RFFX

BASIC TRADING COURSE

 CHAPTERS TO COVER

• INTRODUCTION TO FOREX
• FOREX TRADING TOOLS
• FOREX TRADING ANALYSIS
• RISK MANAGEMENT
• TRADING STRATEGY
• TRADING STRATEGY
• EMOTIONAL TRADING
INTRODUCTION TO FOREX

• What is Forex market?

• What is Forex trading?
• Who participate in the Forex market?
• Different ways to trade forex
• How is forex profitable
What is Forex Market

• “MONEY” A universal term known to all human race,

every Country has its own type of money known as
currencies. Just to mention a few strong currencies
USD GBP YEN EUR CHF AUD
USA UNITED JAPAN EUROPEAN SWEZILAND AUSTRLIA
KINGDOM UNION

• -forex market is a worldwide market were different

currencies are traded.
• if you have ever been in a bureau de change and
exchanged lets say USD against South African rand
ZAR then you have participated in the forex
market.Buying something on line with another
currency payment method then you have participated
forex market.
• You should note that in forex two currencies must be
involved in order for the trade to happen. This meens
currency are traded in pairs example EURUSD,
USDJPY, EURGBP, CADCHF.
• This is the largest market in the world with a volume
between 2 to 5 trillion USD.
• 98% Of FOREX Market transaction happens on line
only 2% of transaction
 classification of currency pairs
• MAJOR CURRENCIES
currencies that trade the most volume against the USD.The currency
pairs have a very liquid market with very narrow spreads.
MINOR(CROSSES) CURRENCY PAIRS
• Currency pairs that are not associated with the USD. These pairs have
slightly wider spreads and are not as liquid as the majors. The crosses
that trade the most volume are among the currency pairs in which
the individual currencies are also majors.
EXOTIC CURRENCY CROSSES
• Exotic currencies pairs include currencies of emerging markets. These
pairs are not as liquid, and the spreads are much wider. An example
of an exotic currency pair is the USD/ZAR (U.S. dollar/South African
rand).
MAJOR MINOR EXOTIC
EUR/USD EURGBP USDHKD
GBP/USD GBPJPY USDSGD
USD/CHF EURCHF USDSEK
USD/JPY EURGBP EURTRY
AUD/USD EURJPY USDSGD
USD/CAD CAD/JPY USDZHR
GBP/AUD USDCHY
GBP/JPY
EUR/CHF
EUR/NZD
GBP/CAD
GBP/CHF
NZD/JPY
EUR/AUD
CHF/JPY
EUR/CAD
 What is Forex trading?

• Forex market of different currencies pair are not static, They

tend to change according to demand and supply of the
underlying currencies.
• The change may vary depending on the strength and
popularity of the currencies,Example EURUSD may change
as fast as milliseconds while USDTZS may change after hours
• This change is what made forex trading possible meaning
buy at a low price and sell at a higher price and profit at a
defined future time buy their difference.
Who participate on the forex market?

• Governments and central banks

• Financial institutions such as banks
• Hedgers
• Speculators
• Retail traders
 Different ways to trade Forex

• Currency Options
• Currency Futures
• Currency Spot Market
How to profit from the Forex Market.

• BUY LOW SELL HIGH. As simple as it gets but

the million dollar question is when to buy and
when to sell.
• Traders tend to buy a currency when they
think the currency is underpriced and tend to
sell when they think the price is overpriced
FOREX TRADING TOOLS
-A valid and faithful broker
-A trading platform (Meta trade,
Trade view)
 A valid Broker
• A broker is a middle men who connects you
with the Interbank market by executing the
Buying and selling orders on your behalf.
• A broker profits from the spread Meaning the
difference between the buy and sell price he
gives you
things to consider choosing a broker

