WHATI

SFOREX?

Qui
tesi
mpl
y,i
t’
sthegl
obal
mar
kett
hatal
l
owsonet
otr
adet
wocur
renci
esagai
nsteachot
her
.

I
fyout
hinkonecur
rencywi
l
lbest
rongerv
ersust
heot
her
,andy
ouendupcor
rect
,theny
oucan
makeaprof
it
.

Anexchanger
atei
sther
elat
ivepr
iceoft
wocur
renci
esf
rom t
wodi
ff
erentcount
ri
es.

Ifyou’
veevert
ravel
edt oanot
hercount
ry,
youusuall
yhadtofi
ndacurr
encyexchangeboot
hat
theair
port
,andthenexchangethemoneyy ouhav
einyourwal
leti
ntot
hecurr
encyofthe
countr
yyouarev i
sit
ing.

Yougouptothecount
erandnot
iceascr
eendi
spl
ayi
ngdi
ff
erentexchanger
atesf
ordi
ff
erent
cur
renci
es.

For
ex(
FORei
gnEXchange)i
sal
mostsel
f-
expl
anat
ory
.

I
tist
heexchange(
buyi
ngandsel l
i
ng)offor
eigncur
renci
es,hencewehav
eamar
ket
.As
y
ouknow,
amar ketisanexchangecent
erforgoodsorservi
ces.

I
nfor
exweexchangecur
renci
es,t
hisi
sal
ldoneonl
i
ne.

A cur
rencyisasy stem ofmoneyi nwhichapar t
icul
arcountr
yuses.Wheny
ouexchange
onecountr
y’scur
rencyforanot
her
,you’
veessent
ial
l
yparti
cipat
edint
hefor
exmar
ket
!

I
'
llcompi
l
eal
i
stoft
hemostusedcur
renci
esi
nthef
orexmar
ket
.

Uni
tedst
ate=Uni
tedst
atedol
l
ar(
USD)

Canada=Canadi
andol
l
ar(
CAD)

Aust
ral
i
a=Aust
ral
i
adol
l
ar(
AUD)

NewZeal
and=NewZeal
anddol
l
ar(
NZD)
Uni
tedki
ngdom=Gr
eatBr
it
ishpound(
GBP)

Ot
herEur
opeancount
ri
esi
ntheEur
opeanUni
on=EURO(
EUR)

Japan=Japanesey
en(
JPY)

Swi
tzer
land=Swi
ssf
ranc(
CHF)

Thefor
eignexchangemar
ketl
ooksabsol
utel
ygi
nor
mouswi
thi
ts$6.
6TRI
LLI
ONadayt
rade
vol
ume.

Asi
def
rom i
tssi
ze,
themar
ketal
sor
arel
ycl
oses!I
t’
sopenv
irt
ual
l
yroundt
hecl
ock.

Theforexmar
keti
sopen24hour
sadayand5day
saweek,
onl
ycl
osi
ngdowndur
ingt
he
weekend.

Theforei
gnexchangemar
ket
,whi
chi
susual
l
yknownas“
for
ex”or“
FX,
”ist
hel
argestf
inanci
al
marketintheworl
d.

TheFXmar keti
saglobal
,decent
ral
izedmarketwherethewor
ld’
scur
renci
eschangehands.
Exchanger
ateschangebythesecondsothemar keti
sconst
antl
yinf
lux.

Sounli
kethest
ockorbondmar
ket
s,t
hef
orexmar
ketdoesNOTcl
oseatt
heendofeach
busi
nessday.

I
nst
ead,
tradi
ngj
ustshi
ft
stodi
ff
erentf
inanci
alcent
ersar
oundt
hewor
ld.

Thedayst
artswhent
raderswakeupinAuckl
and/Wel
l
ingt
on,thenmovestoSydney
, Si
ngapor
e,
HongKong,Toky
o,Fr
ankfurt
,London,
andfi
nal
ly
,NewYork,befor
etr
adingst
art
salloveragai
n
i
nWelli
ngt
on!

(
Woul
dtal
kmor
eaboutt
hisast
imegoeson.
)
WHATI
STRADEDI
NFOREX?

Thesi
mpl
eansweri
sMONEY.

Becauseyou’
renotbuy
inganyt
hingphy
sical
,for
ext
radi
ngcanbeconf
usi
ngashel
l
,sowe’
l
luse
asimpleanal
ogytohel
pexplai
n.

Thi
nkofbuy
ingacur
rencyasbuy
ingashar
einapar
ti
cul
arcount
ry,
kindal
i
kebuy
ingshar
esi
na
company
.

Thepri
ceofthecur
rencyi
susuall
yadi
rectr
efl
ect
ionoft
hemar
ket
’sopi
nionont
hecur
rentand
fut
ureheal
thofi
tsr
espect
iveeconomy
.

I
nf or
extradi
ng,whenyoubuy,say
,theJapanesey
en,
youar
ebasi
cal
l
ybuy
inga“
shar
e”i
nthe
Japaneseeconomy.Youget?

Youareexpect
ingt
hatt
heJapaneseeconomyi
sdoi
ngwel
l
,andwi
l
lev
engetbet
terast
ime
goes.

Oncey
ousel
lthose“
shar
es”backt
othemar
ket
,hopef
ull
y,y
ouwi
l
lendupwi
thapr
ofi
t.

Ingeneral
,theexchangerateofacur
rencyv
ersusot
hercur
renciesisarefl
ecti
onoft
he
condit
ionofthatcountr
y’seconomy,
comparedtoot
hercountr
ies’economies.

CURRENCY

Whil
etherearepot
ent
ial
l
ylot
sofcur
renci
esyoucant
rade,
asanewf
orext
rader
,youwi
l
l
pr
obablystar
ttr
adi
ngwitht
he“maj
orcurr
enci
es“
.

Uni
tedst
ate=Uni
tedst
atedol
l
ar(
USD)

Canada=Canadi
andol
l
ar(
CAD)

Aust
ral
i
a=Aust
ral
i
adol
l
ar(
AUD)

NewZeal
and=NewZeal
anddol
l
ar(
NZD)

Uni
tedki
ngdom=Gr
eatBr
it
ishpound(
GBP)
Ot
herEur
opeancount
ri
esi
ntheEur
opeanUni
on=EURO(
EUR)

Japan=Japanesey
en(
JPY)

Swi
tzer
land=Swi
ssf
ranc(
CHF)

They’
recall
ed“
majorcur
rencies”becausethey
’ret
hemostheav
il
ytr
adedcur
renci
esand
repr
esentsomeoftheworl
d’slargesteconomi
es.
BUYI
NGANDSELLI
NGCURRENCYPAI
RS

For
ext
radi
ngi
sthesi
mul
taneousbuy
ingofonecur
rencyandsel
l
inganot
her
.

Cur
renciesar
etradedthroughabr
okerordeal
erandar
etr
adedi
npai
rs.Cur
renci
esar
equot
ed
i
nrelat
iontoanothercur
rency.

Forexampl
e,t
heeur
oandt
heU.
S.dol
l
ar(
EUR/
USD)ort
heBr
it
ishpoundandt
heJapanesey
en
(GBP/JPY)
.

Wheny
out
radei
nthef
orexmar
ket
,youbuyorsel
li
ncur
rencypai
rs.

Anexchanger
atei
sther
elat
ivepr
iceoft
wocur
renci
esf
rom t
wodi
ff
erentcount
ri
es.

Exchanger
atesf
luct
uat
ebasedonwhi
chcur
rencyi
sst
rongeratt
hemoment
.

Ther
ear
ethr
eecat
egor
iesofcur
rencypai
rs:

The“
maj
ors“

The“
crosses“

The“
exot
ics“

Themaj
orcur
rencypai
rsal
way
sincl
udet
heU.
S.dol
l
ar.

Food,pr
oper
ty,
automobi
l
es,cl
othi
ng,younameit.Whatal
lthesemarketshavei
ncommoni s
buyi
ngandsell
i
ng.Thi
sacti
oniscal
ledtr
ading(
buyingandsell
ingofgoodsandser
vices)
.

Themomenty oubecomeaf orextr

ader
,itmeansnotonlyar eyouaconsumer(buyi
ng)buty
ou
areaproducer(sel
l
ing).Thismakesy ouabusinessperson,butyourli
neofbusi
nessis
curr
enci
es.Whi l
eotherpeoplebuyandsel l
clot
hes,car
s, houses,
land,f
ood,f
urni
tur
eandall
that
,youbuyandsel l
currencies.

Iam goingt
orepeatthesamethi
nginmoreorlessdiff
erentwaystil
li
tgetsint
oyourheads.I
wil
lgiveasmanyexamplesasIcanunti
lI'
m confi
dentthatyouhavegraspedthet
opicofeach
day.TodayI
'mtal
kingaboutcur
renci
esandcurrencypair
sti
llyouknowthem li
keyourl
if
e
dependsonit.

Thecur
rencypai
rsl
i
stedbel
owar
econsi
der
edt
he“
maj
ors.
”

Thesepai
rsal
lcont
aint
heU.
S.dol
l
ar(
USD)ononesi
deandar
ethemostf
requent
lyt
raded.
Compar
edt
othecrossesandexoti
cs,
pri
cemov
esmor
efr
equent
lywi
tht
hemaj
ors,
whi
ch
pr
ovi
demor
etradi
ngopportuni
ti
es.

EUR/
USD -Eur
ozone/Uni
tedSt
ates

USD/
JPY - Uni
tedSt
ates/Japan

GBP/
USD -Uni
tedKi
ngdom /Uni
tedSt
ates

USD/
CHF -Uni
tedSt
ates/Swi
tzer
land

USD/
CAD -Uni
tedSt
ates/Canada

AUD/
USD -Aust
ral
i
a/Uni
tedSt
ates

NZD/
USD -NewZeal
and/Uni
tedSt
ates

Themaj
orsar
ethemostl
i
qui
dint
hewor
ld.

Li
qui
dit
yisusedt
odescr
ibet
hel
evel
ofact
ivi
tyi
nthef
inanci
almar
ket
.

I
nfor
ex,
it’
sbasedont
henumberofact
ivet
rader
sbuy
ingandsel
l
ingaspeci
fi
ccur
rencypai
r
andt
hevol
umebeingt
raded.

Themor
efr
equent
lyt
radedsomet
hingi
s,t
hehi
gheri
tsl
i
qui
dit
y.

Forexampl
e,morepeoplet
radet
heEUR/
USDcur
rencypai
randathi
gherv
olumes,
thant
he
AUD/USDcurr
encypair
.

Thi
smeanst
hatEUR/
USDi
smor
eli
qui
dthanAUD/
USD.

Nowl
et'
smov
eon.

Curr
encypai
rsthatdon’tcont
aint
heU.
S.dol
l
ar(
USD)ar
eknownascr
oss-
cur
rencypai
rsor
si
mplyasthe“crosses.
”

Cross-
cur
rencypair
sdoNOTincl
udetheU.
S.dol
l
ar.Cr
ossest
hati
nvol
veanyoft
hemaj
or
curr
enci
esarealsoknownas”
minors”
.

Exot
iccur
rencypai
rsconsi
stofonemaj
orcur
rencyandonecur
rencyf
rom anemer
gingmar
ket
(EM)
.

Maj
orcr
ossesar
eal
soknownas“
minor
s.”
Whil
enotasfrequent
lytradedast
hemaj
ors,
thecr
ossesar
est
il
lpr
ett
yli
qui
dandst
il
lpr
ovi
de
pl
entyoft
radi
ngoppor t
uniti
es.

Themostact
ivel
ytr
adedcr
ossesar
eder
ivedf
rom t
het
hreemaj
ornon-
USDcur
renci
es:
EUR,
JPY,
andGBP.

Exot
iccur
rencypai
rsaremadeupofonemajorcurr
encypai
redwit
hthecur
rencyofan
emergi
ngeconomy,suchasBrazi
l
,Mexi
co,
Chile,
Turkey,
orHungary.

I
t’
snotunusual
toseespr
eadst
hatar
etwoort
hreet
imesbi
ggert
hant
hatofEUR/
USDor
USD/
JPY.

Duetotheover
alll
owerdegreeofli
qui
dit
y,exot
iccur
rencypai
rst
endt
obef
armor
esensi
ti
vet
o
economicandgeopol
i
tical
ev ent
s.

Forexampl
e,apol
i
ticalscandalorunexpect
edel
ect
ionr
esul
tscancauseanexot
icpai
r’
s
exchanger
atet
oswi ngviol
entl
y.

Soi
fyouwantt
otr
adeexot
icscur
rencypai
rs,
remembert
ofact
ort
hisi
nyourdeci
sion.
BeforewecontinueI'
l
lspeakbrief
lyonotherf
inanci
almar
ket
sbecauset
hisclassi
snotmeant
fortradi
ngcur
rencypair
s,ther
eforeyou'
l
lbet aughthowt
otr
adesomesynthetici
ndi
ces
(Volati
li
ty75i
ndex).

Asmuchaswel iketothi
nkoft
heforexmar
ketast
hebeallandendalloff
inanci
alt
radi
ng
market
s,itdoesn’texi
sti
navacuum.Youmusthavehear
dofsomet heseothermarket
s:gol
d,
oi
l,
stocks,i
ndicesandbonds.

Alway skeepinmindthatallthevariousfi
nancial
mar ketsaremarketsintheirownr ightand
functi
onaccordingtotheirowninternaldynamicsbasedondat a,news,positi
oning, and
senti
ment .Somemar ketsoccasionallyov
erlapanddisplayvary
ingdegreesofcor relation?Of
course,andit’
salwaysimportanttobeawar eofwhat ’sgoingoninotherfinanci
almar kets.But
i
t’salsoessenti
altovi
eweachmar ketini
tsownper specti
veandt ot
radeeachmar ket
i
ndividuall
y.

GOLD

Goldi
scommonl yv i
ewedasahedgeagai nstinfl
ation,anal t
ernativetotheU.S.dollar
,andasa
st
oreofvaluei
nt i
mesofeconomi corpol
iticaluncertai
nty.Ov erthelongterm, t
her el
ati
onshi
p
i
smost l
yinver
se,withaweakerUSDgener all
yaccompany ingahi ghergoldprice,andast r
onger
USDcomi ngwit
hal owergol
dprice.Howev er,
intheshor trun, eachmarkethasi tsown
dynami
csandl i
quidi
ty,
whichmakesshort-termt r
adingrelationshipsgeneral
lytenuous.

Ov eral
l
,thegoldmarketissigni
ficant
lysmal l
erthantheforexmar ket,soifyouareagoldtrader
,
youwoul dsoonerkeepaney eonwhat ’shappeningtothedollar
,ratherthantheotherway
around.Withthatnoted,extr
ememov ement singoldpri
cestendt oattractcur
rencytr
ader
s’
attenti
onandusuallyinf
luencethedollarinamost l
yinversefashi
on.

OI
L

Alotofmisi
nformati
onexi stsontheInt
ernetaboutt
hesupposedrel
ati
onshipbet
weenoiland
theUSDorothercurrencies,suchasCADorJPY.Thei deai
sthat,
becausesomecountri
esare
oilpr
oducer
s,thei
rcurrenciesareposi
ti
vely(
ornegati
vel
y)af
fect
edbyincreases(
ordecr
eases)
i
nt hepr
iceofoil
.
Ifthecountryisani mporterofoi l
(andwhi chcount ri
esaren’ttoday?),t
het heorygoes, i
ts
currencywil
lbehur t(orhelped)byhi gher(orlower)oilpr
ices.Cor r
elati
onst udiesshowno
appreciabl
erelat
ionshipstot hateffect,
especiall
yi nt
heshor trun,whichiswher emost
currencytr
adingisfocused.Whent hereisal ong-termrel
ationship,i
t’sasev identagainstt
he
USDasmuchas, ormor ethan, anyindivi
dualcurrency,whetherani mpor t
erorexpor terofbl
ack
gol
d.

Thebestwayt ol
ookatoili
sasani nfl
ati
oninputandasal imit
ingfactoronov eral
leconomic
growth.Thehigherthepri
ceofoil,
thehigheri
nfl
ati
oni sli
kel
ytobeandt hesloweraneconomy
i
sl i
kelytogrow.Thelowerthepri
ceofoil,t
helowerinfl
ati
onarypressuresarelikel
y(butnot
necessaril
y)tobe.Weliket
of act
orchangesinthepriceofoili
ntoourinflat
ionandgr owth
expectati
ons,andthendrawconclusi
onsaboutthecour seoftheUSDf rom them.Abov eall
,oi
l
i
sj ustoneinputamongmany .

STOCK

Stocksar emi croeconomi csecur iti

es, ri
singandf all
ingi nresponsetoi ndivi
dual cor porate
resul
tsandpr ospects, whil
ecur renciesar eessent i
allymacr oeconomi csecur i
ties, f
luctuati
ngi n
responset owi der-r
angingeconomi candpol it
icaldev elopment s.Assuch, thereisl ittl
eint
uitiv
e
reasont hatstockmar ketsshoul dber el
atedt ocur rencies.Long-term correl
ationst udiesbear
thi
sout ,withcor r
elati
oncoef f
ici
ent sofessent ial
lyzer obet weenthemaj orUSDpai r sandU. S.
equitymar ketsov erthelastf i
vey ears.Thet womar ketsoccasi onall
yintersect,thought hi
si s
usuallyonlyatt heextremesandf orv eryshor tperiods.Forexampl e,whenequi tymar ket
volat
ili
tyreachesext raordinarylevels( say, t
heSt andar d&Poor ’
sloses2+per centi naday )
, t
he
USDmayexper iencemor epressur ethani totherwisewoul d—butt here’snoguar anteeoft hat.
TheU. S.stockmar ketmayhav edr oppedonanunexpect edhikeinU.S.interestr ates,whilethe
USDmayr al
lyont hesur prisemov e.

I
NDI
CESALSOKNOWNASBONDS

Fixed-
incomeorbondmar ketshav eamor eintui
ti
veconnectiontot hefor
exmar ketbecause
they’
rebot hheavi
lyinf
luencedbyi nt er
estrat
eexpectati
ons.Howev er,
short
-term market
dynami csofsupplyanddemandi nt err
uptmostattemptstoest abli
shav i
ablelinkbetweenthe
twomar ket
sonashor t-t
erm basis.Somet imestheforexmar ketreactsfi
rstandf ast
est
dependi ngonshift
sininterestrateexpectati
ons.Atotherti
mes, thebondmar ketmor e
accuratelyref
lect
schangesi ninterestrateexpect
ati
ons,withthef orexmarketlaterplayi
ng
catch-
up.
Ov eral
l
,ascurr
encytr
aders,
youdefi
nitel
yneedtokeepaney eontheyiel
dsofthebenchmar
k
governmentbondsofthemajor
-cur
rencycountr
iestobet
termonit
ortheexpectat
ionsoft
he
i
nterestrat
emarket
.Changesinrel
ati
veinter
estrat
es(i
nter
estrat
ediff
erent
ial
s)exertamaj
or
i
nfl
uenceonf or
exmar ket
s.

SYNTHETI
CINDI
CES

(
VOLATI
LITY75I
NDEX,
BOOM &CRASH)

Volatil
i
ty75i ndex,boom andcr ashandot heri
ndicesarecall
edSy ntheti
cIndi
ces.Theyare
mar ketsthataresimulated.Sot heydon'tgetaffectedbynewsev ents.Theybehavelikereal
monet arymar ketbuttheirbehaviouriscreatedfrom theuseofrandoml ygenerat
ednumber s.
Theser andom number sar egener at
edthroughapcpr ogramme.Fort ranspar
encyissues,the
brokerisunabl etohaveanef fectonorpr edictwhichnumber swil
l begeneratedsotheyare
unablet ocheatthemar ket.

Var
iousTypesofVolati
l
ityIndi
cesy oucantradeonMet aTr
ader5are:Volati
l
ity10Index,
Vol
ati
li
ty25Index,
Volati
li
ty50I ndex,
Volat
il
ity75Index,
Vol
ati
li
ty100I ndex,
Hi gh-
Frequency
Vol
ati
li
ty10Index,
High-FrequencyVolat
il
it
y50I ndexandHi
gh-FrequencyVolatil
it
y100I ndex.

Thesenumber
sfrom 10toonehundr
edi
ndi
cat
esv
olat
il
it
y;10bei
ngt
hel
eastr
iskyand100
bei
ngthemostvolat
il
e.

From t
heabov
eli
st,y
oucanaddit
ional
l
yobserv
eHi ghFrequencyVol
ati
l
ityi
ndi
ces10t
o100t
wo
Theymove4inst
ancesf
ast
erthantheordi
nar
yv ol
ati
li
tyindi
ces.

TheFXmar
keti
sspr
eadal
lov
ert
hegl
obewi
thnocent
ral
locat
ion.

Tr
adescant
akepl
aceany
wher
easl
ongasy
ouhav
eanI
nter
netconnect
ion.

TheU.
S.dol
l
ari
sthemostt
radedcur
rency
,maki
ngup84.
9%ofal
ltr
ansact
ions!

Theeur
o’sshar
eissecondat39.
1%,
whi
l
ethatoft
hey
eni
sthi
rdat19.
0%.

Thereareal
soot
hersi
gni
fi
cantr
easonswhyt
heU.
S.dol
l
arpl
aysacent
ral
rol
eint
hef
orex
market:
TheUni
tedSt
ateseconomyi
stheLARGESTeconomyi
nthewor
ld.

TheU.
S.dol
l
ari
sther
eser
vecur
rencyoft
hewor
ld.

TheUni
tedSt
ateshast
hel
argestandmostl
i
qui
dfi
nanci
almar
ket
sint
hewor
ld.

TheUni
tedSt
ateshasast
abl
epol
i
tical
syst
em.

TheUni
tedSt
atesi
sthewor
ld’
ssol
emi
l
itar
ysuper
power
.

TheU.S.dol
laristhemedi um ofexchangef ormanycross-
bordertr
ansact
ions.Forexampl
e,oi
l
i
spr i
cedinU.S.doll
ars.Alsocall
ed“petrodoll
ars.
”SoifMexicowantstobuyoilfr
om Saudi
Arabi
a,i
tcanonl ybeboughtwi ththeU.S.dollar
.IfMexi
codoesn’thav
eanydol l
ars,
ithast
osell
i
tspesosfir
standbuyU. S.dol
lars.

Li
qui
dit
y–t
heamountofbuy
ingandsel
l
ingv
olumehappeni
ngatanygi
vent
ime

Thi
smakesi
tver
yeasyf
orany
onet
obuyandsel
lcur
renci
es.

Fr
om theperspect
iveofatr
ader,
li
qui
dit
yisv
eryi
mpor
tantbecausei
tdet
ermi
neshoweasi
l
y
pr
icecanchangeov eragi
venti
meperi
od.
HOW TOMAKEMONEYTRADI
NGFOREX

I
nthef
orexmar
ket
,youbuyorsel
lcur
renci
es.

Placi
ngatradei nt
heforei
gnexchangemar ketissimple.Themechanicsofatradear
every
si
mi l
artothosefoundinotherf
inanci
almarkets(li
kethest ockmarket
),soi
fyouhaveany
experi
enceintradi
ng,y
oushouldbeabl et
opi ckitupprettyquickl
y.

Theobject
iveofforextr
adi
ngi
stoexchangeonecur
rencyf
oranot
heri
ntheexpect
ati
ont
hat
thepr
icewil
l change.

Morespeci
fi
cal
l
y,t
hatt
hecur
rencyy
ouboughtwi
l
lincr
easei
nval
uecompar
edt
otheoney
ou
sol
d.

Forexampl
e

Youpur
chase10,
000eur
osatt
heEUR/
USDexchanger
ateof1.
1800

EUR:
+10,
000USD:
-11,
800

Twoweeksl
ater
,youexchangey
our10,
000eur
osbacki
ntoU.
S.dol
l
aratt
heexchanger
ateof
1.
2500

EUR:
-10,
000USD:
+12500

Youear
napr
ofi
tof$700.

EUR10,
000x1.
18=US$11,
800

EUR10,
000x1.
25=US$12,
500

Remembert
hatanexchanger
atei
ssi
mpl
yther
ati
oofonecur
rencyv
aluedagai
nstanot
her
cur
rency
.

Forexample,t
heUSD/
CHFexchangerat
eindi
cateshowmanyU.S.doll
arscanpur
chaseone
Swissfr
anc,orhowmanySwi
ssfrancsyouneedtobuyoneU.
S.doll
ar.

HOW TOREADAFOREXQUOTE

Cur
renci
esar
eal
way
squot
edi
npai
rs,
suchasGBP/
USDorUSD/
JPY.
Ther
easontheyar
equotedi
npair
sisthat
,ineveryf
orei
gnexchanget
ransact
ion,
youar
e
si
mult
aneousl
ybuyi
ngonecurr
encyandsell
inganot
her.

Howdoy
ouknowwhi
chcur
rencyy
ouar
ebuy
ingandwhi
chy
ouar
esel
l
ing?

Thi
siswher
etheconcept
sofbaseandquot
ecur
renci
escomei
n.

BaseandQuot
eCur
rency

Whenev
ery
ouhav
eanopenposi
ti
oni
nfor
ext
radi
ng,
youar
eexchangi
ngonecur
rencyf
or
anot
her
.

I
nGBP/
USD=1.
21228

Thefi
rstli
stedcur
rencyt
othel
eftoft
hesl
ashi
sknownast
hebasecur
rency(
int
hisexampl
e,
theBr
iti
shpound).

Thebasecur
rencyi
sther
efer
enceel
ementf
ort
heex
changer
ateoft
hecur
rencypai
r.I
tal
way
s
hasaval
ueofone.

Thesecondli
stedcur
rencyont
her
ighti
scal
l
edt
hecount
erorquot
ecur
rency(
int
hisexampl
e,
theU.
S.doll
ar)
.

Whenbuying,
theexchanger
atet
ell
syouhowmuchy
ouhav
etopayi
nuni
tsoft
hequot
e
cur
rencyt
obuyONEuni toft
hebasecur
rency
.

I
ntheexampl
eabov
e,y
ouhav
etopay1.
21228U.
S.dol
l
arst
obuy1Br
it
ishpound.

Whensel
li
ng,
theexchanger
atetel
lsyouhowmanyuni
tsoft
hequot
ecur
rencyy
ougetf
or
sel
l
ingONEunitoft
hebasecurr
ency.

I
ntheexampl
eabov
e,y
ouwi
l
lrecei
ve1.
21228U.
S.dol
l
arswheny
ousel
l1Br
it
ishpound.

Thebasecur
rencyrepresent
showmuchoft
hequot
ecur
rencyi
sneededf
ory
out
ogetoneuni
t
oft
hebasecurrency.

IfyoubuyEUR/USDthi
ssimplymeansthaty
ouar
ebuy
ingt
hebasecur
rencyand
simult
aneousl
ysel
li
ngthequotecur
rency
.

Si
mpl
yput
,buyEURsel
lUSD.
Youwouldbuythepai
rify
oubel
i
evet
hebasecur
rencywi
l
lappr
eci
ate(
gai
nval
ue)r
elat
ivet
o
thequot
ecurr
ency.

Youwoul
dsellt
hepai
rify
out
hinkt
hebasecur
rencywi
l
ldepr
eci
ate(
losev
alue)r
elat
ivet
othe
quot
ecur
rency
.

LONGANDSHORT

I
fyouwantt
obuy(whichact
ual
l
ymeansbuyt
hebasecur
rencyandsellt
hequot
ecurrency),
y
ouwantthebasecur
rencyt
ori
sei
nval
ueandtheny
ouwouldsell
itbackatahi
gherprice.

I
ntr
adert
erms,
thi
siscal
l
ed“
goi
ngl
ong”ort
aki
nga“
longposi
ti
on.

”Justr
emember
:long=buy
.

I
fyouwanttosel
l(whi
chact
uall
ymeanssell
thebasecurr
encyandbuythequot
ecurr
ency
),y
ou
wantt
hebasecurr
encytof
alli
nval
ueandthenyouwouldbuyitbackatal
owerpri
ce.

Thi
siscal
l
ed“
goi
ngshor
t”ort
aki
nga“
shor
tposi
ti
on”
.

Justr
emember
:shor
t=sel
l
.

Fl
atorSquar
e

I
fyouhav
enoopenposi
ti
on,
theny
ouar
esai
dtobe“
fl
at”or“
squar
e”.

Cl
osi
ngaposi
ti
oni
sal
socal
l
ed“
squar
ingup“
.

THEBI
D,ASKANDSPREAD

Al
lfor
exquot
esar
equot
edwi
tht
wopr
ices:
thebi
dandask.

I
ngener
al,
thebi
disl
owert
hant
heaskpr
ice.
WHATI
S“BI
D”?

Thebidi
st hepr
iceatwhi
chy
ourbr
okeri
swi
l
li
ngt
obuyt
hebasecur
rencyi
nexchangef
ort
he
quot
ecurrency.

Thi
smeanst
hebi
dist
hebestav
ail
abl
epr
iceatwhi
chy
ou(
thet
rader
)cansel
ltot
hemar
ket
.

I
fyouwantt
osel
lsomet
hing,
thebr
okerwi
l
lbuyi
tfr
om y
ouatt
hebi
dpr
ice.

WHATI
S“ASK”
?

Theaskist
hepr
iceatwhi
chy
ourbr
okerwi
l
lsel
lthebasecur
rencyi
nexchangef
ort
hequot
e
cur
rency
.

Thi
smeanst
heaskpr
icei
sthebestav
ail
abl
epr
iceatwhi
chy
oucanbuyf
rom t
hemar
ket
.

Anot
herwor
dforaski
stheof
ferpr
ice.

I
fyouwantt
obuysomet
hing,
thebr
okerwi
l
lsel
l(orof
fer
)itt
oyouatt
heaskpr
ice.

WHATI
S“SPREAD”
?

Thedi
ff
erencebet
weent
hebi
dandt
heaskpr
icei
sknownast
heSPREAD.

Ont
heEUR/
USDquot
eabov
e,t
hebi
dpr
icei
s1.
34568andt
heaskpr
icei
s1.
34588.

I
fyouwantt
osel
lEUR,
youcl
i
ck“
Sel
l
”andy
ouwi
l
lsel
leur
osat1.
34568.
I
fyouwantt
obuyEUR,
youcl
i
ck“
Buy
”andy
ouwi
l
lbuyeur
osat1.
34588.
KNOW WHENTOBUYORSELLACURRENCYPAI
R

For
ext
radi
ngi
nvol
vest
ryi
ngt
opr
edi
ctwhi
chcur
rencywi
l
lri
seorf
all
ver
susanot
hercur
rency
.

Howdoy
ouknowwhent
obuyorsel
lacur
rencypai
r?

I
nthefol
l
owingexamples,
wearegoingtouseal
i
ttl
efundament
alanal
ysi
stohel
pusdeci
de
whet
hertobuyorsel
laspeci
fi
ccur
rencypair
.

Thesupplyanddemandforacur
rencychangesduet
ovar
iouseconomi
cfact
ors,
whi
chdr
ives
cur
rencyexchanger
atesupanddown.

Eachcurr
encybelongstoacount ry(orr
egion)
.Soforexfundamentalanal
ysi
sfocusesonthe
over
all
stateofthecountr
y ’
seconomy ,suchasproducti
vit
y,employment,manuf
acturi
ng,
i
nter
nati
onaltr
ade,andinterestr
ates.

EUR/
USD

I
nthi
sexampl
e,t
heeur
oist
hebasecur
rencyandt
hust
he“
basi
s”f
ort
hebuy
/sel
l
.

I
fyoubel
ievethatt
heU.
S.economywil
lcont
inuet
oweaken,
whi
chi
sbadf
ort
heU.
S.dol
l
ar,
you
woul
dexecuteaBUYEUR/USDorder
.

Bydoi
ngso,
youhav
eboughteur
osi
ntheexpect
ati
ont
hati
twi
l
lri
sev
ersust
heU.
S.dol
l
ar.

I
fyoubel
i
evethattheU.
S.economyi
sst r
ongandt
heeur
owi
l
lweakenagai
nstt
heU.
S.dol
l
ar,
y
ouwouldexecut
eaSELLEUR/ USDorder.

Bydoi
ngso,
youhav
esol
deur
osi
ntheexpect
ati
ont
hati
twi
l
lfal
lver
sust
heUSdol
l
ar.

USD/
JPY

I
nthi
sexampl
e,t
heU.
S.dol
l
ari
sthebasecur
rencyandt
hust
he“
basi
s”f
ort
hebuy
/sel
l
.

Bydoingsoy
ouhav
eboughtU.
Sdol
l
arsi
ntheexpect
ati
ont
hati
twi
l
lri
sev
ersust
heJapanese
yen.

Ify
oubeli
evethatJapaneseinv
estor
sarepul
li
ngmoneyoutofU.S.fi
nanci
almarket
sand
conver
ti
ngall
theirU.
S.doll
arsbacktoy
en,andthi
swi
llhur
ttheU.S.dol
lar
,youwouldexecut
ea
SELLUSD/JPYorder.

Bydoi
ngsoy
ouhav
esol
dU.
Sdol
l
arsi
ntheexpect
ati
ont
hati
twi
l
ldepr
eci
ateagai
nstt
he
Japanesey
en.

I
fyouthi
nkthatt
heJapanesegov
ernmenti
sgoi
ngtoweakent
hey
eni
nor
dert
ohel
pit
sexpor
t
i
ndust
ry,
youwouldexecut
eaBUYUSD/ JPYor
der.

GBP/
USD

I
nthi
sexampl
e,t
hepoundi
sthebasecur
rencyandt
hust
he“
basi
s”f
ort
hebuy
/sel
l
.

I
fyouthi
nkt
heBr
iti
sheconomywi
ll
conti
nuet
odobet
tert
hant
heU.
S.i
nter
msofeconomi
c
gr
owth,y
ouwoul
dexecuteaBUYGBP/
USDorder
.

Bydoi
ngsoy
ouhav
eboughtpoundsi
ntheexpect
ati
ont
hati
twi
l
lri
sev
ersust
heU.
S.dol
l
ar.

I
fyoubel
ievetheBr
it
isheconomyi
ssl
owi
ngwhi
l
etheAmer
icaneconomyr
emai
nsst
rong,
you
woul
dexecuteaSELLGBP/ USDor
der
.

Bydoi
ngsoy
ouhav
esol
dpoundsi
ntheexpect
ati
ont
hati
twi
l
ldepr
eci
ateagai
nstt
heU.
S.
dol
l
ar.

TRADI
NGI
N“LOTS”

Whenyougotothest
oreorsuper
marketandyouwantt
obuyanegg,
youcan’
tjustbuya
si
ngl
eegg,t
heycomeindozensor“
lot
s”of12.

Inforex,i
tmakesnosensetobuyorsel
l1euro,sotheyusuallycomei n“
lot
s”of1,
000uni
tsof
currency(mi
crol
ot)
,10,
000unit
s(minil
ot),
or100,000units(standar
dlot
)dependi
ngonyour
brokerandthety
peofaccountyouhave(moreon“ l
ots”l
ater
).

MARGI
NTRADI
NG

“
ButIdon’
thav
eenoughmoneyt
obuy10,
000eur
os!CanIst
il
ltr
ade?
”

Youcan!Byusi
ngl
ever
age.

Wheny out
radewi
thl
ever
age,youwoul
dn’
tneedt
opayt
he10,
000eur
osupf
ront
.Inst
ead,
you’
d
putdownasmall“
deposi
t”
,knownasmargi
n.

Lever
ageist
herati
ooft
het
ransact
ionsi
ze(
“posi
ti
onsi
ze”
)tot
heact
ual
cash(
“tr
adi
ngcapi
tal
”)
usedformar
gin.

Forexampl
e,50:
1lev
erage,
alsoknownasa2%mar
ginr
equi
rement
,means$2,
000ofmar
gini
s
r
equi
redt
oopenaposi
ti
onsi
zewor
th$100,
000.

Mi
ghtseem r
eal
l
yconf
usi
ngbuti
t’
snotj
ustt
aket
imeandgoov
eri
tsev
eral
times.

Margi
ntradi
nglet
syouopenl
argeposi
ti
onsi
zesusi
ngonl
yaf
ract
ionoft
hecapi
tal
you’
d
nor
mallyneed.

Thi
sishowy
ou’
reabl
etoopen$1,
250or$50,
000posi
ti
onswi
thasl
i
ttl
eas$25or$1,
000.

Youcanconductr
elat
ivel
ylar
get
ransact
ionswi
thasmal
lamountofi
nit
ial
capi
tal
.

Letmeexpl
ain.

