis of patterns. Currency traders predominantly use the relationship of the highs and lows of the candlewicks over a given time period. However, candlestick charts offer identifiable patterns which can be used to anticipate price movements. There are two types of candles: The bullish pattern candle and the bearish pattern candle. A white (empty body) represents a bullish pattern candle. It occurs when prices open near the low price and close near the period’s high price. A black (filled body) represents a Bearish pattern candle. It occurs when prices open near the high price and close near the period’s low price.

Bullish Candlestick Formations

Hammer - The hammer is a bullish pattern if it Occurs after a significant downtrend. If the line Occurs after a significant uptrend, it is called a Hanging man. A small body and a long wick identify a hammer. The body can be clear or filled in. Piercing Line - This is a bullish pattern. The first candle is a long bear candle followed by a long bull candle. The bull candle opens lower than the bear’s low but closes more than halfway above the middle of the bear candle’s body. Bullish Engulfing Lines - This pattern is strongly bullish if it occurs after a significant downtrend (it may serve as a reversal pattern). It occurs when a small bearish (filled-in) candle is engulfed by a large bullish (empty) candle. Morning Star - This is a bullish attern signifying a potential bottom. The star indicates a possible reversal and the bullish (empty) candle confirms this. The star can be a bullish (empty) or a bearish (filled in) candle. Bullish Doji Star - This star indicates a reversal and a doji indicates indecision. Thus, this pattern usually indicates a reversal following an indecisive period. You should wait for a confirmation before trading a doji star.

Bearish Candlestick Formations

Long Bearish Candle - A long Bearish candle occurs when prices open near the high and close lower near the low. Hanging Man - This pattern is bearish if it occurs after a significant uptrend. If this pattern occurs after a significant downtrend, it is called a hammer. A hanging man is identified by small candle bodies and a long wick below the bodies (can be either clear or filled in). Dark Cloud Cover - This is a bearish pattern. The pattern is more significant if the second candle’s body is below the center of the previous candle’s body. Bearish Engulfing Lines - This pattern is strongly bearish if it occurs after a significant uptrend (it may serve as a reversal pattern). It occurs when a small bullish (empty) candle is engulfed by a large bearish (filled-in) candle. Evening Star - This is a bearish pattern signifying a potential top. The star indicates a possible reversal and the bearish (filled-in) candle confirms this. The star can be a bullish (empty) candle or a bearish (filled-in) candle. Doji Star - This star indicates a reversal and a doji indicates indecision. Thus, this pattern usually indicates a reversal following an indecisive period. One should wait for a confirmation (like a evening star) before trading a doji star. Shooting Star - This pattern suggests a minor reversal when it appears after a rally. The star’s body must appear near the low price, and the candle should have a long upper wick.

Neutral Candlestick Formations

Spinning Tops - This is a neutral pattern that occurs when the distance between the high and low, and the distance between the open and close, are relatively small. Doji - This candle implies indecision. The open and close are the same. Double Doji - This candle (two adjacent doji candles) implies that a forceful move will follow a breakout from the current indecision. Harami - This pattern indicates a decrease in momentum. It occurs when a candle with a small body falls within the area of a larger body. This example a bullish (empty) candle with a large body is followed by a small bearish (filled-in) candle. This implies a decrease in the bullish momentum.

Reversal Candlestick Formations

Long-legged Doji - This candle often signifies a turning point. It occurs when the open and close are the same, and the range between the high and the low is relatively large. Dragonfly Doji - This candle also signifies a turning point. It occurs when the open and close are the same, and the low is significantly lower than the open, high and closing prices. Gravestone Doji - This candle also signifies a turning point. It occurs when the open, close and low prices are the same, and the high is significantly higher than the open, close and low prices. Stars - Stars indicate reversals. A star is a candle with a small real body that occurs after a candle with a much larger real body, where the real bodies do not overlap (the wicks may overlap).

Candlestick Example Charts

Stock charts can also be interpreted (shown below is A BancOne Corp.) Answers to the Exercises Exercise 1: Circle and identify the candlestick formations in the following Charts. Exercise 2: Circle and identify the candlestick formations in the following Charts.

Answers to the Exercises

Chapter 3 - TYPES OF ORDERS

Sellers are ASKing for a high price

Buyers are BIDding at a lower price

Trading is an auction

Slippage occurs with most Market Orders

The difference between the ASK and the BID price is the Spread

A Trader must understand what each order is, what it and what part it plays in capturing profit. A FOREX Trader must use three types of orders: a Market Order, a Limit Order, and a Stop Order. The two primary orders used for entering and exiting the market are a Limit Order and a Stop Order. Once an order is placed your order to enter the market, there are two critical procedures: One-Cancels-the-Other (OCO) and Cancel-and-Replace. Properly executing orders and understanding these procedures are a vital step to profitable trading. Remember: all good carpenters carry a toolbox. The sharper the tools and the more skilled he is at using them, the more effective he is. The sharper you become as a trader the more efficient and lucrative you will be. What orders do: A clear understanding of what each order does is essential before executing orders. Market Orders: A Market Order is an order that is given to a broker to buy or sell a currency at whatever the market is trading for, at that moment. It can be an entry order into the market or an exit order to get out of the market. Traders use Market Orders when they are ready to make a commitment to enter or exit the market. Caution should be exercised when using Market Orders in fast moving markets. During periods of rapid rallies or down reactions gain or lose of many points may occur due to slippage before receiving the fill. Trading is an auction where there are buyers (bidders) and sellers (offerers). The bid is the "buy" and the "ask", or offer is the sell. Slippage is defined as: A trade is executed between a buyer and seller and the resulting buy or sell transaction is different than the price seen just prior to order execution. On average one to six pips will be lost with Market Orders, perhaps more, due to slippage. Market Orders are rarely filled at the exact anticipated price. Market Traders Institute Recommends caution when entering or exiting with a Market Order. Limit Orders: Limit Orders are orders given to a broker to buy or sell currency lots at a certain price or better. The term Limit means exactly what it says. You will buy at that exact limit price or better a large majority of the time. Limit Orders are used to enter and exit the market. They are generally used to acquire a specific price, avoiding slippage and unwanted order fills (execution price) which can happen with Market Orders. When selling above the market, it is a Limit Order. When buying below the market, it is a Limit Order. A limit order will be executed when the market trades through it. Seventy to ninety percent (70% to 90%) of the time, if the market is trading at your Limit Order it will be executed. The market must trade through you specified Limit Order number to guarantee a fill. The trading software will provide notification within seconds of the fill. A trader does not have to call his broker to see if his order has been filled. Stop Orders: Stop Orders are orders placed to enter or exit the market at a desired specific price. When buying above the market, it is a Stop Order. When selling below the market, it is a Stop Order. Stop Orders turn into Market Orders when the market trades at that price. Stop Orders as well as Market Orders are subject to slippage, while Limit Orders are not. The majority of Stop Orders are used as protective Stop Loss Orders. It is the order placed with an entry order to insure an exit when the market goes against you. A good trader never trades without a protective Stop Loss Order. They are orders executed to get you out of the market when your trade has gone against you. Protective Stops are discussed separately as one of the 10 Keys to Successful Trading. One Cancels the Other (OCO): Whenever entering the market, exiting the market at some future time is required. An OCO order is a procedure and means one-cancels-the-other. Upon entering the market, place a protective Stop Loss Order and establish a projected profit target. That projected profit target can be your Limit Order. If you simultaneously place both Limit and Stop Loss Orders when you enter the market, you can OCO them and walk away from your computer. What does that mean? At some future point in time either your Stop Order or Limit Order will be executed, automatically canceling your opposing order. If the trader is so sure about the trade, he can execute an OCO order and walk away from the trade. The trading software will then manage the trade. Cancel/Replace Orders: A Cancel/Replace Order is a procedure and not an entry or exit order. By definition it is when the trader cancels an existing open order and replaces it replace it with a new order. A cancel/replace order is primarily a strategy of trading and is predominately used after one has taken a position in the market and wants to stay in the market locking in profit. For example: you buy Swiss at 1.410. Your protective Stop Loss Order is 1.390. The market moves in you direction as projected. You now want to reduce your potential loss, so you cancel your Stop Order at 1.390 and replace it to 1.410 where you got in. You are now in a trade with no risk. As the market moves further north in your direction, you now want to lock in more profit. You cancel your 1.410 Stop Loss Order and replace it with a new 1.440 Stop Loss Order. You now have locked in 30 Pips in profit. You are in an all-win, no-risk trade. You keep canceling and replacing your Stop until you are finally stopped out. This is discussed separately under Protective Stops as one of the 10 Keys to Successful Trading.

Market Traders Institute's in-depth DVD courses allow you to learn at your own pace and to study the trading techniques at your own pace. Your trading education can advance on a daily basis at your own pace. MTI's home study course is the most comprehensive Forex training you can receive anywhere. Learn from Jared Martinez, one of the worlds most successful traders. MTI's complete 16 step Forex correspondence course on DVD with detailed instructional manuals is your course to a brighter future.

Lesson 1 "What is the FOREX" The Forex Traders Vocabulary and Types of Orders. Reading Candlestick Charts & Formations. View Now Lesson 2 "Trading Japanese Candlesticks" A complete guide to identifying and forex trading formations: morning stars, evening stars, doji stars, spinning tops, tweezer tops and tweezer bottoms. Preview Lesson 3 "Forex Equity Management" Forex Equity Management & placing Protective Stop Losses. Preview Lesson 4 "Forex Support and Resistance" This Forex lesson familiarizes students with the financial game between the Bulls and the Bear. Preview Lesson 5 "Forex Trends and Trend Lines" An excellent guide to Finding and drawing inner and outer trend lines. Preview Lesson 6 Sideways Movement, Consolidation & Fundamental Announcements This lesson teaches forex traders to straddle the market and take advantage of big fundamental moves while avoiding Bull & Bear Traps. Preview Lesson 7 "Forex Price Swings & The Fibonacci Numbers" Support becomes resistance and resistance becomes support. Learning how to Swing Trade. Preview Lesson 8 "The Forex Traders Work Book" Beginners course review and focus on the rules that a Forex trader must follow to be successful. Preview

Advanced Package Lessons 9, 10, 11, 12, 13, 14, 15 and 16

Lesson 9 "Trading BUY and SELL Forex Zones" Learning to enter the Forex market and take advantage of the next move. Preview Lesson 10 "The King's Crown and the Reversal" Identifying the end of a trend, and how to get in at the reversal. Preview Lesson 11 "Trending Days vs. Trading Days" The characteristics of Trending Days vs. Trading Days and the opening price. Preview Lesson 12 "Fibonacci Numbers and Convergences" This forex lesson teaches advanced forex traders how to find the next major level of support or resistance and take advantage of it. Preview Lesson 13 "Trading Gartleys" Extremely useful lesson helping forex traders to understand a Fibonacci formation inside a price swing and how to sucessfully trade them. Preview Lesson 14 "Harmonic Vibrations and Beats" Forex Markets move in harmonic beats. This lesson teaches forex traders to identify and count them - putting money in your pocket. Preview Lesson 15 "Trading Pennants" Learn to identify and trade several different Pennant formations. Preview Lesson 16 "Forex Trading Strategies & Their Justification" This lesson teaches forex traders to find a trade with a high probability of success using tools and a variety of forex charts. (i.e. 15min, 30min, 1hr, 2hr, 4hr, 8hr & daily) Preview

0 notes

projectdroid1-blog · 7 years ago

Text

Forex Trading - Avoiding Mistakes

Forex Trading - Avoiding Mistakes https://www.projectdroid.com/wp-content/uploads/2018/04/word-image-134.jpeg https://www.projectdroid.com/ebook/forex-trading-avoiding-mistakes/ FO R EX T R A D ER    By Abe Cofnas difficult challenge facing a trad- er, and particularly those trad- A ing e-forex, is finding perspective. Achieving that in markets with regu- lar hours is hard enough, but with forex, where prices are moving 24 hours a day, seven days a week, it is exceptionally laborious. When inundated with constantly shifting market information, it is hard to separate yourself from the action and avoid personal responses to the market. NEWS YOU (DON’T) USE Often, news that might seem definitively bullish to someone new to the forex market might be as bearish as you can get. Source: Quote Spread The market doesn’t care about your feelings. Traders have heard it in many different ways — the only thing you can control is when you buy and when you sell. In response to that, it is easier to know how not to trade then how to trade. Along those lines, here are some tips on avoiding common pitfalls when trading forex.  Euro (25 pips x 3-box reversal) Support at 0.8875 GETTING THE POINT Market analysis should be kept simple, particularly in a fast-moving environment such as forex trading. Point-and-figure charts are an elegant tool that provides much of the market information a trader needs. 0.93 0.91 0.89 0.87 0.85 Many times, seemingly straight- forward news releases from government agencies are really public relation vehicles to advance a par- ticular point of view or pol- icy. Such “news,” in the forex markets more than any other, is used as a tool to affect the investment psychology of the crowd. Such media manipulation is not inherently a nega- tive. Governments and traders try to do that all the time. The new forex trader must realize that it is important to read the news to assess the message behind the drums. For example, Japan’s Prime Minister Masajuro Shiokowa was quoted in a news report on Dec. 13 that “an excessive depreciation of the yen should be avoided. But we should make efforts and give consid- eration to guide the yen lower if it is relatively overvalued.” When a government official is ask- ing, in effect, if traders would please slow down the weakening of his cur- rency, then we must wonder whether there is fear the opposite will happen. In this case, that was the outcome as on Dec. 14 the dollar vs. the yen surged to a three-year high. The Prime Minister’s statement acted as a contrarian indicator. This is what “fade the news” means. Often, a bank analyst or trader will be quoted with a public statement on a bank forecast of a currency’s move. When this occurs, they are signaling they hope it will go that way. Why put your reputation on the line, say- ing the currency is going to break out, if you don’t benefit by that move? A cynical position, yes, but traders in the forex markets always need to be on guard. Read the news with the perspective that, in forex, how the event is reported can be as important as the event itself. A price surge is a signature of panic or surprise. In these events, professional traders take cover and see what happens. The retail trader also should let the market digest such shocks. Trading during an announcement or right before, or amid some tur- moil, minimizes the odds of predict- ing the probable direction. Technical indicators during surge periods will be distorted. You should wait for a confirmation of the new direction and remember that price action will tend to revert to pre-surge ranges providing nothing fundamental has occurred. An example is the Nov. 12 crash of the airplane in Queens, N.Y. Instantly, all currencies reacted. But within a short period of time, the surge that reflected the tendency to panic retraced. The desire to achieve great gains in forex trading can drive us to keep adding indicators in a never-end- ing quest for the impossi- ble dream. Similarly, trading with a dozen indicators is not nec- essary. Many indicators just add redundant infor- mation. Indicators should be used that give clues to: 1) trend direction, 2) resis- tance, 3) support and 4) buying and selling pres- sure. One tool helpful with all of these factors is the point-and-figure chart (see “Getting the point”). Point-and-figure charts are one of the earliest forms of tech- nical analysis. Now, with technology, they are easier for traders to use than ever before. While point-and- figure analysis is available on several stand-alone programs, most online platforms do not offer these charts. A few that do are www.quotespeed. com, www.chartanalytics.com and www.dorseywright.com.  Abe Cofnas is president of Learn4x.com, which provides education for forex traders. E-mail: [email protected]. www.futuresmag.com February 2002 Reproduction or use of the text or pictorial content in any manner without written permission is prohibited. Copyright 2002 by Futures Magazine Group, 250 S. Wacker Dr., Suite 1150, Chicago, IL 60606

Global Forex Trading.

Your partner on every trade. Why Forex? 24 hour access Diversificat ion Dynamic price range Leverage Liquidit y – The largest market in t he w orld Why Global Forex Trading? NO commissions 1% margins day or overnight Low init ial deposit Immediate processing of fund requests Tight quotes in major markets Over 40 currency pairs offered Live 24 hour dealing desk Free elect ronic order ent ry softw are Free real t ime chart ing and new s FDIC insured accounts available Regulated FCM st atus rading spot currencies can be tricky with- out the right tools. Or the right partner. T Fortunately for individual traders, Introducing Brokers and fund managers, Global Forex Trading is the right partner, with the right tools for successful forex trading. We can help the individual trader understand the fundamentals of forex trading, providing you with reliable data and unbiased market analysis. Our powerful DealBookFX dealing software is the most advanced in the industry. In addition, Global Forex Trading has built it’s reputation on fair and honest trading quotes and superior customer service that Introducing Brokers have come to rely on in servicing their customer base.

For Individual Traders

DealBookFX’s exclusive ITX window can actually fill orders at better prices than GFT’s already tight 3-5 pip spreads (in major markets).

Market Mentor© market analysis tools, including Turning Point Forecast and Price Direction Index timing tools.

For Introducing Brokers / Training Companies

We offer everything from total turn-key forex options for IBs to individual client servicing for training organizations, with

the finest customer service in the industry.

For Fund Managers

Our dealing rates are truly institutional quality for all of our customers.

Fund managers can set up unique sets of customer accounts so that DealBookFX can automatically assign trades based on your own pre-sets.

Whatever your trading objectives are, GFT has the right tools to help get you there. Call us at 800-465-4373, or visit us at www.gftforex.com for a FREE demo of DealBookFX. Call us at 800-465-4373, or visit us at w w w.gftforex.com for a FREE demo account email: [email protected] Visit our web site: www.gftforex.com

0 notes

projectdroid1-blog · 7 years ago

Text

Forex Report - Predicting Price Movement

Forex Report - Predicting Price Movement https://www.projectdroid.com/wp-content/uploads/2018/04/word-image-352.png https://www.projectdroid.com/ebook/forex-report-predicting-price-movement/ The Forex Report – DATA BRIEF N O V E M B E R 2 0 0 4 Predicting Price Action By Scott Owens with Omer Lizotte Price action is the foundation of all technical indicators, yet most traders do little to understand it. Within trades, price action creates the most important element of context, defining inflection points that affect market entry and exit. The sophisticated investor understands price action and uses it to frame every trading decision. ANALYSIS

How likely is a price move continuation given varying conditions?

DATA

See the probability of price move continuation in assorted tables.

ACTION

Use breakouts to incorporate price action probabilities.

Implement price action informed strategies in your trade exits.

RELATED MATERIAL Test-drive FX Engines for free online at www.fxengines.com to see the power of system building, system testing, and system automation. FX Engines, Inc. The world leader in automated forex trading. For more information and a 15-day free trial, visit: www.fxengines.com ABOUT THIS REPORT The Forex Report is a periodic publication that investigates advanced strategies for superior trading performance in the foreign exchange markets. These reports utilize advanced statistical and econometric modeling techniques to create new insight into the trading strategy of the average trader. This Data Brief, Predicting Price Action, is intended for traders with moderate forex trading experience and technical analysis understanding. To learn more about The Forex Report or to register for delivery of all future reports by email, including Case Studies & Data Briefs, please visit www.fxengines.com.

A N A L Y S I S

What happens when one of the major currency pairs moves 10 pips? 25 pips? 50 pips? How likely is it that it will continue for 10 more pips? 20 more? 50 more? To find out, we took tic data for the four majors and analyzed it by trading interval and breakout level to see what the probability of these price move continuations would be. The results of this study are insightful, but they do not substantiate any particular trading strategy specifically. Although we believe the price action of a particular currency is a major element of every trade, we leave it to each trader to determine how, if at all, these results are to be integrated with his/her trading strategy. The goal of this study is to arm the trader with more information about price action than is currently available. When a trade has moved 10 pips in your favor, what is the general probability that it will continue to another level? We believe this is valuable information for all traders. However, there are a number of caveats that we feel compelled to state:

These probabilities are by no means hard and fast rules for trading. They represent a snapshot of data, some longer than others, and employ a very specific entry strategy which may be difficult to replicate in live manual trading.

These probabilities are affected by seasonality and many other statistical conditions that may render them inaccurate in specific trading situations. In general, the shorter the interval, the greater the chance for these anomalies to occur.

No representation is made regarding the accuracy of the prices used in this study or the probability values that result. We reiterate: this report is intended to enlighten the trader’s “sense” of the market, not inform any specific trading application.

To create this brief, we employed the following assumptions:

The data is tic data from January 2000 through May 2004. Day intervals include data through October 2004.

Each interval includes at least 5,000 observations except the day interval. In that case, we included each daily closing price from January 2000 through October 2004.

We studied the following intervals, in minutes: 5, 30, 60, 120, 240, 1440.

We studied the four major currency pairs: EURUSD, USDJPY, GBPUSD, USDCHF.

We used a “trigger value” to set the entry condition for each simulated trade. To do this, we took each interval close and observed the next 24 intervals. If the trigger was hit in either direction, we entered the market. From that point we measured the probability of hitting our continuation price targets within the 24 periods.

We employed a stop value of 20 pips for every simulated trade.

No spread is taken into account.

RELATED MATERIAL

For other advanced studies on the forex market, go to www.fxengines.com and see:

The Forex Report: The Six Forces of Forex

The Forex Report – Data Brief – When to Trade D A T A The tables below show the probability of price move continuation according to the trigger used to create entry. See the notes and examples in each section for more information.

