Beruflich Dokumente
Kultur Dokumente
By Daniel S.
ForexTradingPower.com
Disclaimer: No part of this book may be used or reproduced in any manner whatsoever
without written permission from Forex Trading Power. All information on this ebook is for
educational purposes only and is not intended to provide financial advise. Any statements
about profits or income, expressed or implied, does not represent a guarantee. Your actual
trading may result in losses as no trading system is guaranteed. You accept full responsibilities
for your actions, trades, profit or loss, and agree to hold Forex Trading Power and any
authorized distributors of this information harmless in any and all ways.
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TABLE OF CONTENTS
CHAPTER 1 Page
Introduction To Forex 5
CHAPTER 2
Why Trade Forex? 8
CHAPTER 3
The Mechanics Of Forex Trading 12
• Currency Quoting Name and Conventions 12
• Major Currency Pairs 12
• Cross Currency Pairs 13
• Exotic Currency Pairs 13
• Reading Base and Quote Currencies 14
• What is PIPS? 15
• Calculating PIP Value 15
• Currency Contracts 16
• Margin Trading 17
• Types of Trading Orders 18
• Rollover and Swap Interest 21
CHAPTER 4
Reading A Currency Chart 22
Choosing Your Broker 23
CHAPTER 5
Forex Strategies 25
• Fundamental Analysis 25
• Technical Analysis 26
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CHAPTER 6
The Trading System – The Pips Mover™ 34
CHAPTER 7
The Psychology of Trading 40
CHAPTER 8
Money Management 44
CHAPTER 9
Forex Trading Tips 46
CHAPTER 10
Forex Glossary 48
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The author of this ebook, Daniel S is an expert foreign exchange currency trader, online
mentor and the CEO of ForexTradingPower, a forex powerhouse online portal that strives
to help people worldwide to improve their trading skills and help them path their way to
financial freedom.
His forte is in forex trading, market analysis, technical analysis and creating forex trading
systems. Daniel started actively to make money online through forex trading in 2007 and
went full-time in 2008.
He is a master at creating quick intraday and short swing profits, to the tune of more
than 600 pips in as little as 13 days. You can get more information from Daniel by
visiting his website ForexTradingPower.com today!
If you have any questions or feedback after reading this ebook, you can email Daniel at
info@forextradingpower.com and he’ll get back to you as soon as he can.
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INTRODUCTION TO FOREX
Four major currency pairs are usually used for investment purposes.
They are: Euro against US dollar, US dollar against Japanese yen,
British pound against US dollar, and US dollar against Swiss franc.
Right now I will show you how they look in the trading market:
EUR/USD, USD/JPY, GBP/USD, and USD/CHF. As a note you
should know that no dividends are paid on currencies.
necessary part of the world wide market, so when you are sleeping
in the comfort of your bed, the dealers in Europe are trading
currencies with their Japanese counterparts.
Below is the time zone which shows the time that forex trading
takes place:
There is high trading volume within the London and New York
session, which is from 07:00 GMT to 21:00 GMT. Most of the
professional traders trade during these timeframes.
The fact is that the FOREX market never stop, even on September
11, 2001 you could still get your hands on two-side quotes on
currencies. The currency market is the largest and oldest financial
market in the world. It is the biggest and most liquid market in the
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When you compare them, you will see that the currency futures
market is only one per cent as big. Unlike the futures and stock
markets, trading currencies is not centered on an exchange.
Trading moves from major banking centers of the U.S. to Australia
and New Zealand, to the Far East, to Europe and finally back to the
U.S. it is truly a full circle trading game.
As you can see, the foreign exchange market has come a long way.
Being successful at it can be intimidating and difficult when you
are new to the game.
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24-Hour Trading
Superior Liquidity
The forex market is the world’s largest and most liquid market.
According to the data from Bank for International Settlements
released on September 25, 2007, currency trading volumes reached
to US$3.2 trillion a day. The liquidity of this market, especially
that of the major currencies, helps ensure price stability. Traders
can almost always open or close a position at a fair market price.
