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Rabu, 14 Januari 2009

Forex

Forex Supreme Course
What is Forex?
Forex is a market that was created in 1971 when
international trade changed from fixed to floating exchange rates.
The Forex Currency exchange was the best way to control
currency because the market determines the value of one
countries currency over another. The main difference between a
countries traditional market and Forex is the amount of money
that exchanges hands on a daily basis. On an average day, it is
estimate that $300 billion dollars is exchanged in the world
securities market. Want to guess how much money is exchanged
in the Forex market in an average day on a daily basis? 1 to 3
trillion dollars in one day. However, Forex is anywhere from
being a traditional world market for the following reasons:
• There is no trading floor
• All trades are done over the telephone and on computer
terminals in banks all over the world simultaneously
• The market is open 24 hours a day.
In a respect, Forex is very similar to your everyday stock
market in a couple of ways. First, the changes in currency rates
are caused by economical, political, and psychological factors.
Factors affecting the economy such as interest rates, inflation,
unemployment, and others affect the exchange rates on a
minute-by-minute basis. The state of the countries government
can significantly impact the exchange of their currency. If an
investor can not have confidence in a particular countries
government policy then it will show in the currency market.
One factor that is very important to remember when
exchanging currencies is that many times it is the expectation of
what is going to happen to a currency and not actual changes
themselves. For better explanation, let’s compare this idea to
something that could happen in America’s stock market. If
“Apple” was preparing to have an earnings forecast right after
Christmas, investors might grab a lot of Apple stock because they
expect the stock to rise after the earnings report. There is no
concrete evidence that Apple’s earnings were positive, these
people are simply speculating. Trading currency is the exact
same way, if an investor believes something good or bad is going
to happen to the state of ones country, they will trade the
currency based on this speculation.
The reason why many investors use charts and systems is
simply because trading currency is done very quickly. In order
to keep up with what exactly is going on and for the investor to
profit they must use technical charts and systems when major
levels of resistance and support are being reached. Experience in
predicting traders is how many currency exchange managers and
investors all over the world make their living. They understand
that “When XYZ happens” then “Average Joe trader is going
to do this” so “I need to do position myself this way to
profit out of this situation.”
As you will learn, there are many successful Forex traders
out there. It takes discipline, hard work, and experience. The
best way to explain exchanging currency is that it’s a constant cat
and mouse game. Follow our systems and we will teach you how
to catch and then bank your profits. Be disciplined and practice
good money management and you will succeed.
What are the basics of Forex?
Whether you are going to be trading Forex professionally or
just for fun part-time, there are some basics you NEED to learn.
The rest of this book will use many of these terms and you will
see them on a day-to-day basis while trading currency.
Exchange Rate- The value of ones currency in comparison to
another. For example if you see, EUR/USD 1.2100, 1 Euro is
worth $1.21
Currency Pair- Two currencies that make up an exchange rate.
Base Currency – The first currency in the pair. This also
describes the currency your account is traded in
Counter Currency – The second currency in the pair. This is
also described as the counter currency.
ISO Currency Codes – Below are listed currency codes, there
are many more, but these are the main ones:
USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar
AUD = Australian Dollar
NZD = New Zealand Dollar
Currency Pair Terminology- This is basically the slang terms
for trading certain currency pairs.
EUR/USD – “Euro”
USD/JPY – “Dollar Yen”
GBP/USD – “Cable” or “Sterling”
USD/CHF – “Swissy”
USD/CAD – “Dollar Canada”
AUD/USD – “Aussie Dollar”
NZD/USD – “Kiwi”
FCM – Futures Commission Merchant. An individual or
organization licensed by the U.S. Commodities Futures Trading
Commission (CFTC) to deal in the futures products and to accept
money from clients to trade them.
Forex ECN Broker- ECN simply means “Electronic
Communications Network.” Basically, the ECN of the Forex acts
similar to the stock market ECN, where market makers, banks,
and traders can have a real-time trading platform to make their
trades.
They can put and bids and offers either in or out of the spread,
making it possible for traders to make trades based on these
prices.
Counterparty- One of the participants in a transaction
Pip – The smallest increment a currency can make which is also
known as points. 1 pip = 0.0001 for EUR/USD. USD/JPY = 0.01
Pip Value – This is the value of the pip. Pip value can be fixed or
can be variable depending on the currency pair and the base
currency of your account. For example, the pip value for
EUR/USD is always going to be $10 for standard lots and $1 for
mini lots.
Here is how to calculate the pip value of the currency you are
trading:
Divide 1 pip by the exchange rate and then multiply it by the lot
size to get the base currency pip value. To convert the pip value
over to your currency value, simply multiply the pip value by your
exchange rate.
