The Way to Trade Forex - Jay Lakhani

The Way to Trade Forex

This book is dedicated to the loving memory of my father, Mohanlal Lakhani, who would have loved to see it in print. Forever in my heart.

I also dedicate this book to “god” as I thank him daily for all the blessings, including being directed to the Markets – And as I often pray, that “ may my knowledge on the markets pass on to you, the reader – so you do not have to go through what I had to in my early days of Trading” God Bless

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The Way to Trade Forex

THE WAY TO TRADE FOREX Jay Lakhani

CONTENTS

•

About the author

•

Foreword by Adrienne Toghraie

•

Acknowledgement

•

Risk warning & Disclaimer

1.

Introduction to Forex

2.

Technical Analysis & Chart Patterns

3.

Trading Strategies

4.

Trading Psychology

5.

Eastern Philosophy – The Bhagavad-Gita

6.

Follow Up Service & Mentoring

7.

Recommended Reading

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The Way to Trade Forex

ABOUT THE AUTHOR

Jay Lakhani was born in Malawi, C.Africa and came to the UK when he was 18. He is a professional trader and has been involved with markets since his early twenties. He has extensive experience of both the US and UK stock markets – Trading in derivatives, Forex, Index & Stock futures, and Commodities. Jay was introduced to the glory of the Stock market by the Lady Thatcher’s Privatisation programme in the eighties, and has never looked back. He has survived a number of stock market crashes, including the crash of 1987 – an experience that has made him a better trader today. Over the years, he has developed unique trading systems and strategies, which have made him into a successful trader. One would say that Jay is blessed with a mind that finds creative solutions to problems; a kind of a person that sees multiple solutions, he has a very inquiring mind. Once he is shown a strategy, he will always look at ways at which it can be improved. Jay uses Technical Analysis in his trading, and believes that successful trading is based on your Strategies and Techniques – your system. He also believes that more emphasis should be put on the trader psychology and having a disciplined money management. Jay is also the Internet’s foremost Forex coach and mentor, and teaches his system to individual investors. For more information about his training and mentoring program, go to www.4x4u.net Prior to becoming a full time trader, Jay was an Accountant, having worked with large companies such as British Airways and Visionhire – a Granada Company. Later on, Jay was working as a Financial Planner specializing in Portfolio Management and Tax Planning.

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The Way to Trade Forex

FOREWORD By Adrienne Toghraie, President of TradingOnTarget.com You are about to embark on a journey of how to make the Forex market work for you, guided by Jay Lakhani giving you his experience and the knowledge necessary so that you can make trading a profitable career. In this book, The Way to Trade Forex, Jay gives you a simple and powerful overview of what it takes to be a trader, and then hones in more specifically on the techniques and the psychology to become a successful Forex Trader. Jay takes you step by step through the process, giving you your own personal trading coach in a book. Jay is one of those traders who learned the hard way how to make the markets simple and profitable. Of course, it should go without saying that you will still go through your own hurdles and learning discoveries even when he lays the pitfalls out to you plainly and clearly. However, if you follow his mentorship and coaching, you will not stumble quite as much as the average trader who fails his way to success. By Jay passing his insights on to you, he is saving you time, energy and losses. Jay teaches you realistically what to expect, unlike those who would like to wow you into thinking you will be instantly wealthy. The fact is, trading is a learnable skill and when you apply yourself through a good success model like Jay offers you in this book, then you are more likely to be successful in the markets in a shorter period of time. What this book is not is an instant win on a lottery ticket. Many traders who first pick up a technical analysis book feel overwhelmed by the “buzz words.” Jay holds your hand through the process of learning these words and their meaning. You will find it immediately understandable and be able to apply what is being taught. Another benefit is that you can review this book with the significant other people in your life, so they can realize that trading is a viable profession and not want to commit you to Gambler’s Anonymous. When important people in your life understand the principles that make trading work, they are more likely to support your efforts in making trading your career. Trading the Forex is one of the most exciting instruments to trade. The problem for some is that with the emotional rollercoaster you can experience from volatility in the Forex, you also are more likely to experience psychological pitfalls that bring about sabotage. The good part of having such volatility is that you can earn money quickly. Jay is exceptional at explaining sabotage pitfalls, so that you will recognize them. With this knowledge you are more likely to want to take the steps necessary to overcome sabotage before it gets too engrained in your psychology. Most traders who are not aware of the psychological pitfalls often act as if their sabotage is a bull in a room that they want to ignore. Not until the bull smashes everything does sabotage get their attention. At this point they have lost all their capital or developed deeply rooted conditioned responses to loss, which paralyses their taking action. If they do continue to trade without first addressing these issues, they are headed for further disastrous experiences in trading. With Jay guiding your path, you are more likely to enjoy the process of becoming a successful trader. It is important to note that even though you may have the best coach in the world he can only give you the flashlight; you must direct it on the right path for you. What Jay has done in his book is not only given you the flashlight but shows you many good paths. Now it is up to you to choose the best one for yourself. Adrienne Toghraie. USA. www.tradingontarget.com

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The Way to Trade Forex

RISK WARNING & DISCLAIMER Margined trading is one of the riskiest forms of investment available in the financial markets and is only suitable for experienced traders. Foreign currencies trading is based on highly leveraged basis (up to approximately 100 times your account equity). The funds in an account trading at maximum leverage can be completely lost, if the position(s) held in the account has a one percent swing in value. Theoretically, an account could lose more than the equity it contains, if the account is trading at maximum leverage and positions held in the account swing more than one percent in value. Given the possibility of losing one's entire investment, speculation in the foreign exchange market should only be conducted with risk capital funds that if lost will not significantly affect one's personal or the institution's financial well-being. You should carefully consider your financial situation as to the suitability to your situation prior to making any investment or entering into any transaction. We assume no responsibility for errors or inaccuracies in these materials, and do not warrant the accuracy or completeness of the information, text or other items contained within these materials, and shall not be liable for any damages, including any loss that may result from these materials. Market Opinions. Any opinions expressed in this book are purely for Education and entertainment, and are not guaranteed in any way. In no event shall we have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided verbally or via the Internet; or any delays, inaccuracies, errors in, or omissions of information. You are responsible for your own actions on how you use the information in this book. If you are in any doubt, you should seek the advise of a Financial adviser or a broker. Internet Trading Risks. Please note that there are risks associated with utilising an Internet-based deal execution trading system including, but not limited to, the failure of hardware, software, and Internet connection. Accuracy of Information. The content on this website is subject to change at any time without notice, and is provided for the sole purpose of assisting traders to make independent investment decisions. We do not guarantee its accuracy, and will not accept liability for any loss or damage which may arise directly or indirectly from the content or your inability to access the website, for any delay in or failure of the transmission or the receipt of any instruction or notifications sent through this website.

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The Way to Trade Forex

LEGAL NOTICES

This legal notice relates to the publication of this book and also the related material as part of the follow up service on our website www.4x4u.net Past performance is not indicative of future results Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable. This website is for informational and educational purposes only and is not an offer to sell any security or investment program. This website is for personal use only and its contents are protected by applicable copyright, patent and trademark laws. The information provided on this website should not be construed as investment advice. It is merely the observations of technical analysis precepts as set forth in the various texts and works about the subject. Bindal FX is not providing personalized investment advice through the website. You should talk to a qualified investment advisor or financial planner before making any decisions based on the information provided on the website. Bindal FX is not responsible, nor liable for the content or any other aspect of any websites which may be accessed from this website. Bindal FX is not responsible for any damages to your computer or software as a result of using this website. Bindal FX has taken certain steps to provide a secure environment for your personal information on the website. However, due to the nature of the Internet, we cannot guarantee the confidentiality of such information. Bindal FX may discontinue or change, at any time, any of the services available through this website. Statistics, tables, charts and other information on trading systems, monthly performance or trades of the day are hypothetical, and are based on the referenced systems as illustrated in the manuals and on the site. THIS INFORMATION IS PROVIDED FOR EDUCATIONAL/ INFORMATIONAL PURPOSES ONLY. These results are not indicative of, and have no bearing on, any individual results that may be attained by the trading system in the future. PAST OR HYPOTHETICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS

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The Way to Trade Forex

COPYRIGHT

© Copyright 2005 Bindal FX and Jay Lakhani, ALL RIGHTS RESERVED. The copyright in all material provided in this book is held by Bindal FX and Jay Lakhani, or by the original creator of the material. Except as stated herein, none of the material may be copied, reproduced, distributed, republished, downloaded, displayed, posted or transmitted in any form or by any means, including, but not limited to, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Bindal FX, or the copyright owner. You may not, without Bindal FX's permission, "mirror" any material contained on these sites on any other server. Any unauthorized use of any material contained on these sites may violate copyright laws, trademark laws, the laws of privacy and publicity, and communications regulations and statutes.

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The Way to Trade Forex

ACKOWLEDGEMENTS Many, many people have gone into the making of this book. First and foremost, I would like to thank my family, My Wife Jemini and my adorable children Bhavesh, Beena, Anand and Bindal. Whilst it might be trite to thank the family members who did none of the research nor write any of the words, but without their support this book would not have been possible. I would like to thank Ensignsoftware.com, esignal.com, and FXCM Marketscope for the permission to reprint the charts from their charting package. In fact, I would not be as successful a trader without access to these excellent charts. I would also like to thank a number of my colleagues and friends, who have come up with ideas and suggestions not only in writing this book, but also for the inspiration and confidence that I have received from them when trading, often exchanging ideas and strategies and giving each other the moral support. Trading can be very lonely at times. In my opinion, success in trading is 90% Psychology. In my own trading career I owe a great deal to Adrienne Toghraie for her help with my psychology, Alexander Elder for showing me the path to successful trading based on three Ms: Mind, Method and Money. I have met both Adrienne Toghraie and Alexander Elder, and my trading success improved substantially, since meeting both of them. I also would like to mention Tony Robbins; attending his courses and seminars-,- has been very inspiring and motivating. Psychology would be incomplete without the methodology and strategies. I am thankful to the authors of many works on the markets and trading which I have read, and also a number of seminars that I have attended. Once again special thanks to Alexander Elder from whom I have learnt many strategies. And Atul Sharma for showing me low risk trading strategies using Options. I also would also like to thank Andrew Shearman and Norman Allen – both from Traderhouse, from whom I learnt the basics of Forex trading. This training in Forex was to take me a step further into success in my trading. I then subsequently created my own trading methods and strategies. Thank you to all those who took the trouble to read the draft of this book, especially Adrienne Toghraie, whom I regard as my “guru”. Adrienne was kind enough to also write the foreword. Special thanks to Neha Singh who has very kindly corrected my grammar mistakes and also Kamlesh Vishwakarma, of perspective-media.com for all his hard work for designing the web site and also the Forex E Book. Finally my thanks to you, the readers of this book. No doubt you have taken a big step from the crowd of amateurs, by purchasing this book you have resolved to become a successful trader. I am sure you will not be disappointed and soon you will be on a path to being a successful trader. God bless. Jay Lakhani

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The Way to Trade Forex

INTRODUCTION TO FOREX

•

Introduction

•

Why do Forex Traders fail?

•

Trading System

•

Background to Forex.

INTRODUCTION Many traders aspire to be successful traders, but few succeed. An amateur trader looks at the Trading platform, makes a trade and loses, makes another trade and loses more. Traders lose because the game is hard and they trade with emotions, lacking a purpose and discipline. If any of these relates to you, I write the book for you, for I too was in this position once! Many traders keep making impulsive trades; they do not have any trading plans or a system, and no money management rules. To put it simply, an amateur trader will cut short his profits, and let the losses run. Professional Traders accept the importance of psychology, yet the novice traders ignore it. You have to practice sound money management and you should watch your capital. In my opinion the markets only exist because losers bring money into the market, which is necessary for the Industry. This book is unique in that it takes you the trader, to devise your own trading philosophy, build your own methodology,-; a trading system which is your own, and not fed to you by the currently “hot” guru-., It guides you to develop your own trading plan. To be truly successful you have to become intuitive, and this simply means that you become an expert in what you are doing – which will come through experience and learning from your past mistakes. You can be free, you can live and work anywhere in the world. You can be independent from routine – This is the life of a successful trader. I can give you the knowledge, only you can supply the motivation. In this book I discuss many winning strategies that are NOT unique in the world, no doubt you have come across them, but chances are that you have never considered using them, or you have never been shown how to apply the strategies correctly. I have put together strategies in this book that I have developed over time. I am sure that you will find these methods to be very profitable for you. Some of the strategies here are awesome-. DEFINITELY practice these techniques in a demo account for a while before trading real money. No doubt, you might have read many books, written by non-traders, showing you strategies that do not work; or the author himself is not an active trader. Therefore the methods shown are not really tried and tested, so how can you trust them? We are living in an era of information overkill. Amateur traders are constantly tuning in to listen to “experts” on Bloomberg or CNBC and reading and following so many emails and newsletters from many trading gurus and then often acting on these “hot tips”. Uncertainty also occurs because of too much information; having to look at so many indicators, which give conflicting signals thereby, you do not take any action. Just how can

Introduction to Forex

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The Way to Trade Forex

you learn and take action using hundreds of Candlestick patterns, chart patterns, chart types and indicators? - Just too many!, no wonder 90% of traders lose money. In order to succeed in trading, you have to Keep It Simple Stupid - KISS, and that is exactly what I am going to do in this book. I will only concentrate on simple strategies, which have worked for me in the past, with actual charting examples and trades. I do not use lots of indicators or fancy trading systems. If you keep it simple, you will succeed – but if you overkill your brain with too much conflicting information, then you are destined to be a loser. In this book I will cut the crap and go straight to the point! You do not need any third party killer system, you yourself can create your OWN Killer System, using some of the strategies shown in this book. You only need to have faith and belief in yourself. Let me once again assure you that, there are NO Holy Grails, NO Secret Code, NO Killer Trading System, and NO Unique Discoveries. The only thing that is stopping you from succeeding is YOU, because you are looking for someone to show you a Secret, which does not exist! Because you do not have faith and belief in yourself. Take a look at some of the Internet marketing of “Forex Codes” and “Forex Secrets” “Are You Ready to Find Out What They Are Hiding From You?” Jay says – Let me assure you nobody is hiding anything from you! You are only hiding from yourself! “Want to learn how to make $200 to $3,000 for as little as ten minutes of work trading FOREX with only tiny risks? And do this multiple times a week?” Jay says – If only I knew how to make that much money from 10 minutes! – Just ask yourself. Is it easy to make that sort of money from “as little as ten minutes”? Else 90% of traders would not have failed! New York "Financial Mastermind" Reveals: The Biggest Online Trading, Day Trading, Investing Online, Cash "SECRET" At last!!! Jay says – Yet another Secret! You will find hundreds of them! It only makes them a millionaire – NOT YOU! 90% Traders fail to make profit! Why may I ask? Firstly, they believe in the systems sold by the Internet Marketing Cons, as above. Unfortunately these so called Gurus will not make you millionaires, but they will laugh all the way to the bank! Secondly, majority of humans believe that, anything that is simple will not make money. They want to have Secrets! And Holy Grail! – You have secrets right in front of you, just look at the Charts on your computer screen; you do not need to go anywhere! Lastly we have a tendency to confuse ourselves. Just look at the following tools available to the modern day traders. Surely a case of analysis paralysis.

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The Way to Trade Forex

The list is endless… In fact you will find hundreds and hundreds of these trader tools and indicators, and I will be not be surprised if we end up having over a thousand such tools.

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The Way to Trade Forex

ANALYSIS PARALYSIS Is it surprising that 90% of Traders lose money? The proliferation of so many so-called “gurus” has ushered in a virtual anarchy of expertise. The psychological reaction to such overabundance of information and competing expert opinions is simply causing confusions in traders’ minds. Too many indicators can create confusion. Too much analysis can create paralysis. In this book, I have kept everything simple – and have followed simple “killer techniques” that have been tried and tested. I have not invented anything new in this book, and I presume you may come across nothing new in this book, which you did not know! – But maybe, nobody told you how to use the simple strategies, and how easy it was to make money! If you tend to second-guess almost every decision you make, you probably aren't getting much accomplished. Whether it is making small everyday decisions in life, or your career, personal life, or indeed the way you trade. Analysis paralysis is a very annoying and unproductive state to be in. You are virtually paralysed from the fear of making a mistake - so you analyse everything to 'just be sure'. Over analysing leads to confusion, and most probably leads to doing a wrong trade, or missing out from a great profitable trade. This type of irrational fear can stem from a variety of past experiences. • • • • • •

Trauma from making a big mistake or having sustained losses in past. Trading without logic and a plan, thus leading to a mistake. Having a parent or a teacher who didn't reinforce the learning potential of making a mistake. Not believing you are qualified or capable to make the decision Believing you always make mistakes and can do nothing right Always regretting decisions you do make because you 'realise' the other option was the better one.

There are many other ways analysis paralysis can affect the way you trade or indeed your life in general. If this sounds like you, your life may feel like you are in an annoying state of limbo. So you need to ask yourself how you arrived at this place? What do you believe is the underlying reason for your inability to trust yourself? If you need help focusing on what is standing in your way of making small and/or crucial decisions in your life or trading, then I am sure that you will greatly benefit from the services of a Trading Coach. Later on, I cover this topic of a trader coach in detail; maybe you want to digest what I have written here? You may begin with reading some of the books on psychology and personal development – 1. Awaken the Giant Within – Anthony Robbins 2. The Trading On Target home study course – Adrienne Toghraie Finally, I myself also offer a one to one consultancy service, for more details kindly visit the website, www.4x4u.net

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The Way to Trade Forex

WHY DO FOREX TRADERS FAIL?

“Failure is a man who has not learnt from his blunders. If you are able to cash in on that experience you are on the path to success” – Jay Lakhani, Forex Trader It is a sad fact that 90% of traders fail, and many very quickly give up. Why? When I went through a phase of losing trades I treated it as a temporary setback and went back to the drawing board. I analysed the reasons of my failure and I sought the guidance of Top Traders, Mentors and Coaches to put me back on the path of success and profitability. In my opinion the high rate of failure for a new trader can be related to the six major obstacles that a trader faces, which are summarised as follows: 1. Poor Skills 2. Lack of adequate capital 3. Setting unrealistic targets and goals 4. Lack of Patience 5. Lack of discipline 6. High risk aversion If we look at the list, it becomes apparent that the failure is as a result of trading without having in place a proper Trading System and a Trading Plan– One that includes mind training, quality Forex education and strategies and sound money management rules. So what are the Characteristics of a Successful Trader? All we have to do is to reframe the liabilities listed above; 1. Adequate trading knowledge and understanding. You should seek services of good quality mentors and a trading coach. 2. Adequate capitalisation – Don’t be fooled that you can earn thousands every week from a starting capital of $500 3. Realistic Goals – don’t expect 100% profit each month, it simply is not possible. 4. Have patience – don’t trade if you don’t have to. You should wait for a set-up according to your trading plan and system. 5. Have Discipline to follow your rules 6. Understanding and Managing Risk 7. And lastly the most important is having a Trading System and a Trading Plan. Virtually 90% of Traders that I have coached have never had one! If you look at the advice from the world’s most successful people or traders today, you will notice that they follow the guidelines as identified above. “Define first the level of risk you dare to assume. Start with a small position, and then build it up if it works” – George Soros

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The Way to Trade Forex

“Give me a stock clerk with a goal and I’ll give you a man who will make history. Give me a man with no goals and I’ll give you a stock clerk” – J.C. Penny “If you go to work on your goals, your goals will go to work on you. If you go to work on your plan, your plan will go to work on you. Whatever good things we build end up building us.” – Jim Rohn In this course, I will attempt to turn you from an amateur trader to a master trader. All you have to simply do is to follow the simple ideas and strategies put forward in this manual. It is only YOU who is responsible for your success or failure. “I can show you the path to successful trading – but YOU have to make a choice to follow it or not.” – Jay Lakhani, Forex Trader.