Wewill
bediscussi
ngmar
gini
nmor
edet
ail
lat
er,
buthopef
ull
y,y
ou’
reabl
etogett
hebasi
cidea
ofhowitwor
ks.

Li
stencar
eful
lybecauset
hisi
sver
yimpor
tant
!

Youbeli
evethatsi
gnal
sint
hemar
ketar
eindi
cat
ingt
hatt
heBr
it
ishpoundwi
l
lgoupagai
nstt
he
U.S.dol
l
ar.

Youopenonestandar
dlot(
100,
000uni
tsGBP/
USD)
,buy
ingwi
tht
heBr
it
ishpoundwi
tha2%
margi
nrequi
rement.

Youwai
tfort
heexchanger
atet
ocl
i
mb.

Wheny oubuyonel
ot(100,
000uni
ts)ofGBP/USDatapri
ceof1.50000,
youar
ebuy
ing100,
000
pounds,whi
chiswor
th$150,000(
100,000uni
tsofGBP*1.50000)
.

Si
ncethemargi
nrequir
ementwas2%,
thenUS$3,
000woul
dbesetasi
dei
nyouraccountt
o
openupthet
rade($150,
000*2%).

Younowcont
rol
100,
000poundswi
thj
ust$3,
000.

Youranal
ysi
sgoeswel
landy
oudeci
det
osel
l
.Youcl
oset
heposi
ti
onat1.
50500.Youear
n
about$500.

Wheny
oudeci
detocloseaposi
ti
on,thedeposi
t(“margi
n”)t
haty
ouor
igi
nal
l
ymadei
sret
urned
t
oyouandacal
cul
ati
onofyourprof
it
sorlossesisdone.

Thi
spr
ofi
torl
ossi
sthencr
edi
tedt
oyouraccount
.
Let
’sr
evi
ewt
heGBP/
USDt
radeexampl
eabov
e.

GBP/
USDwentupbyamer
ehal
fapence!Notev
enonepence.I
twashal
fapence!

Buty
oumade$500.

How?Becausey
ouwer
en’
ttr
adi
ngj
ust£1.

I
fyourposi
ti
onsi
zewas£1,
yes,
youwoul
d’v
emadeonl
yhal
fapence.

But
…yourposi
ti
onsi
zewas£100,
000(
or$150,
000)wheny
ouopenedt
het
rade.

Thebestpar
tist
haty
oudi
dn’
thav
etoputupt
hatent
ir
eamount
.

Al
lthatwasr
equi
redt
oopent
het
radewas$3,
000i
nmar
gin.

$500pr
ofi
tfr
om $3,
000i
ncapi
tal
isa16.
67%r
etur
n

That
’st
hepowerofl
ever
agedt
radi
ng.

Asmal
lmar
gindeposi
tcanl
eadt
olar
gel
ossesaswel
lasgai
ns.

I
tal
someansthatarel
ati
vel
ysmallmovementcanleadt
oapropor
tionat
elymuchlar
ger
movementi
nthesi
zeofanylossorpr
ofi
twhichcanworkagai
nsty
ouaswel lasf
oryou.

Youcoul
d’v
eeasi
l
yLOST$500i
ntheexampl
eabov
e.

Hi
ghl
ever
agesoundsawesome,
buti
tcanbedeadl
y.

Forexampl
e,youopenaf
orext
radi
ngaccountwi
thasmalldeposi
tof$1,
000.Yourbr
oker
off
ers100:
1lever
agesoy
ouopena$100,000EUR/USDposit
ion.

Amov
eofj
ust100pi
pswi
l
lbr
ingy
ouraccountt
o$0.

ROLLOVER

Forposi
ti
onsopenaty
ourbr
oker’
s“cut
-offti
me”(usual
ly5:
00pm ET),
ther
eisadai
ly“r
oll
ov er
fee“
,al
soknownasa“swapfee”t
hatatraderei
therpay
sorearns,
dependi
ngontheposit
ions
y
ouhav
eopen.

I
fyoudonotwantt
oearnorpayint
erestonyourposit
ions,
simpl
ymakesur
etheyar
eal
lcl
osed
bef
ore5:
00pm ET,
theest
abl
ishedendofthemar ketday.
WHATI
SAPI
PINFOREX?

You’
veprobabl
yheardoft
heterms“pi
ps,
”“points“
,and“lot
s”thrownaround,
andnowI
’
m goi
ng
toexpl
ainwhattheyar
eandshowyouhowt heirvaluesarecalcul
ated.

Whati
saPi
p?

Theunitofmeasur
ementt
oexpr
esst
hechangei
nval
uebet
weent
wocur
renci
esi
scal
l
eda
“pi
p.”

I
fEUR/
USDmov
esf
rom 1.
1050t
o1.
1051,
that.
0001USDr
isei
nval
uei
sONEPI
P.

Api
pisusual
l
ythel
astdeci
mal
placeofapr
icequot
e.

Mostpai
rsgooutt
o4deci
malplaces,
butt
her
ear
esomeexcept
ionsl
i
keJapanesey
enpai
rs
(
theygooutt
otwodeci
malpl
aces).

Forexampl
e,f
orEUR/
USD,
iti
s0.
0001,
andf
orUSD/
JPY,
iti
s0.
01.

WHATI
SAPI
PETTE?

Therear
eforexbr
oker
sthatquot
ecur
rencypai
rsbey
ondt
hest
andar
d“4and2”deci
mal
places
to“5and3”deci
malpl
aces.

Theyar
equot
ingFRACTI
ONALPI
PS,
alsocal
l
ed“
poi
nts”or“
pipet
tes.
”

A“
poi
nt”or“
pipet
te”or“
fract
ional
pip”i
sequal
toa“
tent
hofapi
p“.

Forinst
ance,
ifGBP/
USDmov
esf
rom 1.
30542t
o1.
30543,
that.
00001USDmov
ehi
gheri
sONE
PIPETTE.
HOW TOCALCULATEAPI
P

Forcur
rencypai
rswher
ePr
icei
squot
edt
oaf
our
thdeci
malcal
l
eda*
pip*
.

I
n1.
1833,t
hef
our
thdeci
mal(
1.183*
3*)
,iscal
l
edapi
p.Pr
icemov
esi
npi
ps.

>Thi
smeanst
hatt
hepr
ice1.
1834hasmov
ed(
gai
ned)1pi
p,

1.
1843hasmov
ed(
gai
ned)10pi
ps.

>Thi
smeanst
hatt
hepr
ice1.
1832hasmov
ed(
lost
)1pi
p,

1.
1823hasmov
ed(
lost
)10pi
ps.

Her
e'sapi
ctur
etoshowy
ouwhatapi
pis.Andbel
owi
sapi
ctur
ethatshowst
hev
alueofpi
ps.
Pr
icesf
orpai
rswi
tht
heJapaneseYen(
JPY)ar
equot
edt
otheseconddeci
malpl
ace.

Let
’suseEURJPY=126.
20asanexampl
e

I
n126.
20,
theseconddeci
mal
place126.
2*0*i
swhati
susedt
ocal
cul
atet
hepi
p

I
fpr
icemov
esf
rom 126.
20t
o126.
21i
thasgai
ned1pi
p

I
fpr
icemov
esf
rom 126.
20t
o126.
30i
thasgai
ned10pi
ps

I
fpr
icemov
esf
rom 126.
20t
o126.
19i
thasl
ost1pi
p

Youmayask,"
What'
stheimport
anceofbuy
ingandsel
l
ingt
hesepai
rs?
”Wel
lthat
'
s
wher
eyougety
ourprof
itorl
oss.

>Wheny oubuyaCur rencypai randitsmarketpri

cegoesup( aboveyourbuy i
ngprice)
,
yougai
npr of
it
.I fthemar ketpricegoesdown( bel
ow yourbuyi
ngpr i
ce)thenyousuffera
l
oss.>Wheny ousel laCur rencypairanditsmarketpricegoesdown( below y
our
sel
li
ngprice)
,y ougainprofi
t.Ift hemarketpr
icegoesup( aboveyoursel
lingpri
ce)t
hen
youstar
tt osuf f
eral oss.
WHATI
SALOTI
NFOREX?

A“
lot
”isauni
tmeasur
ingat
ransact
ionamount
.

Wheny
oupl
aceor
der
sony
ourt
radi
ngpl
atf
orm,
order
sar
epl
acedi
nsi
zesquot
edi
nlot
s.

Lotrepr
esentst
hesi
zeofyourt
radesi
nFor
ex.I
nanot
heri
nter
pret
ati
on,
Loti
sthenumberof
curr
encyunit
syouwi
llt
radei
nForex.

Ther
ear
e4mai
nty
pesofLot
s:St
andar
dLot
,Mi
niLot
,Mi
croLot
,andNanoLot
.

StandardLot:1st
andardl
otisequiv
alentt
othev ol
umeof100,
000uni
ts.Whenev
eryou
purchase1lotofacurr
encypai
r,youbuy100,000unit
soft
hebasecur
rency(t
hefi
rstcur
rency
i
napai r)

MiniLot
:Beginnert
radersareof
tenadvi
sedtotr
adewithmini
,micr
oornanol
otsi
norderto
avoi
dtheriskofhugelosses.Aminil
oti
sequalto10,
000unit
s,whi
chis10%ofast
andardlot
.
Hence,whenat r
aderopensanorderof0.
1lots,
heistr
adi
ng1mi nil
ot.

Micr
oLot :
Ami cr
olotisequalto1000unit
s,whichaccountfor1%ofastandar
dlot
.Whena
t
raderopensanorderof0.01lot
s,heist
rading1microlot.Fori
nst
ance,
buying0.
01lot
sof
GBP/USDmeansy oubuy1, 000GBP.

NanoLot :Ananolot,i
nForex,
isreferr
edto10or100uni t
s.Whyisthereadiff
erenceofuni
ts?
Becausesomef orexbroker
ssetnanol ott
o10uni t
swhil
esomeot herssetitt
o100units.
Howev er
,nanolotisnotcommon; onlyafewbrokersof
ferit
.Nor
mal l
y,thenanoloti
sthe
pref
err
edchoiceofnewcomer sorst r
ategytest
ers

Al
otofsmal
laccountt
rader
suset
hisonVol
ati
l
ity75.

RELATI
ONSHI
PBETWEENAPI
PANDALOTSI
ZE

Let
ssayf
ori
nst
ancey
ou'
ret
radi
ngEUR/
USDwi
thal
otsi
zeof

<1.0(
standar
dlot
)youmakeorlose$10perpi
pmov
ementi
.ei
fthemar
ketmov
es20pi
psi
n
yourdir
ecti
onyourpr
ofi
twoul
dbe$10×20=$200

<0.
1(mi
nil
ot)y
oumakeorl
ose$1perpi
pmov
ementi
.ei
fthemar
ketmov
es20pi
psi
nyour
di
rect
iony
ourpr
ofi
twoul
dbe$1×20=$20

<0.01(
Micr
olot)youmakeorl
ose$0.1perpi
pmov
ementi
.ei
fthemar
ketmov
es20pi
psi
nyour
dir
ecti
onyourprofi
twoul
dbe$0.
1×20=$2

LEVERAGE

Youar
epr
obabl
ywonder
inghowasmal
li
nvest
orl
i
key
our
sel
fcant
radesuchl
argeamount
sof
money
.

Thi
nkofy
ourbr
okerasabankwhobasi
cal
l
yfr
ont
syou$100,
000t
obuycur
renci
es.

All
thebankasksf r
om youi
sthaty
ougi
vei
t$1,
000asagoodf
ait
hdeposi
t,whi
chi
twi
l
lhol
dfor
youbutnotnecessari
l
ykeep.

Soundst
oogoodt
obet
rue?Thi
sishowf
orext
radi
ngusi
ngl
ever
agewor
ks.

Theamountofl
ever
agey
ouusewi
l
ldependony
ourbr
okerandwhaty
ouf
eel
comf
ort
abl
ewi
th.

Ty
pical
l
ythebr
okerwi
l
lrequi
readeposi
t,al
soknownas“
mar
gin“
.

Oncey
ouhav
edeposi
tedyourmoney,youwil
lthenbeabl
etot
rade.Thebr
okerwi
l
lal
sospeci
fy
howmuchmargi
nisr
equi
redperposi
ti
on(lot
)traded.

Forexampl
e,ift
heal
lowedl
ever
ageis100:
1(or1%ofposi
ti
onrequi
red)
,andy
ouwant
edt
o
tr
adeaposit
ionwort
h$100,
000,buty
ouonlyhave$5,
000i
nyouraccount
.

Nopr
obl
em asy
ourbr
okerwoul
dsetasi
de$1,
000asadeposi
tandl
ety
ou“
bor
row”t
her
est
.

Ofcourse,anyl
ossesorgai
nswi
l
lbededuct
edoraddedt
other
emai
ningcashbal
ancei
nyour
account.

Themi
nimum secur
it
y(mar
gin)f
oreachl
otwi
l
lvar
yfr
om br
okert
obr
oker
.

I
ntheexampl
eabove,t
hebr
okerr
equi
reda1%margi
n.Thismeanst
hatf
orev
ery$100,
000
t
raded,
thebr
okerwant
s$1,
000asadeposi
tont
heposit
ion.
Let
’ssayyouwanttobuy1standar
dlot(
100,
000)ofUSD/
JPY.I
fyouraccounti
sal
l
owed100:
1
l
everage,
youwil
lhavetoputup$1,
000asmargin.

The$1,
000i
sNOTaf
ee,
it’
sadeposi
t.

Yougeti
tbackwheny
oucl
osey
ourt
rade.

Thereasonthebr
okerr
equi
rest
hedeposi
tist
hatwhi
l
ethet
radei
sopen,
ther
e’st
her
iskt
hat
youcouldl
osemoneyontheposi
ti
on!

Assumingt
hatthi
sUSD/JPYtradeistheonlyposi
ti
ony ouhaveopeninyouraccount,
youwoul
d
havet
omaintai
nyouraccount
’sequit
y( absol
uteval
ueofy ourt
radi
ngaccount)ofatl
east
$1,
000atal
lti
mesi nor
dertobeall
owedt okeepthetradeopen.

I
fUSD/JPYplummetsandyourtr
adi
nglossescauseyouraccountequi
tytofal
lbel
ow$1,000,
t
hebroker
’ssyst
em woul
dautomati
cal
l
ycloseoutyourtr
adet oprev
entfurt
herl
osses.

Thi
sisasaf
etymechani
sm t
opr
eventy
ouraccountbal
ancef
rom goi
ngnegat
ive.

AlwaysRemember
,wheny
ouent
erorexi
tat
rade,
youar
esubj
ectt
othespr
eadi
nthebi
d/ask
quote.

Wheny
oubuyacur
rency
,youwi
l
luset
heof
ferorASKpr
ice.

Wheny
ousel
l
,youwi
l
luset
heBI
Dpr
ice.

Thi
sistheendoft
hef
ir
stsect
ionofcl
asses.Wedi
dar
ecapoft
hel
essonsi
ncl
assandmov
ed
toOrdert
ypes.

I
'
m ski
ppi
ngt
her
epet
it
ionsot
hati
t'
ssi
mpl
eandcl
ean.
TYPESOFFOREXORDERS

Anorderi
sanoffersentusi
ngyourbr
oker’
str
adi
ngpl
atf
ormt
oopenorcl
oseat
ransact
ioni
f
thei
nstr
ucti
onsspeci
fiedbyyouar
esati
sfi
ed.

Basi
cal
l
y,t
het
erm“
order
”ref
erst
ohowy
ouwi
l
lent
erorexi
tat
rade.

Her
eI’
l
lbet
alki
ngaboutt
hedi
ff
erentt
ypesofor
der
sthatcanbepl
acedi
nthef
orexmar
ket
.

ORDERTYPES

Ther
ear
esomebasi
cor
dert
ypest
hatal
lbr
oker
spr
ovi
deandsomeot
her
sthatsoundwei
rd.

Or
der
sfal
li
ntot
wogr
oups:

Mar
ketor
der
:anor
deri
nst
ant
lyexecut
edagai
nstapr
icet
haty
ourbr
okerhaspr
ovi
ded.

Pendi
ngor
der
:anor
dert
obeexecut
edatal
atert
imeatt
hepr
icey
ouspeci
fy.

DI
FFERENTTYPESOFORDERSUNDEREACHGROUP

MARKETORDER

Buy

Sel
l

PENDI
NGORDER

Buyl
i
mit

Buyst
op

Sel
ll
imi
t

Sel
lst
op

Mar
ketOr
der
Amar
ketor
deri
sanor
dert
obuyorsel
latt
hebestav
ail
abl
epr
ice.

Forexampl
e,t
hebi
dpr
icef
orEUR/
USDi
scur
rent
lyat1.
2140andt
heaskpr
icei
sat1.
2142.

I
fyouwant
edt
obuyEUR/
USDatmar
ket
,theni
twoul
dbesol
dtoy
ouatt
hepr
iceof1.
2142.

Youwouldclickbuyandyourt
radi
ngpl
atf
orm woul
dinst
ant
lyexecut
eabuyor
deratt
hat
(hopef
ull
y)exactpr
ice.

Pleasekeepinmindthatdependi
ngonmar ketcondi
ti
ons,
ther
emaybeadif
ferencebetween
thepri
cey ousel
ect
edandt hefi
nalpr
icet
hatisexecuted(or“
fi
ll
ed”
)ony
ourtr
adingplatf
orm.

Whenyouplaceamarketor
der
,youdonothav
eanycont
rol
overwhatpr
icey
ourmar
ketor
der
wi
llact
ual
l
ybef i
l
ledat
.

Li
mitOr
der

Ali
mitor
deri
sanor
derpl
acedt
oei
therbuybel
owt
hemar
ketorsel
labov
ethemar
ketata
cer
tai
npri
ce.

Thi
sisanor
dert
obuyorsel
loncet
hemar
ketr
eachest
he“
li
mitpr
ice”
.

-
Youpl
aceaBuyLi
mitor
dert
obuyatorbel
owaspeci
fi
edpr
ice.

-
Youpl
aceaSel
lLi
mitor
dert
osel
lataspeci
fi
edpr
iceorbet
ter
.

Oncet
hemar
ketr
eachest
he“
li
mitpr
ice”t
heor
deri
str
igger
edandexecut
edatt
he“
li
mitpr
ice”
I
nthei
mageabov
e,t
hebl
uedoti
sthecur
rentpr
ice.

Not
icehowt
hegreenli
nei
sbelowthecur
rentpr
ice.I
fyoupl
aceaBUYl
i
mitor
derher
e,i
nor
der
f
ori
ttobetr
igger
ed,
thepr
icewoul
dhavetofall
downherefi
rst
.

Asyoucansee,
ali
mitor
dercanonl
ybeexecut
edwhent
hepr
icebecomesmor
efav
orabl
eto
you.

Not
icehowt
her edli
neisabov
ethecur
rentpr
ice.I
fyoupl
aceaSELLl
i
mitor
derher
e,i
nor
der
f
ori
ttobetr
iggered,
thepri
cewoul
dhavetori
seupherefi
rst
.

Forexampl
e,EUR/
USDi
scur
rent
lyt
radi
ngat1.
2050.Youwantt
ogoshor
tift
hepr
icer
eaches
1.
2070.

Youcanei
thersi
tinfr
ontofy
ourmoni
torandwai
tfori
ttohi
t1.
2070(
atwhi
chpoi
nty
ouwoul
d
cl
ickasel
lmarketor
der)
.

Oryoucansetasell
li
mitorderat1.
2070(
theny
oucoul
dwal
kawayf
rom y
ourcomput
eror
phonet
odosomet hi
ngelse).

I
fthepri
cegoesupto1.
2070,
yourt
radi
ngpl
atf
orm wi
l
laut
omat
ical
l
yexecut
easel
lor
deratt
he
bestav
ail
abl
epri
ce.

Youusethi
sty
peofent
ryor
derwheny
oubel
i
evet
hepr
icewi
l
lrev
erseuponhi
tt
ingt
hepr
icey
ou
speci
fi
ed!
Ali
mitordert
oBUYatapr i
cebelowt
hecur
rentmar
ketpr
icewi
l
lbeexecut
edatapr
iceequal
to
orl
essthanthespeci
fi
edpri
ce.

Ali
mitor
dert
oSELLatapri
ceabovet
hecur
rentmar
ketpr
icewi
l
lbeexecut
edatapr
iceequal
t
oormorethant
hespeci
fi
cpri
ce.

St
opEnt
ryOr
der

Ast
opor
der“
stops”anor
derf
rom execut
ingunt
ilpr
icer
eachesast
oppr
ice.

Youwoul
duseastoporderwhenyouwantt
obuyonl
yaf
terpr
icer
isest
othest
oppr
iceorsel
l
onl
yaf
tert
hepr
icefal
l
st othest
oppri
ce.

Astopent
ryorderi
sanor
derpl
acedt
obuyabov
ethemar
ketorsel
lbel
owt
hemar
ketata
cer
tai
npri
ce.

-
Youpl
aceaBuyStopordert
obuyatapri
ceabovet
hemar ketpr
ice,
andi
tist
ri
gger
edwhent
he
mar
ketpr
icet
ouchesorgoesthr
ought
heBuyStoppr
ice.

-
Youpl
aceaSel
lSt
opor
dert
osel
lwhenaspeci
fi
edpr
icei
sreached.

I
nthei
mageabov
e,t
hebl
uedoti
sthecur
rentpr
ice.

Not
icehowt
hegreenli
neisabovethecur
rentpr
ice.I
fyouplaceaBUYst
opor
derher
e,i
nor
der
f
ori
ttobetr
igger
ed,
thecurr
entpri
cewouldhavetoconti
nuetori
se.
Not
icehowt
her edli
neisbel
owt hecur
rentpr
ice.I
fyouplaceaSELLst
opor
derher
e,i
nor
der
f
ori
ttobetr
iggered,
thecurr
entpri
cewouldhavetocont
inuetof
all
.

Forexampl
e,GBP/USDiscurrent
lytr
adi
ngat1.
5050andi
sheadi
ngupwar
d.Youbel
i
evet
hat
pri
cewil
lcont
inuei
nthi
sdirecti
onifi
thi
ts1.
5060.

Youcandooneoft
hef
oll
owi
ngt
opl
ayt
hisbel
i
ef:

Si
tinf
rontofy
ourcomput
erandbuyatmar
ketwheni
thi
ts1.
5060OR

Setast
opent
ryor
derat1.
5060.

STOPLOSSORDER

Anordertocl
oseouti
fthemar
ketpr
icer
eachesaspeci
fi
edpr
ice,
whi
chmayr
epr
esental
oss
orpr
ofit
.

Astopl
ossorderi
satypeoforderl
i
nkedt
oat
radef
ort
hepur
poseofpr
event
ingaddi
ti
onal
l
ossesi
fthepri
cegoesagai
nstyou.

I
fyouar
einal
ongposi
ti
on,
iti
sasel
lSTOPor
der
.

I
fyouar
einashor
tposi
ti
on,
iti
sabuySTOPor
der
.

REMEMBERTHI
STYPEOFORDER.

Astoplossor
derr
emai
nsi
nef
fectunt
ilt
heposi
ti
oni
sli
qui
dat
edory
oucancel
thest
opl
oss
or
der.

Forexampl
e,youwentlong(
buy
)EUR/
USDat1.
2230.Tol
i
mity
ourmaxi
mum l
oss,
youseta
stopl
ossorderat1.
2200.

Thismeansify
ouwer edeadwr
ongandEUR/USDdropsto1.2200inst
eadofmov i
ngup,your
tr
adingpl
atf
orm woul
dautomat
ical
l
yexecut
easel
lorderat1.2200thebestav
ail
ablepr
iceand
cl
oseoutyourposi
ti
onfora30-
piploss.

Stoplossesareext
remelyusef
uli
fyoudon’
twantt
osi
tinf
rontofy
ourmoni
toral
ldaywor
ri
ed
thaty
ouwi ll
loseal
lyourmoney.

Youcansi
mpl
ysetast
opl
ossor
deronanyopenposi
ti
onsandgodowhat
every
ouwantt
odo.
TRAI
LINGSTOP

Astopl
ossorderwhi
chisal
waysat
tachedtoanopenposit
ionandwhi
chaut
omat
ical
l
ymov
es
oncepr
ofi
tbecomesequalt
oorhi
gherthanalev
elyouspecif
y.

At
rai
l
ingst
opi
sat
ypeofst
opl
ossor
derat
tachedt
oat
radet
hatmov
esast
hepr
icef
luct
uat
es.

Let
’ssayt
haty
ou’
vedeci
dedt
oshor
tUSD/
JPYat90.
80,
wit
hat
rai
l
ingst
opof20pi
ps.

Thismeanst
hator
igi
nal
ly
,yourst
opl
ossisat91.
00.Ifthepr
icegoesdownandhi
ts90.
60,
your
tr
ail
ingst
opwoul
dmov edownto90.
80(orbr
eakeven).

Justrememberthough,
thatyourst
opwi
l
lSTAYatt
hisnewpr
icel
evel
.Itwi
l
lnotwi
deni
fthe
marketgoeshi
gheragainsty
ou.

Goi
ngbacktotheexampl
e,wi
that
rail
i
ngstopof20pi
ps,
ifUSD/
JPYhi
ts90.
40,
theny
ourst
op
woul
dmov et
o90.60(orl
ocki
n20pipspr
ofit
).

Yourt
radewi
l
lremai
nopenasl
ongast
hepr
icedoesnotmov
eagai
nsty
ouby20pi
ps.

Oncethemarketpri
cehit
syourtr
ail
i
ngstoppri
ce,
amar ketordert
ocl
osey
ourposi
ti
onatt
he
bestavai
l
abl
epricewil
lbesentandyourposi
ti
onwil
lbeclosed.

LI
MITORDERSv
ersusSTOPORDERS

Newt
rader
sof
tenconf
usel
i
mitor
der
swi
thst
opor
der
sbecausebot
hspeci
fyapr
ice.

Bothty
pesofor
der
sal
l
owt
rader
stot
ell
thei
rbr
oker
satwhatpr
icet
hey
’rewi
l
li
ngt
otr
adei
nthe
fut
ure.

Thedi
ff
erencel
i
esi
nthepur
poseoft
hespeci
fi
edpr
ice.

Ast
opor
deract
ivat
esanor
derwhent
hemar
ketpr
icer
eachesorpassesaspeci
fi
edst
oppr
ice.
Forexample,EUR/USDist r
adingat1.1000,y
ouhaveastopent ryor
dertobuyat1.
1010.Once
thepri
cereaches1.1010,yourorderwil
lbeexecut
ed.Butitdoesn’
tnecessar
il
ymeanthatyour
buyorderwasfil
ledat1.1010.Ifthemarketwasmovingfast,y
oumi ght
’vebeenf
il
ledat1.
1011.

Basical
ly
,yourordercangetfi
ll
edatt
hest
oppri
ce,worsethant
hestoppr
ice,
orevenbett
er
thanthestoppri
ce.Ital
ldependsonhowmuchpri
ceisfl
uctuat
ingwhent
hemarketpri
ce
reachesthestoppri
ce.

Thinkofastoppri
cesimplyasathreshol
df oryourordert
oexecut
e.Atwhatexactpr
icet
hat
yourorderwi
llbef
il
ledatdependsonmar ketcondit
ions.

Al
i
mitor
dercanonl
ybeexecut
edatapr
iceequal
toorbet
tert
hanaspeci
fi
edl
i
mitpr
ice.

Forexample,
EUR/
USDistradi
ngat1.
1000,youhav
ealimi
tentr
yordert
obuyat1.
1009.Your
orderwi
ll
notbefi
l
ledunl
essyoucangetfi
l
ledat1.
1009orbet
ter
.

Thinkofali
mitpri
ceasapri
ceguarant
ee.Bysett
ingali
mitor
der
,youar
eguar
ant
eedt
haty
our
orderonl
ygetsexecut
edaty
ourli
mitpri
ce(orbet
ter)
.

Thecat
chi
sthatt
hemar
ketpr
icemaynev
err
eachy
ourl
i
mitpr
icesoy
ouror
dernev
erexecut
es.

Inthepr
eviousexampl
e,EUR/USDmayonl yfal
ldownto1.1009beforeskyr
ocket
ing.Soeven
thoughyouwantedtogolongEUR/USD,yourorderwasneverexecut
edsinceyouweretr
yingto
enteral
ongpositi
onatacheaperpr
ice.

I
nconcl
usi
on…

Thebasi
cforexor
derty
pes(market
,li
mitent
ry,
stopent
ry,
stopl
oss,
andt
rai
l
ingst
op)ar
e
usual
l
yallt
hatmosttr
ader
severneed.

Toopenaposi
ti
on,
thef
oll
owi
ngpendi
ngor
der
smaybeused:

BuySt
opt
oopenal
ongposi
ti
onatt
hepr
icehi
ghert
hant
hecur
rentpr
ice

Sel
lSt
opt
oopenashor
tposi
ti
onatt
hepr
icel
owert
hant
hecur
rentpr
ice

BuyLi
mitt
oopenal
ongposi
ti
onatt
hepr
icel
owert
hant
hecur
rentpr
ice

Sel
lLi
mitt
oopenashor
tposi
ti
onatt
hepr
icehi
ghert
hant
hecur
rentpr
ice.
FOREXTRADI
NGSESSI
ONS

Yes,i
tistr
uethatthefor
exmar
keti
sopen24hour
saday
,butt
hatdoesn’
tmeani
t’
sal
way
s
act
ivetheent
ireday.

Youcanmakemoneyt radi
ngwhent
hemarketmov
esup,andy
oucanevenmakemoneywhen
themarketmovesdown.BUTyouwi
l
lhav
eav er
ydi
ffi
cul
tti
metr
yingt
omakemoneywhent
he
marketdoesn’
tmoveatall
.

Bef
orelooki
ngatt
hebestt
imest
otr
ade,
wemustl
ookatwhata24-
hourdayi
nthef
orexwor
ld
l
ooksli
ke.

Thefor
exmarketcanbebrokenupi
ntof
ourmajort
radi
ngsessi
ons:
theSy
dneysessi
on,
the
Toky
osessi
on,theLondonsessi
on,
andtheNewYorksessi
on.

Si
nceNewZeal
andisamajorfi
nanci
alcenter
,thefor
exmar
ket
sopent
her
eonMonday
morni
ng,
whi
lei
tissti
l
lSundayi
nmostoft hewor l
d.

Event
houghtr
adi
ngstart
sinNewZeal
and,
it’
sst
il
lcal
l
edt
heSy
dneysessi
on.Makesnosense
butwedon’
tmaketherul
es.

Unti
lFr
iday,
ther
eisnoti
meduringtheweekwhenthemarketf
ormal
lycl
oses,
alt
houghther
eis
abri
eflul
li
nacti
vit
ybet
weenabout19:00and22:
00GMTwhenmostAmer i
cantr
adershave
gonehomeandmostKiwi andAussi
etrader
sar
egetti
ngr
eadyforwork.

Othert
hantheweekends,
ther
earej
ustt
wopubl
i
chol
i
day
swhent
heent
ir
efor
exmar
keti
s
cl
osed,Chr
ist
masandNewYear ’
sDay.

THEOPENI
NGOFTHETRADI
NGWEEK

Therei
snoof f
icial
l
ydesignatedst
ar t
ingti
metothetradingdayorweek,butf
oralli
ntent
sthe
marketact
ionkicksoffwhenWel l
ington,
NewZealand,thefir
stf
inanci
alcent
erwestofthe
i
nter
nati
onaldateli
ne,opensonMondaymor ni
nglocalti
me.Dependingonwhetherdayli
ght
savi
ngtimeisineffecti
ny ourowntimezone,

I
troughl
ycor
respondst
o:

Ear
lySundayaf
ter
nooni
nNor
thAmer
ica

Sundayev
eni
ngi
nEur
ope

Ver
year
lyMondaymor
ningi
nAsi
a
Andl
ast
lySundayev
eni
ngby10pm i
nAf
ri
ca

TheSundayopenr epr
esentst hestar
tingpointwherecur
rencymar ketsr
esumet radi
ngaftert
he
Fri
daycl
oseoft radinginNor t
hAmer ica(5p.m.Easternt
ime).Thisisthefir
stchanceforthe
for
exmar kettoreacttonewsandev entsthatmayhav ehappenedov ertheweekend.Pri
ces
mayhavecl osedNewYor kt radingatonelevel,
butdependingonthe
cir
cumstances(f
undament als),theymaystarttr
adingatdif
ferentl
evelsattheSundayopen.

Hi
stor
ical
l
y,t
hef
orexmar
kethast
hreepeakt
radi
ngsessi
ons.

Tr
adersof
tenf
ocusononeoft
het
hreet
radi
ngper
iods,
rat
hert
hanat
temptt
otr
adet
he
market
s24hoursperday
.

Thi
sisknownast
he“
for
ex3-
sessi
onsy
stem“
.

Thesesessi
onsconsi
stoft
heAsi
an,
Eur
opean,
andNor
thAmer
icansessi
ons.

Iwi
l
lbr
eakdownt
hesessi
onsoneaf
tert
heot
her

Tr
adi
ngi
ntheAsi
a-Paci
fi
csessi
on

Tr
adi
ngi
ntheEur
opean/
Londonsessi
on

Tr
adi
ngi
ntheNor
thAmer
icansessi
on

TRADI
NGI
NTHEASI
A-PACI
FICSESSI
ON

Currencyt r
adingv ol
umesi nt
heAsia-Pacif
icsessionaccountf
orabout21percentoftot
aldai
ly
globalvolume.Thepr i
nci
palfi
nanci
altr
adingcentersareWelli
ngton,
NewZealand;Sydney,
Aust r
ali
a;Toky o,Japan;HongKong;andSingapore.Inter
msoft hemostacti
velyt
raded
currencypairs,thatmeansnewsanddat areport
sf r
om NewZealand,Aust
ral
i
a,andJapanar e
goingt obehi t
tingthemarketduri
ngthissession.
Becauseoft
hesizeoft
heJapanesemarketandtheimpor t
anceofJapanesedatat
ot hemarket
,
muchoftheact
ionduri
ngt
heAsia-Paci
fi
csessi
onisf ocusedontheJapaneseyencurrency
pai
rssuchasUSD/JPY–U.S.doll
ar/
Japaneseyen--andtheJPYcrosses,li
keEUR/JPYand
AUD/JPY.

Ofcourse,Japanesef
inanci
ali
nsti
tut
ionsar
eal
somostact
ivedur
ingt
hissessi
on,
soyoucan
fr
equentl
ygetasenseofwhatt heJapanesemar
keti
sdoi
ngbasedonpricemovement
s.

Forindi
vi
dualt
rader
s,over
alll
i
qui
dit
yint
hemajorcurr
encypair
si smor ethansuffi
cient
,wi
th
general
l
yorderl
ypri
cemov ement
s.I
nsomeless"l
iqui
d,non-
regionalcurr
encies,
li
keGBP/ USD
orUSD/CAD,pri
cemov ementsmaybemoreerr
ati
cornonexistent,
dependingont he
envi
ronment.

TRADI
NGI
NTHEEUROPEAN/
LONDONSESSI
ON

Aboutmi dwayt hrought heAsiant r

adingday,Europeanfinancial
center
sbegi
ntoopenupand
themar ketgetsintoitsfull
swi ng.Europeanfi
nancialcentersandLondonaccountf
orover50
percentoftotaldailyglobaltr
adingv olume,wit
hLondonal oneaccount
ingf
oraboutone-
thi
rdof
tot
aldailyglobalvolume.

Newsanddat aeventsfr
om t heEurozone( andindiv
idualcountr
iesl
ikeGermanyandFr ance),
Swit
zer
land,andtheUnitedKi ngdom aretypical
l
yreleasedintheearl
y-morni
nghoursoft he
Eur
opeansession.Asar esult,someoft hebiggestmov esandmostact i
vetr
adi
ngt akesplace
i
ntheEuropeancurrenci
es( EUR, GBP,andCHF)andt heeurocrosscurr
encypai
rs(EUR/ CHF
andEUR/GBP)

Asi
antr
adi
ngcenter
sbegintowi nddowni
nthel
ate-
mor
ninghoursoftheEur
opeansessi
on,
andNor
thAmeri
canfinanci
alcenter
scomeinaf
ewhourslat
er,
around7a.m.ET.

TheEur
opeansessionover
lapswit
hhalfoftheAsi
antradingdayandhalfoft
heNorth
Ameri
cantr
adingsessi
on,whichmeansthatmarketi
nterestandl
iqui
dit
yisati
tsabsol
utepeak
dur
ingt
hissessi
on.

