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Table of Contents
What is Forex and how does It work?........................................................................................................... 3
Pair characteristics (the majors and the crosses) ......................................................................................... 3
Introduction to charting................................................................................................................................ 4
Introduction to technical analysis ................................................................................................................. 4
Inherent risks of off exchange Forex trading ................................................................................................ 5
Understanding and trading the news ........................................................................................................... 5
Earning interest in Forex and other portfolio strategies .............................................................................. 6
Introduction to Fibonacci analysis ................................................................................................................ 6
Economic indicators and their affect on Forex prices .................................................................................. 7
Using technical indicators ............................................................................................................................. 7
Introduction to fundamental analysis........................................................................................................... 7
Gold and silver .............................................................................................................................................. 8
Money management..................................................................................................................................... 9
Position sizing................................................................................................................................................ 9

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What is Forex and how does It work?

Before we delve any deeper into the possibilities that exist in the Forex market, we need to go over some
basic Forex market terms.
Pip: A pip (percentage in point) or point, is usually the smallest unit of measurement in the Forex market.
Most currency pair quotes are carried out four decimal placesi.e. 1.4500. When you work with Alpari
quotes are carried out to the 5th decimal place to provide better pricing. The 5th decimal place represents
fractional pips. If the exchange rate of a currency pair moved from 1.45000 to 1.45100, we would say that
the price moved up 10 pips. You make money when the pips move your way in a trade.
Note: Any exchange rate that contains the Japanese yen as one of the currencies will only be carried out
three decimal places.
Currency Pair: We wouldn't have a Forex market if we weren't able to compare the value of one currency
against the value of another currency. It is this comparison that drives prices. Forex contracts are always
quoted in pairs. The Euro vs. the U.S. dollar (EUR/USD) is the most heavily traded currency pair. The
U.S. dollar vs. the Japanese yen (USD/JPY) is another popular pair.
The following is a list of the most common currency pairs, their trading symbols and their nicknames:
Euro vs. U.S. dollar (EUR/USD): "The Euro"
Great Britain Pound vs. U.S. dollar (GBP/USD): "Pound," "Sterling," or "The Cable."
U.S. dollar vs. Swiss franc (USD/CHF): "The Swissie
U.S. dollar vs. Japanese yen (USD/JPY): "The Yen"
U.S. dollar vs. Canadian dollar (USD/CAD): "The CAD," or "Loonie"
Australian dollar vs. U.S. dollar (AUD/USD): "The Aussie"
New Zealand dollar vs. U.S. dollar (NZD/USD): "The Kiwi"

Pair characteristics (the majors and the crosses)

Forex pairs are divided into two broad categories. There are the majors that include the most frequently
traded and most liquid currency pairs and the crosses. The majors all include the USD as either the base
or quote currency. The cross currency pairs do not include the dollar because they "cross" two other
currencies with each other.
The Majors
The most actively traded currency pairs are the majors. These are all crossed with the USD and make up
the majority of annual trading volume in the forex market. For example, according to the Bank for
International Settlements the EUR/USD makes 27% of all forex trading alone. If you combined the trading
volume of the EUR/USD with the GBP/USD and the USD/JPY you would have captured 52% of annual
trading volume. Most traders start their forex career by becoming familiar with the most popular majors
before beginning to trade the crosses or smaller major pairs.

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Introduction to charting
Charting is a primary tool of use by the forex trader. Combined with solid fundamental analysis, it give
traders insight into trade timing and potential profitability.
Reading and analyzing charts is something that you get better at with time and experience. But it's also
easy to abuse, as it's a highly subjective exercise that you must learn to adapt to your trading style. Be
sure to understand whether you're long- or short-term focused, and decide if you're aggressive or more
conservative, as those factors impact your use of charting and technical analysis.