High Leverage
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Inter-Bank Market
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It is Unregulated
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▪ EUR – Euro
▪ JPY – Yen
▪ CAD – Loonie
▪ AUD – Aussie
▪ NZD – Kiwi
The four currencies which are actively traded against the US dollar
make up more than 90% of the forex market and are called major
currencies:
▪ Euro (EUR)
▪ Great Britain Pound (GBP)
▪ Swiss Franc (CHF)
▪ Japanese Yen (JPY)
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When the above currency pairs are traded against the US dollar,
they are quoted as:
▪ EUR/USD
▪ GBP/USD
▪ USD/CHF
▪ USD/JPY
Those currency pairs that do not include the US dollar are referred
to as Cross Currency pairs. A number of the cross currencies offer
attractive interest, e.g. swap, rollover interest, which can be paid
on open positions.
▪ GBP/JPY
▪ EUR/JPY
▪ EUR/GBP
▪ EUR/CHF
▪ GBP/CHF
▪ AUD/JPY
Currency pairs which are traded less, harder to find buyers and
sellers and has very wide PIP spread are called “exotics”. Example
of some exotic currency pairs are the Russian Ruble, Danish Krone,
Mexican Peso, Indian Rupee, Turkish Lira, Chinese Yuan.
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So when you sell one unit of the currency pair, you are actually
selling one unit of the base currency and buying an equivalent
amount of quote currency. Vice versa, when you buy one unit of
the currency pair, you are actually buying one unit of the base
currency and selling an equivalent amount of quote currency.
On the other hand, if you believe the US economy has weaken and
thus US currency will lose value, you would then BUY AUD/USD
(in trading terms: GO LONG). Why? Because you want to own the
Australian Dollar and sell away US dollar as AUD appreciates
against the US dollar.
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What is PIPS?
For currency pairs whose quote currency is the U.S. Dollar, for
example the GBP/USD:
For example, if one has made a profit of 100 pips by selling first at
1.7600 and closing at 1.7500 from trading the GBP/USD, he or she
would have made USD 100 per mini contract.
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For currency pairs whose base currency is the U.S. Dollar, for
example the USD/JPY:
For example, if one has made a profit of 100 pips by buying first at
108.00 and closing at 109.00 from trading the USD/JPY, he or she
would have made USD 91.70 per mini contract.
For example, if one has made a profit of 100 pips by buying first at
1.1300 and closing at 1.1400 from trading the USD/CHF, he or she
would have made USD 87.72 per mini contract.
Currency Contracts
If one has made a profit of 100 pips by selling first at 1.7600 and
closing at 1.7500 from trading the GBP/USD, he or she would
have made USD 1,000 per standard contract instead of USD 100
from the mini contract.
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There are several reasons in the forex market that attract traders
and investors. One of the reasons is trading on margin. This means
that traders can now trade much bigger contract size with a just a
small amount of deposits required. Leverage is the word to use for
margin trading or borrowed capital. Leverage is required in order
to increase the potential returns of investment/currency trade.
A trader has USD 2,000 in his trading account. His trading broker
actually allows him a leverage of 100:1 or 1% margin.
He can now trade one mini lot (contract) of value USD 10,000 for
only USD 100, and he can buy up to 20 mini lots(contracts), using
all his capital in his trading account. He can also trade one standard
lot (contract) of value USD 100,000 for only USD 1,000, and he
can buy up to 2 standard lots, which costs USD 2,000.
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mini lots with a total value of USD 200,000. OR he can buy the
one standard lot with only a margin of USD 500 in his trading
account.
Most forex brokers will allow you a 100:1 leverage, and some will
allow you as high as 200:1, or even 400:1! However, you must
understand that buying and selling currencies with borrowed
money can be risky because both the gains and losses are amplified.
You may think that you will have a potential for greater profit, but
there is a potential of greater losses too. So I personally think
100:1 leverage will be alright unless you have prepared a huge sum
of capital for potential losses if you decided to go for higher
leverage. We will discuss more of that in the money management
session later on.
