Forex Trading Made E-Z

Forex Trading Made E-Z

Forex Trading

How to Trade the Forex Markets for Maximum Profits

by: G. C. Smith

Limits of Liability/Disclaimer of Warranty The author and publisher of this book and all material contained herein have at all times used their best effort in producing this material. However, the author and publisher make no representation or warranty with respect to the accuracy, completeness, or suitability of this material for use by any individual or entity. The author and publisher disclaim any warranties (expressed or implied), as to the merchantability or fitness of this program for any purpose whatsoever. The author and publisher shall in no event be held liable for any loss, damage or omission by the use of this publication, including, but not limited to, any special, incidental, consequential, or other damages This publication contains material protected under International and Federal copyright laws and treaties. Any unauthorized reprint or distribution of this material is prohibited.

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Table of Contents Table of Contents.....................................................................................................................2 Disclaimer................................................................................................................................3 Preface................................................................................................................................4 Introduction.....................................................................................................................5 Background.....................................................................................................................9 Finding a Broker.....................................................................................................................11 Money Management.................................................................................................................14 Setting up Shop........................................................................................................................18 Managing the Latitude Lines....................................................................................................19 Constructing our Charts............................................................................................................27 Analyzing the Trading Day......................................................................................................33 Averaging the Swings...............................................................................................................42 Using the Oscar Calculator......................................................................................................45 Some Observations................................................................................................................51 Make Your PC do the Math....................................................................................................54 Point and Figure.....................................................................................................................57 A Trading Day........................................................................................................................61 Tips and Tricks.........................................................................................................................64 Some Final Thoughts................................................................................................................68 About the Author....................................................................................................................70 Appendix..............................................................................................................72

VIDEOS 1. Introduction.......................................................................................................................24 2. Managing the Latitude Lines .............................................................................................26 3. A Long Roll Day...................................................................................................................40 4. Averaging the Swings............................................................................................................43 5. Oscar..................................................................................................................................49 6. 2008 Videos........................................................................................................................55 7. 2009 Videos.........................................................................................................................63 8. Point and Figure..................................................................................................................60 9. Tips and Tricks....................................................................................................................67 10. Real Time Trading - (1).......................................................................................................67 11. Real Time Trading - (2).......................................................................................................67 12. Real Time Trading - (3).......................................................................................................67

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Disclaimers Each individual investor’s success depends on his or her own background, education, dedication, commitment, desire and motivation. As with any business venture there is always risk of loss of capital and there is no guarantee the use of this publication will result in profits or success. The information contained herein is intended strictly for educational purposes. Nothing in this publication should be construed as a recommendation to buy or sell any security or to provide any investment advice. It is possible the author and/or publisher of this book at this or a subsequent time in the future may own, buy, or sell securities discussed. Information provided herein has been obtained from sources believed reliable but no guarantee is made as to their accuracy or completeness. The advice of a competent legal, tax, accounting, or business professional should be sought at all times.

U.S. Government Required Disclaimer – Trading foreign exchange markets on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in the Forex market, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Readers of this publication should also be aware of the following CFTC disclosure rule 4.41 regarding hypothetical performance results: HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN ACTUALLY EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS MADE THAT ANY USE OF THIS INFORMATION WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.

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PREFACE The material you are about to read is the full and complete version of a condensed report entitled “Forex Trading Made E-Z” The condensed report, consisting of 25 pages, was written in abbreviated form to introduce traders to the author’s strategy and is reproduced here for those who have not received a copy of the original report. It is important to read or re-read the original report – especially the section on money management since it embodies the original concept I derived from martial arts legend Bruce Lee. In his movie, “Game of Death,” Lee envisioned a pagoda on a small island where each level is guarded by a greater and more advanced defender. To reach the top he must win at each level. The same is true if we are to attain the goal of earning $500 per day, starting with as little as two or three hundred dollars. My vision in writing this manuscript is to help you reach your level of success by winning in the Foreign Exchange Markets.

“Forex Trading Made E-Z”

Published by

Adrian Research & Development Website: http://www.forex-trading-made-ez.com Email: [email protected] Copyright © 2010 Adrian R&D All Rights Reserved Revision 6.2

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INTRODUCTION You’re about to embark on a journey like nothing you have ever experienced. By the time you’ve reached the half-way point of this book you’re going to say something like, “Maybe it really is possible to earn $500 Dollars a day!” Let me introduce myself. I’m G.C. Smith. Perhaps you know me from my previous eBook, “$500 Dollars Per Trade.” Maybe I’ve met you at seminars we’ve attended. Or maybe we’ve exchanged emails in the past. Whatever the case, you’re going to enjoy the trip I’m going to take you on as we learn all about how to trade the Foreign Exchange Markets – Forex for short. It’s now a little after 8:30 PM, Pacific Daylight Time, on Sunday, September 13th 2009. I’ve just finished watching 60 minutes on TV. I also bought a $12 pizza from Papa Murphy’s. While I’m eating I just happened to see an easy trade shaping up on my PC. I see so many of them it sometimes makes me frustrated. It’s like a patrolman watching speeders go by: “I can’t catch ‘em all!” If I can trade the Eurodollar against the U.S. Dollar from 1.4540 to 1.4520 I’ll make twelve bucks which will pay for my pizza. Using the tactics you’re going to learn in this report I did just that. It took about an hour. And this isn’t even my normal trading day – Monday through Friday. Okay, maybe I’m showing off. But, now that I’ve got your attention, let’s look at my trade a little closer. Because this trade represents what could be your goal to make $500 Dollars a day – or one million Dollars by next year. There’s no reason you can’t, as long as you follow the rules I’m going to outline and maintain the discipline it’s going to require.

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Let’s look at a chart of the trade. Each candle is equal to five minutes in duration.. We’ll explain more about this later. Note how prices are swinging back and forth? That’s good. If they remained flat, no one would make (or lose) anything. And, prices were trending down! We sold 6,000 units (equal to $0.60 cents per pip) using about $190 trading dollars. We entered the trade at 1.4540 and closed it at 1.4520.

That’s equal to twenty, so called “Pips.” Twenty pips times 60 cents is $12. Again, right now don’t worry about all the technical terms and words. I don’t know an awful lot more than you about what all this means – and I could really care less. But I do know how to trade. And that’s what I’m going to teach you. So, hold on to your hat, and bear with me as I try to describe what could be a turning point in your life. Page 6 ©Adrian R&D - All Rights Reserved

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Let’s start by crunching some numbers. How long do you think it would take to double our money if we made five percent a day? That’s right. Five percent a day! Before I answer that let’s go back to my pizza trade. I made $12 using around $200 Dollars. If we were to make five percent on $200 Dollars it would be $10 Dollars (200 times .05). With just one trade we made better than five percent! If we earn five percent a day it will take fifteen trading days to double our money. Hard to believe, but true. Take a look at this table. DAY

START

5%

END

TOTAL

1 2 3 4 5

500 525 551 578 606

25 26 27 28 30

525 551 578 606 636

25 51 78 106 136

6 7 8 9 10

636 667 700 735 771

31 33 35 36 38

667 700 735 771 809

167 200 235 271 309

11 12 13 14 15

809 849 891 935 981

40 42 44 46 49

849 891 935 981 1030

349 391 435 481 530

Pretty impressive wouldn’t you say? If we could just double our money every fifteen days, the sky’s the limit! In fact, let’s see what it would look like.

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1st fifteen days: 2nd fifteen days: 3rd fifteen days: 4th fifteen days: 5th fifteen days:

$500 goes to $1,000 $1,000 goes to $2,000 $2,000 goes to $4,000 $4,000 goes to $8,000 $8,000 goes to $16,000

In just a little less than three months we could be earning five percent on $10,000 Dollars – $500 per day! Want to carry this a little farther? $16,000 goes to $32,000. $32,000 goes to $64,000. $64,000 goes to $128,000. $128,00 goes to $256,000. $256,000 goes to $512,000. And $512,000 goes to One Million, Twenty-four Thousand Dollars. Is this really possible? Yes! Is it realistic? Maybe! But, not without a great deal of training and discipline. For example. Right now, would you take $10,000 Dollars and try to double it? I doubt it. It’s too stressful. How about $500 Dollars? “Yeah, I could probably afford to risk that much,” you might say. Whatever amount you start with, that’s when your training begins. And, as you become more and more experienced, you can begin to trade larger amounts with more confidence. That’s the concept I’m going to teach you. How to handle ten thousand dollars as if it’s $500.

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CHAPTER ONE - Background We’re going to start by debunking a bunch of myths. First off, you don’t have to understand a lot about the currency markets. Most of us know there is a difference in the exchange rate if we take a trip to Canada, or Mexico, or Japan. If you were to go to Japan right now, a dollar would buy about 100 Yen. You go to a kiosk or money changer, perhaps at the airport, and purchase whatever amount you think you’ll need. That’s easy enough. But what if you’re a large bank doing business overseas. Your client has just purchased 1,000 new Toyota’s and they need to be paid for with Yen. That’s not so easy. That’s why the Forex markets exist. Rather than try to teach you all about the Forex business in this guide, simply download this excellent publication that explains what Forex is all about. The author sells a training program for about $2,000. For the record, I do not participate in any sales commission for his program: http://www.forex-trading-made-ez.com/power_forex.pdf Now for some facts. The market is huge. More money changes hands each day than nearly all the stock exchanges combined. That’s not that important to us as traders because we can trade with as little as $100. There’s no commission charged, as there is at a stock exchange. That’s good. We don’t have to worry about paying extra if we get stopped out of our trade. (I’ll explain later what that means if you’re not an experienced trader.) Instead of a commission, a small spread between prices is leveled just like when you change money at the airport. For example, my pizza trade entry price was actually 1.4541. I had to make slightly more than $12 dollars to net twelve. The most important thing I want to impress upon you at this time is risk control. Page 9 ©Adrian R&D - All Rights Reserved

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You’re going to make money. But you’re also going to lose money. How much you lose will determine your net profit. Always keep that in mind. You must control your losses if you expect to make the kind of money we discussed earlier. Lastly, this is a “hands-on” trading manual. I’m going to train you to make money the same way I trained many pilots to fly jetliners. That’s right. For many years, as an airline captain/instructor, trained by Boeing, I taught other airline pilots how to fly jetliners. So what’s that got to do with trading? Just this. When it comes to flying airplanes, you want to do it in the safest way possible. And the same thing is true when trading! You want to do it in the safest way possible. Much of the material will be very specific. Much of it will be repetitious. But that’s how you learn. Don’t try to outguess the strategy. Everything you’ll learn has a purpose. Keep an open mind and you’ll do just fine. You don’t have to be smart. You don’t have to have a degree in rocket science. You just have to follow the rules and procedures. Just like flying a jetliner!