Introduction to technical analysis

A chart for a currency pair will begin to form predictable patterns during trends. A pattern usually forms
when a pair is in the process of changing: slowing down, reversing trend, etc. When that happens, it's a
signal to take a step back and evaluate what may happen.
Proper understanding of price patterns on a chart will help you better determine the probability of the
currency pair continuing the trend it was in, or reversing to develop a new trend. This helps you
determine whether to buy, sell or hold.
Price patterns are an underutilized and extremely valuable tool in your forex trading arsenal. It may take
a little while to get comfortable dealing with the subtle nuances and occasional ambiguity that are a part
of price pattern analysis, but once you get the basics figured out, you will be able to confidently make
informed trading decisions.
It's also important to understand that price patterns are visual representations of market psychology.
They tell you when traders in the market are excited and moving, when they need to take a moment
and catch their breath and regroup and when they are ready to get moving again.
All price patterns are made of the following four pieces:
Old trend: the trend that the currency pair is in as it starts to form the price pattern
Consolidation zone: a constrained area where the pair isn't clearly continuing the trend or forming a
new one
Breakout point: the point which the currency pair breaks the consolidation zone
New trend: the trend the currency pair enters coming out of the consolidation zone

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Inherent risks of off exchange Forex trading

There are a lot of great things about trading in the forex but there are a few, easy to understand risks
inherent in trading in the off-exchange or "spot" forex market. While there is little that can be done to
eliminate these risks being forewarned is forearmed and can help you manage expectations. The risks I
am referring to typically fall into the two categories listed below. Make sure you understand what these
risks mean before you make a trade in the forex.
1. Leveraged or "Geared" Products
Forex is a leveraged product. This leverage or gearing allows you to control a very large amount of
currency with very little margin. This means that a very small movement in the market may result in a
large loss in your account. Because forex trading is a leveraged product, it is possible to lose more than
you have invested.
2. Risk Reduction Strategies May Have Limited Effect
While it is generally accepted to be a good practice to use stop losses, they are not guaranteed. If
market conditions prevent a stop loss or stop limit order from being executed you could be liable for
those additional losses. In addition, because trading the forex is a leveraged product you may lose more
that your account balance and could be responsible for those additional losses.

Action Items:
1. Read the Risk Warnings
Consider these risks carefully and make sure that you understand them before you start trading. Take
the time to read the risk disclosures and warnings provided by your dealer. Ask your dealer if you have
questions about what you have read.
2. Get Educated
There is no satisfactory substitute for education. Make sure you have taken advantage of all the
educational resources available to you. There are no shortcuts in this process and it will take some work
and effort

Understanding and trading the news

The news in the forex is mostly related to economic events and announcements. Aside from central
bankers, there are very few "personalities" that can move the market very much.

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Unlike the stock market, where each company represents its own micro-economy, currency prices reflect
economy as a whole. Because forex news comes mostly from government and association sources, it
can seem a little boring, and all the acronyms and dates are tough to keep straight.
Utilizing the news correctly can help with those issues and help you turn it into a productive tool you can
use in your trading.

Earning interest in Forex and other portfolio strategies

Another unique factor in forex trading is Interest, or carry. Each currency pair has an interest payment or
charge associated with holding the position long or short. For instance, on some pairs, a payment may
be made if you are in a long position, and a charge is made if you are short the pair. That charge or
payment is the interest or carry for that particular pair.
"Interest," and "carry" are terms used by your dealer to describe this interest premium paid or charged
on each forex pair.
The amount charged or received on each of your forex positions can be seen on the MetaTrader 4
application in the "Terminal." The premium can change on a daily basis but typically not dramatically.
This interest premium is derived from the difference in short term interest rates between the two
economies represented by the currencies in the pair you are trading. The short term interest rates used
are the overnight LIBOR rates. These are typically set by the British Banker's Association and are
changed on a daily basis.
Interest on Wednesdays
A surprising fact for many new forex traders is that the interest payment or charge is tripled on
Wednesdays. This extra payment is to cover the interest that would normally have been paid on
Saturday and Sunday when the market is unavailable for trading.

Introduction to Fibonacci analysis

Fibonacci analysis is a technical method for forecasting levels of support and resistance and projecting
price targets. It can be used to set stops as well as timing entries, however, the most valuable
information is what it can tell us about risk.