PREDICTING PRICE ACTION: EURUSD 10 pip trigger

When price moves 10 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when EURUSD moves 10 pips up or down on the 60 minute interval, the probability that it will continue to +80 (+70 net) is 32.4%. PAIR: EURUSD INTERVAL: 5 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 47.5% 21.9% 12.8% 7.0% 3.7% 2.0% 1.6% 1.5% 1.2%

INTERVAL: 30 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 83.8% 66.7% 52.7% 38.5% 28.7% 20.5% 16.1% 12.3% 9.2%

INTERVAL: 60 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 87.5% 77.6% 67.9% 57.6% 48.3% 39.9% 32.4% 24.5% 19.8%

INTERVAL: 2 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 89.8% 81.5% 75.1% 67.8% 62.2% 55.6% 50.2% 43.7% 38.5%

INTERVAL: 4 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 91.4% 85.3% 79.8% 74.8% 70.8% 66.6% 63.3% 58.7% 54.7%

INTERVAL: DAY CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 94.1% 88.3% 83.3% 78.1% 74.5% 71.6% 68.4% 65.4% 61.4%

PREDICTING PRICE ACTION: USDJPY 10 pip trigger

When price moves 10 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when USDJPY moves 10 pips up or down on the 30 minute interval, the probability that it will continue to +40 (+30 net) is 35.7%. PAIR: USDJPY INTERVAL: 5 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 41.6% 17.5% 9.8% 6.9% 4.5% 3.1% 2.5% 2.2% 1.8%

INTERVAL: 30 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 74.1% 50.8% 35.7% 25.7% 18.5% 14.0% 10.6% 8.3% 5.7%

INTERVAL: 60 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 85.4% 68.0% 55.0% 44.7% 34.9% 28.4% 22.7% 17.8% 14.1%

INTERVAL: 2 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 89.4% 80.1% 71.7% 63.4% 53.8% 47.0% 41.2% 35.1% 29.7%

INTERVAL: 4 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 93.6% 87.5% 82.7% 77.7% 71.8% 67.1% 61.2% 56.4% 51.4%

INTERVAL: DAY CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 94.6% 89.8% 85.5% 80.6% 75.5% 71.2% 67.3% 64.5% 61.7%

PREDICTING PRICE ACTION: GBPUSD 10 pip trigger

When price moves 10 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when GBPUSD moves 10 pips up or down on the 60 minute interval, the probability that it will continue to +80 (+70 net) is 50.1%. PAIR: GBPUSD INTERVAL: 5 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 56.8% 29.2% 17.5% 9.7% 5.7% 3.2% 2.2% 1.7% 1.2%

INTERVAL: 30 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 86.0% 69.1% 54.6% 39.9% 31.0% 23.5% 18.4% 14.0% 10.2%

INTERVAL: 60 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 90.0% 81.3% 74.5% 67.6% 61.0% 54.7% 50.1% 43.7% 38.7%

INTERVAL: 2 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 90.1% 82.8% 76.7% 71.1% 66.6% 61.0% 55.1% 48.8% 43.6%

INTERVAL: 4 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 92.7% 86.1% 81.7% 77.1% 73.8% 70.0% 66.2% 62.7% 58.7%

INTERVAL: DAY CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 95.6% 92.0% 87.0% 82.2% 78.1% 74.0% 69.8% 66.8% 64.2%

PREDICTING PRICE ACTION: USDCHF 10 pip trigger

When price moves 10 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when USDCHF moves 10 pips up or down on the 4 hour interval, the probability that it will continue to +100+ (+90+ net) is 65.7%. PAIR: USDCHF INTERVAL: 5 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 62.6% 34.8% 22.0% 12.6% 8.4% 5.2% 3.3% 2.3% 1.8%

INTERVAL: 30 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 87.0% 73.0% 61.7% 51.0% 41.2% 31.8% 24.8% 18.9% 14.6%

INTERVAL: 60 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 90.8% 82.7% 75.4% 68.3% 62.1% 54.5% 47.3% 39.8% 34.4%

INTERVAL: 2 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 92.4% 85.2% 80.4% 75.1% 70.3% 64.9% 60.4% 55.3% 50.7%

INTERVAL: 4 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 93.6% 88.1% 84.5% 79.6% 76.5% 73.7% 71.1% 68.0% 65.7%

INTERVAL: DAY CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 96.5% 91.8% 88.5% 84.1% 80.5% 77.3% 75.5% 72.6% 70.3%

PREDICTING PRICE ACTION: EURUSD 15 pip trigger

When price moves 15 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when EURUSD moves 15 pips up or down on the 30 minute interval, the probability that it will continue to +60 (+45 net) is 30.9%. PAIR: EURUSD INTERVAL: 5 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 67.2% 31.4% 18.4% 10.0% 5.3% 2.9% 2.3% 2.2% 1.7%

INTERVAL: 30 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 90.5% 71.8% 56.8% 41.6% 30.9% 23.0% 18.0% 13.7% 9.7%

INTERVAL: 60 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 93.6% 82.6% 72.4% 61.2% 51.3% 42.3% 34.2% 25.9% 20.9%

INTERVAL: 2 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 95.2% 86.1% 79.2% 71.3% 65.2% 58.0% 52.3% 45.6% 40.2%

INTERVAL: 4 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 95.9% 89.4% 83.4% 78.0% 73.7% 69.3% 65.8% 61.1% 56.9%

INTERVAL: DAY CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 96.6% 90.8% 85.5% 80.3% 76.6% 73.7% 70.4% 67.2% 63.1%

PREDICTING PRICE ACTION: USDJPY 15 pip trigger

When price moves 15 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when USDJPY moves 15 pips up or down on the 5 minute interval, the probability that it will continue to +80 (+65 net) is 4.0%. PAIR: USDJPY INTERVAL: 5 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 65.9% 27.9% 15.8% 11.2% 7.3% 4.9% 4.0% 3.5% 2.9%

INTERVAL: 30 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 85.1% 58.1% 40.7% 29.1% 20.9% 15.9% 11.9% 9.2% 6.3%

INTERVAL: 60 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 91.6% 72.9% 58.9% 47.8% 37.4% 30.5% 24.3% 19.0% 14.9%

INTERVAL: 2 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 94.8% 84.9% 75.9% 67.0% 57.1% 50.0% 43.8% 37.2% 31.5%

INTERVAL: 4 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 96.4% 89.9% 84.9% 79.8% 73.6% 68.7% 62.7% 57.9% 52.8%

INTERVAL: DAY CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 96.9% 91.9% 87.3% 82.3% 77.3% 72.8% 68.9% 66.0% 63.1%

PREDICTING PRICE ACTION: GBPUSD 15 pip trigger

When price moves 15 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when GBPUSD moves 15 pips up or down on the 60 minute interval, the probability that it will continue to +80 (+65 net) is 51.7%. PAIR: GBPUSD INTERVAL: 5 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 74.6% 38.2% 22.9% 12.8% 7.5% 4.1% 2.8% 2.1% 1.5%

INTERVAL: 30 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 92.1% 73.8% 58.4% 42.9% 33.2% 25.0% 19.6% 14.9% 10.8%

INTERVAL: 60 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 94.9% 85.7% 78.1% 70.6% 63.6% 56.9% 51.7% 45.0% 40.0%

INTERVAL: 2 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 94.9% 87.0% 80.3% 74.1% 69.3% 63.4% 57.2% 50.5% 44.9%

INTERVAL: 4 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 96.3% 89.4% 84.7% 79.7% 76.1% 71.9% 67.8% 64.1% 59.9%

INTERVAL: DAY CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 97.7% 93.9% 88.9% 84.0% 79.8% 75.7% 71.5% 68.4% 65.7%

PREDICTING PRICE ACTION: USDCHF 15 pip trigger

When price moves 15 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when USDCHF moves 15 pips up or down on the day interval, the probability that it will continue to +40 (+25 net) is 89.9%. PAIR: USDCHF INTERVAL: 5 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 77.5% 43.0% 27.1% 15.8% 10.6% 6.5% 4.0% 2.8% 2.3%

INTERVAL: 30 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 92.9% 78.0% 66.0% 54.3% 43.9% 33.8% 26.5% 20.3% 15.7%

INTERVAL: 60 MINUTE CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 94.9% 85.9% 78.3% 70.9% 64.3% 56.2% 48.8% 41.1% 35.5%

INTERVAL: 2 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 96.0% 88.2% 83.0% 77.4% 72.3% 66.8% 62.1% 56.9% 52.1%

INTERVAL: 4 HOUR CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 96.2% 90.5% 86.6% 81.6% 78.4% 75.3% 72.5% 69.4% 67.1%

INTERVAL: DAY CHART

+20 +30 +40 +50 +60 +70 +80 +90 +100+ 98.0% 93.3% 89.9% 85.5% 81.8% 78.7% 76.8% 74.0% 71.5%

PREDICTING PRICE ACTION: EURUSD 20 pip trigger

When price moves 20 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when EURUSD moves 20 pips up or down on the day interval, the probability that it will continue to +80 or more (+60 net) is 72.8%. PAIR: EURUSD INTERVAL: 5 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 46.5% 27.3% 14.9% 7.7% 4.3% 3.3% 3.2% 2.5%

INTERVAL: 30 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 79.1% 62.1% 45.4% 33.8% 25.3% 19.8% 14.9% 11.2%

INTERVAL: 60 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 87.9% 76.9% 64.6% 54.1% 44.3% 35.8% 27.2% 21.9%

INTERVAL: 2 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 89.9% 82.6% 74.1% 67.7% 60.1% 54.0% 47.1% 41.3%

INTERVAL: 4 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 92.9% 86.6% 80.9% 75.9% 71.2% 67.5% 62.5% 58.1%

INTERVAL: DAY CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 93.7% 88.1% 82.9% 79.1% 76.2% 72.8% 69.5% 65.2%

PREDICTING PRICE ACTION: USDJPY 20 pip trigger

When price moves 20 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when USDJPY moves 20 pips up or down on the day interval, the probability that it will continue to +80 or more (+60 net) is 71.0%. PAIR: USDJPY INTERVAL: 5 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 42.4% 24.0% 17.0% 11.2% 7.4% 6.1% 5.3% 4.3%

INTERVAL: 30 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 68.0% 47.7% 34.1% 24.5% 18.5% 13.8% 10.6% 7.3%

INTERVAL: 60 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 79.1% 63.9% 51.3% 40.0% 32.6% 25.9% 20.3% 15.9%

INTERVAL: 2 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 89.5% 79.9% 70.6% 60.5% 53.0% 46.5% 39.6% 33.5%

INTERVAL: 4 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 93.1% 87.9% 82.5% 75.9% 70.9% 64.8% 59.8% 54.6%

INTERVAL: DAY CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 94.9% 90.0% 85.0% 79.5% 74.8% 71.0% 67.9% 65.0%

PREDICTING PRICE ACTION: GBPUSD 20 pip trigger

When price moves 20 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when GBPUSD moves 20 pips up or down on the 4 hour interval, the probability that it will continue to +50 or more (+30 net) is 82.2%. PAIR: GBPUSD INTERVAL: 5 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 51.2% 31.0% 17.2% 10.0% 5.5% 3.6% 2.7% 2.0%

INTERVAL: 30 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 79.9% 63.2% 46.6% 36.0% 27.3% 21.4% 16.3% 11.9%

INTERVAL: 60 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 89.9% 81.7% 73.8% 66.2% 58.9% 53.3% 46.4% 41.1%

INTERVAL: 2 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 91.4% 84.1% 77.6% 72.7% 66.2% 59.7% 52.8% 46.9%

INTERVAL: 4 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 92.4% 87.4% 82.2% 78.4% 74.0% 69.6% 65.8% 61.5%

INTERVAL: DAY CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 96.1% 90.8% 85.9% 81.7% 77.5% 73.3% 70.1% 67.2%

PREDICTING PRICE ACTION: USDCHF 20 pip trigger

When price moves 20 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when USDCHF moves 20 pips up or down on the 60 minute interval, the probability that it will continue to +60 or more (+40 net) is 67.2%. PAIR: USDCHF INTERVAL: 5 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 55.2% 34.7% 20.4% 13.7% 8.4% 5.1% 3.7% 2.9%

INTERVAL: 30 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 83.7% 70.7% 58.1% 47.0% 36.3% 28.5% 22.0% 17.2%

INTERVAL: 60 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 90.1% 82.0% 74.2% 67.2% 58.7% 50.9% 42.8% 36.9%

INTERVAL: 2 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 91.8% 86.4% 80.4% 75.0% 69.1% 64.4% 58.7% 53.7%

INTERVAL: 4 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 93.9% 89.7% 84.5% 81.2% 77.9% 74.9% 71.6% 69.2%

INTERVAL: DAY CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 95.1% 91.3% 86.8% 83.1% 79.9% 78.1% 75.2% 72.6%

PREDICTING PRICE ACTION: EURUSD 25 pip trigger

When price moves 25 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when EURUSD moves 25 pips up or down on the day interval, the probability that it will continue to +50 (+25 net) is 86.0%. PAIR: EURUSD INTERVAL: 5 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 71.5% 41.9% 22.8% 11.9% 6.6% 5.1% 4.9% 3.9%

INTERVAL: 30 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 89.5% 70.2% 51.3% 38.5% 28.7% 22.6% 17.2% 13.0%

INTERVAL: 60 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 94.0% 81.9% 68.5% 57.1% 46.4% 37.5% 28.4% 23.0%

INTERVAL: 2 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 95.3% 87.1% 77.8% 70.8% 62.6% 56.2% 48.9% 42.7%

INTERVAL: 4 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 97.0% 90.2% 84.0% 78.7% 73.7% 69.6% 64.5% 59.8%

INTERVAL: DAY CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 97.0% 91.3% 86.0% 82.1% 79.2% 75.7% 72.1% 67.6%

PREDICTING PRICE ACTION: USDJPY 25 pip trigger

When price moves 25 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when USDJPY moves 25 pips up or down on the 5 minute interval, the probability that it will continue to +90 (+65 net) is 7.8%. PAIR: USDJPY INTERVAL: 5 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 62.2% 35.2% 24.9% 16.4% 10.8% 8.9% 7.8% 6.3%

INTERVAL: 30 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 81.1% 56.7% 40.7% 29.2% 22.1% 16.2% 12.5% 8.6%

INTERVAL: 60 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 87.6% 70.7% 56.5% 44.1% 36.0% 28.3% 22.2% 17.4%

INTERVAL: 2 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 93.9% 83.9% 74.2% 63.9% 56.0% 49.0% 41.7% 35.4%

INTERVAL: 4 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 96.4% 91.0% 85.3% 78.5% 73.4% 67.0% 61.5% 56.2%

INTERVAL: DAY CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 97.0% 91.8% 86.7% 81.0% 76.1% 72.3% 69.2% 66.3%

PREDICTING PRICE ACTION: GBPUSD 25 pip trigger

When price moves 25 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when GBPUSD moves 25 pips up or down on the 30 minute interval, the probability that it will continue to +70 (+45 net) is 30.4%. PAIR: GBPUSD INTERVAL: 5 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 72.7% 44.1% 24.3% 14.2% 7.7% 5.1% 3.8% 2.8%

INTERVAL: 30 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 89.6% 70.6% 52.1% 40.1% 30.4% 24.1% 18.2% 13.3%

INTERVAL: 60 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 95.2% 86.2% 77.6% 69.5% 61.6% 55.6% 48.1% 42.2%

INTERVAL: 2 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 96.3% 88.8% 82.0% 76.6% 69.5% 62.8% 55.6% 49.3%

INTERVAL: 4 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 96.9% 91.4% 86.0% 81.8% 77.0% 72.4% 68.3% 63.8%

INTERVAL: DAY CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 98.8% 93.4% 88.3% 84.0% 79.7% 75.4% 71.9% 68.9%

PREDICTING PRICE ACTION: USDCHF 25 pip trigger

When price moves 25 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when USDCHF moves 25 pips up or down on the 4 hour interval, the probability that it will continue to +50 (+25 net) is 87.5%. PAIR: USDCHF INTERVAL: 5 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 77.5% 48.7% 28.7% 19.3% 11.8% 7.2% 5.1% 4.1%

INTERVAL: 30 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 91.9% 77.6% 63.4% 51.2% 39.7% 31.2% 24.1% 18.9%

INTERVAL: 60 MINUTE CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 95.4% 86.8% 78.1% 70.5% 61.5% 53.0% 44.6% 38.4%

INTERVAL: 2 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 96.1% 90.2% 83.6% 77.9% 71.9% 66.9% 60.9% 55.7%

INTERVAL: 4 HOUR CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 97.3% 92.9% 87.5% 83.9% 80.4% 77.1% 73.7% 71.1%

INTERVAL: DAY CHART

+30 +40 +50 +60 +70 +80 +90 +100+ 97.8% 93.9% 89.4% 85.4% 82.2% 80.3% 77.3% 74.8%

PREDICTING PRICE ACTION: EURUSD 50 pip trigger

When price moves 50 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when EURUSD moves 50 pips up or down on the 5 minute interval, the probability that it will continue to +60 (+10 net) is 51.9%. PAIR: EURUSD INTERVAL: 5 MINUTE CHART

+60 +70 +80 +90 +100+ 51.9% 28.9% 22.3% 21.3% 17.1%

INTERVAL: 30 MINUTE CHART

+60 +70 +80 +90 +100+ 74.6% 55.6% 43.9% 33.4% 25.3%

INTERVAL: 60 MINUTE CHART

+60 +70 +80 +90 +100+ 82.3% 66.8% 54.1% 41.0% 33.1%

INTERVAL: 2 HOUR CHART

+60 +70 +80 +90 +100+ 89.9% 78.5% 69.9% 60.6% 52.7%

INTERVAL: 4 HOUR CHART

+60 +70 +80 +90 +100+ 92.9% 86.2% 80.9% 74.2% 68.2%

INTERVAL: DAY CHART

+60 +70 +80 +90 +100+ 95.0% 91.5% 87.2% 83.0% 78.1%

PREDICTING PRICE ACTION: USDJPY 50 pip trigger

When price moves 50 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when USDJPY moves 50 pips up or down on the 30 minute interval, the probability that it will continue to +70 (+20 net) is 54.0%. PAIR: USDJPY INTERVAL: 5 MINUTE CHART

+60 +70 +80 +90 +100+ 65.6% 43.4% 35.5% 31.3% 25.4%

INTERVAL: 30 MINUTE CHART

+60 +70 +80 +90 +100+ 71.8% 54.0% 39.8% 30.6% 21.0%

INTERVAL: 60 MINUTE CHART

+60 +70 +80 +90 +100+ 77.8% 63.2% 49.4% 38.9% 30.6%

INTERVAL: 2 HOUR CHART

+60 +70 +80 +90 +100+ 85.3% 73.7% 63.8% 54.0% 45.8%

INTERVAL: 4 HOUR CHART

+60 +70 +80 +90 +100+ 92.0% 85.8% 78.4% 72.3% 65.9%

INTERVAL: DAY CHART

+60 +70 +80 +90 +100+ 93.6% 88.3% 83.8% 80.0% 76.5%

PREDICTING PRICE ACTION: GBPUSD 50 pip trigger

When price moves 50 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when GBPUSD moves 50 pips up or down on the 60 minute interval, the probability that it will continue to +90 (+40 net) is 59.6%. PAIR: GBPUSD INTERVAL: 5 MINUTE CHART

+60 +70 +80 +90 +100+ 57.6% 31.1% 20.6% 15.3% 11.3%

INTERVAL: 30 MINUTE CHART

+60 +70 +80 +90 +100+ 77.1% 58.5% 45.9% 34.2% 24.8%

INTERVAL: 60 MINUTE CHART +80

+60 +70 +90 +100+ 89.0% 78.1% 69.8% 59.6% 51.7%

INTERVAL: 2 HOUR CHART

+60 +70 +80 +90 +100+ 92.6% 83.7% 75.8% 66.7% 58.6%

INTERVAL: 4 HOUR CHART

+60 +70 +80 +90 +100+ 94.4% 88.4% 82.7% 77.6% 71.8%

INTERVAL: DAY CHART

+60 +70 +80 +90 +100+ 94.8% 89.7% 84.8% 80.6% 77.4%

PREDICTING PRICE ACTION: USDCHF 50 pip trigger

When price moves 50 pips in either direction, what is the probability that it will continue to the following values with the currency and interval shown? For example, when USDCHF moves 50 pips up or down on the day interval, the probability that it will continue to +80 (+30 net) is 89.5%. PAIR: USDCHF INTERVAL: 5 MINUTE CHART

+60 +70 +80 +90 +100+ 66.7% 40.7% 24.8% 17.7% 14.2%

INTERVAL: 30 MINUTE CHART

+60 +70 +80 +90 +100+ 80.8% 62.6% 49.3% 37.9% 30.0%

INTERVAL: 60 MINUTE CHART

+60 +70 +80 +90 +100+ 89.3% 77.0% 66.4% 55.3% 47.3%

INTERVAL: 2 HOUR CHART

+60 +70 +80 +90 +100+ 92.4% 84.8% 78.5% 71.1% 65.0%

INTERVAL: 4 HOUR CHART

+60 +70 +80 +90 +100+ 95.5% 91.2% 87.3% 83.2% 79.9%

INTERVAL: DAY CHART

+60 +70 +80 +90 +100+ 95.5% 91.9% 89.5% 86.1% 83.1%

A C T I O N

Use a historical testing system that allows you to test multiple strategies to determine the best integration of this probability “sense” with your trading strategies. This data has had a tremendous impact upon the performance of our own trading systems, and can have a positive impact on your own strategies. To see how, we suggest the following test strategies, and hope you will add other strategies of your own creation:

Trade using a fixed exit and limit exits to capture pips in a fixed range. Test different levels of limit exit pips to achieve your optimal success rate.

Use breakout signals to trigger market entry for different interval price charts. For each interval, apply different exit strategies to take advantage of the probability of long or short price moves.

Use tapering trailing exits – available only at FX Engines – to narrow your trail as your profit increases, mirroring your sense of how the price is expected to move.

RELATED MATERIAL

Test the myriad ways in which these probabilities can affect your trades using the FX Engines Back Test Multiplier. The Multiplier takes your engines, breaks them into their component parts, and tests every possible combination. It’s a turbo-charged forex testing tool, available only at www.fxengines.com. For more information about The Forex Report, visit www.fxengines.com or email [email protected]. The Forex Report is available for distribution on third party websites as a co-branded offering. Contact us for more information.

T H E F O R E X R E P O R T

Analyzing statistical, econometric, and behavioral trends in the foreign exchange markets for insight into the optimal use of the FX Engines automated trading platform. The information contained in this report is represented without warranty or any statement of its veracity. The contents of this report are intended to stimulate thinking on issues related to trading forex. This report does not suggest any particular action that could be utilized in live trading for profit or loss. I can put it no better than Hoffer, who deferred to Montaigne: “All I say is by way of discourse, and nothing by way of advice. I should not speak so boldly if it were my due to be believed.”

0 notes

projectdroid1-blog · 7 years ago

Text

Day Trading In Mind

Day Trading In Mind https://www.projectdroid.com/wp-content/uploads/2018/04/word-image-128.jpeg https://www.projectdroid.com/ebook/day-trading-in-mind/ Trading In Mind 10 Ways To Stay Focused For Real-Time Traders Free Reproduction and Distribution Rights You are automatically granted full reprint and reproduction rights to this ebook. That means you are free to distribute this ebook as you wish. You can offer it for download from your website. You can sell it, bundle it with other products, or give it away for free. The only requirement is that the ebook must remain intact. Disclaimer & Risk Warning All trading involves risk. You should never trade with money you cannot afford to lose. The contents of this ebook are for general information purposes only. Although every effort has been made to assure accuracy, the publishers can assume no responsibility for errors or omissions. Examples are provided for illustrative purposes only and should not be construed as investment advice or strategy. Past performance is not indicative of future results. In no event shall Day-Trading-Mind.com or its content providers be liable for any damages of any kind whatsoever with respect to the service, the material and the products provided herein. Before we begin, let's review what is now being called the "Perfect" trading platform. eToro Review About Forex The Forex market has quickly become the world's largest financial market, with an estimate daily turnover of $3.2 trillion. It is a market that has great appeal to a financial trader because of its volume which guarantees liquidity. High liquidity means that a trader can trade whatever currencies he feels like at all times, since there will always be someone to buy and sell any currency he wants. Another outstanding feature of the forex market is that it is active 24 hours a day and is closed only on the weekends. This means that unlike the stock market for example, traders in the forex market don't need to wait for a bell to ring, but can make trading decisions around the clock. Enter the internet into the equation. Now the forex market is literally at your fingertips. Most brokers offer online trading facilities which enable you to trade simply by clicking a button, instead of the traditional phone call. The internet has really revolutionized the industry, making the retail section of the market more dominant than ever. About eToro eToro is a forex trading platform developed to cater to the emerging retail segment of the forex market. With its simple style and exciting trade visualizations, eToro is the perfect platform for a novice trader to get his first forex trading experience. With its great array of professional forex trading and analysis tools, eToro is also the perfect platform for experts in the field who want to trade comfortably and reliably. eToro has developed a truly intuitive interface that lets traders concentrate on trading instead of messing around with bulky and overcomplicated software. It's important to mention that eToro also offers an educational experience, so novices can gain knowledge of the forex market and eventually become pros if they're so inclined. eToro offers forex trading guides, forums and video tutorials to facilitate their traders' progress. eToro also offers an unlimited practice mode where both beginner and seasoned traders can sharpen their skills and test their strategies with real market rates. Overall eToro have successfully designed a software that caters to a very wide segment of the forex trading public. eToro is bound to remain a leader in the forex industry for a long time to come. eToro's features: Visual representation of trades: Monitor your trades with ease by watching creative visualizations of your trading activity. Practice mode: Test your skills and strategies by trading with live rates, without risking a cent. Trading Challenges: Compete against fellow traders for cash prizes - with no entry fees. Trade: Enjoy immediate and accurate execution with all your trades. Low Spreads: Save a fortune on eToros super low spreads - as low as 2 pips. And soon to come: Trade: Enjoy real time execution with all your trades. eToro's Pro Insight: Get a look at what currency pairs eToro's top 100 traders are trading at the moment, and use the inside info to your advantage! Download eToro for FREE and join a fast growing forex community.

Watch Video!