When the market order is placed, the trader has bought or sold the
currency pair at whatever price that the order gets processed.
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price that you requested may get re-quoted. In this case, the trader
will decide whether he or she would want to continue to trade with
the re-quoted price.
Pending Order – It is a type of order to buy or sell a currency pair
when the current price reaches a specific price.
There are four types of pending order which are provided by most
of the trading brokers:
GTC (Good Till Cancelled) – A GTC order will remain active until
the trader decides to cancel it. It is the trader’s responsibility to be
aware of the order he or she possessed as the broker will not cancel
the order for the trader at any time.
GFD (Good for the day) – A GFD order will remain active until
the end of the trading day. It is usually 12:00 GMT.
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The Stop Loss order is used to minimize losses for a trade once a
specific price is reached. You will always use Stop Loss order in
order to prevent excessive losses. And when a portion of the profits
from a trade is protected once a specific price is reached, it is
called ‘protective stops’.
For a long position : When the market price rises, the stop loss also
rises by the same amount of pips. But when the market falls, the
stop loss still remains the same. For example, you have a long
position for GBP/USD at 1.7730, you set the trailing stop order at
30 pips. The market price rises to 1.7780, so now your trailing stop
rises to 1.7750, 30 pips below the market price.
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For a short position : When the market price falls, the stop loss also
falls by the same amount of pips. But when the market rises, the
stop loss still remains the same.
OCO (One Cancels the Other) – It is an order that one of the orders
is executed and the other order is cancelled. It is used to enter the
market based on two prices: to either buy at a higher price or to sell
at a lower price. It is also used to exit the market based on two
prices: to close an open position either when the target profit has
reached or when the price has reached the cut-loss(stop loss) level.
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B. Time Frame: It shows the time frame of each bar and not the
whole chart. In this case, the above chart is set to hourly time
frame. Can be set to 1 minute (M1), 5 minutes (M5), 15
minutes (M15) and 4 hours (H4) etc.
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D. Price Scale: The vertical axis shows the price of the currency
pair. No matter what time frame you change to, the price will
still remains the same.
There are many forex brokers in the market and they offer different
trading platforms. These different trading platforms often show
real-time charts, technical analysis tools, real-time news and data,
and even support for the various trading systems. But the most
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1) Customer service:
Forex is a 24-hour market, so 24-hour support is a must!You can
choose several online brokers and test their efficiency by
contacting their help desks and see how responsive they are.
2) Low Spreads:
In forex trading, transaction costs are calculated in pips spread. For
example, the bid/ask spread for EUR/USD is usually 2 pips, but if
you can find 1 pip, that’s even better. The ‘spread’ is the difference
between the buy and sell price of any given currency pair. Lower
spreads save you money.
3) Leverage:
It is important, but do not overuse it. A good rule of thumb is to
not use more than 100:1 leverage for Standard (100k) accounts and
200:1 for Mini (10k) accounts.
5) Trading tools:
It is very important to have those basic analytical features like
Fibonacci, moving averages, and other types of indicators.
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FOREX STRATEGIES
Fundamental analysis and technical analysis are the two basic
areas of strategy in the forex market which is the exact same as in
the equity markets. You will not be trained to be an expert in
fundamental and technical analysis in this short course and you do
not need to be one! All I’ll teach you here in this short course is to
let you understand the basics of forex and a strategy that will start
earning you money.
Fundamental Analysis
U.S. News:
• Non-farm Payrolls
• Purchasing Managers Index (PMI)
• Consumer Price Index (CPI)
• Gross Domestic Production (GDP)
• Durable Goods
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These are not the only fundamental factors that you have to watch.
There are still a lot more like the U.K news, European Union news,
Japanese news etc. At certain times, you will notice that these
economic indicators cause sharp price swings after they are
released. A 100 pips move is even possible within half an hour
time. For example when the Federal Open Market Committee
(FOMC) changes or give comments on the interest rate, you might
see a very volatile market.