Lot- This is the standard lot size per transaction. Usually a
typical lot size is 100,000 units of the base currency, or 10,000 if
it’s what called a “mini” lot. Currency is even traded in what is
known as a “micro” lot. There are many dealers that will let you
trade any unit size, all the way down to 1 unit.
Spread- This is the difference between the sell quote and the
buy quote. For example if you see “ EUR/USD - 1.2400/03, this
means the difference in the spread is 3 pips. For a trader to break
even, their position must move in the direction of the trade equal
to the amount of the spread.
Margin – The deposit that is required to open or maintain a
position. A 1% margin requirement makes it possible for you to
control a $100,000 position with a $1,000 margin account.
Standard Account – Trading with standard lot sizes, usually
100,000 units of base currency.
Mini Account – Trading with mini lot sizes, which are generally
10,000 units of base currency.
Micro Account – Trading with micro lot sizes, which are usually
1,000 units of base currency.
Leverage- Using borrowed funds to gear your account. By
increasing your leverage, you can either gain or lose more funds.
Divide total open positions by your account equity to get the
leverage ratio. For example, if a trader has $2,000 in his account
and opens up a $200,000 position with $2,000 in his account , he
is leveraging by 200 times or 200:1.
Manual Execution – An order that is executed by a dealer
intervening.
Automatic Execution- An order that is executed automatically
without dealer intervention
Drawdown – The extent to which equity is lost through a series
of trades. This is measured from the height to the lowest,
commonly measured by percentage.
Support – Technical term where buyers outweigh sellers. The
prices will bounce off of a floor temporarily.
Order Types
Market Order- An order to buy or sell at the current market
price.
Stop-Loss Order – An order to restrict losses at a specified
level.
Limit Entry Order – An order to purchase below the market or
to sell above the market at a specified level. Your belief is the
price will reverse direction from that particular point.
Stop-Entry Order – An order to purchase above the market or
to sell below the market at a specified price, your belief is the
price will continue in the same direction it is currently.
OCO Order- One Cancels Other. An order where if one is
executed, the other order will be canceled.
GTC Order- Good Till Canceled – An order that stays in the
market until it is either filled or canceled.
Trading Styles
Fundamental Analysis Trading – This style of trading involves
analysis of macroeconomic factors of an economy, underpinning
the value of a currency and placing trades that support the
trader’s outlook of the economy.
Technical Analysis Trading –This style of trading involves
analysis of price charts for certain technical patterns of behavior.
Range Trading- This style of trading goal is to profit from buying
technical levels of support and then selling technical levels of
resistance. The upper level of resistance and lower level of
support is what defines the range.
Scalping – This style of trading involves frequent trading to gain
small gains over a short period of time. The trades can last from
a few seconds to a few minutes. This is the preferred method for
many online day traders.
Swing Trading- A style of trading that involves seeking profit
from short to medium terms in swings of the trends happening.
Trades can last from a few hours to many days.
Position Trading- A style of trading that involves taking a long
term position that is reflective of a long term outlook. The trades
can last from a few weeks to many months.
Discretionary Trading – A style of trading that uses human
judgment and decision making in every single trade.
Automated Trading – A style of trading that involves neither
involvement nor human decision making, it uses a preprogrammed
strategy that is based on technical or fundamental
analysis to automatically execute trades via an automatic trading
platform.
Trend Trading- A style of trading that tries to gain profit from
riding short, medium, and long term trends in price.
News Trading – A style of trading where a trader attempts to
profit from fundamental news announcements on a country’s
economy that will affect the value of a currency, usually trying to
gain short term profit immediately after the announcement is
released.
What you will need to trade Forex
• A Forex Trading Account - We recommend using
www.marketiva.com
• Money to invest in Forex – Only invest what you can afford
to.
• Forex Trading Software - I recommend using MetaTrader4
which can be downloaded for free at www.marketiva.com
What should I know to be
successful in trading Forex?
#1 RULE “Follow the system, limit your losses, and you
will succeed!”
I am going to make this first point very clear, because I
strongly believe it is the most important factor to remember. In
order to be a successful Forex trader, you must be willing to take
your profits and not look back.
The #1 mistake I see currency traders make is follow a trend,
news, or position too long. They have made up in their mind that
this is the trade where they can get 100+ pips and just forget
about what their system is telling them to do.
The reason systems are in place is to help limit your losses and
profits. By limiting the amount you are going to profit/lose, you
will be a long-term winner by keeping control of your trading
account. It’s really frustrating and sad to have a trader e-mail
me and tell me he lost his whole account because he held on to a
position for too long and ended up losing 50% of his money on
the trade.
#2 RULE: “Plan your trades first, and then trade what your
plan is telling you”
Next, you need to focus on planning your trades first, and
then trading your plan. Your job as the trader is to follow a strict
trading plan. Do you know who is going to write the trading
plan? You are! After you write this plan your job is a breeze
because all you have to do is follow the trading plan you have
devised yourself.