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CHAPTER TWO - Finding a Broker First things first. We need a broker to handle our transactions. This is a little dicey for me because I use a broker I consider one of the best: OandA. It’s just my own opinion. And I don’t receive a dime for referring you to them. You may already have a broker of your own, but if not then give them a try. For one thing all the charts and trades you’re going to see in this report are done on the OandA platform. If you’d like to check out additional brokers, try www.google.com and type in “forex brokers.” Here’s a post from a forum regarding OandA that expresses my sentiments completely. From: Nick in Brisbane Review: “I've been using OandA for almost 2 years and haven’t experienced any major issues with their service or platform. Their charting software is not the best but the most important things for me are tight spreads on the majors and reliable execution of orders. The bitching that goes on here about wide spreads during data releases just confirms my opinion that most would-be traders here are novices with very limited experience or knowledge of the mechanics of financial market places. During volatile market conditions all brokers have to face and deal with widening spreads from their liquidity providers. That’s the nature of the global interbank market. For some reason all the "Johnny come lately" trade-from-home novices that frequent this site think that for some reason brokers such as OandA should bear the cost of this volatility by guaranteeing fixed spreads. Trading currencies intra day is not a get rich scheme but a highly skilled niche skill. If you can’t devise a way to make money without betting on split second volatility during data releases then go and find something else to do.”

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What he’s saying is there is widespread trading based on news events. For example, if you think an interest related report is coming out that is going to move the markets, you jump on it. But let’s be honest. Do you think you can catch that kind of trade consistently when your competition is big banks with millions of dollars? I don’t trade news stories. I never have. It’s just not worth the grief if you’re on the wrong side. So I would strongly encourage you to refrain from that kind of trading unless you have a really good crystal ball! Now that we’ve got that out of the way, let me be more specific. I only trade the Eurodollar/US Dollar (EUR/USD) pair, but my strategy works with any currency pair. If one currency gets stronger than the other then the numbers go up (or down). To tell you the truth I don’t really understand why. The less I know about economics the less likely I am to be influenced one way or the other! I just know how to trade the numbers! Now, this is very important. On most days, at precisely 08:30 AM, Eastern time, and then again at 10:00 AM Eastern, a variety of reports usually come out that can shock the markets. We want to avoid holding a position around those times! If you want to check for all the daily reports from around the world go here: www.forexfactory.com Once again, for the few moments before and after these times, avoid trading. When the fireworks are over we go back to our regular trading pattern. We make our profits on small, consistent trades that add up to five percent per day. We don’t shoot for a big killing that might expose us to devastating losses! If we don’t reach our goal of five percent, possibly because of a very slow day, we don’t try to make up for it. We simply wait for tomorrow to continue our efforts.

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We’re not in a hurry. We’re not greedy. We know we’re going to the world series even though we’re going to lose a lot of games on the way! Before I finish beating this issue to death, there is one more thing you must take into account and that is the meeting convened, usually eight times a year, by the Federal Open Market Committee (FOMC). This is the group (commonly called the Fed’s Fund Rating) that defines interest rates. This has a huge impact on the currency markets. DO NOT try to trade during the few minutes before and after the report is made public, around 2:15 PM. Eastern. To obtain the dates, go to: http://www.federalreserve.gov/monetarypolicy/fomc.htm#calendars End of issue!

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CHAPTER THREE - Money Management Before we get into the actual tactics of trading the Forex markets we have to cover what I consider the single most important element of trading: money management. We can be the best trader in the business, but if we let our losses exceed our gains we’ll end up being a loser! I often compare trading to gambling. I talk about it extensively in the last chapter of this program manual. It’s called “gamblers mentality.” If you gamble and make money you believe you can make more if you just keep betting more and more. Some gamblers even feel guilty about winning so much in such a short time – but that’s another story. When you gamble at a casino the odds are pretty much even. Less than one percent at the dice table. That means you should lose only one dollar for every one hundred wagered. So why is it 97% of the people go home broke? Do I have to answer that, or do you know the answer already. It’s called greed. And that’s what you must overcome if you are going to be a successful trader. Here’s what happens if you’ve been making money at a casino and start to lose (which is inevitable). First, you begin to lose control. You bet bigger and bigger as you lose. You toss aside whatever strategy was making money for you when you were winning. You start “chasing” your money. Any idea of making a profit is abandoned. You’re only thought is getting back even. Until, of course, it’s time to go home. Page 14 ©Adrian R&D - All Rights Reserved

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And that’s what this chapter and the Forex markets are all about. You’re already home and the markets are still open. Forex is a 24 hour casino, right on your PC! And, unlike internet gambling, it’s legal. Nevertheless you must accept the fact there are millions of traders out there – like a vast casino – that all have the same idea. “Make a bundle of money, and go home.” Well, we’re going to rise above that “herd mentality.” Just like a cattle stampede you’ve seen in the movies. Do you want to be a part of that? I didn’t think so. So, here’s how we handle our money, plain and simple. Let’s go back to my pizza trade. I made $12 using about two hundred dollars. Let’s see . . . that’s about six percent on my money ($12 divided by 200) (duh!). But what if I had lost six percent? That’s $12 also. Would you agree that’s not a very good way to trade? We need to lose less than we earn. How? By limiting our loss to no more than two percent on any one trade. That way we maintain control of our money. Let’s say we really had $1,000 dollars in our account. 2% of $1,000 is $20. We could actually lose three times and still break even if we earned six percent, or $60. We don’t have to be real smart. We just have to do the math! And the Forex markets allow us to do that. We know exactly where to get in and where to get out to make or lose two percent. And many times we’ll lose much less than two percent – often just breaking even – which is fine with us. Remember, our original goal is to make five percent per day. And that brings us to the hard part. What do we do when we’ve made five percent? We quit for the day. “But why quit when we’re making money?” you might ask. Let me ask you a simple question. What are you going to do if your very next trade is a loser? Are you going to quit then? Once again, I don’t think so! Page 15 ©Adrian R&D - All Rights Reserved

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Now can you see what I’m getting at. Our overall goal is to double our money every fifteen days. So, maybe it takes eighteen or nineteen because we had some bad days. What’s a “bad” day? It’s when we lose ten percent of our money. That’s $50 on five hundred. Once again, we quit for the day if our losses total ten percent of what we started the day with. Some traders will argue that’s excessive. But, as we’ll see, our strategy is so strong that it’s rare to have a “bad” day. Plus, a good trader will always quit long before that. The next day we start out like nothing happened. We have a fresh mind and attitude and pretty much know our strategy will overcome our losses. We’re not trying to “get our money back.” We’re not beating ourselves up because we had a losing day. We’re in control! Now, let’s recap all this. 1. We never risk more than 2% on any one trade. 2. We quit for the day if we’ve made five percent on our money. 3. We quit for the day if we’ve lost ten percent. 4. We also quit at 3:00 PM Eastern for a few hours until the market activity picks up again usually around 10:00 to 11:00 PM Eastern, sometimes sooner. If you start your trading day like I do at 8:30 AM Eastern (5:30 AM Pacific) – since I’m retired – I’m usually done within 2-3 hours. Often in less than an hour! If you have a day job you might trade after dinner instead of watching TV! Of course when and if you make a go of this business you can quit your day job. Now, here’s a couple of tips to help you maintain your discipline. First, to keep you from going back to the trading table after you’ve quit, try using this website: http://www.webjillion.com/index.php It’s called Temptation Blocker, and once it’s activated it won’t let you go back to any program you’ve selected for whatever time you input. (You can override it but it takes an effort.) Page 16 ©Adrian R&D - All Rights Reserved

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Next, here’s an example of how I keep track of things as I trade. I take a shopping list and jot down my objective for the day - good and bad. It looks like this.