Technical Analysis
• The Trend
• Support and Resistance
• Fibonacci Studies
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• Pivot Points
The Trend
Trend is the most important part of the technical analysis I can say.
It is a very important rule to follow the trend as there is a saying:
“the trend is your best friend” and “never go against the trend”.
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Usually when the market reaches the support and resistance level,
the market may rebound (reversal), range for some while, or break
through the support and resistance levels. With the guide of the S
and R levels, traders will also be able to decide whether it is a good
time to enter a trade, exit a trade or continue the position that he or
she has opened.
For example, you would not want to trade or open a position when
the price is very near a strong S and R levels. Why? Like I have
mentioned earlier, the S and R levels are hard to break through, so
that is very risky if you do trade near those levels.
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There a few support and resistance in real life charts, and it’s up to
you to identify them. After you have identified them, you will find
trading will be easier as they are indicators which you can’t ignore.
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Fibonacci Studies
For the above chart, using just Fibonacci as the only indicator, we
can see that from this downtrend, the price rebounded from the
50% and 61.8% levels to continue to downtrend. In this case, the
Fibonacci acted as a strong resistance.
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Pivot Points
Support and resistance levels are then calculated off the pivot
point.
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Below are some of the tips regarding the pivot points trading:
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™
THE TRADING SYSTEM : THE PIPS MOVER
Parameters:
2. Buy (Go Long) when EMA 4 crosses EMA 60 and the price is
above EMA 200. The entry price must be as close as possible to
EMA 4, preferably less than 15 to 20 pips away from the EMA 4.
The stochastic and MACD must follow the up direction. DO
NOT trade more than 90 minutes after EMA 4 has crossed EMA
60.
3. Sell (Go Short) when EMA 4 crosses EMA 60 and the price is
below EMA 200. The entry price must be as close as possible to
EMA 4, preferably less than 15 to 20 pips away from the EMA 4.
The stochastic and MACD must follow the down direction. DO
NOT trade more than 90 minutes after EMA 4 has crossed EMA
60.
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make 30 pips.
5. Set your Stop Loss 30 to 35 pips away from your entry price,
and target profit depending on your risk to reward ratio. I.e. 60
pips.
6. Adjust the stop loss to breakeven price when you have at least
profited 30 pips. Adjust the stop loss to protective stop, around
10 to 20 pips away from entry price when you have profited
more than 50 pips. Let the market trigger your stop loss or target
profit without having to close your position manually.
4. If you want to take a higher risk and trade when the EMA 4
crossed EMA 60, but EMA 200 is not below the price when
buying or EMA 200 is not above the price when selling, then the
trade can only be executed if the price is at least 30 pips away
from EMA 200.
Let us look at some of the examples that you can learn from:
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Example 1
From the above chart, the blue arrow indicates the initial phase of
the downtrend. The trade was executed because EMA 4(black line)
crossed EMA 60(blue line), and the price executed was below
EMA 200(gold line). But how do we confirm that that is a valid
sell signal? This is where the Stochastic and MACD comes into
play. The Stochastic is to filter out consolidation and noise while to
MACD is telling us where the trend is going. So in this case, the
Stochastic and MACD is also pointing the same direction (down)
as what the trend indicates, so this trade is valid. We prefer to take
signals when the Stochastic crossed down or up from the 80% and
20% levels respectively, but in this case is still alright as it is near
the 80% level.
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Example 2
From the above chart, the blue arrow indicates the initial phase of
the uptrend. The trade was executed because EMA 4(black line)
crossed EMA 60(blue line), and the price executed was above
EMA 200(gold line). As the Stochastic is already above the 80%
level, you may not be confident enough or feel comfortable to take
this trade. So it’s alright that you let go of this opportunity. Later in
this ebook, you will know what I mean by that. The EMA 200
usually acts as very good support and resistance, as you can see
from the chart.
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Example 3
From the above chart, the blue arrow indicates the initial phase of
the downtrend. We should not be opening a trade if the price is not
below EMA 200 when selling. But in this case, like I mentioned
earlier, if you wanted to take a higher risk, you can trade, but make
sure that the price is at least 30 pips away from EMA 200. The
above chart meets the requirement.