• Security/ Safety
Any faithful broker to prove safety to its customers should be regulated by a
trusted government regulatory organization such as
United States: National Futures Association (NFA) and Commodity Futures
Trading Commission (CFTC)
United Kingdom: Financial Conduct Authority (FCA) and Prudential
Regulation Authority (PRA)
Australia: Australian Securities and Investment Commission (ASIC)
• Deposit and withdraw
The time and safety of your money are far themost important accepts for a
good broker. A good broker should have various simple yet secure
methods of deposit funds and withdrawing

• Transaction cost
Every order taken you must pay either a commission spread cost or swap
cost, Therefore you should chose a broker with a fair price in transaction
cost
• Coustomer service
The competence of brokers when dealing with account
or technical support issues is just as important as their
performance on executing trades.
Brokers may be kind and helpful during the account
opening process, but have terrible “after sales” support
There for you should chose a broker whose going to give
you 100% help when something goes wrong this includes
phone calls emails and other communication means
 Trading Platform
Trading requires an online work space
A place where you and your broker interact in the Market, a place
where you can view charts
A platform equipped with tools enabling you to conduct analysis and
make future prediction on where the price is going.
Here we use Metatrade 4/ Metetrade 5 platform which can be
downloaded directly from your broker website. If you are using a
laptop
For Smartphone users you directly download the platform in play
store for android and apple store for I phone. And log in your
credentials
In The trading platform you will have to be
familiar with the following terms
• Leverage
• Pips value
• Lot size
 LEVERAGE
• Leverage is a loan that is provided by a broker by handling a forex trader
account
• When you open an account with broker to connect you with the forex
market. You open a margin account and you chose a leverage example 1:50,
1:100,
• For 1:100 leverage means you need to have 1% of your account Example
100$ account you will Have access to trade 100$ x 100$ =10000$ amount to
trade with in the forex market
• Example An account with 1:25 Leverage may take 100 pips to blow the
account But a 1:100 it will only take 25pips to blow the account.
• For beginners I advice to use a small leverage and only increase it when your
trading skills sharpens
 PIPS VALUE
• In Forex market prices are displayed in for decimal places. No
matter what currency pair you’re trading, the last large number
behind the decimal always represents a pip, the main unit price that
can change for the currency pair. As you trade, you’ll track your
profits (or losses) in pips.
1.23642
• The forth digit is known as a pip, while the small number is known
as a fractional pip or a pipet
• One unit movement represent one pips,The difference between two
prices will calculate you the number of pips Example 1.2364 – 1.2324=
0.0040 which we will say amount 40 pips.
LOT SIZE

• In forex we buy/sell currency in bundles known as lots

• There is a standard lot which 1 lot represent 100,000 units of
the base currency. And a micro lot which 1 lot represent
10,000 units of the base currency
• 1 lot for EUR/USD = 100,000 euros
• 0.1 lot for EUR/USD = 10,000 euros
• 0.01 lot for EUR/USD=1,000 euros
• In Forex, minimal movement is one pip. For standard basic 1
lot (100,000 units) movement of 1 pip is equal to 10$ change.
FOREX TRADING ANALYSIS

The million dollar question. Should you buy or sell a

currency
It’s impossible to know the future 100% but we can
predict it based on the past and present situation.
We conduct analysis on present and past Price data
so we can predict on where I may be in the future.
TWO TYPES OF ANALYSIS
TECHNICAL ANALYSIS
FUNDAMENTAL ANALYSIS
TECHNICAL ANALYSIS

• Here we focus solely on past price charts of a

given currency pair
• prices in charts portray human behavior. And
human behavior tends to repeat it self. There
for we tend to use past price charts data to
predict where the future is going
• In this chapter we are going to classify technical
analysis into two chapters
Primary analysis. & Secondary analysis
Primary analysis

• This is the base of technical analysis also known as price action; this
involves what your bear eyes can see from the currency price charts.
• This analysis is based on analyzing the general human physychology as
reflected in price charts
• Here we will basically discuss the following analysis
1. Support and resistance zone
2. Trend lines
3. Chart patterns
4. Psychological levels
5. Multiple time frame
6. Time zone trading(Trading hours)
7. Currency crosses
SUPPORT AND RESISTANCE ZONE