Each time I complete a trade I add up the score. I know how I’m doing at all times. There’s no doubt in my mind. Try it yourself! Page 17 ©Adrian R&D - All Rights Reserved

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CHAPTER FOUR - Setting up Shop Let’s log on to our trading site. I’m going to use http://www.oanda.com but you can use whatever you have now, or try out OandA if you’re a newcomer. Most firms, including OandA, have two kinds of accounts. An actual trading account and a “demo” account that works the same way. If you’ve never traded before then I would suggest the demo account at first, then open a real account for maybe $100 until you become more experienced. Once you’re on the home page scroll down to “About OandA” on the left side. After reading about the company, which is pretty impressive, go to their FAQ site at http://www.fxtrade.com/whyfxtrade At the bottom of this page you can select either “Open An FXTrade Account” or “Open An FXGame Account” which is their demo account. If you decide to open an actual account, you will need to fund it. The simplest way is with PayPal. If you don’t have a PayPal account go to http://www.paypal.com and click on “sign up” and follow the instructions. You can use a credit card and/or a bank account to deposit funds. Then go back to OandA and log in. Go to “Deposit Funds” and follow the instructions. It’s easy and it’s secure. You must first submit a form, for security purposes, that tells them you are going to submit funds. Follow the instructions, but be sure to click on “Log in to cash management” to advise them you are sending funds. The rest is easy. You will have to pay a small fee to transfer funds. Don’t worry about it. Hopefully, you will quickly make up this fee. Are you ready to go? Because you’re about to enter the “big time.” It doesn’t matter if you’re just starting out with $100 or $100,000. You’re going to double your money if you follow the rules I’m going to outline. Page 18 ©Adrian R&D - All Rights Reserved

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CHAPTER FIVE - Managing the Latitude Lines Well, we’re finally ready to make some money. But first, I have to remind you that we’re also going to lose some money. Remember our loss factor? 2%. Multiply whatever you’re starting with by 2%. Let’s say it’s $500. 2% would be $10. That’s what we’re going to risk on our next trade. That’s what we must base our trade on. A loss of $10. We’ll come back to that in a minute. Before we go any farther, however, I want to call your attention to a few items that I believe are important for you to understand. First of all, I am not a “Guru” in any sense of the word. I am simply a technically minded person with time on his hands who likes to train others to be successful in the Forex business. The same way I enjoyed training other pilots to fly jetliners.. The truth of the matter is, there are many, many sites that promise far more than they deliver. They prey on the “get rich without any work” crowd. That`s why I think you should know what you are up against before you begin trading. Although trading can be enjoyable when you are winning, it is actually a well structured enterprise to relieve the weak and uninformed from their hard earned cash. I`m going to tell you up-front, right now before you lose any money, if you are not willing and able to apply yourself in every way possible, you are not going to make a go of Forex trading. It`s just that simple! There is also another side element to this business, and that is the constant sales pitch traders receive once they have purchased a Forex product. I personally believe that is unethical and only points out the greed that exists within the internet framework. It is one thing to introduce you to another product that may have value for you, but to sell you another “horse racing system” simply because you couldn’t get the first one to work, I think is inexcusable. Page 19 ©Adrian R&D - All Rights Reserved

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That`s one reason I want you to fully understand what I`m about to teach you. For example, there is only one way to fly an airplane. You can go up, down, or sideways (level). But you can`t go backwards. The same thing is true with Forex. Prices can go up, down, or sideways, but you can`t undo what has happened to you in the past. In the pages ahead I`m going to teach you several strategies, each one designed to fit the activity of the Forex market. Think of it this way. If we are flying blind in a snowstorm we`re going to be using different procedures than we would if we were flying in the clear. It`s the same with Forex. We still want to get to our destination but we may use different tactics to do so. You can use these strategies by themselves, or you can use them in combination with each other. You may find one that works really well for you and disregard the others. That`s okay too. What I want you to be thinking of is this. I want you to be consistent. I want you to be a “smooooth” pilot. We don`t want to earn a nice profit today and then give it all back tomorrow. We`ll never reach our destination that way. My basic strategy – and the one I like best – is based on crossing horizontal lines I call “Latitude Lines,” similar to the lines drawn horizontally around the globe. As a pilot, if I’m flying from Seattle to Los Angeles I’m going to cross several latitude lines as I fly South, i.e. down. I’m not going to turn around at San Francisco, because that’s not my destination. I’m going to keep flying until I reach Los Angeles. If I’m flying from Miami to New Jersey I’m not going to turn around at Charleston, South Carolina. I’m going to keep going North! You get the picture. And that’s the way it is with trading. Many potentially good traders are always thinking ahead too soon – before they reach their final destination. So, we’re going to show you how to reach your destination by using a roadmap of prices on a chart!

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What do prices look like when they’re moving up and down? There are several kinds of charts, the most popular being the bar chart, but traders often use several types. On a bar chart the top of the bar is the high for the day (or period), the bottom the low. On the right side a small tick is made indicating the close. Sometimes a tick is made on the left side indicating the open price. Another type of chart gaining popularity – and the one I use – is the "candlestick" chart. The body of the price shows the open and closing price. If the body is black it means the close was lower than the open. On our Forex chart the body is red instead of black if prices are falling. The body is blue if the close was higher than the open. The so called shadows or "wicks" at the top and bottom indicates the high and low for the period. Let’s compare the two types. This is a bar chart:

The same chart as above in candlestick form looks like this:

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We use a combination of three charts. A 15 minute, (each candlestick is 15 minutes in duration) a 5 minute and a one minute chart. We use the 5 minute chart to trade with, the 15 minute chart to help us determine the trend, and the one minute chart to help us enter the trade at the right time. What we need to know first is the overall direction, or “trend” of the markets. We don’t want to be going in the wrong direction when we trade (or fly – like what recently took place in Minnesota). Take a look at this five minute candlestick chart.

Can you see those blue horizontal lines running across the chart? Those are price lines which I refer to as “Latitude Lines” because that’s what they remind me of when I’m looking at a navigational chart. Each time prices passed from one line to another you could have made money. (Or lost money if you were going in the wrong direction!)

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We can actually make money when prices move up or down. When they are moving down it means the U.S. dollar is getting stronger. If they move up, the dollar is getting weaker. As a trader we don’t really care. In fact it can be a distraction to assume just because the U.S. has won some kind of economic or military battle the U.S. Dollar must get stronger. The movement of the dollar relies on only one element: supply and demand. Since we don’t know how much is supply and how much is demand, we must turn to what we can see on our chart: the current direction of prices. Let’s look at another type of chart.

This is called a Heikin-Ashi candlestick chart. Notice how the candles are blue when prices are rising, and red when they are falling, or “pulling back.” There’s not much question here that prices are rising. You would have made money by simply buying on one line and selling on the next. Makes sense doesn’t it? But hold on. It’s not that easy. The problem is prices are rising on this five minute chart, but they might be falling on a 15 minute chart. This may be just a temporary rise in a falling market. Think of it as a jetliner. We’re in a descent, but a sudden gust of wind pushes us up for a few moments. Page 23 ©Adrian R&D - All Rights Reserved

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We can see that on our rate of descent indicator and you can feel it in your seat! After we recover we continue our descent. That’s what often happens with prices. So we have to be aware what is actually happening by checking the time frame of other charts. When we are actually ready to enter the trade we will often use the one minute chart to time things even a little better. Now go back to the chart on the previous page. Notice how the color of the blue candles tends to persist as prices rise? If we just randomly jump into the trade during that rise we might be getting in right at the top of a swing. That’s no good. Instead, if we wait for the pullback – the red candles – and then place an order to buy if prices start to rise again we stand a better chance of success. Watch this video to see what I’m talking about. The video also discusses several trading indicators we will be showing you later on in the manual. Don’t worry about that for now. http://www.forex-trading-made-ez.com/fx121409.html Remember I said earlier we must often use different tactics for different situations. In this example we were able to identify that a “choppy” period had developed which allowed us to achieve our five percent goal in just three trades. I’ve often been asked exactly how I trade the latitude lines the way I do. There are a number of tricks and specific tactics I have learned over the years, that I’m going to share with you now. If you are an experienced trader you will know what I’m discussing. If you are just starting out you will see I refer to ideas and indicators you will be learning about later. In that case you can come back to this page and review these tactics as you learn more. First of all, I usually look for a “choppy” day, but that's really not that important. I can always trade the latitude lines on a "long roll" day, as you will see on many of my videos. Second, I try to determine about how far prices might be swinging back and forth from their highs and lows on a five minute chart. Let's say it's 30 pips. I'll take one-third of that distance and use it for my projected profit, in this case 10 pips. I don’t always trade exactly from line to line. I may buy at 1.4750 but exit at 1.4756 if I’m shooting for a six pip profit. Page 24 ©Adrian R&D - All Rights Reserved

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For example, if the swings are about 20 pips I may use a 6-7 pip profit, and so forth. I just want enough wiggle room to make a profit when lines are crossed. Sometimes I see that a trade may be turning into a longer move than just moving from one trading line to another. I may see that by observing the 15 minute chart. In that case I might be able to shoot for a lot more pips. I always start the trade with a stop loss equal to one-and-a-half times my profit. 10 pip profit, 15 pip stop. 6 pips, 9 pip stop. And so on. Of course as soon as prices have stabilized and are moving in my direction I tighten up the stop as much as possible – usually five-to-ten pips away from prices, depending on volatility. I keep moving it as the trade goes in my favor, never in the wrong direction. I get stopped out often, but I never get badly hurt. Once in a while a trade turns on me right after the fill and I get stopped out at the max -- perhaps 15 pips. In that case I stop all trading and walk away for maybe a half hour. I do that because there is always that tendency to "get back at the market!" I'm sure you know how that is if you’ve done much trading. Now, I'm going to let you in on a little secret. People tell me they are amazed how I can pick a successful trade so often. The fact is – are you ready for this? -- I GUESS! That's right, I simply try to guess where prices might be headed and get a limit order in front of it. (A limit order is an order that can only be filled at the price you specify.) If I'm wrong and prices go in the opposite direction I'm not in the trade. In that case I just cancel the order and wait for another opportunity. Now, why do I pick a particular latitude line to trade? Over the years I've observed that once a "round" number is crossed, (like 4120, 4130, or 3960, 3950), prices often keep going in that direction. It's as if the Forex crowd sees that as "past history" and won’t let prices go back to the past! Of course that's not always true. That's why we use stops! What are stops? Those are orders we place under or above our trade which will be executed if prices move against us. Page 25 ©Adrian R&D - All Rights Reserved