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The Way to Trade Forex

ABOUT PROFIT TARGETS

Different traders have different trading philosophies about how many pips to target per trade. •

• •

Some traders go for large pip targets – from 100 to 500, or even more. They are often position traders, leaving trades overnight – often for days. They would normally start with a stop of 100 pips or more, then gradually moving the stops as the position goes into profit. You then have other traders who focus on day trading, who could be targeting anything above 20 pips to 50 or even a bit more. And lastly, you also have another breed of traders that will trade multiple lots to catch maybe just 5 or 10 pips, within minutes.

There is nothing wrong with trading with any of these objectives in mind, they each have their pros and cons. You MUST find a trading style that meets with your psychology and mindset. Before I started trading FOREX, I use to actively trade the Index Futures, mainly the Dow and Nikkei, my targets were usually in hundreds, and in fact I pride myself with achieving profit targets of 500 points and even 1000 points on the Nikkei, Dow and also recently trading the Google stock futures. When I started trading FOREX, I was taught that I should aim for 20 pips, and when that was achieved, I should call it a day! I was laughed at when I talked about having profit targets of 100 pips or even 500 pips! There is disbelief when I tell some traders that I often use weekly charts on Forex – some so called city professionals thought that I was a fool! Though I cover all Trading styles in this book, but my mindset is not geared up for sitting in front of the screen all day, looking for 5 pips or 10 pips. However, I know many traders who make a perfect living and enjoy the thrills of day trading and are very successful at it. It’s not for me to tell you what to do –you have to seek out a trading style that suits you. In this book I have strategies for all. Can you spot an opportunity at the following “Weekly Chart” of the EURO, between December 2004 and March 2005?

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The Way to Trade Forex

TRADING SYSTEM

It seems that everywhere you look; you see advertisements for software promising accurate buy and sell signals and profits with every trade. Just have a look at some captions of the adverts I have seen! “I’ve finally cracked the Forex Code” “Make thousand pips every month” “Trade Forex with a secret formula that only a handful of Traders use” The list is endless.. These so-called killer systems don’t come cheap, costing you thousands to buy. However with just a little bit of effort, you too can “crack this secret code” yourself. Once again let me assure you, from my experience and knowledge of being a trader for the past 20 years, that there is “NO Secret Code”, “NO Killer Systems”, “NO Holy Grail”, and “No Unique Discoveries”. In my opinion most of these adverts are no more than scams. It may not make YOU rich, but it will certainly make the Vendor’s millionaires. Most of these secrets and codes or discoveries are readily available to you. The only secret is that YOU don’t know how to use these simple strategies! Or nobody has shown you how to use them correctly. This is precisely what I am going to do in my book – “ The way to Trade Forex”, I hope to hold your hand and show you step by step how to create a killer trading system of your own. However, the fact is that many traders are simply lazy and cannot make time to plan or create a system. YOU have a choice, either become a winning trader or continue to lose money!

What Is a Trading System? A trading system is simply a group of specific rules, or parameters, that determine entry and exit points for your trade. These points, known as signals, are often marked on a chart in real time and will prompt you to pull the trigger. Here are some of the most common tools used to construct a trading system: 1.

Chart Patterns

2.

Moving Averages

3.

Stochastics

4.

Oscillators

5.

Relative Strength

6.

Bollinger Bands

7.

Elliott Wave

Often, two or more of these forms of indicators will be combined in the creation of a rule. For example, the MA crossover system uses two moving average parameters, the long-term and the short-term, to create a rule

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Advantages So, why might you want to adopt a trading system? •

It takes all emotion out of trading - Emotion is often cited as one of the biggest flaws of individual investors. By cutting down on these human inefficiencies, system traders can increase profits. Apart from going through lot of strategies in this book so that you can construct your own Trading System, I am also devoting lot of space in psychology of trading, without which a trader can simply not succeed.

•

It can save a lot of time - Once an effective system is developed and optimised, there is little to no effort necessary on the part of the trader. Computers are often used to automate the signal generation.

Developing an effective trading system is by no means an easy task. It requires a solid understanding of the many parameters available, the ability to make realistic assumptions, and the time and dedication to develop the system. However, if developed and deployed properly, a trading system can yield many advantages. It can increase efficiency, free up-time and, most importantly, increase your profits. Designing a Trading System In my book “The Way to Trade FOREX”, I discuss many of the successful and profitable trading strategies that I have made use of from most of the Tools mentioned above. In addition as a follow up service, I am also extending a free 1 month mentoring so as to help you not only devise a Trading system, but also help you in preparing a Trader’s Plan or assist with your Trader Psychology. Here are some of the key factors to keep in mind when designing a trading system in the FOREX: 1. The liquidity and the volume in the Forex market is huge, therefore making trading systems more accurate and effective. 2. Most brokers do not charge commissions in this market, only spreads Therefore, it's much easier to make many transactions without increasing costs. Some brokers offer a very low pip spread. 3. Compared to the amount of equities or commodities available, the number of currencies to trade is limited. But because of the availability of 'exotic currency pairs'--that is, currencies from smaller countries--the range is not limited. 4. The main trading systems used in FOREX are those that follow trends (a popular saying in the market is "the trend is your friend"), or systems that buy or sell on breakouts. This is because economic indicators often cause large price movements at one time. 5. A good quality charting package, I use the eSignal and would highly recommend this package to any readers. In my long experience of Trading, I have read many books on trading and technical analysis. I have come across very few books, which focus on the importance of trading plans and trading systems and assisting their readers in creating such a system. This is precisely what this book is aimed at, i.e. assist you in creating your own killer trading system, having a trading plan, and finally a follow-up service.

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BACKGROUND TO FOREX

The foreign exchange market is probably one of most interesting markets, as due to it’s sheer size and volume, it would make it impossible for any one person, institution or government to control. You may recall that during the ERM crisis, even the British Government was unable to control the Pound. The foreign exchange market now dwarfs any other investment market, with over $2 trillion traded every day, far more than the world’s stock market and bond markets combined. The word FOREX is derived from FOReign EXchange and is the largest financial market in the world, unlike many other markets, the Forex is open 24 hours a day Structure •

Decentralised, over the counter market, also known as the ‘Interbank Market’

•

Main participants: Central Banks, commercial and investment banks, hedge funds, pension funds, corporate and private speculators

•

Online trading began in the mid to late 1990’s

Trading Hours •

24 hours market

•

Sunday 5pm EST through to Friday 4pm EST

•

Trading begins in New Zealand, followed by Australia, Asia, the Middle East, Europe and America.

Major Markets •

The US & UK account for more than 50% of turnover

•

UK alone accounts for over 30% daily turnover by country.

•

Major markets: London, New York, Tokyo

•

Trading activity is the heaviest when major markets overlap.

Trading •

An estimated 95% of transactions are speculative

•

More than 40% of trades last less than 2 days

•

Brokers research: 90% of traders lose money, 5% break even, 5% make money.

The Players •

Customers – small business, individuals and Corporate. For cross border transactions

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•

Banks – Large banks can literally trade billions in a day, with trades executed on behalf of clients, but they themselves will also speculate.

•

Hedge Funds – Speculative Trades

•

Brokers – they facilitate the trades between the two parties

Most commonly used Technical Analysis •

Chart patterns and trend lines

•

Moving averages

•

RSI

•

Fibonacci retracements

•

Stochastics

•

MACD

•

Pivot point

•

Elliott Wave

Currencies •

The US dollar is involved in approximately 90% of all foreign exchange transaction.

Different Sections of The Forex Market The Spot Market – this is the actual price of the currency at any given time, the price is for immediate delivery. You, as a Trader will mostly be using the spot market. Forwards – This is where the parties agree on the price of two currencies involved at a future date (forward). The forward attempts to calculate the fair value for the two currencies using the interest rates of each country. The determination of a forward rate is not a prediction of the future exchange rate, it is merely a tool to allow interested parties to fix a rate in the future. Swaps – A combination of a spot deal, whilst at the same time making a forward deal or vice versa. Currency Futures – are a type of forward transaction. They have specific contract sizes, maturity dates and are traded on a formal exchange. Currency Options – provides the buyer with the right but not the obligation, to sell or buy an exact amount of Forex at an exchange rate and date specified in advance. This guarantees him to buy (call) or Sell (put) the currencies, should he exercise the option if it is in his favour. Intervention – When the central bank of a country intervenes to buy or sell its currency to influence the exchange rate. It may also do so by selling government securities to back up its intervention. Currency Codes

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USD

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US Dollar

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EUR

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Euro

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JPY

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Japanese Yen

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GBP

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British Pound

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CHF

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Swiss Franc

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CAD

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Canadian Dollar

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AUD

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Australian Dollar

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NZD

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New Zealand Dollar

Crosses A cross currency of transaction is when two currencies that do not involve the U.S.Dollar, such as the CHF/JPY. This is commonly referred to as a cross. Exotics This is the exchange of currencies that are not normally traded. This might be because there simply is not enough volume due to little interest. An example may be say the Malawian Kwacha. Leverage and Margin Forex trading is normally undertaken on the basis of margin trading. A relatively small deposit is required to control a much larger position in a market. For trading currencies, a margin broker may require a 2% margin deposit. This means that in order to trade one million dollars, you need to place just USD25, 000 by way of security. As a result you will have obtained a gearing or leverage many times. Some brokers may also allow you a leverage of 100:1 Margin Call Margin call is something you will have to be aware of. If say you have a position of $1,100,000 with a margin of $10,000.your broker may require additional funds to protect your position, if your position is in danger and losing. Why trade Forex? •

An outstanding opportunity to accumulate wealth – leverage (100:1)

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Small amount of capital required

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Easy market access – platforms and brokers

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There is always action

Example Transaction

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Let’s assume you have a trading account and have chosen to use 100:1 leverage on your account. The current quote for EUR/USD is 1.3225/28. You place a market order to buy 1 lot of 100,000 Euros at 1.3228, expecting the euro to strengthen. At the same time you place a stop-loss order at 1.3203, and a limit order at 1.3328. So you are risking 25 pips with a profit target of 100 pips. The value of this transaction is $132,280 (100,000 * 1.3228) but because you are using 100:1 leverage, you only need a margin deposit of 1% of the total, which is $1322.80 ($132,280 * 0.01). The price rises to 1.3328/31, reaching your limit order at 1.3328, and your position is closed. You have made a profit of 100 pips. Your total profit for this transaction is $1,000 (100,000 * (1.3328 - 1.3228)), and the return on your investment is 75.6% ($1000/$1322.80). Trade Summary

Bid and offer Exchange rates in practice are quoted as two-way rates. Thus a dollar/British pound quotation will read something like 1.9000/10. The bank or company, which quotes this rate, understands that it buys Pound (selling dollars) at 1.9010 and sells Pounds (buying dollars at 1.9000). In other words it buys cheaper and sells dearer a given currency in exchange for the other one. Of course, the opposite is true for the person that asks for a quotation. The difference between the purchase and the sale rates is called «spread». Such spreads vary in size according to market volatility. Basis points or pips A foreign exchange rate usually consists of an integer part and 4 decimal points (or 2 decimal points when expressed per 100 units e.g. dollar/yen). Thus the decimals are expressed either at 10th thousands or hundreds. Each such 0.0001 or 0.01 is called basis point or pip. E.g. a 50 pips change of 1.5000 is either 1.5050 or 1.4950 Understanding Forex Quote

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Reading a foreign exchange quote may seem a bit confusing at first. However, it's really quite simple if you remember two things: 1. The first currency listed first is the base currency 2. The value of the base currency is always 1 The US dollar is the centrepiece of the Forex market and is normally considered the 'base' currency for quotes. In the "Majors", this includes USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/JPY 106.00 means that one U.S. dollar is equal to 106.00 Japanese yen When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated in value and the other currency has weakened. If the USD/JPY quote we previously mentioned increases to 108.00, the dollar is stronger because it will now buy more yen than before. The three exceptions to this rule are the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR). In these cases, you might see a quote such as GBP/USD 1.9300, meaning that one British pound equals 1.9300 U.S. dollars. In these three currency pairs, where the U.S. dollar is not the base rate, a rising quote means a weakening dollar, as it now takes more U.S. dollars to equal one pound, euro or Australian dollar. In other words, if a currency quote goes higher, that increases the value of the base currency. A lower quote means the base currency is weakening. Currency pairs that do not involve the U.S. dollar are called cross currencies, but the premise is the same. For example, a quote of EUR/JPY 137.20 signifies that one Euro is equal to 137.20 Japanese yen. When trading Forex you will often see a two-sided quote, consisting of a 'bid' and 'offer'. The 'bid' is the price at which you can sell the base currency (at the same time buying the counter currency). The 'ask' is the price at which you can buy the base currency (at the same time selling the counter currency). Trading Equipment and basic PC set-up. •

You will need a fast PC with plenty of RAM to run several programs simultaneously, ideally 2 or 3 monitors.

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A sound internet connection

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Charting package software

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Online technical analysis software

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A margin broker, demo to begin with, then going to live account trading.

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TECHNICAL ANALYSIS - CHART PATTERNS

Technical Analysis

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Approach to Technical Analysis

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Support and Resistance

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Trend Lines

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Candle Sticks Charting

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Triangles

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Flags & Pennants

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Channel Breakouts

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Double Tops

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Double Bottoms

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Head and Shoulder Patterns

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TECHNICAL ANALYSIS

“An approach to forecasting prices which examines patterns of price change, rates of change, and changes in volume of trading and open interest, without regard to underlying fundamental market factors” FUNDAMENTAL ANALYSIS seeks to determine future stock price by understanding and measuring the objective "value" of equity. The study of stock charts, known as TECHNICAL ANALYSIS, believes that the past action of the market itself will determine the future course of prices. Chartists study the market action, and will try and spot chart patterns, which repeat themselves. The goal is to profit from patterns that recur again and again. The chart shows the price action of the commodity, and it projects the hopes and fears of traders – that’s what makes a market. In order to succeed in trading, you need to listen to the market; it will tell you where it is going, so you can jump on the ride. Why use Charts? It plots the price action that has occurred in the past, and it will project the hopes and fears onto the charts. Smart money tends to put on trades when markets are quiet and may have bottomed whereas the amateur trader will tend to trade the news. The following chart on the GBP/USD perfectly illustrates this.

Source: eSignal. www.eSignal.com

As you can see from the above chart, a picture is worth a thousand words. In order to know where the price is going, we have to know where the price has been. Knowing if a market is moving up or down helps investors to make an informed decision whether to go long or short. The chart simply show the current crowd psychology, the analysis of the past price action can enable to forecast the future. The Technical Analysis is not always right, nothing is. Therefore to succeed you have to have a sound money management plan – cutting losses and letting profits ride.

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Support and Resistance Support is when price stops going down, and Resistance is when price stops going up. Chart patterns are bound by support and resistance levels.

Source: eSignal. www.eSignal.com

In the above chart for CHFUSD, you can see that there had been a trading range, as soon as there is a break, the price has followed in the direction of the break. After a market forms a pattern, it eventually starts a new trend higher or lower, a breakout occurs when the price moves through the support or resistance. This is called a BREAKOUT; this is perfectly illustrated in the above example.

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TREND Technical analysis attempts to gauge the strength and direction of a trend, once the trend is in motion it will continue in that direction for some time. Once the trend is determined early, the trend can be followed and more profit can be made.

Source: eSignal. www.eSignal.com

The trend is your friend - Never fight a trend. In the above example of AUDUSD, the break of up trend is followed by a long down trend. The topping of price action is followed by a price break. Apart from high volatility in the Forex market, you will also notice that it also trends well – both giving perfect opportunities to make money. The markets can only move in one of three ways; up, down, or sideways. That’s it. Prices however do not move in a straight line, they move by zig-zagging up-down-up-down, so you will have• • •

An up trend A downtrend, and A sideways movement

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These trends are illustrated in the following chart.

Source: eSignal. www.eSignal.com

Trends happen when traders worldwide believe that a price is either too low – so you will now be in an up trend as you have a buying pressure, or traders feel that the prices are too high – so you will be in a down trend as there is selling pressure. Sideways movement happen when traders either believe that the current price is more or less right, or when they are undecided. This normally happens when there is major news pending, for example prior to release of say Non Farms Payroll data. The FOREX market trends very well, and that is the main reason why traders love FOREX. If all you knew was how to follow trends properly, then this alone could make you a very nice income. As they say, “a trend is your friend” or never go against a trend! The trendline is the most basic technical analysis, and all traders use it. It is amazing how price repeatedly bounces off the trendline. An up trend will have a series of higher highs and higher lows, whereas a downtrend will have a series of lower highs and lower lows. When you draw a trendline, whether an up trend or a downtrend, so long as prices keep bouncing off a trendline you can keep making money. All trends will eventually end. A good indication that the trend is ending is when the price significantly penetrates through the trend line and takes out the previous low (up trend) or the high (downtrend).

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CANDLE CHARTING BASICS “ A good beginning is the most important of things.” (Japanese proverb) Candlestick charts are much more visually appealing than a standard two-dimensional bar chart. Candles can represent any time frame. The four elements necessary to construct a candle chart are the OPEN, HIGH, LOW and CLOSING price for a given period. Below are the Examples of Candlestick and a definition for each candlestick component

The above represents when prices close higher for that particular time frame

The above candle represents when prices close lower for that particular time frame, so will usually be RED to dark. You will come across probably hundreds of candle patterns, but I like to concentrate on the few of the most important ones that really work!

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HAMMERS / HANGING MAN

Hammers are formed after declines and hanging man after advances. When confirmed they become very powerful reversal signals.

This chart of CHF / USD perfectly illustrates a Hammer, which comes at the end of a downtrend. There is a large Lower Shadow and a small body. This is followed by a positive candle. You can see that the price action resulted into a big uptrend.

