iFOREX- Tutorial

Welcome to the lucrative world of Forex trading. Only recently has Forex
trading become so popular due to its fast paced movements and its high
returns. Up until now, Forex trading was only available to large institutions,
central banks, hedge funds and extremely wealthy individuals. Due to the
extreme development of the internet over the last few years, small investors
can now take advantage of this market, investing their money to profit from
this 24 hour market.

Throughout this guide we are going to cover the basic terminology of this
market, while explaining different techniques which will help you to build
your trading strategy, to form a fixed income.
The different topics will provide you with an understanding of this market,
while giving you the upper edge to be a successful trader.

Topics

1) Basic terminology

2) Currency calculations

3) Economic indicators

4) Technical trading

5) Using the Platform

6) Summary

! Even though this tutorial is full of examples illustrating the exact use of
every instrument, it is still advisable to conclude each section by practicing
the relevant material on your demo account provided by iFOREX.
Furthermore, if you have any additional questions, you can always contact
your account manager to receive an immediate answer/explanation.
 Basic Terminology

Symbols- An arrangement of letters abbreviating a particular currency,

which is globally recognized. The symbol is usually three letters, for
example:
United States Dollar- USD
Great British Pound- GBP

In the Forex market, one currency is always traded against another currency.
For instance GBP/USD- In order to buy Pounds one must sell the equivalent
in U.S Dollars.
Two trading currencies are called a currency pair featuring a base currency,
that is always on the left side of the pair and a secondary currency which is
situated on the right hand side of the pair.

In the currency markets numerous currencies are traded more frequently

than others, making them more liquid and easier to buy and sell. Due to
economic situations, the U.S Dollar has been the most valued currency over
the last couple of decades, making it the most traded currency. To help us
understand which currencies are more popular than others, currency pairs are
divided into different categories.

Majors- Liquid currencies that trade against the dollar.

Crosses- Popular currencies that trade against each other, not including the
USD.
Exotics- Currencies that represent emerging economies. These currencies are
often unique to individual countries.
An excellent example is the Turkish Lira.

Below is a list of commonly traded currency pairs:

EUR/USD, GBP/USD, USD/JPY, AUD/USD, NZD/USD, USD/CAD,

USD/CHF

Bid price- The price at which an investor, trader or institution is willing to

buy the currency price (Bid for the currency).
Ask Price- The price at with an investor, trader or institution is willing to sell
the currency price (Their asking price).

Once the Ask price meets the Bid price the transaction is made.

Spread- The difference between the Bid price and the Ask price. Depending
on the currency pair, the spread will vary.

Example: The spread on the GBP/USD = 4 PIPS

ASK BID
2.0512- 2.0508= 0.004=4 PIPS*

*PIP- The smallest price change a currency

can move.

In our previous example the smallest movement was 0.004 therefore the
spread equals 4 PIPS.

High- The highest price the currency pair traded that particular day. This is
also known as an intraday high.

Low- The lowest price the currency pair traded that particular day. This is
also known as an intraday low.
To receive additional information on our website regarding currency prices,
one can press on the “more” button to expand the details of the currencies.

Example:
 Currency Calculation

Due to the high leverage in Forex trading, currency traders are often confused
how to calculate their profits/losses. Even though our trading platform
automatically calculates all the necessary equations by converting everything
into U.S dollars, it is advisable to understand those calculations in order to build
successful trading strategies.

To demonstrate these calculations, we will be using the most commonly traded

currency- EUR/USD.

Buying a deal size of 10,000 on the EUR/USD means that you are buying
10,000 EUR while selling the equivalent in USD.

Example:

Explanation: A trader assuming that the Euro is going to strengthen against the
Dollar will buy Euros and Sell Dollars.
A click on the “BUY” button will allow you to buy € 10,000 while selling
$14,363

€ 10,000*1.4363(ask price) = $14,363

! Remember that one of the benefits of this markets means that your money is
leveraged (Default = x200), allowing you to open trades a lot larger than your
initial deposit. This allows you to maximize your potential profits while taking
advantage of the moving trends.