All you need to do is follow the rules of your trading plan
which should have a setup, entry, and exit. If you are doing
anything else, then you are simply complicating your job more
then it needs to be.
#3 RULE: “Don’t trade more then you can afford”
It never ceases to amaze me how many traders want to
invest their life savings into high risk investments. On any given
day, any trade can go from good to bad in a matter of minutes.
Do not trade more then you can lose!
While systems, trends, and services are all made to help you
improve your profits and keep you from losing, sometimes it is
inevitable that you will have a bad day.
I recommend trading in these terms, if your overall bankroll
for trading is $50,000 then never invest more then 2-3% on any
one trade. This would amount to a max of $1,500 per trade.
Stick to your principles regarding money management and your
system and you will do well in this business. Just imagine if you
were to invest all your money on one trend one day. What if all
of a sudden the trend took a steep downhill and you lost 50% of
your total money on that trade? How would you feel after that?
Not only would it take months to work your money back up, you
would lose a lot of confidence in your trading ability.
#4 RULE: “Don’t think of this in terms of cash, think of
this in terms of pips”
My advice to my traders is once you put the money in your
trading account, forget it is even cash. It’s harder to execute
trades when you think of them in turns of dollar bills. It’s better
to try and just win pips.
Have you ever wondered why at the casino all they use is chips?
It’s because psychologically, a gambler is much more likely to
gamble more and not be as worried if they are just throwing
around chips. Well, this isn’t quite gambling, but the same
concept should be used with Forex. Try to win pips, don’t think
about winning money.
#5 RULE: “You are the boss”
Remember, you’re the boss of every trade you put into
action, you are the one that is responsible for failure or success.
You will not have anyone telling you to put in this trade or study
this chart.
You must be a self-starter and have an entrepreneurial spirit to
do this day in and day out. If you have never “been the boss”
before then you will learn how much of a responsibility you are
about to undertake.
You cannot find yourself getting too stressed out at the
market or market makers. Negative emotions will get you in a lot
of trouble and will show on your trades. Be sure to follow your
systems and not your emotions!
#6 RULE: “Be careful of your language and how you treat
yourself”
If you beat yourself up for making a bad trade, then you will
never be able to move on to make the good trades. Your mind
does not respond well to repeated abuse. Be sure to keep in
perspective of how you act when you win and win you lose.
Losing is a part of this game, and if you can’t deal with it, then
you are in the wrong game.
#7 RULE: “Fewer trades are better!”
Too many times I see my eager students want to get
involved in way too many trades too quick. They are trigger
happy and want to make a move on every trend or move they
see. My advice is until you really get a grip on trading is to not
make more then 2-3 trades at a time until you really get a
handle. I know this is contradictory to what many experts say,
but from my experience it can save you a lot of headache and
money. You need to learn the markets inside and out before you
are out there making 10+ trades a day.
#8 RULE: “Don’t consume your life with trading, enjoy
life!”
I understand how exciting trading can be, but it shouldn’t be
your life. If you allow yourself to be consumed by trading 99%
of your day, then in the end, your life will be very sad. You need
to get out and socialize with people, enjoy life! Take some of
your profits, go on a vacation, and find new interests.
After working with traders for so long, I began to notice a
trend in most of them. For a lot of traders, they are in this
because something is not right with their life. They are having
problems with their family, at their work, or just in general. They
almost look at trading as an escape from the world around them.
Folks, this is the wrong reason to be in trading. Fix your life
before trading and you will enjoy your time more!
#9 RULE: “How a Real-Time Trader Keeps Organized”
The fact is, it’s rough out there for a real-time trader. You
have to deal with data coming at you literally every moment of
your waking day. It becomes really hard to keep the big
perspective of making meaningful trades in your sight.
I highly recommend for any trader, especially real-time traders
to keep a traders diary. At the end of the day, you should be
able to say “Hello Diary, today I made this trade because of
this..” , “I probably acted the wrong way on this trade.. I won’t
make that mistake again..” , “Diary, this trend is really working
well, keep track of it in future trades.” It doesn’t matter how you
do it, whether it be written or just a blank Microsoft Word
document, the fact is it will help. You’re the only one that is
going to be looking at this document, so it doesn’t matter how
you write it, you just need to actually sit down and write it!
#10 RULE: “This isn’t gambling, this is trading!!”
I can’t stand watching Forex traders that make trades just
for the rush of making a trade. If you like throwing away your
money, then go for it, but if you are here to make profits then
you NEED to follow the signals, trends, and systems. If you are
bored, go rent a movie, don’t think “Wow, I think I can pull out 5
pips really quick if I do this, and if I lose who cares it’s just 5
pips.” My friend, that mentality will destroy you in the long run
of trading.