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DOJI Dojis are powerful reversal indicating candlesticks formed when security opens and closes at the same level, implying indecision in the price. Dojis become more significant, if seen after an extended rally of long bodied candles (bullish or bearish), and is confirmed by the engulfing candle, i.e. a long candlestick formed over the next period that engulfs the doji body.

Dojis can become support or resistance, usually on a short-term basis, a series of doji lines after a prolonged move could signal a rare and important top or bottom. GBP - DOJI Formation.

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In the above chart, prior to a series of Dojis, there was a topping formation at around 1.8950, as you had a series of tops – Resistance. The Dojis were followed by a trendline break, and a series of lower highs. Once again highlighting the importance of reading the chart patterns in conjunction with other signals and indicators. SHOOTING STAR The shooting star is made up of one candlestick (White or Black), with a small body, long upper shadow and small or non existent lower shadow, If this is followed by a down candle, there is a high probability of a downtrend, and may provide a good shorting opportunity.

In this example, based on a 4-hour chart, the shooting star is followed by an extremely bearish candle. Overall resulted in a move of over 250 pips over the next few periods. One can look for a better shorting entry by magnifying a lower time frame chart, such as a 60-minute one or 15 minutes.

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CHART PATTERNS Triangles frequently occur in the market, and this is a good way to catch some nice price moves. There are some traders who just trade and focus ONLY on “triangle chart patterns” – and make handsome profits. Symmetrical Triangles

Symmetrical triangles are areas of indecision. Each top and bottom becomes shallow, as attempts to push the prices higher are quickly met by selling; eventually the price explodes out of this formation. Ascending Triangle. Ascending triangles are generally a bullish chart pattern, and most reliable when found in an up trend. The top part of the triangle appears flat, while the bottom part is upward moving, with higher lows. Prices eventually break the flat top, which was the previous resistance. When this happens, the price may move considerably higher.

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Descending Triangle

The Descending triangle is generally considered bearish. The bottoms are Flat – offering support, whereas the highs are getting lower, as higher prices attract more sellers, and the price retests the old lows. Once again a good opportunity to trade the breakout. FLAGS and PENNANTS Flags and pennants are short-term continuation patterns that mark a small consolidation before the previous move resumes. These patterns are usually preceded by sharp advance or decline.

Pennants look very much like symmetrical triangles.

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Channel Breakout A Channel is formed between parallel support and resistance lines. This pattern usually indicates a strong trend, up, down or sideways is underway, until a breakout occurs

Trading Double Tops and Double Bottoms. No chart pattern is more common in trading than a double bottom or double top. In fact this pattern appears so often that it alone may serve as a proof that price action is not wild. Price charts simply express trader sentiments. If price were truly random, then why do they pause so frequently at those points? The bulls and the bears defend these levels therefore generate strong profitable countermoves.

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Head and Shoulder Patterns The “Head-and-Shoulders” pattern is a trend reversal pattern. It marks the end of an up trend. Two lower peaks, or shoulders surround the “head”. The neckline is drawn through the lowest points of the two shoulders, and may slope upward or downward

The reason this pattern could be a reversal is due to the fact that there appears to be a momentum of falling prices. The prices fail to make a higher low, the retracement from the head is likely to result in a break in the trendline, which has acted as a support. The markets attempts to move up, but only result in a lower high. The target is calculated by measuring vertically from the highest point to the neckline, it is then projected down from the breakout. Once you identify the head & shoulder pattern, how would you manage your longs? You could consider to sell outright, and consider shorts at the break of neckline, tighten your stops so that your profits are locked in, or sell some of the position and hold the rest with tight stops. Your decision depends on how you feel about the pattern. If you did not have any position, then you may want to consider a short, when the neckline is broken, and a stop place above the previous high. Once again it would make sense to trade in conjunction with other indicators of your choice. Head & Shoulder Test your Knowledge, herewith a chart for the EURUSD, between 13 Sep 2004 to 29 Apr 2005, Can you spot the Head & shoulder?

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Test your knowledge, calculate the following values. Feel free to email me with your answers and any queries that you may have. 1. 2. 3. 4. 5.

Head Right Shoulder Left Shoulder Neckline Target

If you were looking to short, what would be your entry point? Was the target achieved? And what was your profit in terms of pips.

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COMPUTERISED TECHNICAL ANALYSIS AND TRADING STRATEGIES

Trading Strategies

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Introduction – Trading Strategies

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Moving Averages

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MACD

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MACD Divergence Trading

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Relative Strength Index (RSI)

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Elliott Wave

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Pivot Points

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Fibonacci

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Fundamental Announcements

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INTRODUCTION – TRADING STRATEGIES For a modern day Trader a Computer is a Must, you are able to look at a number of complex technical Indicators, which can be used as part of your day-to-day trading and managing your positions. Just like a majority of the Car Drivers, you do not need to understand how the engine works, indeed many Car drivers would even struggle to change a wheel, yet they have been driving for years. My advise to many Traders is to Focus on the Indicators and how to read them, as opposed to what the Indicators are and what it’s formula is and try and work out it’s formula! Why invent a wheel, or indeed why change something if it works! I come across so many Traders, with so many ifs and buts. They are constantly looking to prove the author or the coach wrong, in the process burning so much of their precious energy in just trying to prove a point! Clearly such people will NOT succeed in life, let alone Trading! There are several good quality charting packages. To be successful, you have to invest in quality charting packages – whilst there are so many free charts you can get on the Internet, but many have limitations. I have used E Signal and also Ensign software, both very powerful charting packages with many advanced features. These softwares are great toolboxes for the traders, and you must learn to use them to work smarter and more efficiently. It will allow you to look at multiple time frames, and will allow you to split screens, you will be able to look at many popular indicators such as moving averages, channels, MACD, Stochastics, RSI and many others. A quality software will also allow you to write your indicators into the system, also be able to edit some of the regular indicators that are already in the system. You are also able to back test your indicators, thus giving you some confidence on how you can apply it to live data, which is critical when you want to pull the trigger. Indicators Indicators will help you identify trends and reversal points, and it will give you a better insight into the balance of power between bulls and bears. Indicators are more objective than chart patterns. A good trader needs to know which indicator works in which market condition, you must understand what it measures and how it interacts with the price action. Most Traders divide indicators into Trend Following Indicators – these include moving averages, MACD, MACD Histogram. These indicators are lagging indicators and turn after trends reverse. Oscillators – help to identify turning points, they include stochastic, RSI and momentum. Oscillators, often turns ahead of prices. The secret of successful trading is to combine several indicators from different groups, with chart patterns. I have found many Traders who just concentrate on one indicator, which I feel is very dangerous, as often you can end up with a false signal. Basic Theory The most profitable way of trading the Forex market is to identify the trend and once it is identified, stay with it for as long as possible. Often you see the so-called Forex Gurus advising to

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take 20/30 pip profits, yet you could be at a start of a big move. Clearly with good money management and trailing stop loss, you should be able to catch the big move. Many new Traders to the Forex market end up overtrading, trying to enter the markets too often, and in my early days I was not an exception, often incorrectly identifying a trend. A fisherman cannot catch a fish everyday, so too a Forex trader cannot catch a trade everyday. You have to have patience and only trade if your system tells you to do so. If there is no trade, don’t trade – is a simple rule. Markets are there every day, and opportunities will come, however if you desperately try to find a trade when none exists, than this will only frustrate you. One of the most important lessons I can teach you is patience. Often I see that new traders end up having an incorrect entry point, but this is equally followed by an equally incorrect placement of a stop loss. Most have been taught to place no more than 20 point stop loss, and that also just around the previous support/resistance. How often have you seen that stops have been gunned, and than the market continues to go in the direction you first thought it would.? Your entry point, stop loss and exit levels must all be logical and it must be able to produce you consistent profits. Incorrect placement of stop loss can sometimes result in being stopped out just at a reversal point, have a look at the following exampleA signal for a short entry, price level was at 1.9050, signals for the short entry were 1. 2. 3. 4.

Macd divergenc RSI Divergence Resisting at R1 (not shown) Resisting at a Pivot level

If say a 20 or 25 pip stop loss was put in, the position would have been stopped out. The cable peaked at 1.9076, then briefly consolidated, and then it eventually fell by over a 100 pips from its peak.

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I hear lot of so called “gurus” in various books and trading seminars advising on a 20 pip stop loss. With so much of volatility, Forex can move 20 pips in minutes, and if you were on the wrong side of a trade, you are stopped out. Most of them also recommend not to trade unless the risk reward is 1 to 3 and above. I am simply baffled by this advice. To be honest a lot of these guys are not traders themselves. One Guru at a trading seminar says “only morons will trade with a risk reward of 1 to 1, and adds that a trader should only risk £25 to make £100 – a risk reward of 1 to 4 – looks great on paper, and yes the books and trading seminars will sell like hot cakes! In my opinion in most cases the risk/reward ratio is a lie. It is a fun fantasy. Often an amateur sets unrealistic stops and lowers risks to reward, but ends up being stopped out and never achieving the profit target. Bottom line is, what is important is are you able to steadily increase your Capital, if that means having a risk reward of 1:1 or 1:2, then so be it. Off course, once you get experienced and can read the market accurately, then even a risk reward of 1:10 is possible. On some of my swing trading positions, this has often been achieved. However, when I am trading intraday, having done my research and I am reasonably sure of the direction of the trend. I am not at all concerned in having a tight 20 pip stop loss. I would rather lose 60 pips on a well thought out trade with a good market direction, than lose 3 lots of 20 pips trying to achieve the same thing. That does not mean I cannot have tight stops, there have been many instances where there could be a finely balanced trade, and the market could go either way. I have even gone in with a 10 pip stop loss. You have to be flexible, and the market direction should dictate where to put the stop loss. In fact if I was trading of a shorter time frame, I would often start with a risk reward of 1 to1, what I focus on is I have to have the least number of trades, which get stopped out. Generally, I am able to get a winning percentage of 70%, 7 winning trades (7 X60 = 420 pips) 3 losing trades (3 X 60 = 180pips) – that still gives me a net profit of 240 pips! Thank you I would rather have that instead of so many losing trades of 20 pips! Which Time Frame to Use When I first started trading Forex, I was taught to look at 1 & 5 minute charts, have a stop loss of 20 pips and a target of 20 pips. Majority of trades would be stopped out and the few would have been profitable. Profits were snatched too early, on some of those winning trades, these trades had offered opportunity to bank not 20 pips but more than 50 or 100 pips. It was only after I started using the larger time frame that I realised that the Support and Resistance were more relevant on say a 60 minute chart than a 1 minute or 5 minute chart On my screen I will look at four time frames, which would be 15 min, 1 hour, 4 hour and daily. You could use any combination, which suits your trading style, which might beTick, 1 minute, 5 minute, and 15 minute 5 minute, 15 minute, 30 minute and 60 minute etc In this situation, you are able to see the trend in the larger time frame, which will enable you to pin point your entry and exit levels. Take a look at the image below and see what my screen usually looks like:

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I would use the above format, if I were looking for a trade using macd divergence, as you can see I have 4 screen, a 15 min, 60 min, 4 hour, and a daily chart. At the time of writing this book, the system issued a short signal on the EURJPY. As you can see there was a MACD divergence (to be explained later) first on a daily chart, then followed by a divergence on the 4-hour chart. Seeing this signal on 2 charts gives you more confidence to pull the trigger, together with the moving average system (discussed later) that I use. Having seen this divergence, I would then turn to 60 min and 15 min charts to look for a better entry. Trigger pulled and short at 139.62, currently the price is 135.60 – that is a profit of 402 pips! And still in the trade. The 15 min charts are turning bullish, but a strong resistance at 135.80, so my stops have been moved to 136.20. However, looking at the 4-hour and daily chart, you can see that we are still in a strong down trend. It is this market direction that has kept me in the trade. The market direction has kept me in the position on the short side from an open entry level of 139.62. Stops losses are continually being moved to lock in the profits.

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MOVING AVERAGES Introduction There are three types of moving averages: simple, exponential and weighted. Moving averages are one of the most popular and easy to use tools available to the technical analyst. They smooth out the price action and therefore it makes it easier to spot a trend, and this is particularly helpful in volatile and trending markets. They also form the building blocks for many other technical indicators and overlays. A moving average is the composite photograph of the market – it combines prices for several days. The market consists of huge crowds, and the moving average identifies the direction of mass movement It must be noted that all moving averages are lagging indicators and will always be behind price. Currencies trend very well, so they fit well with trend following indicators. When prices are trending, moving averages work very well. I have often used the crossover of Exponential moving average (EMA) this strategy will not work well in a sideways market, as there will be numerous false signals. In order to reduce the lag in simple moving averages, I tend to use the EMA Exponential Moving Averages (EMA) EMA is a better trend following than a simple MA. It gives greater weight to the latest data and responds to changes faster than a simple MA. A successful trader does not forecast the future – he monitors the market and manages his trading position. Moving averages will help us trade in the direction of the trend. No doubt there are literally hundreds of variations on various trading systems using the crossovers of moving averages to initiate a trading position. One of my favourite one is the use of 5, 20 and 60 period EMA. Like all other mechanical trading methods, this will work well in a strongly trending market. The system that I have successfully used is based on the following rulesUSE a 5, 20 and 60 PERIOD EMA WARNING to Buy When the 5 EMA crosses the 20 EMA moving UPWARD. This indicates that the currency pair is in a up trend. Confirmation to Buy When the 5 EMA crosses the 60 EMA moving upward, it indicates that the currency is on an up trend momentum. Warning to sell short This is the Exact opposite to the buy signal, When the EMA5 crosses the EMA20 moving downward, this indicates that the currency pair may be in a downtrend, so be ready to short and continue to monitor the price action. Confirmation to sell short This is when the EMA5 crosses the EMA60 moving downwards, this would indicate that the currency is in a downtrend ENTRY ORDER You should wait to see the price action after the crossover. Often the next 2 or 3 bars will retrace, thereby offering you a better entry point. If however, there is an aggressive price action, following the crossover of EMA, then you may wish

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to consider a market order to fill your trade. Because currencies trend well, therefore you will be able to catch a bigger move. See the following examples; GBP – Short Trade.

The above trade at best could have produced a profit of 175 pips, having entered short at 1.8935 leading to the lowest point at 1.8760. I would let this trade run until I saw a significant turn on the 20 period EMA, the first such signal would have been at 1.8790, producing 145 pips, or the crossover of 20 period EMA with the 60 period EMA – this would have produced a profit of 125 pips. – Not a bad trade, but how many traders would have had a patience to hold on to this trade! Patience is the key – Wait for the signal, than let your profits run.

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JPY – LONG Trade – 14th April 2005.

Obviously when using the crossover of moving averages, you would also look at other signals in addition. Just relying on one indicator is dangerous and risky. If we look at the above chart, you have a double bottom, a higher low, then consolidates, then breaks out of the triangle pattern. This coincides with the EMA crossover. When you have such confluence of events, the certainty of a profitable trade is much higher. CHF – SHORT trade – 4th Oct 2004. DAILY CHART

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Using the Daily chart, a Short signal at 1.2601. One could have taken profits at 1.1300, when there was a double bottom –that is a profit of 1300 pips. Would you have had patience to hold on to this trade for long? It is possible if you have a set of rules, which you follow strictly, off course you would have a trailing stop loss so that your profits are locked. If you had waited for the turning of the 20 period moving average, you could have closed the trade at around 1.1500 – that still produced a profit of 1101 points! If however, you had waited for the crossover of the 20 and 60 period crossover, that would have produced a gain of 800 pips, obviously chances are that you would have taken profits much earlier, using other signals, such as the double bottom. This simple system can work on all time frames, as illustrated above. Once again this illustrates currencies trend well, and EMAs can be used to stay in the trade, for as long as the trend is in your direction. In addition to the EMA crossover signals described above, you can also use the MACD (Explained later) to confirm the trend. Always use the default settings of 12 and 26 to calculate the MACD on your charts. There are 4 basic stages to this cycle;

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1. 2. 3. 4.

The The The The

MACD MACD MACD MACD

crosses the zero line moving upwards continues to increase until it reaches the maximum value then starts to decrease until it passes Zero continues to decrease moving downward to the minimum value

From the above, If MACD is in Phase 1, it verifies the confirmation of a buy signal, and if MACD is in phase 3 it verifies the confirmation to sell short. See the following example.-

Using the EMA crossover signal in conjunction with MACD means that likelihood of a false signal is reduced, as illustrated in the above trade. As you can see that prior to the signal there were few trades where you would have been stopped out, as the markets were range bound. Therefore once again, what you are looking for is a confluence of events.

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RECAP OF SIGNALS 1. 2. 3. 4.

Get ready to buy – EMA5 crosses EMA20 moving upwards Confirmation to buy – EMA5 crosses EMA60, MACD should be in phase 1 Get ready to sell – EMA5 crosses EMA60 Confirmation to sell – EMA5 crosses EMA60 moving downwards. MACD should be in phase 3. An example of a Short Trade

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MOVING AVERAGE CONVERGENCE DIVERGENCE (MACD) Gerald Appel developed the MACD indicator, and it is simply a method of identifying the potential for two exponential moving averages to cross. MACD is calculated using a short length and a long length exponential moving average (defaulted to 12 and 26) and calculating the difference between these two averages. In other words, it is the spread between the two averages. Normally, a signal line is derived by calculating an exponential moving average of the MACD. You can also have the MACD displayed as a histogram – a series of vertical bars above and below a zero line

Crossovers of the MACD and signal lines identify shifts in the balance of power of bulls and bears. Trading in the direction of a crossover means going with the flow of the market When the fast MACD line crosses above the slow signal line, it gives a buy signal. Go long, and place a protective stop below the latest low. See A above. When the fast line closes below the slow line, it gives a sell signal, and places a protective stop above the latest minor high. See B above. MACD HISTOGRAM The MACD Histogram gives a more in-depth guide to the balance of power between bulls and bears, and tells us if the bulls and bears are getting stronger or weaker. In my opinion one of the best tools. In the above chart, you can see that just before point A, the bears are losing the momentum. MACD- HISTOGRAM and PRICE DIVERGENCES Divergences between MACD- Histogram and prices identify major turning points. These signals do not occur often, but when they do, they often let you catch major reversals and the beginning of a new trend. In my opinion the MACD divergence is probably the strongest signal in Technical Analysis. You could probably make a living trading the divergences only! MACD should be a copycat of the price action, and therefore macd will also make a higher high same as a price action, if this pattern is not repeated then you have a divergence. When prices rally to a new high, but MACD traces lower, this is a bearish divergence, this shows that the bulls are getting weaker, this would identify a price weakness at market tops. The following is an example of a Bearish Divergence.

