FOREX: FOR BEGINNERS TO FOREX TRADING

AND FOREX ANALYSIS

Contents
Introduction
Chapter 1 - The basics
Chapter 2 - Why Forex?
Chapter 3 - Getting started
Chapter 4 - Types of orders
Chapter 5 - Learning the lingo
Chapter 6 - Trading the sessions
Chapter 7 – Chart analysis
Fibonacci
Moving averages
Exponential moving average
Bollinger Bands

Conclusion
Introduction

Thanks for downloading ‘A beginner’s guide to Forex’. This book is a must read if you

are interested in trading foreign exchange. Written by an expert in the financial field,
you will learn all you need to know to start trading Forex successfully. Now, let’s get
started!
Chapter 1 - The basics

Forex, or foreign exchange, is the act of buying or selling one currency for another. If

you have ever been overseas and exchanged your money for local currency, you have
unintentionally participated in Forex. Forex is a free currency market, with the value of
each currency is determined by supply and demand. If a countries economy is strong,
the demand of its currency generally increases. When a countries economy is

weakening, there is less demand for its currency. This results in currency fluctuations
with the strength of a currency being a reflection of that countries relative economic
strength. One can capitalise on these currency fluctuations by buying when a currency is
relatively weak and selling it when it is strong.

Forex was first introduced in 1971 when the Bretton-Woods system was abolished. The
Bretton-Woods system was the first monetary policy governing exchange rates. This
system was rather inflexible with set exchange rates, and due to rapidly changing

economic climates during this time the system was soon deemed impractical. When
Forex was first introduced only very large amounts of currency could be traded.
Currency was bought and sold in ‘lots’ and the minimum lot size was often hundreds of
thousands or millions of dollars. Forex was therefore initially inaccessible to the
common person due to the large amount of capital required. Banks, large corporate
traders and very wealthy individuals were the only groups able to participate.
Since Forex was introduced it has undergone a significant evolution. With the advent of
retail Forex, individuals can now trade in foreign exchange without having to source

massive capital. The lot size has been drastically reduced to around $1000. With
margin trading, which will be discussed in detail later in this book, individuals can now
open a Forex account and start trading with as little as $25. What does this all mean for
you? It means that Forex has never been as accessible as it is today.
Chapter 2 - Why Forex?

You may be asking yourself why should I invest in Forex? Why is this any different to

other investments like the stock-market? Well the truth is that there are numerous
benefits that Forex offers not seen in other markets.

Firstly Forex is the largest financial market in the world. With approximately $500
trillion traded on a daily basis, it has approximately 100 times the value of the New
York, London and Tokyo stock exchange combined! Why does this affect you? Well
because there are so many people always wanting to buy and sell all sorts of currencies,
you will never be stuck with a currency that you don’t want. Market orders are
executed immediately and therefore Forex has high liquidity. In addition, because of the
sheer size of the foreign exchange market, it is not easily manipulated by media
coverage or big buy and sell orders from corporate organisations or banks.

Forex is also open 24 hours per day! Although it is closed on the weekends, having a
market open around the clock means you are not stuck to trading early mornings only.
This may not only suit your desired ‘work time’ better, but ensures that you can play the
market as soon as any economic data is released. Although you can execute buy and sell
orders at any time, there are certain times that are better than others and this will be
discussed later.
In comparison to the stock market, the Forex market has low transaction or brokerage
costs. These are usually paid in the bid/ask spread or as brokerage commissions but

fees usually work out to be less than 0.1% of the value purchased or sold.

There are also many free extras that Forex dealers will offer you prior to even
depositing a single dollar in your Forex account. Many dealers offer free demo

accounts where you can test your skills before engaging in Forex for real. They also
often offer chart analysis tools and educational materials to prepare you for entering into
the Forex market with your own capital.
Chapter 3 - Getting started

Currencies are always represented by three letters, the first two having something to do

with the name of the country and the third designating its unit of currency. Some
examples are JPY representing Japanese yen and AUD representing Australian dollar.
Exchange rates are obviously quoted in pairs because you can’t sell or buy one without
buying or selling another. You will therefore see something like this when you go to buy

or sell a currency; USD/AUD = 1.1020. The first currency is known as the base
currency and the second as the quote currency. When selling, this exchange rate tells
you that you will get $1.1020 AUD for every $1 USD that is sold. If buying, this
exchange rate tells you that you will need to pay $1.1020 AUD for every $1 USD.