Keep trading to trading and keep gambling to gambling.
The Forex Supreme System #1 –
Easy Pip Gainer
While this system may seem very easy and simple at first glance,
it really has been my most profitable system to date.
Here is how it works:
1. Set up with any time frame you feel comfortable with. Your
trades will usually last no longer than a day, but some can
be longer.
2. In your charting software, which you can download at
www.marketiva.com, setup the following parameters on
your graph:
• Insert an MACD indicator using the following
parameters:
- Fast EMA 40
- Slow EMA 50
- Signal SMA 100
Or insert Moving Average of Oscillator (OsMA) with the
following parameters:
- Fast EMA: 40
- Slow EMA: 50
- MACD SMA: 100
3. You will be closely following the changes in value of the
MACD and OSMA in each and every price bar.
After you have setup the indicators on your graph, be sure to
follow the following rules:
1. Place a long (buy) trade when the MACD or OSMA value
at the current bar is greater than its value at the previous
bar.
2. Place a short (sell) trade when the MACD or OSMA value
at the current bar is less than its value at the previous
bar.
3. Stop loss and take profit are set at 50 pips. (That is for 1-
hour timeframe. Adjust accordingly for other timeframes.)
This system will work with any time frame you use. If you do not
have time to make intraday trades, then use this system on the
daily, weekly, or monthly timeframe.
If you are a day trader, you can use this system with your hourly,
or four-hour time frames. But don’t use this system for 5-minute,
15-minute, 30-minute timeframes. It’s because with these short
timeframes, a lot of noise and whipsaws will occur, and render
the system ineffective.
Here is an example of this system in action:
6 trades in 12 days. ALL WINNERS!
This was our chart from the period Nov 15th to Nov 29th. Over a
two week period we made 6 trades, profiting on every trade.
Follow the rules for the MACD indicator and you will be able to
profit on 85% of your trade. Again, this will work if you are
trading hourly, four-hour, daily, weekly, or monthly.
Here is an example of another trade using the Easy Pip Gainer:
24 trades in the span of the month of November. We charted this
one using the OSMA indicator. You can use the MACD or the
OSMA to make the trade, use whichever one you feel more
comfortable with. The first green dot resembles the first trade we
made as a buy. Each dot after that resembles when we
sold/bought/sold/bought.
The Forex Supreme System #2- Double
Indicator Assurance
16 trades in 23 days. ALL winning trades! Green Dots
represent buying or selling
This system is really reliable. I’ve found it to rarely fail me in all
the years I’ve been trading. Above is an illustration. We call it
the double indictor assurance because you have to examine two
indicators before you can make the trade. The success rate of
this system has been very good, you just really have to make
sure you are following the rules accurately.
Here are the steps to the system:
1. Your trade times will vary. There are some trades that can
last just a few hours, or there are trades that can last a
couple of days.
2. Okay, you setup the MACD (5,12,100) indicator.
Fast EMA: 5
Slow EMA: 12
Signal SMA: 100
3. Setup your RSI 21-period indicator.
4. Place a long (buy) trade when your MACD crosses “UP” and
your RSI moves ABOVE 50. I have drawn a red line on the
graph above to indicate the 50-value line. There are plenty
of trade opportunities when the RSI is above 50 and MACD
is crossing upward.
5. Place a short (sell) trade when MACD crosses “DOWN” and
your RSI moves BELOW 50. You can easily see when this is
about to happen, you just have to keep a good eye on both
indicators.
6. Close your trades at a profit/loss of 40 pips.
If you are going to use this method, you need to make sure
you have a close eye on your charts. For example, on October
31, the indicators said to BUY, and then later that day they told
you to SELL. On the other hand, the chart indicated to buy on
Nov 3rd and not sell until mid-day Nov 5th. Your trade times
will vary based on how the indicators respond to the market.
Here is another example of a winning trade, these trades were
done in the EUR/GBP
9 winning trades in a month! Time your trades at the right
time using the right indicators and you’ll always be a
winner!
As you can see, this system will work with any currency market
you are comfortable with. Be strict and make sure you follow the
MACD and the RSI. Both indicators must work together to make
the trade.
Conclusion
We’ve tried to outline everything you need to know about
Forex to be a successful trader. We believe the most important
factor to keep in perspective is in order to be successful, you
need to have a plan. Forex Trading can be compared to any
other investment out there, without planned entry and exit
points, it will be hard to ever come out ahead.
Forex Currency Trading is very fun and can be very
lucrative. I recommend learning everything possible out there
about Forex before getting heavily into trading. The systems we
outlined above are what we believe to be two of the best out
there today. Be prepared with all tools and a great learning
attitude and you should thrive in the wonderful currency
exchange market.

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