TRADI
NGI
NTHENORTHAMERI
CANSESSI
ON

Becauseoft
heov
erl
apbet
weenNorthAmer
icanandEuropeant
radi
ngsessi
ons,t
hetradi
ng
vol
umesaremuchmoresi
gni
fi
cant
.Someofthebiggestandmostmeani
ngful
dir
ect
ionalpr
ice
movementstakeplacedur
ingthiscrossoverper
iod.Oni
tsown,howev
er,
theNor
thAmeri
can
tr
adi
ngsessi
onaccount sf
orroughlythesameshar eofgl
obalt
radi
ngvol
umeastheAsi
a-
Paci
fi
cmarket,orabout22percentofglobaldai
lytr
adi
ngvol
ume.

TheNor t
hAmer icanmor ni
ngi swhenkeyU. S.economi cdataisr el
easedandt heforexmar ket
makesmanyofi tsmostsignifi
cantdeci sionsont hev alueoftheU. S.doll
ar.MostU.S.dat a
reportsarereleasedat8: 30a.m.ET, wit
hot herscomi ngoutlater(between9and10a. m.ET) .
Canadi andatar eportsarealsor el
easedi nthemor ni
ng, usuall
ybet ween7and9a. m.ET.Ther e
arealsoaf ewU. S.economi creportsthatv ari
ouslycomeoutatnoonor2p. m.ET,l
iveningup
theNewYor kaf ternoonmar ket.Londonandt heEur opeanfinancialcenter
sbegintowi nddown
theirdail
ytradingoper at
ionsar oundnooneast ernt i
me( ET)eachday .TheLondon,orEur opean
close,asit’
sknown, canf r
equent l
ygener atevolati
lef l
urri
esofact i
vit
y.

Onmostday s,
mar ketl
iqui
dityandinterestfal
loffsignifi
cantlyintheNewYor kaft
er noon,which
canmakef orchall
engingtradingconditi
ons.Onqui etday s,thegenerall
ylowermar keti nt
erest
typicall
yleadst ostagnati
ngpr iceacti
on.Onmor eact i
veday s,wherepricesmayhav emov ed
mor esignificantl
y,thel
owerl i
quidit
ycanspar kadditionalout si
zedpri
cemov ement s,asfewer
tradersscrambl etogetsi mil
arlyfewerpricesandliquidit
y.Justaswi ththeLondoncl ose,
there’sneverasetwayi nwhi chaNewYor kaf
ter
noonmar ketmov eplaysout ,
soy ouj ustneed
tobeawar et hatl
owerl i
quidi
tyconditi
onst endtopr evail
,andadaptaccor dingly
.

SYDNEYSESSI
ON

Opensby10:
00PM Ni
ger
iat
ime

TOKYOSESSI
ON

OPENSBY12:
00AM Ni
ger
iat
ime.

LONDONSESSI
ON

OPENSBY8:
00AM AM Ni
ger
iat
ime.
 FRANKFURTSESSI
ON

OPENSBY9:
00AM Ni
ger
iat
ime

NEW YORKSESSI
ON

OPENSBY2:
00PM Ni
ger
iat
ime.

I
fonesessi
oncl
osest
heot
heropens.

Exampl
e..
.

Sy
dneySessi
ont
hatopensby10:
00PM wi
l
lbecl
osedby7:
00AM

TOKYOSessi
ont
hatopensby12:
00AM wi
l
lbecl
osedby9:
00AM

NEW YORKSESSI
ONt
hatopensby2:
00PM wi
l
lbecl
osedby11:
00PM

LONDONSESSI
ONt
hatopensby8:
00AM wi
l
lbecl
osedby5:
00PM

FRANKFURTSESSI
ONt
hatopensby9:
00AM wi
l
lbecl
osedby6:
00PM
JUSTADD9HOURSTOTHEI
ROPENI
NGTI
MESSOASTOGETTHECLOSI
NGTI
MES.

Hopeyouguysr
ememberthatv
75i
sasy
nthet
ici
ndi
cesandsy
nthet
ici
ndi
cescanbet
radedat
al
lti
mesevenonweekends
MAJORMARKETPARTI
CIPANTS

Unt
ilt
hel
ate1990s,
onl
ythe“
bigboy
s”coul
dpl
ayt
hisgame.

Thei
niti
alr
equi
rementwast
haty
oucoul
dtr
adeonl
yify
ouhadaboutt
ent
ofi
ft
ymi
l
li
onbucks
tost
artwit
h.

Forexwasor
igi
nal
l
yint
endedt
obeusedbybanker
sandl
argei
nst
it
uti
ons,
andnotbyus“
li
tt
le
fol
ks.”

Howev er
,becauseoftheri
seoftheint
ernet
,onl
i
nef
orexbr
oker
sar
enowabl
etoof
fert
radi
ng
accountsto“r
etai
l”t
rader
slikeus.

Wi
thoutf
urt
herado,
her
ear
ethemaj
orf
orexmar
ketpl
ayer
s:

1.TheSuperBanks

Sincethefor
exspotmar
keti
sdecent
ral
i
zed,
iti
sthel
argestbanksi
nthewor
ldt
hatdet
ermi
ne
theexchangerat
es.

Basedonthesuppl
yanddemandforcur
renci
es,
theyar
egener
all
ytheonest
hatmaket
he
bi
d/askspreadt
hatweal
llov
e(orhat
e).

Thesel
argebanks,
coll
ect
ivel
yknownastheinter
bankmarket
,takeonar
idi
cul
ousamountof
for
extr
ansact
ionseachdayforbot
hthei
rcustomersandt
hemsel v
es.

Theyar
eknownas“
fl
owmonst
ers“
.

Fort
hesefl
owmonster
s,t
henameoft
hegamei
svol
umeandcapt
uri
ngt
hei
rshar
eoft
he
tr
adi
ngfl
owofcur
renci
es.

Acoupl
eoft
hesefl
owmonster
sincl
udeCi
ti
,JPMor
gan,
UBS,
Bar
clay
s,Deut
scheBank,
Gol
dmanSachs,HSBC,
andBankofAmeri
ca.

2.Lar
geCommer
cialCompani
es

Compani
est
akepar
tint
hef
orei
gnex
changemar
ketf
ort
hepur
poseofdoi
ngbusi
ness.
Fori
nstance,
Appl
emustf i
rstexchangeit
sU.S.dol
l
arsf
ort
heJapanesey
enwhenpur
chasi
ng
el
ect
ronicpart
sfr
om Japanfortheirpr
oduct
s.

Si
ncethevolumetheytr
adei
smuchsmal
l
erthant hosei
ntheinter
bankmarket
,thi
sty
peof
marketpl
ayerty
pical
l
ydeal
swit
hcommer
cialbanksfort
heirt
ransact
ions.

Mergersandacqui
sit
ions(
M&A)bet
weenl
argecompani
escanal
socr
eat
ecur
rencyexchange
r
atefluct
uat
ions.

I
ninter
national
cross-
bor
derM&As,
alotofcur
rencyconv
ersat
ionshappenst
hatcoul
dmov
e
pr
icesaround.

3.Gov
ernment
sandCent
ralBanks

Gov
ernment
sandcentr
albanks,suchastheEuropeanCentral
Bank,
theBankofEngl
and,
and
t
heFeder
alReser
ve,
areregul
arl
yinvol
vedintheforexmarkett
oo.

Justli
kecompanies,nat
ional
gov er
nmentspar
ti
cipat
einthefor
exmarketfort
hei
roper
ati
ons,
i
nternat
ional
tradepayments,andhandl
i
ngthei
rforei
gnexchanger
eserves.

Meanwhi
le,
cent
ral
banksaf
fectt
hef
orexmar
ketwhent
heyadj
usti
nter
estr
atest
ocont
rol
i
nfl
ati
on.

Bydoi
ngt
his,
theycanaf
fectcur
rencyv
aluat
ion.

Therear
ealsoinst
anceswhencent
ralbanksinter
vene,
eit
herdi
rect
lyorv
erbal
l
y,i
nthef
orex
marketwhentheywanttor
eali
gnexchangerates.

Somet
imes,centr
albanksthi
nkt
hatthei
rcurr
encyispr
icedt
oohi
ghort
ool
ow,
sot
heyst
art
massi
vesel
l
/ buyoperat
ionst
oal
terexchangerat
es.
4.TheSpecul
ator
s

Currencyspecul
ati
onistheactofbuyi
ngandhol
dingfor
eigncur
rencyi
nthehopesofsel
l
ing
thatcurr
encyatahigherexchanger
ateint
hefut
ure.

Thi
sisincontr
asttot
hosewhobuycur
renci
est
ofi
nanceaf
orei
gni
nvest
mentort
opayf
or
i
mportedproduct
sorser
vices.

Specul
ati
oninthef
orexmar
keti
nvol
vest
hebuy
ingandsel
l
ingofcur
renci
eswi
tht
hev
iewof
makingaprofi
t.

Specul
ator
sar
efocusedonpr
icef
luct
uat
ions.

I
tiscall
edspecul
ati
onbecauseoftheuncer
tai
ntyi
nvol
vedsi
ncenoonecanknowf
orsur
e
whetheracur
rencypai
r’
spri
cewill
goupordown.

Tr
ader
sassesst
hel
i
kel
i
hoodofei
therscenar
iobef
orepl
aci
ngat
rade.

Comprisi
ngcl
oseto90%ofal
ltr
adi
ngv
olume,
specul
ator
sasf
orexmar
ketpl
ayer
scomei
nal
l
shapesandsi
zes.

Somehav ef
atpocket
s,somer
oll
thi
n,butal
loft
hem engagei
nthef
orexsi
mpl
ytomake
bucketl
oadsofcash.

Ret
ailFor
exBr
oker
s

Int
hepast,
onlythebigspecul
atorsandhighl
ycapi
tal
izedinvest
mentfundscouldt
rade
cur
renci
es,
butthankstoretai
lfor
exbrokersandt
heInternet
,thi
sisn’
tthecaseany
more.
Withhar
dlyanybar
ri
erst
oentr
y,anybodycoul
djustcontactabroker
,openupanaccount
,
deposi
tsomemoney ,
andtr
adeforexfr
om thecomfortofthei
rownhome.

Br
oker
sbasi
cal
l
ycomei
ntwof
orms:

1.Marketmakers,
ast
hei
rnamesuggest
s,“
make”orsett
hei
rownbi
dandaskpr
ices
themselvesand

2.El
ect
roni
cCommuni cati
onsNetworks(ECN),whousethebestbi
dandaskpr
icesav
ail
abl
eto
them f
rom di
ff
erenti
nsti
tut
ionsont
hei nt
erbankmarket
.

Nextweekwewoul
dst
artt
heser
iouspar
toff
orex

I
’
llt
ryt
osum upt
hebasi
cpar
tsbef
oret
heendoft
hisweek

Y’
al
lshoul
dpr
epar
efornextweekoh

AndIr
eal
l
yhopey
ouguy
sar
efol
l
owi
ngme

I
fyou’
rel
ostdonothesi
tat
etoaskquest
ionst
hispar
tisv
eryi
mpor
tant
.

ADVANTAGESOFFOREXTRADI
NG

Nocommi
ssi
ons

Noclear
ingfees,
noexchangefees,nogov er
nmentfees,nobroker
agefees.Mostret
ail
for
ex
br
okersarecompensat
edf ort
heirser
vicesthroughsomethi
ngcall
edthe“spread“
.

Nof
ixedl
otsi
ze

Inthefutur
esmar ket
s,lotorcontr
actsi
zesar
edeter
minedbyt
heexchanges.Forexampl
e,a
standard-
sizedcontr
actforsi
lverf
utur
esis5,
000ounces.

Inf
orex,youcantr
adesmal
l
erl
otsi
zes,
orposi
ti
onsi
ze.Thi
sal
l
owst
rader
stoopent
radesas
smallas1,000uni
ts.

Lowt
ransact
ioncost
s

Ther
etai
ltr
ansact
ioncost(
thebi
d/askspr
ead)i
sty
pical
l
ylesst
han0.
1%undernor
mal
mar
ket
condi
ti
ons.

Forl
argert
ransacti
ons,
thespreadcoul
dbeasl
owas0.
07%.Ofcour
se,
thi
sdependsony
our
l
ever
age,andallthatwi
llbeexpl
ainedl
ater
.

A24-
hourmar
ket

Therei
snowai t
ingfort
heopeni
ngbell
.Fr
om theMondaymorningopeni
ngi
nAust
ral
i
atot
he
Fri
dayaft
ernoonclosei
nNewYork,t
heforexmarketnev
ersl
eeps.

Thi
sisawesomeforthosewhowantt
ot r
adeonapart
-t
imebasisbecauseyoucanchoose
whenyouwantt
otrade:morni
ng,
noon,ni
ght,
dur
ingbr
eakf
ast,ori
ny oursl
eep.

Lev
erage

I
nfor
extradi
ng,asmall
deposi
tcancont
rolamuchl
argert
otal
contr
actv
alue.Lever
agegi
ves
t
hetr
adertheabi
li
tyt
omakeniceprof
it
s,andatt
hesametimekeepri
skcapit
altoamini
mum.

Forexample,aforexbrokermayoffer50-
to-1l
ever
age,
whi
chmeanst hata$50doll
armar
gin
depositwouldenableatradert
obuyorsell$2,
500wort
hofcur
renci
es.Simi
lar
ly,
wit
h$500
doll
ars,onecoul
dt r
adewi t
h$25,000doll
arsandsoon.

Whi
lethi
sisal
lgrav
y,l
et’
sremembert
hatl
ever
ageisadoubl
e-edgedswor
d.Wit
houtpr
operr
isk
management,
thi
shighdegr
eeofl
ever
agecanleadt
olar
gelossesaswell
asgai
ns.

DeepLi
qui
dit
y

Becausethef orexmarketi
ssoenor mous,i
tisalsoextr
emelyl
i
quid.Thi
sisanadvant
age
becauseitmeanst hatundernormalmarketcondit
ions,
wit
haclickofamouse,youcan
i
nstantaneouslybuyandsellatwil
l
.

Youar
enev er“st
uck”i
nat r
ade.Youcanev ensetyouronl
inetr
adi
ngplat
formt oautomaticall
y
cl
oseyourpositi
ononceyourdesi
redprof
itlevel
(alimi
torder
)hasbeenreached,and/orclose
atr
adeifatradeisgoi
ngagainstyou(
astopl ossorder
).

LowBar
ri
erst
oEnt
ry

Youwouldt
hinkthatgett
ingstar
tedasacur rencytr
aderwouldcostatonofmoney .Thefacti
s,
whencomparedtotradi
ngstocks,options,
orfutur
es,i
tdoesn’
t.Onli
neforexbroker
soffer
“mi
ni”and“
micro”tr
adingaccounts,somewi thaminimum accountdepositof$50.

Iam NOTsayi
ngyoushouldopenanaccountwit
hthebaremi
nimum,buti
tdoesmakef or
ex
tr
adi
ngmuchmor eaccessi
blet
otheaveragei
ndivi
dual
whodoesn’
thavealotofst
art
-up
tr
adi
ngcapit
al.
WHATI
SMARGI
NTRADI
NG?

Thebi
ggestappeal
thatf
orext
radi
ngof
fer
sist
heabi
l
ityt
otr
adewi
thmar
gin.

Butf
ormanyf
orext
rader
s,“
mar
gin”i
saf
orei
gnconceptandonet
hati
sof
tenmi
sunder
stood.

Mar
gint
radi
nggi
vesy
out
heabi
li
tyt
oent
eri
ntoposi
ti
onsl
argert
hany
ouraccountbal
ance.

Wi
thal
i
ttl
ebi
tofcash,
youcanopenamuchbi
ggert
radei
nthef
orexmar
ket
.

Andthenwi
thj
ustasmallchangei
npricemov
ingi
nyourf
avor
,youhav
ethepossi
bil
i
tyof
endi
ngupwit
hmassiv
elyhugeprof
its.

Alotofnewtradersdonotunder
standtheconceptofmar
gin,
howi
t’
sused,
howt
ocal
cul
atei
t,
andthesigni
fi
cancethati
tpl
aysinthei
rtr
ading.

Alotofnewtr
adersdon’tknowwhatmar
gin,usedmar
gin,
freemar
gin,
mar
ginl
evel
,mar
gincal
l
,
astopoutormargi
ncloseoutreal
l
ymeans..
.

Asy
oucansee,
ther
eisALOTof“
mar
ginj
argon”usedi
nfor
ext
radi
ng.

Bef
oreyouchooseaforexbr
okerandbegi
ntr
adi
ngwi
thmar
gin,
it’
simpor
tantt
ounder
stand
whatal
lthi
smargi
njargonmeans.

I
fyoudon’
t,
ter
ri
blet
hingswi
l
lhappentoyourt
radi
ngaccountli
keamar gi
ncal
lorast
opout
.
Buty
ouwon’tevenknowwhatj
usthappenedorev
enwhyi thappened.

I
fyoureall
ywantt ounderst
andhowmar
gini
susedi
nfor
ext
radi
ng,
youneedt
oknowhowy
our
margi
ntradingaccountreal
lywor
ks.

Thi
sstar
tswit
hunder
standi
ngwhatsome(
real
l
yimpor
tant
)number
syouseeony
ourt
radi
ng
pl
atf
ormreal
l
ymean.

We’
l
lcal
lthesenumber
syourmar
ginaccount
’s“
met
ri
cs”
.
Forexampl
e,t
akeal
ookatt
heMet
aTr
ader5,
alsoknownasMT5,
tradi
ngpl
atf
orm.

Themet
ri
csabov
ear
eal
li
nter
twi
ned.

Achangei
nonecausesachangei
nanot
her
.

Now,
I'
ll
showy
ouapi
ctur
e,t
henexpl
ainhowt
hesear
eal
lconnect
ed.Youneedt
ogr
aspt
hese.
Asatrader
,youneedtobeawareoft
her
elat
ionshi
psbet
weent
hem…bef
oreev
erent
eri
nga
si
ngl
et r
adeonaliveaccount
.

Wher
ecer
tai
nmet
ri
csf
all
bel
owacer
tai
nval
ue,
BADTHI
NGSwi
l
lhappen!

Soy
ouneedt
oknowwhatt
hesemet
ri
csar
e.

Youal
soneedt
oknowwhatt
hese“
badt
hings”ar
e.Tr
ustme,
youdo.

Makesur
eyouhav
easol
i
dgr
aspofhowy
ourt
radi
ngaccountact
ual
l
ywor
ksandhowi
tuses
margi
n.

Sol
et’
sdi
ver
ighti
n.

Amar
gint
radi
ngaccountdi
spl
ayst
hef
oll
owi
ngmet
ri
cs:

-
Bal
ance

-
UsedMar
gin

-
FreeMar
gin

-
Unr
eal
izedP/
L

-
Equi
ty

-
Mar
ginLev
el

Amet
ri
cisj
ustameasur
ementof“
somet
hing”
.

Thi
smeanst
hatev
erymet
ri
cabov
emeasur
esomet
hingi
mpor
tantabouty
ouraccounti
nvol
vi
ng
margi
n.
Forexampl
e,the“
Balance”measureshowmuchcashyouhav
einyouraccount
.Andifyoudon’t
haveacert
ainamountofcash,youmaynothav
eenough“margi
n”t
oopennewt radesorkeep
exi
sti
ngtr
adesopen.

Whati
sAccountBal
ance?

Whatdoes“
AccountBal
ance”mean?

I
nor
dert
ost
artt
radi
ngf
orex,
youneedt
oopenanaccountwi
thar
etai
lfor
exbr
oker
.

Oncey
ouraccounti
sappr
oved,
theny
oucant
ransf
erf
undsi
ntot
heaccount
.

Thi
snewaccountshoul
donl
ybef
undedwi
th“
ri
skcapi
tal
”,whi
chi
scashy
oucanaf
for
dtol
ose.

TheAccountBal
anceorsi
mpl
yBal
ancei
sthest
art
ingbal
anceofy
ouraccount
.

Basi
cal
l
y,i
t’
stheamountofCASHi
nyouraccount
.

Thi
nkofi
tthi
sway
:

YourBal
ancemeasur
est
heamountofcashy
ouhav
einy
ourt
radi
ngaccount
.

I
fyoudeposi
t$1,
000,
theny
ourBal
ancei
s$1,
000.

Ify
ouent
eranewtradeori
ntr
aderli
ngo,
“openanewposi
ti
on”
,youraccountbal
ancei
snot
aff
ect
edunt
ilt
heposit
ioni
sCLOSED.

Thi
smeanst
haty
ourBal
ancewi
l
lonl
ychangei
noneoft
hreeway
s:

1.
Wheny
ouaddmor
efundst
oyouraccount
.

2.
Wheny
oucl
oseaposi
ti
on.

3.
Wheny
oukeepaposi
ti
onopenov
erni
ghtandei
therr
ecei
veorpayswap/
rol
l
overf
ee.

Si
ncet
het
opi
cisaboutmar
gin,
theconcept
sofswapandr
oll
overar
en’
treal
l
yrel
atedbutf
or
t
hor
oughness,
I’
ll
quickl
ydescri
beitsinceswapf eesdoaff
ecty
ourBal
ance.Keepi
nmi
ndt
hat
y
oushoul
dpayattenti
ontothelessonstaughtabovetoo.

Justknowthatthere’
sadi
ff
erencebet
weenat
radet
hatl
ast
sacoupl
eofhour
sandat
radey
ou
keepopenovernight.

Thepr
ocedur
eofmov
ingopenposi
ti
onsf
rom onet
radi
ngdayt
oanot
heri
scal
l
edar
oll
over
.

Dur
ingt
hisr
oll
over
,aswapi
scal
cul
ated.

Aswapi saFEEthatiseit
herpai
dorchar
gedt
oyouatt
heendofeacht
radi
ngdayi
fyoukeep
yourt
radeopenovernight
.

I
fyouar
epai
dswap,
cashwi
l
lbeaddedt
oyourBal
ance.

I
fyouar
echar
gedswap,
cashwi
l
lbededuct
edf
rom y
ourBal
ance.

Unlessy
ou’
ret
radi
nghugeposi
ti
onsi
zes,
theseswapf
eesar
eusual
l
ysmal
lbutcanaddupov
er
ti
me.

WHATI
SUNREALI
ZEDP/
LANDFLOATI
NGP/
L?

Whent
radi
ng,
ther
ear
eact
ual
l
ytwodi
ff
erentt
ypesof“
prof
itorl
oss”
,al
soknownas“
P/L”
.

Bot
har
eimpor
tant
.Let
’sdi
scusst
hedi
ff
erencebet
weent
het
wo.

Unr
eal
izedP/
L

Unr
eali
zedP/Lref
erst
othepr
ofi
torl
osshel
diny
ourcur
rentopenposi
ti
ons….
yourcur
rent
ly
act
ivet
rades.

Thi
sisequalt
othepr
ofi
torl
osst
hatwoul
dbe“
real
i
zed”i
fal
lyouropenposi
ti
onswer
ecl
osed
i
mmediatel
y.

Unreal
izedP/Lisalsoknownas“
Float
ingP/
L”becauset
hev
aluei
sconst
ant
lychangi
ngsi
nce
yourposit
ionsaresti
ll
open.
Yourunreal
i
zedP/Lcont
inuousl
yfl
uct
uat
es(
or“
fl
oat
s”)wi
tht
hecur
rentmar
ketpr
icesi
fyou
haveopenposi
ti
ons.

Forexample,i
fyoucur
rent
lyhaveanunreal
i
zedpr
ofi
t,i
fpr
icemov
eagai
nsty
ou,
theunr
eal
i
zed
prof
itcanbecomeanunreali
zedloss.

Real
izedP/
L

AReal
i
zedPr
ofi
tispr
ofi
tthatcomesf
rom acompl
etedt
rade.

Samet
hingwi
thal
oss.

AReal
i
zedLossi
sal
osst
hatcomesf
rom acompl
etedt
rade.

I
not
herwor
ds,
yourpr
ofi
tsorl
ossesonl
ybecomer
eal
i
zedwhent
heposi
ti
onsar
eCLOSED.

Thi
sist
heonl
yti
mewheny
ouraccountbal
ancewi
l
lchanget
oref
lectanygai
nsorl
osses.

I
fyouclosedaposit
ionwit
hprofi
ts,
youraccountbal
ancewi
l
lincr
ease.I
fyoucl
osedwi
th
l
osses,
thenyouraccountbal
ancewil
ldecr
ease.

Exampl
e:Real
i
zedLoss

Let
’ssayyouraccounti
sinUSDandy
ouar
ecur
rent
lyl
ong10,
000uni
tsofEUR/
USD,
whi
chwas
boughtat1.
15000.

Thecur
rentexchanger
atef
orEUR/
USDi
s1.
13000.

Let
’scal
cul
atet
heposi
ti
on’
sFl
oat
ingP/
L:

Theposi
ti
oni
sdown200pi
ps.

Andsi
ncey
ou’
ret
radi
ngami
nil
ot,
eachpi
piswor
th$1.

Soy
oucur
rent
lyhav
eaFl
oat
ingLossof$200(
200pi
psx$1)
.

I
tisaf
loat
ingl
ossbecausey
ouhav
eNOTcl
osedt
het
radey
et.

Buty
oucan’
tst
omachl
osi
ngany
mor
eanddeci
det
ocl
oset
het
rader
ightt
henandt
her
e.
You’
ver
eal
i
zedt
he$200l
ossandt
hecashi
sDEDUCTEDf
rom y
ouraccountbal
ance.

Wheny
ouopenedt
het
rade,
youhad$1,
000asy
ourBal
ance.

Butaf
tery
oucl
osedt
het
radewi
tha$200l
oss,
yourBal
ancei
snow$800.

I
fthepr
icehasmov
ed200pi
psi
nthedi
rect
iony
oupr
edi
ctedy
ou’
l
lbei
na$200f
loat
ingpr
ofi
t

Thenonceyouclosey
ou’
ver
eal
i
zedapr
ofi
tof$200andy
ourbal
ancehasi
ncr
easedf
rom
$1000to$1200

Pr
ofi
tIsn’
tReal
Unt
ilI
t’
sReal
i
zed!
?Damnr
ight
,iti
sn'
t
!

Thedi
ff
erencebetweenreal
i
zedandunreal
i
zedpr
ofi
tissubt
le,
buti
tcanmeant
hedi
ff
erence
bet
weenapr of
it
abletr
adeoralosi
ngt
rade.

I
tisimportantf
ort
rader
stocl
ear
lyknowhowt
odi
ff
erent
iat
ebet
ween“
real
i
zed”P/
Land
“
unreal
ized”P/L

-Reali
zedpr
ofi
tsar
egai
nst
hathav
ebeenconv
ert
edi
ntocashandADDEDt
oyouraccount
balance.

-Real
izedl
ossesarel
ossest
hathav
ebeenconv
ert
edi
ntocashandDEDUCTEDf
rom y
our
accountbal
ance.

I
nor derwords,f
oryout
oreal
izeprof
it
sfr
om atr
adey
ou’vemade,y
oumustrecei
vecashand
notsimplyobservet
heval
ueofyourtr
adei
ncr
easewi
thoutexi
ti
ngt
het
rade.

Unreal
izedpr
ofi
tist
heor
eti
calpr
ofi
tor“
paperpr
ofit
”thati
scurr
ent
lyav
ail
abl
e,butcoul
dbe
takenawayatanymomentift
hepri
cemovesagainstthet
rade.

I
fyouhavenotclosedoutofy
ourposi
ti
onand“
real
i
zed”y
ourgai
n,y
oucoul
dst
il
ll
osesome,
or
al
l,
ofyourpr
ofi
ts.

Real
i
zedpr
ofi
tisr
eal
prof
itt
hatcannol
ongerbeaf
fect
edbypr
icechangesbecausei
tisno
l
ongerpar
tofanact
ivet
rade.

I
tisr
ealmoneyt
hati
saddedtoyourBal
anceandcanbewi
thdr
awnf
rom y
ourt
radi
ngaccount
andt
ransf
err
edi
ntoy
ourbankaccount
.
WHATI
SMARGI
N?

Whentr
adi
ngfor
ex,
youar eonl
yrequi
redt
oputupasmal
lamountofcapi
tal
toopenand
mai
ntai
nanewposi
tion.

Thi
scapi
tal
isknownast
hemar
gin.

Forexample,i
fyouwanttobuy$100,
000wort
hofUSD/JPY,y
oudon’
tneedtoputuptheful
l
amount,youonlyneedt
oputupaporti
on,l
i
ke$3,
000.Theactual
amountdependsonyour
for
exbroker.

Margi
ncanbethoughtofasagoodf
ait
hdeposi
torcol
l
ater
alt
hat
’sneededt
oopenaposi
ti
on
andkeepi
topen.

I
tisa“
goodf
ait
h”assur
ancet
haty
oucanaf
for
dtohol
dthet
radeunt
ili
tiscl
osed.

Mar
gini
sNOTaf
eeorat
ransact
ioncost
.

Margi
nissi
mplyapor
ti
onofyourfundst
hatyourf
orexbrokersetsasidefrom y
ouraccount
bal
ancetokeepy
ourt
radeopenandtoensur
ethatyoucancov erthepotenti
all
ossofthetr
ade.

Thi
spor
ti
oni
s“used”or“
lockedup”f
ort
hedur
ati
onoft
hespeci
fi
ctr
ade.

Oncethetradei
scl
osed,t
hemar
ginis“
freed”or“
rel
eased”backi
ntoy
ouraccountandcannow
be“usabl
e”agai
n…toopennewt
rades.

WHATI
SMARGI
NREQUI
REMENT?

Margi
nisexpr
essedasaper
cent
age(%)oft
he“
ful
lposi
ti
onsi
ze”
,al
soknownast
he“
Not
ional
Val
ue”oft
hepositi
onyouwi
shtoopen.

Dependi
ngonthecur
rencypai
randf
orexbr
oker
,theamountofmar
ginr
equi
redt
oopena
posi
ti
onVARIES.

Youmayseemar
ginr
equi
rement
ssuchas0.
25%,
0.5%,
1%,
2%,
5%,
10%orhi
gher
.

Thi
sper
cent
age(
%)i
sknownast
heMar
ginRequi
rement
.
Whati
sRequi
redMar
gin?

Whenmargini
sexpressedasaspeci
fi
camountofy
ouraccount
’scur
rency
,thi
samounti
s
knownastheRequi
redMargi
n.

EACHposi
ti
ony
ouopenwi
l
lhav
eit
sownRequi
redMar
ginamountt
hatwi
l
lneedt
obe“
locked
up”
.

Requi
redMar
gini
sal
soknownasDeposi
tMar
gin,
Ent
ryMar
gin,
orI
nit
ial
Mar
gin.

Let
’slookatatypi
calEUR/USD(
euroagai
nstU.S.dol
lar
)tr
ade.Tobuyorsel
la100,000of
EUR/USDwi t
houtlev
eragewoul
drequi
ret
hetradertoputup$100,
000inaccountf
unds,t
hef
ull
val
ueofthepositi
on.

Butwi
thaMarginRequi
rementof2%,onl
y$2,000(
the“Requi
redMar
gin“
)oft
het
rader
’sf
unds
woul
dberequi
redtoopenandmaintai
nthat$100,
000EUR/USDposi
ti
on.

Exampl
e:Openal
ongUSD/
JPYposi
ti
on

Let’
ssayy
ou’v
edeposit
ed$1,000i
ny ouraccountandwantt
ogol
ongUSD/
JPYandwantt
o
open1minil
ot(10,
000uni
ts)posi
ti
on.

Howmuchmar
ginwi
l
lyouneedt
oopent
hisposi
ti
on?
Si
nceUSDist
hebasecurr
ency
.thi
smi
nil
oti
s10,
000dol
l
ars,
whi
chmeanst
heposi
ti
on’
s
Noti
onal
Val
ueis$10,
000.

Assumingy
ourtradi
ngaccounti
sdenomi
nat
edi
nUSD,
sincet
heMar
ginRequi
rementi
s4%,
the
Requi
redMargi
nwi l
lbe$400.

Howt
oCal
cul
ateRequi
redMar
gin

Whent radi
ngwit
hmar gi
n,t
heamountofmar
gin(“
Requir
edMargi
n”)neededt
ohol
dopena
posit
ioniscal
cul
atedasapercent
age(
“Mar
ginRequi
rement
”)oft
hepositi
onsi
ze(
“Not
ional
Value”)
.

Thespeci
fi
camountofRequi
redMar
gini
scal
cul
atedaccor
dingt
othebasecur
rencyoft
he
cur
rencypai
rtr
aded.

I
fthebasecurr
encyi
sDIFFERENTf rom yourt
radi
ngaccount
’scur
rency
,theRequi
redMar
gini
s
t
henconvert
edtoyouraccountdenominati
on.

Her
eist
hef
ormul
atocal
cul
atet
heRequi
redMar
gin:

I
fthebasecur
rencyi
stheSAMEasy
ouraccount
’scur
rency
:

Requi
redMar
gin=Not
ional
Val
uexMar
ginRequi
rement
.

I
fthebasecur
rencyi
sDI
FFERENTf
rom y
ouraccount
’scur
rency
:

Requi
redMar
gin=Not
ional
Val
uexMar
ginRequi
rement

xExchangeRat
eBet
weenBaseCur
rencyandAccountCur
rency

Theonl
yreasonforhav
ingf
undsi
nyouraccounti
stomakesur
eyouhav
eenoughmar
gint
o
usef
ortr
ading.
Whenitcomestotradi
ngfor
ex,yourabil
i
tytoopentradesisnotnecessar
il
ybasedonthef
unds
i
nyouraccountbal
ance.Moreaccurat
ely,
it’
sbasedont heamountofmarginyouhave.

Thi
smeansthatyourbrokeri
salwayslookingt
oseeify
ouhav
eenoughmar
gini
nyouraccount
,
whi
chcanactual
l
ydifferfr
om youraccountbal
ance.

Whati
sUsedMar
gin?

I
nor
dert
ounder
standwhatUsedMar
gini
s,wemustf
ir
stunder
standwhatRequi
redMar
gini
s

Whenev
ery
ouopenanewposi
ti
on,
aspeci
fi
camountofRequi
redMar
gini
ssetasi
de.

I
fyouopenmor
ethanoneposi
ti
onatat
ime,
eachspeci
fi
cposi
ti
onwi
l
lhav
eit
sownRequi
red
Margi
n.

I
fyouaddupall
oftheRequi
redMar
ginofal
ltheposi
ti
onst
hatar
eopen,
thet
otal
amounti
s
what
’scal
l
edtheUsedMargi
n.

UsedMar
gini
sal
lthemar
gint
hat
’s“
lockedup”andcan’
tbeusedt
oopennewposi
ti
ons.

Thi
sismar
gini
sal
readybei
ng“
used”
.Hencet
hename,
UsedMar
gin.

Whil
eRequir
edMargi
nisti
edtoaSPECIFI
Ct r
ade,UsedMar
ginr
efer
stot
heamountofmoney
youneededt
odeposi
ttokeepALLyourt
radesopen.

Exampl
e:Openal
ongUSD/
JPYandUSD/
CHFposi
ti
on

Let
’ssayy
ou’
vedeposi
ted$1,
000i
nyouraccountandwantt
oopenTWOposi
ti
ons:

-
LongUSD/
JPYandwantt
oopen1mi
nil
ot(
10,
000uni
ts)posi
ti
on.

-
LongUSD/
CHFandwantt
oopen1mi
nil
ot(
10,
000uni
ts)posi
ti
on.

TheMar
ginRequi
rementf
oreachcur
rencypai
rfr
om y
ourbr
okeri
sasf
oll
ows:

USD/
JPY-4%
USD/
CHF-3%

Howmuchmar
gin(
“Requi
redMar
gin”
)wi
l
lyouneedt
oopeneachposi
ti
on?

Si
nceUSDisthebasecurr
encyforbot
hcurrencypai
rs.ami
nil
oti
s10,
000dol
l
ars,
whi
chmeans
EACHposi
ti
on’snot
ional
valuei
s$10,000.

Let
’snowcal
cul
atet
heRequi
redMar
ginf
orEACHposi
ti
on.

USD/
JPYPosi
ti
on

TheMargi
nRequi
rementforUSD/JPYi
s4%.Assumi
ngy
ourt
radi
ngaccounti
sdenomi
nat
edi
n
USD,
theRequi
redMargi
nwi l
lbe$400.