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Example 4
There are very few times when signals failed as the market goes
choppy. So what you have to do is to accept the loss, forget about
that and wait for another good opportunity to trade. The reason is,
forex trading is not 100% winning all the time, and the fact that if
you can get 60% to 80% of the trades right, you are considered
successful and profitable. One thing you must always remember in
your heart is that, your trading results does not only depend on a
single day or week, it depends on a stretch of period e.g. a month
or so before you can say whether you make profit or loss. So
please give yourself some time and patience, or else you will be
feeling miserable for some tiny losses which you can overcome
with the consistent amount of effort that you put in.
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You may think that the “The Pips Mover™” trading system that I
revealed to you earlier is the most important part in this ebook. But
you will be surprised if I tell you that the psychology part of
trading is the most important of this ebook. And this is true
because what makes up the whole of forex trading is 30% technical
and 70% emotional. What I mean here is that while there is no holy
grail in trading, no matter how good your trading system is, you
have to control your emotions if you want to be a successful trader.
We will now look at several factors that will affect your emotions:
Discipline
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Greed
Once you start trading and found the trading system that suits you
best, you may keep winning and slowly forgot the money
management rules in place. There will be a time when you will
find the small gains unsatisfying and will be tempted to place a
bigger stake on a trade. You will think that, “Ok, I’m going to try
to win a lot of money this time round since most of the time I’m
winning.” But you might not know that the trade which you traded
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with huge stake could be the downfall when it lost. I know the
temptation is very strong, it happens to everyone and I admit
sometimes I was tempted too. That is why I said that psychology
part of trading is so important, now you get it? But don’t worry, try
to get pass this hurdle, so that with time, consistent wins and equity
growth will make you a very successful trader.
Patience
I do not know what you think about forex trading. Most people
will think that trading is fun and exciting. However, while it may
be fun to some people, forex trading is certainly very boring. Yes,
you heard it right! Trading is boring! Why? Because traders must
not be emotional and will trade according to their system and plan,
so it’s nothing excited about for doing the same stuffs all over and
over again. Except that when you earn profits, then that is the
reason to be excited about.
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MONEY MANAGEMENT
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Accounts has grown 30% from $20,000 to $26,000, then you can
increase your lot size to trade 1 standard($10) and 3 mini lots($1
per mini), which is risking 30 pips X $13 = $390 per trade, which
is still 1.5% of total account.
The bottom line is, you should be consistent in your trading at all
times and take a step at a time to increase lot sizes when your
trading account grows.
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1) Never open 2 trades at the same time unless your first trade is
already in profits.
2) You should never trade against the trend, go along with the
trend, as the trend is your best ‘friend’!
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11) Good habits are so much easier to give up than bad ones, so
never build on bad habits, try to get rid of it as soon as
possible.
12) You should not worry about a missed opportunity, there will
always be another one round the corner.
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FOREX GLOSSARY
Below is the list of glossary that are commonly used in forex
trading for your easy reference.
Bar Chart - A type of chart which consists: the high and the low
prices, which form the vertical bar. Closing price and opening
price are represented by a right tick and a left tick respectively.
Bid Price - The bid is the price at which the market is prepared to
buy a specific Currency in a Foreign Exchange. For example, in
the quote GBP/USD 1.7625/29, the bid price is 1.7625; meaning
you can buy one Great British Pound for 1.7625 U.S. Dollar.
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European Central Bank (ECB) - the Central Bank for the new
European Monetary Union.
Federal Reserve (Fed) - The Central Bank for the United States.
Fill Price - The price at which a buy or sell order was executed.
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Last but not least, I hope you’ve enjoyed reading this ebook and
find it helpful. I’ll like to hear more from you. Tell me the top 3
burning questions on forex trading that you’ll need anwers and
drop me a mail at info@forextradingpower.com. My team and I
will get back to you as soon as we can.
Thank you.
Daniel S.
ForexTradingPower.com
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