• Support occurs when falling prices stop, change direction, and begin to
rise. Support is often viewed as a “floor” which is supporting, or holding
up, prices.
• Resistance is a price level where rising prices stop, change direction, and
begin to fall. Resistance is often viewed as a “ceiling” keeping prices from
rising higher.
• If price breaks support or resistance, the price often continues to the next
level of support or resistance. Support and resistance levels are not always
exact; they are usually a zone covering a small range of prices so levels can
be breached, or pierced, without necessarily being broke
 How to draw a proper support
and resistance
• Identify proper rejection
Here we identify long rejections and ignore short term rejections
• The more the rejection the stronger
Once you identified a proper rejection then look for more rejections and
draw your level in such a manner to include more and more rejections
(including tiny ones).
If you have identified two proper rejection you may wait for the third
rejection to enter a trade. Note that to many rejection make the level weaker
The very recent rejection are the most important
When drawing levels you should consider very recent rejections those
rejections are very important because market tends to react those rejections
more often in a Forex Support and Resistance levels. By recent rejection i
mean very last rejection in your level once your level is complete and after
that you waits for price to react your level to take a trade
Mistakes to avoid in drawing support and
resistance
• Thinking support and resistance level is a certain defined price
Remember support and resistance levels are zones not just lines so spending
time on their right placement is useless it is impossible to draw a Perfect line.
Also S/R lines tends to move some pips as market moves because the very
recent touch of those lines would not be exactly the same as the previous
one! People moves the market not machines
• S/R lines can only be drawn on Shadows/wicks:
Another mistake is that you should only consider shadows of candles and not
real bodies when drawing those levels.
• Thinking every support and resistance line is a valid level
You should not draw line every level you see on your chart! Not every level
can be called an Forex Support and Resistance lines. If you do that then your
chart will be full of lines and it will become impossible for you to trade.
HOW TO TRADE SUPPORT AND RESSISTANCE

• If you spot price approaching a major Support you wait for

price to reach between the support zone to enter a Buy order
while stop loss is placed few pips below the support zone
• If you spot price approaching a major resistance you patiently
wait for price to reach between the resistance zone to enter a
Sell position Here stop loss is placed few pips above the
resistance zone
TREND LINES

• In an uptrend price forms higher high and higher lows as time

elapse
• And in a down trend price tend to form lower highs and lower lows
• A trend line connects lows of an uptrend or high of a down trend
• Two trend lines may form what known as a channel an area where
price may tend to move within the channel unless I changes the
trend
• Remember up trend are drawn bottom valleys of the trend
while down trend are drawn above the hills of the down
trend charts
• Trend lines are drawn above the tops prices in uptrend and
the bottom prices of the downtrend.
• Trend lines are drawn by joining the end of the candlesticks
and not the middle body.
• We should be very careful in drawing trend lines if wrongly
drawn you may falsely think price has broken and enter the
wrong trade
 HOW TO TRADE TREND LINES
• Yes we have defined and learn to draw trend
lines. All this have no use if we wont know how
to use them in our trading arsenal.
• For downward trend line we wait for price to
touch a trend line higher low (HL) to enter a sell
position
• For Upward trend line we have to wait for
prices to touch our trend line point known as
Lower high (LH) so as to enter a Buying position
 CHART PATTERNS
• Chart patterns are specific price formations on
a chart that predict future price movements.
As technical analysis is based on the
assumption that history repeats itself, popular
chart patterns have shown that a specific price
movement is following a particular formation
of price (chart pattern) with high probability of
defining a direction.
chart pattners are grouped into
• 1)continuation patterns
• 2)reversal patterns
A falling wedge forms after a long uptrend
where buyers take a breath(sellers try to take
back control of the market this can be
observed by lower lows and highs) later on
buyer takes over and continue riding the upper
trend