Once a position is opened, the value of each PIP varies depending on your
position size.

To demonstrate the calculations we will continue to use the example on the

previous page.

€ 10,000*1.4363(ask price) = $14,363

€ 10,000*1.4364(ask price) = $14,364
------------
$00,001 = Each pip is worth $1

€ 50,000*1.4363(ask price) = $71,815

€ 50,000*1.4364(ask price) = $71,820
------------
$00,005 = Each pip is worth $5

• This calculation will always give you the value of each PIP in the
secondary currency.

Simple formulas

1) (Deal size)/10,000 = value of each PIP in the secondary currency.

(This formula is only for currencies with 4 digits
after the decimal point)

Example: EUR/USD € 10,000/10,000= $1 per PIP

2) (Deal size)/ 100 = value of each PIP in the secondary currency.
(This formula is only for currencies with 2 digits
after the decimal point)

Example USD/JPY $10,000/100= ¥100 per PIP

• Calculations can be adjusted to the desired currency accordingly.

PIP values that are not in USD can be easily converted to the currency
requested by using the relevant pair.

Example: Step 1) USD JPY Bid price =114.23 Ask price =114.29

Step 2) USD/JPY $10,000/100= ¥100

Step 3) PIP value/ Bid price = value of PIP in desired rate

¥100 / 114.23 = $0.8754

It is always advisable to calculate your potential profits and losses before taking
the trade.
 Economic Calendar

In today’s markets one must understand the importance of economic indicators.

On a regular basis each country publishes different results, gauging the strength
of various parts of the economy. These indicators tell traders whether the
economy is continuing to grow at a steady pace, or if there is a current
slowdown due to an economic contraction. Understanding the value of these
results normally indicates to traders whether monetary measures need to be
taken or not, in order to control the economy.

Monetary Policy- To keep economic growth under control, preventing inflation

or hyperinflation, each central bank uses numerous tools to insure gradual
growth or to stimulate it after economic slowdowns. One of the most common
tools used in today’s economic cycles are interest rates.

During economic growth, increasing interest rates are used to offer consumers
an alternative to their money. This attracts them to invest in higher yielding
programs, therefore allowing central banks to control consumer consumption.
A Decrease of interest rates is often used to encourage consumption spending,
making returns on savings less attractive.
One has to remember that by nature traders will always look for higher returns
on their money, encouraging investors/traders to move their money from
currency to currency according to interest rates differentials.

In order to help first time traders, our web site contains all the major data
needed to understand this field. By taking a glance at the economic calendar
once a week, a trader can prepare her/his trades accordingly, by knowing what
results could affect her/his trade.

With the click of a mouse a trader can know exactly what the indicator
measures, including its importance. The higher the indicator is ranked the more
it will have an effect on the intraday trading session.
 Technical Analysis

Charts
A price chart is a sequence of prices drawn over a specific time frame.
Technicians, technical analysts, traders and investors can use charts to analyze a
wide range of currencies in order to forecast future price movements. Any
currency with price data over a period of time can be used to form a chart.

Example GBP/USD

Charts can be shown in a variety of time scales according to the request of the
trader, for example; hourly, daily, weekly and monthly charts.
There are several types of charts that can be used in order to make decisions, for
example:
1) Bar charts.
2) Candle-stick Charts.
3) Dot charts.
4) Line charts.
Originating from Japan, candlestick charts have become the most popular
method for analyzing currency pairs.

• The body of the candle will vary according to the intraday volatility.
Trend lines

Trend –The movement of highs and lows that constitutes a trend.

Trend line- A straight line that connects two or more prices on the chart.
A trader will often extend the trend line into the future to act as a line of support
or resistance.
Trend lines are also used in order to confirm the price trend.
Support and Resistances

Support and resistance represent key junctions where the forces of supply and
demand meet.

Support- A certain price which is strong enough to prevent the current trading
price from declining further.