Requi
redMar
gin=Not
ional
Val
uexMar
ginRequi
rement

$400=$10,
000x0.
04

USD/
CHFPosi
ti
on

TheMar
ginRequi
rementf
orUSD/
CHFi
s3%.

Assumi
ngy
ourt
radi
ngaccounti
sdenomi
nat
edi
nUSD,
theRequi
redMar
ginwi
l
lbe$300.

Requi
redMar
gin=Not
ional
Val
uexMar
ginRequi
rement

$300=$10,
000x0.
03

Si
ncey
ouhav
eTWOt
rades,
theUsedMar
gini
nyourt
radi
ngaccountwi
l
lbe$700.

UsedMar
gin=Sum ofRequi
redMar
ginf
rom ALLopenposi
ti
ons
$700=$400(
USD/
JPY)+$300(
USD/
CHF)

WHATI
SEQUI
TY?

Theaccountequi
tyorsi
mpl
y“Equi
ty”r
epr
esent
sthecur
rentv
alueofy
ourt
radi
ngaccount
.

Equi
tyi
sthecurr
entv
alueoftheaccountandf
luct
uat
eswi
thev
eryt
ickwhenl
ooki
ngaty
our
tr
adi
ngplat
for
m onyourscr
een.

I
tist
hesum ofyouraccountbal
anceandal
lfl
oat
ing(
unr
eal
i
zed)pr
ofi
tsorl
ossesassoci
ated
wi
thyouropenposi
ti
ons.

Asy
ourcur
rentt
radesr
iseorf
all
inv
alue,
sodoesy
ourEqui
ty

Howt
oCal
cul
ateEqui
tyI
fYouHav
eNoTr
adesOpen

I
fyoudoNOThav
eanyopenposi
ti
ons,
theny
ourEqui
tyi
sthesameasy
ourBal
ance.

Equi
ty=AccountBal
ance

Forexampl
eyoudeposi
t$1,
000i
nyourt
radi
ngaccount
.

Si
ncey
ouhav
en’
topenedanyt
radesy
et,
yourBal
anceandEqui
tyi
sthesame.

Howt
oCal
cul
ateEqui
tyI
fYouHav
eTr
adesOpen

I
fyouhaveopenpositi
ons,
yourEqui
tyi
sthesum ofy
ouraccountbal
anceandy
ouraccount
’s
f
loat
ingPr
ofi
t/Loss.

Forexampl
eYoudeposi
t$1,
000i
nyourt
radi
ngaccount
.Andy
oudeci
dedt
oshor
tGBP/
USD

Pr
icemov
esi
mmedi
atel
yagai
nsty
ouandy
ourt
radeshowsaf
loat
ingl
ossof$50.

Equi
ty=AccountBal
ance+Fl
oat
ingPr
ofi
ts(
orLosses)
$950=$1,
000+(
-$50)

TheEqui
tyi
nyouraccounti
snow$950.

I
fyoudeci
det
olongGBP/USDand

Pr
icemov
esi
mmedi
atel
yiny
ourf
avorandy
ourt
radeshowsaf
loat
inggai
nof$100.

TheEqui
tyi
nyouraccounti
snow$1,
100.

Youraccountequi
tycont
inuousl
yfl
uct
uat
eswi
tht
hecur
rentmar
ketpr
icesasl
ongasy
ouhav
e
anyopenpositi
ons.

Equi
tyshowst
he“
TEMPORARY”v
alueofy
ouraccountatt
hecur
rentt
ime.

That
’swhyEqui
tyi
sseenasa“fl
oati
ngaccountbal
ance“
.Itwi
l
lonl
ybecomey
our“
real
account
bal
ance”i
fyouwer
etocloseal
lyourt
radesi
mmediatel
y.

Whati
sthedi
ff
erencebet
weenBal
anceandEqui
ty?

I
fyouraccounti
s“f
lat
”ordoesNOThav
eanyposi
ti
onsopen,
theny
ourBal
anceandEqui
tyar
e
t
heSAME.

Buti
fyoudohav
eopenposi
ti
ons,
thi
siswhent
heBal
anceandEqui
tydi
ff
er.

-
TheBal
ancer
efl
ect
syourpr
ofi
t/
lossf
rom cl
osedposi
ti
ons.

-TheEqui
tyr
efl
ect
st her
eal
-t
imecal
cul
ati
onofy
ourpr
ofi
t/
loss.TheEqui
tyt
akesi
ntoaccount
bothopenANDclosedposi
ti
ons.

Thismeansthatwheny
ou’
rel
ooki
ngaty
ourBal
ance,
iti
sNOTt
heact
ual
real
-t
imeamountof
yourf
unds.

Thismeansthatwheny
ou’
rel
ooki
ngaty
ourBal
ance,
iti
sNOTt
heact
ual
real
-t
imeamountof
yourf
unds.

I
t’
spossi
blet
ohav
eav
eryl
argeBal
ance,
butv
erysmal
lEqui
ty.

Thi
shappenswheny
ouropenposi
ti
onshav
eal
argeunr
eal
i
zed(
fl
oat
ing)l
osses.
Forexampl
e,i
fyourBal
ancei
s$1,
000,
andy
ouhav
eanopent
radet
hathasaf
loat
ingl
ossof
$900.

YourEqui
tyi
sonl
y$100.

Whati
sFr
eeMar
gin?

Mar
gincanbecl
assi
fi
edasei
ther“
used”or“
free”
.

UsedMargi
n,whi
chisj
ustt
heaggr
egat
eofal
ltheRequi
redMar
ginf
rom al
lopenposi
ti
ons,
was
di
scussedi
naprevi
ousl
esson.

Fr
eeMar
gini
sthedi
ff
erencebet
weenEqui
tyandUsedMar
gin.

FreeMargi
nr ef
erst
otheEqui
tyi
nat
rader
’saccountt
hati
sNOTt
iedupi
nmar
ginf
orcur
rent
openposit
ions.

FreeMargini
sal
soknownas“
Usabl
eMar
gin”becausei
t’
smar
gint
haty
oucan“
use”
….i
t’
s
“usabl
e”.

Fr
eeMar
gincanbet
houghtofast
wot
hings:

1.
Theamountav
ail
abl
etoopenNEW posi
ti
ons.

2.
Theamountt
hatEXI
STI
NGposi
ti
onscanmov
eagai
nsty
oubef
orey
our
ecei
veaMar
ginCal
l
orSt
opOut.

Don’
twor
ryaboutwhataMar
ginCal
landSt
opOutar
e.Theywi
l
lbedi
scussedl
ater
.

FreeMar
gini
salsoknownasUsabl
eMar
gin,
Usabl
eMai
ntenanceMar
gin,
Avai
l
abl
eMar
gin,
and
“Avai
l
abl
etoTrade“
.

Howt
oCal
cul
ateFr
eeMar
gin

Fr
eeMar
gin=Equi
ty-UsedMar
gin

I
fyouhav
eopenposi
ti
ons,
andt
heyar
ecur
rent
lypr
ofi
tabl
e,y
ourEqui
tywi
l
lincr
ease,
whi
ch
meanst
haty
ouwi
l
lhav
emor
eFr
eeMar
ginaswel
l
.

Fl
oat
ingpr
ofi
tsi
ncr
easeEqui
ty,
whi
chi
ncr
easesFr
eeMar
gin.

I
fyouropenposi
ti
onsar
elosi
ngmoney
,yourEqui
tywi
l
ldecr
ease,
whi
chmeanst
haty
ouwi
l
l
al
sohavelessFr
eeMargi
naswell
.

Fl
oat
ingl
ossesdecr
easeEqui
ty,
whi
chdecr
easesFr
eeMar
gin.

Exampl
e:OpenaLongUSD/
JPYPosi
ti
on

Let
’ssayy
ouhav
eanaccountbal
anceof$1,
000.

St
ep1:Cal
cul
ateRequi
redMar
gin

YouwanttogolongUSD/
JPYandwantt
oopen1mi
nil
ot(
10,
000uni
ts)posi
ti
on.TheMar
gin
Requi
rementi
s4%.

Howmuchmar
gin(
Requi
redMar
gin)wi
l
lyouneedt
oopent
heposi
ti
on?

Si
nceUSDist
hebasecurr
ency
.thi
smi
nil
oti
s10,
000dol
l
ars,
whi
chmeanst
heposi
ti
on’
s
Noti
onal
Val
ueis$10,
000.

Requi
redMar
gin=Not
ional
Val
uexMar
ginRequi
rement

$400=$10,
000x.
04

Assumingy
ourtradi
ngaccounti
sdenomi
nat
edi
nUSD,
sincet
heMar
ginRequi
rementi
s4%,
the
Requi
redMargi
nwi l
lbe$400.

St
ep2:Cal
cul
ateUsedMar
gin

Asi
def
rom t
het
radewej
ustent
ered,
ther
ear
en’
tanyot
hert
radesopen.
Si
ncewejusthav
eaSI
NGLEposi
ti
onopen,
theUsedMar
ginwi
l
lbet
hesameasRequi
red
Margi
n.

St
ep3:Cal
cul
ateEqui
ty

Let’
sassumet
hatt
hepr
icehasmov
edsl
i
ght
lyi
nyourf
avorandy
ourposi
ti
oni
snowt
radi
ngat
breakev
en.

Thi
smeanst
haty
ourf
loat
ingP/
Lis$0.

Let
’scal
cul
atey
ourEqui
ty:

Equi
ty=AccountBal
ance+Fl
oat
ingPr
ofi
ts(
orLosses)

$1,
000=$1,
000+$0

TheEqui
tyi
nyouraccounti
snow$1,
000.

St
ep4:Cal
cul
ateFr
eeMar
gin

Nowt
hatweknowt
heEqui
ty,
wecannowcal
cul
atet
heFr
eeMar
gin:

Fr
eeMar
gin=Equi
ty-UsedMar
gin

$600=$1,
000-$400

TheFr
eeMar
gini
s$600.

Sof
ar,
wel
ear
nedaboutt
hef
oll
owi
ng:

-
FreeMargi
nist
hemoneyt
hati
sNOT“
lockedup”duet
oanopenposi
ti
onandcanbeusedt
o
opennewposi
ti
ons.

-
WhenFr
eeMar
gini
satzer
o,addi
ti
onal
posi
ti
onscannotbeopened.
Whati
sMar
ginLev
el?

TheMargi
nLev
eli
stheper
cent
age(
%)v
aluebasedont
heamountofEqui
tyv
ersusUsed
Margi
n.

Mar
ginLev
elal
l
owsy
out
oknowhowmuchofy
ourf
undsar
eav
ail
abl
efornewt
rades.

Thehi
ghert
heMar
ginLev
el,
themor
eFr
eeMar
giny
ouhav
eav
ail
abl
etot
rade.

Thel
owertheMargi
nLevel
,thelessFr
eeMarginav
ail
abl
etot
rade,
whi
chcoul
dresul
tin
somet
hingver
ybad…li
keaMar gi
nCalloraSt
opOut.

Howt
oCal
cul
ateMar
ginLev
el

Mar
ginLev
el=(
Equi
ty/UsedMar
gin)x100%

Yourt
radi
ngpl
atf
orm wi
l
laut
omat
ical
l
ycal
cul
ateanddi
spl
ayy
ourMar
ginLev
el.

I
fyoudon’
thav
eanyt
radesopen,
yourMar
ginLev
elwi
l
lbeZERO.

Margi
nLeveli
sv er
yimportant
.For
exbr
oker
susemar
ginl
evel
stodet
ermi
newhet
hery
oucan
openaddi
ti
onalposit
ions.

Di
ff
erentbr
oker
ssetdi
ff
erentMar
ginLev
ell
i
mit
s,butmostbr
oker
ssett
hisl
i
mitat100%.

Thi
smeanst hatwhenyourEqui
tyi
sequal
orl
esst
hany
ourUsedMar
gin,
youwi
l
lNOTbeabl
e
toopenanynewpositi
ons.

I
fyouwantt
oopennewposi
ti
ons,
youwi
l
lhav
etocl
oseexi
sti
ngposi
ti
onsf
ir
st.

Exampl
e:Openal
ongUSD/
JPYposi
ti
onwi
th1mi
nil
ot

Let
’ssayy
ouhav
eanaccountbal
anceof$1,
000.

St
ep1:Cal
cul
ateRequi
redMar
gin

Youwantt
ogol
ongUSD/
JPYandwantt
oopen1mi
nil
ot(
10,
000uni
ts)posi
ti
on.TheMar
gin
Requi
rementi
s4%.

Howmuchmar
gin(
Requi
redMar
gin)wi
l
lyouneedt
oopent
heposi
ti
on?

Si
nceUSDist
hebasecurr
ency
.thi
smi
nil
oti
s10,
000dol
l
ars,
whi
chmeanst
heposi
ti
on’
s
Noti
onal
Val
ueis$10,
000.

Requi
redMar
gin=Not
ional
Val
uexMar
ginRequi
rement

$400=$10,
000x.
04

Assumingy
ourtradi
ngaccounti
sdenomi
nat
edi
nUSD,
sincet
heMar
ginRequi
rementi
s4%,
the
Requi
redMargi
nwi l
lbe$400.

St
ep2:Cal
cul
ateUsedMar
gin

Asi
def
rom t
het
radewej
ustent
ered,
ther
ear
en’
tanyot
hert
radesopen.

Si
ncewej
usthav
easi
ngl
eposi
ti
onopen,
theUsedMar
ginwi
l
lbet
hesameasRequi
redMar
gin.

St
ep3:Cal
cul
ateEqui
ty

Let’
sassumet
hatt
hepr
icehasmov
edsl
i
ght
lyi
nyourf
avorandy
ourposi
ti
oni
snowt
radi
ngat
breakev
en.

Thi
smeanst
haty
ourFl
oat
ingP/
Lis$0.

TheEqui
tyi
nyouraccountwi
l
lbe$1,
000.

St
ep4:Cal
cul
ateMar
ginLev
el

Nowt
hatweknowt
heEqui
ty,
wecannowcal
cul
atet
heMar
ginLev
el:

Mar
ginLev
el=(
Equi
ty/UsedMar
gin)x100%
250%=(
$1,
000/$400)x100%

TheMar
ginLev
eli
s250%.

I
ftheMar
ginLev
eli
s100%orl
ess,
mostt
radi
ngpl
atf
ormswi
l
lnotal
l
owy
out
oopennewt
rades.

I
ntheexampl
e,si
ncey ourcur
rentMar
ginLev
eli
s250%,
whi
chi
swayabov
e100%,
you’
l
lst
il
lbe
abl
etoopennewtrades.

Whati
saMar
ginCal
lLev
el?

I
nforextr
adi
ng,
theMar
ginCal
lLev
eli
swhent
heMar
ginLev
elhasr
eachedaspeci
fi
clev
elor
t
hreshol
d.

Whent hi
sthr
esholdisreached,youareindangeroft
hePOSSI
BILI
TYofhav
ingsomeoral
lof
yourposi
ti
onsforci
blyclosed(or“l
iqui
dated“
).

TheMar
ginLev
elisthe“
met r
ic”andt
he“
Mar
ginCal
lLev
el”i
saspeci
fi
c“v
alue”oft
hemet
ri
c
(whi
chi
stheMargi
nLevel)

Forexampl
e,somef
orexbr
oker
shav
eaMar
ginCal
lLev
elof100%.

I
nt hi
sexampl
e,i
ftheMar
ginLev
eli
nyouraccountf
all
sto100%orl
ower
,a“
Mar
ginCal
l
”wi
l
l
occur.

Whati
saMar
ginCal
l?

AMargi
nCal
liswhenyourbr
okernot
if
iesyout
haty
ourMar
ginLev
elhasf
all
enbel
owt
he
r
equi
redmi
nimum l
evel(
the“
MarginCall
Level
”)
.

Thi
snotif
icat
ionusedt
obeanact
ual
phonecal
l
,butnowaday
s,i
t’
susual
l
yanemai
lort
ext
message.

AMar
ginCal
loccur
swheny
ourf
loat
ingl
ossesar
egr
eat
ert
hany
ourUsedMar
gin.

Thi
smeanst
haty
ourEqui
tyi
slesst
hany
ourUsedMar
gin(
sincef
loat
ingl
ossesr
educey
our
Equi
ty)
.

"
Mar
ginCal
lLev
el”v
s.“
Mar
ginCal
l”
NewTr
ader
stendt
ogetconf
usedbet
weenaMar
ginCal
lLev
elandMar
ginCal
l
.

-A“Margi
nCallLevel
”isat
hresholdsetbyyourbr
okerthatwi
l
ltr
iggera“Mar
ginCal
l
”.I
tisa
speci
fi
cpercentage(
%)val
ueoft heMarginLevel
.Forexampl
e,whentheMargi
nLevel
is100%.

-A“Margi
nCall
”isanevent
.WhenaMarginCall
occurs,yourbrokert
akessomesortofact
ion.
Usual
ly
, t
heacti
onis“t
osendanoti
fi
cat
ion”
.ThiseventonlyoccurswhentheMar
ginLevelfal
l
s
bel
owacer t
ainval
ue.Thi
sval
ueist
he“MarginCall
Level”.

Exampl
e:Mar
ginCal
lLev
elat100%

Let
’ssayyourfor
exbrokerhasaMarginCal
lLev
elat100%.Thi
smeanst haty
ourt
radi
ng
pl
atfor
m wil
lsendyouawar ni
ngnot
if
icat
ioni
fyourMargi
nLevelr
eaches100%.

Asi
def
rom r
ecei
vi
nganot
if
icat
ion,
yourt
radi
ngwi
l
lal
sobeaf
fect
ed.

I
fyouraccount
’sMarginLevel
reaches100%,
youwi
l
lNOTbeabl
etoopenanynewposi
ti
ons,
y
oucanonl ycl
oseexist
ingposi
ti
ons.

AMar
ginCal
lLev
elat100%meanst
haty
ourEqui
tyi
sequal
toorl
owert
hany
ourUsedMar
gin.

Thi
soccur
sbecausey
ouhav
eopenposi
ti
onswhosef
loat
ingl
ossescont
inuet
oINCREASE.

Let
’ssayyouhav
ea$1,000accountandyouopenaUSD/
CHFposi
ti
onwi
th1mi
nil
ot(
10,
000
uni
ts)t
hathasa$200Requi
redMargin.

Si
nceyouonl
yhav
eoneposi
ti
onopen,
UsedMar
ginwi
l
lal
sobe$200(
sameasRequi
red
Margi
n).

Let
’ssayy
oust
artl
osi
ngbi
gti
me

You’
renowdown800pi
ps.
At$1/
pip,
thi
smeansy
ouhav
eaf
loat
ingl
ossof$800!

Thi
smeansy
ourEqui
tyi
snow$200.

YourMar
ginLev
eli
snow100%.

Mar
ginLev
el=(
Equi
ty/UsedMar
gin)x100%

100%=(
$200/$200)x100%

Oncet
heMar
ginLev
elr
eaches100%,
youwi
l
lNOTbeabl
etoopenanynewposi
ti
onsunl
ess:

1.
Themar
ketr
ever
sesbacki
nyourf
avor
.

2.
YourEqui
tybecomesgr
eat
ert
hany
ourUsedMar
gin

I
f#1doesn’
thappen,
#2i
sonl
ypossi
blei
fyou:

-
Deposi
tmor
efundsi
ntoy
ouraccount
.

-
Closeoutexi
sti
ngposi
ti
ons.

Theaccountwi
l
lbeunabl
etoopenanynewposi
ti
onsunt
ilt
heMar
ginLev
eli
ncr
easest
oal
evel
abov
e100%.

Whathappensi
fyourbadt
radecont
inuest
ogoagai
nsty
ou?

I
fthi
shappens,onceyourMargi
nLevel
fal
l
sfur
thert
oANOTHERspeci
fi
clev
el,
thent
hebr
oker
wi
llbef
orcedtocloseyourposi
ti
on.

Theot
herspeci
fi
clev
eli
sknownast
heSt
opOutLev
elandv
ari
esbybr
oker
.
WHATI
SASTOPOUTLEVEL?

TheStopOutLev
eli
ssi
mi l
art
otheMar
ginCal
lLev
el,
whi
chwascov
eredi
nthepr
evi
ousl
esson,
exceptt
hati
t’
smuchworse!

I
nforextr
adi
ng,aSt
opOutLevel
iswhenyourMargi
nLevelf
all
stoaspeci
ficper
centage(
%)
l
eveli
nwhichoneoral
lofy
ouropenposi
ti
onsar
eclosedautomat
ical
l
y(“l
i
quidat
ed”)byyour
br
oker.

Thi
sliqui
dat
ionhappensbecauset
het
radi
ngaccountcannol
ongersuppor
ttheopenposi
ti
ons
duetoalackofmargin.

Morespeci
fi
call
y,t
heSt
opOutLev
eli
swhent
heEqui
tyi
slowert
hanaspeci
fi
cper
cent
ageof
yourUsedMargi
n.

I
fthi
slev
eli
sreached,
yourbr
okerwi
ll
automat
ical
lyst
artcl
osi
ngoutyourt
radesstar
ti
ngwi
th
t
hemostunprof
it
ableoneunt
ily
ourMargi
nLev
el i
sbackabovetheSt
opOutLev el
.

I
fyourMargi
nLeveli
satorbel
owt heSt
opOutLev
el,t
hebrokerwi
llcl
oseanyoral
lofyour
openposi
ti
onsasquickl
yaspossi
blei
nordert
opr
otecty
ouf r
om possi
blyi
ncur
ri
ngfur
ther
l
osses.

Thi
sactofcl
osi
ngy
ourposi
ti
onsi
scal
l
edaSt
opOut
.

Keepinmi
ndthataStopOutisnotdi
scret
ionar
y.Oncethel
iqui
dat
ionpr
ocesshasst
art
ed,
iti
s
usual
l
ynotpossi
blet
ostopitsi
ncetheprocessi
sautomated.

Di
ff
erentf
orexbr
oker
shandl
eaMar
ginCal
li
ndi
ff
erentway
s.

Somebr okerst
reataMar ginCal
landStopOutasoneandthesame, meani
ngt
heywi
l
lnotsend
youawar ningmessage,theywil
lsi
mplyjustst
artcl
osi
ngy
ourtradesal
ongwit
hamessage
noti
fyi
ngy ouoftheact
ion!
Forexampl
e,abr
okermaysett
hei
rMar
ginCal
lLev
elat100%wi
thnosepar
ateSt
opOutLev
el.

ThismeansthatifyourMar
ginLevel
dropsl
owert
han100%.t
hebr
okerwi
l
laut
omat
ical
l
ycl
ose
yourposi
ti
onwithoutanywarni
ngs!

Andnow,we’
reaboutt
ostar
tthemoreser
iouspar
tofforex.You'
vemadei
tthi
sfar
,andbynow,
youshoul
dbeablet
olookwit
hinandseei
fyouunder
stand.

Don'
twor
ryi
fyoudon'
tunder
standev
ery
thi
ng.Justmakesur
eyougoback,
alr
ight
?

Now,
let
'smov
eon.
3TYPESOFFOREXMARKETANALYSI
S

Infor
ex,youreducati
onwil
lnev
erstop.
Evenaf
tery
ouaredonewi
ththi
scl
ass,
y oumust
constant
lypursueasmuchknowledgeasyoucan,sot
haty
oucanbecomeatrueFOREX
MASTER! Thelear
ningnev
erends!

Tobegin,
let
’sl
ookatt
hreeway
sonhowy
ouwoul
danal
yzeanddev
elopi
deast
otr
adet
he
market
.

Ther
ear
ethr
eet
ypesofmar
ketanal
ysi
s:

1.Techni
cal
Anal
ysi
s

2.Fundament
alAnal
ysi
s

3.Sent
imentAnal
ysi
s

Techni
calAnal
ysi
s

Techni
cal
anal
ysi
sist
hef
ramewor
kinwhi
cht
rader
sst
udypr
icemov
ement
.

Thet
heoryi
sthataper
soncanlookathi
stor
ical
pri
cemov
ement
sanddet
ermi
net
hecur
rent
tr
adi
ngcondi
ti
onsandpot
enti
alpri
cemovement.

Someonewhousest
echnicalanal
ysisiscal
l
edat
echni
cal
anal
yst
.Tr
ader
swhouset
echni
cal
anal
ysi
sar
eknownastechnicaltr
aders.

Themai
nevi
denceforusi
ngtechnical
anal
ysi
sist
hat
,theor
eti
cal
l
y,al
lcur
rentmar
ket
i
nfor
mat
ioni
srefl
ectedi
ntheprice.

I
fpr
icer
efl
ectsal
lthei
nfor
mat
iont
hati
soutt
her
e,t
henpr
iceact
ioni
sal
lonewoul
dreal
l
yneed
t
omakeatrade.

Techni
cal
anal
ysi
slooksatt
her
hyt
hm,
flow,
andt
rendsi
npr
iceact
ion.
Now,
youmusthav
ehear
dtheol
dadage,
“Hi
stor
ytendst
orepeati
tsel
f“
?

Wel
l
,that
’sbasi
cal
l
ywhatt
echni
cal
anal
ysi
sisal
labout
!

Ifacer
tai
npriceheldasamaj
orsuppor
torr
esist
ancelevel
inthepast
,for
ext
rader
swi
l
lkeep
aneyeoutforitandbaset
hei
rtr
adesar
oundthathi
stori
calpr
icel
evel
.

Techni
calanal
ystslookforsi
mil
arpatt
ernst
hathavef
ormedinthepastandwi
l
lfor
mtr
ade
i
deasbeli
evingthatpri
cecoul
dpossibl
yactthesamewaythati
tdidbef
ore.

Technicalanal
ysisisthest
udyofhi
stor
icalpr
iceacti
oninor
dert
oident
if
ypat
ter
nsand
deter
mi neprobabil
i
tiesoft
hefut
uredir
ecti
onofprice.

Sohowdoesone“
studyhi
stor
ical
pri
ceact
ion“
?

I
nt hewor
ldoftr
adi
ng,
whensomeonesay
s“t
echni
cal
anal
ysi
s”,
thef
ir
stt
hingt
hatcomest
o
mindisachar
t.

Techni
calanal
yst
susechar
tsbecausetheyaret
heeasi
estwaytovi
sual
i
sehist
ori
cal
dat
a!The
thi
ngsthathav
ehappenedi
nthemar ketbef
orey
outookalookatt
hechart
.

Youcanl ookatpastdatatohel
pyouspott
rendsandpat
ter
nswhi
chcoul
dhel
pyouf
indsome
greatt
radingopport
unit
ies.

What’
smorei
sthatwit
hallt
hetraderswhorel
yontechnical
anal
ysi
soutt
her
e,t
hesepr
ice
pat
ter
nsandi
ndi
catorsi
gnal
stendt obecomesel
f-
ful
fi
ll
ing.

Asmor eandmoref
orext
radersl
ookf
orcer
tai
npri
cel
evel
sandchar
tpat
ter
ns,
themor
eli
kel
y
thatt
hesepat
ter
nswil
lmanif
estt
hemsel
vesint
hemarket
s.

Youshoul
dknowt
hought
hatt
echni
cal
anal
ysi
sisVERYsubj
ect
ive.

Fundament
alAnal
ysi
s
Whereast
echnicalanaly
sisi
nvol
vespor
ingoverchar
tst
oident
if
ypat
ter
nsortr
ends,
f
undamentalanaly
sisinvol
vespor
ingov
ereconomicdat
areport
sandnewsheadl
ines.

Fundament
alanal
ysi
sisawayoflookingatthef
orexmar
ketbyanal
yzi
ngeconomi
c,soci
al,
and
pol
iti
cal
for
cesthatmayaf
fectcur
rencypri
ces.

Usi
ngsuppl
yanddemandasanindi
catorofwherepr
icecoul
dbeheadedi
seasy
.Thehar
dpar
t
i
sanal
yzi
ngall
ofthef
actor
sthataf
fectsuppl
yanddemand.

I
notherwords,
youhavetol
ookatdi
ff
erentf
act
orst
odet
ermi
newhoseeconomyi
sgoodand
whoseeconomysucks.

Youhavetounderst
andthereasonswhyandhowcer t
ainevent
sli
keani
ncr
easei
nthe
unemploymentr
ateaff
ectacount r
y’seconomyandmonetar
ypoli
cywhi
chul
ti
mat
ely,
aff
ect
s
thel
evelofdemandfori
tscurrency.

Theideabehi
ndthisty
peofanalysi
sist
hati
facount
ry’
scur
rentorf
utur
eeconomi
cout
looki
s
good,i
tscurr
encyshouldst
rengt
hen.

Thebet t
ershapeacountr
y’seconomyis,t
hemoreforei
gnbusinessesandinvest
orswil
li
nvest
i
nt hatcount
ry.Thi
sresul
tsintheneedtopur
chasethatcount
ry’
scurrencyt
oobtaint
hose
assets.

Forexample,l
et’
ssayt
hatt
heU.
S.dol
l
arhasbeengai
ningst
rengt
hbecauset
heU.
S.economy
i
simpr ov
ing.

Ast
heeconomyget
sbet
ter
,rai
singi
nter
estr
atesmaybeneededt
ocont
rol
growt
handi
nfl
ati
on.

Hi
gheri
nter
estr
atesmakedol
l
ar-
denomi
nat
edf
inanci
alasset
smor
eat
tract
ive.

I
nordert
ogetthei
rhandsonthesel
ovel
yasset
s,t
rader
sandi
nvest
orshav
etobuysome
dol
l
arsfi
rst
.Thi
sincr
easesdemandfort
hecurr
ency.

Asaresul
t,t
hev
alueoft
heU.
S.dol
l
arwi
l
lli
kel
yincr
easeagai
nstot
hercur
renci
eswi
thl
esser
demand.

Tobeabletousefundamentalanal
ysi
s,i
tisessenti
alt
ounder
standhoweconomi
c,f
inanci
al,
andpol
i
ticalnewswil
limpactcurr
encyexchangerat
es.
Thi
srequi
resagoodunder
standi
ngofmacr
oeconomi
csandgeopol
i
tics.

Noneedt obeint
imidat
edbysuchf ancy-soundi
ngwor dsthough.Fornow,justknowthat
fundamental
analy
sisisawayofanal yzi
ngt hepotent
ial
mov esofacurrencythroughthe
strengt
horweaknessofthatcount
ry’
seconomi coutl
ook.

Sent
imentAnal
ysi
s

Sent
imentanal
ysi
sisusedt
ogaugehowot
hert
rader
sfeel
aboutapar
ti
cul
arcur
rencypai
r.

Eachtr
aderhashisorherownopini
onofwhythemarketi
sact
ingt
hewayi
tdoesandwhet
her
totr
adeinthesamedirect
ionoft
hemarketoragai
nsti
t.

themarketbasical
lyrepr
esent
swhatal
ltr
ader
s–y
ou,
War
renBuf
fet
,orAnyot
herr
andom
person–feelaboutthemarket
.

Eacht
rader
’sthought
sandopinions,whi
chareexpr
essedthr
oughwhatev
erposi
ti
ont
heytake,
hel
psfor
mt heoveral
lsent
imentofthemarketr
egardl
essofwhati
nfor
mationi
soutt
her
e.

Theprobl
em i
sthatasr
etai
ltr
aders,nomatterhowst
rongl
yyouf
eel
aboutacer
tai
ntr
ade,
you
can’
tmovethefor
exmarketsi
ny ourfav
or.

Asat
rader
,youhav
etot
akeal
lthi
sint
oconsi
der
ati
on.Youneedt
oper
for
m sent
imentanal
ysi
s.

I
t’
supt
oyout
ogaugehowt
hemar
keti
sfeel
i
ng,
whet
heri
tisbul
l
ishorbear
ish.

Thenyouhavetodeci
dehowy
ouwantt
oincor
por
atey
ourper
cept
ionofmar
ketsent
iment
i
ntoyourt
radi
ngstrat
egy
.

Beingablet
ogaugemar
ketsent
imentakasent
imentanal
ysi
scanbeani
mpor
tantt
ool
iny
our
toolbox.
WHI
CHTYPEOFANALYSI
SFORFOREXTRADI
NGI
SBEST?

Throughoutyourj
our
neyasanaspi
ri
ngf
orext
rader
,youwi
l
lfi
ndst
rongadv
ocat
esf
oreacht
ype
ofanalysi
s.

Whereast
echnicalanal
ysi
s(TA)inv
olv
espor
ingoverchar
tst
oident
if
ypat
ter
nsortr
ends,
f
undamentalanaly
sis(FA)i
nvol
vespori
ngov
ereconomicdat
areport
sandnewsheadl
i
nes.

For
tunat
ely
,thedi
ff
erentt
ypesofmar
ketanal
ysi
scompl
ementeachot
her
.

Evenhardcoretechni
cal
tradersmayf
indusef
ulf
undament
alnugget
sthatcanhel
pwi
tht
hei
r
techni
calanal
ysis.Andvi
cev er
sa.

Inreal
-worl
dmarkets,
pri
cesar
econstantl
ychangi
ng,
andusual
l
ydev
elopt
rends.Those
changesinpri
cescananddoaffectf
undamental
s.

Thi
smeanst
hatt
rendsi
npr
icesaf
fectf
undament
alsj
ustasf
undament
alsaf
fectpr
ices.

Andasy
ou’
l
lfi
ndouti
nlat
erl
essons,
ident
if
yingt
rendsi
sahugepar
toft
echni
cal
anal
ysi
s.

Onei
snotbet
tert
hant
heot
her
…theyar
eal
lj
ustdi
ff
erentway
stol
ookatt
hemar
ket
.

Attheendoft
heday
,iti
sbestt
ocombi
net
heknowl
edgeofal
li
not
hert
ocr
eat
eyourt
radi
ng
st
yle.

Tor ecap,
techni
calanalysi
sisthest
udyofcur
rencypricemovementonthechar
tswhi
l
e
fundamentalanal
ysistakesalookathowthecountr
y’seconomyi
sdoing.

Marketsenti
mentanal
ysi
sdeter
mineswhet
hert
hemar
keti
sbul
l
ishorbear
ishont
hecur
rentor
f
uturefundament
aloutl
ook.

Fundamental
fact
orsshapesent
iment
,whil
etechnical
analysi
shel
psusv
isual
i
zet
hat
senti
mentandapplyafr
ameworktocreat
eourtradeplans.

Thoset
hreewor
khand-
in-
hand-
in-
handt
ohel
pyoucomeupwi
thgoodf
orext
radei
deas.

I
nor
dert
obecomeat
ruef
orext
rader
,youwi
l
lneedt
oknowhowt
oef
fect
ivel
yuset
heset
hree
t
ypesofmar
ketanal
ysi
s.

Letmegivey
ouanexampl
eofhowf
ocusi
ngononl
yonet
ypeofanal
ysi
scant
urni
ntoa
di
sast
er.

-
Let
’ssayt
haty
ou’
rel
ooki
ngaty
ourchar
tsandy
ouf
indagoodt
radi
ngoppor
tuni
ty.

-
Yougetal
lexci
tedt
hinki
ngaboutt
hemoneyt
hat
’sgoi
ngt
ober
aini
ngdownf
rom t
hesky
.

-
Yousaytoyour
sel
f,“
Man,
I’
venev
erseenamor
eper
fectt
radi
ngoppor
tuni
tyi
nGBP/
USD.Il
ove
mychar
ts.

-
Yout
henpr
oceedt
obuyGBP/
USD

-
Butwai
t!Al
lofasuddent
het
rademakesa100pi
pmov
eint
heOTHERDI
RECTI
ON!

-
Lit
tl
edi
dyouknow,
butt
heUKj
ustgav
eaf
ucky
out
otheEU.

-
Sincey
ouj
ustl
ookatchar
ts(
techni
cal
anal
ysi
s),
youhav
enocl
ueWTFanEUi
s.Soy
ouGoogl
e
i
t.

-
Youlearnt
hati
tstandsf ort
heEuropeanUnion,whichi
saneconomi
candpoli
ti
cal
union
i
nvol
ving28Europeancountri
es,t
hatall
owsfreet
rade,whi
chmeansgoodscanmovebetween
membercountr
ieswithoutanychecksorext
racharges.

-Younowjustreal
i
zethatit
’sprobabl
yser
iousi
ftheUKwant
stodot
his.Thei
reconomycoul
d
bedevast
ated.Lotsofpeoplemightl
osej
obs.

-
Suddenly
,ever
yone’
ssent
imentt
owar
dsBr
it
ain’
smar
kett
urnssour
,andev
ery
onet
radesi
nthe
opposi
tedir
ect
ion!