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Another example of a perfect MACD Bearish Divergence A possible entry at 1.8670, The EMA crossover at 1.8295 will still keep you in this trade; at this point the profit from the trade was 375 pips. You could consider closing the position at 1.7970 when the 20 EMA starts to rise, this giving a profit of 700 pips. At this stage the 20 EMA has not crossed over the 60 EMA, so some of you may want to carry on with the trade. If you did so then you would have had a perfect opportunity to close the trade at the Double bottom on 7/10/04 at 1.7760 – giving a total of 910 pips profit. Not a bad trade, from divergence. MACD BULLISH DIVERGENCE If the prices fall to a new low but MACD traces a more shallow low, it would mean that bulls are ready to gain control, and this would identify strength at market bottoms. This is a Bullish divergence. They give buy signals when most traders feel fearful about a breakdown to a new low! The following chart illustrates a perfect MACD Bullish divergence on a EURUSD Chart

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You could consider longs when the MACD Histogram ticks up from its shallower bottom; while prices are at a new low, place a protective stop below it’s latest low. The higher the time frame of a chart in which the MACD divergence occurs, this may result in a larger move. For example in the above chart, at around 1.2250 the peak of that rally had been 1.2850 – thereby giving an overall gain of 600 pips. In this instance your entry points were much earlier than the EMA 5/60 day crossover All the above strategies will work in any time frame, so unlike me, if you enjoy the thrills and excitement of watching your screens for every second to catch 20 to 30 pips per trade, then you can certainly switch the charts to a lower time frame, i.e. 1 minutes or 5 minutes. Relative Strength Index (RSI) The relative strength Index (RSI) is a momentum-based indicator. Determining the true value of an oscillator depends on the understanding of overbought or oversold positions. The basic formula for calculating RSI is as follows: 100-(100/(1+U/D) U = average upward price change D = average of downward price change

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RSI as an indicator is front weighted i.e. it gives more importance to more recent price action. It gives a better velocity reading than other oscillators; it also tends to filter out lot of noise. Your software should be able to do the work for you. At the bottom of the chart below, the RSI, on a scale of 0 to 100, indicates that the overbought position is at 70 and oversold position is at 30. Some traders use the 80/20 range, as they do not want to pull the trigger too fast! Some traders also use the short term moving average crossovers, this will also indicate a shift in direction, and when this occurs when the RSI is at extreme levels then it could be a powerful setup to pull the trigger. There are 5 different uses for RSI; 1. Tops and bottoms – overbought and oversold conditions are usually signalled at 30 and 70. 2. Divergences – when a pair makes new highs or lows, but the RSI does not follow price action, this usually indicates that price reversal is coming. 3. Support and Resistance – RSI may show levels of support and resistance, sometimes more clearly than the price chart itself. 4. Chart Formations – Patterns such as double tops and head and shoulder may be more visible on RSI rather than on price charts 5. Failure swings – when RSI breaks out, i.e. it surpasses previous high or low, this may indicate that a breakout in price is coming. It is important to understand that an overbought or oversold position can remain in an extended up trend or downtrend for some time, so try and use other methods combined with RSI, rather than using it on its own.

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In the above chart, RSI was useful in detecting a short trade after a divergence and also a crossover of the 70 “ overbought” level. The above chart is a 5-minute time frame. There are at least 2 good short trades. On the long side, notice the RSI bouncing just around the 30 oversold, subsequently there is a double bottom, and a divergence on the RSI. This was around the price level 1.880. Having a closer review of the above 5-minute chart, which covers a two-day period. The GBP has not moved much, yet there were few opportunities to trade both from the long side as well as short, with a gain of more than 100 pips.

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INTRODUCTION TO ELLIOT WAVE The Elliot Wave Theory was proposed in the early 1930s by R.N. Elliot, a stock market speculator, Elliot focused on classifying market activity according to a set of cycles and ratios of movements. As with the waves on the ocean, market activity ebbs and flows in cycles that repeat and can be subdivided into smaller cycles. The theory states that markets move in repetitive patterns; a five-wave advance (impulse waves) and a three-wave decline (corrective waves, labelled with letters). This cycle of eight waves can be seen in all time frames from intraday to what Elliot called the "Grand Supercycle" of over 200 years. Each wave in a cycle can be subdivided into smaller cycles. The diagram below shows how an eight-wave cycle advances in five waves and declines in three. One of the rising impulse waves has been broken down into five smaller waves

According to physical law: “Every action creates an equal and opposite reaction”. The same goes for the financial markets. A contrary movement must follow a price movement up or down, as the saying goes: “ What goes up must come down” (and vice versa) Price actions can be divided into trends on the one hand and corrections or sideways movements on the other hand. Trends show the main direction of prices, while corrections move against the trend. In Elliott terminology these are called impulsive waves and Corrective waves. Wave "1" – is the changing of market opinion from bearish to bullish. It often is driven by a rebound from depressed prices and is the shortest of the rising impulse waves. Basically, the bargain hunting has begun. Wave "2" - is a retracement of wave "1". Most, if not all of the gains from wave "1" are erased because market participants have used this rally to sell their losing positions at slightly

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better prices. This wave often presents itself as the right shoulder of a head and shoulders pattern. Wave "3" - is the reversal patterns completed by the first two waves break into the new trend. This is the longest and strongest of the impulse waves, at least in the financial markets, as most technical patterns have signalled the new trend and market participants now rush in to follow it. Wave "4" - is the consolidation phase of the advance. Its structure is also fairly complex, yielding many common continuation patterns such as triangles. This wave may never drop below the peak of wave "1". Wave "5" - is final stage of the advance and often shows a divergence with such technical indicators as cumulative volume and relative strength (RSI). Wave "a" - at first appears to be a normal correction to the rally. Elliot Theory says that wave "a" will break down into five, not three, sub-waves. A market move in five waves indicates a new dominant market direction. Wave "b" - is the bear market correction allowing a second chance for sellers to sell. Wave "c" typically breaks support and the peak of wave "3". Here, many technical indicators confirm that the original rally is over. Identifying waves is often a difficult activity because there are a number of exceptions and variations in the waves. These deserve a separate discussion for themselves.

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The Elliott Wave Theory has assigned a series of categories to the waves in order of the largest to the smallest. They are: • • • • • • • • •

Grand Supercycle Supercycle Cycle Primary Intermediate Minor Minute Minuette Sub-Minuette

To use the theory in everyday trading, the trader determines the main wave, or supercycle, goes long and then sells or shorts the position as the pattern runs out of steam and a reversal is eminent. Rules of Wave Labelling Correctly labelling waves is at the heart of wave analysis. Incorrect labelling can prove very costly to a trader, and so it is important to observe the rules of labelling. Elliott established three simple rules that, if not observed, will invalidate a wave count: 1. 2. 3.

Wave 3 can never be the shortest impulse wave. Wave 2 can never exceed the start of Wave 1. Wave 4 can never overlap Wave 1 (i.e., cross into the same price area).

HOW CAN YOU USE ELLIOTT WAVE TO PREDICT TRENDS Everything you have read so far is the background in brief to the Elliot Wave principles. Many traders do use these studies, and are indeed profitable. However, when these principles are combined with the Elliot Wave indicators, you have a powerful and unique trading technique, which can be extremely profitable. Most charting software will have these Elliot Indicators as part of their advanced packages. The three Elliot Wave indicators that I often use are; Elliot Wave Trend (ET) Elliot Wave Number (EN) Elliot Wave Oscillator (EWO)

Æ Æ Æ

TREND WAVE COUNT MOMENTUM

Elliot Wave Trend (Abbreviated ET) ET will measure whether the trend is positive, negative or neutral. ET trend of 1 will mean that the trend is positive, ET of –1 means that the trend is negative, and ET of 0 shows that the market may be flat or sideways.

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In the above chart the trend changes to negative on the 11th May 2005, on a 60-minute chart – GBPUSD. The candle closes at 1.8742. The Trend stays negative until 18th May 2005 and the candle closes at 1.8393. A move of 349 pips. Elliot Wave Number (EN) The Elliot Number can read 1,2,3,4 & 5. These numbers correspond to the Elliot Wave, as described above. Therefore you can place an entry order when EN changes, i.e. say EN changes from 3 to 4. The Entry order is for the open price in the new EN. It is important that your order is filled at the early trend start, if your order is not filled within the next 3 or 4 periods, then you should cancel your entry order. As after 4 periods, either you have missed the trend or the trend will be reversing. This is one of the most important indicators. For this you should try and use the default ET settings on your chart – which will be 70,20. This basically means that the software needs 70% match of the Elliot Wave profile, and 20 of the most recent periods to calculate this number.

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I find that this indicator works brilliantly in an up trend, which would be getting the wave 3, which is the longest. In the above example of CHFUSD, the EN changes to 3 on the 11th of May, the candle closed at 1.2065. The EN Indicator changes to 4 on the 16th May 2005, the candle closed at 1.2221. The total movement between the two numbers was 156 pips. Elliot Wave Oscillator (EWO) This indicator measures the momentum of a trend, i.e. how fast or slow the trend is splitting apart or coming together. This indicator is either positive or negative. If this number drops below 0, you may want to close your long position, or if the number goes above 0 then you may want to close your short positions. Any EWO greater then +. 001 is a strong positive signal and an EWO of less then -.001 is a strong negative signal.

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The above chart represents a 60-minute time frame on GBPUSD, between 5th May 2005 and 22nd May 2005. On 11th May EWO moves from a positive number to a negative number, i.e. below zero. The candle closed at 1.8732. If at this stage you were already short, then the change in this indicator would have kept you in the trade. The EWO moves to above zero on the 18th May 2005. So if you were short at this stage, you could consider closing shorts and taking profits. The candle closed at 1.8380. The move between 11th May when the EWO turns negative, to 18th May when the EWO turn positive, was 352 PIPS. When all these indicators line up, there is a very high probability of predicting the trend, up or down. If all the indicators do not line up, then the certainty of forecasting the trend becomes difficult. The fact that the indicators do not line up does not necessarily mean that the trend will not move in the direction, which was anticipated, therefore by following all three indicators, you will miss out on some of the trends. Your most profitable trade This would simply be the strongest trade indicated by this method; this trade is where there is1. 2. 3.

A New EN of 3, i.e. moving from 2 to 3. Since wave 3 would be the longest of all cycle this will produce you the most gain. An ET of 1, since this being a positive A positive EWO – the more positive the better.

LONG POSITION – i.e. when you will be buying the stock, to exit you have to SELL to close your original position. So you buy when you expect the price to go up, and sell it to close your position.

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For Long positions you are expecting EN of 3 or 5 (remember UP waves), ET must be 0 or 1, and EWO must be positive. These 3 things must happen simultaneously. Once these 3 indicators line up you should look for a good opportunity to go long. The price to close your position is the open price of the first period where EWO first became negative. An EWO decline to below 0 is enough to tell us that the price may retrace, so you should book your profits! SHORT POSITION – i.e. when you sell the stock that you do not own. You are expecting the price to go down so that you may buy it back at a lower price. This is opposite to the Buy signal. Here you are looking for an EN of 4 (downswing), ET must be –1 or 0, and EWO should be negative. When EWO is negative it means that the trend should diverge away from 0 in a negative manner, i.e. go down. These 3 things must happen simultaneously. Once these 3 indicators line up you should look for a good opportunity to go short. To Buy back we just look for EWO to rise above 0, this is enough to tell us that we are headed up from here. The price to Buy-back is the open price of the first period where EWO first became positive. IMPORTANT NOTE Always have strong money management rules. Always have a stop loss and monitor your trades. As your position goes into profit, consider to raise your stops to lock in profits. You should also look to see the chart patterns, for example if you are long than look at the last three candlesticks on your charts, and see if they are forming consecutive higher lows. How to look for trades If you are day trading, and say you were using a 15 minute time frame, then when you are looking for trades, you need to find trades as they develop. So if you were trading several currencies or stocks, then it would be difficult to look at each chart every few minutes. Do an initial survey of all stocks that you are looking at in your watch list, and make a note of the highest and lowest EWO, so concentrate initially on those charts that have EWO close to 0, whilst also keeping and eye on the other charts.

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TRADE EXAMPLES – Using the Elliott Indicators EUR/USD DAILY CHART

Using the Daily Chart on the EUR, You have a perfect BUY signal at around 1.2300, when all the 3 Elliott Indicators are positive for a Long signal. Just using the above indicators, it would have kept you in the long position, until the EWO turn 0, or negative. This was around 1.3400. This trade using a daily chart has given a profit of 1,100 pips. Obviously using the daily chart, you will no doubt be using wider stops – taking into account your risk profile, and then as the position moves into profit, you would move your stops to lock in your profit. You can also consider taking profits by closing half the position, when you have achieved a certain target. If I am using a Daily chart, I would normally close 25% position when 250 pips are achieved and then move the stops on the rest of the position to a breakeven, I would further close another 25% position by taking 500 pips, and also at the same time moving my stops to lock in profit. Does the System work in a lower Time Frame? Well, lets look at the following trade.

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GBP/USD – 60 minutes, from 15th April 2005.

On the above chart, the three indicators were not in conformity till the 15th April 2005 that is when the Trend moves into a positive mode. Long Signal at 1.8890 Close position at 1.9125, when the EWO turns negative. 20th April 2005. Total profits from the trade. – 235 pips Analysing the above trend, you could possibly have entered on the trade earlier. Using other indicators, in this instance the Double bottom at 1.8780, which also confirmed the bottom. The second signal also came at 1.8860, the crossover of the 5 & 60 periods EMA, and finally the Elliot signal. Overall this gives a strong signal when you have confluence of events. As I keep repeating, by combining 2 or more signals you will increase the certainty of a profitable trade. This of course, may mean that you are missing out on few other trades, but then you will be cutting out some of the risks and will end up having a higher win/loss ratio.

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USD/CHF Using a 15 minute time Frame The Elliot system will work in any time frame. Let’s examine a trade on the CHF on 20th April 2005.

From the top at 1.1890, CHF starts falling, the currency falls by 50 pips before there is an Elliot signal. Let’s face it nobody is going to catch the tops and bottoms. We get a signal to turn short at 1.1825, on 20th April 2005 Close position at 1.1750, when the EWO turns positive. 20th April 2005. Total profits from the trade. – 75 pips. So you can see that this signal will work in all time frames, when combined with other strategies discussed in this course. Often I am able to achieve up to 90% accuracy Elliot Indicators – Test your Knowledge. GBP/USD – 5 minute Chart Date: 22nd April 2005. How many opportunities can you spot on the following chart? Feel free to email me with any queries, [email protected]

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Pivot Points as a Support and Resistance Tool Pivot points are one of the primary tools used by many Forex Traders, and yet they are not commonly taught at Forex Courses and also the average trader does not generally understand them. Using pivot points as a trading strategy has been around for a long time and was originally used by the floor traders. Pivot points can be calculated using few simple arithmetic calculations, using the previous 24 hour “session” days high, low and a close. A series of points are delivered. These points can be critical support or resistance levels. These Pivots are valid for the next 24 hours, and you have to calculate them on a daily basis. Pivots are also widely used by the bank and institutional traders, where large part of FOREX volume is based, so I guess they become accurate by definition. Since much of the volume on Forex depends on these techniques, pivot lines then become the focal points for the battles between buyers and sellers. Whilst no system is perfect, but when a trading strategy is devised in conjunction with other indicators or chart formations, Pivot levels can become very powerful You can easily develop a Pivot calculator, using an Excel spreadsheet. One formula that is widely used is as followsOpen Price High Low Close

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If you need a spreadsheet calculator, then kindly email me and I will send you one by return. From the above formula, you eventually finish with 7 points, 3 resistance levels, 3 support levels and the actual pivot point. In determining when to enter a trade you will also look for the usual candlestick formations indicating reversals (Hammers, Railway Tracks, spinning tops etc). Confirmation with technical indicators such as RSI is also useful. Adding trend lines is also very important, as when you have confluence of events, you could expect a price explosion. The three most important pivots are R1, S1 and the actual pivot point. The general idea behind trading pivots is to look for a reversal or break of R1 or S1. By the time the market reaches R2, R3 or S2, S3 the market will already be overbought or oversold and these levels should be used for exits rather than entries.

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On the above chart the Canadian Dollar was nicely trending up, pierces through R1, but is quickly followed by Railway Tracks in the next candle. If you were watching the charts, then you could have gone short at 1.2490. This is then followed by a crossover of moving averages. Sit back and enjoy the ride! The downtrend stalls precisely around the pivot point! – Who could have guessed? It is unable to close decisively under the pivot point. After the Doji the market starts to turn higher, clearly time to close your shorts and consider longs. In the space of 2 hours a nice long and a short trade, producing at least 100 pips.

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Another good Trade on the USDCHF on 27th April 2005, Price pierces through R2 at 1.1936, followed by a doji then the slide began. On its way down it passes through R1, then the Pivot level at 1.1875, but stalls just short of S1. It now starts consolidating, but the pivot is now acting as a strong resistance. As soon as the Pivot is breached decisively, it now acts as a support. Guess time to close the shorts and consider longs. – producing at least 60 pips. On the way back up, look at the pattern, having gone through the R1. It stalls precisely at R2! – Who could have guessed! – Yet another trade producing 50 pips On the above examples I have not gone deeply into patterns around the pivot levels, or looked at other indicators, but that is not the point of this lesson. I just wanted to introduce another possible way for you to trade.

Fibonacci Fibonacci is a massive subject and there are a lot of different areas you could investigate, however, for the purposes of the method to be used in this training material, we shall only be concentrating on a few specific points. Leonardo Pisano (Nickname Fibonacci) was a mathematician, born in 1170, in Pisa, Italy. Fibonacci had also learnt accounting. Fibonacci contributed to the science of numbers, and introduced the ‘ Fibonacci sequence’ The Fibonacci sequence is the sequence of 1,1,2,3,5,8,13,21,34,55,89,144 etc every next number is the sum of preceding two. There are also fibonacci ratios, by comparing the relationship with each number, and each alternate number and even number to the one to the four places to the right, we arrive at some fairly consistent ratios. The important ones are .236, .50, .382, .618, .764, 1.382 1.618, 2.618, 4.236. For example if you divide 34 by 89 = 0.382. As a trader you do not need to go into the mechanics of working out the numbers, as your charting program will work all this out for you. It

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turns out that the Fibonacci ratios are prevalent in nature around us, in the universe, in plants etc, so what you may ask is how come one should apply the fibonacci techniques to the trading environment. Traders study the charts, and Fibonacci ratios can be applied to the price scale and also to the time scale of the charts. Prices never move in a straight line, they advance then retrace, and if you normally look at the price patterns they tend to retrace in Fibonacci proportions often enough. I will show you some examples below; GBPUSD on a 4 hour chart.

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Have a look at the above chart – GBP/USD on 05th May 2005, on a day when there was not a great deal of price action, but trading within a channel. Look at the way the price slide was halted at the Pivot point, which also coincided with the 38.2% fibonacci level. Who would have guessed? Having bounced from the 38.2% and pivot point, it is on a steady up trend, rising by 60 pips, but only to be stopped at fibonacci 61.8%, which also coincided with R1. Many attempts were made for higher prices, but the rally repeatedly stopped at R1 & 61.8%. Once again this further illustrated how you can have an easy trade when combining two or more studies together. On the above example, even though the cable moved only 60 pips, but an active trader could have easily made over 100 pips – just trading off the pivot and Fibonacci levels. – Obviously with tight stops. Do not blindly anticipate the market to turn at a Fib level. Support and resistance levels are there to be broken. It takes some skill to determine which Fib level is likely to cause the market to turn, therefore you should experiment with as many charts as possible. No technical study is perfect, you must develop the skills to filter out bad trades, and improve the odds of finding better trades.

