Forex System

Forex System Part I-Introduction What is Forex? Forex is the knowledge and art of trading currencies in a way to gain some profit. In other words, Forex market is a place where people buy or sell currencies expecting profit. It is clear that we only buy when we expect the value of a currency will raise and sell when we expect it will fall. All the efforts of a Forex trader are in this way that predict the upward or downward movement of a currency. Currencies are usually expressed as pairs with US dollar as the base. Major currency pairs are relevant to the major economical countries. EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CHF and USD/CAD are the majors. 1-2 Profit/Loss Units (pips) Pip (or in plural pips) connotes point in percent, means one forth decimal in a unit of currency. For example if the price (or ratio) of USD/CAD goes from 1.0035 to 1.0085 it has changed 0.0050 unit or 50 pips. So, if you buy USD/CAD at 1.0035 and sell it at 1.0085 you will profit 50 pips. 1-3 Investment Units (lots) A lot in Forex means the portion of trading investment in comparison to $100,000. For example if you invest $10,000 in a trade it will be $10,000/$100,000=0.1 lot. It is very important that you take your trading lot size according to your investment budget. Usually investing 1/30 up to 1/20 of the total budget in a single trade is considered safe. 1-4 Leverage One of the advantages of Forex market that makes it very attractive is that the brokers multiply your investment amount in each trade by usually 50-500 times. This is called leverage. For example if you invest $50 in a trade with a broker of leverage 100, actually you will enter to the market with $5,000. In this case your trade lot size will be $5,000/$100,000=0.05, or if you want to trade 0.1 lot at leverage of 150 you should invest (0.1x$100,000)/150=$66 in this trade. So, your required investment in each trade will be determined by your lot size and the leverage level of the broker. Using the leverage offer of the broker is upon your choice and there are lots of controversies around it because although you can multiply your profit if you leverage your investment, in the same time there is a risk of a great loss (if the

currency goes in wrong direction). But to end this argument we have to say if our trading system (or strategy) is reliable and its profit/loss ratio is high why not use leverage advantage. Leverage is bad in a case which the risk of loss is higher than win. 1-5 Forex Charts Forex charts are the drawings of currency pairs in various time windows. The are drawn in forms of lines or candles. Candle forms are traders standard and the most beneficial form for trading purpose because each single candle shows the opening, closing, maximum and minimum of the price in a specific time window. If a candle body opens at a lower and closes at a higher price it is called bullish or long and is drawn in green (or blue). Maximum and minimum spot prices in the same candle are shown by spikes. If the price opens in a higher spot and closes in a lower price the candle or chart is called bearish or short and is shown in red. Candle charts are the top most visual tool to analyze a trading opportunity. In this way, having top quality charts are very important. A good chart should be clear, exact (both in pricing and drawing) and well-scaled. Only on such a chart you will be able to spot prices, compare, evaluate or calculate them or realize the patterns. You can get an amazing Forex trading system for free from the below address. With an amazing 90% profitable trade rate, the system has proven itself during the time. The system is full of rare, top secret tips and strategies that only 1% of Forex traders know them. I earn constantly 3200 pips a month using this system. It is so easy that you can do indeed. This offer is only valid for a short time. So, just don't miss this one time in a life opportunity. http://forextoplist.blog.com/forex-secret-system/

Part II- Support And Resistance Many traders believe that support and resistance are the most important concepts in Forex. I describe them and their use here so you can judge yourself how much they may worth. Support is a zone where the currency price can hardly pass it and goes down further. It is not a fix price but a price range that each time the price reach it lose momentum and stops there. On the other side, resistance is a zone where resists the price to goes up further. If we draw an hourly or a 4-hour chart for each of the currency pairs we can see top and down levels that price has tried them many times but never has passed them as if those levels act as barriers for the price. If we take a closer look at the charts, there are several intermediary support and resistance levels between weekly or monthly high or low prices. Weekly or monthly highs and lows are called strong support or resistance. The price hangs

around them for awhile and then goes up or down to reach another intermediary level as if it jumps between these levels. If again we revisit the charts we understand that when the price releases from one level almost in all times goes non-stop to reach the nearest level, then heads for another level in its neighborhood. This is a point that needs some attention. If this is true, so there is plenty of trading opportunities when a currency moves from one support or resistance level to another one. Actually, experienced traders use the full potential of this property to their advantage. However, support and resistance have a deeper meaning. Support occurs when a series of positive economical factors force the price to stop weakening and push it upward. Just the same, resistance take place when a series of negative economical factors cause a price to stop. At these levels, the currency has reached its full potential and can not goes further. To go further and pass the barriers it needs more positive or negative economical drives. From this view we can resemble support and resistance as the two poles of an electromagnet with the price swings in between. The reason of the price swing is the current of electricity (in our case economical drives). When the current increases, the price jumps up and when it decreases, the price goes down. So, a smart trader takes the most out of all these theories. Trading has a close relationship with probability. So if we take it to account, the chance of breaking of strong supports or resistances is much less than the chance of price rebound. According to this logic, if we buy at support or sell at resistance, with a high probability we will be on the profit side. Math says this and all we know that math is right. You can get an amazing Forex trading system for free from the below address. With an amazing 90% profitable trade rate, the system has proven itself during the time. The system is full of rare, top secret tips and strategies that only 1% of Forex traders know them. I earn constantly 3200 pips a month using this system. It is so easy that you can do indeed. This offer is only valid for a short time. So, just don't miss this one time in a life opportunity. http://forextoplist.blog.com/forex-secret-system/

Part III-Forex Chart Patterns For many reasons, forex charts usually obey some patterns. If you work with them and your eyes get familiar with them, these patterns are very powerful tools to guide you during your trades. There are many patterns and each of them has its name but to be simple and short I explain here only the most proven patterns which always work and you can rely on. 3-1 M and W (Bat) Patterns These are the most frequent chart patterns and more or less have M or W shapes.