Introduction – pg 4

Understand The Truth – pg 5

Plan Your Trades, Then Trade Your Plan – pg 7

If You Don't Spend Much, You Can't Lose Much – pg 8 4. Don't Think Money, Think Points – pg 9

5. What The Mind Can Conceive... - pg10 6. Be Your Own Boss – pg 11 7. Mind Your Language – pg 12 8. Less Is Definitely More – pg 13 9. Get A Life – pg 14 10. The Essential Real-Time Trading Tool – pg 15 What's Next? – pg 17 Take two traders. Give them the same starting capital, the same trading platform, the same market, and the same trading system with precise rules for entry and exit. Come back a month later and what will you find? One trader will be up 20%. The other will be down 40%. It's fascinating, isn't it, how two people can have the same opportunities in life, and yet get very different results. We at Day-Trading-Mind.com firmly believe that the answer to success lies within each of us; and that we are each completely responsible for our own results in the market. The following top 10 list was compiled from the many discussions that take place at our regular monthly “trader's conferences” (i.e. a local bar). ;-)) Some of it you'll already know... some of it will be new. Hopefully you'll find it useful. Trading is a game of probabilities. Imagine we're flipping a coin. Heads I win one dollar - tails you win one dollar. Simple. Heads and tails will each come up half the time, and we'll both neither win nor lose. However, unknown to me, you have a loaded coin. For every 100 throws, heads comes up 49 times, and tails comes up 51 times. You now have a license to print money. Let's call it the "Tails Trading System". All you have to do is sit back and bet on tails forever. Eventually, you'd win all my money (and anyone else's who took you on). All any trading system gives you is an "edge". A favorable bias. Something that is more likely to happen than not. Whatever trading system you use... e.g. ... pattern breakouts, trend-following, fibonacci, moving averages, channel following, oscillator signals, bollinger bands, swing trading, opening gaps... ... you are relying on a positive bias. Essentially, the trading system is saying "when 'x' happens... 'y' usually follows". Sometimes it doesn't. Most of the time it does. And all your trading system does is help you identify high probability trades, enter then correctly, and protect yourself while allowing your profits to grow. Now some trading systems are better than others. But don't get caught up on the search for the perfect system... You know, the trader's Nirvana... the elusive "Holy Grail"... the system that delivers profits on demand and never, ever gets it wrong. Find a trading system that you like. One you feel comfortable with. One you understand. Then stick with it. Be consistent. A cool, disciplined, trader will take an average system and make money with it. A nervous, arbitrary trader will take a brilliant system and wreck it. All traders have "good" days and "bad" days. Some days you'll make small profits. Other days you'll make small losses. And once or twice a month, on average, you'll make big profits. That's how you make money as a traders. It's not 9 till 5. Problem is, you never know when the big trades are due to arrive. Like our "Tails Trading System" above, the one time you don't take the trade is exactly the time the market takes off and never looks back. You MUST see the big picture. Realize that the current trade is only one of many. On that basis, the current trade hardly matters. It's like a piece of plankton in a very large ocean. Trading is all about managing risk and then surrendering yourself to the oldest law in the Universe: The ancient law of probability. Your job as a trader is to follow a trading plan. And who's going to write this trading plan? You are. Notice the word "write". It needs to be written down, on your trading desk, in front of you. Your trading system will give you the rules to follow. All you do is translate these into your plan. A trading plan must have three parts: Setup, Entry and Exit. (Obviously it's beyond the scope of this document to provide details on specific trading systems as there are literally hundreds of them! However we do feature some occasionally in our newsletter.) The point is that a trading plan covers every eventuality. You know what to look for in the market, when to get into a trade, and when to get out. Keep it simple. Then follow it. Religiously. One of the biggest mistakes you can make as a trader is have too much money riding on a trade. The more money you use, the more emotional fuel you are pouring onto the fire. Eventually, you are likely to be burned... badly. And the post-traumatic stress may be irreparable. Most beginning traders stake too much in the hope of a quick win. Experienced traders know better. In day trading, where the trades can come thick and fast, a few big losers can eat you alive very quickly. Good day traders who survive will risk only a tiny amount of their trading capital on any one trade. If you're "under capitalized" then consider using a trading system which offers a tight stop loss. Alternatively, trade a shorter time-frame, like the 1-minute chart, where losses can be minimized. Overconfidence is the other cause of excessive risk. "Hey... heads has come up 10 times in a row... let's put half the trading capital on tails (which is sure to come up next) and clean up." The problem with sure-thing trades is that:

The market hardly ever obliges;

Everyone else sees them as sure-things as well and jumps aboard. So when they go wrong, they go wrong big-time.

Risk a tiny amount on each trade. You'll be more relaxed, and more able to execute the trade properly. Following on from minimizing your exposure, we come to your relationship with money. Whether we like it or not, money is highly prized in our society. It's important. And we attach a lot of feeling to it. How then will you feel when you see hundreds of dollars (perhaps thousands, depending on your account size) go up in smoke in front of you? The problem is, "expenses" are part of the game. You have to lose some to win some more. There is no holy grail, like we said before. If you can't change your relationship with money, then just don't think about it. Focus instead on numbers. Think "percentage of trading account". Think "average risk-to-reward ratio". Think "potential profit points versus maximum points risked". Concentrate on getting the numbers right and the money will take care of itself. Is it possible you secretly want to lose? Self-destructive behavior can easily manifest itself in the markets, particularly among day traders. When the price is dancing around in front of your eyes, it can take a grip of you. You can start to feel like it's playing with you. This is why you have to be very, very careful to avoid emotional trading. If you're a boiling cauldron waiting to explode, then you're heading for a seriously bad experience in the market. Don't get emotional about trading. Remember the current trade is only one of a long series. You're in this for the long term. Remember that and don't, ever, get too attached to any one trade. You must see yourself as a professional trader. At the start of each trading day, before the market opens, take a few minutes for yourself. Close your eyes. Start visualizing the market. See the real-time chart on your computer screen. Watch as the price gyrates up and down. See yourself entering a trade. Notice you feel relaxed. You're alert but calm. Completely non- emotional. Observe how the price moves after you enter. How it comes close to your stop loss. Mentally place a number of trades. Follow them through. You get a losing trade. Notice you see the big picture. You are unemotional. Completely calm. You put on another trade. Again, another small loss. You are unperturbed. Next a winning trade. Again, you are relaxed. It's all part of the job. This takes practice. And you must do it regularly to get the maximum benefit. Try it every morning, and any time you even begin feel stressed or you lose your focus. The advantage of this technique is it's free. And the payoff is excellent. You're the one in charge of your trading. You alone are responsible for your success or failure as a trader. Not the market... not the trading system... not the government or the Federal Reserve. You. That's quite a responsibility. You handle it by being kind to yourself. Become your own mentor. Watch how you're behaving during the trading session. Be especially careful to notice your feelings. Focusing on your feelings gives you useful feedback about your performance. Remember that having a "winning day" or a "losing day" is not the issue here. All that's important is how you're performing in the job. Are you being professional, remaining emotionally detached? Or are you starting to get irritable at the market... the market makers... the unfairness of life...? Negative emotions are early-warning signals that you need to cool down and relax. Get back into your state. Observe the tension in your body and release it. Just let it go. Perform the visualization exercise again. Remind yourself that it's all percentages. This is just another trade, just another day. If you make a mistake during your trading - and who doesn't - don't beat yourself over the head with it. Learn from it. Make a mental note to build on it. Thank the market for the training lesson ;-) and move on. Be nice to yourself! It's very important that you avoid spiraling down into an emotional cycle where you end up doing some serious damage to your account and to your own ego. Try this experiment sometime: Tell a friend to close her eyes and stretch her arm out wide. Now get her to think of the word "weak", then press down on her hand. You'll notice her whole arm moves down easily. Repeat the experiment as before, only this time, tell her to focus on the word "strong". This time you'll notice enormous resistance in her arm, and you might struggle to move it at all. Two simple words - two very different results. If words are so incredibly powerful, just think what you do to yourself when you call yourself an "idiot" or worse! But words are more subtle than just name-calling. How about this one... 'Loss'. Boy, think what that one conjures up. Missed opportunity? A gaping hole in your life? A theft? A bereavement, even? No wonder traders find it hard to take losses. Let's call it something else: 'An expense'. Ah, now it's sounding better. Much more business like. Helps to put it into its true perspective. Similarly, on the other side of the balance sheet, let's stop talking about: 'Win' ... which again is steeped in emotion... and change it to: 'Income'. Income versus expenses. Isn't that what trading really is? A business. You're much more likely to become profitable when you realize this. And forget about pitching your ego into imaginary battles that ensnare your sense of reason along the way. Mind your language when trading. Use neutral words at all times, both about yourself and the market. The best times to day trade are usually the first two hours after the open. Some traders also like to trade the last half-hour before the close. Momentum is greatest at these times, with real buying and selling pressure creating the best trends. Many real-time traders also follow the "3 strikes and you're out" rule. By limiting your trading to only three trades a day - MAX - you reduce your stress level enormously. You'll be sharper and less likely to make mistakes. You also insure yourself against a "suicide day", when you take serial losses, each time trying to recover from the previous loss... Reading this away from the market, you might feel you would never fall into that trap. However, it's surprising how many traders have come unstuck in a real-time avalanche as the losses begin to snowball. The motto? Tomorrow's another day. Take it easy. Don't trade a 40-hour week. Accumulate your profits over time. And you'll make more by doing less. Do you know why you trade? Is it the fun and excitement, the sheer nerve-jangling, adrenaline rush that comes from trading the word's financial markets? Perhaps you enjoy status of being a trader? "Hi - John Doe - Futures Trader - nice to meet you..." For some traders, it's an escape. They hate the world around them - their job, their boss, their spouse, their whole life in fact. Trading then becomes a fantasy to slip into at will. The fact is, trading has to be about one thing. Making a profit. If you do it for any other reason, you are probably doomed to failure, because you'll operate from emotion instead of the cold, mechanical thinking that's the hallmark of a good trader. Look at your own motivations for trading. See if you can discover a hidden agenda. If there's something missing in your life that trading is currently filling, then you need to address that. Live a balanced life. Don't spend the whole day trading. Meet people. Get out! Start a new business. Find new interests. Keep your trading desk free from emotional clutter. Real-time traders live from moment to moment. Such is the pull of a live data feed, it's often a challenge to see the big picture. But this you must do if you want to survive and prosper. . Visualizing the current trade as one of a series helps to maintain your discipline and lower your emotional cholesterol. But there's one trading tool that will really improve your performance more than anything else. A trader's diary. Don't be scared off by the sentimental connotations of keeping a diary. "Dear Diary... today I... " this is not. Your own trading diary can be computer-based - via a word-processing document or a simple text file saved to your desktop. Or you may find a traditional pen and paper version more effective. (There is something about writing on paper that makes it more personal. Probably the way the hand and eye coordinate with the brain. Plus you've probably got enough applications running when you're trading in real-time!) Another option is to a personal tape recorder. Good if you prefer speaking to writing. Whatever format you use... what will you actually write (or say)? Anything. Don't worry about grammar. Make one-word notes of what's happening. Sure, you can note down the facts and figures - stock code, time and date, position size, entry price, stop loss, exit price. But also - and more importantly - record your thoughts. If you were hesitant about getting in the trade, say so. If you're terrified now you're in (the dreaded "Trader's Remorse") then make a note of it. When you exit, say why. Stopped out? Took profits? Why? How did you feel before the exit? How do you feel now, afterwards? This only takes a few seconds to record this ongoing commentary of your own trading. But the information you get can be priceless. Here's why: At the end of each week, preferably at the weekend when the markets are closed, review the week's entries. You can guarantee that you'll see a pattern in your behavior. There is probably something you are doing consistently that's causing negative results. And once you've identified the problem, the solution usually becomes obvious. Do this exercise every week, and also every month to get a longer term perspective. Only you can do this for yourself. Nobody looks after your own affairs better than you do. You don't need the latest million dollar trading system to be successful in this business. Look within. You may be amazed with the results.

What's Next?

If you're not already a subscriber, make sure you subscribe to the “Trading In Mind” newsletter. It's fun. It's fast. And it's free. And if you want to send some feedback or get in touch then contact us here. Also make sure you visit the web site regularly where we review the latest trading products. Trade well. http://Day-Trading-Mind.com/ The Day Trader's Portal

0 notes

projectdroid1-blog · 7 years ago

Text

Day Trading 101- Myths vs. Reality

Day Trading 101- Myths vs. Reality https://www.projectdroid.com/ebook/day-trading-101-myths-vs-reality/ Day Trading 101 Myth VS. Reality with David Nassar

Why Trade Electronically?

 Its exciting, challenging, and potentially very rewarding  It's an Opportunity to Beat the Spread. Buy Wholesale, Sell Retail.  Controllable Downside/Liquidity  Avoid MIC - Market Impact Cost  Take Control of Your Portfolio  Nobody Cares About Your Money More Than You  Freedom, You Can Trade Full-Time (Career Alternative) Or Part- Time (Secondary Income Source)

How the Market Works

 Market Maker/Specialists  NASDAQ/NYSE  Value of a Seat  The Role They Play  Supply/Demand in Real Time

What is a Market Maker/Specialist and their Role

 A Dealer for Stocks and Bonds

Primary Purpose of a Market Maker

 To Fill Customer Orders at the Best Possible Price  To Match Buyers and Sellers

Secondary Purpose of a Market Maker

 Trade for Their Own Account to Make Money  Make a Two-Sided Market

The Market Maker and the Level 11 Screen

 The BID and ASK  Buys at BID (Wholesale)  Sells at ASK (Retail)

The Tools and Systems of the Electronic Trader

 SOES  SelectNet  SuperDot  ECN Executions - Island, Instinet, Archipelago,  Redi

Direct Real-Time Order Executions After Hours Trading

The Level II Screen  Transparency, you see the entire market  Breadth of market  The trend (momentum) is your friend, ride the wave Levels the "playing field" with the Market Makers

The Market Wise 7 Steps to EDAT Trading

 Blueprint  Technology  Psychology  Simulator Research  Support Education

Professional Tools, Comprehensive Education

 Markets and Market Participants  Types of Securities: Common Stocks, Preferred Stocks, Options  Understanding Economic Data  Trading Basics/Trading Styles  The NYSE vs. The OTC Market  Introduction to Level II  Discipline  New Sources: TV, Print and Radio News  Technical Analysis  NASDAQ Level II: Market Breadth and Volume Theory  The Real Time "Trade Wise Simulator"'  Earnings, Splits, Rating Changes, IPO's and Secondary Offerings 'Managing Risk  Trading Psychology  Advanced Trading Strategies ("Dog-Fighting")

Precision Execution, Take Control!

Course Offerings

E-Trading 101 (One-Day Course)

 Market Vs. Limit Order Technology  Learn To Do Research  Learn How to Read and React to the News  Trading Strategies  Prepares You to Trade

Electronic Direct Access Trading (Four-Day Course)

 Level II  S&P Futures  Picking Tradable Stocks  Live Trading and Simulation  Trading Strategies  Prepares You to Trade  Shorting Strategies  Hybrid Trading

Daytrading

Momentum Trading

Swing Trading

Trend Trading

 3 Weeks of Mentoring Included

Technical Analysis (Two-Day Course)

 Chart Formations  Indicators  Stolcastics  Oscillators  Supply/Demand Imbalance  Relative Strength  Setting Up Your Technology  Bollinger Bands  Gann Lines And Much More....

Options (Two-Day Course)

 Options Strategies

Covered Calls

Buying Calls and Puts

Calender Spreads

Strangles

Straddles

 Options Basics  Electronic Options Order Execution  Using Technology To Trade Options

Continuing Education/Mentoring Program

 Breakfast of Champions

Every Friday at 6 AM

 CDROM's on Market Strategy  Web Sites (wwww.getmarketwise.com, www.marketwise.com)

Web Based Research

Document Downloads

 Trade Analysis  Daily Interaction with Professional Traders  Automated Emails with Market Updates  Real Audio Market Commentary  Moderated Forum with Professional Traders  Free to Active Traders

The Program

0 notes

projectdroid1-blog · 7 years ago

Text

Daily Fozzy Method

Daily Fozzy Method https://www.projectdroid.com/wp-content/uploads/2018/04/word-image-348.png https://www.projectdroid.com/ebook/daily-fozzy-method/ www.forexebook.net - Free Forex eBooks And Articles Collection The Daily Fozzy Method An e-book for trading forex daily charts Introduction………………………………………………… Page 2 First steps………………………………………............ Page 2 Making a trade…………………………….. Page 4 Placing stops………………………………………………. Page 5 Exiting a trade………………………………………...... Page 7 No target point………………..………….. Page 8 Using limits………………………………….. Page 9 Getting in and out; Setting limits based on s/r; Using the 28 EMA; Using Fibonacci levels Multiple lots…………………………………. Page 11 Choosing the trades to trade…………………….. Page 12 Going with the trend……………………. Page 12 Bucking the trend………………………… Page 12 Waiting for convergence………….…. Page 13 Back-to-back signals………..…………. Page 14 Reactions to news releases……..…. Page 15 Waiting for retraces…………………….. Page 15 Final thoughts…………………………………………….. Page 16 Risk and correlation…………………….. Page 16 Backtesting………………………………….. Page 16 Produced by forex-rewards.com

Introduction

This e-book aims to outline a simple method of using daily charts to profit from forex. Why daily charts? Using the dailies allows the trader to work trading into his daily routine, being able to assess every opportunity but stopping the charts from taking over his life. In short, a tradable system for people living in the real world. Most of the ideas contained within this e-book belong to the generous traders at Forex Factory’s forum. You can visit that thread here at www.forexfactory.com/showthread.php?t=7984. My thanks go to all the traders who have shared their ideas and thoughts. The following pages merely provide guidelines for taking and exiting trades. This book comes with no guarantees, no promises. Trades are made at your own risk and the author of this e-book is not liable for any losses you may incur. Forex is a high risk enterprise, you may lose all of your money and you should only trade with money you can afford to lose.

First steps

I use Metatrader4 for my charts. They are free and incredibly user friendly. Downloads can be found at any MT4 broker, just sign up for a demo account. A non- expiring account can be found at www.northfinance.com/eng/open-demo-account/ So we have our charts. Now we want to set up the method. First, make sure you are looking at the daily (D1). Open the navigator and expand the “Indicators” sub-root (see Fig 1). Next drag the Moving Average icon onto the RSI window and set it as an 8-period EMA (Exponential Moving Average) (see Fig 3 for settings details). Next step is to put an ATR (Average True Range) figure in the window (see Fig 4). Note: We only want the ATR value, not the graph so color should be set to “none”. Finally, add a 28-period EMA to the main chart window so your chart should look like Fig 5. To avoid having to set up charts yourself, you can find a template at my home page’s resource page at www.forex-rewards.com/resources. Download the file and put it in c:\program files\your metatrader4 directory\templates. A brief overview of the RSI indicator and related topics can be found at www.investopedia.com/terms/r/rsi.asp.

Making a trade

So let’s look at making our first trade. The rules we set for entry are very simple. We look for when the RSI crosses its moving average. Fig 6 illustrates when a trade is on. We BUY when RSI crosses the moving average from below (green box and line) and SELL when it crosses from above (blue box and line). It is vital to note that a cross is only validated after the daily candle has closed. We don’t take a trade on the day when the cross has formed as it may disappear later in the day. We enter the trade as soon as the new candle is formed i.e. at the opening price. Daily candles (or bars) close at slightly different times depending on which broker you are using (the broker you downloaded the charts from). The link in this e-book uses North Finance’s charts where the daily candle closes at 10pm GMT. Others might close at 11pm or midnight GMT. To find out when your new daily candle forms, go to the one minute chart (1M) and look at the latest candle’s time. Let’s say that time is 15:30. This means you have 8½ hours to wait for the next daily candle and confirmation if you have a signal to trade or not. It’s also important to note that your charts should not give a “Sunday candle” i.e. a separate candle for the first few hours of the market opening for the new week. This skews the crossover data. If you get a Sunday candle, download a new chart package from a different MT4 broker. Since the actual method is quite simple, the main focus of this e-book deals with where to place stop losses, ways to exit a trade and selecting the best trade set ups.

Placing stops

Stop losses are vital if we are to protect our capital and live to trade another day. So where do we put them? At which point do we think “OK, I was wrong, this trade is dead, forget it and move on.”? There are a few options to look at. One, and a powerful one which has proved very effective for me, is using a percentage of the ATR (Average True Range). The ATR shows numerically how volatile a currency has been recently. A small ATR (30-50 pips) shows the daily ranges have been small, this currency pair is moving very little. A higher ATR (100- 200 pips) shows a currency pair on a rollercoaster ride, either in a strong trend or ranging wildly. Obviously for a high ATR we need a bigger stop to give the trade some room to breathe. I mostly use a stop of 70% ATR(20). Look at Fig 7 to see a stop calculation in action. Another method for choosing a relevant stop level is simple price analysis. What levels has the price action reacted to recently? We could simply use yesterday’s high/low as our stop, reasoning that if the price didn’t move beyond that level yesterday, it could have a hard time doing it today. Make sure to add a buffer of 5- 10 pips in case price moves to the exact level of the previous day – we don’t want to get taken out for the sake of 1-2 pips. The drawback of this method is the stops may be very large, exposing us to greater risk if we keep the same trade size, or may even be too small, making “no sense”. Common sense plays a big part here. If our 70% ATR stop is only a few pips shy of yesterday’s extreme, we may as well increase the stop to that level and give ourselves more chance of staying in the trade. One strong indicator of a good stop level is a double or triple top/bottom (see Fig 8). The more price has bounced off a certain level the more important that level is. We certainly don’t want to be placing our stops inside those important levels if we can help it. This is basic price analysis and more study of these patterns will, in my opinion, greatly enhance the chances for successfully trading the Fozzy method. It is outside the scope of this book but good information can easily be found online with a basic Google search of “candlestick patterns”. Further basic patterns are discussed later in this e-book. No matter how much the charts tell me though, I never place a stop bigger than 100% ATR. This is a personal rule – you must find whatever level you are comfortable with.

Exiting a trade

“Where a calculator on the ENIAC is equipped with 18,000 vacuum tubes and weighs 30 tons, computers in the future may have only 1,000 vacuum tubes and perhaps weigh 1.5 tons.” Popular Mechanics, March 1949 When to exit a trade is, like predicting the future, deceptively difficult. It is where all the negative emotions of greed, fear and regret come out to play so having a plan of exit is vital. Here we look at a few suggestions for exiting your trades. Traders, especially those who use daily charts, fall into two broad groups – those who like to close out trades quickly for a small profit or those who like to hang on and try to ride a trend. You must decide what kind of trader you are, your expectations and your trading personality. Are you happiest when closing trades for some profit quickly or are you prepared to suffer more losses, even profitable trades which turn into losers, for the prospect of riding a big trend? Let’s first look at trying to stay in the market, in the hope that a trend will develop and carry our profits with it.

No target point, moving up stops to 70% of ATR

Here we don’t set a target point (t/p or limit) where we’re happy to get out the trade. What we aim to do is simply move up our stop day by day, ‘locking in’ profit as we go and let the market decide when the trade is over. Remember our 70% ATR stop level? Well, we place that as usual on the first day but set no t/p. On the next day, if the trade goes in our favor, we move that stop which will, depending on the movement, lock in some profit or at least decrease the stop size (and therefore risk). The aim is to get in a happy situation where we’re in a trade, profit is locked in and we ride that trend with zero risk. This is known as a “Free trade”. It’s best to look at a real example. On the chart in Fig 9 we are making use of a 70% ATR channel indicator to visually show where the stops are – you can of course calculate manually. The indicator is available on the resource page (www.forex- rewards.com/resources) – put it in the /experts/indicators folder of your Metatrader4 directory. Thanks to willf for posting this on the fozzy thread. In Fig 9 we have entered a BUY trade on the GBP/JPY. Following the rules we enter at the opening price of the new candle and set our stops at 70% ATR as indicated by the lower channel (or calculated manually) – position (a). The trade goes in our favor so the next day we move up the stop to position (b). You can see this means we have locked in a small profit – we’re in a free trade and all pressure is off. Next day stop is moved to (c) and we move further into profit. Then the price starts to fall a little, not enough to take out our stop, though. Crucially, the stop IS NOT MOVED LOWER. We keep it at the same level as (c) and the trade is stopped out at (d). We’re now going to look at ways of setting a target point – a level at which you’re happy to exit a profitable trade. Remember: if you’re HAPPY exiting a trade, don’t get plagued by “if onlys” if the price continues to go on in the same, profitable direction. Make your exit plan part of your entry strategy.

Getting in and out

You may want the security of “pips in the bank” as soon as possible – aiming to get out of a trade the same day. The Fozzy method lends itself well to this strategy, (backtest yourself to reaffirm this) even setting a target which is less than your stop. This may take the form of another multiple of the ATR – equal to the stop at 70% or even lower at 50%.

Setting a limit at support/resistance areas

Areas of support and resistance (s/r) give us a logical level at which to exit a trade. If the price has reacted to a certain level in the past, we need to be aware of this when placing our target point. This could mean a recent high or low, an historical high or low, double tops/bottoms or a level which price has reacted to many times over a long period.

The 28 EMA as a target point

The 28 period exponential moving average is a favorite of mine when using the dailies. It often provides support or resistance and I also use it to indicate the trend (discussed later). Other traders have other preferences for moving averages – play around with different values and find your own preference. Below are a couple of charts showing where the 28 EMA is used to exit a trade – we are predicting that price will have trouble going past this and so get out. Now of course when the EMA is far from our starting price, other methods may have to be used.