So how do you make a profit from trading Forex you ask? Well cashing in on currency
fluctuations is fairly straightforward. By buying currency when it is weak relative to
your base currency, and selling it when it is strong relative to your base currency you

will make a profit. Of course it does get slightly more complicated than this, but this is
the basis for making profits trading Forex.

Let’s say for example that you have $10,000 USD to invest into Forex. You decide that
due to the (theoretical) strengthening economy in the UK and the high likelihood of
interest rate rises, to buy GBP. You buy $10,000 worth of GBP at an exchange rate of
USD/GBP 0.6108, therefore giving you £6108. Sure enough, as you anticipated, the
interest rates are increased in the UK. This results in increased demand for the GBP,
and it increases in value relative to the USD. You decide to buy back USD at a rate of

USD/GBP 0.5873 giving you $10,400, a profit of $400 USD or 4%.

Before starting to trade in Forex, you should have a comprehensive understanding of a

market analysis. You should adopt a multi-faceted approach to market analysis rather

than looking at the market from one angle. This will help ensure you make the right
decisions when performing currency exchanges. You should analyse the market from a
fundamental, sentimental and technical perspective to ensure you are making the best
decisions.

Fundamental analysis is looking at the market using basic principles. This may include
economic data, local political issues and interest rate changes. For example, if the
American economy is showing growth and promise the USD should strengthen and you

would therefore buy it. If the interest rates in the US were about to be reduced you may
consider selling USD.

A sentimental analysis will help you gauge market sentiment from buyers and sellers.
After all, it is these very people that determine which way the market or currency will
head by directly affecting supply and demand. The market can be bearish (investors are
hesitant to buy) or bullish (investors snapping everything up rapidly) or somewhat in
between. In the example given above under the fundamental analysis description, even
if the economy in the US is showing promise, if the general sentiment in the market is

bearish then you are unlikely to see a significant strengthening of the USD. Negative
news in a bearish market can result in amplified negative impacts on the currency in
question. On the other hand, positive news in a bullish market may result in amplified
positive effects and negative news in a bullish market may not result in significant
negative impact on the currency in question.

The final analytical perspective that you will need to understand is technical analysis.
This will include all the number crunching and chart analysis techniques that will be
discussed later in this book. It is vital that you understand how to analyse a market in
these three ways and apply this knowledge to each of your currency exchanges to ensure
the best trades are made.

Many dealers offer free demo accounts where you can trade fake money. These
accounts are an invaluable tool in learning the Forex ropes and I would strongly
recommend that you trade with a demo account for a significant period of time before
you start trading in Forex with real money. These demo accounts not only help you to
familiarise yourself with Forex, but they will also let you know if your methods will
make or lose money. You should continue to trade with a demo account until you are
consistently making profits.
Now let’s get started. You will need to set up a Forex trading account online which you
will conduct your trades through. There are many companies offering Forex accounts

who will provide brokerage services to you. They will take a small payment usually
from each trade that is executed. The retail Forex dealers usually make their profits
through a bid/ask spread or through commissions. The bid/ask spread is the difference
in price between the bid price and the ask price. For example, if you sell $1000 USD to
buy GBP you may get £611. If you sell £611 at exactly the same time you will get a

small amount less than $1000 USD. The broker executing the trade for you will keep
the difference.

On the other hands, a retail Forex company charging commissions is known as an

electronic communication network broker or ECN broker. ECN brokers will charge a
commission with each trade and the amount they charge is usually a percentage of the
trade value. Retail Forex is getting competitive and the commission rates are dropping.
It is not uncommon for the charges under an ECN broker to work out less than a bid/ask

spread.