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Economic indicators and their affect on Forex prices

Economic indicators are important to forex traders, as they represent vital data in evaluating the
underlying strength or weakness of a currency's economy. While their use short-term is highly
subjective, using them as a gauge for long-term trends can be very effective.
These indicators usually fall into two categories: Trade Indicators and Capital (cash) flow indicators.
From an economic perspective this should make sense. Trade and capital flows are two sides of the
balance of payments for an economy. The balance of payments for any economy tracks all the money
moving in or out of an economy. An increase of money moving out of an economy will be bad for the
currency while an increase in the money coming into the economy will be good for a currency.
Trade indicators tell us what is going on with the current account or first half of the balance of
payments. Capital flows report what is going on in the capital account or the second half of the balance
of payments. All economic indicators will provide information about one side of the balance of
payments or the other and sometimes both.

Using technical indicators

A typical technical indicator applied to a chart uses one to three pieces of information: time, price
and/or volume. The indicator takes that information and creates a visual representation of the data to
give you insight into where a pair is headed.
Because Forex is a distributed market, there is very little volume information. That usually leaves just
price and time. There are a lot of ways to analyze that information and the potential variables are
endless. Understanding how to wade through this data is vital. Technical indicators are designed to help.

Introduction to fundamental analysis

We have found that forex traders tend to focus on one type of analysis or the other (fundamental or
technical) in their trading and will often completely dismiss other types.
We encourage traders to spend the time it takes to understand the underlying forces moving the market
(fundamental analysis) as well as what is happening in price, volume and volatility (technical analysis).
We separate fundamental forces into two categories:
Trade Fundamentals
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Of course trade number themselves are obviously the key announcement that we pay attention to when
analyzing this fundamental. Trade data is released in most economies once a month and the trend of
that information is important. If exports are increasing over time, we would expect the currency to
appreciate versus other currencies whose, exports or net exports are shrinking.
Other announcements will affect trade numbers indirectly. For example, if producer prices are
increasing, it can make an country's exports more expensive and therefore could hurt trade export
numbers. Similarly, falling commodity prices could damage exporter profitability and in turn hurt a
currency's value.
Whether you are looking at the actual trade numbers from an economy or supplemental trade
information like producer prices and commodity values, trade fundamentals will have a bigger impact on
the commodity currencies. Make sure you place the right fundamental emphasis on the right currencies.
Capital Flow Fundamentals
Capital flows are a measure of the pace of investment in an economy. The US traditionally attracts the
most investment in government debt amongst the major economies and is therefore sensitive to
relative interest rate yields from one economy to another. If rates and other yields are high in one
economy compared to others then that currency is likely to appreciate in value.
Besides the benchmark interest rates, stock market performance and market volatility will also affect
capital flows. These factors will impact currencies most sensitive to capital flows.

Gold and silver

Trading Gold and Silver is a great way to increase your portfolio diversification by including exposure to
another asset class. Gold and silver have long been effective stores of value and are heavily influenced
by macro-economic fundamentals. Precious metals can be analyzed with the same technical and
fundamental methods forex traders use on the major currency pairs. This means it is a great market to
trade in today's global economy. Access to gold and silver in a spot platform makes trading these
instruments much more convenient and flexible than the traditional formats on the futures market.
Alpari UK offers both spot metals within the MetaTrader 4 platform. Order entry and system design is
similar to the individual forex pairs already offered on MetaTrader 4 which simplifies the learning
process. The gold and silver products benefit from enhanced leverage, adjustable lot sizes and speed of
execution that you expect from all of Alpari UK's trading products. In the video you will learn more
about how to access precious metals within the platform, how to execute an order and some
fundamental and technical analysis basics.

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Money management
A common mistake of forex traders is failure to understand, accept and manage risk. These are
principles applied to investing in the forex market in general, as well as in each trade.
Once risk is assessed, you can use consistency and diversification to smooth returns and control risk.

Position sizing
Position sizing is the process of determining how much to invest, or risk, in any single trade. Position
sizing is different for active trading, versus longer-term investing. In the case of short-term trading, it is
usually a function of how much you could lose if the trade went bad.
In longer-term investing strategies, position sizing is a bit more complicated and may depend on the
strategy at play. In this section, we will focus on sizing positions for short-term trades.

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