-Youjustl
ostabunchofmoney,
andi
t’
sal
lbecausey
oucompl
etel
yignor
edf
undament
al
analy
sisandsenti
mental
anal
ysi
s.

whent
radi
ng,
don’
trel
yonj
ustonet
ypeofanal
ysi
s.

I
nst
ead,
youmustlear
nt obal
ancet
heuseofal
loft
hem.I
tisonl
ythent
haty
oucanr
eal
l
yget
t
hemostoutofy
ourtradi
ng.
3TYPESOFFOREXCHARTSANDHOW TOREADTHEM

I
nordert
ostudyhowthepriceofacur
rencypai
rmov
es,
youneedsomesor
tofwayt
olookat
i
tshi
stor
ical
andcur
rentpr
icebehavi
or.

Achar
t,ormorespeci
fi
cal
ly
, apri
cechar
t,happenst
obet
hef
ir
stt
ool
thatev
eryt
raderusi
ng
t
echni
calanal
ysi
sneedstolearn.

Achar
tissi
mpl
yav
isual
repr
esent
ati
onofacur
rencypai
r’
spr
iceov
erasetper
iodoft
ime.

Thi
sisanexampl
eofwhatachar
tlooksl
i
ke.

I
tvisuali
zesthetr
adi
ngacti
vi
tyt
hatt
akespl
acedur
ingasi
ngl
etr
adi
ngper
iod(
whet
heri
t’
s10
minutes,4hours,
oneday,
oroneweek)
.

Anyf
inanci
alassetwi
thpr
icedat
aov
eraper
iodoft
imecanbeusedt
ofor
m achar
tforanal
ysi
s.

Chart
sareuser-
fr
iendl
ysi
nceit
’spr
ett
yeasyt
ounder
standhowpr
icemov
ement
sar
epr
esent
ed
overt
imesincei
t’
ssov i
sual
.

Wit
hachart
,iti
seasyt
oident
if
yandanal
yzeacur
rencypai
r’
smov
ement
s,pat
ter
ns,
and
t
endenci
es.

Whatdoesapr
icechar
trepr
esent
?

Apr
icechar
tdepi
ctschangesi
nsuppl
yanddemand.

Achar
taggr
egat
esev
erybuyandsel
ltr
ansact
ionoft
hatf
inanci
ali
nst
rumentatanygi
ven
moment.

Achar
tincor
por
atesal
lknownnews,
aswel
last
rader
s’cur
rentexpect
ati
onsoff
utur
enews.
Whent
hef
utur
ear
ri
vesandt
her
eal
i
tyi
sdi
ff
erentf
rom t
heseexpect
ati
ons,
pri
cesshi
ftagai
n.

The“futurenews’i
snow“knownnews”
,andwitht
hisnewi
nfor
mat
ion,
trader
sadj
ustt
hei
r
expectati
onsonfutur
enews.Andt
hecycl
erepeat
s.

Char
tsbl
endal
lact
ivi
tyf
rom t
hemi
l
li
onsofmar
ketpar
ti
cipant
s,whet
hert
hey
’rehumansor
al
gos.

Whetherthetransacti
onoccur
redbytheact
ionsofanexpor ter,
acurrencyinter
venti
onfrom a
cent
ralbank,t
r adesmadebyanAIfrom ahedgefund,ordiscreti
onarytradesfr
om retai
ltr
ader
s,
achartbl
endsALLt hi
sinf
ormati
ontoget
hertoinavisualf
ormatt echnicaltr
aderscanstudy
andanalyze.

Ty
pesofPr
iceChar
ts

Let
’st
akeal
ookatt
het
hreemostpopul
art
ypesofpr
icechar
ts:

1.
Linechar
t

2.
Barchar
t

3.
Candl
est
ickchar
t

Now,we’
l
lexpl
aineachoft
hef
orexchar
ts,
andl
ety
ouknowwhaty
oushoul
dknowabouteach
oft
hem.

Li
neChar
t

Asi
mpl
eli
nechar
tdr
awsal
i
nef
rom onecl
osi
ngpr
icet
othenextcl
osi
ngpr
ice.

Whenstr
ungtoget
herwi
thal
i
ne,
wecanseet
hegener
alpr
icemov
ementofacur
rencypai
rov
er
aper
iodoft
ime.

I
t’
ssimplet
ofoll
ow,butthel
i
nechar
tmaynotpr
ovi
det
het
raderwi
thmuchdet
ail
aboutpr
ice
behav
iorwi
thi
ntheperi
od.
Ally
ouknowist
hatpr
icecl
osedatXatt
heendoft
heper
iod.Youhav
enocl
uewhatel
se
happened.

Buti
tdoeshel
pthetr
aderseet
rendsmor
eeasi
l
yandv
isual
l
ycompar
ethecl
osi
ngpr
icef
rom
oneper
iodtot
henext.

Thi
sty
peofchar
tisusual
l
yusedt
ogeta“
bigpi
ctur
e”v
iewofpr
icemov
ement
s.

Thel
i
nechar
tal
soshowst
rendst
hebest
,whi
chi
ssi
mpl
ythesl
opeoft
hel
i
ne.

Sometradersconsi
dert
heclosinglevel
tobemoreimpor
tantthantheopen,
high,orl
ow.By
pay
ingattent
iontoonl
ytheclose,pri
cefl
uct
uat
ionswi
thi
nat r
adingsessi
onareignor
ed.

Her
e'sanexampl
eofal
i
nechar
tforEUR/
USD.

BarChar
t

Abarchar
tisali
tt
lemor
ecompl
ex.I
tshowst
heopeni
ngandcl
osi
ngpr
ices,
aswel
last
he
hi
ghsandlows.

Barchar
tshel
pat
raderseet
hepr
icer
angeofeachper
iod.
Thebott
om ofthevert
ical
bari
ndicat
esthel
owestt
radedpr
icef
ort
hatt
imeper
iod,
whi
l
ethe
topoft
hebarindi
catesthehi
ghestpri
cepai
d.

Thev
ert
ical
bari
tsel
findi
cat
est
hecur
rencypai
r’
str
adi
ngr
angeasawhol
e.

Asthepri
cefl
uctuat
ionsbecomeincreasi
ngl
yvol
ati
l
e,t
hebar
sbecomel
arger
.Ast
hepr
ice
fl
uct
uati
onsbecomequi et
er,
thebarsbecomesmall
er.

Thefluct
uati
oninbarsizei
sbecauseofthewayeachbari
sconst
ruct
ed.Thever
ti
cal
hei
ghtof
thebarref
lect
stherangebetweenthehi
ghandthelowpri
ceoft
hebarperi
od.

Thepr
icebaral
sor
ecor
dst
heper
iod’
sopeni
ngandcl
osi
ngpr
iceswi
that
tachedhor
izont
all
i
nes.

Thehori
zontal
hashonthel
eftsi
deoft
hebari
stheopeni
ngpr
ice,
andt
hehor
izont
alhashon
ther
ightsi
deisthecl
osi
ngpri
ce.

Her
e'sanexampl
eofabarchar
tforEUR/
USD.
Takenot
e,thr
oughoutourl
essons,
youwi
l
lseet
hewor
d“bar
”inr
efer
encet
oasi
ngl
epi
eceof
dataonachart
.

Abari
ssi
mpl
yonesegmentoft
ime,
whet
heri
tisoneday
,oneweek,
oronehour
.

Whenyouseet
hewor
d‘bar
’goi
ngf
orwar
d,besur
etounder
standwhatt
imef
ramei
tis
r
efer
enci
ng.

Barchartsarealsocal
led“OHLC”chartsbecauset
heyi
ndi
cat
etheOpen,
theHi
gh,
theLow,
and
theCloseforthatpar
ti
cularcur
rencypair
.

Abigdi
ff
erencebetweenalinechar
tandanOHLC(
open,
high,
low,
andcl
ose)char
tist
hatt
he
OHLCchartcanshowv ol
ati
l
ity.

Candl
est
icksChar
ts

Thecandl
est
ickchar
tisav
ari
ati
onoft
hebarchar
t.

Candl
est
ickchar
tsshowt
hesamepr
icei
nfor
mat
ionasabarchar
tbuti
napr
ett
ier
,gr
aphi
c
for
mat.

Manyt
rader
sli
ket
hischar
tbecausenotonl
yisi
tpr
ett
ier
,buti
t’
seasi
er-
to-
read.

Candl
est
ickbar
sst
il
li
ndi
cat
ethehi
gh-
to-
lowr
angewi
thav
ert
ical
li
ne.
However
,incandl
esti
ckcharti
ng,
thel
argerbl
ock(
orbody
)int
hemi
ddl
eindi
cat
est
her
ange
bet
weentheopeningandclosi
ngpri
ces.

Candlest
ickshel
pvi
sual
i
zebul
l
ishorbear
ishsent
imentbydi
spl
ayi
ng“
bodi
es”usi
ngdi
ff
erent
col
ors.

Tradi
ti
onall
y,i
ftheblocki
nthemi
ddl
eisf
il
ledorcol
oredi
n,t
hent
hecur
rencypai
rcl
osed
LOWERt hanitopened.

I
nthefol
l
owi
ngexampl
e,t
he‘
fi
ll
edcolor
’isbl
ack.Forour‘f
il
led’bl
ocks,
thet
opoft
hebl
ocki
s
t
heopeni
ngpr
ice,
andt
hebot
tom oft
heblockisthecl
osingpr i
ce.

I
ftheclosi
ngpr
iceishi
ghert
hant
heopeni
ngpr
ice,
thent
hebl
ocki
nthemi
ddl
ewi
l
lbe“
whi
te”
orhol
l
oworunfill
ed.

Youcanal
way
schanget
hecol
orofy
ourcandl
esony
ourchar
ttho.
Her
e'sanexampl
eofacandl
est
ickchar
tforEUR/
USD.

Thepur
poseofcandlest
ickchar
ti
ngi
sst
ri
ctl
ytoser
veasav
isual
aidsi
ncet
heexactsame
i
nfor
mationappear
sonanOHLCbarchart.

Theadv
ant
agesofcandl
est
ickchar
ti
ngar
e:

-Candlest
icksar
eeasyt
oint
erpr
etandar
eagoodpl
acef
orbegi
nner
stost
artf
igur
ingoutf
orex
chartanalysi
s.

-Candlest
icksareeasytouse!Yourey
esadaptal
mosti
mmediatel
ytotheinf
ormat
ioninthebar
notati
on.Plus,r
esearchshowsthatvi
sual
shel
pwithst
udy
ing,
soitmighthel
pwithtr
adingas
well!

-Candl
esti
cksar
egoodatident
if
yingmar kett
urni
ngpoint
s–r ev
ersalsf
rom anupt
rendt
oa
downtrendoradownt
rendtoanuptrend.Youwi l
ll
ear
nmor eaboutthi
slat
er.
SUPPORTANDRESI
STANCE

"
Suppor
tandr
esi
stance”i
soneoft
hemostwi
del
yusedconcept
sinf
orext
radi
ng.

ev
ery
oneseemst
ohav
ethei
rowni
deaofhowy
oushoul
dmeasur
esuppor
tandr
esi
stance.

Let
’st
akeal
ookatt
hebasi
csf
ir
st.

I
nthi
spi
ctur
eabov
eAsy
oucansee,
thi
szi
gzagpat
ter
nismaki
ngi
tswayup(
a“bul
lmar
ket
”).

Whenthepricemov
esupandt
henpul
l
sback,
thehi
ghestpoi
ntr
eachedbef
orei
tpul
l
edbacki
s
nowresi
stance.

Resi
stancel
evel
sindi
cat
ewher
ether
ewi
l
lbeasur
plusofsel
l
ers.

Whenthepr
icecont
inuesupagai
n,t
hel
owestpoi
ntr
eachedbef
orei
tst
art
edbacki
snow
suppor
t.

Suppor
tlev
elsi
ndi
cat
ewher
ether
ewi
l
lbeasur
plusofbuy
ers.

I
nthi
sway
,resi
stanceandsuppor
tar
econt
inual
l
yfor
medast
hepr
icemov
esupanddownov
er
t
ime.

Ther
ever
sei
str
uedur
ingadownt
rend.

I
nthemostbasi
cway
,thi
sishowsuppor
tandr
esi
stancear
enor
mal
l
ytr
aded:
Tr
adet
he“
Bounce”

-
Buywhent
hepr
icef
all
stowar
dssuppor
t.

-
Sel
lwhent
hepr
icer
isest
owar
dsr
esi
stance.

Tr
adet
he“
Break”

-
Buywhent
hepr
icebr
eaksupt
hroughr
esi
stance.

-
Sel
lwhent
hepr
icebr
eaksdownt
hroughsuppor
t.

PLOTTI
NGSUPPORTANDRESI
STANCELEVELS

Onet
hingt
orememberi
sthatsuppor
tandr
esi
stancel
evel
sar
enotexactnumber
s.

Oft
enti
mesy ouwill
seeasupportorresi
stancel
evel
thatappear
sbr
oken,
butsoonaf
terf
ind
outt
hatthemarketwasj
usttest
ingit
.

Withcandl
est
ickchar
ts,
these“t
est
s”ofsuppor
tandr
esi
stancear
eusual
l
yrepr
esent
edbyt
he
candl
esti
ckshadows(
wicks).

Not
icehowt
heshadowsoft
hecandl
est
est
edt
he1.
4700suppor
tlev
el.

Att
hoset
imesi
tseemedl
i
ket
hemar
ketwas“
breaki
ng”suppor
t.

I
nhi
ndsi
ght
,youcanseet
hatt
hemar
ketwasmer
elyt
est
ingt
hatl
evel
.

Sohowdowet
rul
yknowi
fsuppor
tandr
esi
stancewer
ebr
oken?
Thereisnodefini
teanswertothi
squesti
on.Somearguethatasupportorr
esi
stancel
evel
is
brokenift
hepricecanactual
lycl
osepastthatl
evel
.However,
youwill
f i
ndt
hatthi
sisnot
al
way sthecase.

Let’
stakeoursameexamplefrom abov
eandseewhathappenedwhent
hepr
iceact
ual
l
ycl
osed
pastthe1.
4700supportl
evel
.

I
nt hi
scase,
thepr
icehadcl
osedbel
owt
he1.
4700suppor
tlev
elbutendedupr
isi
ngbackup
aboveit
.

I
fyouhadbel
i
evedt
hatt
hiswasar
eal
breakoutandsol
dthi
spai
r,y
ouwoul
d’v
ebeenf
ool
ed.

Looki
ngatthechartnow,youcanv
isual
lyseeandcometot
heconcl
usi
ont
hatt
hesuppor
twas
notact
ual
lybroken;i
tisst
il
lver
ymuchintactandnowev
enstr
onger
.

Lear
ninghowt
ot r
adestr
uctur
esliket
hisr
equi
rest
heknowl
edgeofi
nst
it
uti
onal
tradi
ng,
geni
us
moneyandwyckoff
’sdi
str
ibut
ion.

Thebestwaytopl
otsuppor
tandr
esi
stancezonesi
sbypl
ott
ingt
hem onal
i
nechar
trat
hert
han
acandl
esti
ckchar
t.

Thereasoni
sthatl
i
nechar
tsonl
yshowyout
hecl
osi
ngpr
icewhi
l
ecandl
est
icksaddt
he
ext
remehighsandl
owstothepi
ctur
e.

Thesehighsandl
owscanbemi
sleadi
ngbecauseof
tent
imest
heyar
ejustt
he“
knee-
jer
k”
react
ionsoft
hemarket
.

Whenpl
ott
ingsupportandresi
stance,
youdon’
twantt
her
efl
exesoft
hemar
ket
.Youonl
ywant
t
oploti
tsi
ntent
ional
mov ements.

Looki
ngatt
hel
i
nechar
t,y
ouwantt
opl
oty
oursuppor
tandr
esi
stancel
i
nesar
oundar
easwher
e
y
oucanseet
hepr
icef
ormi
ngsev
eral
peaksorv
all
eys.

Ot
heri
nter
est
ingpoi
ntsaboutsuppor
tandr
esi
stance:

-
Whent
hepr
icepassest
hroughr
esi
stance,
thatr
esi
stancecoul
dpot
ent
ial
l
ybecomesuppor
t.

-Themoreof
tenpri
cetestsalev
elofr
esi
stanceorsuppor
twi
thoutbr
eaki
ngi
t,t
hest
rongert
he
areaofr
esi
stanceorsuppor
tis.

Bel
owi
sanexampl
eofabr
eakandr
etest
.You'
l
lunder
standaswemov
eonwi
thpr
act
ici
ng.
Thi
sisev
enanexampl
eofabr
eakandr
etest

Pri
cebroketheprev
iousresi
stancecamebackt
otestt
her
esi
stancer
eject
edi
tandbecamea
suppor
tthenstar
tedgoingup.
TRENDLI
NES

Tr
endl
i
nesar
epr
obabl
ythemostcommonf
orm oft
echni
cal
anal
ysi
sinf
orext
radi
ng.

Theyar
epr
obabl
yoneoft
hemostunder
uti
l
izedonesaswel
l
.

I
fdr
awncor
rect
ly,
theycanbeasaccur
ateasanyot
hermet
hod.

Unf
ort
unat
ely,
mostf or
ext
rader
sdon’
tdr
awt
hem cor
rect
lyort
ryt
omaket
hel
i
nef
itt
hemar
ket
i
nst
eadoftheotherwayar
ound.

I
nthei
rmostbasi
cfor
m,anupt
rendl
i
nei
sdr
awnal
ongt
hebot
tom ofeasi
l
yident
if
iabl
esuppor
t
ar
eas(val
l
eys)
.

Thi
sisknownasanascendi
ngt
rendl
i
ne.

I
nadowntr
end,
thet
rendl
i
nei
sdr
awnal
ongt
het
opofeasi
l
yident
if
iabl
eresi
stancear
eas
(
peaks)
.

Thi
sisknownasadescendi
ngt
rendl
i
ne.

HOW DOYOUDRAW TRENDLI

NES?

Todrawforext
rendl
i
nespr
oper
ly,
all
youhav
etodoi
slocat
etwomaj
ort
opsorbot
tomsand
connectt
hem.
Ty
pesofTr
ends

Ther
ear
ethr
eet
ypesoft
rends:

1.
Upt
rend(
higherl
ows)

2.
Downt
rend(
lowerhi
ghs)

3.
Sideway
str
end(
rangi
ng)

Her
ear
esomei
mpor
tantt
hingst
orememberusi
ngt
rendl
i
nesi
nfor
ext
radi
ng:

I
ttakesatl
eastt
wot
opsorbot
tomst
odr
awav
ali
dtr
endl
i
nebuti
ttakesTHREEt
oconf
ir
ma
t
rendli
ne.

TheSTEEPERt
het
rendl
i
ney
oudr
aw,
thel
essr
eli
abl
eiti
sgoi
ngt
obeandt
hemor
eli
kel
yitwi
l
l
break.

Li
kehor
izont
alsuppor
tandr
esi
stancel
evel
s,t
rendl
i
nesbecomest
rongert
hemor
eti
mest
hey
ar
etest
ed.

Andmostimportant
ly,
DONOTEVERdrawtr
endl
inesbyf
orci
ngt
hem t
ofi
tthemar
ket
.Ift
hey
donotf
itr
ight
,thenthatt
rendl
i
nei
sn’
taval
i
done!

TRENDCHANNELS

Ifwetaket
hist
rendlinet
heoryonest
epfur
theranddrawaparal
lel
li
neatthesameangleoft
he
uptr
endordowntrend,wewil
lhavecr
eat
edachannel.
They
’recal
l
edt r
endchannel
s/pr
ice
channel
s.
Theuppert
rendl
i
nemar ksr
esist
anceandthel
owertr
endli
nemarkssuppor
t.Sobot
hthet
ops
andbott
omsofchannel
srepr
esentpot
enti
alar
easofsuppor
torr
esist
ance.

Tr
endchannel
swithanegat
ivesl
ope(
down)ar
econsi
der
edbear
ishandt
hosewi
thaposi
ti
ve
sl
ope(
up)areconsi
der
edbull
ish.

Ty
pesofTr
endChannel
s

Ther
ear
ethr
eet
ypesofchannel
s:

1.
Ascendi
ngchannel
(hi
gherhi
ghsandhi
gherl
ows)

2.
Descendi
ngchannel
(lowerhi
ghsandl
owerl
ows)

3.
Hor
izont
alchannel
(rangi
ng)

Tocreat
eanup(ascending)channel
,si
mplydrawaparal
l
ell
i
neatthesameangleasanuptr
end
l
ineandthenmovethatl
inetopositi
onwhereitt
ouchest
hemostr
ecentpeak.Thi
sshoul
dbe
doneatthesameti
mey oucreatethetr
endli
ne.

Tocreateadown( descendi
ng)channel
,si
mplydrawapar al
lell
ineatt
hesameangl
easthe
downtrendli
neandthenmov ethatl
inetoaposit
ionwhereittouchest
hemostr
ecentv
all
ey.
Thi
sshoul dbedoneatthesamet i
mey oucreat
et het
rendli
ne.

Whenpr
iceshi
ttheLOWERt
rendl
i
ne,
thi
smaybeusedasabuy
ingar
ea.

Whenpr
iceshi
ttheUPPERt
rendl
i
ne,
thi
smaybeusedasasel
l
ingar
ea.

I
mpor
tantt
hingst
orememberaboutdr
awi
ngt
rendchannel
s:
-
Whenconst
ruct
ingat
rendchannel
,bot
htr
endl
i
nesmustbepar
all
elt
oeachot
her
.

-Gener
all
y,t
hebott
om ofthetr
endchannel
isconsi
der
eda“
buyzone”whi
l
ethet
opoft
het
rend
channeli
sconsi
dereda“sel
lzone”
.

-
Likei
ndr
awi
ngt
rendl
i
nes,
DONOTEVERf
orcet
hepr
icet
othechannel
sthaty
oudr
aw!

Asteeptr
endlinehappenswhent herei
sashar padvance(ordecl
ine)overabr i
efperi
odofti
me.
Li
kewhent her
ei sasuddenincr
easeordecreaseinpriceTheangleofat rendli
necreatedf
rom
suchshar
pmov esi
sunlikel
ytoofferameaningful
supportorresi
stancelevel.

Ev
ensomet
hingl
i
ket
hati
sst
il
lcal
l
edav
ali
dtr
endchannel
.

Not
ethatatr
endchannel
justpr
ovi
desy
oumor
eoppor
tuni
ti
est
otr
ade.Youcanchoset
otr
ade
wi
ththetr
endal
one.

So,
let
'sdoaqui
ckr
ecap,
okay
?

Whenthepricemovesupandt
henpul
l
sback,
thehi
ghestpoi
ntr
eachedbef
orei
tpul
l
sbacki
s
nowresi
stance.
li
keacei
li
ng

Asthepri
cecont
inuesupagain,
thel
owestpoi
ntr
eachedbef
orei
tcl
i
mbsbackupi
snow
suppor
t.
li
keafl
oorofabuil
ding.

Suppor
tandResi
stancear
eZones

Onet
hingt
orememberi
sthatsuppor
tandr
esi
stancel
evel
sar
eusual
l
ynotexactnumber
s.

Suppor
tandResi
stanceCanRev
erseRol
es
Anot
hert
hingtorememberi
sthatwhenpr
icepassest
hroughar
esi
stancel
evel
,thatr
esi
stance
coul
dpot
enti
all
ybecomesupport
.

Anexampl
e:

Thesamecouldalsohappenwi
thasuppor
tlev
el.I
fasuppor
tlev
eli
sbr
oken,
itcoul
dpot
ent
ial
l
y
becomearesi
stancelev
el

Tr
endLi
nes

I
nthei
rmostbasi
cfor
m,anupt
rendl
i
nei
sdr
awnal
ongt
hebot
tom ofeasi
l
yident
if
iabl
esuppor
t
ar
eas(val
l
eys)
.
Anupt
rend.

Tocreateadown(
descendi
ng)channel
,si
mplydr
awaparal
lell
ineatt
hesameangl
easthe
downtrendl
i
neandthenmovethatl
inetoaposi
ti
onwher
eittouchest
hemostr
ecentv
all
ey.

I
nadowntr
end,
thet
rendl
i
nei
sdr
awnal
ongt
het
opofeasi
l
yident
if
iabl
eresi
stancear
eas
(
peaks)
.

Tocreateadown(
descendi
ng)channel
,si
mplydr
awaparal
lell
ineatt
hesameangl
easthe
downtrendl
i
neandthenmovethatl
inetoaposi
ti
onwher
eittouchest
hemostr
ecentv
all
ey.
Howt
oTr
adeSuppor
tandResi
stance

Tr
adi
ngsuppor
tandr
esi
stancel
evel
scanbedi
vi
dedi
ntot
womet
hods

1.
The“
bounce”

2.
The“
break”

Whentradi
ngthebouncewewanttoti
ltt
heoddsinourf
avorandf
indsomesor
tof
conf
ir
mat i
ont
hatthesuppor
torr
esist
ancewi
llhol
d.

I
nst
eadofsi
mpl
ybuy
ingorsel
l
ingr
ightof
fthebat
,wai
tfori
ttobouncef
ir
stbef
oreent
eri
ng.

Bydoingthis,
youav oi
dt hosemoment
swher
epr
icemov
essof
astt
hati
tsl
i
cest
hrough
supportandresi
stancelevels

Asf
ort
radi
ngt
hebr
eak,
ther
eisanaggr
essi
vewayandt
her
eisaconser
vat
iveway
.

I
ntheaggressi
veway,
yousimpl
ybuyorsel
lwhenev
ert
hepr
icepassest
hroughasuppor
tor
r
esi
stancezonewit
hease.
I
ntheconser
vat
iveway
, youwai
tfort
hepr i
cetomakea“
pul
l
back”t
othebr
okensuppor
tor
r
esi
stancel
evel
andenteraft
erpr
icebounces.

I
ntheconser
vat
iveway
, youwai
tfort
hepr i
cetomakea“
pul
l
back”t
othebr
okensuppor
tor
r
esi
stancel
evel
andenteraft
erpr
icebounces.

Youunderst
andi
ngwhatyouread?Don'
trush.Rel
axandgobackupt
oread.Asmanyt
imeas
i
t'
spossibl
efory
outounderst
andthem deepl
y.
JAPANESECANDLESTI
CKPATTERNS.

Longwhi
teJapanesecandl
est
icksshowst
rongbuy
ingpr
essur
e.

Thel
ongert
hewhi
tecandl
est
ick,
thef
urt
hert
hecl
osei
sabov
etheopen.

Thisindi
cat
est
hatpr
icesi
ncr
easedconsi
der
abl
yfr
om opent
ocl
oseandbuy
erswer
e
aggressi
ve.

Longbl
ack(
fi
ll
ed)candl
est
icksshowst
rongsel
l
ingpr
essur
e.

Thel
ongert
hebl
ackJapanesecandl
est
ick,
thef
urt
hert
hecl
osei
sbel
owt
heopen.

Thi
sindi
cat
est
hatpr
icesf
ell
agr
eatdeal
from t
heopenandsel
l
erswer
eaggr
essi
ve.

TYPESOFJAPANESECANDLESTI
CKS.

Spi
nni
ngTops

Japanesecandl
est
ickswi
thalonguppershadow,l
onglowershadow,andsmal
lreal
bodi
esar
e
cal
ledspinni
ngt
ops.Thecol
oroftherealbodyi
snotveryi
mportant
.
TheSpi
nni
ngToppat
ter
nindi
cat
est
hei
ndeci
sionbet
weent
hebuy
ersandsel
l
ers.

Thesmallrealbody(whetherhol
l
oworfil
l
ed)showsl
i
ttl
emov ementfr
om opentocl
ose,and
theshadowsindicat
ethatbothbuyer
sandsel
ler
swerefi
ght
ingbutnobodycoul
dgaintheupper
hand.

Eventhought
hesessi
onopenedandcl
osedwi
thl
i
ttl
echange,
pri
cesmov
edsi
gni
fi
cant
lyhi
gher
andlowerint
hemeanti
me.

Nei
therbuy
ersnorsel
l
erscoul
dgai
ntheupperhand,
andt
her
esul
twasast
andof
f.

-
Ifaspi
nningtopfor
msduri
nganupt r
end,
thisusual
l
ymeanst
her
ear
en’
tmanybuy
ersl
eftand
apossi
blerev
ersali
ndi
rect
ioncoul
doccur.

-I
faspi
nningtopf
ormsduri
ngadownt r
end,
thi
susual
l
ymeanst
her
ear
en’
tmanysel
l
ersl
eft
andapossibl
erev
ersal
indi
rect
ioncoul
doccur
.
Mar
ubozu

Mar
ubozumeanst
her
ear
enoshadowsf
rom t
hebodi
es.

Thewor
d“mar
ubozu”t
ransl
atest
o“bal
dhead”or“
shav
edhead”i
nJapanese.

SoaMar
ubozucandl
est
icki
sabal
dcandl
eorshav
edcandl
emeansi
thasnoshadoworwi
ck.

Dependi
ngonwhethert
hecandl
est
ick’
sbodyi
sfi
l
ledorhol
l
ow,
thehi
ghandl
owar
ethesame
asit
sopenorcl
ose.

AWhiteMarubozucont
ainsal
ongwhit
ebodywit
hnoshadows.Theopenpr
iceequal
sthel
ow
pr
iceandt
heclosepri
ceequal
sthehi
ghpri
ce.

Thi
smeanst
hatt
hecandl
eopenedati
tsl
owestpr
iceandcl
osedati
tshi
ghestpr
ice.

Thisi
saverybul
l
ishcandl
easitshowsthatbuyer
swereincont
rol
oftheenti
resessi
on.I
t
usual
l
ybecomesthefi
rstpar
tofabull
i
shcont i
nuat
ionorabul
li
shrev
ersal
patter
n.

ABl
ackMarubozucont
ainsal
ongbl
ackbodywi
thnoshadows.Theopenequal
sthehi
ghand
t
hecl
oseequal
sthelow.

Thismeansthatthecandl
eopenedatit
shighestpriceandcl
osedatit
slowestpr
ice.
Thisi
sa
verybeari
shcandl
easitshowsthatsel
ler
scontrol
ledthepri
ceact
iontheent
ir
esession.I
t
usuall
yimpli
esbeari
shconti
nuat
ionorbeari
shreversal
.

Dependi
ngonwher
eamar
ubozui
slocat
edandwhatcol
ori
tis,
her
ear
efewgui
del
i
nes:
Whi
teMar
ubozu

-
IfaWhi
teMar
ubozuf
ormsatt
heendofanupt
rend,
acont
inuat
ioni
sli
kel
y.

-
IfaWhi
teMar
ubozuf
ormsatt
heendofadownt
rend,
arev
ersal
isl
i
kel
y.

Bl
ackMar
ubozu

-
IfaBl
ackMar
ubozuf
ormsatt
heendofadownt
rend,
acont
inuat
ioni
sli
kel
y.

-
IfaBl
ackMar
ubozuf
ormsatt
heendofanupt
rend,
arev
ersal
isl
i
kel
y.

St
il
lonBasi
cJapaneseCandl
est
ickPat
ter
ns

DOJI

Doji
candl
esti
ckshavet
hesameopenandcl
osepriceoratl
eastt
hei
rbodi
esar
eext
remel
y
short
.ADoji
shouldhav
eaverysmal
lbodyt
hatappearsasathi
nli
ne.

Doj
icandl
essuggesti
ndeci
sionorast
ruggl
efort
urfposi
ti
oni
ngbet
weenbuy
ersandsel
l
ers.
Pri
cesmoveabov
eandbel
owt
heopenpr
icedur
ingt
hesessi
on,
butcl
oseatorv
eryneart
he
openpr
ice.

Nei
therbuy
ersnorsel
l
erswer
eabl
etogai
ncont
rol
andt
her
esul
twasessent
ial
l
yadr
aw.

Ther
ear
eFOURspeci
alt
ypesofDoj
icandl
est
icks.

Thelengt
hoftheupperandlowershadowscanv
aryandt
her
esul
ti
ngf
orexcandl
est
ickl
ooks
l
ikeacross,
inver
tedcr
oss,orpl
ussign.

Thewor
d“Doj
i
”ref
erst
obot
hthesi
ngul
arandpl
ural
for
m.

WhenaDoj
ifor
msony
ourchar
t,payspeci
alat
tent
iont
othepr
ecedi
ngcandl
est
icks.

I
faDojif
ormsaft
eraseri
esofcandl
esti
ckswit
hlonghol
l
owbodies(l
ikeWhi
teMar
ubozus)
,the
Doj
isi
gnal
sthatt
hebuyer
sarebecomingexhaust
edandweakeni
ng.

I
nor derf
ort
hepr i
cetoconti
nueri
sing,
morebuyersareneededbutt
her
earen’
tanymore!
Sel
lersar
eanti
cipati
ngwit
hgreatpl
easureandarelooki
ngtocomeinanddri
vethepr
iceback
down.
I
faDojif
ormsafteraseri
esofcandl
est
ickswit
hlongf
il
ledbodi
es(
li
keBl
ackMar
ubozus)
,the
Doj
isi
gnal
sthatsell
ersar
ebecomingexhaust
edandweak.

I
norderf
orthepri
cetoconti
nuefal
li
ng,moresel
l
ersareneededbutsel
l
ersar
eal
lexhaust
ed!
Buy
ersareear
nestl
ywait
ingforachancet
ogetincheap.

Hopeful
ly
,bytheendoftoday’
slessononcandl
est
icks,
youguyswil
lknowhowt orecogni
ze
di
ff
erenttypesoff
orexcandl
esti
ckpatt
ernsandmakesoundtr
adingdeci
sionsbasedonthem.
SI
NGLECANDLESTI
CKPATTERNS

Nowthatyou’
refami
l
iarwit
hbasiccandl
esti
ckpatt
ernsli
kespi
nni
ngt
ops,
mar
ubozus,
anddoj
i
s,
Iwannateachhowtorecogni
zesingl
ecandl
esti
ckpatter
ns.

Whent
heset
ypesofcandl
est
icksappearonachar
t,t
heycansi
gnal
pot
ent
ial
mar
ketr
ever
sal
s.

HammerandHangi
ngMan

TheHammerandHangingManl
ookexact
lyal
i
kebuthav
etot
all
ydi
ff
erentmeani
ngsdependi
ng
onpastpr
iceact
ion.

Bothhavecut
eli
tt
lebodi
es(
blackorwhi
te)
,longl
owershadows,
andv
eryshor
torabsentupper
shadows.

TheHammerisabul
l
ishr
ever
salpat
ter
nthatf
ormsdur
ingadownt
rend.I
tisnamedbecause
themar
keti
shammeri
ngoutabott
om.

Whenpr
icei
sfal
l
ing,
hammer
ssi
gnal
thatt
hebot
tom i
snearandpr
icewi
l
lst
artr
isi
ngagai
n.

Thelongl
owershadowindi
catest
hatsel
l
erspushedpri
cesl
ower
,butbuy
erswer
eabl
eto
over
comethi
ssell
ingpr
essureandcl
osedneartheopen.

Justbecauseyouseeahammerfor
mi nadowntrenddoesn’
tmeanyouautomat
ical
l
ypl
acea
buyorder!Mor
ebulli
shconf
ir
mat
ionisneededbefor
eit
’ssaf
etopul
lthet
ri
gger.

Atypi
cal
exampleofconf
ir
mati
onwoul
dbet
owai
tforawhi
tecandl
est
ickt
ocl
oseabov
ethe
opentot
heri
ghtsi
deoftheHammer.
TheHangi
ngMani
sabear
ishr
ever
sal
pat
ter
nthatcanal
somar
kat
oporst
rongr
esi
stance
l
evel
.

Whenpr
iceisr
isi
ng,t
hef
ormat
ionofaHangi
ngMani
ndi
cat
est
hatsel
l
ersar
ebegi
nni
ngt
o
out
numberbuy
ers.

Thel
ongl
owershadowshowst
hatsel
l
erspushedpr
icesl
owerdur
ingt
hesessi
on.

Buy
erswer
eabl
etopusht
hepr
icebackupsomebutonl
yneart
heopen.

Thisshoul
dsetof
fal
armssi
ncethi
stel
lsusthatt
her
ear
enobuy
ersl
eftt
opr
ovi
det
he
necessar
ymomentum t
okeepr
aisi
ngthepri
ce.

Recogni
ti
onCr
it
eri
aforaHammer
:

-
Thel
ongshadowi
saboutt
woort
hreet
imesoft
her
eal
body
.

-
Lit
tl
eornouppershadow.

-
Ther
eal
bodyi
satt
heupperendoft
het
radi
ngr
ange.