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What do I use most to help me guess? Other than the EMA's on the 5 and 15 min. charts, I use the trading line on the 1 and 5 min. charts. Often I back it up with Point and Figure (P&F). I know that once a three box reversal occurs, prices usually keep moving in that direction. (I’ll be teaching you all about P&F in Chapter 12.) Of course I also use the color change on the Heikin-Ashi candles to help me determine where prices might be headed. Finally, I also watch the bars and signal line on the 5 minute MACD chart to show the current state of prices -- whether they've bottomed, peaked, or in-transit. I know this all sounds complicated right now. But once you have your charts set up and understand what each one is telling you, it will become second nature. Think of it as sitting in the cockpit of a jetliner. There are dozens of dials in front of you. But we don’t look at all of them all at once. We scan them. We use the one that is most important at the time – like altitude or airspeed. You’ll do the same with a Forex chart! Before I finish this chapter let me clear up any confusion you might have on how we figure how much money to use on any one trade. OandA uses a system of “units” to trade with. To me it is very simple, but if you are used to trading with lots you may want to understand how units work also. Let’s start with “pips.” A pip is like a point (dollar) in stocks. A pip, just like a stock, can have a different value depending on how much you have invested in the trade. When we trade with units, 1000 units equal ten cents per pip. If we were using 1000 units and we earned 10 pips we would make one dollar. Go here to calculate how many units to use www.forexcalc.com If you are trading with OandA and using $100, you would be allowed to trade about 3,400 units with your one hundred dollars (at 50:1 margin). You would earn $3.40 on a ten pip profit. Now, watch some of these videos to learn more about this strategy: http://www.forex-trading-made-ez.com/heikin-ashi.html http://www.forex-trading-made-ez.com/line.html Page 26 ©Adrian R&D - All Rights Reserved

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CHAPTER SIX - Constructing Our Charts When trading any free market entity there are two ways to go about it. You can try to figure out the direction of prices by reading the “fundamentals,” the various economic and financial reports that come out periodically. This is a particularly daunting task. A better way, in my opinion, is to follow prices on a chart. This is called “technical” analysis and is usually a far more successful way to trade financial markets. We previously learned how we use three basic charts to trade with – a one minute, five minute and a fifteen minute chart. Because they all have a different time frame, we need to learn how to use each one in turn. Remember how I said prices could be descending on a 15 minute chart but temporarily rising on a 5 or 1 minute chart? That’s why we need to keep track of what we are doing. We also need to configure the charts with various indicators that can help us trade as successfully as possible. While each indicator displays a different picture – just like the gauges in a cockpit – together they all serve to help us arrive at our destination. In this chapter I’m going to show you how to construct or modify these indicators, and then later explain how I use each one as we go along. I’ve also produced a video of all this which you can view at the end of the chapter. You may find your charts are structured differently than ours at OandA. That should not be a problem. Simply try to follow the basic idea of what we are trying to present to you and then duplicate it on your own chart. . We’ll start with a 5 minute chart as shown on the next page. At the top of the chart make sure you have selected EUR/USD . . 5 minute . . Candlestick. You can change the selections by use of the pull-down menus. Notice how the candlesticks are blue when prices are higher than the previous candle and red when they are lower. Page 27 ©Adrian R&D - All Rights Reserved

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Next, we want to set up our exponential moving averages. There are two of them, a 30 period bar, (colored red) which means thirty 5 minute bars will be averaged (with the last few bars weighted exponential), and a 20 bar average which we will color green. Click on “Add Study” at the left bottom and select EMA. Again, at the bottom change the 14 to 20 and click the plus + sign next to it. Click your cursor on the line displayed and change the color to green. Do the same thing again only change the 14 to 30, and color the line red.

Next, we want to set up the Stochastic index at the bottom of our chart. Stochastics are based on the idea that as prices rise the closing price for that time frame (or bar) tends to settle close to the top of the highest price registered for that time frame. This happens because traders are stimulated to buy as prices move higher. The reverse is true in a decline. Page 28 ©Adrian R&D - All Rights Reserved

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When used with a one minute chart it’s fairly accurate, but tends to lag progressively more and more when used with a longer time frame, like a 15 minute chart. I modify it in an unusual way and call it my “trading line.” Click the “Add Study” button again and select Slow Stochastics. Change the 14 to 8, leave the 3 as is and click on the +. You’ll see two lines appear at the bottom of the chart. One will be sort of jerky and the other smoother. I use just the smooth line. (If you’re familiar with stochastics, it’s the %D line.) I hide the other line (%K) by clicking on it and coloring it black so it blends into the background. The line we’re hiding is much faster, but can give you a false sense of direction because it moves so quickly. Now we need to give it some framework to help us use it. Stochastics rarely move much higher than 80 or lower than 20. That’s why we put in two horizontal lines at 80 and 20. Click on the icon at the top right of the chart (it looks like a pencil) and select “Horizontal Trendline.” Move it to the 80 level and click on it. Do the same thing again and place it at the 20 level. It doesn’t have to be exact. Place another line at mid-level, 50, and color it green. That will complete our stochastic indicator. You can expand or contract it by clicking and holding the top of the index frame while moving your mouse up and down. Remember, we’re doing all these adjustments just on the 5 minute chart. We’ll create the 1 and 15 minute charts by simply copying the 5 minute chart. We do that by clicking on the icon at the top far right of our chart. It looks like this: We then change the chart we’ve copied to the time frame we want. When finished we want to be sure to save all of them by clicking on Tools=>Save Current Layout, found on the platform page of the trading website. To create the “Latitude Lines” we use the same procedure as the stochastic 20/80 lines. We simply place them at whatever price level we want to use. It could be every ten pips on a 5 minute chart, or perhaps every twenty pips on a 15 minute chart. I color the first one blue and then “Duplicate” the rest of them at the selected levels. Page 29 ©Adrian R&D - All Rights Reserved

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The next chart I want to show you is called a Heikin-Ashi chart. It also uses candlesticks but displays them differently. If prices are rising the color of the candlesticks tend to persist until prices change direction. Here’s what it looks like.

Note how the candlesticks remained red all the way down, and then sort of stair-stepped all the way back up? And, look at all the Latitude lines that were crossed up and down! To create this chart is very easy. Simply click on Heikin-Ashi from the pull down menu at the top of the chart. Now I want to point out another use of moving averages on this type of chart. I learned this many years ago from a technical analyst I met in Honolulu at Shearson, Hammill. His name was Richard Donchian and he is now considered one of the pioneers in this business. Look at the top left of the chart above. Note the EMA (3) and SMA (18). Once these moving averages (MA’s) cross over decisively, prices may be getting ready to reverse direction. If instead they simply bounce off one another they may still have a way to go in the current direction. Page 30 ©Adrian R&D - All Rights Reserved

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The next, and last, thing I want to talk about is an indicator I have used for many years, both with stocks and the Forex markets. It’s called a Moving Average Convergence and Divergence, or MACD for short. Rather than go into a detailed discussion of its use here, I would suggest you take a moment and watch this video. It’s important because it is the first step we must take to help us determine the major direction of prices. Watch it now: http://www.forex-trading-made-ez.com/fxdayone.html I’m sure you’re beginning to wonder if we’re ever going to get to the trading business. But I can assure you all of this is necessary. You wouldn’t fly a plane without instruments. The same is true of Forex. We need something to help us stay on course. Always keep in mind a fair amount of work goes in to producing a profit. Is it worth it? Page 31 ©Adrian R&D - All Rights Reserved

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How long would you have to work to earn $500? A day? Two days? A week? I'm a great believer in the concept that we're paid for what we're worth. If we're out of work we're worth nothing! If we're a CEO we might be earning $500 an hour. So the effort we put in to earn $500 or more is equal to the time we spend doing the work to produce these results. I don't know how to put it any other way. Before we finish this chapter I want to touch on an important part of forex trading. I mentioned earlier the number of units you can buy depends on the leverage (margin) you are using. If you are using 50:1 leverage, as I do, you could buy or sell around 3,400 units for each $100 you have in your account. If you use, let’s say, 20:1 leverage you could only buy or sell about 1,700 per $100. Many firms allow the use of as much as 400:1 margin. This is way too much and you risk the chance of losing most of your cash on just one bad trade. You may also be forced out of your trade by what is commonly called a “margin call” when your trade reaches a certain limit. All of that is unnecessary. I easily make 5% using just 50:1 margin. And most of the time I’m only using a portion of my cash on each trade. We’ll cover more of this in later chapters, but for now just keep in mind the higher the leverage the riskier the trade. I’ll leave you with this one thought. In October, 1929 the New York stock exchange collapsed. One of the causes of the collapse was the high volume of stocks that were purchased with only 10% down. In other words, a hundred dollar stock had only to move to $90 and you were wiped out!

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CHAPTER SEVEN - Analyzing The Trading Day If you’ve ever gambled at a dice table you know there are two types of action. Most of the time the dice are “choppy.” You win for a short while, then you lose. Then you win, then you lose. You can’t seem to get ahead. You become bored or frustrated. And just when you think it’s time to quit, the dice start to win over and over. They begin a long roll where only the steel-nerved gamblers bet up the table. The weak are pulling back because they’ve been conditioned to losing. When the roll is finished, the winners have made up all their losses and then some. The losers have won a few dollars but go home broke. It’s often the same way with the Forex markets. Small up-down moves that are pretty difficult to make any money with. Then large, sizeable moves that seem to come out of nowhere. Moves you just can’t believe keep going, and going and going. That’s why we have to analyze what type of trading day we are having. That’s how our charts give us an edge. That’s how we can adapt our trading to the type of day we are having – a long roll, or a choppy one. If we can just do all that we can make our five percent and go home! So, let’s get down to business. I’ve shown you how to make money trading the latitude lines. That type of trading is more in tune with a choppy market. We can make a quick profit and then get out before prices change direction on us. Let’s see how it works. First, I’m going to show you what a choppy day looks like. Then I’ll show you what I call a long roll day. Lastly, I’m going to show you how to blend them together to suit your personality. Take a look at the choppy day on the next page. Notice how many latitude lines are crossed up and down, but at the end of the day prices are just about where they started. How many lines would you have caught? I’ll bet more than enough to make five percent.