A rising wedge forms after a long down

trend, here sellers tend to take a breath or
buyers try to take control(which can be
observed by higher highs and higher lows),
after the condensation of price sellers win
and price goes back down
A bearish pennant occurs in between a down trend
where by buyers and sellers come in position of in
decision leaving the price in a tight space, here
mostly sellers come and take control of the market

A bearish rectangle forms when there is indecision

between buyer and sellers in between an uptrend,
this can be spotted by the ranging market formed.
Here we buy after price broke the resistance level
A bullish pennant forms after an exotion of an
up treand here buyers are tired so sellers come
and try to move the price back

A berish rectangle forms when exorion of a

down treand occurs and sellers tend to fight
with buyery on where to move the price, at
last sellers win, so we enter a short trade after
the break of the support
 reversal patterns
Patterns which signal reversal/ change of
direction of the underlying trend.
• Double Top
• Double Bottom
• Head and Shoulders
• Inverse Head and Shoulders
• Rising Wedge
• Falling Wedge
Head and souder might be the most popular
pattern. The read line represent a support or
ressistance line, here the price tries to break
the resistance or support line but fails so price
turns back to the direction it was before

Inverse head and shoulder is the opposite of

the head and shoulder pattern. This pattern
mostly forms below a support. Price tries to
break the support but fails and end up
here price tries to break the support which is
the neckline and fails. Price forms two bottoms
before changing direction. We take a buy
position at

A rising wedge is a reversal pattern which

signals the end of buyers when prices tights up
and form an wedge shape. We enter a sell
order after the break of the trend line below
A falling wedge is the opposite of a rising
wedge here price reverse from sellers in
control to buyers. After the wedge is formed
we wait for price to squeeze we wait for price
to break the trend line above
 Multiple timeframe analysis

Multiple time frame analysis is simply the process of looking at the same pair
and the same price, but on different time frames
This means that different forex traders can have their different opinions on
how a pair is trading and both can be completely correct.
You can view prices in a chart in different time frames from a minute to
monthly chart time frame. But bear in mind that’ many time frame brings
a lot of confusion. This is because every time frame speakes a different
tone.
This may get you confused and lead you in making a wrong decision
Which time frem should I trade

• Each forex trader should trade a specific time

frame that
• Well it depends on your personality and
character. You have to feel comfortable with
the time frame you’re trading in. fits his or her
own personality
• we choose time frames according to our goals, and
build an analytical approach so that we know the
time to employ our strategy and enter trades
based on what time it is that we want to get out of
the market.
• traders can get conflicting views of a currency pair
by examining different time frames. While the
daily might be showing an up-trend, the hourly
can be showing a down-trend. But which way
should we trade it?
How to use different time frame
• a longer time frame will allow the trader to see a ‘bigger
picture of the currency pair so that they may get an idea of
general trends(direction), while the shorter time frame chart
can be used for plotting the actual trade. This leads into a very
popular permutation of technical analysis in which traders
incorporate multiple time frames into their approach.
Classification according to time frame
• Here we see a relationshi between time
frame, type of trader and position holding
period
Trader type Holding Trend chart Entry Chart
period
Long-Term 1 day + Weekly Daily
Swing-Trader Few hours- Daily 4 hours
few days
Short-term Less than a 4 hour Hourly
day
Scapler Less than few Hourly 15 miuntes
hours
 Physiological levels

• This are levels of definite price where traders tend to

watch when price approch
• This are those levels which shows a major shift in the
price of the underlying asset. We usualy watch the
shift in price to a bigger decimal place in it qoatation
Example 1.0000, 1.1000, 1.2000 this are example of
figures traders tend to think are unique therefore
price will likely bounce from them
Time zone trading

The forex market can be broken up into four

major trading sessions: the Sydney session,
the Tokyo session, the London session, and
time to trade, the New York session.
Different pairs pose a different volume during a
difined trading zone as shown below
Currency colleration