Recogni
ti
onCr
it
eri
aforaHangi
ngMan:

-
Alongl
owershadowwhi
chi
saboutt
woort
hreet
imesoft
her
eal
body
.

-
Lit
tl
eornouppershadow.

-
Ther
eal
bodyi
satt
heupperendoft
het
radi
ngr
ange.

-
Thecol
oroft
hebodyi
snoti
mpor
tant
,thoughabl
ackbodyi
smor
ebear
isht
hanawhi
tebody
.

I
nver
tedHammerandShoot
ingSt
ar
TheI
nvert
edHammerandShooti
ngStaral
solooki
dent
ical
.Theonl
ydi
ff
erencebet
weent
hem
i
swhetheryou’
rei
nadownt
rendorupt
rend.

AnI
nver
tedHammeri
sabul
l
ishr
ever
sal
candl
est
ick.

AShoot
ingSt
ari
sabear
ishr
ever
sal
candl
est
ick.

Bothcandl
est
ickshavepet
it
eli
tt
lebodi
es(
fi
ll
edorhol
l
ow)
,longuppershadows,
andv
erysmal
l
orabsentl
owershadows.

TheInver
tedHammeroccurswhenpri
cehasbeenf
all
ingsuggestst
hepossi
bil
i
tyofar
ever
sal
.
I
tslonguppershadowshowst
hatbuy
erstr
iedt
obidthepri
cehigher
.

However
,sel
l
erssawwhatt
hebuy
erswer
edoi
ng,
sai
dno!andat
tempt
edt
opusht
hepr
iceback
down.

TheShoot
ingStari
sabear
ishrev
ersalpat
ter
nthatl
ooksi
dent
ical
tot
hei
nver
tedhammerbut
occur
swhenthepri
cehasbeenri
sing.

I
tsshapei
ndi
cat
est
hatt
hepr
iceopenedati
tsl
ow,
ral
l
ied,
butpul
l
edbackt
othebot
tom.

Thismeansthatbuyer
sattemptedtopushthepri
ceup,
butsel
l
erscameinandover
power
ed
them.Thisi
sadefini
tebeari
shsignsi
ncetherear
enomorebuyer
slef
tbecauset
hey’
veal
lbeen
exhaust
ed.

Fort
unat
ely
,thebuy
erswer
est
rongenoughandst
il
lmanagedt
ocl
oset
hesessi
onneart
he
open.

Sincethesel
l
erswer
en’tabl
etocl
osethepri
ceanyl
ower
,thi
sisagoodi
ndi
cat
iont
hat
ev
erybodywhowantstosell
hasal
readysol
d.
Andi
fther
ear
enomor
esel
l
ers,
whoar
elef
t?Buy
ers.
DUALCANDLESTI
CKPATTERNS

Engul
fi
ngCandl
es

Ther
ear
etwot
ypesofEngul
fi
ngcandl
es:
Bul
l
ishEngul
fi
ngandBear
ishEngul
fi
ng.

TheBul
l
ishEngul
fi
ngpat
ter
nisat
wocandl
est
ickr
ever
sal
pat
ter
nthatsi
gnal
sast
rongupmov
e
maybecoming.

I
thappenswhenabear
ishcandl
eisi
mmedi
atel
yfol
l
owedbyal
argerbul
l
ishcandl
e.

Thi
ssecondcandl
e“engul
fs”thebear
ishcandle.Thi
smeansbuy er
sarefl
exi
ngthei
rmuscl
es
andthatt
her
ecoul
dbeast rongupmov eafterarecentdownt
rendoraperi
odofconsol
i
dat
ion.

Ont
heot
herhand,
theBear
ishEngul
fi
ngpat
ter
nist
heopposi
teoft
hebul
l
ishpat
ter
n.

Thisty
peofcandlest
ickpat
ter
noccurswhenthebul
l
ishcandl
eisi
mmedi
atel
yfol
l
owedbya
beari
shcandl
ethatcomplet
ely“engul
fs”i
t.

Thi
smeanst
hatsel
l
ersov
erpower
edt
hebuy
ersandt
hatast
rongmov
edowncoul
dhappen.

TweezerBot
tomsandTops

Tweezerpat
ter
nsar
etwocandl
est
ickr
ever
sal
pat
ter
ns.

Thi
sty
peofcandl
esti
ckpat
ternisusual
l
yspot
tedaf
teranext
endedupt
rendordownt
rend,
i
ndi
cat
ingt
hatarever
salwi
l
l soonoccur
.
Ther
ear
etwot
ypesofTweezerpat
ter
ns:
theTweezerBot
tom andt
heTweezerTop.

Themostef
fect
iveTweezer
shav
ethef
oll
owi
ngchar
act
eri
sti
cs:

-Thef
ir
stcandl
esti
cki
sthesameast
heov
eral
ltr
end.I
fpr
icei
smov
ingup,
thent
hef
ir
stcandl
e
shoul
dbebulli
sh.

-Thesecondcandl
est
icki
sopposi
tet
heov
eral
ltr
end.I
fthepr
icei
smov
ingup,
thent
hesecond
candl
eshouldbebeari
sh.

-
Theshadowsoft
hecandl
est
icksshoul
dbeofequal
lengt
h.

-
TweezerTopsshoul
dhav
ethesamehi
ghs,
whi
l
eTweezerBot
tomsshoul
dhav
ethesamel
ows.
TRI
PLECANDLESTI
CKPATTERNS

Toident
if
ytri
pleJapanesecandl
esti
ckpat
ter
ns,
youneedt
olookf
orspeci
fi
cfor
mat
ionst
hat
consi
stofthr
eecandlesti
cksi
ntotal
.

Thesecandl
est
ickf
ormat
ionshel
ptr
ader
sdet
ermi
nehowt
hepr
icei
sli
kel
ytobehav
enex
t.

Somethr
eecandl
est
ickpatt
ernsarerev
ersal
patt
erns,whi
chsi
gnal
theendoft
hecur
rentt
rend
andt
hestar
tofanewtrendintheopposit
edir
ect
ion.

Andotherthr
eecandl
est
ickpat
ternsar
econt
inuat
ionpat
ter
ns,
whi
chsi
gnal
apauseandt
hen
thecont
inuat
ionoft
hecurr
enttr
end.

Ev
eni
ngandMor
ningSt
ars

TheMorningStarandt
heEv
eni
ngSt
arar
etr
ipl
ecandl
est
ickpat
ter
nst
haty
oucanusual
l
yfi
ndat
theendofatrend.

Theyar
erev
ersal
pat
ter
nst
hatcanber
ecogni
zedt
hrought
hreechar
act
eri
sti
cs.

I
’
lluset
heEv
eni
ngSt
arPat
ter
nont
her
ightasanexampl
eofwhaty
oumaysee:

1.
Thef
ir
stcandl
est
icki
sabul
l
ishcandl
e,whi
chi
spar
tofar
ecentupt
rend.

2.
Thesecondcandlehasasmallbody,i
ndi
cat
ingthatt
her
ecoul
dbesomei
ndeci
sioni
nthe
market
.Thi
scandlecanbeei
therbull
i
shorbeari
sh.

3.
Thet hi
rdcandl
estickact
sasaconf i
rmat
iont
hatar
ever
sal
isi
npl
ace,
ast
hecandl
ecl
oses
beyondthemidpointofthefi
rstcandl
e.
Thr
eeWhi
teSol
dier
sandBl
ackCr
ows

TheThr
eeWhi
teSoldier
spat
ter
nisfor
medwhent hr
eel
ongbul
l
ishcandl
esf
oll
owa
DOWNTREND,
signali
ngarev
ersal
hasoccur
red.

Thisty
peoftr
ipl
ecandlest
ickpatt
ernisconsi
deredasoneofthemostpot
entbulli
shsignal
s,
especi
all
ywhenitoccur
saf t
eranextendeddowntrendandashor
tper
iodofconsol
idat
ion.

Thef
ir
stofthe“thr
eesol
dier
s”iscal
ledt
hereversal
candl
e.Itei
therendsthedownt
rendor
i
mpli
esthattheperi
odofconsol
idat
iont
hatf
ollowedthedowntr
endi sover.

Fort
heThreeWhi
teSol
dier
spatt
ernt
obeconsi
der
edv
ali
d,t
hesecondcandl
est
ickshoul
dbe
bi
ggert
hanthepr
evi
ouscandl
e’
sbody.

Al
so,
thesecondcandl
est
ickshoul
dcl
oseneari
tshi
gh,
leav
ingasmal
lornon-
exi
stentupper
wi
ck.

Fort
heThr
eeWhi
teSoldi
erspatt
ernt
obecompl
eted,
thel
astcandl
est
ickshoul
dbeatl
eastt
he
samesi
zeast
hesecondcandleandhav
easmal
lornoshadow.

TheThr
eeBl
ackCr
owscandl
est
ickpat
ter
nisj
ustt
heopposi
teoft
heThr
eeWhi
teSol
dier
s.

I
tisf
ormedwhent
hreebear
ishcandl
esf
oll
owast
rongUPTREND,
indi
cat
ingt
hatar
ever
sal
isi
n
t
heworks.

Thesecondcandl
e’
sbodyshoul
dbebi
ggert
hant
hef
ir
stcandl
eandshoul
dcl
oseatorv
erynear
i
tslow.

Final
ly
,thethi
rdcandl
eshoul
dbet
hesamesi
zeorl
argert
hant
hesecondcandl
e’
sbodywi
tha
veryshortornol
owershadow.

Fort
heThr
eeBl
ackCr
owspat
ter
ntobecompl
eted,
thel
astcandl
est
ickshoul
dbeatl
eastt
he
samesi
zeast
hesecondcandl
eandhav
easmal
lornoshadow.

Thr
eeI
nsi
deUpandDown

TheThr
eeI
nsi
deUpcandl
est
ickf
ormat
ioni
sat
rend-
rev
ersal
pat
ter
nthati
sfoundatt
hebot
tom
ofaDOWNTREND.

Thi
stri
plecandl
esti
ckpat
ter
nindi
cat
est
hatt
hedownt
rendi
spossi
blyov
erandt
hatanew
upt
rendhasstar
ted.

Forav
ali
dthr
eei
nsi
deupcandl
est
ickf
ormat
ion,
lookf
ort
hesepr
oper
ti
es:

1.
Thefir
stcandl
eshoul
dbef
oundatt
hebot
tom ofadownt
rendandi
schar
act
eri
zedbyal
ong
bear
ishcandl
est
ick.

2.
Thesecondcandl
eshoul
datl
eastmakei
tupal
lthewayupt
othemi
dpoi
ntoft
hef
ir
stcandl
e.

3.
Thethi
rdcandl
est
ickneedstocl
oseabovethef
ir
stcandl
e’
shi
ght
oconf
ir
mthatbuy
ershav
e
ov
erpoweredt
hestr
engthofthedownt
rend.

Conv
ersel
y,t
he*
Thr
eeI
nsi
deDowncandl
est
ickf
ormat
ioni
sfoundatt
het
opofanPTREND.

I
tmeanst
hatt
heupt
rendi
spossi
blyov
erandt
hatanewdownt
rendhasst
art
ed.

AThr
eeI
nsi
deDowncandl
est
ickf
ormat
ionneedst
ohav
ethef
oll
owi
ngchar
act
eri
sti
cs:

1.Thefir
stcandl
eshoul
dbef
oundatt
het
opofanupt
rendandi
schar
act
eri
zedbyal
ongbul
l
ish
candlest
ick.

2.
Thesecondcandl
eshoul
dmakei
tupal
lthewaydownt
hemi
dpoi
ntoft
hef
ir
stcandl
e.

3.
Thet
hir
dcandl
est
ickneedst
ocl
osebel
owt
hef
ir
stcandl
e’
slowt
oconf
ir
mthatsel
l
ershav
e
ov
erpower
edt
hest
rengt
hoft
heupt
rend.
USI
NGCANDLESTI
CKSWI
THSUPPORTANDRESI
STANCE

wewill
nowbelooki
ngatt hesebasi
ccandl
est
ickpat
ter
nst
hatwehav
ejustdi
scussedt
omake
soundtr
adi
ngdeci
sions.

Thesi
mpl
estway
stousecandl
est
icksi
swi
thsuppor
tandr
esi
stancel
evel
s.

Becausesupportandresi
stancel
evel
sdeter
mineareaswherebuyersandsel
lershavesetup
thei
rdefenses,
looki
ngathowcandlesti
cksr
eactt
ot hem wi
l
lhelpyougreat
lyinpredi
cti
ng
wherepricewil
lheadnext
.

Her
e'sar
eal
For
exwor
ldexampl
e.

I
nthi
sscenar
io,
youcanseet
hatt
her
eisr
esi
stancear
oundt
he1.
4900l
evel
.

Youbadl
ywanttoent
erbuty
oudeci
det
owai
tinst
eadbecauset
hecandl
ethatt
ouchedt
his
l
evell
ooksv
erybul
li
sh.

Twocandl
eslater
,youspotani
cet
hreei
nsi
dedowncandl
est
ickpat
ter
n,whi
chi
sconsi
der
edas
aver
ypotentbear
ishsi
gnal.

Usi
ngt
hef
ormat
ionasy
oursel
lsi
gnal
conf
ir
mat
ion,
yougoaheadaandshor
tthepai
r.Si
nce
y
ou'
reasmar
ttr
ader
,youal
sosetast
opl
ossabov
ether
esi
stance.

Becauseofyourhi
ghlev
elofpati
enceandy
ourknowl
edgeofcandl
est
ickf
ormat
ions,
youhav
e
great
lyi
ncr
easedtheoddsinyourfav
or.

Her
e'st
heendr
esul
toft
het
rade.

JustbecauseJapanesecandlest
ickshi
ntatareversalorconti
nuat
ion,
itdoesn’
tmeanitwi
ll
happenforsur
e!Youmustal waysconsidermarketcondit
ionsandwhatpriceact
ioni
stel
li
ng
you.

Now,wemovet
over
yseri
ousstuf
f.TheFi
bonacci
.Youhav
etot
akei
tser
ious,
wat
cht
hev
ideos
gi
ventoy
ouatt
heri
ghtt
imetoo.

Thi
sisv
eryi
mpor
tantt
ohowwel
lyoudoasaVi
x75t
rader
.
FI
BONACCITRADI
NG

Fi
bonacci
isahugesubj
ectandt
herear
emanydiffer
entFi
bonaccist
udi
eswi
thwei
rd-
soundi
ng
namesbutwe’
regoi
ngtosti
cktotwo:r
etr
acementandext
ension.

Idon’
twantt
ost
ressy
ouwi
thunnecessar
ydef
ini
ti
onsandhi
stor
y

Letmej
ustgost
rai
ghtt
othepoi
nt

Fi
bonacciRet
racementLev
els

0.
236,
0.382,
0.618,
0.764

Fi
bonacciExt
ensi
onLev
els

0,
0.382,
0.618,
1.000,
1.382,
1.618

Youwon’treall
yneedtoknowhowtocal
cul
ateal
lofthi
s.Yourchar
ti
ngsof
twarewil
ldoallthe
workforyou.Besides,
we’
vegotani
ceFi
bonacci
calcul
atort
hatcanaut
omati
call
ycalcul
ate
thosel
evelsforyou.

Fi
bonacciret
racementl
evel
sworkonthetheor
ythataf
terabi
gpricemoveinonedi
rect
ion,the
pr
icewill
retr
aceorret
urnpart
waybacktoaprevi
ouspri
celev
elbefor
eresumi
ngint
heor i
ginal
di
rect
ion.

Tr
ader
suset
heFi
bonacci
ret
racementl
evel
saspot
ent
ial
suppor
tandr
esi
stancear
eas.

Sincesomanyt
raderswatchthesesamelevelsandplacebuyandsel
lor
der
sont hem t
oent er
tr
adesorpl
acestops,t
hesupportandresi
stancelev
elstendt
obecomeaself-
ful
fi
ll
ingprophecy.

Tr
ader
suset
heFi
bonacci
ext
ensi
onl
evel
saspr
ofi
ttaki
ngl
evel
s.

Agai
n,si
ncesomanytr
ader
sar
ewatchingthesel
evel
stoplacebuyandsellorder
stotake
pr
ofi
ts,t
hist
ool
tendst
oworkmor
eoftenthannotduetoself-
ful
fi
ll
i
ngexpectati
ons.

Mostchar
ti
ngsof
twar
eincl
udesbot
hFi
bonacci
ret
racementl
evel
sandext
ensi
onl
evel
tool
s.

I
nordertoappl
yFi
bonacci
lev
elst
oyourchar
ts,
you’
l
lneedt
oident
if
ySwi
ngHi
ghandSwi
ng
Lowpoint
s.

Howt
oUseFi
bonacciRet
racement
s
Let
’st
alkaboutFi
bonacci
ret
racementl
evel
s.

Fibonaccir
etr
acementl
evelsarehor
izontall
inesthati
ndi
cat
et hepossi
blesuppor
tand
resi
stancelev
elswher
epricecoul
dpot enti
all
yrev
ersedir
ect
ion.

Thefi
rstt
hingy
oushoul
dknowaboutt
heFi
bonacci
tool
ist
hati
twor
ksbestwhent
hemar
keti
s
tr
endi
ng.

Theideaist
ogol
ong(
orbuy
)onar
etr
acementataFi
bonacci
suppor
tlev
elwhent
hemar
keti
s
tr
endingUP.

Andtogoshor
t(orsel
l
)onar
etr
acementataFi
bonacci
resi
stancel
evel
whent
hemar
keti
s
tr
endi
ngDOWN.

Fibonaccir
etr
acementl
evel
sar
econsider
edapr
edi
cti
vet
echni
cal
indi
cat
orsi
ncet
heyat
tempt
toidenti
fywherepr
icemaybei
nthefutur
e.

Fi
ndi
ngFi
bonacciRet
racementLev
els

I
nordert
ofi
ndtheseFi
bonacci
ret
racementl
evel
s,y
ouhav
etof
indt
her
ecentsi
gni
fi
cantSwi
ng
Hi
ghsandSwingsLows.

Then,
fordownt
rends,
cli
ckont
heSwi
ngHi
ghanddr
agt
hecur
sort
othemostr
ecentSwi
ng
Low.

Forupt
rends,dotheopposi
te.Cl
i
ckontheSwingLowanddragthecur
sort
othemostr
ecent
SwingHigh.
(*al
lthesewoul
dbedemonstr
atedinavi
deothatwoul
dbesentaf
tert
hecl
ass*
)

Exampl
e

Upt
rend
Thi
sisadai
l
ychar
tofAUD/
USD.

Her
et heFi
bonacci
ret
racementl
evelsbywaspl
ott
edbycl
icki
ngont
heSwi
ngLowat.
6955on
Apr
il20anddraggi
ngthecur
sortotheSwingHi
ghat.
8264onJune3.

Thechar
ti
ngsof
twar
emagi
cal
l
yshowsy
out
her
etr
acementl
evel
s.

Asyoucanseefrom t
hechart,
theFibonaccir
etr
acementl
evel
swer
e.7955(
23.
6%)
,.7764
(38.
2%)
,.7609(
50.0%*),
.7454(61.
8%),and.7263(76.
4%).

Now,theexpect
ati
onisthati
fAUD/USDr et
racesfrom t
herecenthigh,
itwi
l
lfindsupportatone
oft
hoseFibonacci
ret
racementl
evelsbecausetrader
swi l
lbeplaci
ngbuyordersattheselev
els
aspri
cepull
sback.

Now,
let
'sl
ookatwhathappenedaf
tert
heSwi
ngHi
ghoccur
ed.

Pri
cepul
ledbackr
ightt
hrought
he23.
6%l
evel
andcont
inuedt
oshootdownov
ert
henext
coupl
eofweeks.

I
tev
ent
est
edt
he38.
2%l
evel
butwasunabl
etocl
osebel
owi
t.

Lat
eron,
aroundJul
y14,
themar
ketr
esumedi
tsupwar
dmov
eandev
ent
ual
l
ybr
oket
hrought
he
swi
nghi
gh.

Cl
ear
ly,
buy
ingatt
he38.
2%Fi
bonacci
lev
elwoul
dhav
ebeenapr
ofi
tabl
elong-
ter
mtr
ade!

I
naDownt
rend

Now,l
et’
sseehowwewoulduset
heFi
bonacci
ret
racementt
ool
dur
ingadownt
rend.Bel
owi
sa
4-
hourchar
tofEUR/
USD.

Asyoucansee,
wef oundourSwingHughat1.
4195onJanuar
y25andourSwi
ngLowat
1.
3854,
afewday sl
ateronFebr
uary1.

Theret
racementl
evel
sar
e1.
3933(
23.
6%)
,1.
3983(
38.
2%)
,1.
4023(
50.
0%)
,1.
4064(
61.
8%)and
1.
4114(76.4%)
.

Theexpectati
onforadowntr
endist
hatifpri
ceretr
acesfr
om thi
slow,
itcoul
dpossibl
y
encounterr
esist
anceatoneoft
heFibonaccil
evel
sbecausetr
aderswhowanttoplaythe
downtrendatbett
erpri
cesmaybereadywithsell
order
sther
e.

Let
’scheckoutwhathappenednext
.

Themar
ketdi
dtr
ytor
all
y,st
all
edbel
owt
he38.
2%l
evel
forabi
tbef
oret
est
ingt
he50.
0%l
evel
.
I
fyouhadsomeor
der
sei
theratt
he38.
2%or50.
0%l
evel
s,y
ouwoul
d’v
emadesomemadpi
ps
onthatt
rade.

I
nthesetwoexamples,
weseethatpr
icef
oundsomet
empor
aryf
orexsuppor
torr
esi
stanceat
Fi
bonaccir
etr
acementl
evel
s.

Becauseofallt
hepeoplewhouset
heFi
bonacci
tool
,thosel
evel
sbecomesel
f-
ful
fi
ll
i
ngsuppor
t
andresi
stancelev
els.

Onethi
ngy
oushouldtakenot
eofisthatpr
icewon’
tal
way
sbouncef
rom t
hesel
evel
s.They
shoul
dbel
ookedatasareasofi
nter
est.

Rememberi
nthebegi
nni
ngIsai
dthatsuppor
tandr
esi
stancel
evel
sev
ent
ual
l
ybr
eak.

Well
,seei
ngashowFi bonacci
lev
elsar
eusedt
ofi
ndsuppor
tandr
esi
stancel
evel
s,t
hisal
so
appl
i
est oFi
bonacci
!

Alt
houghtheFibonaccit
ooisv
erypower
ful
,Fi
bonacci
ret
racement
sdonotwor
k100%oft
he
ti
me.Theyarenotfoolpr
oof
.
HOW TOUSEFI
BONACCIRETRACEMENTWI
THSUPPORTANDRESI
STANCE

Whil
etheFibonaccir
etracementt
ool i
sext
remel
yuseful
,i
tshouldn’
tbeusedallbyit
slonesome
sel
ftheFi
bonacciret
racementtoolshoul
dbeusedincombinat
ionwithot
hertools.

Fi
bonacciRet
racement+Suppor
tandResi
stance

Oneofthebest/mostef
fect
iveway
stousetheFibonacci
retr
acementtooli
stospotpot
ent
ial
suppor
tandresist
ancel
evel
sandseei
ftheyl
ineupwi t
hFibonacci
ret
racementl
evel
s.

I
fFibonaccil
evel
sar eal
readysupportandresi
stancelev
els,andyoucombinet
hem wit
hother
pri
ceareasthatalotofothert
rader
sar ewatchi
ng,thenthechancesofpr
icebounci
ngfrom
thoseareasaremuchhigher.

Let
’slookatanexampleofhowy oucancombi
nesuppor
tandr
esi
stancel
evel
swi
thFi
bonacci
l
evels.Bel
owisadail
ychartofUSD/CHF.

Asy
oucansee,
it'
sbeenonanupt
rendr
ecent
ly.

Youdeci
det
haty
ouwantt
ogeti
nont
hisl
ongUSD/
CHFbandwagon.

Butt
hequest
ioni
s,“
Whendoy
ouent
er?
”

Youbustoutt
heFibonacci
retracementt
ool,
usingthelowat1.
0132onJanuar
y11f
ort
he
SwingLowandthehighat1.0899onFebruary19fortheSwi
ngHigh.
Nowthatwehaveafr
amewor
ktoincreaseourpr
obabi
l
ityoff
indi
ngasol
i
dent
ry,
wecan
answert
hequest
ion“
Wher
eshoul
dy ouenter?
”

Youl
ookbackal it
tl
ebi
tandy
ouseethatthe1.0510pri
cewasgoodresi
stancel
evel
int
hepast
andi
tjusthappenstol
i
neupwit
hthe50.0%Fibonacci
retr
acementl
evel
.

Nowt
hati
t’
sbr
oken,
itcoul
dtur
nint
osuppor
tandbeagoodpl
acet
obuy
.

I
fyoudi
dsetanor
dersomewher
ear
oundt
he50.
0%Fi
blev
el,
you’
dbei
nser
iouspr
ofi
t

Therewoul
dhavebeensomepr
ett
ytensemoment
s,especi
all
yont
hesecondt
estoft
he
suppor
tlev
elonApr
il1.

Pr
icet
ri
edtopi
ercethr
oughthesuppor
tlevelbutfai
ledt
ocl
osebel
owi
t.Ev
ent
ual
l
y,t
hepai
r
br
okepastt
heSwingHighandresumeditsuptrend.

Youcandot hesamesetuponadownt r
endaswell
.Thepoi
nti
syoushoul
dlookf
orpr
icel
evel
s
thatseem t
ohavebeenareasofi
nter
estint
hepast
.

I
fyout
hinkabouti
t,t
her
e’sahi
gherchancet
hatpr
icewi
l
lbouncef
rom t
hesel
evel
s.

Why
?
Fi
rst
,aswediscussedinthebegi
nni
ngprev
ioussuppor
torresi
stancelevel
sar
eusual
l
ygood
ar
eastobuyorsellbecauseot
hertr
ader
swillal
sobeeyei
ngtheselevels.
Howt
oUseFi
bonacciRet
racementwi
thTr
endLi
nes

Anot
hergoodt
ool
tocombi
newi
tht
heFi
bonacci
ret
racementt
ool
ist
rendl
i
neanal
ysi
s.

Aft
eral
l,Fi
bonacci
ret
racementl
evel
swor
kbestwhent
hemar
keti
str
endi
ng,
sot
hismakesa
l
otofsense!

Remembert
hatwheneverapai
risi
nadownt
rendorupt
rend,
trader
suseFi
bonacci
ret
racement
l
evel
sasawaytogetinonthetr
end.

Sowhynotl
ookf
orl
evel
swher
eFi
blev
elsl
i
neupr
ightsmackwi
tht
het
rend?

Here'
sa1-hourchar
tofAUD/JPY.Asyoucansee,
pri
cehasbeenr
espect
ingashor
tter
mri
sing
t
rendli
neoverthepastcoupl
eofdays.

Youthi
nktoyour
sel
f,“
Hmm, t
hat’
sasweetuptrendri
ghtt
here.IwannabuyAUD/JPY,
eveni
f
i
t’
sjustf
orashortt
ermtr
ade.It
hinkI
’
llbuyoncethepai
rhit
sthetrendl
ineagai
n.”

Beforeyoudothatthough,whydon’
tyour
eachf
oryourf
orextool
boxandgett
hatFi
bonacci
ret
racementtoolout?Let
’sseei
fwecangetamoreexactent
rypri
ce.

Her
e,wepl
ott
edt
heFi
bonacci
ret
racementl
evel
sbyusi
ngt
heSwi
ngLowat82.
61andt
he
SwingHighat83.
84.Not
icehowt
he50.
0%and61.
8%Fi
blev
elsar
eint
erect
edbyt
her
isi
ng
tr
endli
ne.

Coul
dthesel
evel
sser
veaspot
ent
ial
suppor
tlev
els?l
et’
sseewhathappened

The61.
8%Fibonacci
retr
acementl
evelhel
d,as
pri
cebouncedt
herebef
oreheadi
ngbackup.I
fyouhadsetsomeordersatt
hatl
evel
,youwould
havehadaperf
ectent
ry!

Acoupl
eofhour
saf
tert
ouchi
ngt
het
rendl
i
ne,
pri
cezoomedupbur
sti
ngt
hrought
heSwi
ng
Hi
gh.

Asyoucansee,i
tdoespaytomakeuseoftheFi
bonacci
ret
racementt
ool
,ev
eni
fyou’
re
pl
anni
ngtoenteronaret
estoft
hetr
endli
ne.
HOW TOUSEFI
BONACCIRETRACEMENTWI
TH JAPANESECANDLESTI
CKS

I
’m goingtoteachy ouhowtocombinet
heFibonaccir
etr
acementt
ool
wit
hyourknowl
edgeof
Japanesecandlest
ickpatt
ernst
haty
oulear
nedear l
i
er.

WhencombiningtheFi
bonacci
retracementt
ool
wit
hcandl
est
ickpat
ter
ns,
wear
eact
ual
l
y
l
ooki
ngforexhausti
vecandl
est
icks.

I
fyoucantel
lwhenbuy
ingorsel
l
ingpr
essur
eisexhaust
ed,
itcangi
vey
ouacl
ueofwhenpr
ice
maycont
inuetr
endi
ng.

Let
’st
akeal
ookatanexampl
etomaket
hiscl
ear
er.

Bel
owi
sa1-
hourchar
tofEUR/
USD.

Thepai
rseemst
ohav
ebeeni
nadownt
rendt
hepastweek,
butt
hemov
eseemst
ohav
epaused
forabi
t.

Wil
lther
ebeachancetogetinonthi
sdownt
rend?Youknowwhatt
hismeans.I
t’
sti
met
otake
t
heFibonacci
ret
racementt
oolandgett
owork!

Asyoucanseefrom t
hechar
t,we’
vesetourSwi
ngHi
ghat1.
3364onMar
ch3,
wit
htheSwi
ng
Lowat1.2523onMarch6.

Let
’ssayi
t’
saFri
day,y
oudeci
dedt
ojustchil
lout
,takeanear
lydayof
f,anddeci
dewheny
ou
wannaent
eronceyouseet
hechar
tsaf
tertheweekend.
Bytheti
meyoupoppedopeny
ourchar
ts,
youseet
hatEUR/
USDhasshotupqui
teabi
tfr
om i
t'
s
Fr
idaycl
osi
ngpr
ice.

Whil
ethe50.
0%Fibl
evelhel
dforabit
,buy
ersev
ent
ual
l
ytookt
hepai
rhi
gher
.Youdeci
det
owai
t
andseewhet
hert
he61.8%Fiblev
elhol
ds.

Af
teral
l
,thel
astcandl
ewaspr
ett
ybul
l
ish!Whoknows,
pri
cej
ustmi
ghtkeepshoot
ingup!

We'
ll
,wi
ll
youlookatt
hat
?Al
ongl
eggeddoj
ohasf
ormedr
ightont
he61.
8%Fi
bonacci
r
etr
acementl
evel
.

Ifyoupaidat
tent
ionwhenIwast
eachi
ngcandl
est
icks,
you’
dknowt
hatt
hisi
san“
exhaust
ive
candle.
”

I
fyouhadshor
tedr
ightaf
tert
hatdoj
ihadf
ormed,
youcoul
dhav
emadesomeser
iouspr
ofi
ts.
Rightaf
terthedoj
o,Pr
icest
all
edf
orsbi
tbef
oreheadi
ngst
rai
ghtdown.Takeal
ookatal
lthose
redcandles!

Itseemsthatt
hebuy
erswer
eindeedpr
ett
yti
red,
whi
chal
l
owedsel
l
erst
ojumpbacki
nandt
ake
control
.

Looki
ngfor“
FibSticks(candl
est
ickspatt
ernsaroundfi
bzones)
”canber
eal
l
yusef
ul,
ast
hey
cansi
gnalwhetheraFibonaccir
etracementl
evelwil
lhol
d.

I
fitseemsthatpri
ceisst
all
i
ngonaFi
blev
el,
chancesar
ethatot
hert
rader
smayhav
eputsome
or
dersatthoselev
els.

Thi
swoul
dactasmor
econf
ir
mat
iont
hatt
her
eisi
ndeedsomer
esi
stanceorsuppor
tatt
hat
pri
ce.

Anot
herni
cet
hingaboutFi
bSt
icksi
sthaty
oudon’
tneedt
opl
acel
i
mitor
der
satt
heFi
blev
els.

Youmayhavesomeconcer nswhet
herthesuppor
torr
esi
stancewi
l
lhol
dsi
ncewear
elooki
ng
ata“
zone”andnotnecessari
l
yspeci
fi
clevel
s.

Thi
siswher
eyoucanusey
ourknowl
edgeofcandl
est
ickf
ormat
ions.

Youcoul
dwaitforaFibSt
ickt
oformri
ghtbeloworabov
eaFibonacci
ret
racementl
evel
togi
ve
youmoreconf
ir
mat i
ononwhethery
oushouldputi
nanorder
.

IfaFi
bsti
ckdoesf
orm,youcanj
ustent
erat
radeatmar
ketpr
icesi
ncey
ounowhav
emor
e
confi
rmat
iont
hatl
evel
coul
dbeholdi
ng.
I
MPORTANTCHARTPATTERNS

I
nthi
slesson,
youwi
l
llear
nbasi
cchar
tpat
ter
nsandf
ormat
ions.

Whencor
rect
lyi
dent
if
ied,
itusual
l
yleadst
oanexpl
osi
vebr
eakout
,sowat
chout
!

Remember,
ourgoalist
ospotbi
gmov
ement
sbef
oret
heyhappensot
hatwecanr
idet
hem out
andr
akeinthecash.

Theycanal
soindi
cat
ewhethert
hepri
cewil
lconti
nueinit
scurrentdi
rect
ionorr
ever
sesowe’
l
l
al
sobedevi
singsomeni
ft
yt r
adest
rat
egi
esforthesechartpat
terns.

I
nanut
shel
l
,char
tpat
ter
nshel
pyouanswert
hreequest
ions:

1.
HowdoIf
indpot
ent
ial
ent
rypoi
ntsi
nar
isi
ng(
orf
all
i
ng)t
rend?

2.
Howcanchar
tpat
ter
nsof
ferpot
ent
ial
ent
rysi
gnal
s?

3.HowdoIknowwhent ogetout(exi
tsi
gnal
)ei
thert
otakepr
ofi
t(i
fthechar
tpat
ter
nwor
ked)or
cutmylosses(
ift
hechartpat
ter
nf ai
l
ed)?

Her
e’st
hel
i
stofchar
tpat
ter
nst
hatwe’
regoi
ngt
ocov
er:

-
Doubl
eTopandDoubl
eBot
tom

-
HeadandShoul
der
sandI
nver
seHeadandShoul
der
s

-
Risi
ngandFal
l
ingWedges

-
Bul
l
ishandBear
ishRect
angl
es

-
Bear
ishandBul
l
ishPennant
s

-
Tri
angl
es(
Symmet
ri
cal
,Ascendi
ng,
andDescendi
ng)

Howt
oTr
adeDoubl
eTopsandDoubl
eBot
toms

Whenadoubl
etopordoubl
ebot
tom char
tpat
ter
nappear
s,at
rendr
ever
sal
hasbegun.

Doubl
eTop

Adoubl
etopi
sar
ever
sal
pat
ter
nthati
sfor
medaf
tert
her
eisanext
endedmov
eup.

The“
tops”ar
epeakswhi
char
efor
medwhent
hepr
icehi
tsacer
tai
nlev
elt
hatcan’
tbebr
oken.
Aft
erhi
tt
ingt
hisl
evel
,thepr
icewi
l
lbounceof
fitsl
i
ght
ly,
butt
henr
etur
nbackt
otestt
hel
evel
agai
n.

I
fthepr
icebouncesof
foft
hatl
evel
agai
n,t
heny
ouhav
eaDOUBLEt
op!

I
nthechar
tabov
eyoucanseet
hatt
wopeaksor“
tops”wer
efor
medaf
terast
rongmov
eup.

Not
icehowt
hesecondt
opwasnotabl
etobr
eakt
hehi
ghoft
hef
ir
stt
op.

Thisisastr
ongsignthatarever
sal
isgoi
ngt
ooccurbecausei
tist
ell
i
ngust
hatt
hebuy
ing
pressur
eisjustaboutf
ini
shed.

Wit
hthedoubl
etop,wewoul
dpl
aceourent
ryor
derbel
owt
heneckl
i
nebecausewear
e
ant
ici
pat
ingar
eversal
oft
heupt
rend.
Looki
ngatt
hechar
t,y
oucanseet
hatt
hepr
icebr
eakst
heneckl
i
neandmakesani
cemov
e
down.