Sometimes, one leg extends or another leg gets short. These are not very accurate signals but they help you to get a rough estimation of a currency move. 3-2 Weakening M and Strengthening W (Triangle) Patterns In contrast to M and W patterns, weakening M and strengthening W patterns are very accurate signals. A weakening M occurs when an upward (bullish) move is completed, then a weaker downward move (one third or half of the first move) forms and then a very weak (usually one candle) bullish follows it. After completion of the third move you can say with a high confidence that the currency price will sharply drop. This is the point you should sell the currency and gain a nice profit. Strengthening W pattern has just the same story but in a reverse order. I love triangle patterns because they are very strong signals and nearly always are correct. 3-3 Weakening Upward or Downward (Cascade) Patterns These are in fact upward or downward moves that get weaken during the time. For example, an upward move starts with three bullish candles, then continues by one bearish candle, then two bullish and again one bearish and hence forth. It is obvious that the move gets weaken and then tends to reverse (a major or minor reversal depends on the support/resistance type, for example if a weakening upward cascade reaches a major resistance level it is highly expected to go for a big reversal). These patterns are tradable in two forms. The first is at the time when only the first few bullish or bearish candles have formed and the move is in its half way to get matured (reach a support or resistance level). At this time we can buy or sell and wait until the move ends, then close the trade with profit. However, these are short or medium range moves and we can not expect so much pips. The second better use is at the time when a move gets matured and a reversal is imminent. We can take this opportunity and trade. I also like weakening cascades because they are very reliable and stable signals. 3-4 J or Reverse J Patterns These patterns form when a move starts with very dwarf body candles and during the time the candles get taller and the move escalates. In these patterns the candles are usually uniform (full bullish in upward or full bearish in downward moves). The start of such patterns are usually from a strong support or resistance and they are profitable if the trader recognize them at the very early stages. If they grabbed in time, they are very reliable and profitable. 3-5 Fractals Fractals in general are regularly repeated shapes in various scales. Fractals occur in forex charts and are very various in in both shape and size. If a fractal is detected in the early stages (when the first or second fractal has shaped), the

trader can trade on it. Trading fractals needs much experience and many forex professionals use them in their advantage. You can get an amazing Forex trading system for free from the below address. With an amazing 90% profitable trade rate, the system has proven itself during the time. The system is full of rare, top secret tips and strategies that only 1% of Forex traders know them. I earn constantly 3200 pips a month using this system. It is so easy that you can do indeed. This offer is only valid for a short time. So, just don't miss this one time in a life opportunity. http://forextoplist.blog.com/forex-secret-system/

Part IV-Consolidation and Breakout, Local Maxima and Minima 4-1 Consolidation and Breakout If a currency swing in a relatively tight price range (10-20 pips) for a long time (a few hours or more) it is said that the currency is in consolidation. If we zoom in a 4-hour consolidation by charting short time frames (for example 15-minute charts), we can see several zigzag moves. As soon as we zoom out the same consolidation to a 4-hout charting, that consolidation transforms to a single 4-hour dwarf candle (that may have equal head or tail spikes). So, charting time frame can hide or show a consolidation. Moreover, any short range equilateral candle in any time frame is a consolidation if it is charted in smaller time frames. If we take a look at the behind scene, it will be found that consolidation happens actually when economical forces reach a very tight balance. Positive and negative forces fight each other to overcome and push the price up or pull it down. During a consolidation period this does not take place until one of the forces wins and causes a fast, big move. Such a move is called breakout. In other words, breakout is the release of currency from a tight consolidation range and heading fast upward or downward seeking to reach new price levels (usually at a strong support or resistance). General rule is that the momentum of a breakout depends on the duration of its consolidation. Longer time consolidations usually signal that bigger breakouts are on the way. Now, the question is when a breakout will happen and what will be the direction of the move. The answer is a breakout happens when the involving economic forces get out of balance and it goes to the direction that the winner forces determine. To know about these forces we need to learn more about economy, currency dynamics and forex fundamentals. 4-2 Local Maxima and Minima During the study of consolidation or support and resistance we note that the price goes up and down in a short range (10-30 pips). These price levels are local maxima or minima. To take out the most from our trade and gain the maximum

profit we should always wait the price reach its local minima to buy and its local maxima to sell. This way we will earn 10-30 pips more profit in each trade. Moreover, in setting stop loss, we should always consider local maxima and minima. You can get an amazing Forex trading system for free from the below address. With an amazing 90% profitable trade rate, the system has proven itself during the time. The system is full of rare, top secret tips and strategies that only 1% of Forex traders know them. I earn constantly 3200 pips a month using this system. It is so easy that you can do indeed. This offer is only valid for a short time. So, just don't miss this one time in a life opportunity. http://forextoplist.blog.com/forex-secret-system/