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Choppy Day

Long Roll Day

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Look at the choppy day chart again. Notice how even the trading line at the bottom is choppy compared to the long roll day. In a choppy market we have to be on our toes. We have to almost watch the screen constantly. Now look at the “long roll” day. There are wide swings up, then sizeable swings down. If we can catch just one of those swings we could make our five percent in one trade. But, here’s the problem. Most traders are afraid to hold a trade for that long. They’ve been told, “You can’t go broke takin’ a profit!” They simply can’t believe prices will keep going their way. They get out too soon when they should actually be adding to their position. As I said earlier, they turn around at San Francisco instead of flying on to LA. Well, I’m going to show you how to overcome that fear of losing a profit by explaining the nature of price moves in the Forex market. We already know we don’t trade when news events are imminent. Not too long ago the Feds cut interest rates by ½ percent. It shocked the dollar, plunging it to an all time low against the Euro. But what about normal price swings during the trading day. An interesting phenomenon often occurs. Take a look at the next page. Prices started swinging upwards right after noon, 12:00 p.m. Pacific time (GMT-8), December 23rd 2009. They began making higher highs each time. We should only be buying this kind of market. Had we done so, we would have caught a number of latitude lines. But, more importantly, we would have felt confident trading these swings. Why? Because each one rose more than the previous! Take a look at P1 to P2. It rose 14 pips. Here are the actual numbers: P1- P2 P3- P4 P5- P6 P7- P8 P9- P10

4324 to 4338, 4324 to 4343, 4331 to 4357, 4333 to 4371, 4348 to 4418,

14 pips 19 pips 26 pips 38 pips 70 pips Page 35

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This sort of thing happens all the time. As we get into the trading day the swings often become progressively wider. Then, as the day begins to finish up, the swings contract until they’re often nearly flat. Why is this important to know? Because price movements have a tendency to repeat themselves over and over as they trend up and down. In fact they tend to “overshoot” the next move in a busy market (and undershoot as the markets become quiet). Let’s look at this a little closer. By the time prices have moved from P5 to P6 we are pretty much convinced they are in an uptrend. As prices begin to retract we start thinking about the next upswing. Where will prices stop retracting and start up again? Well, we don’t know that right now. In fact we will only know that in hindsight when prices begin moving higher. How much higher?

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There are many ideas published on just this subject. How much does it take to convince you a turnaround has occurred? I personally use a figure that is 25% of the previous upswing, in this case P5 to P6, or 26 pips. This is simply my choice and many traders use 10%, 15%, 20%. It doesn’t make a lot of difference except the lower the percentage the more likely you are to be filled prematurely. In other words you’ve jumped in too soon! The higher the percentage the more likely a reversal has actually occurred. In our case we take 26 (pips), multiplied by 25% and we get about 7 pips. We assume if prices move 7 pips up from their low they most likely will keep going. But that doesn’t always happen. Many times they move up and then turn around on us and continue lower. That’s why we use a “stop” order. What’s that? It’s an order we place underneath our trade which will sell us out if prices begin to fall. We actually have two orders in place when we are trading. The first is the target price where we will exit with a profit, and the stop order where we are sold out, usually at a loss. Many times, if prices move higher, we can move the stop order higher so we will lose less money if we are “stopped out.” Think of it this way. What if prices turn around after we’ve been filled. They start going down . . and down . . until we realize they’re going lower. So, we can’t let prices go too far. We’re losing money on every pip that prices go lower. If we don’t have a stop loss order in place we’re going to be hurt. That’s especially true if our PC restarts or we lose the internet connection. Prices could fall sharply while we’re offline. Now let’s go back to our trade. On the next page I’ve enlarged the chart showing the P5 point, which I’ve renamed P1, and P6, which is now P2. From now on that’s how we view this kind of trade: P1-P2-P3. What we’re assuming will occur is the price movement from P1 to P2 will be at least as much as P3 to the next high (P4). We already know P1 to P2 is 26 pips. If P3 is 4333, and we add 26 pips we would place our target at 4359 (4333 + 26). Page 37 ©Adrian R&D - All Rights Reserved

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But how are we going to determine P3 when prices are falling? What can we use to help us pinpoint that elusive P3 point? First of all, it doesn’t have to be exact. We do know we want to enter the trade about 7 pips up from P3, whatever it might be. Do you remember when we were using latitude line trading we would place our order on the next higher line above prices? We can do the same thing with P3. Each time prices make a new low – as they decline toward P3 – we could simply add 7 to the new low. However, there are additional ways to help us determine if P3 is being made. One of them is to watch for a color change of the Heikin-Ashi candlesticks, as well as the MACD bars at the bottom. Note how the candlesticks changed color above? Later on, in my chapter on Tips and Tricks, I’m going to show you how to refine and further determine if P3 has actually been made. But for now let’s see how this trade would play out if 4333 became the actual low (which it was). Page 38 ©Adrian R&D - All Rights Reserved

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1. A low is made at 4333. 7 pips up from the low we place a buy order at 4340 (4333 plus 7) for X number of units. We’ll get to that in a minute. 2. The next upswing should be at least 26 pips (P1 to P2). 4333 plus 26 is 4359. That will be our target. That’s where we will place our exit order. 3. If we enter the trade at 4340, and exit at 4359 we will make 19 pips. 4. But wait. There’s more. If prices do continue higher we can add to our position with what we call an “add-on.” Since we are now ahead on the trade it is relatively painless. We do it by placing another buy order about half way up from our entry point to our target. In this case about 4350. I usually use about the same number of units as the original entry order. But this can vary depending on how confident I am of the trade and how close I’m getting to earning my five percent. I may end up simply adding half my original position. 5. At the same time that I place the trade I need to figure out how far I can let prices fall before I must abandon the trade if they turn on me and start down. I use a figure slightly below what I’m assuming P3 to be. I usually use two times the spread. If the spread is 0.9, I will place my stop 2 pips below the P3 low of 4333, or 4331. 6. Now, how do we figure out how much we’ll lose? It’s going to be the difference between the entry point and our stop order, times the number of units we’re using. Let’s say we are working with $500. The most we are willing to lose is 2%, which would be $10. The number of pips we will lose is 9 (7 plus the 2 pip spread). We take $10 and divide it by 9. That gives us the unit value of each pip. We get $1.11. This is equal to 11,111 units, which I would round off to 11,000 units since I’m a conservative trader. We can check this by multiplying $1.10 by 9. We get $9.99. 7. How much will we make if the trade is successful? Our original position will make $20.90 (19 times $1.10). Our add-on another $4.95 if we used just half the number of units (9 times $0.55). With just one trade we’ve made 5.2% ($25.85 divided by $500)!

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Keep in mind prices actually rose to 4371, 12 pips higher than expected. Of course this doesn’t always work out this way. Still, it gives us a good shot at a trade when it does. Also keep in mind this strategy works equally well if prices are declining. We simply do everything we’ve been doing only in the opposite direction. Now here’s the videos for this chapter. Start with the first one which will show you the forex calculator I created to speed up the calculations I just showed you. http://www.forex-trading-made-ez.com/fxdaythree07.html Below is a form I’ve also created that helps me keep track of all the numbers we’ve been talking about. A blank form which you can reproduce may also be found in the appendix on the back page. Using this form I know where to get in (EP = entry point), where to get out (TGT), where I want to abandon the position (STOP), and how many pips I’ll make (GAIN) if I’m successful. I’ll also know how many pips my entry point is from the high or low (PTE = pips to entry), as well how many units I want to use. The PTE is helpful when you’re trying to trail your order up or down from a high or low.

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CHAPTER EIGHT - Averaging The Swings Now I want to show you something that can make your job a little easier when it comes to selecting your latitude lines. Many of my traders use this method exclusively and truly swear by it. This method works great with a choppy environment, as well as long roll days when you just want to trade the latitude lines. You decide if it’s right for you. Basically, we analyze past swings to determine the direction and distance of the next swing which might give us a profit from one latitude line to another. We do this by keeping track of past swings, and then averaging them out to see how far the next swing might move. If the next swing might cross two latitude lines then we could have a winner. At first glance this strategy may appear to be too complicated. But once you try it a few times it will become second nature. I’m going to take it a step at a time and use a log to help me keep track of the swings. Here’s the first entry I make in the morning.

What I’m doing here is looking back at previous swings and estimating the up and down movement of the earlier price swings. Today I’m starting with 20/20. It doesn’t have to be exact. If prices are swinging higher and higher I might use 25/20. I usually start out with 20, 25, or 30, if I can’t really estimate earlier swings. Within a few entries it will average out. Page 41 ©Adrian R&D - All Rights Reserved

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Next, I’m going to enter the high and low that I want to start with. I’m going to use the chart and figures we used earlier on pages 35-36.

The difference between the high and low is 14. I’m going to start by creating a new average (AVG) using the previous average of 20. To average these swings I rely on a calculator I created (AVG.exe) that helps me do the math. You’ll be able to download it later, but here is the basic formula in longhand. First of all, to get a simple average of past swings, we could just add up the last three up or down swings and divide by three. A better way is to "smooth" the figure by multiplying the previous up or down average by two, adding today's swing, and then dividing it by three.