Because brokerage fees vary between companies it is important to hunt around for the
best deal. Once your account it set up you will need to transfer funds into it before you
are able to buy and sell currency.
Chapter 4 - Types of orders

Once the account is active you can finally begin participating in the Forex market.

There are many different types of orders that you can place through your account when
buying currency. You need to know about the most common types of orders before you
go any further. A market order is by far the most common order executed in the Forex
market. This is simply an order where you agree to purchase currency at the current

market price. Because of the high liquidity of the Forex market, the order is processed
immediately. The main benefit of a market order is that you will always know the exact
price that you will buy or sell the currency for.

A limit entry order is an order placed to buy a currency at a lower rate than its current
market value. If you want to purchase a certain currency but want it to drop to a certain
value first, then this is the type of order for you. You can also place a limit exit order to
sell a currency when you want to sell it at a higher price than its current market value.

You can place either of these orders and they will execute when the currency hits the
specified value. These orders are often desired because of their ‘set and forget’ nature.
If you place a limit order but then decide to place a market order because the currency
is not fluctuating as desired, don’t forget to cancel the limit order otherwise you may
end up committing to two purchases.

A stop loss order is another common order which purpose is to limit the amount of
capital you can lose. You would place these orders to sell the currency your holding if
it devalues to a certain extent, preventing you from losing large amounts of capital if it

has a big drop. These orders are useful because they provide peace of mind that you
will, at worst, only loose a specific amount and it saves you having to watch your
currency around the clock. Stop entry orders can also be placed, which are orders to
purchase a specific currency if it increased above current market value. This at first
may not make much sense, but an investor may believe that if a currency reaches a

certain value then it will continue to rise.

The final common order that you should be aware of is a trailing stop order. A trailing
stop order is similar to a stop loss order but it has a ‘trailing’ sell price as the name
suggests. These types of orders are designed to minimise loss if the currency falls a set
percentage or amount whilst protecting profits. An example of a trailing stop order is if
you purchased GBP with USD at a rate of USD/GBP 0.6100 and immediately set the
trailing stop order to sell if the GBP weakens to USD/GBP 0.6500. The sell order will

not execute until the GBP weakens up to USD/GBP 0.6500 or greater. Now where it
varies from a standard stop loss order is that if the GBP strengthens, the activation price
will also be adjusted. Let’s say the GBP strengthens to USD/GBP 0.6000 then the
trailing stop order will be adjusted to sell when if the GBP weakens to USD/GBP
0.6400 and so on. Keep in mind these are just the most common types or orders and
there are many other different types of orders you may be able to place depending on
your broker.
Chapter 5 - Learning the lingo

If you have been involved in Forex in the past or done any other reading about foreign

exchange you will hear the term ‘pips’ thrown around fairly often. A pip, or percentage
in point, is a small unit of currency fluctuation that we can measure profits or losses in.
Most currencies are specified to four decimal places on the Forex and a pip is a
hundredth of a cent equivalent. For example, if the USD/GBP rate changes from 0.6000

to 0.5998 then the GBP has strengthened by two pips. Some currencies, such as the
Japanese Yen, are only quoted to two decimal places and in this instance a pip is 0.01.
You can even sometimes hear about smaller units of change known as pipettes. Some
dealers quote to five decimal places and this is where the pipette term is used. One
pipette is one tenth of a pip.

The next terminology that you will need to be familiar with is lot size. The amount of
currency that you can exchange is set to pre-defined amounts know as lots. A standard

lot is 100,000 units of the funding currency of your Forex account. For example a
standard lot of US currency is worth $100,000 USD. Other lots sizes have been
developed since the advent of retail Forex to make Forex more accessible. These are
known as mini lots and micro lots. Mini lots consist of 10,000 units of the funding
currency, and micro lots consist of 1000 units of the funding currency. There are even
some brokers that offer nano lots which are only 100 units of the funding currency.
Profits and losses both depend on the pips gained or lost and the lot size. For example,
if you have a standard lot in US currency, or $100,000 USD, then each pip gained will

make you $10 USD (0.0001 x 100,000). Mini lots will vary $1 per pip, and micro lots
will vary 10 cents per pip. When starting with Forex (and after having significant time
on a demo account), micro lots are ideal as your capital is more sheltered from currency
fluctuations. Starting with micro lots and developing good money management skills
whilst building your confidence is the way to go.