Rememberthatdoubletopsar
eat
rendr
ever
sal
for
mat
ionsoy
ou’
l
lwantt
olookf
ort
heseaf
ter
ther
eisast
ronguptrend.

You’
l
lal
sonot
icet
hatt
hedr
opi
sappr
oxi
mat
elyt
hesamehei
ghtast
hedoubl
etopf
ormat
ion.

Keept
hati
nmi
ndbecauset
hat
’l
lbeusef
uli
nset
ti
ngpr
ofi
ttar
get
s.

Doubl
eBot
tom

Thedoublebot
tom i
sal
soat
rendr
ever
sal
for
mat
ion,
butt
hist
imewear
elooki
ngt
ogol
ong
i
nsteadofshor
t.

Thesef
ormat
ionsoccuraf
terext
endeddownt
rendswhent
wov
all
eysor“
bot
toms”hav
ebeen
for
med.
Youcanseefrom t
hechartabovethataf
tert
heprev
iousdownt
rend,
thepr
icef
ormedt
wo
val
l
eysbecauseitwasn’
tabletogobelowacert
ainlev
el.

Not
icehowt
hesecondbot
tom wasn’
tabl
etosi
gni
fi
cant
lybr
eakt
hef
ir
stbot
tom.

Thi
sisasi
gnt
hatt
hesel
l
ingpr
essur
eisaboutf
ini
shed,
andt
hatar
ever
sal
isaboutt
ooccur
.
Thepr
icebr
oket
heneckl
i
neandmadeani
cemov
eup.

Remember
,justl
i
kedoubl
etops,
doubl
ebot
tomsar
eal
sot
rendr
ever
sal
for
mat
ions.

You’
l
lwantt
olookf
ort
heseaf
terast
rongdownt
rend.
Howt
oTr
adet
heHeadandShoul
der
sPat
ter
n

Theheadandshoul
der
schar
tpat
ter
nisar
ever
sal
pat
ter
nandmostof
tenseeni
nupt
rends

I
tisf
ormedbyapeak(
shoul
der
),f
oll
owedbyahi
gherpeak(
head)
,andt
henanot
herl
owerpeak
(
shoul
der
).

A“
neckl
i
ne”i
sdr
awnbyconnect
ingt
hel
owestpoi
ntsoft
het
wot
roughs.

Thesl
opeofthi
sli
necanei
therbeupordown.Ty
pical
l
y,whent
hesl
opei
sdown,
itpr
oducesa
morer
eli
abl
esignal
.

I
nthi
sexampl
e,wecaneasi
l
yseet
heheadandshoul
der
spat
ter
n.

Theheadisthesecondpeakandisthehighestpointi
nthepat
ter
n.Thet
woshoul
der
sal
so
for
m peaksbutdonotexceedtheheightofthehead.

Wi
tht
hisf
ormat
ion,
weputanent
ryor
derbel
owt
heneckl
i
ne.
I
nver
seHeadandShoul
der
s

Thenamespeaksf
ori
tsel
f.I
tisbasi
cal
l
yaheadandshoul
der
sfor
mat
ion,
exceptt
hist
imei
t’
s
upsi
dedown.

Avall
eyisformed(shoul
der
),f
oll
owedbyanev enl
owerval
ley(
head)
,andthenanot
herhi
gher
val
l
ey(shoulder
).Thesef
ormati
onsoccuraf
terext
endeddownwardmovements.

Her
eyoucanseet
hatt
hisi
sjustl
i
keaheadandshoul
der
spat
ter
n,buti
t’
sfl
i
ppedupsi
dedown.

Wi
tht
hisf
ormat
ion,
wewoul
dpl
aceal
ongent
ryor
derabov
etheneckl
i
ne.
Ourt
argeti
scal
cul
atedj
ustl
i
ket
heheadandshoul
der
spat
ter
n.

Youcanseet
hatt
hepr
icemov
edupni
cel
yaf
teri
tbr
oket
heneckl
i
ne.

However
,ther
earetr
ademanagementtechniqueswherey
oucanl
ockinsomeofy
ourpr
ofi
ts
andst
il
lkeepyourt
radeopeni
ncasethepriceconti
nuest
omoveyourway.

Youwi
l
llear
naboutt
hosel
ater
.
Howt
oTr
adeWedgeChar
tPat
ter
ns

I
naWedgechar
tpat
ter
n,t
wot
rendl
i
nesconv
erge.

I
tmeanst
hatt
hemagni
tudeofpr
icemov
ementwi
thi
ntheWedgepat
ter
nisdecr
easi
ng.

Wedgessi
gnal
apausei
nthecur
rentt
rend.

Wheny
ouencount
ert
hisf
ormat
ion,
itsi
gnal
sthatf
orext
rader
sar
est
il
ldeci
dingwher
etot
ake
t
hepai
rnext
.

AFal
li
ngWedgei
sabul
l
ishchar
tpat
ter
nthatt
akespl
acei
nanupwar
dtr
end,
andt
hel
i
nes
sl
opedown.

ARisi
ngWedgei
sabear
ishchar
tpat
ter
nthat
’sf
oundi
nadownwar
dtr
end,
andt
hel
i
nessl
ope
up.

Wedgescanser
veasei
thercont
inuat
ionorr
ever
sal
pat
ter
ns.

Ri
singWedge

Ari
singwedgeisfor
medwhenpr
iceconsol
i
dat
esbet
weenupwar
dsl
opi
ngsuppor
tand
r
esi
stancel
ines.

Her
e,t
hesl
opeoft
hesuppor
tli
nei
sst
eepert
hant
hatoft
her
esi
stance.

Thi
sindi
cat
esthathi
gherl
owsarebeingfor
medfastert
hanhi
gherhi
ghs.Thi
sleadst
oawedge
-
li
keformat
ion,
whichi
sexact
lywherethechar
tpat
ternget
sit
snamef r
om!

Withpr
icesconsol
i
dating,
weknowt
hatabi
gspl
ashi
scomi
ng,
sowecanexpectabr
eakoutt
o
ei
thert
hetoporbottom.

I
fther
isi
ngwedgef
ormsaf
teranupt
rend,
it’
susual
l
yabear
ishr
ever
sal
pat
ter
n.

Ont
heot
herhand,
ifi
tfor
msdur
ingadownt
rend,
itcoul
dsi
gnal
acont
inuat
ionoft
hedown
mov
e.

Eitherway,
theimport
antthi
ngi
sthat
,wheny
ouspott
hisf
orext
radi
ngchar
tpat
ter
n,y
ou’
re
readywithyourent
ryorder
s
I
nthi
sfi
rstexample,ari
singwedgefor
medattheendofanupt
rend.Not
icehowpr
iceact
ioni
s
f
ormi
ngnewhi ghs,butatamuchslowerpacet
hanwhenpri
cemakeshigherl
ows.

Seehowpricebr
okedowntot
hedownsi
de?Thatmeanst
her
ear
emor
efor
ext
rader
sdesper
ate
tobeshor
tthanbelong!

Theypushedt
hepr
icedownt
obr
eakt
het
rendl
i
ne,
indi
cat
ingt
hatadownt
rendmaybei
nthe
car
ds.

Justl
i
keintheot
herfor
ext
radi
ngchar
tpat
ter
nswedi
scussedear
li
er,
thepr
icemovementaf
ter
thebr
eakouti
susual
l
yappr
oximat
elyt
hesamemagni
tudeasthehei
ghtoft
hefor
mation.

Nowl et
’st
akealookatanotherexampl
eofar
isi
ngwedgef
ormat
ion.Onl
ythi
sti
mei
tact
sasa
bear
ishconti
nuat
ionsi
gnal.
Asyoucansee,
thepr i
cecamef
rom adownt
rendbef
oreconsol
i
dat
ingandsket
chi
nghi
gher
hi
ghsandevenhigherl
ows.

Int
hiscase,
thepri
cebroketot
hedownsi
deandt
hedownt
rendcont
inued.That
’swhyi
t’
s
cal
l
edacont i
nuat
ionsi
gnal.

Seehowt
hepr
icemadeani
cemov
edownt
hat
’st
hesamehei
ghtast
hewedge?

Pr
iceusual
l
ydoest
hatbuti
tdoesn’
thappenal
lthet
imet
ho.
Don’tf
orgetAri
singwedgef
ormedaf
teranupt
rendusual
l
yleadstoaREVERSAL(
downt
rend)
whil
ear i
singwedgefor
medduri
ngadowntr
endtypi
cal
lyr
esult
sinaCONTINUATI
ON
(downtr
end).

Si
mpl
yput
,ar
isi
ngwedgel
eadst
oadownt
rend,
whi
chmeanst
hati
t’
sabear
ishchar
tpat
ter
n!

Fal
li
ngWedge

Justl
i
ket
her
isi
ngwedge,
thef
all
i
ngwedgecanei
therbear
ever
sal
orcont
inuat
ionsi
gnal
.

Asarev
ersal
signal
,i
tisf
ormedatabot
tom ofadownt
rend,
indi
cat
ingt
hatanupt
rendwoul
d
comenext
.

Asaconti
nuat
ionsignal
,i
tisfor
medduringanupt
rend,
impl
yi
ngthatt
heupwardpr
iceact
ion
woul
dresume.Unl
iketheri
singwedge,
thefal
li
ngwedgeisabul
l
ishchar
tpat
ter
n.

I
nthi
sexample,
thefal
l
ingwedgeser
vesasar
ever
sal
signal
.Af
teradownt
rend,
thepr
icemade
l
owerhi
ghsandlowerl
ows.

Not
icehowt
hef
all
i
ngt
rendl
i
neconnect
ingt
hehi
ghsi
sst
eepert
hant
het
rendl
i
neconnect
ing
t
helows.
Uponbr
eakingabovethetopofthewedge,
thepairmadeanicemoveupwardst
hat
’s
appr
oxi
matelyequaltot
heheightoft
hefor
mation.I
nthi
scase,t
hepri
ceral
l
ywentafewmor
e
pi
psbeyondthattar
get!

Let
’st
akeal
ookatanexampl
ewher
ethef
all
i
ngwedgeser
vesasacont
inuat
ionsi
gnal
.

LikeImenti
onedear
li
er,
whenthef
all
i
ngwedgef
ormsdur
inganupt
rend,
itusual
l
ysi
gnal
sthat
thetrendwi
llr
esumelat
eron.
Inthi
scase,t
hepri
ceconsoli
datedforabi
taft
erast r
ongral
l
y.Thi
scouldmeanthatbuyers
simpl
ypausedtocatcht
heirbreathandpr
obabl
yr ecr
uit
edmorepeopl
etojoi
nthebullcamp.I
t
l
ooksliket
hepairi
srevv
ingupf orastr
ongmov e.

Seehowpr
icebr
oket
othet
opsi
deandwentont
ocl
i
mbhi
gher
?

I
fyouplacedanent
ryorderabov
et hatf
all
i
ngtr
endli
neconnecti
ngthepair
’shi
ghs,
you
woul
d’v
ebeenabletojumpinont hestr
ongupt
rendandcaughtsomepips.

Agoodupsi
det
argetwoul
dbet
hehei
ghtoft
hewedgef
ormat
ion.

I
fyouwanttogoformorepi
ps,y
oucanl
ockinsomepr ofi
tsatthet
argetbycl
osi
ngdowna
por
ti
onofyourposi
ti
on,
thenl
ett
ingt
her
estofyourposit
ionri
de.

Afall
ingwedgeinadownt r
endsigni
fi
estrendr
ever
sal
,butifi
t’
sinanuptrend,y
oucanpul
lout
yourfi
btoseeiftheti
pofthewedgef al
l
sonaf i
bzonesincei
t’sacont
inuati
onpat
ter
nandthe
wholewedgemi ghtbearetr
acement
Howt
oUseRect
angl
eChar
tPat
ter
nst
oTr
adeBr
eakout
s

Arect
angl
eisachar
tpat
ter
nfor
medwhenpr
icei
sboundedbypar
all
elsuppor
tandr
esi
stance
l
evel
s.

Arect
angleexhi
bit
saperiodofconsol
idat
ionorindeci
sionbet
weenbuy
ersandsel
l
ersast
hey
t
aketurnsthr
owingpunchesbutnei
therhastakenover.

Thepr
icewi
l
l“t
est
”thesuppor
tandr
esi
stancel
evel
ssev
eral
timesbef
oreev
ent
ual
l
ybr
eaki
ng
out
.

From t
here,t
hepr
icecoul
dtr
endi
nthedi
rect
ionoft
hebr
eakout
,whet
heri
tist
otheupsi
deor
downside.

I
ntheexampl
eabove,
wecanclear
lyseet
hatt
hepai
rwasboundedbyt
wokeypr
icel
evel
s
whi
charepar
all
elt
ooneanot
her.

Bear
ishRect
angl
e

Abear
ishr
ect
angl
eisf
ormedwhent
hepr
iceconsol
i
dat
esf
orawhi
l
edur
ingadownt
rend.

Thi
shappensbecausesel
l
erspr
obabl
yneedt
opauseandcat
cht
hei
rbr
eat
hbef
oret
aki
ngt
he
pai
ranyl
ower.
I
nthisexampl
e,pr
icebr
oket
hebot
tom oft
her
ect
angl
echar
tpat
ter
nandcont
inuedt
oshoot
down.

I
fyouhadashor
tor
derj
ustbel
owt
hesuppor
tlev
el,
wewoul
dhav
emadeani
cepr
ofi
tont
his
t
rade.

Her
e’sati
pOncethepai
rfal
l
sbel
owt
hesuppor
t,i
ttendst
omakeamov
ethati
saboutt
hesi
ze
oft
herect
angl
epatt
ern.

Int
heexampl
eabov
e,t
hepai
rmov
edbey
ondt
het
argetsot
her
ewoul
dhav
ebeenachancet
o
cat
chmorepi
ps!

Bul
li
shRect
angl
e

Her
e’sanot
herexampleofarect
angle,
thi
sti
me,abul
l
ishr
ect
angl
echar
tpat
ter
n.Af
teran
upt
rend,
thepr
icepausedtoconsol
idat
eforabi
t.
Not
icehowt
hepr
icemov
edal
lthewayupaf
terbr
eaki
ngabov
ethet
opoft
her
ect
angl
epat
ter
n.

I
fyouhadal
ongor
deront
opoft
her
esi
stancel
evel
,youwoul
d’v
ecaughtsomepi
psont
he
t
rade!

Justl
i
kei
nthebear
ishr
ect
angl
epat
ter
nexampl
e,oncet
hepai
rbr
eaks,
itwi
l
lusual
l
ymakea
movethat’
sATLEASTt hesi
zeofi
tspr
evi
ousr
angeori
t’
ll
stopatt
henextar
eaofi
mpor
tance
(
supportorresi
stance)
Howt
oTr
adeBear
ishandBul
li
shPennant
s

Si
mil
art
orect
angl
es,
pennant
sar
econt
inuat
ionchar
tpat
ter
nsf
ormedaf
terst
rongmov
es

Aft
erabi
gupwardordownwardmove,buy
er sorsel
ler
susual
l
ypauset
ocat
cht
hei
rbr
eat
h
bef
oret
aki
ngthepai
rfur
theri
nthesamedirecti
on.

Becauseoft
his,
thepr
iceusual
l
yconsol
i
dat
esandf
ormsat
inysy
mmet
ri
cal
tri
angl
e,whi
chi
s
cal
ledapennant
.

Whil
ethepr
iceisst
il
lconsoli
dati
ng,morebuy
ersorsel
ler
susual
lydeci
det
ojumpi
nont
he
st
rongmove,f
orci
ngthepricetobustoutoft
hepennantfor
mati
on.

Bear
ishPennant
s

Abear
ishpennanti
sfor
meddur
ingast
eep,
almostv
ert
ical
,downt
rend.

Afterthatshar
pdropi
nprice,
somesel
lerscl
osethei
rposi
ti
onswhi
l
eot
hersel
l
ersdeci
det
ojoi
n
thetrend,makingt
hepri
ceconsol
i
dat
ef orabi
t.
Assoonasenoughsell
ersj
umpi
n,t
hepr
icebr
eaksbel
owt
hebot
tom oft
hepennantand
cont
inuest
omov edown.
Asy
oucansee,
thedr
opr
esumedaf
tert
hepr
icemadeabr
eakoutt
othebot
tom.

Totr
adethi
schar
tpatt
ern,we’
dusual
l
yputashor
tor
deratt
hebot
tom oft
hepennantwi
tha
st
oplossabov
ethepennant.

Thatway
,we’
dbeoutoft
het
rader
ightawayi
ncaset
hebr
eakdownwasaf
akeout
.

Unli
ketheot
herchartpatt
ernswher
eint
hesizeoft
henextmov
eisappr
oxi
mat
elyt
hehei
ghtof
thefor
mati
on,pennantssi
gnalmuchstr
ongermoves.

Bul
li
shPennant

Bul
l
ishpennant
s,j
ustl
i
kei
tsnamesuggest
s,si
gnal
sthatbul
l
sar
eaboutt
ogoa-
char
gin’
agai
n.

Thi
smeanst
hatt
hesharpcli
mbinpr
icewouldresumeaftert
hatbr
iefper
iodofconsol
i
dat
ion,
whenbul
l
sgat
herenoughener
gytot
akethepri
cehigheragai
n.
I
nthisexampl
e,t
hepri
cemadeasharpver
ti
cal
cli
mbbef
oret
aki
ngabr
eat
her
.Youcanseet
he
bul
l
sstompingandr
evvingupf
oranot
herr
un!
Justl
ikewepr edi
cted,t
hepri
cemadeanotherst
rongmoveupwar
dsaft
erthebr
eakout.
Toplay
thi
s,we’dplaceourlongor
derabov
ethepennantandourst
opbel
owthebott
om ofthepennant
toavoidfakeout
s.

t
hesizeoft
hebr
eakoutmov
eisusual
l
yar
oundt
hehei
ghtoft
hemast(
ort
hesi
zeoft
heear
li
er
move).

Yousee,
pennantsmaybesmal
li
nsi
zebutt
heycoul
dsi
gnal
hugepr
icemov
essodon’
t
under
est
imat
e’them!
Howt
oTr
adeTr
iangl
eChar
tPat
ter
ns

Atri
angl
echartpatt
erninv
olv
espri
cemov i
ngi
ntoati
ght
erandti
ght
err
angeast
imegoesby
andprov
idesavisualdi
spl
ayofabatt
lebet
weenbul
l
sandbears.

Thetr
iangl
epatt
ernisgeneral
lycategor
izedasa“conti
nuat
ionpatt
ern”
,meani
ngthataf
tert
he
pat
ter
ncompletes,it
’sassumedt hatpr
icewil
lcont
inueint
hetrenddir
ect
ioni
twasmov i
ng
bef
orethepat
ternappeared.

Atri
angl
epat
ter
nisgeneral
l
yconsi
der
edt
obef
ormi
ngwheni
tincl
udesatl
eastf
ivet
ouchesof
suppor
tandr
esi
stance.

Forexampl
e,t
hreet
ouchesoft
hesuppor
tli
neandt
wof
ort
her
esi
stancel
i
ne.Orv
icev
ersa.

ther
earethr
eetypesoft
ri
angl
echar
tfor
mat
ions:
symmet
ri
cal
tri
angl
e,ascendi
ngt
ri
angl
e,and
descendi
ngtr
iangl
e.

Sy
mmet
ri
calTr
iangl
e

Asy
mmet ri
cal
tri
angl
eisachar
tfor
mat
ionwherethesl
opeofthepri
ce’
shighsandt
hesl
opeof
t
hepri
ce’
slowsconver
getoget
hert
oapointwher
eitl
ooksl
ikeatri
angl
e.

What
’shappeni
ngdur
ingt
hisf
ormat
ioni
sthatt
hemar
keti
smaki
ngl
owerhi
ghsandhi
gher
l
ows.

Thi
smeanst hatnei
thert
hebuy
ersnort
hesel
l
ersar
epushi
ngt
hepr
icef
arenought
omakea
cl
eart
rend.

I
fthi
swer
eabat
tl
ebet
weent
hebuy
ersandsel
l
ers,
thent
hiswoul
dbeadr
aw.

Thi
sisal
soat
ypeofconsol
i
dat
ion.
I
nthechar
tabove,wecanseethatnei
therthebuy
ersnort
hesellerscoul
dpusht
hepr
icei
n
t
hei
rdir
ect
ion.Whenthi
shappenswegetl owerhi
ghsandhigherlows.

Ast
heset
wosl
opesgetcl
osert
oeachot
her
,itmeanst
hatabr
eakouti
sget
ti
ngnear
.

Wedon’tknowwhatdir
ecti
onthebreakoutwi
l
lbe,butwedoknowt
hatt
hemar
ketwi
l
lmost
l
ikel
ybr
eakout.Ev
entual
ly
,onesideofthemarketwil
lgi
vei
n.

Sohowcanwet
akeadv
ant
ageoft
his?

Si
mpl
e.

Wecanplaceent
ryor
dersabov
ethesl
opeoft
hel
owerhi
ghsandbel
owt
hesl
opeoft
hehi
gher
l
owsofthesymmetri
cal
tri
angl
e.

Si
ncewealreadyknowthatt
hepr
icei
sgoi
ngt
obr
eakout
,wecanj
usthi
tchar
idei
nwhat
ever
di
rect
iont
hemar ketmoves.
I
nt hi
sexample,
ifwepl
acedanent
ryor
derabov
ethesl
opeoft
hel
owerhi
ghs,
wewoul
d’v
e
beentakenal
ongforani
ceri
deup.

I
fyouhadpl
acedanot
herentryor
derbel
owt
hesl
opeoft
hehi
gherl
ows,
theny
ouwoul
dcancel
i
tassoonasthef
ir
storderwashit
.

Ascendi
ngTr
iangl
e

Anascendi
ngt r
iangl
eisatypeoft
ri
angl
echar
tpat
ter
nthatoccur
swhent
her
eisar
esi
stance
l
evelandaslopeofhigherl
ows.

Whathappensdur
ingthi
stimeisthatt
hereisacert
ainlev
elthatt
hebuyerscannotseem t
o
exceed.Howev
er,
theyaregradual
l
ystart
ingtopushthepri
ceupasevidencedbythehigher
l
ows.
I
nthechartabove,y
oucanseet
hatt
hebuy
ersar
est
art
ingt
ogai
nst
rengt
hbecauset
heyar
e
maki
nghigherlows.

Theykeepput
ti
ngpr
essur
eont
hatr
esi
stancel
evel
andasar
esul
t,abr
eakouti
sboundt
o
happen.

Nowthequesti
oni
s,“
Whichdi
rect
ionwi
l
litgo?Wi
l
lthebuy
ersbeabl
etobr
eakt
hatl
evel
orwi
l
l
t
heresi
stancebet
oostr
ong?”

Manychar
ti
ngbookswil
ltel
lyout
hati
nmostcases,
thebuy
erswi
l
lwi
nthi
sbat
tl
eandt
hepr
ice
wi
llbr
eakoutpastt
her
esist
ance.

Howev
er,
ithasbeenmyexper
iencet
hatt
hisi
snotal
way
sthecase.

Somet
imestheresi
stancel
evel
ist
oost
rong,
andt
her
eissi
mpl
ynotenoughbuy
ingpowert
o
pushi
tthr
ough.

Mostoftheti
me,thepr
icewil
l
,inf
act,
goup.Thepoi
ntIam tr
yingtomakei
sthatyoushoul
d
notbeobsessedwit
hwhichdi
rect
iont
hepri
cegoes,
butyoushouldber
eadyformovementi
n
EITHERdir
ecti
on.

I
nthiscase,
wewoul
dsetanent
ryor
derabov
ether
esi
stancel
i
neandbel
owt
hesl
opeoft
he
hi
gherlows.
I
nthi
sscenar
io,t
hebuyer
slostt
hebatt
leandt
hepriceproceededtodive!Youcanseet
hatt
he
dr
opwasapproxi
matel
ythesamedist
anceastheheightofthetr
iangl
eformati
on.

I
fwesetourshor
tor
derbel
owt
hebot
tom oft
het
ri
angl
e,wecoul
d’v
ecaughtsomepi
psof
fthat
di
ve.

Descendi
ngTr
iangl
e

Asy
oupr
obabl
yguessed,
descendi
ngt
ri
angl
esar
etheexactopposi
teofascendi
ngt
ri
angl
es.

I
ndescendi
ngt
ri
angl
echar
tpatt
erns,
ther
eisastr
ingoflowerhi
ghswhichf
ormst
heupperl
i
ne.
Thel
owerli
nei
sasuppor
tlev
eli
nwhichthepr
icecannotseem t
obreak.

I
nthechar
tabov
e,youcanseethatt
hepricei
sgradual
lymakingl
owerhi
ghswhi
cht
ell
ust
hat
t
hesel
ler
sarest
art
ingt
ogainsomegr oundagai
nstthebuy
ers.
Nowmostoftheti
me,
andwedosayMOST,
thepr
icewi
l
lev
ent
ual
l
ybr
eakt
hesuppor
tli
neand
cont
inuet
ofal
l.

Howev
er,i
nsomecases,
thesuppor
tli
newi
l
lbet
oost
rong,
andt
hepr
icewi
l
lbounceof
fofi
t
andmakeastr
ongmoveup.

Thegoodnewsi
sthatwedon’
tcar
ewher
ethepr
icegoes.Wej
ustknowt
hati
t’
saboutt
ogo
somewher
e.

Inthi
scase,
wewoul
dpl
aceent
ryor
der
sabov
etheupperl
i
ne(
thel
owerhi
ghs)andbel
owt
he
supportl
i
ne.

I
nthi
scase,
thepr
iceendedupbr
eaki
ngabov
ethet
opoft
het
ri
angl
epat
ter
n.

Aftert
heupsidebr
eakout,
itpr
oceededt
osur
gehi
gher
,byar
oundt
hesamev
ert
ical
dist
anceas
theheightoft
hetr
iangl
e.

Pl
acinganent
ryor
derabovet
hetopoft
hetri
angl
eandgoi
ngf
orat
argetashi
ghast
hehei
ght
oft
hef or
mati
onwoul
d’vey
iel
dedni
ceprof
it
s.
KNOW THE3MAI
NGROUPSOFCHARTPATTERNS

I
nthi
ssect
ion,
we’
l
ldi
scussabi
tmor
eabouthowt
ouset
hesechar
tpat
ter
nst
oyouradv
ant
age.

I
’
llsummar
izet
hechar
tpat
ter
nsy
ouj
ustl
ear
nedandcat
egor
izet
hem accor
dingt
othesi
gnal
s
t
heygiv
e.

Rev
ersalChar
tPat
ter
ns

Reversal
pat
ter
nsar
ethosechar
tfor
mat
ionst
hatsi
gnal
thatt
heongoi
ngt
rendi
saboutt
o
changecour
se.

I
farev
ersal
chartpat
ter
nfor
msdur
inganupt
rend,
ithi
ntst
hatt
het
rendwi
l
lrev
erseandt
hat
t
hepri
cewil
lheaddownsoon.

Conv
ersel
y,ifarev
ersal
char
tpat
ter
nisseendur
ingadownt
rend,
itsuggest
sthatt
hepr
icewi
l
l
moveuplateron.

Sof
ar,
wecov
eredsi
xchar
tpat
ter
nst
hatgi
ver
ever
sal
signal
s:

1.
Doubl
eTop

2.
Doubl
eBot
tom

3.
HeadandShoul
der
s

4.
Inv
erseHeadandShoul
der
s

5.
Risi
ngWedge

6.
Fal
l
ingWedge
Totradet
hesechar
tpat
ter
ns,si
mplypl
aceanorderbey
ondt
heneckli
neandint
hedir
ecti
onof
thenewtr
end.Thengof
oratargett
hat
’sal
mostthesameasthehei
ghtoft
heformat
ion.

Forinstance,
ify
ouseeadoublebottom,pl
aceal
ongorderatt
hetopofthefor
mati
on’
s
neckli
neandgof orat
argett
hat’
sjustashi
ghast
hedistancef
rom t
hebott
omst ot
heneckl
i
ne.

I
ntheint
erestofproperri
skmanagement,don’
tfor
gettopl
acey
ourst
ops!Ar
easonabl
est
op
l
osscanbesetar oundthemiddl
eofthechartf
ormati
on.

Forexample,
youcanmeasur
ethedist
anceoft
hedoubl
ebot
tomsf
rom t
heneckl
i
ne,
div
idet
hat
bytwo,andusethatast
hesi
zeofyourst
op.

Cont
inuat
ionChar
tPat
ter
ns

Conti
nuat
ionchar
tpat
ter
nsar
ethosechar
tfor
mat
ionst
hatsi
gnal
thatt
heongoi
ngt
rendwi
l
l
resume.

Usual
ly,
thesear
ealsoknownasconsoli
dat
ionpat
ter
nsbecausetheyshowhowbuy er
sor
sel
ler
stakeaquickbr
eakbefor
emov i
ngfur
theri
nthesamedirect
ionasthepr
iort
rend.

Trendsdon’
tusual
lymoveinastrai
ghtl
inehi
gherorl
ower.Theypauseandmov esi
deway
s,
“corr
ect
”lowerorhi
gher
,andthenregai
nmoment um t
oconti
nuetheoveral
ltr
end.

I
’vecoveredsev
eralconti
nuat
ionchar
tpatterns,
namelythewedges,r
ectangl
es,andpennants.
Notethatwedgescanbeconsi der
edei
therrever
salorcont
inuat
ionpat
ternsdependi
ngont he
t
rendonwhi chtheyfor
m.
Totradethesepat
ter
ns,
simplyplaceanorderabov
eorbel
owtheformat
ion(f
oll
owingt
he
di
recti
onoftheongoi
ngtrend,
ofcourse)
.Thengoforat
argett
hat
’satl
eastt
hesizeoft
hechar
t
patt
ernforwedgesandr
ectangles.

Forpennant
s,y
oucanai
m hi
gherandt
argett
hehei
ghtoft
hepennant
’smast
.

Forcont
inuat
ionpat
ter
ns,
stopsar
eusual
l
ypl
acedabov
eorbel
owt
heact
ual
char
tfor
mat
ion.

Forexample,whentr
adingabear
ishr
ect
angl
e,pl
acey
ourst
opaf
ewpi
psabov
ethet
opor
resi
stanceofther
ectangl
e.

Bi
lat
eralChar
tPat
ter
ns

Bi
lat
eral
char
tpat
ter
nsar
eabi
tmor
etr
ickybecauset
hesesi
gnal
thatt
hepr
icecanmov
e
EI
THERway .
Thisiswheretr
iangl
ef ormat
ionsfal
li
n.Rememberwhenwedi
scussedt
hatt
hepr
icecoul
d
breakei
thertothetopsideordownsi
dewitht
ri
angl
es.
Toplaythesechar
tpatt
erns,
youshoul
dconsi
derbot
hscenari
os(
upsi
deordownsi
debr
eakout
)
andplaceoneorderontopofthef
ormati
onandanot
heratt
hebot
tom oft
hefor
mati
on.

I
foneor
derget
str
igger
ed,
youcancancel
theot
herone.Ei
therway
,you’
dbepar
toft
heact
ion.

Theonl
yprobl
em i
sthaty
oucouldcat
chaf
alsebr
eaki
fyousety
ourent
ryor
der
stoocl
oset
o
thet
oporbott
om oft
heformat
ion.

Sobecar
eful
anddon’
tfor
gett
opl
acey
ourst
opst
oo!
TECHNI
CALI
NDI
CATORS

Techni calindicat
or sareastatist
icalform oftechni
calanalysi
swheret echni
ciansapplyvari
ous
mat hemat icalformulast opri
cesandv ol
umes.Themostcommont echnicali
ndicator
sare
mov ingav erages, whichsmoot hpricedatat ohelpmakei teasi
ertospott r
ends.Mor ecomplex
technical i
ndicatorsincludethemov i
ngav er
ageconv er
gence-div
ergence( MACD) ,whichl
ooks
atthei nterpl
aybet weensev eralmov i
ngav erages.Manytradingsystemsar ebasedont echni
cal
i
ndicat orssincet heycanbequant i
tati
velycalcul
ated.

WhatAr
eMov
ingAv
erages?

Mov
ingav
eragesar
eonemostcommonl
yusedt
echni
cal
indi
cat
ors.

Amovingaver
ageissimplyawayt osmoothoutpr
icefl
uctuat
ionst
ohel
pyoudi
sti
ngui
sh
bet
weentypi
calmarket“
noise”andtheact
ualt
renddir
ecti
on.

By“mov
ingaver
age”
,wemeant haty
ouar
etaki
ngt
heav
eragecl
osi
ngpr
iceofacur
rencypai
r
fort
hel
ast‘
X’numberofper
iods.

Onachar
t,i
twoul
dlookl
i
ket
his.

Asyoucansee,
themov i
ngaver
agelooksl
i
keasqui
ggl
yli
neov
erl
ayedont
opoft
hepr
ice
(r
epr
esent
edbyJapanesecandl
est
icks)
.

Likeever
ytechni
cal
indi
cat
or,
amov
ingav
erage(
MA)i
ndi
cat
ori
susedt
ohel
pusf
orecast
futur
epri
ces.

Thereasonf
orusingamov i
ngaver
ageinsteadofjustl
ooki
ngatt
hepr
icei
sduet
othef
acti
n
ther
ealworl
d,t
rendsdonotmoveinst
raightli
nes.

Pri
cezi
gsandzagssoamov i
ngaveragehel
pssmoot
houtt
her
andom pr
icemov
ement
sand
hel
pyou“see”t
heunder
lyi
ngt
rend.
Ther
earedif
ferentt
ypesofmov
ingav
eragesandeachoft
hem hasi
tsownl
evel
of
“smoot
hness”.

Gener
all
y,t
hesmoot
hert
hemov
ingav
erage,
thesl
oweri
tist
oreactt
othepr
icemov
ement
.

Thechoppi
ert
hemov
ingav
erage,
thequi
ckeri
tist
oreactt
othepr
icemov
ement
.

Tomakeamovi
ngav
eragesmoot
her
,youshoul
dgett
heav
eragecl
osi
ngpr
icesov
eral
onger
ti
meper
iod.

The“l
engt
h”ort
henumberofrepor
ti
ngperi
odsi
ncl
udingt
hemov
ingav
eragecal
cul
ati
on
aff
ect
showthemovingav
erageisdi
spl
ayedonapri
cechart
.

Theshor
teri
ts“
lengt
h”,
thef
ewerthedat
apoint
sthatarei
ncl
udedint
hemov i
ngaver
age
cal
cul
ati
on,whi
chmeansthecl
oserthemov
ingaveragest
aystot
hecurr
entpri
ce.

Thi
sreducesi
tsusef
ulnessandmayof
ferl
essi
nsi
ghti
ntot
heov
eral
ltr
endt
hant
hecur
rent
pri
cei
tsel
f.

Thelongeri
tsl
ength,t
hemoredat
apoint
sthatar
eincl
udedinthemov i
ngav
eragecal
cul
ati
on,
whichmeansthelessanysi
ngl
epri
cecanaff
ecttheov
eral
laverage.

I
fther
earetoomanydatapoint
s,pr
icef
luct
uat
ionsmaybecome“
toosmoot
h”t
haty
ouwon’
tbe
abl
etodetectanyki
ndoft
rend!

Ther
ear
etwomaj
ort
ypesofmov
ingav
erages:

1.
Simpl
e

2.
Exponent
ial

Si
mpl
eMov
ingAv
erage(
SMA)Expl
ained

Basi
call
y,asimplemov i
ngaveragei
scal
cul
atedbyaddi
ngupt
hel
ast“
X”per
iod’
scl
osi
ngpr
ices
andthendiv
idingthatnumberbyX.

I
fyouplot
teda5peri
odsimpl
emov i
ngaver
ageona1- hourchar
t,y
ouwoul
daddupt
hecl
osi
ng
pr
icesf
orthel
ast5hour
s,andthendi
vi
dethatnumberby5.
Mostchar
ti
ngpackageswi
l
ldoal
lthecal
cul
ati
onsf
ory
ou.

Ther
easonIboredyouwit
ha“ howto”oncal
cul
ati
ngsimpl
emovi
ngaveragesi
sthati
t’
s
i
mport
anttounderst
andsothatyouknowhowtoeditandt
weakt
hei
ndicator
.

Under
standinghowanindicat
orworksmeany
oucanadj
ustandcr
eat
edi
ff
erentst
rat
egi
esas
themarketenvi
ronmentchanges.