Using Fibonacci levels

Fibonacci levels show retracement points where price, moving counter to the trend, may bounce. Bundles of information on drawing and interpreting Fibonacci levels can be found on the web. When we are trading counter to trend, these levels give us a good point to put our targets. In my trading of the Fozzy, I look most to the 50.0 level. Below is a chart illustrating this point and also how we can use the 28 EMA and s/r to back up our t/p decision. This ‘convergence’ is a crucial part of chart analysis and we look at it further in the “Choosing the trades to trade” section.

Multiple lots

There is of course a middle ground to the choice of using a target point (limit) or not and that is to use two (or even three) lots. Say I want to trade 1 standard lot - $100,000 – but instead of choosing whether to put a t/p or not, I want to have two different trades, one with and one without. This means splitting that lot in two – two $50K mini lots. On one I choose a limit using one of the methods outlined above and the other I leave open (the 70% ATR stops method), hoping a trend develops and riding it for all it’s worth. I place identical stops on each trade. ………………………………………………………………………………………………………………………………………..... Above is the outline for a trading system. It is one I and others have used to considerable success. This doesn’t mean it will be a success for all who try it. I recommend trading this for a least 1-2 months on a demo account, getting a feel for the method and for each currency pair (and on demo try to trade as many pairs as possible). If you’re comfortable after that, look to be more selective in which trades you take. Add in something you think makes it better, make it your own. The following chapter looks at being more selective, waiting for the best set-ups to appear.

Choosing the trades to trade

A handful of patience is worth more than a bushel of brains. Dutch proverb Do you trade like this… ….or like this? You don’t always have to be in a trade – in fact not taking a trade is a position too, just as going long or going short is. Here are some things I personally look for to give me confidence I’m entering a good trade. I’m not always right, nobody is. I’m merely looking to improve my odds of being right.

Going with the trend as shown by 28EMA

Look at the recent history, say 4 or 5 months, of a pair – is there a strong trend? Look at the 28EMA – has price stayed on one side of it? If the answer is yes, then do we really want to be guessing the end of this trend? All I’m doing is playing the odds. In my experience going with the trend, if there is one, produces a lot less stomach acid and a few more pips. In real terms this means ignoring the crosses which go against the bigger trend, waiting for the subsequent cross to get back into that trend, or taking the counter- trend signal while lowering my t/p expectations. Following the trend can be taken to mean not just the daily but weekly trend too. Take some time when evaluating your trades on the daily charts to click on the weeklies to see if the trends agree. Of course there are occasions where we should be looking to trade against the trend and below we’ll look at some.

Bucking the trend with double tops/bottoms and exhaustion spikes

Candle patterns play an important role in determining a potential turning point in price. If I see one of these patterns when a cross occurs I’m usually on board. Look at Fig 13 for descriptions of these candles. Note: the usual terminology for an ‘exhaustion spike’ is either a hammer or a shooting star – I just think the first term is easier to visualize. It’s important to note that candle patterns are not enough by themselves to give a green light, we must use other indications that a top/bottom is in place and in our case that comes as an Fozzy cross. Here is a chart showing when candle patterns give us the confidence to enter a trade against the established trend – i.e. picking a top/bottom. Let me repeat, using tools like these only attempts to improve our edge. These charts show when it does work out. There are plenty of times when the trades fail.

Waiting for convergence

As mentioned in the Exiting Trades section, we come back to our friend convergence - the intersection of different technical tools. In my trading I look most often at Fibonacci levels, the 28 EMA and trendlines. When I see price bouncing from these, it’s a big heads-up. If they’re accompanied by a support/resistance level or candle pattern then it’s game over. The chart below shows an example of different technical analysis techniques giving back-up to the Fozzy cross and giving us the confidence to enter a trade.

Ignoring ‘back-to-back’ signals

If only all charts had nice big sweeps with large trends which deposited pips galore into our account. Unfortunately we have to trade in the real world where price whips back and forth and produces multiple losing cross signals. While accepting losses is a big part of becoming a successful trader, we need to look at avoiding the down times as much as possible. When a cross comes immediately after a cross, especially if the 8EMA is flat, it may be time to put on your sniper’s hat and sit it out and if you are taking a trade in these conditions you’ll want to keep your t/p conservative. In ranging markets there is the choice of ignoring the Fozzy crosses (when there are back-to-back-to-back signals) and instead set up a breakout play based on recent highs and lows. Look to adapt, accept your losses as part of doing business and there’s more chance you’ll come out the other end of a testing time.

Not taking a cross due to important news reactions

Without wishing to write a whole chapter on news releases and their affect on price, it is important to take into account crosses which happen due to a single news release. That is, the price reacts to some unexpected political or economic news, drops like a stone and we have a bagful of crosses the next day. Looking at the FF calendar, www.forexfactory.com/calendar.php, would tell you what, if anything, caused the price to move violently. The most important thing is how we deal with these crosses. Personally I’m wary of taking a trade on the back of a news release and prefer to sit them out or limit my exposure. One I do make an exception for is any surprise interest rate hike which has more potential than other data to impact the market for several days and can initiate a trend.

Waiting for a retrace on bigger moves

If a signal does happen due to one large move, be it news-related or not, and I decide to take it, this is the only time I don’t automatically look to get in at the opening price. In my case, I wait for a retrace in price using the 23.6 or 38.2 Fibonacci levels of the previous day’s high and low. This enables me to get a better price and means I can lower my stop loss level too. Sure you’re going to miss some trades when the price doesn’t retrace and keeps on its merry way but, as always, we’re not trying to catch every pip, just increase our odds for success.

Some final thoughts

Risk exposure and minding correlation

Risk exposure is another key to the long-term success of any trading method. In black and white terms this means what percentage of your capital are you willing to risk on one trade. Risk too much and you’ll be forever playing catch-up. Consecutive losses will happen and being sensible with trade sizing will ensure we stay in the game through a rough period. While with experience you may be able to judge risking more or less depending on your confidence in the trade, it is best to start off small.(whether you’re new to trading forex or trying a new method). Personally I am comfortable risking up to 3% of my equity on an Fozzy trade. This doesn’t mean I always risk this much and certainly, if you’re starting out and feeling your way, use 2% or even 1% risk. I have prepared a simple yet effective excel tool for calculating what size lots you should be trading. As always, it’s on the resource page at www.forex-rewards.com/resources. Never decrease your stops so you can trade more lots – determining stops comes first, then calculating how much that stop allows you to trade. Excellent examples and advice can be found on www.forexfactory.com/showthread.php?t=3690. Take the time to read and digest – you’ll be glad you did. Another consideration is how many currency pairs you are going to trade. As I mentioned above, when demo trading trade as many as possible for practice - and in real trading we also want to be trading a basket of pairs to ensure we get a good amount of signals. But when trading for real we have to be aware of correlation i.e. currency pairs which move in the same direction. Take EUR/USD and USD/CHF for example. These two pairs often run in mirror- opposite directions so when you get a BUY cross on one, you’ll more often than not get a SELL cross on the other on the same day. Taking both, you’re effectively doubling your exposure as both will likely have the same outcome. A safer strategy would be to look at pairs which move more independently of each other, say, EUR/USD and USD/CAD or GBP/JPY. This gives more diversification and so less chance of taking a big hit to our account.

Backtesting for confidence

Picture this. You’re trading the Fozzy method, everything is going along fine and then BOOM – five losing trades in a row. How you respond to this is crucial to your success, not just in this method but in any. You can pause, look back at your trades, read your trading log, read this book again. “Was there anything I missed? What can I learn from this?”. Losses happen – what can give you the confidence to stick with a certain method and not just give up and look for the latest new thing offering “500+ pips/month GUARANTEED!!!!”? Confidence comes from backtesting. Going over the charts one bar at a time and assuring yourself that this works. If you haven’t done that pencil work you’re more likely to give up when the losers roll in (and roll in they will). I’ve done that pencil work but I’m not trading your account. Confidence to trade through a rough period only comes from the rock-solid belief that “Yes, this has happened before but look – it picked up again. I know because I tested it.” Good luck on your trading career. I hope this e-book will go some way in making it more successful. This e-book was written by Michael Dunbar. Michael lives and works in Japan and has been trading forex for over four years. Some days he even thinks about other things. All material, advice and feedback is provided free. Michael is also an introducing broker for a number of firms and as well as taking time working for each trader, he also gives cash rebates on every trade his clients make with selected brokers. See his website, www.forex-rewards.com, for more information on how to claim your guaranteed rebates for very little effort and no risk. © Michael John Dunbar 2007 All Rights Reserved This material may be redistributed providing the contents remain unchanged. The advice in this e-book is for educational purposes only and the author accepts no liability for any losses that may occur from trading forex.

0 notes

projectdroid1-blog · 7 years ago

Text

Cut Your Trading Taxes in Half

Cut Your Trading Taxes in Half https://www.projectdroid.com/ebook/cut-your-trading-taxes-in-half/

The NEW Tax Act of 2001

by Ted Tesser, CPA

The tax circus is in town again, bringing with it the latest version of current changes, future promises, and of course, the proverbial smoke and mirrors. The fact that Congress thinks that any tax bill will withstand ten years and two and a half presidencies, without change, is somewhat ludicrous. The life of an average tax bill in this country is about 3 - 4 years. The 2001 Tax Act is actually is not a bad piece of legislation. The only problem with this tax bill is that the biggest tax reductions come in year ten. The question of whether you and I, or, in fact, whether the tax bill itself will be around in ten years, has to be just that - a question!

The 2001 Tax Act significantly affects the following areas of the tax code:

-Current tax rates

-Estate Tax Provisions

-Retirement Planning

It isn’t purely coincidental that these three areas are the exact same areas I use in the Triple Crown Strategy, which will be explained in full detail in the accompanying video. These areas of the tax law are, in fact, the three major sources of taxation from both traders and non-traders alike.

This Tax Act makes over 400 changes to the law, but it is the timetable for full enactment, the many phase-outs, and multiple effective dates, which makes this bill so much fun. The true test for any tax law is ultimately how it is interpreted, and we always must await further refinement of the grey areas, by the IRS (through future IRS rev. procs. or Revenue Procedures) to clarify and interpret the law. This law will be no exception to how that process unfolds.

Tax Rate Cuts:

10% Tax Bracket: A section of this tax bill reinstates a 10% tax bracket, which replaces the 15% minimum tax rate of the previous law.

Upper Brackets Reduced: More significant in dollar value, there is a general reduction of tax rates which is granted in installments, with the first reduction effective as of July 1, 2001. Eventually the top rate will effectively drop from 39.6% to 35%. The rates will decrease in percentage points with the schedule looking something like this:

Year:

28% Rate To:

31% Rate To:

36% Rate To:

39.6% Rate To:

2001:

27.5%

30.5%

35.5%

39.1%

2002 - 3:

27%

30%

35%

38.5%

2004 - 5:

26%

29%

34%

37.6%

2006 on:

25%

28%

33%

35%

Capital Gain Rates: With a few exceptions, the capital gain rates stay the same, for now, at a 20% maximum rate for any capital asset held for a year or more. The two most common exceptions to this are for collectibles (28% maximum) and depreciation recapture (25%). Any capital asset held for less than a year will be taxed at the short term rate (same as ordinary income), and consequently will now benefit from the overall decrease in tax rates.

This is a comparison of what typical tax savings could look like for three tax payers based on the combination of decreases just discussed:

Taxable Income:

Filing Status:

Saved In - 2001:

Saved In - 2002:

Saved in - 2010:

$100,000

Single

$669

$1,038

$2,513

Married

$881

$1,162

$2,730

$500,000

Single

$2,669

$5,038

$17,889

Married

$2,881

$5,162

$18,116

$2,000,000

Single

$10,169

$20,038

$86,899

Married

$10,381

$20,162

$90,987

As you can see by the above chart, the true savings kick in during the last phase of this bill, and this is especially true if you have taxable income of over $1,000,000. Please note that the above chart does not consider the Alternative Minimum Tax or “AMT” (more on the AMT will be discussed in this video). It is estimated, however, that the number of taxpayers impacted by the AMT will increase significantly under the new Tax Act.

As I have already stated, a major problem I have with this new law is that I hope we all live long enough to see it fully enacted. The second problem I have with it is that even if we survive, and the tax bill survives, the tax savings from the bill all virtually disappear on January 1, 2011!

Estate Tax Planning in three words or less - Call Dr. Kervorkian!

There are very few unambiguous, crystal-clear sections of the new tax bill, but here is one of them: if you die between January 1st, 2010 and December 31, 2010, you will pay NO estate tax on your estate. If you die January 1st, 2011, or anytime subsequent to that, you get stuck with the whole 55% tax on your estate -- again.

From what I hear, Kervorchian’s 2010 schedule is “waiting list only”, but surely if you put it off any longer, he will not even have room on this. So to really do some shrewd estate tax planning, call and schedule your appointment with him today.

Some people believe that the repeal of estate tax is the centerpiece of the new Tax Act. However, most people do not realize that, number one, this repeal is not effective until January 1, 2010, and, number two, that it disappears on December 31st, 2010! The uncertainty of all the events that will take place

between now and then, and the potential political climate at that time, make reliance on this repeal a poor approach to planning your estate. More appropriate is the use of the Triple Crown, as addressed in depth in this video. Nonetheless, the understanding of what will transpire now and prior to 2010, are important.

Provisions effective in 2002

The following provisions of the Act are effective in 2002:

Increase in the gift and estate tax unified exemption from $675,000 to $1,000,000.

Reduction of the top rate from 55% to 50%

Provisions after 2002

These are the provisions effective after 2002:

Reduction of the Gift and Estate Tax as illustrated on the following chart.

YEAR

MAXIMUM TAX BRACKET

APPLICABLE LEVEL

2001

55% + 5% Surtax

$ 675,00

2002

50%

1,000,000 *(Gift = $1,060,000)

2003

49%

1,000,000 *(Gift = $1,060,000)

2004

48%

1,500,000

2005

47%

1,500,000

2006

46%

2,000,000

2007-8

45%

2,000,000

2009

45%

3,500,000

2010

Estates are not taxed –Gifts

taxed at individual rates

(*) Currently, this exemption amount is the same for Gift and Estate Tax, except for the year 2001 - 2003 when it is $1,000,000 for Estate Taxes, but $1,060,000 for Gift Tax.

There are other considerations such as basis calculation, guidelines for non-resident aliens, gift tax strategies, etc. Fine points such as these are too lengthy and too complex to address in full detail in this short summary, and, if you are interested, my new book “The New Trader’s Tax Solution ” gives more detail on the finer points of the new law.

What To Do Until 2010

Whatever your ultimate goals are, I strongly recommend that you take advantage of the increased gift and estate tax exemption which goes up to $1,000,000 in 2001; $1,500,000 in 2004; $2,000,000 in 2006; and $3,500,000 in 2009. In 2009 the top estate tax rate will drop to 45%, and is then repealed to 0% in 2010. You must plan to utilize this amount, no matter if your assets’ net worth is greater or lesser than the threshold amounts in the chart on illustrated above. You should consider using the complete exemption as soon as possible, but you should get counsel on how to properly set this up

(possibly by using a family limited partnership, as I discuss in the video). The difference may well be worth any cost to you to do so.

You should also review your will and make sure the amounts stated in it do not lock you into small specific amounts that will be useless with this law in effect. If the will needs to be changed, I advise doing so, as soon as possible.

Retirement Plan Provisions

The Tax Act increased the maximum amount of deductible contributions that can be made to Individual Retirement Accounts (IRAs) and other retirement plans (KEOGHs, SEPs, etc.). The most significant change, however, is a catch-up provision has been passed which allows individuals who have reached the age of 50 to kick in a little more for their retirement, and get the benefit of this larger deduction. Other provisions include:

The maximum annual contribution limit for qualified plan purposes increases from $170,000 to $200,000 after 2001

The rules permitting rollovers between various plans have been liberalized

Plan loans to sole proprietors, partners, are S corporation owners are permitted starting in 2002.The loans must be made available to participants who are not owners as well.

Education Changes:

No tax bill would be complete without some tinkering with programs that effect social policy towards education. This tax bill is no different; the 2001 Tax Act clearly demonstrates our elected officials’ stance on promoting education through various tax incentives.

Educational IRAs

Education IRAs have been expanded significantly to increase both the amount that can be contributed to the plans and the number of individuals that will qualify for the program. Additionally, tax-free distributions will be allowed for a wider range of qualified education expenses.

Employer Provided Educational Assistance

Distributions from employer provided educational plans are excluded from income to the tune of $5,250 annually, if used to pay for qualified education expenses.

Changes For The Trader:

Traders were very lucky, once again, that the Government did not tinker with any provisions which affect the qualifications for Trader Status, the manner in which to file as a Trader, or any other provisions which affect Section 475, the Mark to Market election. Traders were given tremendous tax benefits in the previous tax law (1997), and at least for the present, the government has allowed most of

those benefits to remain in effect. In 1999, however, the IRS put out Revenue Procedure 99-17 (Rev. Proc. 99-17) which severely restricted the timing of when Traders must make the Section 475 election. This curtailed some of the tax reduction strategies that we were previously able to enact. However, in sum, the Trader has still been granted a very advantageous position, relative to the investor.

Much more on this in the accompanying video, which I hope you will enjoy, and from which you will reap much tax benefit. For more information on the benefits of Trader Status and the strategies

which can be enacted by its use, you can purchase “The New Trader’s Tax Solution” from

Trader’s Library (800-282-2755), and, for a free “Trader Status Questionnaire and

Evaluation”, and more information on the tremendous tax benefits afforded Traders under

current law, you can call our office at (800-556-9829).

Original online support manual begins here:

This tutorial was originally titled "Bottom Line Tax Strategies for Online Traders" and was recorded at the Online Trading Expo

Cut Your Trading Taxes In Half

Ted Tesser

email - [email protected]

Introduction:

This session will illustrate how to accomplish three tax reduction goals which will allow you to cut your current taxes by up to fifty percent, build up substantial wealth for retirement, and ultimately create a multi-million dollar estate for your heirs -- tax free.

Having been in the financial services industry for the past 25 years, and having practiced as a Certified Public Accountant for most of them, these are the concerns that I most frequently must address. The answer to these concerns and the path to these goals can be found in a three-step plan of action which I call "BottomLine Strategies for OnLine Traders".

STEP I -- THE BUSINESS

The Basics

Most people don't realize that having a business is truly the last great tax reduction opportunity left in America today. There are really two tax systems in existence for U.S. citizens. One is for employees; the second is for the owners of businesses. If you're an employee, you can deduct itemized deductions below the line such as mortgage interest, real estate taxes, charitable contributions, IRA contributions and other miscellaneous itemized deductions. However, if you are a business owner, you get all sorts of deductions in addition to the ones that employees get. These deductions are not only more numerous, but are also deducted in a different manner above the line rather than below it.

In other words, business owners get all the deductions of an employee plus a whole bunch of additional deductions not available to people without businesses. They not only get more deductions, but

they get to deduct them in a more advantageous manner.

Establish a Business

This is step one of my three-part plan.

Anyone already in business has the structure through which we can enact the second and third parts of my strategy. But for those of you that don't, let me say that a business is like money in the bank -- it is something everyone should have.

For those of you who have no business, let me offer you one - the business of Trading.

The Trading Business

Background: If you read my original works, The Serious Investor's Tax Survival Guide, The Trader's Tax Survival Guide, or The Trader's Solution, my latest follow-up, you know that there is now a new breed of investor the Trader. In order to understand the exact nature of what a Trader does and his or her advantages, you must understand the other types of participants in the market.

Broker-Dealer/Market Maker. Under Reg Section 1.471-5, the Code defines a dealer in securities" and delineates this participant as someone who engages in the purchase of securities for resale to customers with the intent of making a profit. The Broker-Dealer/Market Maker is a merchant with an established place of business who regularly engages in this practice. He therefore treats his securities or commodities as inventory and unlike other investors, these items which are held for sale to his customers are treated as ordinary, not capital assets. This results in the generation of ordinary income or loss, not capital income or loss.

Dealers can deduct, dollar for dollar, any amount of expense they incur in transacting their business. The Broker Dealer/Market Maker is not limited to a $3,000 per year capital loss as are other taxpayers including most Traders . This is a major distinction. Also, any income generated from these assets will also be considered ordinary with regard to self-employment tax, retirement plan contributions, self-employed health deduction and, as of 1993, mark-to-market considerations (Section 475).

Broker Dealer/Market Makers must pay self-employment tax on their trading income.

Investors , on the other hand, is defined in the tax code under Section 263(a). He is a person who buys or sells securities for his own account. Investors are clearly defined as investing for their own accounts as opposed to dealers who buy and sell for resale to customers. All expenses of the investing activity are considered to be investment expenses. They are treated as miscellaneous itemized deductions on Schedule A of an Investor's tax return and are also subject to significant limitations and phase-outs.

All income is considered to be capital gain income and not subject to self-employment tax (under most circumstances), not eligible for retirement plan contributions and hence reported on Schedule

D. Furthermore, an Investor is always limited to a $3,000 per year net capital loss deduction, which can be carried forward (or even back, in the case of Section 1256 transactions) see Appendix in the original text of The Trader's Tax Survival Guide.

Traders. This is a hybrid category. There is no election on the tax return that one would make to indicate that he or she is a Trader. There have been cases decided over the past 65 years in the Supreme Court and various district tax courts which have recognized this hybrid category. The decisions in these cases have recognized that Traders are investors who engage in the purchase and sale of securities for their own accounts. However, they do so at such a high level of activity that it becomes a business to them.

There are no objective requirements in the tax code to qualify a person as a Trader, and up until the Taxpayer Relief Act of 1997 the distinction was barely acknowledged in the Code. It was agreed that the taxpayer must trade in stock, securities, futures contracts or options on a relatively short-term basis; however, this classification was purely subjective. But now, in paragraph 341 of the new tax act, Congress has defined a Trader as follows:

“Traders are taxpayers who are in the business of actively buying, selling or exchanging securities or commodities in the market. On the other hand, dealers deal directly with customers when they regularly buy or sell securities in the course of their business . . “

Furthermore, on December 17, 1997 the Joint Committee on Taxation issued its report (a.k.a., the Blue Book), to explain the new tax law. On page 180 of this report, Title X, Section A (financial products), sub-section 1001(b), they stated:

“Traders in securities generally are taxpayers who engage in a trade or business involving active sales or exchanges of securities on the market rather than to customers . . .”

What they basically have done is alluded to, but not strictly define, the definition of a Trader. The court cases throughout history have defined what really determines Trader Status. These cases still define the criteria that separate an investor from a Trader.

They are looking for someone who trades on a frequent, regular and continuous basis.

They're looking for someone who has a substantial number of trades.

They're looking for someone who does short-term trading.

They're looking for someone who spends a substantial amount of time trading.

They're looking for someone who has the existence of a small percentage of income derived

from dividends .

 They're looking for someone who takes these expenses on a Schedule C.

 They're looking for someone who has the existence of an office either home or otherwise.

What they do not tell you is how frequent regular and continuous the trading must be, although they do shed new light on what they consider it to be. They never tell you how many trades are substantial. They never tell you what short-term trading must be in order to qualify you as a trader. They never tell you what a substantial amount of time is spent trading.

They never tell you what amount of dividends they will allow you to earn before they disqualify you from being a trader. They do tell you that it must be on a Schedule C. Although they do not discount a home office, they do require that an office be present. In fact, part of the provisions of the new tax act has liberalized the deduction of a home office.

Until the requirements are made objective, you can obtain a free Trader Status Evaluation by calling our toll free phone number (1-800-556-9829) to request a form. If you fill it out and send us the Questionnaire, each inquiry will be responded to, free of charge. Be sure to include your name, address and daytime phone number, and a copy of last year's tax return so that we may do a thorough evaluation.

Implementation: This truly is the best tax shelter available for Investors who meet the requirements. With the higher phase-outs, you need as many deductions as possible. For those of you that don't believe you meet the criteria of being Traders, do not despair, I have worked with many Investors, and helped them to achieve Trader Status.

The Results:

Here is a brief summary of the major advantages that a Trader has over an Investor.

Expenses are not subject to a 2% to 3% floor on Schedule A that investment expenses are. They are deducted on Schedule C, dollar for dollar.