• Correlation is a statistical measure of the

relationship between two trading assets.
Currency correlation shows an extent to which
two currency pairs have moved in the same,
opposite, or totally random directions within a
particular period. Awareness of currency
correlation can help to reduce risk and
strengthen our trading experience.
• Example if we
• Examples of strong positive correlations (Yearly time frame):
• EUR/USD and GBP/USD (+ 0.89)
• EUR/USD and AUD/USD (+ 0.81)
• EUR/USD and EUR/CHF (+ 0.93)
• AUD/USD and Gold (+ 0.75)
• Examples of strong negative correlations (Yearly time frame):
• EUR/USD and USD/CHF (- 0.85)
• USD/CAD and AUD/USD (- 0.88)
• AUD/NZD and NZD/SGD (- 0.78)
• USD/JPY and Gold (- 0.78)
• So we should avoid to trade opposite position
for trade with same colleration.
• This also
Secondary Analysis

• In this chapter we will disscuss indicators which look

at price information andtranslate it into simple, easy-
to-read signals that can help you determine when to
buy or sell
• Technical indicators are based on mathematical
equations that produce a value that is then plotted
on your chart.and when to sell a currency pair.
 Technical indicators are divided into
the following categories
• Trending Indicators
• Oscillating Indicators
• Volume Indicators
 TRENDING INDICATORS
• identify and follow the trend of a currency pair.
• Forex traders make most of their money when
currency pairs are trending, It is therefore crucial for
you to be able to determine when a currency pair is
trending and when it is consolidating. If you can enter
your trades shortly after a trend begins and exit shortly
after thetrend ends, you will be quite successful.
• We will take a look at the following trending indicator
- Moving average
- Bollinger bands
 Moving average
• They show you what direction a currency pair is
going and where potential levels of support and
resistance may be
• You can adjust the volatility of a moving average by
adjusting the timeframe the indicator looks at to
obtain the average price.
Moving averages that look at fewer time
periods to determine an average are more volatile.
• Moving averages that look at more time periods to
determine an average are less volatile.
 How a Moving Average is
Constructed
• Moving averages are constructed by finding the
average closing price of a currency pair at any given
time and then plotting these points on a price chart.
The result gives you a smooth line that follows the
price movement of the currency pair.
MOVING AVERAGE TRADING SIGNAL
Entry signal—when an up-trending currency pair bounces back
up
• after hitting an up-trending moving average, or when a down-
trending currency pair bounces back down after hitting a
down-trending moving average.
Exit signal—when you enter a trade on an up-trending currency
pair,
• set a stop loss below the moving average. As the moving
average rises,move your stop loss up along with the moving
average. If the currency pair ever breaks far enough below the
moving average, your stop loss will takeyou out of your trade.
 BOLLINGER BANDS
• Bollinger bands, created by John Bollinger, are
a trending indicator that
• can show you not only what direction a
currency pair is going but also howvolatile the
price movement of the currency pair is.
• Bollinger bands consist of two bands—an
upper band and a lower band—and a moving
averageand are generally plotted on top of the
price movement of a chart.
How Bollinger Bands are Constructed
• Bollinger bands are typically based on a 20-
period moving average. This moving average
runs through the middle of the two bands.
The upper band is plotted two standard
deviations above the 20-period moving
average. The lower band is plotted two
standard deviations below the 20 period
moving average
 BOLLINGER BAND TRADING SIGNAL

• Bollinger bands provide useful breakout signals for currency

pairs thathave been consolidating.
• Entry signal—when the bands widen and begin moving in
opposite
directions after a period of consolidation, you can enter the trade
in thedirection the price was moving when the bands began to
widen.
• Exit signal—when the band narrows the price of the currency
pair
moved away from the breakout turns and starts moving back
toward the current price of the currency pair, set a trailing stop
loss to take you out of the trade if the trend reverses.
OSCILLATING INDICATORS