Another common term thrown around the Forex market is ‘going long’ or ‘going short’.
As you will already understand when you are buying a currency you are also essentially
selling a currency too. You therefore end up with a larger amount of the currency you
are purchasing and a lesser amount of the currency you are selling. By doing this, you
are going long in the currency that you are buying and going short in the currency that
you are selling. For example, if you are buying Japanese Yen with American Dollars,
you are going long in Japanese Yen and going short in American Dollars.

Once you get the hang of buying and selling currency, you may want to start using margin
trading. This effectively gives you large amounts of leverage to trade with without
having to find the capital. If you decide to start margin trading, you can get different
levels of leverage depending on your broker. For example, if you have $5000 USD in
your Forex account and margin trade at a leverage of 50:1, you will have access to
$250,000 USD.
Be careful though, margin lending is a double edge sword as although the gains may be
much larger, it is also much easier to lose your invested capital. If your broker is ‘nice’

enough to allow you a higher leverage for margin trading then any significant drop in
your holding currency will rapidly result in margin calls. And although you cannot lose
the ‘paper money’ that you were lent by the broker to trade with, you can easily lose all
of the invested capital in your Forex account. I would recommend steering clear of
margin trading unless you are a very experienced Forex trader.

Rollover interest is another term that you should be familiar with as it may affect what
currencies you buy and sell. Each currency has its own interest rate attached to it that
you will pay or make if you hold that currency after the close of business. If the
currency that you have gone long in has a higher interest rate than the currency you have
gone short in, then you will make a profit being the difference in the interest rate
between the two currencies. If you have gone long in a currency that has a lower
interest rate than the currency you have sold, then you will end up having to pay

interest.

Many investors take advantage of these interest rate differences and consider rollover
interest when choosing a suitable currency to buy. An example of this (with the interest
rates at the time this book was written) would be going long in the AUD which had an
interest rate of 2.5% and going short in the USD which had an interest rate of 0.25%.
By going long in the AUD you would essentially make 225 basis points profit per annum
just from rollover interest. If you were to then combine this with margin trading at a
leverage of 1:10, you could be making 22.5% interest per annum just from the rollover

interest. You can therefore see that rollover interest is a big factor to consider when
exchanging currencies.

Futures are another type of investment in Forex that you should be aware of. When you

purchase a future, you enter into an agreement to exchange a specific currency at a set
amount at a set time in the future. In the Forex market, futures are not capped so can be
as large as you want. You also do not have to buy futures in lot sizes so you can
purchase futures in any amount you would prefer.

Options are another common investment type in Forex markets. They are similar to
futures but you are not obligated to exchange the currency on the expiry date, hence the
name options. One disadvantage of options is that they cannot be traded around the

clock and therefore they have less liquidity.

Some brokers offer ‘packages’ of currency tied in with shares of specific companies.
These are known as exchange traded funds. One of the disadvantages of exchange
traded funds is that because they include shares, it restricts the times you are able to sell
because the stock markets are not open 24/7 like Forex.
Chapter 6 - Trading the sessions

As discussed previously, Forex is a 24 hour market. You need fluctuations in the

currency prices to make money in Forex, and therefore you need people to be buying
and selling. Although there will be currency bought and sold at all times, there are
specific times where there is more action, greater currency fluctuation and therefore

more potential to make profits. This all relates to the sessions of the four major stock
markets, the London stock exchange, the New York stock exchange, the Sydney stock
exchange and the Tokyo stock exchange. Although Forex is open 24 hours, it will be
busiest during the trading hours of these stock markets.