Itemized deductions are not even necessary in order to deduct trading expenses. A Trader can take a standard deduction and still deduct trading expenses in addition to this on Schedule C.

Investment seminars, which were determined as non-deductible to Investors in the 1986 tax act, are now considered trading seminars and are still deductible.

Investment interest expense, which was severely limited under the 1986 tax act, is now considered to be trading interest (a normal business expense) and is 100% deductible.

Section 179 depreciation, which was not allowed to Investors, is now available to Traders.

The home office expense, which cannot be deducted by Investors, now becomes deductible, and, in fact, becomes one of the criteria in establishing Trader Status.

Although the Trader is still subject to a $3,000 per year net capital loss deduction for his trading loss, he may deduct 100% of his business expenses as ordinary. With the passage of the Taxpayers' Relief Act of 1997, this $3,000 limitation can be avoided if he elects to mark-to-market under Code Section 475. Read on for information on making a Section 475 election.

More on Section 475

You can elect Section 475 mark-to-market. By doing so, a Trader may deduct more than a

$3,000 net loss (if he or she had losing year). In a profitable year, a Trader may more easily set up a Section 419 Plan by making such an election (see Step #3).

Background: With the passage of the 1993 tax act, Broker Dealer/Market Makers were required through Section 475 to mark their positions to market, thereby forcing them to put all their trading income or losses on Schedule C and not being able to carry over any unrealized gains into the next year. This really didn’t do much to affect their tax situation other than prevent them from carrying over gains into the following year. Their income or losses were already reportable on Schedule C.

With the passage of the 1997 tax act, Traders were given the option of electing Section 475, thereby granting them the same privilege as market makers. The major difference here is that if a Trader elects Section 475, although the income becomes Schedule C income, it is not self-employment income. This was further clarified in the Technical Corrections Act which followed the tax bill. In the Congressional Blue Book report Congress further clarified this statin:



“The Act allows security Traders and commodity Traders and dealers to elect application of the mark-to-market accounting rules which apply only the security dealers under prior law . . . Congress intended that gain or loss that is treated as ordinary solely by reason of the election would not be treated as other than gain or loss from a capital asset, for purposes of determining an individual's net earnings from self-employment under the Self- employment Contributions Act (Section 1402) . . .”

What this is essentially doing is giving the Trader a tremendous benefit -- the best of both worlds. They now have the option of deciding whether or not to treat their losses as ordinary and still maintain the integrity of keeping the income from being subject to self-employment tax.

Implementation: There is no box to check on the Schedule C for one to elect Section 475 -- as there is no box to check to elect Trader Status. The way to elect 475 is simply state you are doing so by the deadline date. You then report the income on the Schedule D first, and then back the capital gain income or loss off of the Schedule D. Transfer it then to Schedule C, noting that the Trader has elected Section 475, and the income or loss thereby becomes Schedule C income or loss. A form will be coming out in the future on which to make the election.

Caveat: If you trade commodities or commodity options, you give up some preferred tax treatment. Consult with your tax advisor before making this election to determine if it is appropriate for you. This is serious business do not do it yourself!

To Sum Up

For the first time in Tax Reform History, Congress validated the existence of Traders in the Tax Code . The Technical Corrections Act has been passed and like all tax bills certain issues which were skipped in the original Tax Act, or which needed clarification were addressed. They addressed the Trader Status issue but let the definition of who qualifies stay purposely vague. Because of this, however, we can still defer to the cases coming down from the tax court, the Supreme Court and the various district courts as to our interpretation of who qualifies for Trader Status and the various other issues that we must address with regard to the criteria.

In the final analysis, a Trader is judged by: the frequency of trades, the number of trades, the holding period of the trades, the amount of time spent trading, whether or not substantial dividends are accrued on the trading account, the existence of a Schedule C, and the existence of an office.

Until Trader Status is made more objective, you can obtain a free Trader Status Evaluation by calling our office toll-free [(800) 556-9829] to request a form. If you fill it out and send us the Questionnaire, each inquiry will be responded to, free of charge. Be sure to include your name, address, e-mail address and daytime phone number, and a copy of last year's tax return so that we may do a thorough evaluation..

For those of you that don't already have a business, I suggest you qualify for Trader Status - now more than ever, it is important to do so!

STEP II -- THE ENTITY

Common Misconceptions

The second component to my three-step approach is to put your business in an entity, which is most

advantageous to you. The two most common misconceptions of Traders who telephone our offices on a daily basis are: (1) that they must trade in an entity to achieve Trader Status; and, (2) that they should conduct their trading activities through a “corporation”. I wish to put both of these misconceptions to rest.

It is not necessary to trade through an entity in order to receive the tax benefits afforded to Traders . If you meet the criteria which has been outlined above you are considered a Trader and will receive the tax advantages afforded to Traders. This is done by filing a Schedule C along with your individual tax return. The existence or non-existence of a trading entity is irrelevant to the issue of Trader Status.

“Corporations”, per se, are not necessarily the preferred entity of choice for conducting a trading business. While there are many circumstances in which corporations are utilized, and in fact recommended, in structuring a trading business, there are equally important reasons NOT to place your trading accounts into a corporation.The determination of a proper trading entity for your business should not be limited to corporations must take into account several very individualized factors, and proper planning requires consideration of not only corporations (both “C” and “S” corporations) but also, Limited Partnerships, Limited Liability Companies, Business Trusts and other entities.

However

Although an entity in general and a corporation in particular are not necessary in order to achieve Trader Status, proper entity structuring will provide you with all of the tax advantages afforded to Schedule C Traders PLUS many, many more advantages which are not available to a typical Trader. These will be addressed below.

Sole Proprietorship

This is the form of business under which most self-employed individuals operate. It is by far the easiest to establish, maintain and control. There are no governmental filings required and no special taxes. A Trader who files a Schedule C falls into this category

A Schedule C Trader, unless he elects Section 475 (mark-to-market) reports all his income on Schedule D and all his expenses as ordinary on Schedule C. Although the expenses are ordinary, the income maintains the character of capital gain income. Because of this, it is not subject to self - employment tax, does not qualify for pension plan contributions, and does not allow the Trader the opportunity to deduct self -employed health deductions (our revised interpretation).

This is not etched in stone; however, these are the best interpretations I have been able to get from my

NOTE: Key among these are the personal holding company (PHC) issue and petential imposition of a 36% PHC tax.

contacts at the IRS. There are no court cases specifically defining these allowances. It is generally agreed by my colleagues that subject to the above limitations, a Schedule C Trader can still elect to take Section 179 depreciation, assuming that there is income to allow for it.

The real problem occurs with retirement plan contributions, as there is no self-employment income.The only way to establish a retirement plan and to allow for the deductions associated with defined benefit and defined contribution plans is by drawing salary against the trading income. A self-employed individual cannot accomplish this on a Schedule C. Thus, for retirement planning purposes, a sole proprietor Trader CANNOT contribute to a Simple IRA, Roth IRA, Simplified Employee Plan (SEP) NOR any other type of qualified or non-qualified retirement plan.

From a non-tax standpoint sole proprietors have unlimited personal liability for debts, losses and claims against the business. Thus, 100% of his/her assets (subject to certain limited exemptions) are at risk to litigation, poor business decisions, and divorce. These non-tax implications make the sole proprietorship the most vulnerable and undesirable form for conducting a trading business.

A. General Partnership

Where two or more people come together for a common business enterprise a partnership is established. Like sole proprietorships, they are easy to form (a handshake will do), require no governmental filings, have no special taxes and decision making is easy (just a nod and a wink). An informational return is filed to reflect the partnership’s activities and each partner is issued a K-1 which reflects their individual income/loss. This is attached to and reported on their personal tax return.

The main disadvantages of general partnerships are non-tax in nature. Each partner is deemed to be an agent of the partnership and thus capable of making decisions which bind the partnership even in the absence of knowledge by the other partner. Each partner has joint and several liability for the debts and claims against the partnership, thus even an unaware partner with deep pockets can be held fully liable for financial decisions made by other partners.

Limited Partnerships

Limited Partnerships are the preferred structure for conducting business in partnership form precisely because of the liability issue discussed above. Limited partnerships are comprised of one or more Limited partners whose liability is limited to the amount of their partnership investment, and a General partner who assumes unlimited liability. Because of the separation of liability between general and limited partners, the general partner is typically issued a very small percentage of ownership in the entity (perhaps 1-2%) so as to further reduce the vulnerability to creditors.

Limited Partnerships are creatures of statute. Every state has enacted a statute authorizing the

establishment of limited partnerships. A written agreement is required, there are restrictions on the ability of limited partners to participate in management, and there are statutory procedures to be following in terminating them. Thus, they are a bit more complex than general partnerships but the advantages far outweigh the disadvantages.

The IRS requires the filing of an informational return (Form 1065), however, income/loss is apportioned to each partner in proportion to their partnership interest on a K-1 and flows through and is reported on their individual tax returns. Whereas partners in a general partnership are required to pay 15.3% self-employment tax on their income, limited partners do not. A variation of limited partnerships known as Family Limited Partnerships (FLP) provide all of the same benefits plus many more where the partnership is comprised of family members. We have placed a great number of our clients in FLPs because of the tremendous benefits they afford for tax planning, retirement planning and estate planning.

Limited Liability Company

This entity is a hybrid between a corporation and a limited partnership. Similar to corporations and limited partnerships, LLC members’ interests are limited to the amount of their investments. Unlike limited partners, however, member in an LLC may participate in management, and like limited partners, the gain/loss flows through to the members to be included on their individual returns.

LLCs can be either single-member or multi-member in nature, however, for tax purposes the IRS disregards single member LLCs and some states doen’t authorize them. The effect is that while a single- member LLC may enjoy asset protection, it will continue to be taxed as a sole proprietorship requiring the filing of a Schedule C and a Schedule SE on which the 15.3% self-employment tax must be reported and paid. A multi-member LLC is taxed more like a limited partnership, in which income is generally not subject to self-employment tax, however, in the event the LLC is member-managed (as opposed to “manager- managed”) the managing member will be subjected to such tax.

While there are some advantages to utilizing these entities there are also disadvantages. LLCs initially came on the scene in 1997 when Wyoming enacted the first statute in the country. Since then they have been adopted in nearly all states and the various states’ statutes vary widely. Since the LLC is a relatively new entity structure there have not been a great deal of court cases deciding the tax and non-tax implications of this form of doing business. While there are some circumstances in which an LLC is appropriate, frequently we choose to use Limited Partnerships due to the fact that there is much more history and certainty to their use.

Corporations – In General

The consideration of whether to utilize a corporation in your entity structuring strategy requires a preliminary understanding of the two different types of corporations: S-Corporations and C-Corporations. All corporations when organized begin as C-Corporations, however, by making a special election with the

IRS on Form 2553 the corporation can elect, for tax purposes, to have its income/loss reported on the individual tax return of its shareholders.

All corporations (both C- and S-Corporations) share similar characteristics. They are created by state statutes and are the only business entity which is considered and treated as being totally separate and distinct from their owners (i.e. shareholders). They are the most complex structure to formulate and maintain and require for their continuation and validity the most formalities. Though more complex than other forms of doing business, the requirements are by no means unmanageable and in fact, corporations provide the greatest tax advantages for businesses – particularly Traders.

C-Corporations When most people think of corporate America it is the C-Corporation which is their frame of reference. These are the big-boys, IBM, Proctor & Gamble, General Motors, etc. – large publicly held companies. However, C-Corporations are also available for use by mom and pop grocery stores, shoe repair shops and Traders too!

C-Corps receive the widest array and highest limits of tax deductions of any business entity. There is far more flexibility in establishing VEBAs, 419 trusts, retirement plans, deducting travel and entertainment and seminar expenses, paying medical and educational expenses with tax deductible dollars and many other benefits which are either unavailable or severely limited in other forms of business.

The most frequent heard disadvantage about C-Corps is the double taxation issue. As a separate entity the income of a corporation is subject to taxation at the corporate level and then is taxed again at the individual level when paid as salary or dividends. However, through the use of proper planning and implementation of corporate programs, taxation at the individual level is kept to a minimum because more “business” expenses can be paid for you on a tax deductible manner. Additionally, the income of C- corporations are only taxed at 15% on the first $50,000 of income (compared to 28% for individuals).

Caveat: If 60% or more of your C-Corp’s income is derived from trading it may be considered a Personal Holding Company and subjected to a 36% tax rate. If ALL you do is trade C-Corps should not be used without first consulting with competent accounting and legal professionals to implement strategies to avoid this result..

S-Corporations A subchapter-S corporation looks and acts like a corporation but is taxed on the individual's tax return.The flow-through nature of this entity makes it an ideal vehicle for trading. A second reason for establishing an S corporation is that of asset protection. Anybody suing the individual trader would not generally be able to get to the assets of the S Corporation. On the other hand, anyone suing the S Corporation would not be able to get at the assets of the Trader outside of the corporate entity, provided however, the corporate entity is properly maintained.

S-Corporations are not recognized in the state of Connecticut which imposes the state’s corporate tax rate to them.

S-Corps, do, however, have some limitations. Key tax limitations include the non-deductibility of disability premiums, limitations on deductibility of medical insurance premiums, limitations on deductibility of travel and entertainment expenses, and heightened scrutiny on the employment of family members. Additionally, there can be no more than 75 shareholders.

From a non-tax standpoint both C- and S-Corporations are quite similar from an asset protection standpoint so long as the corporate veil remains intact. The surest way to loose all of the tax and non-tax advantages of incorporating is for a person to conduct his/her corporate affairs without regard to the formalities required by a corporate structure. It has been our experience that S-Corporations are particularly susceptible to this, perhaps more so from a psychological standpoint than anything else (i.e. the owners perceive them as being more akin to a partnership than a “true” corporation and thus loose sight of the fact that formalities must be adhered to).

As a corporation, it is easy to deduct ordinary, normal and reasonable business expenses associated with doing business in the corporation. There will be no question as to the business nature of the entity if it is a corporation. Expenses such as these will now become dollar-for-dollar deductions.

VEBA and Section 419 Plan contributions

Accounting, legal and other professional fees

Automobile expenses (Traders be careful)

Books and audio/videotape courses on investing

Trading seminars, conferences and conventions

Brokerage account management fees

Calculators, adding machines, cassette tape recorders and typewriters

Cost of managing investments for a minor

Financial advice on audio/videotapes

Home computers, software, internet service and cable TV

Data retrieval service

Trading advice, coaching and mentoring

Business Interest expense

Qualified and Non-qualified pension plan contributions

Entertainment and meals during which business is conducted

Safe deposit box rental and storage space for trading documents

The salary of bookkeepers, accountants or others who keep your trading records

Subscriptions to trading publications

Trips to look after your trading account and conferences with trading advisors

A portion of your home expense that qualifies as home office deductions

Incorporate in a Tax-Free State

Most states charge an income tax all their own. There are several states, however, which do not charge income tax for residents. These states are: Florida, Texas, Nevada, Washington, Tennessee, Alaska and New Hampshire. A corporation, no matter what state it is authorized in, may legally operate in any other state of the country. Thus, even though you reside in a state which has a state income tax you can still form a corporation in a state which does not. The advantage is that income earned within the out of state corporation will not be subject to taxation in your home state.

ONLINE TRADERS BEWARE!!!

There are many who will tell you to form a Nevada corporation for your trading business and avoid state taxation. Much of this misinformation is from companies who want to “sell” you a corporation. DO NOT BE DECEIVED. What they DO NOT tell you is that if you place your trading business in a Nevada corporation but you are sitting in New York (or another taxable state) executing your trades, you have just subjected yourself to registering your corporation to do business in New York and are now subject to New York taxes! You’ve just defeated the whole purpose of incorporating in Nevada. There are ways to structuring this to reduce and eliminate this result.

Also, There are very complex rules regarding “apportionment”, “nexus” and “controlled groups” which must be understood and properly applied. Structuring your trading business in a tax free state can work but it requires very specialized knowledge and sophisticated planning and structuring. Do not attempt to do this yourself without competent professional advice and assistance. Our firm’s professional staff of certified public accountants, attorneys, enrolled agents an trading professionals spend numerous hours each week in reviewing the latest changes in applicable laws throughout the country and developing strategies to address them. We can guide you in properly structuring your trading business. G. Audit Proof Your Trading Business

For both tax and non-tax reasons a Trader should consider forming a separate entity through which to conduct his trading business. Primarily, because it will make him a small fish in a large pool" for audit purposes. I have long believed that corporations and limited partnerships are less subject to audit than are individuals and, in fact, on December 16th The Wall Street Journal reported that the IRS has acknowledged that it is shifting its audit personnel from the corporate division to the individual division.

This is especially true in light of the fact that a Trader will generally trade a large number of transactions throughout the year and generate a large amount of gross proceeds. This huge gross proceeds figure, often times in the millions, will be more susceptible to audit on an individual's tax return than in an entity. A corporation, for example, is in a pool with corporations such as Exxon, IBM, and Coca-Cola. Similarly, many large real estate, drilling and mining ventures frequently use limited partnerships and limited liability companies and these IRS is accustomed to seeing large dollar figures on these type of returns. For this reason, entity tax returns with gross proceeds in the multi-millions will not even raise an eyebrow, whereas, million dollar numbers on an individuals tax return may cause IRS auditor eyebrows to furrow.

If you have read my books The Serious Investor's Tax Survival Guide, The Trader's Tax Survival

Guide or The Trader's Solution you will recall that there is also a certain degree of comparison from year to year for audit selection. If somebody decides to be a Trader one year and starts generating millions of dollars of gross sales from trades, it may be kicked out in a computer comparison between this year and last year. However, if one switches entity to a corporation there will not be the discrepancy in the year-to-year figures on the individual's tax return (generated by multi-million dollar gross proceeds).

If your accountant tells you this is not so fire him or her it is!

Entity Structuring – Putting It All Together

In considering the use of an entity for conducting your Trading business it is essential that your overall short and long term objectives be considered. These include, income tax planning, retirement planning, estate tax planning. Factors impacting these issues include your age, the existence and ages of a spouse and children, other non-trading sources of household income, assets, liabilities, etc. The emphasis is on Planning! There is no such thing as a “one-size-fits-all” entity structure. Frequently it is most advantage to use multiple entities to achieve the desired result.

A hypothetical structure might include the establishment of a Limited Partnership (LP), a C- Corporation, and an S-Corporation. While an individual entity has its own advantages and disadvantages standing on its own, when united with others in a properly structured strategy symphonic harmony is created. In this example the C-Corporation could be established in a non-taxed state (e.g. Nevada) and would serve as the General Partner of the LP for the purpose of managing the affairs of the LP. The LP would hold your assets (trading accounts, etc.). The C-Corp would enter into a contract with the S-Corp for the purpose of trading the accounts of the LP. The C-Corp would hold a nominal interest in the LP with you and other investors (which could be a spouse, children, or unrelated) holding the significant partnership interests.

A multiple entity structure such as this would be utilized for the following purposes:

Family Limited Partnership:

 Income received will be capital gains. Though ineligible for funding retirement plans the income will not be subject to self-employment tax when passed through on your personal return.

 Pays a management fee to the C-Corp general partner thus transforming the capital gains income into ordinary income to the corporation which can be used to fund retirement plans.

 Shares can be easily transferred to children and other family members to reduce current income tax and reduce estate taxes without loosing control of the asset.

C-Corporation:

 If organized in a tax-free state such as Nevada there would be no state tax due on management fees received.

 Receives income from management fees to the FLP and leasing fees from the S-Corp.

 First $50,000 of taxable income taxed at 15% federal rate.

 Dividends receive preferential tax treatment

 Can have a fiscal year end thus allowing for the deferral of income to a subsequent tax period.

S-Corporation:

 Incorporated in the Trader’s home state to prevent the requirement of registering the C-Corp to do business in the home state.

 Pays nominal salary which is subject to self-employment tax while non-salary income flows through to owners free of self-employment tax.

(The foregoing is by no means exhaustive and is provided merely to illustrate how a multiple- entity structure works together)

STEP III – THE BOTTOMLINE

A. Overview

This is where we pull it all together. This is in essence – The Bottom Line. All of the foregoing discussion has been leading you to this place where the actual tax savings takes place. Having established you as a Trader and structured your Entity, you are now ready to embark upon the greatest tax savings and wealth building techniques available to Traders. For months or years you have worked countless hours day in and day out planning your trades. You pour over charts, watch endless news reports and analyze the market until you spot just the right trade. Then after you’re in, you endure the most rigorous psychological pressure just to squeeze out the last point of profit. But, if you’re like most people, you spend very little time keeping the IRS from eating away at your hard fought dollars. You spend all your time and effort on making money and very little on how to keep it!

A. Retirement Benefits for Corporate Officers and Employees

As previously stated, the plans listed below are not available to Schedule C Traders. Some type of business entity must be established in order to take advantage of these plans. Some of the plans outlined below are mutually exclusive. Others are available only if your gross income falls below a certain ceiling. You should consult with a competent tax and accounting professional to review your specific situation to determine which of these plans are available and best suit your savings, tax, and retirement planning needs/goals.

While some of these plans can in some circumstances be established through a partnership they are

most often established through a corporate structure. The corporation receives a tax deduction for the contributions and growth within the plans are tax deferred. Many of the plans can be self-directed, meaning that you can continue to trade the funds which are in the plans. Competent tax and accounting advise is essential as there are rules governing this.

401K: A corporation can establish a 401K plan for salaried officers and employees. You and can contribute up to $10,000 per year (or as limited by salary) which can be matched by the corporation up to 25% of pay.

ROTH IRA: You can contribute up to $2,000 for 1999 (or as limited by salary) and subsequent years (based upon current law). This amount may be limited and or phased out depending upon income level if coupled with certain other plans. (Note: contributions are not tax deductible and not taxable when withdrawn)

SEP (Simplified Employee Plan): You may be entitled to establish a SEP into which each of you may contribute up to $24,000 or 15% of pay, whichever is less.

IRA: A standard IRA plan can be established by into which you may contribute Two Thousand ($2,000.00) Dollars for 1999 (or as limited by salary) and subsequent years (based upon current law. This amount may be limited and or phased out depending upon income level if coupled with certain other plans.

KEOGH: There are two types.

In a Profit Sharing Plan you can contribute up to $24,000 or 15% of pay, whichever is less.

In a Money Purchase Plan you can contribute up to $30,000 or 25% of pay, whichever is less.

DEFINED BENEFIT PLAN: Has the advantage of allowing an unlimited contribution depending upon actuarial assumptions, the age of the participants, and the amount desired per year at retirement. This plan usually works best for those who do not have other retirement savings and have attained the age of at least 45 – the older the better the benefits.

Other Benefits

Following is a general outline of the many different benefits and plans available to you through your new structure. This list is by no means exhaustive. Our office will assist you in implementing any or all of the benefits outlined below.

Group Term Life Insurance: You can receive up to $50,000 in coverage and the premium is not included in your gross income. The expense is 100% deductible to the corporation.

Medical/Dental Reimbursement Plan: Medical and Dental Reimbursement Plans can be established whereby the corporation can reimburse you for any uncovered medical expenses that you pay out of your own pocket. Any reimbursements actually paid to you are deductible to the corporation and they are not considered income to you. This may include reimbursement for premiums currently being paid on any private plans currently in effect.

Dependent Care: Upon the birth of a child, the corporation can establish a dependent care plan. This plan can provide you with up to $5,000.00 per year for child care. This sum is deductible to the Corporation and it is not part of your gross income.

Medical Plans: The corporation can pay 100% of your health insurance and receive a deduction for it. This benefit is non-taxable to you.

Educationa l Assistance: You may elect to take an educational allotment of up to $5,250 per year which is not considered part of your gross income but is 100% deductible to the corporation.

Seminar Expenses: These Expenses, including meals and lodging, are 100% tax deductible to the Corporation and not considered part of your income.

Physical Fitness Facility: You can have a physical fitness facility on the premises totally paid for by the corporation. The cost of the facility is 100% tax deductible to the corporation.

Lease of Corporate Space: The corporation can lease office & storage space in your home. Income received will be rental in nature and thus not subject to self-employment tax. If you own your home you will also be entitled to a depreciation deduction as well as a deduction for a portion of the utilities and other upkeep expenses. The expense is 100% deductible to the corporation.

Entertainment/Meals/Lodging: Business travel expenses are 100% deductible to the corporation where as limits to deductibility are imposed upon Schedule C Traders.