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For example, if we take the UP avg. of 20 and multiply it by 2, we get 40. Add that to the upswing of 14, we get 55. Divide 55 by three we get 18, rounded off. That figure becomes our new average (estimate) of how far our next upswing might go. (In our example you’ll notice the entry at 14:30 just happened to be the same as 12:55.) Before I explain more, this is a good time to watch this video: http://www.forex-trading-made-ez.com/fxdayfivef/fxdayfivef.htm

There are several ways you can use this log to help you see what prices might be doing. For example, take a look at the target figure of 4349 at 17:05. We get that by adding the previous up average of 18 to the 17:05 low of 4331. You would not want to be buying as prices approached the 4349 level. At the same time, remember back on page 38 where we were trying to determine if P3 was a valid turning point? Well, the target at 18:50 was 4341. Since prices had reached that level (and fallen 8 pips lower to 4333) we could begin getting ready for our trade to the upside. Each one of the targets we calculated on this log were reached or exceeded. Page 43 ©Adrian R&D - All Rights Reserved

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If you want to use AVG.exe to speed up your calculations simply download it as shown in Chapter 11. When used, it doesn’t matter if the swings are going up or down. Just follow the instructions. If it asks for the high number put in the last high. The same for the low. Then simply place the figures in the log. I’ve also reproduced a blank copy of my log in the appendix. Here are the training videos for this strategy: http://www.forex-trading-made-ez.com/trend.html

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CHAPTER NINE - Using The “Oscar” Calculator Next I want to tell you about an indicator I put together years ago to help me trade the stock market. Later, I found it works equally well with the Forex markets. It’s an oscillator I affectionately call “Oscar.” Sort of like Tom Hanks calling his basketball friend “Wilson” in the movie “Cast Away.” The first thing I want to tell you is that Oscar is not foolproof. Like any tool, it is just that . . a tool. You must accept this as fact and plan for it accordingly. That means never placing a trade without a stop order. Even if it’s a stop order you know will never get hit.(?) Place it anyway! Second, I want to tell you it can be a lot of work. If you’re trading stocks you only have to calculate Oscar once a day. But, if you’re trading the Forex markets – depending on the time frame – you may find yourself a very busy person. I generally use it on the fifteen minute time frame, but it can be used with the 30 minute, one hour, or even a one day time frame. It’s not just a calculator, it’s also a method of keeping track of prices. You see, many traders tend to be more visually oriented, especially those whose language is learned by memorizing characters, such as Chinese and Japanese, rather than sounds, like phonics. These traders are more “numbers” oriented. At a glance they can see the picture by reading the numbers. For that reason I created a form to assist traders who are more “numbers” oriented. On the next page is an example. It is the high, low, close of each bar on a fifteen minute chart. Once again, there is a blank form you can copy in the appendix. Previously, I also mentioned how you can often use a “long roll”day to help you trade the latitude lines. Many traders simply can’t handle the stress of holding a position that is moving in the right direction but swinging wildly. Using a form like this can give you more confidence in holding a position for a longer period of time.

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So, let’s learn all about Oscar. It’s an oscillator that swings up and down as prices move up and down. We’re looking for it to change direction right about the time prices change direction. If so, we can be fairly confident what direction to trade. Especially if we are trying to determine P3 in our P1- P2 - P3 strategy. Let’s start with the log. As an airline pilot you wouldn’t believe how many logs I had to fill out. At the end of a flight all I wanted to do was go home. No, I had to fill out a flight log, a fuel log, a maintenance log . . even my own personal log book. So, you can see why I tend to keep track of prices. In the case of Forex trading it forces us to face facts. If prices are moving against us, we must we must take action.. If prices are making money for us, we capitalize on it by adding to our position if Oscar is telling us it’s “okay” to do so. We’ll see that by the fact the Oscar numbers may still be rising or falling. To get started, we look back at the last eight entries (periods) of our log. We want to select the highest and lowest price for the last eight periods to place in our program. It doesn’t matter if it’s a five, fifteen, or a three hour period. We go back eight lines. Turn to the previous page. Go down to 04:45. Count back eight periods. The high for the past eight periods (including the prices at 04:45) was 3698. The low for the past eight periods is 3553 (just happened to be at 4:45). The last price (close) at 4:45 is 3562. We then enter these numbers into our Oscar.exe calculator, (which you’ll be able to download shortly), and come up with a figure which we place in the OSC column. This number can be anything between zero and 100 but rarely goes higher than 90 or lower that 10. It doesn’t matter. What we are really looking for are numbers that change direction. If you’d like to stop here and learn the formula for Oscar please visit: http://www.forex-trading-made-ez.com/osc.html Page 47 ©Adrian R&D - All Rights Reserved

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Let’s say the numbers reach 60, then fall back to 50 and continue falling. Chances are prices are changing direction. If they simply fall to perhaps 58 or 57 it might be just a blip or false move that is not significant. We need to watch what it does next. In other words, it’s not mechanical. We want to watch whatever other trading tools we might be using, such as moving averages, higher highs, lower lows, and also the trading line at the bottom of our chart. There are also a few tricks we need to know about the calculator. For example, let’s say we are doing several periods at a time (in case we get behind). If we press 0 (zero) when prompted for “previous oscar” the program will enter the last OSC that was obtained, automatically. To exit simply press Control “C” and Enter. When I get up in the morning, maybe around six o’clock, the first thing I do is look at the 15 minute chart. I analyze the swings that have occurred from midnight on. I then place my cursor over each candlestick and record the high, low, close on my log. This takes me about 30 minutes to do and is really just “busy” work. But believe me, when I’m through I’m wide awake! Of course I have to start with a previous Oscar figure. That’s really not a big deal, since within 6-8 periods Oscar will work itself out. I simply use 50 as a starting point at the first period and then go line by line selecting the high and low of past lines. A more accurate way is to simply place 50 on the seventh line down and start from there. That way you can easily see the highest high and lowest low for the past eight entries. As I said, what I’m really looking for are numbers that change direction. If instead, Oscar doesn’t move much, especially during slow or inactive periods such as off hour trading, it’s not too reliable. Now we need to download Oscar. Simply click or copy this URL to your browser and save the zip file to the root directory of your PC, usually the c:\ drive. http://www.forex-trading-made-ez.com/OSCAR.zip Page 48 ©Adrian R&D - All Rights Reserved

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You will get a window that looks like this: Click Save, and save it to your C:\ drive. After the download is complete, click on “Open” and unzip the file. If your PC does not have a zip program you can get it here at no charge: http://www.pkware.com/download-software You will see two files. The file you want to use is Oscar.exe. Simply click on it to start Oscar. If you have a 64 bit PC you may want to “Run” the program from this site: http://www.forex-trading-made-ez.com/OSCAR.exe By the way, to speed things up, so I don’t have to count back, I made a template out of cardboard that I place over my log sheet like this:

Here is a list of video tutorials that demonstrate the power of “Oscar.” http://www.forex-trading-made-ez.com/fx010209.html http://www.forex-trading-made-ez.com/fx010509.html Page 49 ©Adrian R&D - All Rights Reserved

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http://www.forex-trading-made-ez.com/fx012809.html http://www.forex-trading-made-ez.com/fx012209.html http://www.forex-trading-made-ez.com/fx012009.html http://www.forex-trading-made-ez.com/fx011209.html You might also be interested to see a sample of a site we update daily at our Membership Club using Oscar: http://www.forex-trading-made-ez.com/1006.html To learn more about our Membership Site and forum please visit us here: http://www.forex-trading-made-ez.com/fxmembershipclub.html

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CHAPTER TEN - Some Observations Let’s stop here and talk about some observations I have about Forex, and why I consider the Forex markets far superior for trading purposes than nearly any other market – including the stock market. First of all, there is no commission or exchange fees. That sounds great. Perhaps you’re thinking this means you’ll make more money all things being equal. What this really means is you’ll save more money because psychologically you’re not afraid to get out of a losing position simply because you’d have to pay a fat commission. Second, there are no restrictions on selling short as there is on stock exchanges. Since currency trading always involves buying one currency and selling another, there is really no bias or emotional element to selling short. If you are not familiar with selling stocks short, it’s borrowing the shares of a company, selling them on the open market and then buying them back at a lower price (hopefully) to replace the borrowed shares. Third, the leverage on your money is exceptional. You can control many thousands of dollars of currencies with just a few hundred. Of course this can work against you as well. That’s why I believe you should start small until you gain the knowledge and experience to trade larger amounts. Fourth, while you can lose all your money, you can never lose more than what you have in your account. Also, unlike stocks, the price you pick for a stop loss in the Forex market is the price you’re going to get. Lastly, Forex prices are somewhat adaptable to technical analysis (the use of so-called trading indicators), as compared to fundamental and economic news. We’ve already covered some of them and we’ll get into more in the rest of this manual. For now I just want you to concentrate on two things: Risk control and Discipline! Page 51 ©Adrian R&D - All Rights Reserved

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Forex trading is really very simple to learn. On the other hand, discipline is far more difficult. I don’t think you can be taught discipline. You just have to learn it in whatever way your personality dictates. And one of the best ways to learn discipline is to lose a chunk of money. I don’t want that to happen to you, but when it does, profit from it. What did I do that I could have avoided? What was I thinking of when I put on that trade? Did I jump in too soon? Was I too aggressive? Did I overtrade? Was I trying to get back money I just lost? Things like that. I’m going to help you as best I can to control the emotional part of trading. But I can only do so much. You’ll have to carry the ball the rest of the way. Remember, our goal is to simply make five percent a day. We’ve seen what we can achieve if we can do that. Don’t lose sight of your goal. I have this recurrent dream. I learned it from Richard Dennis, a legendary and perhaps the greatest commodity futures trader in the world. Starting with just $400 he traded it up to several hundred million. Dennis believed he could take a group of newbies – Turtles, he called them – and train them to do what he did. The rest was history. They went on to do just that! It’s my dream of turning hundreds of Turtles all over the world into millionaires. I hope you’ll keep that in mind as you continue to read. Earlier I mentioned that currency trading is simple. That’s true. But you can make it as complex as you want it to be. What I’m saying is, do you want to learn everything there is to know about the Forex markets, or do you just want to make some money? If the latter is the case then you’re in for a surprise. I’ve said before I honestly don’t know that much about the markets myself, so that makes my job simple. I just have to teach you how to make money! However, if you insist, I can tell you the best book on the market to learn all about this business is “Day Trading The Currency Market,” by Kathy Lien. Page 52 ©Adrian R&D - All Rights Reserved

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You can get it at www.amazon.com for under fifty bucks. Now, let me start by explaining how all this works. We are basically buying and selling a line on a chart, just like we would buy and sell a house. It’s no different. We’re hoping our line will give us a profit, the same way we’re hoping our house will increase in value. The only difference is the time frame. A few minutes with Forex – a few years with a home. We begin with a small position until we’ve made some money. If the trade starts to fail we dump it with a small loss – something more difficult to do if we’re buying and selling real estate. If our trade is successful we stick with it. We may even add to it. But basically we just want to make a series of small profits until we reach five percent for the day. We’ve seen earlier how we can make a profit just by buying or selling the latitude lines. It’s somewhat easy to do if we have everything set up properly and wait for the market to come to us. But that means watching our screen almost minute-by-minute for the right moment to arrive. That’s why I’ve also tried to show you some longer term approaches.