Resistance- A certain price which is strong enough to prevent the current

trading price from advancing further.

Popular Technical Indicators:

Moving Averages – An average line that appears on the chart. This line is
calculated according to the amount of days requested
by the trader. For example:
SMA(30) – Moving average over the last 30 days
Moving averages are often used to indicate a change in trend, the cross-over
between two or three moving averages will hint to the trader that the current
trend has possibly come to an end.

Macd- A momentum indicator that shows the relationship between two moving
averages of prices. The Macd is calculated by subtracting the EMA(26)
from the EMA(12), while comparing the subtraction to an EMA(9).
The Macd is used in three different ways:
1) Divergence/convergence of the current trend.
2) Tracking the crosses of the averages.
3) Crosses over the 0 point.

RSI- (Relative strength index) – The RSI quantifies the current direction and
strength. This indicator is often used to follow the current trend in
order to see if the trend is losing its current strength.
Traders often class RSI>70 to be overbought and RSI<70 to be oversold

Technical analysis is a tool that assists traders to make decisions regarding their
future trading strategies. Together with fundamental analysis, a trader can build
an arsenal of tools in order to beat the market.
 Using the Platform

iFOREX provides you with a trading platform customized to meet your trading
experience, volume activity and internet connection speed.
To meet your trading standards, we have developed two types of trading
platforms. One, a download version for stationary traders, and another, a full
and complete web based platform for mobile traders. Both trading systems
accommodate the same username and password giving you access to instant
rates while allowing you to monitor your trades.
Both systems were designed user-friendly allowing traders to execute different
trades with the click of a mouse.

Due to the similarity between the two systems, this tutorial will only explain the
web-base as it is a more commonly used system by new traders.

After logging into the system through the login button (situated on the main
page), it is advisable to click on “Open Deals” (top left hand side of the screen).
This organizes the screen for the user, simulating the download version.

Monitoring your account

- Current status of your open positions.

- Closed positions.
- Account balance including open positions.
- Current exposure to the markets.
- Maximum amount of exposure allowed
- Equity/ Net exposure
Opening positions

1) New deal- This button (middle of the screen) allows traders

to open new deals using portfolio management through
Stop-losses and Take profits.

Stop-loss: Setting a price/amount in the system that will automatically close

the position, preventing additional losses.

Take Profit: Setting a price/amount in the system that will automatically

close the position, capturing your profits.

• These two additional functions allows traders to control their portfolios

when absent from the computer.
• Once a position has been opened, the position will automatically appear
below (open deals box) allowing traders to view their status.

2) New limit- This function allows trader to submit an opening order in the
system. The order will only execute when the desired price is hit- opening the
position. Traders often use this function to set orders if they are absent from
their computers, allowing them not to miss the trade.

Close Deal

This button, located on the trading tool bar allows traders to close their
positions. When closing the position it is important to verify that the position
number is the correct position you want closed.
 • Opening and closing deals can also be executed through our unique “3
step deal” (On the main page once entering your account).

Using our unique 3 step deal, one can choose a preferred currency, deal size and
trading assumption with just three clicks.

Once clicking on the “Deal” button the position will automatically open at the
relevant trading price.

Think that the base currency is going to go up? Click on the buy button

Think that the base currency is going to go down? Click on the sell button.

! Remember that currencies trade in a pair, meaning that if one currency

strengthens the other will weaken.

! The Forex market allows you to prosper from all market conditions, whether
the market is going up or down.
 Summary

Here at iFOREX we provide our traders with up-to-date trading tools, including
a 24 hour dealing desk. Our professional trading team together with our
multilingual dealing desk are here to assist you at any time needed.

To receive our contact details please go to our web site at www.iforex.com

In order to profit from the Forex markets one must be constant with her/his
trading rules. Building strategies are essential for success.
Begin trading on your demo account while gradually opening live positions
simultaneously. Once more confident, enjoy the trends while seeing your
portfolio grow.

Good luck trading

Adam Perl
Currency strategist
adam@iforex.com