Hiring your Spouse and Children: Children over the age of 7 can be employed. The child can receive a salary up to $4,300 per year tax free (due to personal exemption) and up to $25,349 the child will be only be taxed at a 15% rate. The wages paid are deductible to the corporation. This is an excellent way to pay your child’s allowance with tax deductible dollars. The child’s actual tax liability can be further reduced by the establishment of an IRA, or Educational IRA.

Awards and Gifts; Achievement awards for longevity and safety can be awarded annually and the corporation can receive a deduction of up to $1,600 per award per year. To obtain this a qualified plan must be adopted by the corporation. Similarly the corporation can present gifts to employees and

associates and receive a deduction. The gifts and awards can be either in cash or property and are not taxable to the recipients.

Reduced Taxation on Dividends: If you place dividend paying investments (stocks, mutual funds etc) into the corporation you will benefit from reduced tax rates. For example, if as an individual you receive $1,000 in dividends and are in the 39.6% tax bracket your tax liability on the dividends would be $396. If, however, you transferred the stocks to a corporation 80% of the dividends would be received tax free and the remaining $200 would only be taxed at a 15% rate for a $30 tax bill – a savings of $336!

Medical Savings Accounts: These plans permit you to contribute $5,000 per year in pre-tax dollars which can be invested and grow on a tax deferred basis then withdrawn tax free for paying medical expenses. We suggest that you coordinate this with a medical insurance policy with a high dollar deductible which will significantly reduce your monthly premium payments.

VEBAs and Section 419 Plans – The Granddaddy Of Them All

My wish list for an ideal investment would look something like this:

Avoid current tax through huge tax deductions;

Save an unlimited amount for retirement;

Grow it tax free in addition to getting an up-front tax deduction;

Pass the wealth down to your heirs, estate tax free;

Allow assets to accumulate on a tax-deferred basis forever;

Have the full blessing of the IRS and Congress with a favorable letter of determination in other words, this strategy is pre-approved;

Have no vesting for employees who terminate prematurely;

Make contributions as flexible as you like in any amount;

Allow large contributions in peak years;

Allow early or late distributions without penalties for distributing prior to age 59 or for contributing beyond age 70 ;

Provide favorable tax relief for business owners (Traders);

Provide full safety of investment;

Provide the ability to grow funds in conjunction with market growth;

Acquire tax-deductible life insurance;

Provide funds to pay estate taxes; and

Protect funds from creditors;

It is inexpensive to set up and administer.

Access the funds after five years at tax rates as low as 7 - 10%!

My answer to all of these questions is a solution that has been on the books since 1928 called the VEBA (the Voluntary Employee Benefit Association) and its kissing cousin the Section 419 Plan. Section 501(c)(9) of the Internal Revenue Code describes the VEBA as a tax-exempt, ten or more multiple employer welfare benefit trust. It is further defined by Section 419(A)(f)(6) which was passed in 1984. Section 419(A)(f)(6) of the 419 and 419(A) rules were put in originally to curb abuses to VEBAs. If a program qualifies under this section, then it is exempted from the restrictions and prohibitions of Sections 419 and 419(a). In this manner, the greatest tax deferral and asset accumulation program allowed by Federal law came into existence.

Under this program, contributions become 100% tax deductible. But more than that, the cash build- up inside a plan is 100% tax deferred, thus providing both a great investment vehicle as well as a tax-free death benefit. This may also be funded in addition to your current pension plan. This is the greatest thing in the world for a company with an over-funded pension or a retain-earnings problem OR A TRADER WHO HAS HAD A PHENOMENAL YEAR! You can have a qualified plan as well as a non-qualified VEBA. This will also allow you to transfer retirement plans, income and estate tax free, to your heirs.

There is another aspect, too involved to go into in detail here, which will allow us to access the funds in the VEBA at any time after the first 5 years -- at tax rates as low as 7 - 10%! This can be used for a variety of reasons, such as to fund a childs college education, buy a house, a car, or any number of employee benefits for the ultimate employee -- you! This is true even if you are under age 59 1/2.

Although it is not meant to be set up as a retirement plan, it is, in fact, a wonderful vehicle for accumulating tax-deferred wealth. In addition to being a tax-deductible vehicle, if set up properly, it will allow the business owner to accumulate and compound wealth for many years and ultimately distribute it for his retirement. The way this works is that the law provides that any business owner may, for reasonable cause,choose to terminate a VEBA program.

This could mean that the business owner is going out of business, has an economic need not to continue VEBA program, or simply for any other reasonable cause (i.e., cannot afford to continue or maintain it). If and when this happens, the wealth built up inside the VEBA program will then revert back to the employees

including the owner/employee.

Anything within the VEBA trust will then be distributed in proportion to cumulative salary earned by any employees still with the firm.

NOTE: Because of the continual shifting of legal and regulatory precedents, taxpayers should seek competent professional advice regarding investment and trading transactions on an on-going basis. This booklet is by no means an exhaustive work on tax consequences. It should not be used in lieu of competent legal and/or accounting advice, but I hope it provides some insight into the tax issues and complications involved in the investment and trading industry.

You will be notified by Traders Library of new offers, changes, improvements and additions to our web site.

0 notes

projectdroid1-blog · 7 years ago

Text

Currency Trading for Dummies

Currency Trading for Dummies https://www.projectdroid.com/wp-content/uploads/2018/04/word-image-288.png https://www.projectdroid.com/ebook/currency-trading-for-dummies/ Compliments of A Reference for the Rest of Us!® FREE eTips at dummies.com® Capitalize on the growing forex market Mark Galant Chairman and founder, GAIN Capital Group Brian Dolan Chief currency strategist, FOREX.com Welcome to FOREX.com There has never been a more challenging and exciting time to be trading in the foreign exchange market. What started out as a market for professionals is now attracting traders from all over the world and of all experience levels. At FOREX.com, we focus exclusively on the needs of individual forex trader, offering an advanced trading platform, premium tools, and customized services for the way you trade. Our commitment to your success extends to our professional dealing practices and world class service. After reading this Getting Started Edition, I encourage you to explore our Web site for additional information about the forex market and our trading services, and to sign up for a free practice account to experience both firsthand. Mark Galant Chairman & Founder GAIN Capital Group Currency Trading FOR DUMmIES‰ GETTING STARTED EDITION

by Mark Galant and Brian Dolan

Authors of Currency Trading For Dummies Currency Trading For Dummies®, Getting Started Edition Published by Wiley Publishing, Inc. 111 River Street Hoboken, NJ 07030-5774 Copyright © 2007 by Wiley Publishing, Inc., Indianapolis, Indiana Published by Wiley Publishing, Inc., Indianapolis, Indiana No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for permission should be addressed to the Legal Department, Wiley Publishing, Inc., 10475 Crosspoint Blvd., Indianapolis, IN 46256, (317) 572-3447, fax (317) 572-4355, or online at www.wiley.com/go/permissions. Trademarks: Wiley, the Wiley Publishing logo, For Dummies, the Dummies Man logo, A Reference for the Rest of Us!, The Dummies Way, Dummies Daily, The Fun and Easy Way, Dummies.com, and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc. and/or its affiliates in the United States and other countries, and may not be used without written permission. All other trademarks are the property of their respective owners. Wiley Publishing, Inc., is not asso- ciated with any product or vendor mentioned in this book. LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKE NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COM- PLETENESS OF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WAR- RANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. NO WARRANTY MAY BE CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS. THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION. THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERV- ICES. IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PRO- FESSIONAL PERSON SHOULD BE SOUGHT. NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM. THE FACT THAT AN ORGANIZATION OR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF FURTHER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE INFORMATION THE ORGANIZATION OR WEBSITE MAY PROVIDE OR REC- OMMENDATIONS IT MAY MAKE. FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS READ. For general information on our other products and services, please contact our Customer Care Department within the U.S. at 800-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002. For details on how to create a custom For Dummies book for your business or organization, contact [email protected]. For information about licensing the For Dummies brand for products or services, contact BrandedRights&[email protected]. ISBN: 978-0-470-25143-0 Manufactured in the United States of America 10 9 8 7 6 5 4 3 2 1

Introduction

hanks to the Internet, tens of thousands of individual traders and investors all over the world are discovering T the excitement and challenges of online trading in the forex market. Yet in contrast to the stock market, the forex market somehow remains more elusive and seemingly complicated to newcomers. Currency Trading For Dummies, Getting Started Edition, strips away the mystique of the forex market for smart, intelligent investors like you who know something about the potential of the forex market but don’t have the foggiest how it actually works. Read this book and then, if you like what you’ve read, put your knowledge and intuition to the test by getting a practice trading account with an online forex brokerage before you put any actual money at risk. Note: Trading foreign currencies is a challenging and poten- tially profitable opportunity for educated and experienced investors. However, before deciding to participate in the forex market, you should carefully consider your investment objectives, level of experience, and risk appetite. Most impor- tant, don’t invest money you can’t afford to lose.

About This Book

Currency Trading For Dummies, Getting Started Edition, contains the no-nonsense information you need to take the first step into the world of currency trading: Chapter 1: What Is the Forex Market? introduces you to the global forex market and gives you an idea of its size and scope. Chapter 2: The Mechanics of Currency Trading exam- ines how currencies are traded in the forex market: which currency pairs are traded, what price quotes mean, how profit and loss is calculated, and how the global trading day flows, just to name a few. Chapter 3: Choosing Your Trading Style reviews the various approaches used by professional currency traders and how they influence trading decisions, as well as how to develop a disciplined trading plan and to stick with it. Chapter 4: Getting Started with Your Practice Account walks you through the various ways of establishing a position in the market, how to manage the trade while it’s open, how to close out the position, and how to eval- uate your results critically.

Icons Used in This Book

Throughout this book, you see icons in the margins next to certain paragraphs. Here are the icons and what they mean: Theories are fine, but anything marked with a Tip icon tells you what currency traders really think and respond to. These are the tricks of the trade. Paragraphs marked with the Remember icon contain the key takeaways from this book and the essence of each subject’s coverage. Achtung, baby! The Warning icon highlights errors and mis- takes that can cost you money, your sanity, or both. You can skip anything marked by the Technical Stuff icon with- out missing out on the main message, but you may find the information useful for a deeper understanding of the subject. Want to go deeper? Try the big book If you want to delve more deeply market really works, what moves it, into currency trading, consider pick- and how you can actively trade it. ing up the full version of Currency We also provide you with the tools Trading For Dummies, from which to develop a structured game plan this special edition was derived. The you need to seriously trade in the full version of Currency Trading For forex market. Dummies shows you how the forex Chapter 1 What Is the Forex Market? In This Chapter Getting inside the forex market Understanding that speculating is the name of the game Trading currencies around the world Linking other financial markets to currencies he foreign exchange market — most often called the forex market, or simply the FX market — is the most traded finan- T cial market in the world. We like to think of the forex market as the “Big Kahuna” of financial markets. The forex market is the crossroads for international capital, the intersection through which global commercial and investment flows have to move. International trade flows, such as when a Swiss electronics company purchases Japanese-made components, were the original basis for the development of the forex markets. Today, however, global financial and investment flows dominate trade as the primary non-speculative source of forex market volume. Whether it’s an Australian pension fund investing in

Treasury bonds, or a British insurer allocating assets to the Japanese equity market, or a German conglomerate purchasing a Canadian manufacturing facility, each cross-border transac- tion passes through the forex market at some stage.

More than anything else, the forex market is a trader’s market. It’s a market that’s open around the clock six days a week, enabling traders to act on news and events as they happen. It’s a market where half-billion-dollar trades can be executed in a matter of seconds and may not even move prices notice- ably. Try buying or selling a half billion of anything in another market and see how prices react. Getting Inside the Numbers Average daily currency trading volumes exceed $2 trillion per day. That’s a mind-boggling number, isn’t it? $2,000,000,000,000 — that’s a lot of zeros, no matter how you slice it. To give you some perspective on that size, it’s about 10 to 15 times the size of daily trading volume on all the world’s stock markets combined.

Speculating in the currency market

While commercial and financial transactions in the currency markets represent huge nominal sums, they still pale in compar- ison to amounts based on speculation. By far the vast majority of currency trading volume is based on speculation — traders buying and selling for short-term gains based on minute-to- minute, hour-to-hour, and day-to-day price fluctuations. Estimates are that upwards of 90 percent of daily trading volume is derived from speculation (meaning, commercial or investment-based FX trades account for less than 10 percent of daily global volume). The depth and breadth of the specula- tive market means that the liquidity of the overall forex market is unparalleled among global financial markets. The bulk of spot currency trading, about 75 percent by volume, takes place in the so-called “major currencies,” which represent the world’s largest and most developed economies. Additionally, activity in the forex market frequently functions on a regional “currency bloc” basis, where the bulk of trading takes place between the USD bloc, JPY bloc, and EUR bloc, representing the three largest global economic regions.

Getting liquid without getting soaked

Liquidity refers to the level of market interest — the level of buying and selling volume — available at any given moment for a particular asset or security. The higher the liquidity, or the deeper the market, the faster and easier it is to buy or sell a security. From a trading perspective, liquidity is a critical consideration because it determines how quickly prices move between trades and over time. A highly liquid market like forex can see large trading volumes transacted with relatively minor price changes. An illiquid, or thin, market tends to see prices move more rapidly on relatively lower trading volumes. A market that only trades during certain hours (futures contracts, for example) also represents a less liquid, thinner market.

Around the World in a Trading Day

The forex market is open and active 24 hours a day from the start of business hours on Monday morning in the Asia-Pacific time zone straight through to the Friday close of business hours in New York. At any given moment, depending on the time zone, dozens of global financial centers — such as Sydney, Tokyo, or London — are open, and currency trading desks in those financial centers are active in the market. Currency trading doesn’t even stop for holidays when other financial markets, like stocks or futures exchanges, may be closed. Even though it’s a holiday in Japan, for example, Sydney, Singapore, and Hong Kong may still be open. It might be the Fourth of July in the United States, but if it’s a business day, Tokyo, London, Toronto, and other financial centers will still be trading currencies. About the only holiday in common around the world is New Year’s Day, and even that depends on what day of the week it falls on.

The opening of the trading week

There is no officially designated starting time to the trading day or week, but for all intents the market action kicks off when Wellington, New Zealand, the first financial center west of the international dateline, opens on Monday morning local time. Depending on whether daylight saving time is in effect in your own time zone, it roughly corresponds to early Sunday afternoon in North America, Sunday evening in Europe, and very early Monday morning in Asia. The Sunday open represents the starting point where currency markets resume trading after the Friday close of trading in North America (5 p.m. Eastern time). This is the first chance for the forex market to react to news and events that may have happened over the weekend. Prices may have closed New York trading at one level, but depending on the circumstances, they may start trading at different levels at the Sunday open.

Trading in the Asia-Pacific session

Currency trading volumes in the Asia-Pacific session account for about 21 percent of total daily global volume, according to a 2004 survey. The principal financial trading centers are Wellington, New Zealand; Sydney, Australia; Tokyo, Japan; Hong Kong; and Singapore. In terms of the most actively traded currency pairs, that means news and data reports from New Zealand, Australia, and Japan are going to be hitting the market during this session Because of the size of the Japanese market and the importance of Japanese data to the market, much of the action during the Asia-Pacific session is focused on the Japanese yen currency pairs (explained more in Chapter 2), such as USD/JPY – forex- speak for the U.S. dollar/Japanese yen -- and the JPY crosses, like EUR/JPY and AUD/JPY. Of course, Japanese financial insti- tutions are also most active during this session, so you can fre- quently get a sense of what the Japanese market is doing based on price movements. For individual traders, overall liquidity in the major currency pairs is more than sufficient, with generally orderly price movements. In some less liquid, non-regional currencies, like GBP/USD or USD/CAD, price movements may be more erratic or nonexistent, depending on the environment.

Trading in the European/London session

About midway through the Asian trading day, European finan- cial centers begin to open up and the market gets into its full swing. European financial centers and London account for over 50 percent of total daily global trading volume, with London alone accounting for about one-third of total daily global volume, according to the 2004 survey. The European session overlaps with half of the Asian trading day and half of the North American trading session, which means that market interest and liquidity is at its absolute peak during this session. News and data events from the Eurozone (and individual countries like Germany and France), Switzerland, and the United Kingdom are typically released in the early-morning hours of the European session. As a result, some of the biggest moves and most active trading takes place in the European currencies (EUR, GBP, and CHF) and the euro cross- currency pairs (EUR/CHF and EUR/GBP). Asian trading centers begin to wind down in the late-morning hours of the European session, and North American financial centers come in a few hours later, around 7 a.m. ET.

Trading in the North American session

Because of the overlap between North American and European trading sessions, the trading volumes are much more significant. Some of the biggest and most meaningful directional price movements take place during this crossover period. On its own, however, the North American trading ses- sion accounts for roughly the same share of global trading volume as the Asia-Pacific market, or about 22 percent of global daily trading volume. The North American morning is when key U.S. economic data is released and the forex market makes many of its most sig- nificant decisions on the value of the U.S. dollar. Most U.S. data reports are released at 8:30 a.m. ET, with others coming out later (between 9 and 10 a.m. ET). Canadian data reports are also released in the morning, usually between 7 and 9 a.m. ET. There are also a few U.S. economic reports that variously come out at noon or 2 p.m. ET, livening up the New York after- noon market. London and the European financial centers begin to wind down their daily trading operations around noon eastern time (ET) each day. The London, or European close, as it’s known, can frequently generate volatile flurries of activity. On most days, market liquidity and interest fall off signifi- cantly in the New York afternoon, which can make for chal- lenging trading conditions. On quiet days, the generally lower market interest typically leads to stagnating price action. On more active days, where prices may have moved more signifi- cantly, the lower liquidity can spark additional outsized price movements, as fewer traders scramble to get similarly fewer prices and liquidity. Just as with the London close, there’s never a set way in which a New York afternoon market move plays out, so traders just need to be aware that lower liquidity conditions tend to prevail, and adapt accordingly.

Currencies and Other Financial Markets

As much as we like to think of the forex market as the be all and end all of financial trading markets, it doesn’t exist in a vacuum. You may even have heard of some these other mar- kets: gold, oil, stocks, and bonds. There’s a fair amount of noise and misinformation about the supposed interrelationship among these markets and curren- cies or individual currency pairs. To be sure, you can always find a correlation between two different markets over some period of time, even if it’s only zero (meaning, the two mar- kets aren’t correlated at all). Always keep in mind that all the various financial markets are markets in their own right and function according to their own internal dynamics based on data, news, positioning, and sentiment. Will markets occasionally overlap and display varying degrees of correlation? Of course, and it’s always important to be aware of what’s going on in other financial markets. But it’s also essential to view each market in its own perspective and to trade each market individually. Let’s look at some of the other key financial markets and see what conclusions we can draw for currency trading.

Gold

Gold is commonly viewed as a hedge against inflation, an alternative to the U.S. dollar, and as a store of value in times of economic or political uncertainty. Over the long term, the relationship is mostly inverse, with a weaker USD generally accompanying a higher gold price, and a stronger USD coming with a lower gold price. However, in the short run, each market has its own dynamics and liquidity, which makes short-term trading relationships generally tenuous. Overall, the gold market is significantly smaller than the forex market, so if we were gold traders, we’d sooner keep an eye on what’s happening to the dollar, rather than the other way around. With that noted, extreme movements in gold prices tend to attract currency traders’ attention and usually influ- ence the dollar in a mostly inverse fashion.

Oil

A lot of misinformation exists on the Internet about the sup- posed relationship between oil and the USD or other curren- cies, such as CAD or JPY. The idea is that, because some countries are oil producers, their currencies are positively (or negatively) affected by increases (or decreases) in the price of oil. If the country is an importer of oil (and which countries aren’t today?), the theory goes, its currency will be hurt (or helped) by higher (or lower) oil prices. Correlation studies show no appreciable relationships to that effect, especially in the short run, which is where most cur- rency trading is focused. When there is a long-term relation- ship, it’s as evident against the USD as much as, or more than, any individual currency, whether an importer or exporter of black gold. The best way to look at oil is as an inflation input and as a lim- iting factor on overall economic growth. The higher the price of oil, the higher inflation is likely to be and the slower an economy is likely to grow. The lower the price of oil, the lower inflationary pressures are likely (but not necessarily) to be. We like to factor changes in the price of oil into our inflation and growth expectations, and then draw conclusions about the course of the USD from them. Above all, oil is just one input among many.

Stocks

Stocks are microeconomic securities, rising and falling in response to individual corporate results and prospects, while currencies are essentially macroeconomic securities, fluctuat- ing in response to wider-ranging economic and political devel- opments. As such, there is little intuitive reason that stock markets should be related to currencies. Long-term correla- tion studies bear this out, with correlation coefficients of essentially zero between the major USD pairs and U.S. equity markets over the last five years. The two markets occasionally intersect, though this is usually only at the extremes and for very short periods. For example, when equity market volatility reaches extraordinary levels (say, the Standard & Poor’s loses 2+ percent in a day), the USD may experience more pressure than it otherwise would — but there’s no guarantee of that. The U.S. stock market may have dropped on an unexpected hike in U.S. interest rates, while the USD may rally on the surprise move.

Bonds

Fixed-income or bond markets have a more intuitive connec- tion to the forex market because they’re both heavily influ- enced by interest rate expectations. However, short-term market dynamics of supply and demand interrupt most attempts to establish a viable link between the two markets on a short-term basis. Sometimes the forex market reacts first and fastest depending on shifts in interest rate expectations. At other times, the bond market more accurately reflects changes in interest rate expectations, with the forex market later playing catch-up. Overall, as currency traders, you definitely need to keep an eye on the yields of the benchmark government bonds of the major-currency countries to better monitor the expectations of the interest rate market. Changes in relative interest rates (interest rate differentials) exert a major influence on forex markets. Chapter 2 The Mechanics of Currency Trading In This Chapter Understanding currency pairs Going long and short Calculating profit and loss Reading a price quote he currency market has its own set of market trading con- ventions and related lingo, just like any financial market. If T you’re new to currency trading, the mechanics and terminol- ogy may take some getting used to. But at the end of the day, most currency trade conventions are pretty straightforward. Buying and Selling Simultaneously The biggest mental hurdle facing newcomers to currencies, especially traders familiar with other markets, is getting their head around the idea that each currency trade consists of a simultaneous purchase and sale. In the stock market, for instance, if you buy 100 shares of Google, you own 100 shares and hope to see the price go up. When you want to exit that position, you simply sell what you bought earlier. Easy, right? But in currencies, the purchase of one currency involves the simultaneous sale of another currency. This is the exchange in foreign exchange. To put it another way, if you’re looking for the dollar to go higher, the question is “Higher against what?” The answer is another currency. In relative terms, if the dollar goes up against another currency, that other currency also has gone down against the dollar. To think of it in stock- market terms, when you buy a stock, you’re selling cash, and when you sell a stock, you’re buying cash.

Currencies come in pairs

To make matters easier, forex markets refer to trading curren- cies by pairs, with names that combine the two different cur- rencies being traded, or “exchanged,” against each other. Additionally, forex markets have given most currency pairs nicknames or abbreviations, which reference the pair and not necessarily the individual currencies involved. Major currency pairs The major currency pairs all involve the U.S. dollar on one side of the deal. The designations of the major currencies are expressed using International Standardization Organization (ISO) codes for each currency. Table 2-1 lists the most fre- quently traded currency pairs, what they’re called in conven- tional terms, and what nicknames the market has given them. Table 2-1 The Major U.S. Dollar Currency Pairs

ISO Currency Pair Countries Long Name Nickname EUR/USD Eurozone*/U.S. Euro-dollar N/A USD/JPY U.S./Japan Dollar-yen N/A GBP/USD United Kingdom/U.S. Sterling-dollar Sterling or Cable USD/CHF U.S./Switzerland Dollar-Swiss Swissy USD/CAD U.S./Canada Dollar-Canada Loonie AUD/USD Australia/U.S. Australian-dollar Aussie or Oz

NZD/USD New Zealand/U.S. New Zealand-dollar Kiwi * The Eurozone is made up of all the countries in the European Union that have adopted the euro as their currency. Major cross-currency pairs Although the vast majority of currency trading takes place in the dollar pairs, cross-currency pairs serve as an alternative to always trading the U.S. dollar. A cross-currency pair, or cross or crosses for short, is any currency pair that does not include the U.S. dollar. Cross rates are derived from the respective USD pairs but are quoted independently. Crosses enable traders to more directly target trades to spe- cific individual currencies to take advantage of news or events. For example, your analysis may suggest that the Japanese yen has the worst prospects of all the major currencies going for- ward, based on interest rates or the economic outlook. To take advantage of this, you’d be looking to sell JPY, but against which other currency? You consider the USD, potentially buying USD/JPY (buying USD/selling JPY) but then you con- clude that the USD’s prospects are not much better than the JPY’s. Further research on your part may point to another cur- rency that has a much better outlook (such as high or rising interest rates or signs of a strengthening economy), say the Australian dollar (AUD). In this example, you would then be looking to buy the AUD/JPY cross (buying AUD/selling JPY) to target your view that AUD has the best prospects among major currencies and the JPY the worst. The most actively traded crosses focus on the three major non- USD currencies (namely EUR, JPY, and GBP) and are referred to as euro crosses, yen crosses, and sterling crosses. Table 2-2 highlights the most actively traded cross currency pairs.