Bel
owi
sanexampl
eofhowmov
ingav
eragessmoot
houtt
hepr
iceact
ion.

Onthechar
tabov e,
we’vepl
ott
edthr
eedif
fer
entSMAsonthe1-
hourchar
tofUSD/
CHF.Asy
ou
cansee,
thelongertheSMAperiodi
s,t
hemoreitl
agsbehi
ndt
hepri
ce.

Not
icehowt
he62SMAi
sfar
therawayf
rom t
hecur
rentpr
icet
hant
he30and5SMAs.

Thi
sisbecauset
he62SMAaddsupt
hecl
osi
ngpr
icesoft
hel
ast62per
iodsanddi
vi
desi
tby
62.

Thel
ongerper
iody
ouusef
ort
heSMA,
thesl
oweri
tist
oreactt
othepr
icemov
ement
.

TheSMAsinthischar
tshowsy outheov
eral
lsent
imentoft
hemar
ketatt
hispoi
nti
nti
me.Her
e,
wecanseethatthepai
rist
rending.

I
nsteadofj
ustl
ooki
ngatt
hecur
rentpr
iceoft
hemar
ket
,themov
ingav
eragesgi
veusabr
oader
v
iew.

Wi
tht
heuseofSMAs,
wecant
ell
whet
herapai
rist
rendi
ngup,
trendi
ngdown,
orj
ustr
angi
ng.

Ther
e'sav
ideof
ort
hispar
t.Lookf
ori
tandf
oll
owupaccor
dingl
y.
HOW TOSETUPTHEI
NDI
CATORSFORTRADI
NGVI
X75

KnowledgeofPriceacti
onandmarketstr
uct
ure(basi
cal
lyevery
thingI’
vebeent
eachi
ng
si
nce)wil
lhelpy
oupi npoi
ntagoodentr
yandexitpoint
.Especi
all
yifyou'
retr
adi
ngatkeyl
evel
s
ofsupportandresi
stance

Soy
ou'
l
lhav
ever
yli
tt
leornodr
awdownatal
l
.

Nowl
et'
sst
artwi
thhowt
osetupy
ourMet
atr
ader5f
ort
hest
rat
egy
.

You'
l
lneed3i
ndi
cat
orsf
ort
heV75st
rat
egy
:

TheBol
li
ngerbands,
theSt
ochast
icosci
ll
ator
sandt
heMACD.

Thenextst
epsmi
ghtbehar
dtogr
aspcost
her
e'snov
isual
repr
esent
ati
onofi
t

Butaft
ert
heexpl
anat
ionI
'
lldr
opav
ideot
hatshowshowt
osett
hem upt
heny
oushoul
dal
sodo
thesameonyourMT5

Nowt
hef
ir
sti
ndi
cat
ory
ou'
ret
oaddi
stheBol
l
ingerbands

You'
ret
oaddi
ttot
hemai
nchar
twi
tht
hef
oll
owi
ngset
ti
ngs:

Per
iod-
34

Dev
iat
ion-
1.619

Shi
ft
-0

Appl
y-Cl
ose

St
yle:
2pi
xel

Col
our
:Bl
ue

Thent
henexti
ndi
cat
ort
obeaddedi
sthe*
Stochast
icOsci
l
lat
or*i
nindi
cat
orwi
ndow1

Wi
tht
hef
oll
owi
ngset
ti
ngs

%kper
iod-
5
%Dper
iod-14

Sl
owi
ng-13

Pr
icef
iel
d-Low/
high

Met
hod-
Simpl
e

St
yles:

Mai
n-2pi
xel
scol
or:
green

Si
gnal
-2pi
xel
scol
our
:r
ed

Lev
els:

30-buy

50-y
oucannamet
hiswhat
every
ouwant

70-sel
l

Nowt
heset
ti
ngsf
ort
hel
asti
ndi
cat
orwhi
chi
sthe*
MACD*

I
ndi
cat
orwi
ndow2.

MACD

f
astEMA-12

sl
owEMA-
26

MACDSMA-9

Appl
yto-Cl
ose

St
yle:

Mai
n-1pi
xel
col
our
;Gr
ey

Si
gnal
-2pi
xel
Col
our
;red

3maj
orcr
it
eri
ashav
etobemetf
orust
otakeanyt
radeusi
ngt
hisst
rat
egy
Not
e:t
hisst
rat
egyi
sver
yver
ysi
mpl
ebutsuperef
fect
ivef
orVol
ati
l
ity75i
ndex

Pl
easenev
erbet
oogr
eedy

Al
way
sbepat
ientandwai
tfort
hesecondi
ti
onst
obemetbef
oret
aki
ngat
rade.

AndI’
dadvicet
hatyouusethisst
rat
egyasaconf
luencewi
thwhatyou’
vebeentaughtear
li
er
don’
tdependonindi
cat
orsalonecosthel
agsometi
mesandtechni
calanal
ysi
sisveryver
y
i
mportant
.

Topl
aceaBuy:

1.Pr
icehast
otoucht
hebot
tom Bol
l
ingerband

2.TheSt
ochast
ichast
obebel
ow30orat30

3.Ther
emustbeapeakf
ormat
ionatt
hebot
tom oft
heMACD

Topl
aceasel
l
:

1.Pr
icehast
otoucht
het
opBol
l
ingerband

2.Thest
ochast
ichast
obeabov
e70orat70

3.Ther
emustbeapeakf
ormat
ionatt
het
opoft
heMACD
Thi
siswhaty
ourMT5/
MT4shoul
dlookl
i
kewheny
ou'
redoneset
ti
ngi
tup.

Wearenowatthel
astl
apsofy
ourj
our
ney
.Remembert
haty
ouhav
etokeepl
ear
ningand
comi
ngback.Remember
.
KNOW THEDI
FFERENTTYPESOFTRADI
NGSTYLES

Ouruni
queper
sonal
i
tieswi
l
lleadust
otr
adedi
ff
erent
lyf
rom oneanot
her
.

Somemaybeaggressi
ve,
“ty
peA”per
sonal
i
tyt
rader
swhi
l
eot
her
smaybemor
erel
axed,
“ty
pe
B”per
sonal
i
tyt
rader
s.

Somemayli
ketaki
ngsmallwi
nsal
lthet
ime,
whi
l
eot
her
sdon’
tmi
ndl
osi
ngabi
tinor
dert
o
maket
hosehugegainswhent
heydowin.

Astr
aders,
thereareawidevari
etyofappr
oachesav
ail
abletotr
ytoint
erpr
etpr
icemovements
andt
rytoprofi
tfr
om them.Somet r
ader
smayuseapar t
icul
arappr
oachalmostexcl
usi
vel
y.

Thepoi
nti
sthatnot
wot
rader
sar
eal
i
ke.

Scal
ping

Scal
ptr
adi
ng,
alsoknownasscal
ping,i
sapopulart
radi
ngstr
ategychar
act
eri
zedbyr
elat
ivel
y
shor
tti
meper
iodsbetweent
heopeningandcl
osingofatr
ade.

Theset
ypesoft
radesar
eusual
l
yonl
yhel
dont
oforaf
ewsecondst
oaf
ewmi
nut
esatt
hemost
!

Themai nobj
ect
iveforfor
exscal
per
sistograbver
ysmal
lamount
sofpi
psasmanyt
imesas
theycanthr
oughoutthebusi
estt
imesoftheday
.

I
tsnameisder
ivedfr
om thewayit
sgoal
sar eachieved.At
raderi
sli
ter
all
ytr
yingt
o“scal
p”l
ots
ofsmal
lpr
ofi
tsfrom ahugenumberoft
radesthroughoutt
heday.

Whatmakesscal
pingsoat
tract
ivet
otr
ader
s?

Small
ermoveshappenmor
efr
equent
lyt
hanlar
gerones,ev
eninrel
ati
vel
ycal
m mar
ket
s.Thi
s
meansthatt
her
earemanysmall
movementsfr
om whichascal
percanbenef
it
.

Scal
per
scanpl
aceupt
oaf
ewhundr
edt
radesi
nasi
ngl
eday
,seeki
ngsmal
lpr
ofi
ts.
Al
lposi
ti
onsar
ecl
osedatt
heendoft
het
radi
ngday
.

Becausescal
persbasi
call
yhavetobegluedtothechar
ts,
iti
sbestsui
tedf
ort
hosewhocan
spendsever
alhoursofundiv
idedat
tent
iontothei
rtr
adi
ng.

I
trequi
resi
ntensefocusandqui
ckt
hinki
ngt
obesuccessf
ul.Notev
ery
onecanhandl
esuchf
ast
anddemandingtr
ading.

Iti
snotfort
hoselooki
ngtomakebi
gwinsal
ltheti
me,butr
atherf
ort
hosewhol
i
ker
aki
ngi
n
small
profi
tsovert
helongrunt
omakeanoveral
lpr
ofi
t.

Thest
rat
egybehi
ndscal
pingi
sthatl
otsofsmal
lwi
nscaneasi
l
ymor
phi
ntol
argegai
ns.

Scal
pingfocusesonlar
gerposi
ti
onsizesf
orsmal
l
erpr
ofi
tsi
ntheshor
testper
iodofhol
ding
ti
me:from afewsecondstominutes.

Theassumpt
ionisthatpr
icewi
l
lcomplet
ethefir
stst
ageofamov
ementi
nashor
tspanoft
ime
soyouaimtotakeadvant
ageofmarketv
olat
il
it
y.

Youmi
ghtbeaf
orexscal
peri
f:

-
Youl
i
kef
astt
radi
ngandexci
tement

-
Youdon’
tmi
ndbei
ngf
ocusedony
ourchar
tsf
orsev
eral
hour
satat
ime

-
Youar
eani
mpat
ientper
sonwhodoesn’
tli
ket
owai
tforl
ongt
rades

-
Youcant
hinkf
astandchangebi
as,
ordi
rect
ion,
qui
ckl
y.

Youmi
ghtNOTbeaf
orexscal
peri
f:

-
Youeasi
l
ygetst
ressedi
nfast
-mov
ingenv
ironment
s

-
Youcan’
tcommi
tsev
eral
hour
sofundi
vi
dedat
tent
iont
oyourchar
ts

-
You’
drat
hermakef
ewert
radeswi
thhi
gherpr
ofi
tgai
ns

-
Youl
i
ket
aki
ngy
ourt
imet
oanal
yzet
heov
eral
lpi
ctur
eoft
hemar
ket
.
DayTr
adi
ng

Dayt
radingi
sapopul
artr
adingstr
ategywher
ey oubuyandsel
laf
inanci
ali
nst
rumentov
era
t
imeframeofasi
ngleday’
stradi
ngwiththei
ntent
ionofpr
ofi
ti
ngf
rom smal
lpri
cemovement
s.

Dayt
radi
ngisanot
hershortt
ermtradi
ngstyl
e,butunl
i
kescal
ping,
youar
ety
pical
l
yonl
ytaki
ng
onet
radeadayandclosi
ngitoutwhenthedayisover
.

Thesetrader
sli
kepi
cki
ngasideatthebegi
nni
ngoft
heday
,act
ingont
hei
rbi
as,
andt
hen
fi
nishi
ngthedaywit
hei
theraprof
itoral
oss.

TheyDON’
Tli
kehol
dingt
hei
rtr
adesov
erni
ght
.

Daytradi
ngissui
tedforfor
extr
ader
sthathav
eenought
imet
hroughoutt
hedayt
oanal
yze,
executeandmonitorat
rade.

I
fyouthinkscal
pingi
stoof
astbutswi
ngt
radi
ngi
sabi
tsl
owf
ory
ourt
ast
e,t
hendayt
radi
ng
mightbeforyou.

Youmi
ghtbeaf
orexdayt
raderi
f:

-
Youl
i
kebegi
nni
ngandendi
ngat
radewi
thi
noneday
.

-
Youhavet
imet
oanal
yzet
hemar
ket
satt
hebegi
nni
ngoft
hedayandcanmoni
tori
tthr
oughout
t
heday.

-
Youl
i
ket
oknowwhet
herornoty
ouwi
norl
oseatt
heendoft
heday
.

Youmi
ghtNOTbeaf
orexdayt
raderi
f:

-
Youl
i
kel
ongerorshor
tert
ermt
radi
ng.

-
Youdon’
thav
eti
met
oanal
yzet
hemar
ket
sandmoni
tori
tthr
oughoutt
heday
.

Somet
hingst
oconsi
deri
fyoudeci
det
odayt
rade:

-St
ayinformedonthelatestf
undamental
sev ent
stohel
pyouchooseadi
rect
ion:
Youwi l
lwant
tokeepy our
sel
fup-t
o-dateonthel
atesteconomicnewssothaty
oucanmakey ourt
radi
ng
deci
sionsatthebegi
nningoftheday.

-
Doy
ouhav
eti
met
omoni
tory
ourt
rade?

I
fyouhav
eaf
ull
-t
imej
ob,
consi
derhowy
ouwi
l
lmanagey
ourt
imebet
weeny
ourwor
kand
t
radi
ng.Basi
cal
l
y….
don’
tgetf
ir
edf
rom y
ourj
obbecausey
ouar
eal
way
slooki
ngaty
ourchar
ts!

Ty
pesofDayTr
adi
ng

Dayt
rader
slooki
ngtomaxi
mizei
ntr
adaypr
ofi
tsof
tenuseoneormul
ti
pleoft
hef
oll
owi
ngday
t
radi
ngstr
ategi
es.

Tr
endTr
adi
ng

Tr
endt
radi
ngi
swheny
oul
ookatal
ongert
imef
ramechar
tanddet
ermi
neanov
eral
ltr
end.

Oncetheov
eral
ltr
endisest
abli
shed,
youmovetoasmal
l
ert
imef
ramechar
tandl
ookf
or
t
radi
ngopport
uni
ti
esinthedir
ecti
onoft
hatt
rend.

Fi
rst
,det
ermi
newhatt
heov
eral
ltr
endi
sbyl
ooki
ngatal
ongert
imef
rame.

Onceyoudet
ermi
net
heov er
all
trend,youcant
henmovetoasmall
erti
mefr
ameandl
ookf
or
ent
ri
esint
hesamedi
rect
ion.Thisiscall
edmul
ti
plet
imef
ramesanal
ysi
s.

Count
ert
rendTr
adi
ng

Count
ert
renddayt
radi
ngi
ssi
mil
art
otr
endt
radi
ngexceptt
hatoncey
oudet
ermi
ney
ourov
eral
l
t
rend,
youl
ookf
ort
radesi
ntheopposi
tedi
rect
ion.

Theideaherei
stofi
ndtheendofatr
endandgeti
near
lywhent
het
rendr
ever
ses.Thi
sisal
i
ttl
e
ri
ski
erbutcanhavehugepayof
fs.

Traderswhouset
hisst
rat
egyneedtobequi
ckt
ospott
heendofat
rendi
nor
dert
oopena
posit
ionatt
heopt
imalent
rypoi
nt.

Thi
sst
rat
egyi
sfi
ght
ingt
het
rendandcanwor
kagai
nstt
rader
satt
imes.

Remembert
hatgoi
ngopposi
teoft
het
rendi
sver
yri
sky
,buti
fti
medcor
rect
ly,
itcanhav
ehuge
rewar
ds!

Count
ert
rendtr
adi
ngf
avor
sthosewhoknowr
ecentpr
iceact
ionr
eal
l
ywel
landsoknowwhent
o
goagai
nstit
.

RangeTr
adi
ng

Ranget
radi
ng,somet
imesref
erredtoaschanneltr
adi
ng,
isadayt
radi
ngst
rat
egyt
hatst
art
s
wit
hanunderst
andi
ngoftherecentpr
iceact
ion.

Atraderwi
l
linspectchartpat
ter
nst oi
denti
fyt
ypi
calhi
ghsandl
owsdur
ingt
hedaywhi
l
e
keepi
ngacloseeyeont hedif
ferencebet
weenthesepoi
nts.

Forexampl
e,i
fthepri
cehasbeenr
isi
ngoffasuppor
tlev
elorf
all
i
ngoffaresi
stancelev
el,
then
atradermi
ghtchooset
obuyorsel
lbasedonthei
rper
cepti
onofthemar
ket’
sdirect
ion.

Thi
sisknownas“t
radi
ngi
nar
ange“
,wher
eeacht
imepr
icehi
tsahi
gh,
itf
all
sbackt
othel
ow.
Andvi
ceversa.

Adaytr
aderwhoi
susingt
hisst
rat
egywhoi
slooki
ngt
ogol
ongwi
l
lbuyar
oundt
hel
owpr
ice
andsel
latt
hehi
ghpr
ice.

Adayt
raderwhoi
susi
ngt
hisst
rat
egywhoi
slooki
ngt
ogoshor
twi
l
lsel
lar
oundt
hehi
ghpr
ice
andbuyatt
hel
owpr
ice.

Mostr
anget r
ader
swil
lusestopl
ossesandlimi
tor
der
stokeept
hei
rtr
adi
ngi
nli
newi
thwhat
t
heypercei
vetobehappeni
ngint
hemar ket
.

Astoplossor
deri
sthepoi
ntatwhichaposi
ti
oni
saut
omat
ical
l
ycl
osedouti
fthepr
iceoft
he
secur
it
ydropsbel
owthetr
ader
’sentr
ypoi
nt.

Ali
mitorderistheautomat
iccl
osi
ngofaposi
ti
onatt
hepoi
ntwher
ethet
raderper
cei
vesa
pr
ofi
tabl
er uncouldend.

Ranget
radi
ngrequir
esenoughv
olat
il
itytokeepthepr
icemovi
ngforthedur
ati
onoftheday
,but
notsomuchvolat
il
it
ythatt
hepr
icebreaksoutofther
angeandst
artsanewt r
end.

Br
eakoutTr
adi
ng

Breakoutt
radi
ngi
swheny oulookattherangeapai
rhasmadeduringcer
tai
nhoursoft
heday
andthenplaci
ngt
radesoneit
herside,hopi
ngtocat
chabreakouti
neit
herdi
rect
ion.

Thi
sispar
ti
cularl
yeff
ecti
vewhenapai
rhasbeenat
ightr
angebecausei
tisusual
l
yan
i
ndi
cati
onthatthepai
risaboutt
omakeabigmove.

Yourgoalher
eist
osety
our
sel
fupsot
hatwhent
hemov
etakespl
acey
ouar
ereadyt
ocat
ch
thewave.

Inbreakoutt
radi
ng,
youdet
ermi
near
angewher
esuppor
tandr
esi
stancehav
ebeenhol
ding
str
ongly.

Oncey
oudo,
youcansetent
rypoi
ntsabov
eandbel
owy
ourbr
eakoutl
evel
s.

Asar ul
eoft
humb,
youwantt
otar
gett
hesameamountofpi
pst
hatmakesupy
ourdet
ermi
ned
range.
NewsTr
adi
ng

Newstradi
ngisoneoft
hemostt
radi
ti
onal
,pr
edomi
nant
lyshor
tter
m-f
ocusedt
radi
ngst
rat
egi
es
usedbydaytr
aders.

Someonewhoi
snewst radi
ngpaysl
essatt
ent
iontochartsandtechnicalanal
ysi
s.Theywai
tfor
i
nfor
mati
ontober
eleasedthatt
heybel
iev
ewil
l dr
ivepr
icesinonedirecti
onortheother
.

Thisi
nformati
oncoul
dbearepor
trel
easi
ngeconomi
cdata,suchasunempl
oyment
,int
erest
rat
esorinfl
ati
on,
orsi
mplybr
eaki
ngnewsorrandom pr
esi
denti
altweet
s.

Todowellwit
hnewstradi
ng,
dayt
rader
stendt
ohav
easol
i
dunder
standi
ngoft
hemar
ket
sin
whi
chthey
’retr
adi
ng.

Theydev
elopthei
nsi
ghtst
odet
ermi
nehowthenewswil
lber
ecei
vedbyt
hemar
keti
nquest
ion
i
ntermsoftheext
entt
owhichi
tspr
icewi
l
lbeaf
fect
ed.

Theywi
llbeal
ertt
ovar
iousdi
ff
erentnewssour
cesatt
hesamet
imeandknowwhent
oent
er
themar
ket.

Thedrawbackofnewst
radi
ngi
sthatev
ent
sthatcausesubst
ant
ial
mov
ement
sinpr
icesar
e
usual
l
yrare.

Mor
eoftenthannot,
theex
pect
ati
onsofsuchev
ent
sar
efact
oredi
ntot
hepr
icei
nther
unupt
o
t
heannouncement.

Swi
ngTr
adi
ng

Swingtr
adi
ngr ef
erstothemedi
um-
ter
mtr
adi
ngst
ylet
hati
susedbyf
orext
rader
swhot
ryt
o
pr
ofitf
rom pr
iceswings.

Iti
stradi
ngstyl
erequi
respati
encet
oholdyourtr
adesforsev
eral
daysatat
ime.Swi
ngt
radi
ng
standsbetweentwootherpopul
art
radi
ngsty
les:dayt
radi
ngandposi
ti
ontr
adi
ng.

Swingtr
adersident
if
yapossi
bletr
endandt
henhol
dthet
rade(
s)f
oraper
iodoft
ime,
from a
minimum oftwodaystosev
eralweeks.
I
tisideal
fort
hosewhocan’
tmonit
ort
hei
rchar
tst
hroughoutt
hedaybutcandedi
cat
eacoupl
e
ofhoursanal
yzi
ngt
hemarketev
eryni
ght
.

Swingtr
adingi
sbestsui
tedfort
hosewhohaveful
l
-ti
mejobsorschool
buthav
eenoughf
ree
ti
met ost
ayup-t
o-dat
ewithwhatisgoi
ngoni
ntheglobal
economy.

Swingtradi
ngstr
ategi
esemployfundamental
ortechni
cal
anal
ysi
sinordert
odetermi
ne
whetherornotaparti
cul
arcur
rencypai
rmightgoupordowninpri
ceinthenearf
utur
e.

Swingt
radi
ngat
tempt
stoi
dent
if
y“swings”wi
thi
namedi
um-
ter
mtr
endandent
eronl
ywhen
ther
eseemstobeahi
ghpr
obabi
li
tyofwinni
ng.

Forexampl
e,inanuptrend,youai
mt obuy(
golong)at"
swinglows."Andconv
ersel
y,sel
l(go
short
)at"
swinghighs"totakeadvant
ageoft
emporarycount
ertr
ends.

Becausetradesl
astmuchlongert
hanoneday,l
argerst
oplossesar
erequi
redt
oweat
her
vol
ati
li
ty,
andaf or
extr
adermustadaptthatt
otheirmoneymanagementpl
an.

Youwil
lmostl
ikel
yseet
radesgoagainstyoudur
ingt
hehol
dingt
imesi
ncet
her
ecanbemany
fl
uct
uat
ionsi
nthepri
ceduri
ngtheshortert
imefr
ames.

I
tisi
mpor
tantt
haty
ouar
eabl
etor
emai
ncal
m dur
ingt
heset
imesandt
rusti
nyouranal
ysi
s.

Ty
pesofSwi
ngTr
adi
ng

Ther
ear
esev
eral
dif
fer
entt
radi
ngst
rat
egi
esof
tenusedbyswi
ngt
rader
s.

Her
ear
ethef
ourmostpopul
ar:
rev
ersal
,ret
racement(
orpul
l
back)
,br
eakout
s,andbr
eakdowns.
Rev
ersalTr
adi
ng

Rever
saltr
adingr
eli
esonachangei npri
cemoment um.Arever
sali
sachangeint hetr
end
di
rect
ionofanasset’
spr
ice.Forexample,whenanupwardtr
endlosesmoment um andthe
pri
cestar
tstomovedownwar ds.Arev
ersalcanbeposi
ti
veornegati
ve(orbul
l
ishorbearish)
.

Ret
racementTr
adi
ng

Retr
acement(orpullback)t
radi
nginvol
vesl
ooki
ngforpri
cet
otemporar
il
yrev
ersewit
hina
l
argert
rend.Pri
cetempor ar
il
yretr
acestoanear
li
erpri
cepoi
ntandt
henconti
nuestomovein
thesamedirect
ionlater.

Rev ersal
saresomet
imeshardtopredi
ctandtotel
lapartf
rom shor
t-
term pul
l
backs.Whi
lea
reversaldenot
esachangei
ntrend,
apullbacki
sashor t
er-
ter
m“ minir
eversal
”wit
hinanexi
sti
ng
trend.

Thi
nkofar
etr
acement(
orpul
l
back)asa“
minorcount
ert
rendwi
thi
nthemaj
ort
rend”
.

I
fit’
saretr
acement
,pr
icemov
ingi
ntheagai
nstt
hepr
imar
ytr
endshoul
dbet
empor
aryand
r
elati
vel
ybri
ef.

Rever
sal
sal
waysstar
taspot
ent
ial
pul
l
backs.Thechal
l
engei
stoknowwhet
heri
tisonl
ya
pul
l
backoranact
ualtr
endr
ever
sal

Br
eakoutTr
adi
ng

Breakoutt
radi
ngi
sanapproachwhereyoutakeaposi
ti
onontheear
lysi
deofanUPTREND, and
l
ookingforpri
cet
o“br
eakout
”.Youent
erint
oaposit
ionassoonaspr
icebreaksakeyl
evel
of
RESISTANCE.

Br
eakdownSt
rat
egy

Abreakdownstrat
egyi
stheopposit
eofabr eakoutstrat
egy.Youtakeaposi
ti
onontheear
ly
si
deofaDOWNTREND, andl
ookingforpr
iceto“breakdown”(al
soknownasadownside
br
eakout).Youent
eri
ntoaposi
ti
onassoonaspr icebreaksakeyl
ev el
ofSUPPORT.

Youmi
ghtwantt
obeaswi
ngt
raderi
f:

-
Youdon’
tmi
ndhol
dingy
ourt
radesf
orsev
eral
day
s.

-Youarewi
l
li
ngt
otakef
ewert
radesbutmor
ecar
eful
tomakesur
eyourt
radesar
ever
ygood
setups.
-
Youdon’
tmi
ndhav
ingl
argest
opl
osses.

-
Youar
epat
ient
.

-
Youar
eabl
etor
emai
ncal
m whent
radesmov
eagai
nsty
ou.

Youmi
ghtNOTwantt
obeaswi
ngt
raderi
f:

-
Youl
i
kef
ast
-paced,
act
ion-
packedt
radi
ng.

-
Youar
eimpat
ientandl
i
ket
oknowwhet
hery
ouar
eri
ghtorwr
ongi
mmedi
atel
y.

-
Yougetsweat
yandanxi
ouswhent
radesgoagai
nsty
ou.

-
Youcan’
tspendacoupl
eofhour
sev
erydayt
oanal
yzet
hemar
ket
s.

Posi
ti
onTr
adi
ng

Posit
iontr
adingi
sthel
ongestt
ermt
radi
ngandcanhav
etr
adest
hatl
astf
orsev
eral
mont
hst
o
sever
alyears!

Posi
ti
ontradersignor
eshor
t-
ter
m pr
icemov
ement
sinf
avorofpi
npoi
nti
ngandpr
ofi
ti
ngf
rom
l
onger-
ter
mt rends.

I
tisthi
sty
peoftr
adingthatmostclosel
yresembl
es“i
nvest
ing”
.Thecruci
aldif
fer
encei
sin
market
soutsi
def
orex,“
invest
ing”usual
l
ymeansy ouhol
dposit
ionst
hatarelong.

Thiskindoffor
extr
adi
ngisreserv
edforsuperPATI
ENTt
rader
sandr
equi
resagood
understandi
ngoft
hefundamental
s.

Becauseposi
tiont
radi
ngishel
dforsol
ong,
fundament
alt
hemeswi
l
lbet
hepr
edomi
nantf
ocus
whenanalyzi
ngthemarket
s.

Fundamental
sdi
ctat
ethelongter
mt r
endsofcurrencypai
rsanditi
simportantt
haty
ou
underst
andhoweconomicdataaff
ect
sy ourcountr
iesandi
tsfut
ureout
look.

Becauseoft
hel
engt
hyhol
dingt
imeofy
ourt
rades,
yourst
opl
osseswi
l
lbev
eryl
arge.
Thismeanst
haty
ourl
ossescanendupbei
nghuge,
buti
tal
someansy
ourpr
ofi
tscanbe
huuuuge.

Youmustmakesur
eyouar
ewel
l
-capi
tal
i
zedory
ouwi
l
lmostl
i
kel
ygetmar
gincal
l
ed.

Posi
ti
ontradi
ngal
sor
equi
resthickski
nbecausei
tisal
mostguar
ant
eedt
haty
ourt
radeswi
l
lgo
agai
nsty
ouatonepoi
ntoranother.

Thesewon’
tjustbel
i
ttl
eret
racement
sei
ther
.

Youmayexperi
encehugeswi
ngsandyoumustbereadyandhav
eabsol
utet
rusti
nyour
anal
ysi
sinor
dertoremai
ncal
m duri
ngtheset
imes.

Ty
pesofPosi
ti
onTr
adi
ng

Whil
ef undament
alanal
ysispl
aysamuchl
argerr
olef
orposi
ti
ont
rader
s,t
hatdoesn’
tmeant
hat
t
echnicalanal
ysi
sisn’
tused.

Posi
ti
ontr
ader
stendt
ousebot
hfundament
alandt
echni
cal
anal
ysi
stoev
aluat
epot
ent
ial
tr
ends.

Her
ear
esomet
radi
ngst
rat
egi
esut
il
iz
ingt
echni
cal
anal
ysi
sthatposi
ti
ont
rader
suse:

Suppor
tandResi
stance(
S&R)Tr
adi
ng

Supportandresi
stancel
evel
scansi
gnal
wher
ethepr
icei
sheaded,
let
ti
ngposi
ti
ont
rader
sknow
whethertoopenorcloseaposi
ti
on.

Asuppor
tlev
eli
sapri
celev
elt
hat
,hi
stor
ical
l
y,doesnotf
all
bel
ow.These“
hist
ori
cal
”suppor
t
l
evel
scanholdf
ory
ears.

Aresi
stanceleveli
sapricelevel
that,
hist
orical
l
y,t
endsnott
obeabl
etobr
eak.These
“
hist
ori
cal”resi
stancel
evelscanalsoholdforyear
s.

I
fposi
ti
ont
radersexpectal
ongter
mr esi
stancehol
d,t
heycancl
oseoutt
hei
rposi
ti
onsbef
ore
unr
eal
i
zedprof
it
sstarsmelt
ingaway.

Theymayal
soent
erl
ongposi
ti
onsathi
stor
ical
suppor
tlev
elsi
ftheyexpectal
ongt
ermt
rend
t
ohol
dandcont
inueupwar
datt
hispoi
nt.

Thisst
rategyrequir
est
hattr
ader
stoanal
yzechar
tpatter
ns.Whenanalyzi
ngt
hechart
,posi
ti
on
tr
adersconsiderthr
eef
actor
swhentry
ingtoi
dent
ifysupportandr
esi
stancel
evel
s.

1.Thehi
stor
icpri
ceisthemostr
eli
abl
esourcewhenident
if
yingsupportandresist
ance.Duri
ng
peri
odsofsigni
fi
cantupordowninamarket,
recur
ri
ngsupportandresist
ancelevel
sareeasy
tospot.

2.Pr
ev i
oussupportandr
esi
stancelevel
scanindi
cat
efuturel
evel
s.I
tisnotunusual
fora
resi
stancel
eveltobecomeaf ut
uresuppor
tlevel
onceithasbeenbr
oken.

3.Techni
cali
ndicator
sli
kemovingav
eragesandFi
bonacci
ret
racementpr
ovi
dedy
nami
c
supportandresist
ancel
evel
sthatmoveasthepri
cemoves.

Br
eakoutTr
adi
ng

Tr
adi
ngbr
eakout
scanbeusef
ulf
orposi
ti
ont
rader
sast
heycansi
gnal
thest
artofanewt
rend.

Breakoutt
rader
susi
ngt
hist
echni
quear
eat
tempt
ingt
oopenaposi
ti
oni
ntheear
lyst
agesofa
tr
end.

Abreakouti
swherethepr
icemovesout
sidedef
inedsuppor
torr
esi
stancel
evel
s(pr
efer
abl
y
conf
ir
medwi thi
ncr
easedvolume)
.

Theideabehindtr
adi
ngbreakoutsi
stoopenal
ongposit
ionaf
tert
hepr
icebr
eaksabov
e
resi
stanceoropenashor
tpositi
onwhenthepr
icebr
eaksbel
owsuppor
t.

Tosuccessful
lytr
adebr
eakout
s,y
ouwi
l
lneedt
obeconf
identi
nident
if
yingper
iodsofsuppor
t
andresi
stance.

Pul
lbackTr
adi
ng

Apul
l
backi
sashor
tdi
porsl
i
ghtr
ever
sal
int
hepr
evai
l
ingt
rend.
Thi
sst
rat
egyi
susedwhent
her
eisabr
iefmar
ketdi
pinal
onger
-t
ermt
rend.

Pul
l
backt
rader
sai
mtocapi
tal
i
zeont
hesepausesi
nthemar
ket
.

Thei
deabehi
ndt
hepul
l
backst
rat
egyi
sthi
s:

-
Forl
ongtr
ades,
tobuyl
owandsel
lhi
ghbef
oreamar
ketbr
ief
lydi
ps,
andt
hent
obuyagai
nat
t
henewlow.

-
Forshor
ttr
ades,
tosel
lhi
ghandbuyl
owbef
oreamar
ketbr
ief
lyr
all
i
es,
andt
hent
osel
lagai
nat
t
henewhigh.

I
fexecut
edsuccessf
ull
y,at
radercannotonl
ypr
ofi
tfr
om al
ong-
ter
mtr
endbutav
oidpossi
ble
marketl
ossesby:

-
Sel
l
inghi
ghandbuy
ingt
hedi
ps(
forl
ongt
rades)
.

-
Buy
ingl
owandsel
l
ingt
her
ips(
forshor
ttr
ades)
.

Tohelpident
if
ypot
ent
ial
pul
l
backs,
youcanuser
etr
acementi
ndi
cat
ors,
li
ket
heFi
bonacci
ret
racement.

Youmi
ghtbeaposi
ti
ont
raderi
f:

-
Youareanindependentt
hinker
.Youhavet
obeabl
etoi
gnor
epopul
aropi
nionandmakey
our
owneducat
edguessesast owherethemar
keti
sgoi
ng.

-
Youhaveagreatunder
standi
ngoff
undament
alsandhav
egoodf
oresi
ghti
ntohowt
heyaf
fect
y
ourcur
rencypai
rinthel
ongrun.

-
Youhav
ethi
ckski
nandcanweat
heranyr
etr
acement
syouf
ace.

-
Youhav
eenoughcapi
tal
towi
thst
andsev
eral
hundr
edpi
psi
fthemar
ketgoesagai
nsty
ou

-Youdon’
tmindwaiti
ngforyourgrandrewar
d.Longtermfor
extradi
ngcannetyousever
al
hundredt
oseveral
thousandsofpips.I
fyougetexcit
edbei
ngup50pi psandal
readywantt
o
exity
ourt
rade,
considermovingtoashorter
-t
ermtradi
ngsty
le.

-
Youar
eex
tremel
ypat
ientandcal
m.
Youmi
ghtNOTbeaposi
ti
ont
raderi
f:

-
Youeasi
l
ygetsway
edbypopul
aropi
nionsont
hemar
ket
s.

-
Youdon’
thav
eagoodunder
standi
ngofhowf
undament
alsaf
fectt
hemar
ket
sint
hel
ongr
un.

-
Youaren’
tpat
ient
.Eveni
fyouar
esomewhatpat
ient
,thi
sst
il
lmightnotbethet
radi
ngsty
lef
or
y
ou.Youhavetobetheul
ti
matezenmast
erwhenitcomestobeingthi
ski
ndofpati
ence

-
Youdon’
thav
eenoughst
art
ingcapi
tal
.

-
Youdon’
tli
kei
twhent
hemar
ketgoesagai
nsty
ou.

-Youl
i
keseeingy ourr
esul
tsfast
.Youmaynotmi
ndwai
ti
ngaf
ewday
s,butsev
eral
mont
hsor
evenyear
sisjusttool
ongforyoutowai
t.
Wit
hthi
s,y
ouhaveever
ythi
ngy
ouneedt
ogoandconquert
hemar
ket
.Keepy
ourki
thandyatal
l
t
imesandnev
ershar
e.

Mayt
hecandl
est
icksal
way
sfav
ourus.

edbySHAMEL
Compi
l ESS.