The London session runs from 0700-1600 GMT, the New York session from 1200-2100
GMT, the Sydney session from 2200-0700 GMT and the Tokyo session from 2300-0800
GMT. These session times are for summer and due to local time zone changes for

daylight savings these will change slightly during winter.

As already mentioned it is best to play Forex whilst the sessions are in motion as this is
when you can usually see the biggest fluctuation in currency prices. It is even better to
enter buy and sell orders when two sessions are running simultaneously particularly
when one is just opening. In particular, the London and New York session overlap tends
to see the most buyers and sellers. Forex also tends to have more fluctuation and be
busier during the middle of the week for Tuesday, Wednesday and Thursday. So if you
can trade Forex during session overlaps in the middle of the week you will be off to a

great start.
Chapter 7 – Chart analysis

When it comes to chart analysis there is a lot to be said and a lot to learn. This chapter

will only cover the tip of the iceberg when it comes to chart analysis as the subject is
too broad to cover in totality in this book. There are many chart analysis techniques
which can be used to give you the best chance at making profitable Forex exchanges. I
would recommend you understand the principles of all of these techniques prior to

sinking your own money into the Forex market.

The first thing you should know about Forex charts are the different charts available.
The simplest of charts is just a line graph. This shows the close prices of your selected
currency over a defined period of time. Next is the bar chart, this shows the open and
close price but also the high and the low price. Finally there is the candlestick chart.
The candlestick chart represents the same information provided in a bar graph but in a
fashion which is easier and quicker to interpret. Below you will find examples of a line

chart, bar chart and candlestick chart

Line chart

Bar chart

Candlestick chart

There are certain patterns that can show up in bar charts and candlestick charts and you
should have a grasp on recognising these patterns and interpreting what they mean prior
to participating in Forex. These patterns can often show you whether the market is
bullish or bearish and provide other useful information too.

Another basic set of information that a chart can provide you is information about
support and resistance levels. These are levels at which a currency prices seems to
have resistance in passing either above or below. This is often seen with shares when
there is reluctance from the buyers to purchase above a certain stock price or from the

sellers to sell below a certain stock price. This may be because the share price has
never surpassed that value in the past of simply because it is a whole number with a
psychological barrier such as 10c, $1 or $10. It is the same story with currency where
support and resistance levels are a result of a reluctance of sellers to sell and buyers to
buy respectively.

You can use support and resistance levels to your advantage when selling and buying
currencies. If the currency strength is about to hit the support level, where in the recent
past sellers had not sold below this value, it may be a good time to buy that currency.
The reasoning for this is that the currency price is likely to increase or bounce off the
support level hence making you pips. In a similar fashion, you could sell a currency
when it reaches a resistance level where buyers have been hesitant to buy above in the
recent past.

It is very important to realise that support and resistance levels can be broken and they
often are. In addition to this, it may not be a great idea to buy a currency when it is
nose-diving towards a support level akin to catching a falling knife. There is always the
chance that the currency may smash through the support level and continue onto an all-
time low, not a great buy. It may be better to ‘ride the bounce’ off the support and
resistance levels. What this means is to wait until the currency hits and bounces off the
support and resistance levels and then immediately buy or sell respectively. This at
least gives you peace of mind that the currency will not crash after you have bought or

continue to rise after you have sold. In the chart below you can see good examples of
prices hitting support and resistance. First it hits the support level the lowest red line
and never bounces under the yellow line again. Once you see 1-2 positive candles you
are in a relatively safe position to execute a buy / long order. The second example you
can see on the chart is a sell / short order where the price has hit resistance and bounces

back below. What also happens a lot is that when support or resistance lines are broken
they become the opposite. Like a support line becomes a resistance line and a resistance
line becomes a support line.

Trend lines are another very good way to analyse your chart. With trend lines you can
easily see which way the market is going at the moment. There are three types of trends
which are:

1. Upward trend
 If the market is in an upward trend the price will move up for a specific period
of time. This depends on the timeframe of your chart. In our examples we use

hourly charts or daily charts to show you the trends.