Table 2-2 Most Actively Traded Cross Pairs

ISO Currency Pair Countries Market Name EUR/CHF Eurozone/Switzerland Euro-Swiss EUR/GBP Eurozone/United Kingdom Euro-sterling EUR/JPY Eurozone/Japan Euro-yen GBP/JPY United Kingdom/Japan Sterling-yen AUD/JPY Australia/Japan Aussie-yen NZD/JPY New Zealand/Japan Kiwi-yen Base currencies and counter currencies When you look at currency pairs, you may notice that the currencies are combined in a seemingly strange order. For instance, if sterling-yen (GBP/JPY) is a yen cross, then why isn’t it referred to as “yen-sterling” and written “JPY/GBP”? The answer is that these quoting conventions evolved over the years to reflect tra- ditionally strong currencies versus traditionally weak currencies, with the strong currency coming first. It also reflects the market quoting convention where the first currency in the pair is known as the base cur- rency. The base currency is what you’re buying or selling when you buy or sell the pair. It’s also the notional, or face, amount of the trade. So if you buy 100,000 EUR/JPY, you’ve just bought 100,000 euros and sold the equivalent amount in Japanese yen. If you sell 100,000 GBP/CHF, you just sold 100,000 British pounds and bought the equivalent amount of Swiss francs. The second currency in the pair is called the counter currency, or the secondary currency. Hey, who said this stuff isn’t intuitive? Most impor- tant for you as an FX trader, the counter currency is the denomina- tion of the price fluctuations and, ultimately, what your profit and losses will be denominated in. If you buy GBP/JPY, it goes up, and you take a profit, your gains are not in pounds, but in yen. (We run through the math of calculating profit and loss later in this chapter.)

The long and the short of it

Forex markets use the same terms to express market position- ing as most other financial markets. But because currency trading involves simultaneous buying and selling, being clear on the terms helps — especially if you’re totally new to finan- cial market trading. Going long No, we’re not talking about running out deep for a football pass. A long position, or simply a long, refers to a market posi- tion in which you’ve bought a security. In FX, it refers to having bought a currency pair. When you’re long, you’re looking for prices to move higher, so you can sell at a higher price than where you bought. When you want to close a long position, you have to sell what you bought. If you’re buying at multiple price levels, you’re adding to longs and getting longer. Getting short A short position, or simply a short, refers to a market position in which you’ve sold a security that you never owned. In the stock market, selling a stock short requires borrowing the stock (and paying a fee to the lending brokerage) so you can sell it. In forex markets, it means you’ve sold a currency pair, meaning you’ve sold the base currency and bought the counter currency. So you’re still making an exchange, just in the opposite order and according to currency-pair quoting terms. When you’ve sold a currency pair, it’s called going short or getting short and it means you’re looking for the pair’s price to move lower so you can buy it back at a profit. If you sell at various price levels, you’re adding to shorts and getting shorter. In currency trading, going short is as common as going long. “Selling high and buying low” is a standard currency trading strategy. Currency pair rates reflect relative values between two cur- rencies and not an absolute price of a single stock or com- modity. Because currencies can fall or rise relative to each other, both in medium and long-term trends and minute-to- minute fluctuations, currency pair prices are as likely to be going down at any moment as they are up. To take advantage of such moves, forex traders routinely use short positions to exploit falling currency prices. Traders from other markets may feel uncomfortable with short selling, but it’s just some- thing you have to get your head around. Squaring up Having no position in the market is called being square or flat. If you have an open position and you want to close it, it’s called squaring up. If you’re short, you need to buy to square up. If you’re long, you need to sell to go flat. The only time you have no market exposure or financial risk is when you’re square.

Profit and Loss

Profit and loss (P&L) is how traders measure success and fail- ure. A clear understanding of how P&L works is especially critical to online margin trading, where your P&L directly affects the amount of margin you have to work with. Changes in your margin balance determine how much you can trade and for how long you can trade if prices move against you.

Margin balances and liquidations

When you open an online currency trading account, you’ll need to pony up cash as collateral to support the margin requirements established by your broker. That initial margin deposit becomes your opening margin balance and is the basis on which all your subsequent trades are collateralized. Unlike futures markets or margin-based equity trading, online forex brokerages do not issue margin calls (requests for more collateral to support open positions). Instead, they establish ratios of margin balances to open positions that must be maintained at all times. Here’s an example to help you understand how required margin ratios work. Say you have an account with a leverage ratio of 100:1 (so $1 of margin in your account can control a $100 position size), but your broker requires a 100% margin ratio, meaning you need to maintain 100% of the required margin at all times. The ratio varies with account size, but a 100% margin requirement is typical for small accounts. That means to have a position size of $10,000, you’d need $100 in your account, because $10,000 divided by the leverage ratio of 100 is $100. If your account’s margin balance falls below the required ratio, your broker probably has the right to close out your positions without any notice to you. If your broker liqui- dates your position, that usually means your losses are locked in and your margin balance just got smaller. Be sure you completely understand your broker’s margin requirements and liquidation policies. Requirements may differ depending on account size and whether you’re trading stan- dard lot sizes (100,000 currency units) or mini lot sizes (10,000 currency units). Some brokers’ liquidation policies allow for all positions to be liquidated if you fall below margin require- ments. Others close out the biggest losing positions or portions of losing positions until the required ratio is satisfied again. You can find the details in the fine print of the account opening con- tract that you sign. Always read the fine print to be sure you understand your broker’s margin and trading policies.

Unrealized and realized profit and loss

Most online forex brokers provide real-time mark-to-market calculations showing your margin balance. Mark-to-market is the calculation that shows your unrealized P&L based on where you could close your open positions in the market at that instant. Depending on your broker’s trading platform, if you’re long, the calculation will typically be based on where you could sell at that moment. If you’re short, the price used will be where you can buy at that moment. Your margin bal- ance is the sum of your initial margin deposit, your unrealized P&L, and your realized P&L. Realized P&L is what you get when you close out a trade posi- tion, or a portion of a trade position. If you close out the full position and go flat, whatever you made or lost leaves the unrealized P&L calculation and goes into your margin balance. If you only close a portion of your open positions, only that part of the trade’s P&L is realized and goes into the margin bal- ance. Your unrealized P&L continues to fluctuate based on the remaining open positions, as does your total margin balance. If you’ve got a winning position open, your unrealized P&L is positive and your margin balance increases. If the market is moving against your positions, your unrealized P&L is nega- tive and your margin balance is reduced. Forex prices change constantly, so your mark-to-market unrealized P&L and total margin balance also change constantly.

Calculating profit and loss with pips

Profit-and-loss calculations are pretty straightforward in terms of math — they’re all based on position size and the number of pips you make or lose. A pip is the smallest incre- ment of price fluctuation in currency prices. Pips can also be referred to as points; we use the two terms interchangeably. Looking at a few currency pairs helps you get an idea what a pip is. Most currency pairs are quoted using five digits. The placement of the decimal point depends on whether it’s a JPY currency pair, in which case there are two digits behind the decimal point. All others currency pairs have four digits behind the decimal point. In all cases, that last itty-bitty digit is the pip. Here are some major currency pairs and crosses, with the pip underlined: EUR/USD: 1.2853 USD/CHF: 1.2267 USD/JPY: 117.23 EUR/JPY: 150.65 Focus on the EUR/USD price first. Looking at EUR/USD, if the price moves from 1.2853 to 1.2873, it’s just gone up by 20 pips. If it goes from 1.2853 down to 1.2792, it’s just gone down by 61 pips. Pips provide an easy way to calculate the P&L. To turn that pip movement into a P&L calculation, all you need to know is the size of the position. For a 100,000 EUR/USD posi- tion, the 20-pip move equates to $200 (EUR 100,000 0.0020 = $200). For a 50,000 EUR/USD position, the 61-point move trans- lates into $305 (EUR 50,000 0.0061 = $305). Whether the amounts are positive or negative depends on whether you were long or short for each move. If you were short for the move higher, that’s a – in front of the $200, if you were long, it’s a +. EUR/USD is easy to calculate, especially for USD-based traders, because the P&L accrues in dollars. If you take USD/CHF, you’ve got another calculation to make before you can make sense of it. That’s because the P&L is going to be denominated in Swiss francs (CHF) because CHF is the counter currency. If USD/CHF drops from 1.2267 to 1.2233 and you’re short USD 100,000 for the move lower, you’ve just caught a 34-pip decline. That’s a profit worth CHF 340 (USD 100,000 0.0034 = CHF 340). Yeah but how much is that in real money? To convert it into USD, you need to divide the CHF 340 by the USD/CHF rate. Use the closing rate of the trade (1.2233), because that’s where the market was last, and you get USD 277.94. Even the venerable pip is in the process of being updated as electronic trading continues to advance. Just a couple para- graphs earlier, we tell you that the pip is the smallest incre- ment of currency price fluctuations. Not so fast. The online market is rapidly advancing to decimalizing pips (trading in 1⁄10 pips) and half-pip prices have been the norm in certain currency pairs in the interbank market for many years.

Factoring profit and loss into margin calculations

The good news is that online FX trading platforms calculate the P&L for you automatically, both unrealized while the trade is open and realized when the trade is closed. So why did we just drag you through the math of calculating P&L using pips? Because online brokerages only start calculating your P&L for you after you enter a trade. To structure your trade and manage your risk effectively (How big a position? How much margin to risk?), you’re going to need to calculate your P&L outcomes before you enter the trade. Understanding the P&L implications of a trade strategy you’re considering is critical to maintaining your margin balance and staying in control of your trading. This simple exercise can help prevent you from costly mistakes, like putting on a trade that’s too large, or putting stop-loss orders beyond prices where your account falls below the margin requirement. At the minimum, you need to calculate the price point at which your position will be liquidated when your margin balance falls below the required ratio.

Understanding Rollovers and Interest Rates

One market convention unique to currencies is rollovers. A rollover is a transaction where an open position from one value date (settlement date) is rolled over into the next value date. Rollovers represent the intersection of interest-rate markets and forex markets.

Currency is money, after all

Rollover rates are based on the difference in interest rates of the two currencies in the pair you’re trading. That’s because what you’re actually trading is good old-fashioned cash. When you’re long a currency, it’s like having a deposit in the bank. If you’re short a currency, it’s like having borrowed a loan. Just as you would expect to earn interest on a bank deposit or pay interest on a loan, you should expect an interest gain/expense for holding a currency position over the change in value. Think of an open currency position as one account with a pos- itive balance (the currency you’re long) and one with a nega- tive balance (the currency you’re short). But because your accounts are in two different currencies, the two interest rates of the different countries apply. The difference between the interest rates in the two countries is called the interest-rate differential. The larger the interest- rate differential, the larger the impact from rollovers. The nar- rower the interest-rate differential, the smaller the effect from rollovers. You can find relevant interest-rate levels of the major currencies from any number of financial-market Web sites. Look for the base or benchmark lending rates in each country.

Applying rollovers

Rollover transactions are usually carried out automatically by your forex broker if you hold an open position past the change in value date. Rollovers are applied to your open position by two offsetting trades that result in the same open position. Some online forex brokers apply the rollover rates by adjusting the aver- age rate of your open position. Other forex brokers apply rollover rates by applying the rollover credit or debit directly to your margin balance. Here’s what you need to remember about rollovers: Rollovers are applied to open positions after the 5 p.m. ET change in value date, or trade settlement date. Rollovers are not applied if you don’t carry a position over the change in value date. So if you’re square at the close of each trading day, you’ll never have to worry about rollovers. Rollovers represent the difference in interest rates between the two currencies in your open position, but they’re applied in currency-rate terms. Rollovers constitute net interest earned or paid by you, depending on the direction of your position. Rollovers can earn you money if you’re long the currency with the higher interest rate and short the currency with the lower interest rate. Rollovers cost you money if you’re short the currency with the higher interest rate and long the currency with the lower interest rates.

Understanding Currency Quotes

Here, we look at how online brokerages display currency prices and what they mean for trade and order execution. Keep in mind that different online forex brokers use different formats to display prices on their trading platforms.

Bids and offers

When you’re in front of your screen and looking at an online forex broker’s trading platform, you’ll see two prices for each currency pair. The price on the left-hand side is called the bid and the price on the right-hand side is called the offer (some call this the ask). The “bid” is the price at which you can sell the base currency. The “offer” is the price at which you can buy the base currency. Some brokers display the prices above and below each other, with the bid on the bottom and the offer on top. The easy way to tell the difference is that the bid price is always lower than the offer price. The price quotation of each bid and offer you see will have two components: the big figure and the dealing price. The big figure refers to the first three digits of the overall currency rate and is usually shown in a smaller font size or even in shadow. The dealing price refers to the last two digits of the overall cur- rency price and is brightly displayed in a larger font size. For example, in Figure 2-1 the full EUR/USD price quotation is 1.3493/95. The 1.34 is the big figure and is there to show you the full price level (or big figure) that the market is currently trading at. The 93/95 portion of the price is the bid/offer deal- ing price. Figure 2-1: A dealing box from the FOREX.com trading platform for EUR/USD shows the current bid and offer price. The “bid” (on the left) is the price at which you can sell Euros. The “offer” on the right, is the price at which you can buy Euros.

Spreads

A spread is the difference between the bid price and the offer price. Most online forex brokers utilize spread-based trading platforms for individual traders. Look at the spread as the compensation the broker receives for being the market-maker and executing your trade. Spreads vary from broker to broker and by currency pairs at each broker as well. Generally, the more liquid the currency pair, the narrower the spread; the less liquid the currency pair, the wider the spread. This is especially the case for some of the less-traded crosses. Chapter 3 Choosing Your Trading Style In This Chapter Determining what trading style fits you best Understanding the different trading styles Developing and maintaining market discipline efore you get involved in actively trading the forex market, take a step back and think about how you want B to approach the market. There is more to currency trading than meets the eye, and we think the trading style you choose is one of the most important determinants of overall trading success. This chapter takes you through the main points to consider as you define your own approach to trading currencies. We review the characteristics of some of the most commonly applied trading styles and discuss what they mean in concrete terms. We also run you through the essential elements of developing and sticking to a trading plan. Finding the Right Trading Style for You We’re frequently asked, “What’s the best way to trade the forex market?” That’s a loaded question that seems to imply there’s a right way and a wrong way to trade currencies. Unfortunately, there is no easy answer. Better put, there is no standard answer — one that applies to everyone. The forex market’s trading characteristics have something to offer every trading style (long-term, medium-term, or short- term) and approach (technical, fundamental, or a blend). So in terms of deciding what style or approach is best suited to currencies, the starting point is not the forex market itself, but your own individual circumstances and way of thinking.

Real-world and lifestyle considerations

Before you can begin to identify the trading style and approach that works best for you, give some serious thought to what resources you have available to support your trading. As with many of life’s endeavors, when it comes to financial-market trading, there are two main resources that people never seem to have enough of: time and money. Deciding how much of each you can devote to currency trading helps to establish how you pursue your trading goals. If you’re a full-time trader, you have lots of time to devote to market analysis and actually trading the market. But because currencies trade around the clock, you still have to be mindful of which session you’re trading, and of the daily peaks and troughs of activity and liquidity. (See Chapter 1 for trading- session specifics.) Just because the market is always open doesn’t mean it’s necessarily always a good time to trade. If you have a full-time job, your boss may not appreciate your taking time to catch up on the charts or economic data reports while you’re at work. That means you’ll have to use your free time to do your market research. Be realistic when you think about how much time you’ll be able to devote on a regular basis, keeping in mind family obligations and other personal circumstances. When it comes to money, we can’t stress enough that trading capital has to be risk capital and that you should never risk any money that you can’t afford to lose. The standard defini- tion of risk capital is money that, if lost, will not materially affect your standard of living. It goes without saying that bor- rowed money is not risk capital — you should never use bor- rowed money for speculative trading. When you determine how much risk capital you have avail- able for trading, you’ll have a better idea of what size account you can trade and what position size you can handle. Most online trading platforms typically offer generous leverage ratios that allow you to control a larger position with less required margin. But just because they offer high leverage doesn’t mean you have to fully utilize it.

Making time for market analysis

The full version of Currency Trading For Dummies talks about the amount of data and news that flows through the forex market on a daily basis — and it can be truly overwhelming. So how can an individual trader possibly keep up with all the data and news? The key is to develop an efficient daily routine of market analysis. Thanks to the Internet and online currency broker- ages, independent traders can access a variety of information. Your daily regimen of market analysis should focus on: Overnight forex market developments: Who said what, which data came out, and how the currency pairs reacted. Daily updates of other major market movements over the prior 24 hours and the stories behind them: If oil prices or U.S. Treasury yields rose or fell substantially, find out why. Data releases and market events (for example, the retail sales report, Fed speeches, central bank rate announcements) expected for that day: Ideally, you’ll monitor data and event calendars one week in advance, so you can be anticipating the outcomes along with the rest of the market. Multiple-time-frame technical analysis of major cur- rency pairs: There is nothing like the visual image of price action to fill in the blanks of how data and news affected individual currency pairs. Current events and geopolitical themes: Stay abreast on issues of major elections, political scandals, military con- flicts, and policy initiatives in the major currency nations.

Technical versus fundamental analysis

Ask yourself on what basis you’ll make your trading decisions — fundamental analysis or technical analysis? Fundamentals are the broad grouping of news and information that reflects the macroeconomic and political fortunes of the countries whose currencies are traded. Most of the time, when you hear someone talking about the fundamentals of a cur- rency, he’s referring to the economic fundamentals. Economic fundamentals are based on: Economic data reports Interest rate levels Monetary policy International trade flows International investment flows The term technicals refers to technical analysis, a form of market analysis most commonly involving chart analysis, trend-line analysis, and mathematical studies of price behav- ior, such as momentum or moving averages, to mention just a couple. We don’t know of too many currency traders who don’t follow some form of technical analysis in their trading. Even the stereotypical seat-of-the-pants, trade-your-gut traders are likely to at least be aware of technical price levels identified by others. If you’ve been an active trader in other financial markets, chances are, you’ve engaged in some technical analysis or at least heard of it. Followers of each discipline have always debated which approach works better. Rather than take sides, we suggest fol- lowing an approach that blends the two disciplines. In our experience, macroeconomic factors such as interest rates, relative growth rates, and market sentiment determine the big-picture direction of currency rates. But currencies rarely move in a straight line, which means there are plenty of short- term price fluctuations to take advantage of — and some of them can be substantial. Technical analysis can provide the guideposts along the route of the bigger price move, allowing traders to more accurately predict the direction and scope of future price changes. Most important, technical analysis is the key to constructing a well- defined trading strategy. For example, your fundamental analy- sis, data expectations, or plain old gut instinct may lead you to conclude that USD/JPY is going lower. But where exactly do you get short? Where do you take profit, and where do you cut your losses? You can use technical analysis to refine trade entry and exit points, and to decide whether and where to add to posi- tions or reduce them. Sometimes forex markets seem to be more driven by funda- mental factors, such as current economic data or comments from a central bank official. In those times, fundamentals pro- vide the catalysts for technical breakouts and reversals. At other times, technical developments seem to be leading the charge — a break of trend-line support may trigger stop-loss selling by market longs and bring in model systems that are selling based on the break of support. Subsequent economic reports may run counter to the directional breakout, but data be damned — the support is gone, and the market is selling. Approaching the market with a blend of fundamental and technical analysis improves your chances of both spotting trade opportunities and managing your trades more effec- tively. You’ll also be better prepared to handle markets that are alternately reacting to fundamental and technical develop- ments or some combination of the two.

Different Strokes for Different Folks

After you’ve given some thought to the time and resources you’re able to devote to currency trading and which approach you favor (technical, fundamental, or a blend), the next step is to settle on a trading style that best fits those choices. There are as many different trading styles and market approaches in FX as there are individuals in the market. But most trading styles can be grouped into three main categories that boil down to varying degrees of exposure to market risk. The two main elements of market risk are time and relative price movements. The longer you hold a position, the more risk you’re exposed to. The more of a price change you’re anticipating, the more risk you’re exposed to. In the next few sections we detail the three main trading styles and what they really mean for individual traders. Our aim here is not to advocate for any particular trading style, because styles frequently overlap, and you can adopt different styles for different trade opportunities or different market conditions. Instead, our goal is to give you an idea of the vari- ous approaches used by forex market professionals so you can understand the basis of each style.

Short-term, high-frequency day trading

Short-term trading in currencies is unlike short-term trading in most other markets. A short-term trade in stocks or commodi- ties usually means holding a position for a day to several days at least. But because of the liquidity and narrow bid/offer spreads in currencies, prices are constantly fluctuating in small increments. The steady and fluid price action in curren- cies allows for extremely short-term trading by speculators intent on capturing just a few pips (explained in Chapter 2) on each trade. Short-term forex trading typically involves holding a position for only a few seconds or minutes and rarely longer than an hour. But the time element is not the defining feature of short- term currency trading. Instead, the pip fluctuations are what’s important. Traders who follow a short-term trading style are seeking to profit by repeatedly opening and closing positions after gaining just a few pips, frequently as little as 1 or 2 pips. In the interbank market, extremely short-term, in-and-out trading is referred to as jobbing the market; online currency traders call it scalping. (We use the terms interchangeably.) Traders who follow this style have to be among the fastest and most disciplined of traders because they’re out to cap- ture only a few pips on each trade. In terms of speed, rapid reaction and instantaneous decision-making are essential to successfully jobbing the market. When it comes to discipline, scalpers must be absolutely ruth- less in both taking profits and losses. If you’re in it to make only a few pips on each trade, you can’t afford to lose much more than a few pips on each trade. Jobbing the market requires an intuitive feel for the market. (Some practitioners refer to it as rhythm trading.) Scalpers don’t worry about the fundamentals too much. If you were to ask a scalper for her opinion of a particular currency pair, she would be likely to respond along the lines of “It feels bid” or “It feels offered” (meaning, she senses an underlying buying or selling bias in the market — but only at that moment). If you ask her again a few minutes later, she may respond in the opposite direction. Successful scalpers have absolutely no allegiance to any single position. They couldn’t care less if the currency pair goes up or down. They’re strictly focused on the next few pips. Their position is either working for them, or they’re out of it faster than you can blink an eye. All they need is volatility and liquidity. Retail traders are typically faced with bid/offer spreads of between 2 and 5 pips. Although this makes jobbing slightly more difficult, it doesn’t mean you can’t still engage in short- term trading — it just means you’ll need to adjust the risk parameters of the style. Instead of looking to make 1 to 2 pips on each trade, you need to aim for a pip gain at least as large as the spread you’re dealing with in each currency pair. The other basic rules of taking only minimal losses and not hang- ing on to a position for too long still apply. Here are some other important guidelines to keep in mind when following a short-term trading strategy: Trade only the most liquid currency pairs, such as EUR/USD, USD/JPY, EUR/GBP, EUR/JPY, and EUR/CHF. The most liquid pairs have the tightest trading spreads and fewer sudden price jumps. Trade only during times of peak liquidity and market interest. Consistent liquidity and fluid market interest are essential to short-term trading strategies. Market liquidity is deepest during the European session when Asian and North American trading centers overlap with European time zones — about 2 a.m. to noon Eastern time (ET). Trading in other sessions can leave you with far fewer and less predictable short-term price move- ments to take advantage of. Focus your trading on only one pair at a time. If you’re aiming to capture second-by-second or minute-by-minute price movements, you’ll need to fully concentrate on one pair at a time. It’ll also improve your feel for the pair if that pair is all you’re watching. Preset your default trade size so you don’t have to keep specifying it on each deal. Look for a brokerage firm that offers click-and-deal trading so you’re not subject to execution delays or requotes. Adjust your risk and reward expectations to reflect the dealing spread of the currency pair you’re trading. With 2- to 5-pip spreads on most major pairs, you proba- bly need to capture 3 to 10 pips per trade to offset losses if the market moves against you. Avoid trading around data releases. Carrying a short- term position into a data release is very risky because prices can gap sharply after the release, blowing a short- term strategy out of the water. Markets are also prone to quick price adjustments in the 15 to 30 minutes ahead of major data releases as nearby orders are triggered. This can lead to a quick shift against your position that may not be resolved before the data comes out.