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Fundamental Announcements. Looking at the calendar. On the fundamental announcement (FA) days, you will see some extreme volatility, and this will sometimes offer you the best trading opportunities. This will result in the best breakout days, as sometimes the prices may move by 100 pips or more within a few minutes of announcements. Keep an eye on the time when the numbers are being released. Release of key economic data seems to generate more price action than say speeches. It is really difficult to anticipate what will create strong reactions, but after practicing for some time you should get a feel of what to expect. Always review the night before, the key fundamental announcements for the next day. Set your plan in advance and you should have better success. The time spent planning on such matters separates you from the novice traders, showing that you are a professional quality trader who takes time to properly plan your trades, and then trade your plan. There are certain FAs that are much more likely to result in strong movements. If there is uncertainty about the announcement, then there will be a drastic effect on the Forex market. The most important to watch areUnemployment reports Interest rates Consumer price index (CPI) Inflation Gross Domestic Product (GDP) M2 Money supply Producer Price Index Various surveys – U. of Michigan confidence and the Tankan Survey. Your broker’s website should be able to provide the calendar of fundamental announcements, if not then please email us and we will be able to provide the best websites to look for this information. So how do you trade the FAs? Early in my FOREX career I was 100% technical, making good profits from this, until such time as the technically strong currency was crushed following release of FAs. Today I consider fundamental, technical, and market sentiment simultaneously; each one provides important clues. For example, if I think the market sentiment is changing to USD positive and it’s starting to look good on the charts, and a great number for the USD is being released, this to me is a perfect buy signal; it looks good and the news says it will be good; in a game of probability I can’t imagine a better trade set up. This kind of holistic view is essential for FOREX trading success in my opinion. Consider this, 95% of new FX traders lose and 95% of new FX traders rely solely on technicals. That’s enough of a reason for me not to rely exclusively on technical analysis only! My experience has been that once a strong move is generally underway, following the release of FA’s and a lot more can be made going with the move as it kicks into high gear, off course at this I will also consider the charts, and the support and resistance levels GBPUSD – 4 hour chart

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On the above 4-hour chart release of FAs, being Dollar negative, sees the Cable making an explosive move initially, but the rally stops precisely at a double top – Who would have guessed? Then followed by the pound getting crushed. On the failure of a breakout – I was quite happy to go short for over a hundred-pip ride south. This is where doing your homework will help you tremendously. Before the release of FAs I will always sit down and look at the charts, in all time frames and look at the trend lines, with support and resistance levels, also look at the pivot points for the day. GBP USD 5 minute Chart

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As you can see from the above 5 minute chart, the Dollar got crushed, The Cable moved up nearly 100 pips on the 5 minute chart – then settled in a rectangle channel for a 30 pip range. Once this range is broken to the downside, there is a move south of nearly 200 points. A good short entry would have been at the break of the channel. Once again, another example of Technical analysis and breakout pattern on the FA days. One of my Forex trader friends does a straddle trade on the day of a major FA, and he swears on it, that it works majority of times. If fact with this system – you are in profit if you were wrong 50% of time. So in the above chart, before the release of the FA, he goes long on one account, and then also goes short on the other account. He targets 75 pips from each trade – and has a stop of 150 pips. On this basis you can only lose on one – not both – yet with volatility like the above chart – you can win on BOTH the trades. Surely a case of free money for 10 minutes work! Paper trade, and see it for yourself. I have so far done 4 trades, won 2 (300 pips) and lost 2 (150 pips). Overall gain of 150 pips – not bad! Just for a few minutes’ work. This strategy works so well when there is a big price move, but the price action failed to follow through and the price went back through the pre-release start point! Example of a trade based on the above strategy would be - Refer to the chart of GBPUSD on the previous page; Simultaneously do the following trade, before the release of FAs

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On Account A Go Long at 1.8885, Target 1.8960 (75 pips) Stop 1.8740 (150 Pips)

On Account B Go Short at 1.8880 (assuming a 5 pip spread) Target 1.8810 (75pips) Stop 1.9030 (150 pips)

May seem a silly trade to most, but tends to work time after time on most occasions. As soon as the FAs are released, the Cable moves up nearly 100 pips, at this stage your long would have been filled for a 75-pip profit. However, during the next 2 hours subsequently the Cable moves down by over 200 pips. At this stage your shorts on Acct. B has been filled with a profit of another 75 Pips. Overall you have come out with a net gain of 150 pips, and you were risking 75 pips. That is a risk reward of 1: 2. With so much volatility, not a bad way to trade. You should however appreciate that this strategy seems to work in the current very volatile markets. If however, the behaviour and the pattern of currencies change, than this strategy will not work. Try it out and paper trade it. If it works, stay with it – and the day it stops working, look for something else.

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TRADING PSYCHOLOGY •

Money Management & Risk Management

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Money Management Rules

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Trading Commitment

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Determine Your Trading Style

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Overcoming Fear

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Discipline, Discipline, Discipline

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A Trading Coach?

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Secrets of Highly Successful Traders

Money Management / Risk Management Money management also referred to, as “risk management” is absolutely critical to successful day trading on an ongoing basis. Many traders regard it as the single most important aspect of trading. Indeed lack of proper money management is a major cause of failure among new traders. Money management covers the allocation of funds to your trading, i.e. how you will allocate funds to your trades, size of the trades, and the makeup of your portfolio and how you will diversify between different investment types. The entry and exit points, stop loss management, risk reward ratio – if you apply that, or profit to trade and your trading style. For money management rules to be profitable to the trader, in my opinion entry as well as exit levels are both important. Most so called gurus tend to put lot of stress on the exit (stops), which I agree, but have to add that exit would be totally meaningless if the entry itself was not at a right level. At a Trading seminar I went to some years ago, I recollect a “Trading Guru” telling his audience – “ it is not entry which is important – it is exit” – I choose to differ. If the entry price was not the best price, then you will have a quick exit, when your position is stopped out Money management becomes key after you have pulled the trigger, based on the entry price which would be according to your trading system (this is covered separately under trading system and entry methodology) . However, having got a good entry level, what you don’t want to happen to your position is the following; 1.

The position goes against you, and you keep moving the stops, hoping that the price will eventually turn in your favor.

2.

The loss gets too much to bear, and you close your position at a massive loss, it wipes you out, and just as you close, the market moves in the direction you wanted. OR

3.

The market moves in your favor, you are happy with a big smile, counting your profits, you are in fear, just in case your profit evaporates! You chicken out, take a small profit, and go to the pub in the evening to celebrate!

4.

Then next day the market keeps going further in the direction that you had intended, but what’s the point – you have already snatched your profits! In the subsequent days and weeks, the market keeps going in the direction further and further!

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Have you ever experienced this? Do you ever say, WHY Does it happen to me? – This is money management. Why do trends reverse? Because most losers think alike, when a frightened trader closes, the master trader opens his position. “ When the amateur trader is fearful, the professional trader turns greedy” A real professional trader does not get too excited about his wins or losses, he simply concentrates on the task at hand, and that is trading. The professional trader uses his trading system for entry and for the exit strategies. He will stick to his rules. On the other hand, an amateur trader finds it difficult to cut his losses but does not find it difficult to snatch the profits. Preserve Capital One of the main ideas behind money management is living to trade another day. Too much risk on a trade is not worth it, if that risk can knock you out of the trading game. Preservation of capital should be the first rule for trading and investing. The key is to take moderate risks with good stop losses to steadily increase your capital. You should avoid unnecessary risks, as that can wipe you out. There is no get rich quick scheme in trading, you have to work very hard, and it is not an easy game. Risk Reward Profit to Trade What is risk? It simply means losing money. A lot of people talk about risk/reward ratio, for example some traders will only risk 20 pips to gain 60 pips. That would be a risk/reward ratio of 1: 3, i.e. risking £1 to earn £3. How do you calculate a risk/reward? The simplest form of calculation involves nothing more than the following. Entry price Stop loss target Stop profit target The resulting risk/reward ratio. So, taking the above example a person making 3 trades and losing on 2 and winning the third will still make a net gain of 20 pips, even though he is right only a third of the time. However you must have realistic expectations, as there is no point in having a good risk/reward ratio only to be stopped out all the three positions. Once again you should trade according to your risk tolerance and your own trading style. Whatever works for you, stick with it. One of my students who started trading Forex few months ago, has consistently averaged over a thousand pips every month. He risks 75 pips to make 50 pips! Most traders would say he is crazy, but this strategy and system has consistently worked for him – so why change. Looking at it, what is important is that this trader has a set of rules and he abides by his rules and has an exit strategy on hand. He will not change his stop losses. A very disciplined trader indeed. A close look at his last 20 trades gave me the following statistics Total Trades: Trades stopped out: Trades with profit: Net Gain:

Trading Psychology

20 3 Loss of 225 pips 17 Gain of 850 pips 625 pips

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When I looked in detail at the 17 profitable trades, had he placed a stop loss of less than 40 pips, then he would have been stopped out on further 11 trades. That would have meant that 14 trades stopped out for a loss of 560 pips. So by trying to improve on a risk/reward ratio on paper, he would have lost overall. It is also interesting to see from the trades, that this particular trader waited for a good setup and that he was able to profit from 85% of his trades, patience in this case paid, as he only pulled the trigger if his system allowed him to do so. He will NOT trade unless he finds 3 good reasons, and was willing to place a wider stop loss. His main focus was on finding good entry points and avoiding gambling with risky trades. Because of good entry points, due to a well thought out strategy, most of his trades could have generated more than 50 pips. But he is happy with 50 and smiles all the way to the bank. To some, not a great way to trade, but it works wonders for this trader, and he is consistently laughing all the way to the bank! So the bottom line is, you have to have a system in place, that works for YOU, not what is written in a book or what a guru tells you to do. So long as a strategy consistently works and is steadily increasing your bank balance, then you stick with it. The day it stops to work, you change and look for something else. Risk/Account Ratio This is the amount that you are risking to the amount in your account. Some traders would rather work with a risk/account ratio as opposed to a risk/reward ratio. By comparing the risk to the account size, i.e. the amount of dollars you have now vs. the number of dollars after you lose, you are comparing apples to apples, i.e. risk/account. What is the correct ratio? It all depends on your personal tolerance for risk. Most traders tend to work with 2%, but this may not be enough, unless the bet size is very low and higher stop loss. I generally work with 5%, so for example if I have a £10,000 than I would allow myself to lose £500 on a trade that would be 5% of my capital. I personally believe it is difficult to start trading with a small account size, I believe you need at least £5,000 account ideally to have a realistic chances of having consistent profits. One Forex website selling a “hot System” for $500, suggested that you could start trading from as little as $300! In my opinion an outrageous advice, as this can only kill an aspiring trader with one or two losses. The best futures traders make money on 30 to 40% of their trades, majority of their trades end up as losers, they are aiming of a risk reward ratio of at least 1:3 – letting profits run and cutting losses. Amateur traders often trade heavily after a big drawdown, they are hoping to comeback with double his trade size after a loss. This is a very poor method of money management. As I have said previously, I will trade aggressively if my system is making money, but when I have a few losing trades, I will reduce my bet size. Reinvesting Profits Compounding means earning interest on interest is best described by an ancient story A Maharaja ruled the Indus Valley, in northern India, in the sixth century. Bored, he asked his court gamesman to develop a new game for him. The gamesman created chaturanga, which is the oldest known form of the chess game. This game is played on a board of sixty-four squares. The Maharaja was delighted and asked the gamesman what he would like as a reward.

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The gamesman replied, "Just one single grain of wheat on the first square, two grains on the second, four on the third, eight on the fourth, and so on across the board." In calculating the gamesman's reward, the Maharaja discovered that, even before he was halfway across the board, he owed the gamesman more grains of wheat than existed in all of India. The gamesman was earning interest at the rate of 100% per square, far beyond what we can expect. However, the principle of compounding interest remains the same. Earning interest on interest can add up over the long term. Time and compounding your money will make you rich - if you stick with your system. If you can manage to make 50% a year in your trading, you can grow an initial £10,000 account to over £170,000 in just seven years. Check the following chart for other percentage return of investments.

Wonderful! Looks so easy, so with a start up capital of £100,000 you will be a millionaire in no time! Compounding looks great on paper, and most books on trading are full of it! In fact attending various seminars on trading, they make it look so easy and the amateur trader gets excited. A professional trader calmly removes some of his profits from his account, and he will leave some in the account, and continues to trade in his normal way using his system. Leaving some of the profits will allow him to make money faster and will also start using long term positions, using wider stops. One of my students, reinvests half of his profits on long-term Forex positions, and trades this in a separate account, using weekly and daily charts. The positions start with as much as 200 pip stop loss, but targeting at least 500 pips. The position is left for many days. Once again, this style works great for this particular trader So don’t be greedy, remove some of your winnings on a regular basis, and leave the other to trade, and diversify your portfolio. Only increase your trade size, if you are comfortable with, else stick with the current strategy and trade sizes. An amateur trader comes into the market to get rich quick, opens an account and expects it to run it to a million! Many want action and thrill unable to wait for a good entry, wanting to be on the move all the time. Many traders I have met set themselves unrealistic targets, forget 30 0r 40% annual return, some want to achieve 500% or a thousand percent, because they have just been to a seminar, and a Guru talks about achieving these sorts of returns! – The gurus make it sound so easy. I bet they make more money from their seminars and presentations, than they do on their trading. You have set yourself modest and realistic targets that you are able to achieve.

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Position Size Professional traders know the importance of money management. If you risk a little, you win little. If you risk too much, then there is a chance that you could become a millionaire soon, but also an equal chance that you will be wiped out never to fight again. The optimum is somewhere in the middle, a balanced trading approach is necessary. A bold trader placing huge trades feels the pressure and will get emotional the moment he is losing few pips. I ask traders, would you double your bet size if you had doubled your capital? If you are successful trading 1 lot, will your psychology cope with say 10 lots, or 100 lots? Reinvesting can turn a winning account into a losing account, if your psychology cannot cope with trading big sizes. I was once asked to trade a big account for an American investor. I was requested to trade 50 and 100 lots, 100 lots would be approximately $10 million. At that time, my psychology was used to trading 5 and 10 lots, not 100 lots – the whole experience was a disaster, and it greatly affected my trading confidence. I had to stop trading for some time, and started trading with a mini account. It was an experience never to be forgotten. Money Management Rules To summarise, in my opinion these are the important time tested Money Management Rules, which are necessary to survive as a Trader over the long term. 5

Preserve Capital – Survival first is the first goal. You should limit the loss and let your profits run.

5

“Trend is your friend” – Always trade in the direction of the trend, don’t try and outsmart the market. In a bull market, look for opportunities to enter long. In a bear market, look for opportunities to enter short. Close the positions for profit when your targets are achieved

5

Always, always use actual stops. Once again use the stop levels that you are comfortable with, according to your trading system.

5

Do not move your stop, if the price gets closer to the stop.

5

Always consider bet size and diversification.

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Risk Reward Ratio – I have written enough on this, don’t get too hung up on risk reward. It looks nice having a risk reward of 1 to 3, but what’s the point if your 3 positions are stopped out. My focus is in steady increase in my capital.

5

When on a winning streak – trade aggressively, if however you have a streak of losing trades, then take time out from trading.

Finally, a big drawdown can wipe you out, if you have no capital left, then you cannot trade. It takes time to accumulate wealth, but it can disappear fast if you do not follow your trading rules. Trading Commitment What is commitment? – The state of being bound emotionally or intellectually to a course of action. Commit – to promise or give your loyalty, time or money to a particular principle, person or plan of action.

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To translate it to trading Forex, you simply have to have great amount of passion to succeed and want to be a trader, who enjoys doing it in a fun way. Money may not necessarily be the main objective. Once this passion is created, commitment to some will come naturally. Commitment is an absolutely necessary quality if you are going to be a successful trader. Staying committed to your goals and trading plans does not guarantee that you will have easy success, but you will be working toward something important with every step you take in that direction. It takes great commitment to make money from the Forex market. Trading requires commitment and persistence. A trader must build up skills so that they are able to take actions effortlessly, with precision, over and over again. It is essential to enjoy trading because it is your passion. The monetary benefits, which is the end product, may be less important than the fulfilment that trading offers. You've got to want to trade with a passion. If you worry about profits, you'll never make them. You will want to leave the game before you've really started. Rather than considering how trading profits can change your life, focus on how enjoyable the process of trading is. It's fun; it's challenging; and when you devote enough time and energy to it, it can be fulfilling. Have a strong commitment to study the markets and identify good set-ups, so that you can pull the trigger effortlessly, in the end, it's worth it. Traders will always experience ups and downs in their trading career, however when they are going through a rough patch, there is always a way to turn things around if you are committed. Stay committed to your goal. Determine your Trading Style – What Kind of Trader are you? No two traders have the exact same personality, bankroll, and objectives; the first step in formulating a trading plan is have a heart to heart with yourself and determine what kind of trading suits your unique character, funds, and goals. Most traders fall into one of the following categories: 1) 2) 3)

Day trader – buys and sells very quickly, often times doing 10 or more trades each day; closes all positions by the end of each day. Swing trader – holds positions for bigger moves and a longer period of time than day traders; holding period is generally hours to days. Long-term trader – holds positions for long periods of time, normally weeks to months. Although excellent for long-term trading and swing trading, successful FOREX day trading is infinitely more difficult; here is why.