2. Downward trend

If the market is in a downward trend the price will move down for a specific
period of time.

3. Sideward trend (Ranging)

If the market is in a sideward trend the price will move between two price
points. These are the high and the low point. The price will not move outside of
these levels.

To draw the trend lines correctly on your chart you will need to find a low and a high
point on your chart with at least two bottoms connecting your line up or downwards.
Chart trend lines

When you are able to draw parallel trend lines you can create a trend channel. This can

be very valuable information when you are trading for short periods as with a trend
channel you can predict the short term moves in the market. Of course the price can
sometimes move outside of the channel but this is ok as long it stays in the trend the
channel is going. An example of a trend channel can be seen below.

Trend channels

If you combine trend lines or trend channels with support and resistance lines then you
have already formed a basic trading strategy. With all these lines on your chart you will
be able to predict the market movements on the short and longer term. Please do make
sure that these lines are not the Holy Grail. They can help you decide on the right trades
but can be influenced by many factors like news or economical events.
Fibonacci

The Fibonacci levels are widely used by traders to predict the potential support and
resistance areas. As these areas are the levels where most traders buy or sell they can
be a very good indication point of when to open and when to close trades. I could go
into depth on how these lines are plotted and the entire math behind it but as this is a
book for beginners we will let you use your charting software to automatically create
the levels for you. This is supported by most popular charting software.
To give you an idea of how this works let’s start with an example. You will go long
(buy) at a Fibonacci retracement level in an uptrend or you will go short at a Fibonacci
retracement level in a down trend. Now if you would want to find these levels on your
chart you will need to look for a recent swing low and a recent swing high.
So how do you calculate these levels and use them to your advantage? Begin by adding
one to itself. which is two. Then add two to one to get three. The next number in the
series. You keep adding the current number to the previous number so it looks like this:
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 and so on.

Next, there is an important ratio which is calculated by dividing one number in the
series by its previous number. For example: 144 ÷ 89 = 1.618
This ratio is known as the Golden Mean and is the basis for most retracement
percentages. Equally important is the reciprocal of 1.618
1 ÷ 1.618 = .618
Here are some other percentages you'll want to use...
.382 = .618 squared
.500 = 1 ÷ 2, the second and third numbers in the series
.786 = square root of .618
1.000 = 1.618 x .618
1.272 = square root of 1.618
2.618 = 1.618 squared
In the image below you will see the trend going from point A to point B. This is an
upward trend. From there you see a retrace downwards to C of 50%. This is one of the
Fibonacci levels and might be a very good point to go long (buy). You would be closing
your trade for profit at point D or if you are too late close your trade at point E.
There is much more to Fibonacci but this will be too complicated for starters. We will
describe this further in our next book where you will find more details about the
different types of Fibonacci. But even with this basic explanation you should have
learned a lot about the basis of Fibonacci. As with all indicators you will find that
Fibonacci can fail as well and you should be careful with trading based just on
Fibonacci.

Moving averages

Another great tool you can use for your daily trading the moving average. This lagging
indicator helps smooth out the price action by filtering the so called noise from the price
fluctuations. There are several types of moving averages and all have their own way of
smoothing out the price fluctuations. The two most commonly used moving averages are
the SMA (Simple moving average) and the EMA (Exponential moving average).

Simple moving average

This indicator simply calculates the last X number of closing prices and divides that
number by X. So if you would add a 3 period moving average on a chart with a one hour
timeframe you would add up the closing prices of the last 3 hour candles and divide
those prices by 3. Now just add those periods all together and you will have the moving
average on your chart. 99% of the charting software will do this automatically for you
but I think it is good you understand how an indicator works before you start using it.