• Oscillating indicators, as their name suggests, are indicators that move

back and forth as currency pairs rise and fall. Oscillating indicators can
help you determine how strong the current trend of a currency pair is and
when that trend is in danger of losing momentum and turning around.
• When an oscillating indicator moves too high, the currency pair
isconsidered to be overbought (too many people have bought the
currency pair and there are not enough buyers left in the market to push
thecurrency pair higher). This indicates the currency pair is at risk of losing
• momentum and turning around to move lower or sideways.When an
oscillating indicator moves too low, the currency pair is considered to be
oversold (too many people have sold the currency pair and there are not
enough sellers left in the market to push the currency pair lower). This
indicates the currency pair is at risk of losing momentum and turning
around to move higher or sideways.
MOVING AVERAGE CONVERGENCE
DIVERGENCE (MACD)
• The moving average convergence divergence (MACD) is
an oscillating indicator developed by Gerald Appel that
can show you when trading
• - It helps you identify volatility in a currency pair
• - It helps you identify potential reversal points for a
currency pair
• - It helps you confirm the strength of current trends
How the Moving Average Convergence Divergence
(MACD) is Constructed

• The moving average convergence divergence is

constructed based on a series of moving averages
and how they relate to one another. The
• standard MACD looks at the relationship between
a currency pairs 12-period and 26-period
exponential moving average. Specifically, the
MACD looks at the distance between these two
moving averages. If the 12-period moving average
is above the 26-period moving average,
Moving Average Convergence Divergen(MACD)
Trading Signal
• Entry signal—when the MACD crosses above the trigger line, you
can buy the currency pair knowing that momentum has shifted from
being bearish to being bullish. When the MACD crosses below the
trigger line, you can sell the currency pair knowing that momentum
has shifted from being bullish to being bearish.
• Exit signal—when the MACD crosses back below the trigger line
when you have bought the currency pair, you can sell the currency
pair back knowing that momentum has shifted back from being
bullish to being bearish.
• When the MACD crosses back above the trigger line when you have
sold the currency pair, you can buy the currency pair back knowing
that momentum has shifted back from being bearish to being
bullish.
 STOCHASTIC
• stochastic is an oscillating indicator developed by
George Lane that can show you when investor
sentiment changes from being bullish to bearish and
from being bearish to bullish. The stochastic can also
show you when traders are becoming over-extended,
which usually results in a trend reversal for the
currency pair.
 How the Slow Stochastic is Constructed
• The slow stochastic consists of two lines—%K and %D
—that oscillate in a range between 0 and 100. %K is
constructed based on where the current closing price
of a currency pair is in relation to the range of closing
prices for that same currency in the past. %D is a
moving average of %K.
 Stochastic Trading Signal
Entry signal—when %K crosses from above 80 to below 80, you
can sell the currency pair knowing that investor sentiment
toward the currencypair has shifted from being bullish to
being bearish.
• When %K crosses from below 20 to above 20, you can buy
the currency pair knowing that investor sentiment toward the
currency pair has shifted from being bearish to being bullish.
Exit signal—when %K reverses direction after having crossed
either above 20 or below 80 and crosses over %D, you can
exit your trade knowing that investor sentiment is changing
direction again
VOLUME INDICATORS
• Since currencies are traded on the inter-bank
market and not on a central exchange, volume
data for currency transactions is not available.
Without volume data, you cannot construct
volume indicators. Therefore, we do not use
volume indicators in Forex trading.
FUNDAMENTALS ANALYSIS
• The key to making money in the Forex is understanding
what makes currency pairs move. Ultimately, it is
investors who make currency pairs move as they buy
and sell different currencies, but these investors buy and
sell for a reason. Either they see something happening
fundamentally in the global economy that makes them
believe a currency is going to get stronger or they see
something happening fundamentally that makes them
believe a currency is going to get weaker. In other
words, they watch the fundamentals and make their
decisions according to what they see.