Most new FOREX traders begin as day traders; they buy and sell very quickly, often making 10 or more trades a day and closing all positions at the end of each day. This can be a recipe for disaster in most cases. FOREX day trading is expensive; bid/ask spread are a killer when there are so many transactions; in addition stop loss orders are executed when the price level is reached not breached, resulting in premature closing out of positions, limit orders may not be filled, and off course you may have heard the term “ stops being gunned”. When you trade often and for small profit and loss targets the disadvantages of using on-line FOREX brokers are magnified and a declining account balance is almost a certainty. Of all the drawbacks the retail investor faces, bid/ offer spread is a relentless adversary that should be examined closer. Brokers provide a service and are entitled to charge for it but the question is how wide a spread is justified. Most brokers provide a consistent spread and ostensibly a constant source of liquidity, which is of course vitally important to traders. However, during the

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past 6 months it has become standard practice among most on-line FOREX brokers not to provide dealable bid/ offer rates during volatile times, such as around news announcements and when price volatility increases for technical reasons, such as often occurs at key price levels. Bottom line is bid/offer spreads are too wide; they overcompensate for the risk / service provided. As a result, brokers are generating more revenue than ever; what’s key to realize is that a substantial portion of these revenues are re-invested in advertising and other aggressive strategies for securing new clients, such as paying referral fees on every transaction to third parties for signing up new customers. What’s not obvious but happening behind the scenes is a steady flow of existing clients dropping out and new clients replacing them. I am fairly certain that the bid/ offer spread is the root cause of this very high attrition rate as existing clients lose their stake and also the root cause of the very high rate of replacements as monies generated from prior clients is used to secure new clients. Simply put, most on-line FOREX brokers are a typical of brokers; they don’t rely on retaining client relationships; they gain when clients lose. Most clients lose and most clients loose quickly. Let me leave you with this thought; the on-line FOREX brokers websites are filled with reasons why clients make money trading foreign exchange (practically all half truths or self serving theories) but have you ever seen a single word on their clients’ actual results? In summary, I recommend experienced day traders take a rational look at their performance to date in light of their direct cost of doing business (mark ups). Download from your broker website all trades you have ever done in chronological order onto an excel spreadsheet. Eliminate all columns except; 1) 2) 3) 4)

Currency traded Amount traded P&L on each trade. Next to the P&L column add a column titled mark ups;

You should now determine and record the mark up on each trade. Make a line graph with three lines: 1) cumulative P&L, 2) cumulative mark ups, and 3) cumulative P&L plus mark ups. The reason I spend a lot of time on mark ups is because it’s a variable trading expense that can be controlled, once traders are made aware of its potent negative impact on performance results. Overcoming Fear How do you define fear? "A strong emotion caused by anticipation or awareness of danger, it implies anxiety and usually the loss of courage." This definition of fear is useful in helping define the issues that traders face when coping with fear. The reality is that all traders feel fear at some level, but the key is how we prepare to address our concerns related to taking on risk as a trader. Mark Douglas, in his book, ‘Trading in the Zone’, says that most investors believe they know what is going to happen next. This causes traders to put too much weight on the outcome of the current trade, while not assessing their performance as "a probability game" that they are playing over time. This manifests itself in investors getting too high and too low and causes them to react emotionally, with excessive fear or greed after a series of losses or wins. All traders will encounter fear at some stage, no matter whether you are a professional or a novice trader, this seems inevitable, and to succeed and fight fear, traders will have to work through this positively. Winning traders manage their fear, while losers are controlled by it. Winners take positive action in spite of their fears. Two of the greatest fears that a trader will encounter can be,

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1. Fear of Loss 2. Fear of Letting a profit turn into a loss Fear of a Loss No matter how skilled you may be in your technical analysis, or your study of fundamental analysis, or your having devised some brilliant trading strategies – but you may still face roadblocks on becoming a successful and a profitable trader. Why? – Overcoming fear of losing money. I have never met a trader who really likes losing money – at the same time I have never come across any trader who has NEVER lost any money. I know of one leading “guru” on charts and technical analysis in UK, who regularly lectures at seminars, once admitted that despite being brilliant in his study of technical analysis, he has failed miserably in his trading, having blown his account many times – now he just concentrates on teaching trading to others! Fear of losing is not a problem, but it is how you handle the loss. A trader, who is relaxed, can look forward to another trade. Your success or failure in trading depends on your attitudes towards your gain as well as losses – and how you handle them. The market does not know that you, the traders exists, you or for that matter any trader cannot do anything to change the market or influence it. Only YOU can control your behaviour. Whether it is a big drawdown on an account, or a good profitable trade, a professional trader uses his head to stay calm and will look for his new trade. Only a novice trader will become excited and depressed. You are simply wasting your precious nervous energy! The primary difference between a professional trader and a novice trader is how they handle a loss. One of the greatest reason for a lack of success in trading is because most traders played it safe, they are so afraid of losing that they simply do not pull the trigger, even when they have a great trade! To a professional trader, winning means being unafraid to lose. Imagine how many times did you fall down, before you finally learnt to ride a bike? Or how many times did the baby fall down before the child went from crawling to walking to running? So for most novice traders, the reason they do not win in their trading is because the pain of losing money is far greater than the joy of being a winning trader, on the other hand losing inspires a professional trader, for he will look at that as a way to learn from that loss and he will always ask the question, how can I profit the next time? The winning trader will have a trading journal, where he records his trade; he will pull out the chart, and study it carefully, why the trade made a loss. A professional Trader is more concerned about avoiding a big loss, and less concerned about small losses. One trader that I had recently coached had an overall winning trade of 80%, yet his overall monetary record is of having a massive loss. He likes trading stock futures, particularly the stock Google, had many, many successful trades on the long side, but finally he went short at $179 and at the time of writing this book, he was still short with the price at $198. He had many opportunities to come out with a small loss, but “he did not want to take a loss”. This position has stopped him focussing on new opportunities. The longer you can stay in the game with a sound trading plan, the more likely you will start to experience a better run of trades, that will always serve you well in times of temporary trading slumps. Being a cricket follower, I see that even a world-class cricketer goes through a lean patch, be it Botham, Tendulkar or Richards – But they all come back with a bang, so it should not be different for a trader.

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What is important is how well you execute your trading plan, and stay focussed with ruthless discipline. With a good trading plan you should be able to have an entry and exit strategies, which you will action decisively and not hesitantly. Fear of letting a profit turn into a loss I am often asked when do I take my profit? - I simply say, “Go with the trend! – Let the profits run, and cut the losses short” But what do most Traders do? They SNATCH PROFITS and let the losses run! Too many traders want to lock in a quick profit to guarantee that they feel like a winner. In the above example of a trader who was trading Google, had he just followed the above rule, of letting the profits run and cutting short the loss, he would have quadrupled his equity. Yet now he is close to getting wiped out. He is now saving money from his full time job, to fund his account to have another go! So when do you take profits? For example I tend to break my trade into 2 lots, or 4 lots, depending on what time frame I am trading. So lets say If I am trading a shorter term time frame, I break my trade in 2 lots, so that as soon as I am say 30 points in profit, I close 50% of my trade and then for the remaining, I move my stop to break even. This way I am guaranteed that I will not lose! I will let the second lot run and I am seeking to ride the position with a trailing stop on the remaining portion of the position. Quite often I get stopped out, but imagine if only 2 out 10 trades you catch are a “big move” –what would that do to your bank balance! – The key is patience. If however, I were trading a longer-term time frame, I would break the trade in 4 parts, taking 25% profits gradually, and at the same time trying to catch the big move. This strategy has given me the most confidence. In 2003 I went long on the Nikkei Index, after it broke out of its long downtrend. I was so confident that the bottom was made here, having started of with a wide stop I was now hoping to ride this all the way up! The position was broken down into 4 parts, i.e. 25% each portion. The target for each portion was 250 points, 500, 750 and finally 1,000 points. As soon as my 250 points were achieved, I moved my stop to a Breakeven point in money terms, then a limit order to take profits as the Index went on a run! One of my Trader friends said “ I was crazy” – subsequently he ate his words. In so many years of my trading experience, I have yet to come across anyone, unless they have not told me, to have achieved a thousand points. All you need is faith in your system, with discipline to follow your goal and a lot of patience! One of my goals is to target a point gain of 5,000 points on Google, either on a short side or Long. You will know of it, when I achieve it So just how do you achieve the faith in your system, the discipline and patience? In my opinion, for a novice trader, it is vitally important to have some sort of consultancy from experienced traders or have a trader’s coach to guide them. Few thousands spent on being mentored, will more than be paid for not only from the profits that you will make as a result – but also the losses you will not sustain. Refer to the section “A trading coach” for more information. You have a choice, and only YOU, can make that decision Discipline, Discipline, Discipline. One thing is for certain, I would like to give credit where credit is due. This page is dedicated to Adrienne Toghraie – of ‘Trading on Target’, for all the help that I have received from her during workshops, consultations and also reading her books- The Winning Edge Series. This changed my life as a trader!

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Though I had been a profitable trader for many years, but I feel that my elevation to a “consistently successful trader” has only been made complete by the tremendous assistance I have received from Adrienne either directly or indirectly. In my opinion a successful trader needs three things, Trading System – a system, which will allow the trader to pull the trigger, from which he can profit. 1. Money Management techniques – Having pulled the trigger, you need to place the stop to limit the risk of any loss. It is also important that the stop loss is not moved further when the price gets nearer the stop, and 2. The most important of all- Discipline, Discipline and Discipline! – Trade the signals as they occur. No signals then no trade should be one of your golden rules. So what is Discipline? One of the reasons why many traders are unable to be disciplined is because they have not defined it. Discipline – To be accustomed to regular and systematic action; to bring under control so as to act systematically. “ The habit of obedience.” Trading Discipline – To pull the trigger when your trading system gives you the signal followed by a stop loss. You have a set of rules that you will follow, and will only act, if your system says so. The key word in the above definition is “habit” – so discipline in trading is the practice of making what you do a habit. Discipline will involve the need to act consistently, in a reliable manner, and in accordance with your trading strategy, which you set forth in your trading plan. It is said that 90% of traders lose money, and more shocking statistics are that 10% of traders go bankrupt, so why would this be the case if say most of the traders were aware of discipline or were exercising discipline? All individual traders have their own needs and it will vary from a person to person, for example a certain task to one person may require tremendous amount of self control and discipline, whereas the same task to another person may not require any effort. To practice discipline in trading, two things are most important, which are; Trading System – You have to regularly monitor your trading systems with the changes in the market and also your style of trading. If there were changes in the products that you trade, i.e. for example if you were trading stocks, then the system you may have used will not be relevant for the Forex market, because the behaviour, patterns, volume etc are totally different in a Forex market, so your trading system should reflect what products you are trading. In order to devise a trading system, you have to make plans and have patience, to go through all areas of trading. Having designed a system you must ensure that you implement it – Many traders fail to implement the system, mostly due to fear. Fear of profit or fear of loss, fear is also the most important aspect in the psychology of trading and I have written a full chapter on fear as it relates to trading. Money Management - Must have discipline to follow sound money management. So for example a trader who has 70% of winning trades, yet overall loses more on the 30% of trades – is a loser. The bottom line is what you take home! Small losses should not turn into large losses, and equally important you should not snatch your profits. Once again here, if you implement your trading system, then large losses can be contained – the ability to do this is discipline!

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As part of my trading system, as soon as I pull the trigger to open a new position, I immediately put a stop loss. Once the position is in profit, often I will start closing some of the positions gradually. Depending on the market conditions, I would close at least 25% of my position for a profit of 20 to 50 pips, then another 25% for 75 pips+, thereafter I would be using trailing stops for the rest of the position, using the moving averages and other indicators to keep me in the trade. Using this method I have been able to pocket several hundred pips from the final trade! As I keep saying currencies trend very well – so ride the trend. One Forex trader I am mentoring “never” closes any of his position – he uses trailing stops and all his trades get stopped. Looking at his trade record for the past 3 months, he has 70% of his trades being stopped out between a loss of 50 pips to gain of 50 pips. He starts with a 50-pip stop loss then will gradually have a trailing stop. Overall, this 70% of trades has averaged a loss of 10 pips per trade, so for 7 trades that would be 70 pips. However, for the 30% of winning trades he has averaged a profit of 180 pips per trade, so for 3 trades that is a profit of 540 pips. Therefore, that would be a net gain of 470 pips for 10 trades. Once again, this illustrates the power of letting your profits run. I discuss some of these strategies in my weekly Forex newsletter, the bottom line is not how many losing trades you have, but how much you take home, i.e. to what extent your capital is increasing. How can you improve your discipline? Your trading should be treated as a business, nothing less, it should not be a hobby. Any business organisation will have goals, they will have budgets prepared in which they will detail the sources of its revenues and against it there will be a budget of its outgoings – the net of these are profits. The company will measure its performance against the budget and will attempt to take action on any variances, and will look at reasons why the performance is positive or negative. Your trading should not be any different. In the case of your trading you have to compare your actual performance with your system, e.g. is your performance better than the system? The losing or winning trades you had, do they mirror the system? If not, why is it different? Why did you not follow the system? Did you have a loss, which should not have occurred if you followed your system? I am regularly comparing my performance with my Trading System, so how have I coped with this? Well, for a start, I don’t trade that often, and when I do I need an “iron clad” signal – I have patience to wait. I keep a trading journal, which will record full details of my trade together with a copy of the chart, on which I will write notes. I have a full-page trade journal, and on each page I have various inspiration quotes to motivate myself. My trading journal will have the following information; The chart with all my trend lines and indicators Reasons for placing the trade, at least 3 reasons Entry date & Time, Price, stop, and initial target Exit date & time, price. Profit/Loss Comments & lessons learned. In the comments section, I will examine the position in detail, and determine the reasons of the loss. Until you know the cause, you will not be able to change it. Without having a trading discipline, you are doomed to fail, it is no good having a great system if you do not have the discipline to follow it. Trading discipline should be your number one priority.

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Tips to Give you More Discipline Take responsibility of your actions Only YOU determine what to do & how to do it, so if anything goes wrong you take responsibility and not blame anyone else. So you have to set yourself free by taking control over the rest of your life. Mistakes You have to analyse your mistakes, the mistakes you make are in some way related to the negative mental states – whether it is an inability to pull the trigger or compulsiveness, you can trace it to a negative mental state. Discipline involves controlling your mental state. In my opinion, the most important negative mental attitudes or delusional emotions is anger. Anger is an emotion that destroys more people, relationships and businesses than all the illness in the world. People seem so angry all the time. Imagine what this does to the trading result. Smile and the world smiles back at you, learn to be a happy person, this will do wonders for your bottom line. It must be emphasised that to completely eliminate negative emotions from your mind is a lengthy psychological process, requiring study, mindfulness, reflection and honest observation of one’s mind. To begin with meditation is an ideal way to try and conquer the negative mental attitudes, it will not only give you insight into what anger is and what happens to oneself when feeling angry, but it also has a calming effect, tends to relax your mind and body. I always start my day with prayers and meditation. If you are unable to control your mental state, then you simply cannot trade profitably. In my opinion if this applies to you, then you must consider giving up trading until such time as you are able to control your mental state. You should seek professional guidance in this matter, and certainly there are few good quality Trader Coaches who specialise in such areas. Passion This gives you the driving force to enjoy the process. Most succesful traders have true love or passion about their trading. Ok, they are in for the money, which is the end result, but also they enjoy reading the charts, designing the trading system, pulling the trigger. What is the point of being disciplined if you do not enjoy the process. “A man is only truly great, when he acts from the passions.” Passion is defined as having great deal of emotion or feeling. So how do we get passion? The same way we get love & warmth, we have to decide it and feel it. In the same way, you have to have love for trading. For example my son says to me, ‘I don’t care how much money I make trading, but what is important is How can I become greater than Warren Buffet’ , to him that is his driving force, his goal – By having this passion built in your physiology, the target gets nearer. A TRADING COACH? “I learn teaching from teachers. I learn golf from golfers. I learn winning from coaches” -Harvey Penick

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The naked truth is that the markets prey on your fear and ignorance around trading. Most people are more comfortable talking about their sex life than their trading success or failures. In fact, many people are downright embarrassed that they don’t know all about investing in stocks. It’s time to come out of the dark ages and realize that these are learned skills like any other skill that you’ve already mastered and that all you need is the right coach. 5 5 5 5

Top athletes like Tiger Woods and Andre Agassi use Performance Coaches to stay at the top of their game. Oscar winning actors use Acting Coaches. Award winning singers use Voice Coaches. And Successful Traders use Trading Coaches.

If you want to become financially free you must reject conventional ways of thinking and follow proven methods that work. The real key to wealth is your thinking process. A trading coach is a trusted counsellor, guide, or a tutor. There is no reason to stumble and fall when you have someone guiding you around the blocks on the road. I consider trading skills to be one of the most difficult to acquire, yet very few traders take on a coach or a mentor to help them. All professionals, in every field get the best coaches these days, yet traders fail to do this. A trader’s coach helps you to develop the ability to achieve higher levels of success in all areas of your life. Every part of a trader’s life will affect his performance. The ability for a trader to follow his trading system for entering and exiting a trade is what traders call “the discipline of trading.” Without having discipline you will never have the consistency necessary to improve your technical skills. If you do not have a good foundation of technique, you will not master the art of trading. What good is the best system in the world if you cannot follow it? This is one of the reasons why traders need coaching. Another reason a trader’s coach is valuable to a trader is when a trader wants to break out of the comfortable level of good performance to be a trading master. Just like top athletes have coaches to observe and feed- back to increase performance, so too can a trader benefit from top performance coaching as well Do you want to become a better trader without losing your entire trading account in the process? Trading coaches are not cheap, but in my opinion it is a lot cheaper than the losses that many traders make in the markets. It is not difficult to make money from the markets, but first you have to learn the mechanics of how you go about doing it. How can you benefit from a Trader Coach? A Trader coach often is familiar with the trading environment and has years of experience from which to draw. They are someone whose work or accomplishments you admire and would like to model in your own career. The mentor relationship is one that is built on respect and is exclusively focused on your professional development and success. He or she can offer unbiased advice and share wisdom that will allow you to grow and reach your full potential. Your mentor can also help you to avoid mistakes many young professionals make, steer clear of common pitfalls and serve as an unbiased beacon with your best interest at heart. Additionally, a relationship with a mentor helps you to utilize two of the quickest methods for personal development: modelling and emulation. The success principles that work for one person will usually work for another. Therefore, as you model and emulate the desired behaviour(s) of your mentor, you will quickly improve your skill set, expand your professional and business knowledge and jump-start your results.

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What can a coach do for you? A coach, on the other hand, is a professional whose work is focused on helping you manifest your inner self -- your needs, passion and desire to contribute -- to achieve success. The coach's guidance is more personal and specific and the results are often quick and dramatic. "The decision to work with a coach is intimate, personal and totally confidential," said Anneli Driessen, author of "Ultimate Success: Seven Secrets to Spiritually-Based Leadership." "It is based upon the integrity of both people involved. If the client is willing to be absolutely open, honest and to offer complete disclosure, the results can be staggering," Driessen said. There are many trading coaches today who can offer you the quality guidance. I myself do some coaching, but as my main focus is trading the markets I only do a limited amount of coaching each year. I would have no hesitation in recommending the services of other successful Trader Coaches. I myself have used the services of Adrienne Toghraie, of Trading On Target. I met Adrienne at one of the Trading Expos in New York; I had a consultation with her and followed it by purchasing the Trading on Target Home Study Course. As I mentioned earlier, this course changed my life as a trader. I was impressed with Adrienne’s The Winning Edge books. The course is realistically priced and Adrienne has tapes aimed at specific trading problems, e.g. discipline, motivation, self-confidence, and a trading plan. Coaching is a powerful partnership that can save you time and money by helping you avoid dangerous pitfalls and dead-end paths while accelerating your financial journey. Your coach will provide support and accountability for your goals while mentoring you with valuable insights. Your personal coach will help you see perspectives you didn’t even know existed, and will help you overcome the inevitable bumps and hurdles that develop along your journey to financial freedom. Your personal coach isn’t biased by commissions or advertising dollars. Your coach is paid for one thing – to help you reach your goals and live the life you dreamed about. Most importantly, you will improve your trading performance. The difference between your current level of success and the level you desire to reach is largely – perhaps almost entirely – psychological. These mental barriers can be subtle, small, and insidious. But their impact can be extreme. A trader coach will isolate your deficiencies and then help you find ways to help you break through to a much higher level of profitability.