At the picture above you see 3 different SMA lines plotted on the chart. See how higher
the period gets the further away it is from the price? This happens because the higher the
period the higher number of closing prices will be added together and divided by this
number of periods. It will take a lot longer to react to the current price movements. With
the help of the SMA lines you can determine the market sentiment.
In the picture above you see we had an uptrend for a while but are now slowly going
into a downtrend again. The downside of just using the SMA is that it can be influenced
heavily by big price movements which are likely to happen during big news events. To
solve these problems there are EMAs or exponential moving averages.

Exponential moving average

The exponential moving average gives a bigger weight to the most recent periods on the
chart. This is causing more accurate values as big spikes up or down don’t have to0
much impact on the end result. When you look at the chart in the picture below you will
see that the orange line the 26 EMA is much closer to the prices than the 26 SMA.
So which one is better to use? That really depends on your trading style. I normally
recommend if you use the moving averages to help you trade to plot at least one of each
on your chart. That way you will get the best information from both indicators.

If you see the moving averages in an uptrend and the price is above the moving average
it could be a great entry to buy or go long. The same goes for the opposite to sell or
short. To make sure you won’t get a “fake” signal it is smart to add multiple moving
averages to your chart with different period settings. The lower period moving average
should be moving higher than the lower period average to confirm the trend.

When the trend is changing which you can see perfectly in the image above the moving
averages will cross. In the above image you see the yellow moving average cross the
orange moving average indicating a trend change. As you see on the image the trend
went from an upward trend into a downward trend. This is just another example on how
you can use moving averages to trade.

Bollinger Bands

Another indicator you can use are the Bollinger bands. This indicator was created by
John Bollinger. This indicator is used to check on the market’s volatility.
When there is little movement in the market the “bands” will be close together and when
there is a lot of movement the bands will spread apart. This way you will know how
volatile a market is at the moment you are looking at it. There are many ways to use
Bollinger bands for trading. One of the most popular ways is the Bollinger Bounce. As
you can see in the image above there is an upper line a middle line and a lower line and
the price almost always stays in between the upper and lower lines.
You can also see that when the prices move to the outer lines it moves back to the
middle sooner or later. This you can use to your advantage by going short on spikes up
to the upper line and by going long with spikes to the lower line. As you can see in the
above picture the price is in a down trend. I would recommend to only place trades
according to the trend. So if the trend is going down only do short trades, if the market is
in an uptrend do only long trades.

There are lots of other indicators that you can use when trading Forex. In our next book
in this series we will go into depth of these indicators, teach you how to trade the news
events, how to trade price break outs and price fake outs. You will learn about
fundamental analysis and start to develop a trading plan. In this trading plan we will talk
about risk management, position sizes, setting a stop loss and much much more. With the
information in this book I would recommend to start looking for a demo account with a
Forex broker and play around with the information given to you in this book. In the next
book we will help you to setup with a real Forex account explaining everything about
Forex brokers.
Conclusion

In this book I have introduced you to foreign exchange trading, explained how it is
superior in many aspects to trading in the stock-market, show you the basics of Forex

trading, and given you some tips and tricks to maximise you investment. Trading Forex
can create a great income stream; however the information provided in this book only
covers the basics.

If you want to be a successful Forex trader, and perhaps even make it your main source
of income, it is important that you continue to learn. It is also important to realise that
even the most experienced Forex traders will make a bad trade at some stage. If you are
willing to continually educate yourself and take some losses with the profits then you

should have what it takes to become a great Forex trader.

About the author
James Goldman is a financial trading expert at Binary Options University. With many
years of experience in the financial industry, James now writes articles and finance
related books for Binary Options University. He also teaches traders on how to get
started with trading in different financial markets. With Forex being such a great

opportunity for investment, he decided to write this Forex guide for beginners and
welcome new readers into the world of foreign exchange trading.

If you enjoyed this book, and would like to learn about binary options check out James’s
binary options book, only available on Amazon at:

http://www.amazon.com/dp/B00HCDGZ6Q
Disclaimer
Please note that although this book is written by a financial professional, it does by no
means replace or override advice from your own financial professional. The author
does not accept legal liability or responsibility for the advice or information provided
in this book if any consequences arise from its use.