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CHAPTER ELEVEN - Make Your PC Do the Math As we’ve seen earlier I use several calculators to help me with my trading. It gives me all the numbers we saw being used in the last chapter in just a fraction of the time it would take by longhand. I originally wrote the program using qBasic language. Then I had some help from one of my students who was gracious enough to produce it as a simple download. Simply click or copy this URL to your browser and save the zip file to the root directory of your PC (usually the c:\ drive). If you have a 32 bit PC use this URL: http://www.forex-trading-made-ez.com/FOREX.zip If you have a 64 bit PC use this URL: http://www.forex-trading-made-ez.com/fxcalc.html

After the download is complete, click on Open and unzip the file. You will see two files. The file you will use is Forex.exe. You can move it to your desktop if you like.

To open the program double click Forex.exe. To exit, simply press CTRL + C. Do the same with this file labeled AVG.zip http://www.forex-trading-made-ez.com/AVG.zip

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You will use this program to help you with the calculations used in Chapter 8. Once again, you can move this file to your desktop as a shortcut If you would rather not go to the trouble of downloading the Forex.exe, you can also use my online calculator here: http://www.forex-trading-made-ez.com/forexcalculator.htm The online calculator allows you to adjust for whatever spread is being used. The Forex.exe program is fixed at 1.2 pip spread. This is not that important since you can adjust for it yourself when you make the trade. Here is the list of all videos made in 2008: http://www.forex-trading-made-ez.com/vid2008.pdf

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CHAPTER TWELVE - Point and Figure Now I want to show you something I use each day to help me with my trading. Before you tell me I’m losing it, let me give you a little background. When I started out there were no computers or internet helpers like we have today. We had to hand draw all our own charts. I always believed in the technical side of trading so I used a variety of chart forms. One form I liked was called point and figure. It uses a series of X’s and O's, up and down, to show where prices have been. It’s pretty simple and if you’re a visual sort of person like I am you may find the charts useful. I’ve often thought there is so much high-tech material available to the average trader that it just becomes overwhelming. I’m sure there is more than one trader who has said, “I’ve got so many indicators I don’t know which one to believe.” I know I have! So, point and figure (P&F) at least is simple to learn and understand. And with the tips I’m going to show you from my experience you might like it also. Anything that can help you identify the direction and movement of prices from one latitude line to another is going to be of value. You can use any kind of graph paper you want, but my favorite is Mead 4/5 Quadrille graph paper which I get at Staples office supplies. It's already pre-punched with three holes, comes in tablet form, and is sturdy enough to withstand a lot of erasing! It also has 1/4 inch squares on one side of the page and a smaller size on the other. That’s important because sometimes prices run off the sides or top and you have to readjust your drawing. Along the left side we draw prices depending on the volatility we’re experiencing. You may have to experiment with this a little until you get the hang of it. I usually use a five minute chart with the quarter inch squares and assign each box one or two pips. If I’m using a 15 minute chart I may use a 5 pip box as shown on the next page. Page 56 ©Adrian R&D - All Rights Reserved

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This is an actual duplicate of a 15 minute candlestick chart, in P&F form. You’ll notice we draw X’s as prices go up, and O’s when they decline. They reverse when prices rise or fall three boxes. There cannot be just two boxes of X or O’s.

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The charts have no time frame -- a swing can be five minutes or an hour or more – although I often place a number at the bottom to show the time. When drawing a P&F chart of a five minute candlestick chart I generally use a two pip box. Here’s an example of a five minute “choppy day” chart:

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Note how erratic prices are. It’s hard to predict their direction. But one thing is pretty certain. Once prices change direction they tend to keep on going. What this means is once prices reverse direction we have a reasonable chance of making at least five or more pips on the move. On the other hand go back to the previous chart on page 57. We see prices are trending higher and higher. Then notice how they are unable to better the 5765 level. In fact prices fell to the 5745 level, tried one more time to break 5765 and then began to slide where they broke down through the previous low. Another feature of P&F charts is their tendency to stay within, or breakthrough, a line drawn at a 45 degree angle to a previous move. Like this:

I’m hoping you’ll see the value of these charts as I do. If nothing else, try using them on an hourly, three hour or even a daily chart. They can give you the big picture. Page 59 ©Adrian R&D - All Rights Reserved

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try using different price scales for different charts until you find the ones that seem to fit. If you’d like to learn more about P&F visit this site. Excellent background material. http://www.investorsintelligence.com/x/default.html By the way, if you don’t have any graph paper handy, I’ve included a blank copy you can reproduce at the end of this manual. Now, here are the videos for this chapter. Training Videos: Using Point and Figure http://www.forex-trading-made-ez.com/p-f.html

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CHAPTER THIRTEEN - A Trading Day I usually start my trading day around 6:00 AM. I don’t actually trade then until all the morning reports come out, but I spend the time looking at the 15 minute – as well as the 30 and 60 minute time frames – to get a feel for what’s been going on overnight. Often a report will set the tone for the trading day. Is the dollar being hurt by bond sales, bad economic data, political news? Things like that. You’ll often see a sustained move, up or down, for the whole day. Those days are easy to trade. I generally start out using a smaller amount of cash that may lose only one-half to one percent instead of two percent. Then, as the day progresses and I’m ahead, I bump it up to the two percent loss figure until I’m getting close to my five percent goal. Then I cut back again so I don’t lose a bundle just before I quit for the day. I rarely, if ever, use a market order (an order that’s filled at whatever price the market is trading at). I know where I want to get in and get out at all times. Using a market order doesn’t guarantee the price you want. The trades that are most successful for me are those that are placed using a limit order, often called a buy stop or sell stop. That’s where the price is above or below the latitude line I want to trade off of, and then moves in the direction I expect. That way the movement already has some momentum behind it and usually keeps going. For example, let’s say everything looks good for prices to move higher. I don’t care about buying at the bottom of the swing. I want to see prices rising and then place my order on a latitude line just above the current price so I can catch the trade if prices actually do move higher. The same thing for prices in a decline. Now, let me cover something you need to know. If you recall I try to place my orders so I don’t lose more than two percent of my capital on any one trade. If we’re trading with five hundred dollars that’s $10. Initially, when I first place my order, I may select a stop order slightly more than what I may earn. It may be a loss of as much as $15. I do this for two reasons. Page 61 ©Adrian R&D - All Rights Reserved

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First, when my trade is executed prices may swing immediately against me by the amount I expect to earn. If I placed my stop too close, especially in an active market, I might get stopped out needlessly. However, you must have a stop loss in place when the trade is executed -- for one important reason. What if your computer restarts, crashes, or you lose the internet connection? Without a protective stop you’re going to be hurt badly if prices suddenly move in the wrong direction before you can get back online. However, once the trade is in place, and moving in my direction, I start changing the stop to within 5-10 pips from the current price and continue moving it until my exit point is reached or I’m stopped out. The actual distance will vary depending on the volatility. That’s how you stay out of trouble. That’s how you avoid a “bad” day! Now, let me clarify the strategy I am teaching you. It's basically very simple. Make FIVE percent on your money and quit for the day. Do that successfully for fifteen days and you've doubled your money! What does it take? Just 20-25 pips a day. Four, 5-6 pip trades. Or, three trades: A 10 pip trade and two 5-6 pip trades. Or, two, 10 - 12 pip trades, etc. Maybe just one long-roll trade that yields 25-30 pips. Personally, I like the four, 5-6 pip plan best. It's so easy to make 5 pips. Just get in front of a trend with a buy or sell stop, and get out five pips later. Or, the one I often make, a ten pip latitude line trade with an add-on half way up or down. The only problem is it may take a little more time waiting for the right moment. (Umm, that sounds like the TV commercial!) But, for me, I'm at my PC answering emails anyway. Plus, I'm retired. When you're retired you can work for yourself, when you please, however you please! Page 62 ©Adrian R&D - All Rights Reserved

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Don't get hung up on the details. I can make 5-10 pips using just Point and Figure. If I do that 3-4 times I’m home free. But I don’t have to make 5% every day. I’m happy with whatever I can get. You should be too as long as you are making progress. That brings up another good point. I’ve said you should quit whenever you lose 10% of your money. Actually, I quit long before that. If you can’t seem to make any progress for the day, go ahead and quit. It usually just gets worse if you don’t. A trick that I use works like this. Let’s say I’m working with $1,000. Yesterday I made my five percent, or $50. I’m now starting my trading day with $1,050. I begin trading and get stopped out. I start to lose several times in a row. No matter what the markets are telling me, nor what my emotions are telling me to do, I will not let my losses fall back lower than what I started with yesterday: $1,000. It’s as if yesterday never happened, and tomorrow is a whole new ball game. You’re starting all over again with $1,000. Does that make sense to you? Try it if you have trouble controlling your losses. Here is the list of all videos made in 2009: http://www.forex-trading-made-ez.com/vid2009.pdf

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CHAPTER FOURTEEN - Tips and Tricks In this chapter I’m going to clean up all the loose ends and answer any questions you might be asking at this point. For example, how do you know when prices are peaking or bottoming out? If I knew the answer to that I wouldn’t be telling anyone. But there are a few clues. One of them is simply exhaustion. Prices run out of gas. They may rise dramatically, fall back, and try again to go higher. If they can’t, and instead start to fall, that’s a pretty good sign the upswing is over. You’ll often see this on the fifteen minute chart. The “wick” at the top of the bar is unusually long. Like most of the tops on page 23. Prices rise, then fall back which creates the long wick at the top. The same thing happens at a low. I also keep track of the previous swings, as I’ve shown you, so I can anticipate a top or bottom. I can also see that on my P&F chart, especially when prices are in a congestion phase. As we’ve seen in a previous chapter, I also rely on Oscar to give me a hand. Earlier I said I was going to answer a question that always comes up: “How do we know when our third turning point (P3) is reached?” I've struggled with the problem of identifying this third point (P3) ever since I started trading Forex. Many times I've prematurely selected P3, only to be stopped out. It's as if the Forex gods were dropping a Coke bottle on me, if you remember the 1980 cult movie, "The Gods must be crazy." I don't want to make this overly complicated, but here’s what I’ve come up with that seems to work for me. First, I want to be sure we are in a "long roll" type of day, as described on page 46. This usually occurs during active trading sessions, although there are exceptions. I don't use the Forex calculator during choppy sessions. Page 64 ©Adrian R&D - All Rights Reserved