THE SECRETS OF HIGHLY SUCCESFULL TRADERS One of the most important things that affect trading has to be self-discipline. Self-discipline is simply a mental technique to stay focussed on the trading skills that you need to acquire, to take actions to implement your trading system, and to accomplish your goals. Stay focused on what you need to learn. You need to focus on education, on how you can improve and implement your trading plan, rather than focus on the money. If you are a successful trader then you will have the money, which is the by-product of your success. Every professional has to have a continuous professional development, so that they keep pace with the new market environment, so why should the traders be different?. You should always keep learning and improving.

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Take Complete Responsibility You and only you alone are completely responsible for whatever you end up with. You will never meet a successful trader who is looking to blame someone or something else for his or her losses. This is a critical step in understanding how to become a successful trader because until you take complete responsibility for all of your trades, you will never feel comfortable with your system and you will never reap the rewards. Additionally, when something goes wrong with a trade, the traders who take complete responsibility for their actions will look at those "failures" as learning experiences. The trader who takes responsibility will try and determine what went wrong and what needs to be done in order to avoid similar mistakes in the future. The trader who does not take complete responsibility will simply say "the market wasn't right" or "my broker is an idiot". That trader will likely make the same mistakes again and will never understand why he/she cannot win in the stock market. This step is critical. Before all else, you must accept everything that you do as your responsibility. Dealing With Losses You should strictly follow your money management rules, otherwise you are doomed to fail. When you enter the trade you should confront with the possibility that you could be wrong, and if you were wrong, what will be the amount you will lose and what impact it will have on your trading capital? Therefore when you confront losses, you are not trading from the position of fear, as a result the possibility of a losing trade will not create any pain. You will simply accept the loss and move on to the next trade. Become an Expert with One Market Behaviour Lots of traders tend to confuse themselves with too many conflicting indicators and tend to overanalyse the trend, leading to confusion – paralysis by analysis. To become an expert, choose one simple trading system that identifies a pattern on a chart. You want to understand every aspect of this pattern and it’s behaviour, you are going to focus just on that pattern for the time being. This may mean that you may let go other opportunities that arise, but what you will be doing is building a base of confidence from concentrating on a small area and you will be able to trade with more confidence. Obviously, once you think that you are trading successfully with this pattern, then you can try and move on and learn other patterns. One of my students, virtually makes a living out of trading MACD divergence on all currencies, and has a great success rate, which even a professional trader will envy! And to add to the divergence he will add a few candle chart patterns. Presently he is earning several hundred pips each month just trading divergence. He has become an expert in this, and within minutes will know if he sees an “iron clad” pattern. He intends to learn other areas of market behaviours, such as Pivot point trading and moving average crossovers at a later stage. Plan the Trade and Trade the Plan The point of this rule is that once you have developed a system that is right for you then you must stick to it no matter what. As a result, your plan must be able to cater to every eventuality. Once you put your money down then you no longer can control what happens. You won't know what the prices will do so you can't worry about anything except following your plan. What will your entry be? What will your exit be? What happens if the price gets close to your stop order? Do you see what I'm getting at? You don't want to have to answer these questions AFTER you put your money down! You want everything to be automatic by that point. So make sure that your system plans for everything.

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Execute your Trading System Confidently The proper execution of your trades is one of the most important aspects of becoming a successful trader, which is an art that most traders find it so difficult to learn. Many successful traders have discovered and developed a system that fits them best. Once you have spent a lot of time developing the system and rules you should stick with it and don’t try and out guess the system, as it will lead to extreme frustration and possibly losses in the long term. Most good trading systems will make consistent money from the markets over the long term, you must have faith in your system and try and follow it if it is successful. If you are not comfortable with your system then you will always be tempted to break it. Positive Self-Belief The successful traders know that it is the discipline displayed in following their rules that makes all the difference. If you do not believe in yourself and your system then you are going to have difficulty following your rules. Following your rules is the most important aspect of successful trading. But even if you do follow all your rules, if you are constantly doubting yourself then you aren't going to have any fun at all, plain and simple. On the other hand if you are not believing in yourself then there may be a problem with your system... it may not be suited for you. Keep Trading as part of a Balanced Life. Have fun and have a life outside of Trading. Trading is stressful, so do everything you to eliminate this stress. I have met many successful traders and one thing they common is their lack of stress. They all have hobbies, families, friends, sports, activities that allow them to follow their rules without stressing about every move. It's Monitor your performance

can think of all have in and leisure amazing!

You should be disciplined to have an audit of all your actions, have a trading journal for all trades, and with reasons on why you entered the trade. All trades once closed must be analysed, and look at the successes and failures of these trades. Focus on the failures and see what could have been done to improve upon it. Just like any business, you should maintain a set of accounts - a profit & loss account with a balance sheet, for your trading activities. Your profits should be after you have paid yourself. Only then you can have a true picture of your success.

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FOREX TRADING TIPS Money Management Rules Please remember to exercise good equity management in all your trades. There are no hard rules on this, you should do what suits your trading style rather than do what I tell you or what a socalled “Forex Guru” says. Whilst most books talk about 2% of your margin account on a single trade, or 20 pips. I personally tend to have an open mind, and my stops will be based on the trading opportunity which is presented to me, often I could have a trade with just 10 pips stop and sometimes when I am using, say a weekly chart, I may even have a stop of even 100 pips or more, but often targeting hundreds of points in profit. But the bottom line is ALWAYS HAVE A STOP that suits your trading style –and only YOU know what to do. Lastly, DON’T TRADE MONEY THAT YOU CAN’T AFFORD TO LOSE! Take a break If you did have a streak of losing trades, then, shut the computer and take a break, and stop trading for the rest of the day. Yes, you may end up losing an opportunity, but you are far more likely to save yourself from losses. Also during the day, take lots of breaks, drink lots of water and trade in an environment with fresh air, do your stretches. I also meditate in between, and offer my prayers to God for making me successful. In fact my day in the office starts with prayers and listening to devotional music – once again this is what suits me, and I have found success and relaxation, you have to do what suits you. Stop Loss Never, and I mean NEVER EVER EVER trade without a protective stop loss, this will apply to any trading strategy. Also if the position is moving against you, and you are close to your stop, I personally have never moved my stop – that is breaking the first rule of discipline! – NEVER DO IT! Don’t Trade if you don’t have to When in doubt stay out! Key to higher profits is to have patience. Wait for a good trading set-up. Markets are there everyday – Trading for the sake of trading is plain stupid! Be Flexible Don’t marry a trade. If you see that it is not going your way, be willing to change direction. When ‘reasons’ change or signals change – go with the change rather than insisting to go “ your way”. Multiple Time Frames At the start of the trading session, I always start looking at the longer time frames – taking a “big view” of the charts, drawing my trend lines and gradually moving down. Throughout each time frame I am looking for various chart patterns, this enables me to figure out the overall trend. Trend Line Bounces This is one of the easiest trading opportunities to spot, and to catch. If you see a nicely defined trend line, either UP or DOWN, and look to catch the move once you have a confirmation. You can place your stop below the trend line or just below the previous low (for a long trade) or previous high for the short trade.

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Trading Session Moves Forex is one market, which trades 24 hours, apart from weekends, therefore even when you are asleep, the markets are moving. There are three major markets that trade FOREX; 5 5 5

The Asian market, including New Zealand and Australia The European Market The North American Market.

Often the best moves to catch are the market overlap, i.e. Asian close and Europe open, and also the Europe afternoon and North American Open. Some trader’s will only trade FOREX during these overlap periods, as these offer huge moves. Fundamental News Many “Forex Gurus” advise not to trade around or on the days of Fundamental News, for example the non-farm payroll days. I personally love the volatility, and if you catch the move, then probably you could achieve your week’s target in just a few hours. Please refer to the main section covering the Fundamental News – where I discuss the trading opportunities. What Kind of Trader are you? No two traders have the exact same personality, bankroll, and objectives; the first step in formulating a trading plan is have a heart to heart with yourself and determine what kind of trading suits your unique character, funds, and goals. Most traders fall into one of the following categories: 1)

Day trader – buys and sells very quickly, often times doing 10 or more trades each day; closes all positions by the end of each day.

2)

Swing trader – holds positions for bigger moves and a longer period of time than day traders; holding period is generally hours to days.

3)

Long-term trader – holds positions for long periods of time, normally weeks to months.

There are trading strategies in this manual to suit all traders, in my case the day trader does not suit my personality and trading style, but have been extremely successful using the options 2 and 3. I have successfully held on a position for weeks, through many FAs, finally coming out with a profit target of 500 pips! – How many day trades will I have to do to make 500 pips? Daily Loss Within your Trading Plan you should have a maximum daily loss limit. This is not for me to tell you, but you have to have a limit, which meets with your risk attitude and size of the Capital. Most traders will work with 2% of Capital; I have known some Traders to work with 5%. You should be disciplined to take action and STOP Trading, once your limit has been reached. Often I have seen people try to get it back – only to lose more! Give time for your trades to work Be patient with winning trades. Don’t look for excuses to take profit. Use trailing stops based upon a systematic formula for locking in profits.

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Forex Trend Trade active currencies and only when significant price change is occurring. Trade in the direction of the Trend, Don’t try and be clever and fight the trend, listen to the market. Currencies trend very well, sometimes when they are in a trend, it may be worth hundreds of pips. Traders Trend Just like the trending market, you as a trader will also have a trend. You will also have an UP trend and a DOWN trend. When your trend is up, trade aggressively and when it’s down tread lightly. Take it easy when there is a trend change. Trend Don’t try to enter the market tops or the bottoms, allow the trend to gain a foothold and then join the move. Follow the market wherever it wants to go; don’t waste your time predicting where it will go. Get used to fundamental News When the Fundamental News is released, often it creates a move much greater than the news itself. You should get used to it. Often the markets may do totally opposite to what you expect, and jump hundreds of pips within minutes. That’s why I say markets can be crazy. KISS Keep it simple stupid, the more indicators the more ambiguity. Target 20 When you are just starting out in Forex, initially aim to achieve a target of 20 pips, or closing at least half of your position for 20 pips. By having many lots of 20 pips profit will boost your confidence levels. Once you become a master trader you can set your eyes on bigger targets. Stops for Insurance Purpose That does not mean that you should snatch the profits, in order to protect profits you can employ a trailing stop in order to protect your profit. Which Time Frame to use? I often see many traders using 1-minute and 5-minute charts, in my view there is simply too much noise. I would only use this when there is huge volatility. Otherwise you want to focus on 15-minute charts. Also look at the hourly chart to get an overall picture. Obviously, if you are looking to hold positions overnight or for few days, then definitely you must regularly review the daily and even weekly charts. MACD MACD is a lagging indicator, and in my opinion is a useless indicator as a trigger. I mostly use MACD for divergences to make a trading decision. When the divergence strategy is used in conjunction with the Pivot levels, trend lines and Candle formations – This can be one of the most powerful triggers.

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Become an expert When you are starting out, I would strongly recommend that you pick one currency pair and get to know its patterns and how it behaves. Once you feel that you have more experience, then only start to look at other traders. Trading Journal When ever you trade, always make a record of all your trades, and learn from it. Analyse the trades –both profitable as well as losing trades and learn from it. Trade the trend Currencies trend very well, and often the trend could last for hundreds of pips. So have patience, don’t buy too soon in a downtrend and don’t sell too soon in an up trend. If the trend is DOWN then think down, sell rallies, don’t look to buy. Look at the wider time scale I would always recommend that you take a step back from the intra day action, and start having a look at longer chart time frames, i.e. 4 hours, daily or weekly charts. You will see these charts will offer a clue as to where the prices are likely to go next. Be Patient Don’t trade if you do not see any set-ups, don’t just pull the trigger because you think it’s time to do so, wait for the signal. 15 Minute Charts Be sure to draw the Pivots and Fibonacci points, you can also draw trend lines. When prices break a trend at a juncture with a pivot or fibonacci point, this could be very powerful evidence that the price is going the other way. Your Psychology For new traders to Forex, your confidence will grow with more winning trades, no matter now many –and of course cutting your losses. You will always have a losing trade – but don’t beat yourself, learn from it, forget it and than move on. Don’t try and be clever and second-guess the tops and bottoms –believe in your system, and let it issue a signal and then take action. Never listen to anyone, make your own decision based on your system, close your ears when you are trading, STAY AWAY FROM NEGATIVE PEOPLE, BECAUSE THEY WILL DRAG YOU DOWN. Focus on your success, for this will lead you to greater success. Be careful what you think about, as your thoughts will mould your actions and outcomes. “The more I practice, the luckier I get” - Wayne Gretzky. Meditation / Relaxation Traders love patterns – chart patterns, oscillator patterns, and historical patterns. However, most traders always loose sight of one pattern, that is crucial and that is their emotional patterns when they trade. Successful trading requires an elimination of emotions. Traders can learn to become their own therapist – just how can you do this to help you? I have noticed that ever since I started relaxation and meditation, my trading records have improved significantly. I spend at least

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20 minutes each day in meditation, also take time off from trading to relax, and also go to the gym. Don’t get glued to your monitors for too long. Repetition is mother of all skills The more you practice good trading skills and disciplines, the more better you will get. You have to keep at it, persistence is the key.

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ORGANISING A WINNING TRADING PLAN •

A Trading Plan Introduction

•

A trading Journal

•

Trading Plan Template

TRADING PLAN What is a Trading Plan? A trading plan is a complete set of rules that covers very aspect of your trading life. A trader with a plan starts with an edge, as he will perform a lot better than someone without one. Many amateur traders do not have any plans at all, and when they enter the market they have absolutely no clue whatsoever about what they have done and why? There is an old saying in business: “Fail to plan and plan to fail.” If any of you are really serious about succeeding in Trading, you should follow these eight words as if they were written in stone. Ask any trader who makes money consistently, and he will tell you that you have two choices, either you automatically follow a trading plan, or you fail. If you have written a trading plan, than congratulations! You are in the minority. Whilst it is still no absolute guarantee to success, you have eliminated a major roadblock. If your plan uses flawed techniques, your success will not come immediately, but at least you are in a position to review and modify the course. You will be able to monitor your performance. Whilst a trading plan will not guarantee a success, as the success would depend on a Trading strategy and a trading system that you use – which itself is a component of a trading plan. However, a good plan, which is followed by the trader, will surely have a chance of greater success and he will be able to review the plan if any of its components were not working the way it was anticipated. In his book `Trading Online`, Alpesh B. Patel writes, “ While a plan cannot predict the future, it can lay down how you react to the possible outcomes. This is why a plan is essential. It is a list of strategic responses to events beyond your control. You control the only thing you can control – yourself”. Benefits of a Trading Plan 5 5 5 5 5

It will make trading simpler as you have rules to follow before you pull the trigger. It will act as a road map for your trading journey, so that monitoring of your trades becomes easier. If you are having a string of losses, it could be that one of the components of the trading plan is not working or you are not following the plan, it is time to review. Relaxed and emotional free trading. The plan will instil a measure of discipline in your trading. The plan will enable you to control yourself!

Building the Perfect Master Plan The trading plan should be tailored to suit your personality, ability and resources. It should be your plan and unique to your style of trading. At the end I have provided you with a template, and you could use this as a starting point to create your own trading plan. Your answers should not be vague and a simple one liner, the more you expand with relevant information, the more it will

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help you in your trading. There is no room for ambiguity in your plan. Also where possible, always define and qualify your statements. This usually means posing questions – what, when, where, why or how. For example if you were trading the EUR. Why the EUR and not the GBP? Take into account your emotional and psychology side of you. Do not pretend to be some one you are not; be honest with yourself when creating your trading plan. What are the components of a good trading plan? Here are some essentials that every Trading plan should include. 1. Have you got the skills to be a Trader? Have you tested your system by paper trading it and do you have confidence that it works? Can you follow your signals without hesitation? Trading in the markets is a battle of give and take. The real pros are prepared and they take their profits from the rest of the crowd who, lacking a plan, give their money away through costly mistakes. 2. Mental preparation – How do you feel? Did you get a good night's sleep? Are you ready to face the challenge of trading? If you are not emotionally and psychologically ready to do battle in the markets, it is better to take the day off - otherwise, you risk losing your shirt. Many traders have a market mantra they repeat before the day begins to get them ready. Create one that puts you in the trading zone. I start my day with prayers followed by meditation for at least 20 minutes. And before the computers are switched on, I will read my Trading mantra and visualise the success. I take a two-hour break during the late morning, going to the gym or a swim. By the time I get back to my trading desk, I am totally refreshed. Throughout the day I drink a lot of water and do regular stretches. 3. Set risk level – How much are you prepared to risk on any one trade? It can range anywhere from around 1% to as much as 5% of your trading capital. 4. Set goals – Before you enter a trade, set realistic profit targets and risk/reward ratios, or what is your risk/capital ratio? You should also set weekly, monthly and annual goals in monetary value, and re-assess them regularly. You should compare the actual results achieved with your goals set at the beginning of your financial year. 5. Research – Before you start the day always review the previous day, and also what is going on around the world – both politically and economically. Find out which important economic reports are due and at what time, and decide if you will want to trade ahead of an important economic report. For most traders, it is better to wait until the report is released then take unnecessary risk. Pros trade based on probabilities. They don't gamble. 6. Trade preparation – Before the trading day, reboot your computer(s) to clear the resident memory (RAM). Whatever trading system and program you use, label major and minor support and resistance levels, set alerts for entry and exit signals and make sure all signals can be easily seen or detected with a clear visual or auditory signal. Your trading area should not offer distractions. Remember, this is a business, and distractions can be costly. 7. Set exit rules – Most traders make the mistake of concentrating 90% or more of their efforts in looking for buy signals but pay very little attention to when and where to exit. Many traders cannot sell if they are down because they don't want to take a loss. Get over it or you will not make it as a trader. If your stop gets hit, it means you were wrong. Don't take it personally. Professional traders lose more trades than they win, but by managing money and limiting losses, they still end up making profits. Before you enter a trade, you should know where your exits are. There are at least two for every trade. First, what is your stop loss if the trade goes against you? Second, each trade should have a profit target. Once you get there, sell a portion of your position and you can move your stop loss on the rest of your position to break even if you wish.