Medium-term directional trading

Medium-term positions are typically held for periods ranging anywhere from a few minutes to a few hours, but usually not much longer than a day. Just as with short-term trading, the key distinction for medium-term trading is not the length of time the position is open, but the amount of pips you’re seeking/risking. Where short-term trading looks to profit from the routine noise of minor price fluctuations, almost without regard for the overall direction of the market, medium-term trading seeks to get the overall direction right and profit from more significant currency rate moves. Almost as many currency speculators fall into the medium- term category (sometimes referred to as momentum trading and swing trading) as fall into the short-term trading category. Medium-term trading requires many of the same skills as short-term trading, especially when it comes to entering/ exiting positions, but it also demands a broader perspective, greater analytical effort, and a lot more patience. Capturing intraday price moves for maximum effect The essence of medium-term trading is determining where a currency pair is likely to go over the next several hours or days and constructing a trading strategy to exploit that view. Medium-term traders typically pursue one of the following overall approaches, with plenty of room to combine strategies: Trading a view: Having a fundamental-based opinion on which way a currency pair is likely to move. View trades are typically based on prevailing market themes, like interest rate expectations or economic growth trends. View traders still need to be aware of technical levels as part of an overall trading plan. Trading the technicals: Basing your market outlook on chart patterns, trend lines, support and resistance levels, and momentum studies. Technical traders typically spot a trade opportunity on their charts, but they still need to be aware of fundamental events, because they’re the cat- alysts for many breaks of technical levels. Trading events and data: Basing positions on expected outcomes of events, like a central bank rate decision or a G7 meeting, or individual data reports. Event/data traders typically open positions well in advance of events and close them when the outcome is known. Trading with the flow: Trading based on overall market direction (trend) or information of major buying and sell- ing (flows). To trade on flow information, look for a broker that offers market flow commentary, like that found in FOREX.com’s Forex Insider (www.forex.com/forex_ research.html). Flow traders tend to stay out of short- term range-bound markets and jump in only when a market move is under way. When is a trend not a trend? When it’s a range. A trading range or a range-bound market is a market that remains confined within a relatively narrow range of prices. In currency pairs, a short-term (over the next few hours) trading range may be 20 to 50 pips wide, while a longer-term (over the next few days to weeks) range can be 200 to 400 pips wide. For all the hype that trends get in various market literature, the reality is that most markets trend no more than a third of the time. The rest of the time they’re bouncing around in ranges, consolidating, and trading sideways. Although medium-term traders are normally looking to cap- ture larger relative price movements — say, 50 to 100 pips or more — they’re also quick to take smaller profits on the basis of short-term price behavior. For instance, if a break of a technical resistance level suggests a targeted price move of 80 pips higher to the next resistance level, the medium-term trader is going to be more than happy capturing 70 percent to 80 percent of the expected price move. They’re not going to hold on to the position looking for the exact price target to be hit.

Long-term macroeconomic trading

Long-term trading in currencies is generally reserved for hedge funds and other institutional types with deep pockets. Long-term trading in currencies can involve holding positions for weeks, months, and potentially years at a time. Holding positions for that long necessarily involves being exposed to significant short-term volatility that can quickly overwhelm margin trading accounts. With proper risk management, individual margin traders can seek to capture longer-term trends. The key is to hold a small enough position relative to your margin balance that you can withstand volatility of as much as 5 percent or more.

Carry trade strategies

A carry trade happens when you buy a high-yielding currency and sell a relatively lower-yielding currency. The strategy prof- its in two ways: By being long the higher-yielding currency and short the lower-yielding currency, you can earn the interest- rate differential between the two currencies, known as the carry. If you have the opposite position — long the low-yielder and short the high-yielder — the interest-rate differential is against you, and it is known as the cost of carry. Spot prices appreciate in the direction of the interest- rate differential. Currency pairs with significant interest- rate differentials tend to move in favor of the higher- yielding currency as traders who are long the high yielder are rewarded, increasing buying interest, and traders who are short the high yielder are penalized, reducing selling interest. So let me get this straight, you may be thinking: All I have to do is buy the higher-yielding currency/sell the lower-yielding currency, sit back, earn the carry, and watch the spot price move higher? What’s the catch? The catch is that downside spot price volatility can quickly swamp any gains from the carry trade’s interest-rate differen- tial. The risk can be compounded by excessive market posi- tioning in favor of the carry trade, meaning a carry trade has become so popular that everyone gets in on it. Figure 3-1 illus- trates the trending price gains of a carry trade, punctuated by sudden price setbacks. Carry trades usually work best in low-volatility environments, meaning when financial markets are relatively stable and investors are forced to chase yield. Keep in mind that carry trades need to have a significant interest-rate differential between the two currencies (typically more than 2 percent) to make them attractive. And carry trades are definitely a long- term strategy, because depending on when you get in, you may get caught in a downdraft that could take several days or weeks to unwind before the trade becomes profitable again. Daily NZD/JPY Carry trades can see significant spot price gains punctuated by rapid price reversals. Figure 3-1: NZD/JPY trends higher in line with carry trade fundamentals (New Zealand’s interest rates are much higher than Japan’s), but it meets sharp setbacks along the way.

Developing a Disciplined Trading Plan

No matter which trading style you decide to pursue, you need an organized trading plan, or you won’t get very far. The dif- ference between making money and losing money in the forex market can be as simple as trading with a plan or trading with- out one. A trading plan is an organized approach to executing a trade strategy that you’ve developed based on your market analysis and outlook. Here are the key components of any trading plan: Determining position size: How large a position will you take for each trade strategy? Position size is half the equation for determining how much money is at stake in each trade. Deciding where to enter the position: Exactly where will you try to open the desired position? What happens if your entry level is not reached? Setting stop-loss and take-profit levels: Exactly where will you exit the position, both if it’s a winning position (take profit) and if it’s a losing position (stop loss)? Stop- loss and take-profit levels are the second half of the equa- tion that determines how much money is at stake in each trade. That’s it — just three simple components. But it’s amazing how many traders, experienced and beginner alike, open posi- tions without ever having fully thought through exactly what their game plan is. Of course, you need to consider numerous finer points when constructing a trading plan, and we focus on them more in the full version of Currency Trading For Dummies. But for now, we just want to drive home the point that trading without an organized plan is like flying an air- plane blindfolded — you may be able to get off the ground, but how will you land? And no matter how good your trading plan is, it won’t work if you don’t follow it. Sometimes emotions bubble up and distract traders from their trade plans. Other times, an un- expected piece of news or price movement causes traders to abandon their trade strategy in midstream, or midtrade, as the case may be. Either way, when this happens, it’s the same as never having had a trade plan in the first place. Developing a trade plan and sticking to it are the two main ingredients of trading discipline. If we were to name the one defining characteristic of successful traders, it wouldn’t be technical analysis skill, gut instinct, or aggressiveness — though they’re all important. Nope, it would be trading disci- pline. Traders who follow a disciplined approach are the ones who survive year after year and market cycle after market cycle. They can even be wrong more often than right and still make money because they follow a disciplined approach.

Taking the Emotion Out of Trading

If the key to successful trading is a disciplined approach — developing a trading plan and sticking to it — why is it so hard for many traders to practice trading discipline? The answer is complex, but it usually boils down to a simple case of human emotions getting the better of them. Don’t under- estimate the power of emotions to distract and disrupt. So exactly how do you take the emotion out of trading? The simple answer is: You can’t. As long as your heart is pumping and your synapses are firing, emotions are going to be flowing. And truth be told, the emotional highs of trading are one of the reasons people are drawn to it in the first place. There’s no rush quite like putting on a successful trade and taking some money out of the market. So just accept that you’re going to experience some pretty intense emotions when you’re trading. The longer answer is that because you can’t block out the emotions, the best you can hope to achieve is understanding where the emotions are coming from, recognizing them when they hit, and limiting their impact on your trading. It’s a lot easier said than done, but keep in mind some of the following to keep your emotions in check: Focus on the pips and not the dollars and cents. Don’t be distracted by the exact amount of money won or lost in a trade. Instead, focus on where prices are and how they’re behaving. The market has no idea what your trade size is and how much you’re making or losing, but it does know where the current price is. It’s not about being right or wrong; it’s about making money. The market doesn’t care if you were right or wrong, and neither should you. The only true way of measuring trading success is in dollars and cents. You’re going to lose in a fair number of trades. No trader is right all of the time. Taking losses is as much a part of the routine as taking profits. You can still be suc- cessful over time with a solid risk-management plan. Chapter 4 Getting Started with Your Practice Account In This Chapter Getting the most out of your practice account Pulling the trigger Managing the trade Evaluating your results he best way for newcomers to get a handle on what cur- rency trading is all about is to open a practice account. T Almost every forex broker offers a free practice account to prospective clients; all you need to do is sign up for one on the broker’s Web site. Practice accounts are funded with “vir- tual” money, so you’re able to make trades with no real money at stake and gain experience in how margin trading works. Practice accounts give you a great chance to experience the forex market. You can see how prices change at different times of the day, how various currency pairs may differ from each other, and how the forex market reacts to new informa- tion when major news and economic data is released. You also can start trading in real market conditions without any fear of losing money, experiment with different trading strategies to see how they work, gain experience using different orders and managing open positions, improve your understanding of how margin trading and leverage work, and start analyzing charts and following technical indicators. Practice accounts are a great way to experience the forex market up close and personal. They’re also an excellent way to test-drive all the features and functionality of a broker’s platform. However, the one thing you can’t simulate is the emotion of trading with real money. To get the most out of your practice-account experience, treat your practice account as if it were real money. Pulling the Trigger It’s trigger-pulling time, pardner. This section assumes you’ve signed up for a practice account at an online forex broker and you’re ready to start executing some practice trades. You make trades in the forex market one of two ways: You can trade at the market, or the current price, using the click-and- deal feature of your broker’s platform; or you can employ orders, such as limit orders and one-cancels-the-other orders (OCOs).

Clicking and dealing

Many traders like the idea of opening a position by trading at the market as opposed to leaving an order that may or may not be executed. They prefer the certainty of knowing that they’re in the market. Actively buying and selling are also elements that make trading and speculating as much fun as hard work. Most forex brokers provide live streaming prices that you can deal on with a simple click of your computer mouse. To exe- cute a trade on those platforms:

Specify the amount of the trade you want to make.

Click on the Buy or Sell button to execute the trade.

The forex trading platform responds back, usually within a second or two, to let you know whether the trade went through: If the trade went through, you’ll receive a pop-up confir- mation from the platform and see your open position list- ing updated to reflect the new trade. If the trade fails because the trading price changed before your request was received, you receive a response indicating “rates changed,” “price not available,” or something along those lines. You then need to repeat the steps to make another trade attempt. Attempts to trade at the market can sometimes fail in very fast-moving markets when prices are adjusting quickly, like after a data release or break of a key techni- cal level or price point. Part of this stems from the latency effect of trading over the Internet, which refers to time lags between the platform price reaching your computer and your trade request reaching the platform’s server. If the trade fails because the trade was too large based on your margin, you need to reduce the size of the trade. Understand from the get-go that any action you take on a trad- ing platform is your responsibility. You may have meant to click Buy instead of Sell, but no one knows for sure except you.

Using Orders

Orders are critical trading tools in the forex market. Think of them as trades waiting to happen, because that’s exactly what they are. If you enter an order and a subsequent price action triggers its execution, you’re in the market, so be as careful as you are thorough when placing your orders in the market. Currency traders use orders to catch market movements when they’re not in front of their screens. Remember: The forex market is open 24 hours a day, five days a week. A market move is just as likely to happen while you’re asleep or in the shower as while you’re watching your screen. If you’re not a full-time trader, then you’ve probably got a full-time job that requires your attention when you’re at work. (At least your boss hopes he has your attention.) Orders are how you can act in the market without being there. Experienced currency traders also routinely use orders to: Implement a trade strategy from entry to exit Capture sharp, short-term price fluctuations Limit risk in volatile or uncertain markets Preserve trading capital from unwanted losses Maintain trading discipline Protect profits and minimize losses We can’t stress enough the importance of using orders in cur- rency trading. Forex markets can be notoriously volatile and difficult to predict. Using orders helps you capitalize on short- term market movements while limiting the impact of any adverse price moves. While there is no guarantee that the use of orders will limit your losses or protect your profits in all market conditions, a disciplined use of orders helps you to quantify the risk you’re taking and, with any luck, gives you peace of mind in your trading. Bottom line: If you don’t use orders, you probably don’t have a well-thought-out trading strategy — and that’s a recipe for pain.

Types of orders

Multiple types of orders are available in the forex market. Bear in mind that not all order types are available at all online brokers, so add order types to your list of questions to ask your prospective forex broker. Take-profit orders Don’t you just love that name? An old market saying goes, “You can’t go broke taking profit.” Use take-profit orders to lock in gains when you have an open position in the market. If you’re short USD/JPY at 117.20, your take-profit order will be to buy back the position and be placed somewhere below that price, say at 116.80 for instance. If you’re long GBP/USD at 1.8840, your take-profit order will be to sell the position some- where higher, maybe 1.8875. Limit orders A limit order is any order that triggers a trade at more favor- able levels than the current market price. Think “Buy low, sell high.” If the limit order is to buy, it must be entered at a price below the current market price. If the limit order is to sell, it must be placed at a price higher than the current market price. Stop-loss orders Boo! Sound’s bad doesn’t it? Actually, stop-loss orders are crit- ical to trading survival. The traditional stop-loss order does just that: It stops losses by closing out an open position that is losing money. Use stop-loss orders to limit your losses if the market moves against your position. If you don’t, you’re leav- ing it up to the market, and that’s dangerous. Stop-loss orders are on the other side of the current price from take-profit orders, but in the same direction (in terms of buying or selling). If you’re long, your stop-loss order will be to sell, but at a lower price than the current market price. If you’re short, your stop-loss order will be to buy, but at a higher price than the current market. Trailing stop-loss orders You may have heard that one of the keys to successful trading is to cut losing positions quickly, and let winning positions run. A trailing stop-loss order allows you to do just that. The idea is that when you have a winning trade on, you wait for the market to stage a reversal and take you out, instead of trying to pick the right level to exit on your own. A trailing stop-loss order is a stop-loss order that you set at a fixed number of pips from your entry rate. The trailing stop adjusts the order rate as the market price moves, but only in the direction of your trade. For example, if you’re long EUR/CHF at 1.5750 and you set the trailing stop at 30 pips, the stop will initially become active at 1.5720 (1.5750–30 pips). If the EUR/CHF price moves higher to 1.5760, the stop adjusts higher, pip for pip, with the price and will then be active at 1.5730. The trailing stop continues to adjust higher as long as the market continues to move higher. When the market puts in a top, your trailing stop will be 30 pips (or whatever dis- tance you specify) below that top, wherever it may be. If the market ever goes down by 30 pips, as in this example, your stop will be triggered and your position closed. So in this case, if you’re long at 1.5750 and you set a 30-pip trailing stop, the stop initially becomes active at 1.5720. If the market never ticks up and goes straight down, you’ll be stopped out at 1.5720. If the price first rises to 1.5775 and then declines by 60 points, your trailing stop will have risen to 1.5745 (1.5775–30 pips) and that’s where you’ll be stopped out. Pretty cool, huh? One-cancels-the-other orders A one-cancels-the-other order (more commonly referred to as an OCO order) is a stop-loss order paired with a take-profit order. An OCO order is the ultimate insurance policy for any open position. Your position stays open until one of the order levels is reached by the market and closes your position. When one order level is reached and triggered, the other order automatically cancels. Let’s say you’re short USD/JPY at 117.00. You think if it goes up beyond 117.50, it’s going to keep going higher, so that’s where you decide to place your stop-loss buying order. At the same time, you believe that USD/JPY has downside potential to 116.25, so that’s where you set your take-profit buying order. You now have two orders bracketing the market and your risk is clearly defined. As long as the market trades between 116.26 and 117.49, your position remains open. If 116.25 is reached first, your take profit triggers and you buy back at a profit. If 117.50 is hit first, then your position is stopped out at a loss. OCO orders are highly recommended for every open position. Contingent orders A contingent order is a fancy term for combining several types of orders to create a complete currency trade strategy. Use con- tingent orders to put on a trade while you’re asleep, or other- wise indisposed, knowing that you’re contingent order has all the bases covered and your risks are defined. Contingent orders are also referred to as if/then orders. If/then orders require the If order to be done first, and then the second part of the order becomes active, so they’re sometimes called If done/then orders. The key feature of most brokers’ order policies is that your orders are executed based on the price spread of the trading platform. That means that your limit order to buy is only filled if the trading platform’s offer price reaches your buy rate. A limit order to sell is only triggered if the trading platform’s bid price reaches your sell rate. In practical terms, let’s say you have an order to buy EUR/USD at 1.2855 and the broker’s EUR/USD spread is 3 pips. Your buy order will only be filled if the platform’s price deals 1.2852/55. If the lowest price is 1.2853/56, no cigar, because the broker’s lowest offer of 56 never reached your buying rate of 55. The same thing happens with limit orders to sell. Stop-loss execution policies are slightly different than in equity trading. Stop-loss orders to sell are triggered if the broker’s bid price reaches your stop-loss order rate. In concrete terms, if your stop-loss order to sell is at 1.2820 and the broker’s lowest price quote is 1.2820/23, your stop will be filled at 1.2820. Stop-loss orders to buy are triggered if the platform’s offer price reaches your stop-loss rate. If your stop order to buy is at 1.2875 and the broker’s high quote is 1.2872/75, your stop will be filled at 1.2875. The benefit of this practice is that some firms will guarantee against slippage on your stop-loss orders in normal trading conditions. (Rarely, if ever, will a broker guarantee stop losses around the release of economic reports.) The downside is that your order will likely be triggered earlier than stop-loss orders in other markets, so you’ll need to add in some extra cushion when placing them on your forex platform.

Managing the Trade

So you’ve pulled the trigger and opened up the position, and now you’re in the market. Time to sit back and let the market do its thing, right? Not so fast, amigo. The forex market isn’t a roulette wheel where you place your bets, watch the wheel spin, and simply take the results. It’s a dynamic, fluid environ- ment where new information and price developments create new opportunities and alter previous expectations. We hope you’ll take to heart our recommendations about always trading with a plan — identifying in advance where to enter and where to exit every trade, on both a stop-loss and take-profit basis. Bottom line: You improve your overall chances of trading success (and minimize the risks involved) by thoroughly planning each trade before getting caught up in the emotions and noise of the market. Depending on the style of trading you’re pursuing (short-term versus medium- to long-term) and overall market conditions (range-bound versus trending), you’ll have either more or less to do when managing an open position. If you’re following a medium- to longer-term strategy, with generally wider stop- loss and take-profit parameters, you may prefer to go with the “set it and forget it” trade plan you’ve developed. But a lot can happen between the time you open a trade and prices hitting one of your trade levels, so staying on top of the market is still a good idea, even for longer-term trades.

Monitoring the Market while Your Trade Is Active

No matter which trading style you follow, it pays to keep up with market news and price developments while your trade is active. Unexpected news that impacts your position may come into the market at any time. News is news; by definition, you couldn’t have accounted for it in your trading plan, so fresh news may require making changes to your trading plan. When we talk about making changes to the trading plan, we’re referring only to reducing the overall risk of the trade, by taking profit (full or partial) or moving the stop loss in the direction of the trade. The idea is to be fluid and dynamic in one direction only: taking profit and reducing risk. Keep your ultimate stop-out point where you decided it should go before you entered the trade.

Staying alert for news and data developments

If your trade rationale is reliant on certain data or event expectations, you need to be especially alert for upcoming reports on those themes. Part of your calculus to go short EUR/USD, for instance, may be based on the view that Eurozone inflation pressures are receding, suggesting lower Eurozone interest rates ahead. If the next day’s Eurozone consumer price index (CPI) report confirms your view, the fundamental basis for maintaining the strategy is reinforced. You may then consider whether to increase your take-profit objective depending on the market’s reaction. By the same token, if the CPI report comes out un- expectedly high, the fundamental basis for your trade is seri- ously undermined and serves as a clue to exit the trade earlier than you originally planned. Every trade strategy needs to take into account upcoming news and data events before the position is opened. Ideally, you should be aware of all data reports and news events scheduled to occur during the anticipated time horizon of your trade strategy. You should also have a good understand- ing of what the market is expecting in terms of event out- comes to anticipate how the market is likely to react.

Keeping an eye on other financial markets

Forex markets function alongside other major financial mar- kets, such as stocks, bonds, and commodities (e.g. gold, oil, etc.). Important fundamental and psychological relationships (discussed more in Chapter 1) exist between other markets and currencies, especially the U.S. dollar, so look to develop- ments in other financial markets to see whether they confirm or contradict price moves in the dollar pairs.

Evaluating Your Trading Results

Regardless of the outcome of any trade, you want to look back over the whole process to understand what you did right and wrong. In particular, ask yourself the following questions: How did you identify the trade opportunity? Was it based on technical analysis, a fundamental view, or some combination of the two? Looking at your trade this way helps identify your strengths and weaknesses as either a fundamental or technical trader. For example, if technical analysis generates more of your winning trades, you’ll probably want to devote more energy to that approach. How well did your trade plan work out? Was the posi- tion size sufficient to match the risk and reward scenar- ios, or was it too large or too small? Could you have entered at a better level? What tools might you have used to improve your entry timing? Were you patient enough, or did you rush in thinking you’d never have the chance again? Was your take profit realistic or pie in the sky? Did the market pay any respect to your choice of take-profit levels, or did prices blow right through it? Ask yourself the same questions about your stop-loss level. Use the answers to refine your position size, entry level, and order placement going forward. How well did you manage the trade after it was open? Were you able to effectively monitor the market while your trade was active? If so, how? If not, why not? The answers to those questions reveal a lot about how much time and dedication you’re able to devote to your trad- ing. Did you modify your trade plan along the way? Did you adjust stop-loss orders to protect profits? Did you take partial profit at all? Did you close out the trade based on your trading plan, or did the market surprise you somehow? Based on your answers, you’ll learn what role your emotions may have played and how disciplined a trader you are. There are no right and wrong answers in this review process; just be as honest with yourself as you can be. No one else will ever know your answers, and you have everything to gain by identifying what you’re good at, what you’re not so good at, and how you as a currency trader should best approach the market. Currency trading is all about getting out of it what you put into it. Evaluating your trading results on a regular basis is an essential step in improving your trading skills, refining your trading styles, maximizing your trading strengths, and mini- mizing your trading weaknesses. If you like this minibook, you'll love Currency Trading For Dummies ISBN: 978-0-470-12763-6 • $24.99 Featuring forex market guidelines and sample trading plans, Currency Trading For Dummies is the next step in identifying all your trading opportunities. Available wherever books are sold! Get the most out of your forex practice account! The fun and easy way® to get started in online currency trading This nuts-and-bolts guide offers essential information about trading currencies and includes a simple action plan for getting started with a practice account.Whether you’re an experienced trader in other markets looking to expand into currencies, or a total newcomer to trading, this book is an ideal place to start. Mark Galant founded GAIN Capital in 1999; today, the firm's proprietary trading platform is used by clients from 140 countries around the globe. Brian Dolan has over 18 years of experience in the foreign exchange markets and oversees fundamental and technical research at FOREX.com. Identify trading opportunities Understand what drives the market Execute a successful practice trade Use orders to minimize risk and maximize profit @ Find listings of all our books Choose from many different subject categories Sign up for eTips at etips.dummies.com ISBN: 978-0-470-25143-0 Book not resalable

0 notes