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Second, I generally use a 5 minute chart to trade with. I will check longer term charts, 15, 30, and sometimes the 60 minute chart to see the overall direction, but I will usually use just the 5 min. P1, P2, P3 numbers to enter into the Forex calculator. Still, if prices are really volatile I'll use a 15 min. chart. Third, I want to see the EMA's in my favor (rising or declining, red or green on top, etc.) and generally not going sideways as that would indicate a more choppy situation. Fourth, if I can draw channels, like you’ll see in some of my videos, that will often show P3 touching the sides of the channel. Fifth, it helps if the trading line is reaching a top or bottom, but this doesn't always happen. Instead, it may simply change direction, often right in the middle of the move. Sixth, (and this takes awhile to get used to), I use the timeless strategy I showed you earlier called point and figure (P&F) to help me see how far prices have moved. Seventh, as Charles Lindsay points out in his book "Trident, A trading Strategy" a valid turning point must have a lower low on each side of a peak, and a higher high on each side of a bottom. I think that goes without saying. Eighth, and the one I've found to be very effective in calling the turns, is Oscar using the 15 minute chart. Ninth, for some unknown reason, it seems every time I think I have P3 nailed, if I just wait for a bit, a new P3 will form that WILL be the valid turning point. I tend to think that's how the markets (label that "brokers") take advantage of us. They know we are often short on patience, and can't wait to get into a trade. Tenth, If I have a pretty good log going of price swings (as shown in Chapter 8) it will often help me confirm that a P3 has been made. Finally, and I think this is important. When we are successful we'll only make 75% of the total move. (Remember, we're not in the first 25% of the move.) So, let's say we get stopped out, start over and ARE successful. Now we make 50% of the move. Page 65 ©Adrian R&D - All Rights Reserved

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That's usually more than enough to offset our loss and make our five percent. Along the same line of reasoning, if we happen to miss the entry point (EP) we can often get in at a higher or lower figure and still make 5%, especially if we use an add-on. All of these things help me judge a turnaround, but of course are never a sure thing. That’s why I use very tight stops. How do I handle “add-ons?” These are additional trades, usually on a “long roll” move – but often on a latitude line trade also – that I add on when I’ve already got a good profit going for me. If I do add to my trade, I’m very careful not to let it turn my original position into a loss. At worst I will usually break even on my original trade and lose on my add-on. I usually add-on just half of what I originally bought or sold, so I don’t get hurt too badly. I’m also constantly aware of how much I’m going to make. As soon as I see prices are getting close to earning five percent, I quickly revise my target accordingly. I can’t emphasize this enough. Make your five percent and go home! Another thing we saw when opening our account was the need to select what margin or leverage you wish to use. What this means is basically how large a position you can carry for the amount of money you have in your account. I’ve never used more than 50:1 leverage, compared to some firms that allow up to 200:1 and more. A higher amount can often result in a margin call, in which case your entire position is closed out. I don’t ever recall having a margin call simply because of my use of very tight stops. Let me tell you about a trick I use to calculate my five percent profit. Let’s say I’m working with $1,000. I multiply that by 5% and get $50. Seems simple enough. But, what I actually do is multiply $1,000 by 1.05. Now I know the minimum amount I want to reach, $1,050. I then multiply $1,000 again, only this time by 1.059. I get $1,059. Now I know the parameters I’m shooting for.

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In this case somewhere between $50 and $59 dollars. That’s my target zone. That’s why you’ll often see me making 5.4, 5.7, or perhaps 5.9 percent. Sometimes I get into a monster of a trade. I know it’s going to continue making money for me so instead of getting out at 5% I just keeping moving my stop in tune with prices. Often I’ll end up with 10, 20, even 30% for the day. I get so excited, do you know what I do? I pretend I’ve made five, 5% days, and take the next five days or so off! It’s the only way I can get a vacation! I’m often asked what’s the best time to trade? Lately, it seems anytime you have the time. I’m not trying to be humorous. It’s true! I often make a trade or two at midnight then one in the morning or even the afternoon. As long as there is activity, and the spread is no more than 3, I’ve been able to trade anytime of the day or night. However, a very slow time is the period between 4 p.m. and 11 p.m. Eastern. I would avoid those times as I’ve said earlier. My time zone here in Seattle is GMT-8. Let’s finish up this chapter by watching some videos. Training Videos: Tips and Tricks http://www.forex-trading-made-ez.com/fx110308f/fx110308f.htm http://www.forex-trading-made-ez.com/fx090408/fx090408.htm http://www.forex-trading-made-ez.com/fx081808/fx081808.htm http://www.forex-trading-made-ez.com/fx090808f/fx090808f.htm

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CHAPTER FIFTEEN - Some Final Thoughts By now it must be apparent to you, after my many references to it, that I believe Forex trading and gambling are closely related. Consider this. Both are somewhat random in nature. Black can appear ten times in a row on a roulette wheel. Then go black, red, black ten times in a row. With Forex you may have a full day of small cycles that end up right where they started. The next day prices may soar and never look back. In that way they’re both similar. But, what does a casino have that most of us don’t have? Why do they seem to thrive while their visitors go home broke. The answer is easy. Casinos are mindless entities that have an edge on every dollar wagered. No matter how long it may take, they always come out ahead simply because they have the edge. The odds are always in their favor. If we accept this concept as fact, then it stands to reason if we can perform as a casino we will also prosper. But, to do that we must create our own edge. We must think, not as a mindless entity, but as someone who has the edge and knows how to use it. That’s what I’ve tried to instill with you in this report. Casinos do not make a killing! They are content to rake in a certain percentage each day. We must do the same if we are to become successful traders. You’ve been given the tools in this manual that will give you the edge. I call these tools the Keys to successful trading. They work. But you must use them carefully. If you choose to ignore or violate them you run the risk of “gambler’s ruin.” Every casino game has a limit as to how much you can bet (as well as how little). Why do you think that is so?

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It’s because they want to limit their exposure to risk! To control our risk we must do the same. No matter how much cash you have burning a hole in your pocket you can’t violate the rules I gave you back at the beginning of this manual: Let me refresh your memory: 1. We never risk more than 2% on any one trade. 2. We quit for the day if we’ve made five percent on our money. 3. We quit for the day if we’ve lost ten percent. 4. We also quit at 3:00 PM Eastern no matter where we are simply because the markets slow down around that time when the New York trade goes home. Lastly, you must want to be a winner! Bruce Lee was told by doctors he might never walk again. Nearly broke and crippled, he visualized writing down all these negative thoughts on a piece of paper. Then, he’d see himself crumpling it up and throwing it in the trash. Six months later he was a martial arts legend. Bruce Lee was the hardest working person I’ve ever known. He never stopped learning. He never stopped innovating, and he never gave up his quest for doing the best he could. Bruce once explained, “If you always put limits on yourself, both physical or otherwise, you might as well call it quits.” I hope you’ll take those words to heart and let me know what plateau you’ve achieved in your reach for success in the Foreign Exchange Markets. All the best with your trading,

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About the Author Hi. I’m G.C. Smith. “George” to my friends. Please call me that also. Whenever I read a book I’m always curious about the author. What can he teach me? Where is he coming from? What are his goals and motives in writing a book that may have taken countless hours of time. I’m sure you can understand this as well. So, I’m going to bend your ear for a moment and tell you where I’m coming from. You’re not going to believe this but I was a pilot for more than forty years. Ten years as a Navy pilot, then thirty as an airline pilot. If you’ve ever been to Hawaii perhaps you’ve been on one of my Aloha Airlines’ flights. Unfortunately, my company went out of business when the economy hurt tourism worldwide. So, what has flying got to do with trading? Two things. First, as any pilot will tell you, flying is more a matter of discipline and following the rules than manipulating the controls. Checklists, checklists, checklists. You do everything the same way, using the same procedures, every time. It’s the same with successful trading! Second, when you’re flying a plane full of passengers you always have a sense of responsibility about getting them where they’re going in a safe manner. It just becomes second nature. And when you’re trying to teach someone to trade it’s the same thing. You not only want them to succeed, you want them to do it in the safest way possible. When I was a teenager I read a book that fascinated me. It was about an individual who traveled around the world while trading the stock market using telegrams. I still remember the name: “How I Made $2,000,000 in the Stock Market” by Nicolas Darvas. It started me on the road to stock market investing.

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In reading his book I learned much about technical analysis, including the use of stop orders not only to exit a trade but enter one as well. I began charting all the popular stocks of the day using the methods described by Edwards and Magee in their investment classic, “Technical Analysis of Stock Trends.” Later I began charting and trading commodity futures. As time passed, however, the markets became too wild for my style of trading. There was a time when silver plunged down the limit each day for about a month, wiping out even the Hunt brothers who, it was said, were intent on cornering the markets. Like all airline pilots, forced to retire at age sixty by Federal law, (recently changed, but not retroactive), we decided to move to the Pacific Northwest, not only for a change of scenery, but to avoid the early morning trading hours dictated by the time zones. Hawaii is six hours behind New York during daylight saving time and getting up at 3 AM each morning is no picnic. Now happily settled with my wife Jo Ann, a former PanAm flight attendant, two cats, and a black Lab we have the best of all worlds. It’s a little rainy at times and the commutes are as bad as anywhere. But who cares when you’re retired. The change of seasons (something we missed in Hawaii) and the joy of holidays are ever present. Best wishes to you and yours, from Seattle.

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