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8. Set entry rules – Entry rules are just as important as the Exit. It is essential that you get in at a right level, you have to have reasons to pull the trigger, some traders will only trade if they can find 3 good enough reasons to do so. For example what use is a stop (Exit) if you decided to go long on a falling market, which continues to keep falling, and there were no good enough reasons to go long. 9. Daily Review – After each trading day, adding up the profit or loss is secondary to knowing the why and how. Write down your conclusions in your trading journal so that you can reference them again later. 10. Record keeping – this is one of the most important aspects of trading success. You should be able to compute your accounts showing your net profits, in whichever time frame you are comfortable with. Most traders would do it on a weekly, monthly and an annual basis. You should have a simple profit & loss account, with a balance sheet if possible, which will show you the net worth of your business. In the profit & loss you should divide it between 2 sections – Your income and your expenditure. You should not lose track of your costs of running the business, traders often forget how much they are paying in overheads – i.e. training, systems, software, office costs and not to forget your salary In addition all successful traders will have a trading journal. In this you record in detail every time you trade. I get tons of questions on how to set up a Trading Journal. The following is a very simple outline that I use. I hope you find it as helpful as I do! Trading Journal Please make sure you fill in every field. The more information you provide, the more it will help you when reviewing your logs. DATE: Time: Currency: Long / Short (circle one) Entry Price TYPE OF SETUP: PROS: CONS: CURRENT MARKET CONDITIONS: EXPECTATIONS: PRICE TARGET: REASON FOR PRICE TARGET: ANTICIPATED RISK TO REWARD: ANTICIPATED RISK LEVEL (rate 1 to 10 with 10 being high risk and 1 low risk): STOP PRICE AND WHY IT'S SET AT THAT PRICE (also note when the stop was adjusted and why): EXIT TIME(S): EXIT PRICE(S): REASON FOR EXIT: OUTCOME OF TRADE: EXPECTATIONS MET? YES/NO (circle one) TRADE ANALYSIS (Include thoughts on the trade such as what could have been improved, what you felt you did correctly, areas you may need to work on, etc.): ATTACH A SEPARATE PRINT OUT OF ALL RELEVANT CHARTS.

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Trading Plan Template I have summarised as follows an overview and a template of a business plan that I use, however you should do your own research so that you have a Plan, which is appropriate to your style of trading. You should prepare your trading plans each year, and review it ongoing throughout the trading year. Example – Format of a Trading Plan

Cover Sheet Table of Contents – Core Plan ƒ

You – know yourself & your purpose

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Your Trading Name

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Your Business Philosophy

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Mission for The Business

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Business Goals

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Which Markets will you trade

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Your Resources - technology

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Homework & Research

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Money Management

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Trading Strategies

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Follow Up & Review

Financial Information Golden Trading Rules

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Trading Plan Cover Sheet This page would contain your business name, the period that the trading plans covers. The date it was prepared. You – discover yourself In my opinion it impossible to draw up a successful trading plan without getting to know the psychological make up of yourself, for example how you would react to profit or loss. What does success mean to you? How would you feel if you failed? Examine what motivates you and why do you want to become a trader, are there any other alternatives to you than trading, trading is not easy as 90% of traders don’t make it, probably the highest failure rates in business. What are your strengths and weaknesses? How can you keep yourself mentally relaxed? What do you expect from trading? Is it financial passion or some other reasons? Your Trading Name You should treat trading as a business, and operate exactly like any other business, so you should start off by giving it a name. Your Business Philosophy The analysis of your beliefs for the way you trade, the disciplines comprising logic and ethics of your trading. Mission for The Business Why not have mission statements for your business? A mission statement helps to clarify what business you are in, your goals and your objectives. The mission statement reflects every facet of your business, for example the range and nature of the instruments you trade, growth potential, technology, and community. Consider the statement one entrepreneur developed for his consulting business: "Raj Consultancy is a company devoted to developing human potential. Our mission is to help people create innovative solutions and make informed choices to improve their lives. We motivate and encourage others to achieve their own personal and professional fulfilment. Our motto is: Together, we believe that the best in each of us enriches all of us. This is just an idea, to get your brains ticking on how you could put up a mission statement for your Trading. Business Goals A clear vision of what you want to accomplish will help you achieve your dreams. Every Trader should have goals. But do you know how to effectively accomplish them? ƒ ƒ ƒ

Put them in writing. Though it sounds simple, this task is often the difference between goals that remain dreams and those that become accomplishments. Challenge yourself. Sure, you must always be true to yourself. But to reach new heights, you have to push beyond your previous limits. Distinguish between long- and short-term goals. Short-term goals are the building blocks for your long-term vision. They should not read like a to-do list. For example what are your daily trading goals, then weekly, monthly yearly, and don’t be afraid to have 5 yearly trading goals.

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Focus on the goal, not the journey. It's too easy to lose sight of your goals when life has a nasty habit of interfering. Sometimes it helps to post your goals where you can see them often. Be flexible about how you will achieve your goals. Trust your intuition, and never expect your goals to happen the way you planned.

Which Markets will you trade Successful traders are clear on which markets they want to trade. Sometimes many traders trade too many instruments or in case of Forex, too many currencies, I am not saying that it is not possible to do it, off course it is, but firstly you must establish a track record of successful trading a few or maybe just one currency. As a general rule of thumb, professional traders tend to restrict their focus to a limited number of markets and instruments. By contrast, a novice trader tends to trade index futures one day, commodities like cotton and oil the next day, and currency pairs the next day etc! Success in trading requires that you develop absolute clarity about which instruments you will trade with, that does not stop you from adding more products in future, if you are able to do so. Your Resources – technology Put your goals in perspective by using quality software and data feeds. If your trading strategies are based on technical analysis, then you must ensure that you are equipped with good quality charting packages, which have the features that you want to use. Too many traders rely on free software packages, which many times tend to be unreliable and have limited features. If you are serious about trading you should consider subscribing to a package that provides you with all the tools. Also consider real time data feeds. Homework & Research Before you start you need to do your homework. If you were embarking on a journey to a destination you have never been before, would you not plan the journey? You would check the oil and fuel levels of the car, the tyre pressure before setting off. You would also check the road maps and decide which route you will take. So why should trading be any different? You need to start the day by reviewing what you did yesterday, review your trading journals, review your open positions. What are the general market conditions, is there any economic news coming out on the day, if so when? Plan your day, also be sure to factor in time for breaks, lunch etc. This should be away from the computer. Review the charts that are on your watch list. Risk & Money Management You need a real disaster plan; your business’s survival depends on it. Face the worst trading nightmares and prepare yourself.

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In this section, you should identify how you would minimise loss and maximise profits. What is your risk attitude and your trading style? Also identify your overall market risk and ask if you have got any hedge of a market crash or any sudden world events, like a 9/11 terrorist attack or the Tsunami? Risk against system failure? Either your own or the broker’s? When you are unable to trade, if so what back ups have you got? What would be your risk reward ratio, or your risk capital ratio. What is your risk per trade, or where will you put the stop loss orders? If you are having a bad day, then when will you stop trading? Or if you have achieved your targets, will you continue or will you stop. Once the position is in profit, will you use a trailing loss and lock in your profits? And how will you determine the position size? Trading Strategies Strategies are a result of meticulous analysis – it gives you the upper hand. So having gone through the strategies in this book, it is time to analyse these and see which ones can work for you. Choose the rules that fit your personality and you must ensure that you keep it simple and not complicated. What set-ups will you use? These are the set of characteristics that enable you to identify a highprobability trade, for example at the end of a downtrend, you could see a confluence of events, such as a Hammer at the end of a run, which bounces strongly off a pivot point and also a Fibonacci retracement level, forming a double bottom. How will you find the set-ups – most software has scanning features, and also alert system, you can also program in certain features i.e. a candle pattern, or an alert when a crossover happens. Follow Up & Review Always have regular ongoing reviews built in your plans, i.e. end of the day, weekly, monthly and annual for example. Did you record all your trades and have a detailed trading journal? How were the trades, did you trade according to your system? Having a trading plan enables you to discipline to a set of rules. Financial Information Scared of numbers? I have rarely seen traders having detailed financial information, the only exception being that they have a registered business for tax purposes. So in some ways they have been forced to maintain records for the taxman, but not for their own benefit. You should not be scared of numbers, but should maintain strict accounting records. Seek the services of a professional accountant in this matter. I strongly recommend that you maintain a set of books, which records all your income & expenditure for the business, and a ledger, which records the regular transactions taking place within the account headings.

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Your accounting records should comprise of the following; -

Actual financial statements – profit & loss account. Balance sheets Cash flow statements

Before the year starts, most professional traders will have projected statements for the above. They set themselves a set of goals. Golden Trading Rules Have top strategies and rules, excitement alone will not guarantee success, so follow your golden rules to make your trading more bankable. Your rules should be ones that are pertine nt and meaningful to you. Having read this book, you should be able to get TEN golden rules that you may want to follow. For example one of your golden rules could be, Trade with the trend: No Trend, No Trade! Or Plan the trade – Trade the plan!, Buy at support, sell at resistance! The list is endless, but you should ideally get a short list of at least 10 rules. Display your golden rules in your office or trading area, and read it every day.

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AND FINALLY •

Eastern Philosophy & Bhagavad-Gita

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Appendices

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Follow Up Service

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Consultancy Service

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Recommended Reading

EASTERN PHILOSOPHY THE BHAGAVAD GITA You may ask what has the Bhagavad-Gita and Eastern Philosophy got to do with success in trading? You will no doubt agree that trading requires mental toughness. Mental toughness depends on the ability to concentrate and focus. Faulty concentration will sabotage your success as a trader. Any of you practicing meditation or relaxation techniques will have noticed that after each session the state of mind is totally focussed and is relaxed, it can minimise the impact of emotional interference. I believe that the capacity to enter this state of consciousness may allow us to efficiently process information. There was a Hindu story about concentration that I heard in my childhood. I was surprised to hear this story being narrated by a successful American entrepreneur when I had attended the New York Trading Expo. This particular story was told from the Mahabharata, which is an ancient epic in India. The original text was in Sanskrit and it is believed to be one of the world’s longest epics in world literature. It is said “whatever is here is found elsewhere. But whatever is not here is nowhere else” In this story about concentration, which I heard once again at the Traders Expo in New York - The Guru Dronacharya was teaching archery to his disciples. He called them one by one and asked them all the same question: "Tell me what you see on the tree?" One of the Princes said, "I see the tree, the leaves, the twigs, the branches and a bird." The second Prince said, "I can see the colour of the bird." Somebody else said, "I can see the bird on the branch of the tree." Finally Dronacharya called Arjuna, the hero of the Bhagavad-Gita, and asked him, "What do you see there?" Arjuna replied, "The small black spot, the eye of the bird." Dronacharya said, "Shoot it!" Arjuna shot and hit it. That was archery. If you have to shoot the eye of the bird, then you should focus the lens of your mind so it can only see that and not the tree, the twig, the branches or leaves, not even the bird, but only the eye. When you focus the lens of your mind, only one thing is visible, and that is ekagrata. Eka means only one. If you see the bird, the tree and the branches it is three, four or five. How can you say that to be aware of many is concentration? Applying this to trading, just imagine the profound positive effect that a more powerful mind, improved concentration would have on your trading results. The benefits could be immense; Think more clearly, thus avoiding losing trades Be smarter instantly – thus jumping as soon as you see a trade with good set-ups. Become more creative Learn faster and have a stronger memory

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And lastly and more importantly, find inner peace. Concentration is an elusive state of mind. Ironically, the more you think or worry about concentration, the less you are actually concentrating on the task at hand. Power of concentration can be achieved through yoga and meditation techniques. Meditation techniques have been practiced for thousands of years. Originally the goal was to help individuals deepen their understanding of the sacred and mystical forces of life. And for many, meditation continues to be a spiritual and religious practice. Variations of meditative practice are found in all of the world's religions. When you were a child, no doubt you were shown a fascinating experience, how a magnifying glass could burn a piece of paper when the rays of the sun were focused through it. The fire could start only when the rays were concentrated to a small point. When the magnifying glass was moved too far away or too close, the rays were not focused and nothing happened. This experience demonstrates the tremendous power of concentration. Concentration can be described as focused attention, the ability to pay attention to one single thought or subject to the exclusion of everything else, and as a one pointed mind. When our mind is focused we do not dissipate our energy on unnecessary activities. Developing concentration is essential to anyone who aspires to take charge of his life. It is required in order to succeed in all walks of life. Without it our efforts are dissipated, but with it we can accomplish a great deal. Whilst it was nice to be told one of my favourite childhood stories, but what I did not expect was to hear this story at a Trader’s Expo in New York. What was also surprising to me was that many of the extremely successful traders of American & European descent whom I had met, were very much aware of the benefits of some of the ancient Hindu teachings. Some of them had incorporated these as part of their daily living, thereby helping them becoming exceptional traders. I come from a Hindu upbringing, but I had never read the Bhagavad-Gita or the Ramayana, although I had listened to some of the discourses. Today I see that most Indians are leaving behind these teachings, whereas I see that the West is now more and more getting to know about Ancient India, not only the Curry, but the Vedic teachings of ancient India. One of the decisions I made when I was in New York was to read the Bhagavad-Gita. Though I have not finished reading it, but the more I read, the more I came to the conclusion that what you read in so many motivational and personal development books is all in the Bhagavad-Gita, which has been in existence for thousands of years! What further inspired me to learn more about Eastern Philosophy and of course my roots, was when I read the book “Trader’s Secrets” by Murray Ruggierro and Adrienne Toghraie, the authors have interviewed many successful traders in this book. One trader, which caught my eye, was Scott A Krieger, who is a full-time trader, and also an author of a book “ How to Become a RealTime Commodity Futures Trader” Scott says that most of his fundamental beliefs came from Eastern Philosophy; he enjoys pursuing the ancient Vedic literatures. He adds, “I became very interested in translations of the ancient Vedas. One of the most remarkable books I have ever read is the Bhagavad-Gita As it is by A.C.Bhaktivedanta. He also says that he learnt Sanskrit when he was in India. For the full interview, I would strongly recommend reading Trader’s Secrets. It has become my bedside reading. This is a great book, as it has interviews with so many other successful traders,

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for example one interview with a Canadian trader who took his $100k account to $3 million in 1998! It could not be a coincidence that my trading took me to a next level. Soon after I started meditation and yoga, I started reading the Bhagavad-Gita. Reading Scotts interview inspired me to make good use of money. Apart from cutting down waste, I started to regularly sponsor children from developing countries. It gives great pleasure when I receive letters from the children that I sponsor. When Scott was asked about money, he had the following to say; “ I do not get a rush out of just having money any more. Money is called “ Lakshmi” in India. Lakshmi is the name of the Goddess of Fortune. We get the word “lucky” from the Sanskrit word “Lakshmi.” The understanding is that money is innocent, but it is how you use it that determines its morality for you. It is not bad or good. It is divine power. Money is a divine gift of power. How you use this power determines your karma (cause and effect) and ultimately your destiny. The proper use of money is what excites me.” He further adds, “ I am not Mother Teresa and I am not Donald Trump. I am someplace in the middle. Hopefully I can make some kind of difference and do some lasting good before I disappear. Talking of Eastern Philosophy, The Japanese Candlesticks came from the East, I wonder what would I do without the Candle patterns! Steve Nisson, when researching into the candlesticks, spent lot of time reading and coming to understand the philosophy of the East, including the principles of Yin and Yang. Steve Nisson says “The Eastern philosophy of Yin and Yang is at the very base of Japanese Candlestick charting. Yang is bullish and Yin is bearish. The Japanese have a saying that states that when Yang reaches an extreme, we have stillness. The stillness gives rise to Yin.” In ’The Warrior Trading’, by Clifford Bennett - Clifford views the market as a battleground upon which only a few great warriors stand. And it is these warrior traders who truly make the level of profit we all desire from the markets. Reflecting a mixture of both Eastern and Western philosophy. Clifford draws on his own experience in the ‘battlefield’.

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APPENDICES

Follow Up Services I doubt if you will ever come across any Forex training programme, which not only offers a money back guarantee, but also at the same time offers you a follow up service! Too often, you have programmes, which promise you easy success, but then there is nobody to hold your hand and guide you. For a limited time period only, we are offering a bonus service to readers of this book;

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You will receive a free one-month mentoring programme, by email. Please feel free to ask any questions relating to your Forex trading education. Email address is [email protected]

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We will assist you in preparing a Trading Plan. Once you have followed the step-by-step guide on how to prepare your Trading Plan, feel free to send us a copy of the Plan, and we will do a free evaluation report for you.

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Free Email Newsletters for 1 month. We will discuss actual trades with Charts. This will further assist you in your trading.

There are indeed so many training courses offering you a goldmine, but few to offer you the above follow up services. There are indeed so many training courses offering you a goldmine, but few to offer you the above follow up services.

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CONSULTANCY SERVICE A number of clients want more direct contact with a trader’s coach/mentor. I am offering a one to one training, to help out with the markets and Forex trading. As I am a full time trader, so I only limit to a number of clients that I take for the consultancy. For more information, kindly go to www.4x4u.net. Below is a primary structure used as a guideline of our Training Course; however, your mentor customizes and tailors the process to meet your individual needs as well as support materials.

Overview Developing an “edge” Learning to spot what the “market is telling you” Putting the odds in your favour Picking trades to match your style Creating your own trading system

Technical analysis Pattern recognition Trend lines and channels Consolidation – rectangles Support & resistance Triangles & continuation patterns Head & Shoulder, Wedges Technical Indicators Moving averages Momentum Oscillators Fibonnacci analysis Elliot wave theory

Risk Management Understanding risk Elements of risk Money management Stops

Planning & Managing your trade Proper entries, price targets, exits, risk/reward Trade management – trailing stops and protecting profits Stops

Trading Skills Putting it together – using multiple indicators, look out for confluence of events. Analysis of multiple time frames – monthly, weekly, daily and intra day chart analysis. Trading breakouts Trading reversals

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Shorting strategies Price behaviour Quality of setups and follow through Developing your own system

Executions Proper use of trading platforms Order entry and limit orders Automatic trailing stops Automatic executions

Trading Psychology Crowd psychology Fear and greed Common traps

Creating a Trading Plan Tracking personal patterns Overtrading undertrading. Buying too early Pre-Market analysis

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RECOMMENDED READING

The Disciplined Trader Trading For A Living Awaken the Giant Within The Winning Edge Series Bhagavad-Gita As It Is Think & Grow Rich The Candlestick Course The Monk Who Sold His Ferrari How To Know God Man’s Search For Ultimate Meaning Yoga & Meditation

Mark Douglas Alexander Elder Anthony Robbins Adrienne Toghraie & Jake Bernstein A.C. Bhaktivedanta Napolean Hill Steve Nisson Robin Sharma Deepak Chopra Viktor E Frankl Get guidance from your Guru or trainer

And Finally, “ I wish you good luck with your Trading. There are many opportunities to succeed and be profitable in this business. You have to seek out those opportunities and then follow your plans with discipline.” Jay Lakhani

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