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60 Minutes with a Professional Trader
A Traders Business Plan
Applying Risk Management - a Practical
Average True Range
Basic Indicators Part 1
Basic Indicators Part 2
Basic Indicators Part 3
Basic Principles of Technical Analysis
Basic Trends Analysis
Be successful – see the Bigger Picture
Building the Right Expectations
Choosing your Broker and Software
Confluence and expansion levels
Currency Pairs & Margins
Entry Point for the Novice Trader
Entry Point System
Examples of Fibonacci Trading System Part
Examples of Fibonacci Trading System Part
Fibonacci Analysis Part 1
Fibonacci Analysis Part 2
Fibonacci Analysis Part 3
Fibonacci Analysis Part 4
Fibonacci Analysis Part 5
Forex in Afrikaans
Forex Novice Module 1 Part 1
Forex Novice Module 1 Part 2
Forex Novice Module 1 Part 3
Forex Novice Module 1 Part 4
Forex Novice Module 3 Part 1
Forex Novice Module 3 Part 2
Forex Novice Module 3 Part 3
Forex Novice Module 3 Part 4
Forex Novice Module 4 Part 1
Forex Novice Module 4 Part 2
Forex Novice Module 5 Part 1
Forex Novice Module 5 Part 2
Forex Novice Module 5 Part 3
Forex Novice Module 6 Part 1
Forex Novice Module 6 Part 2
Forex Trading Business Plan
Forex Training (Margins, lots, bid, ask,
Fundamentals influence your trading
Getting to know the Rule of Eight
How to get started with Forex Trading
Interview with a Professional trader
Introduction to Fibonacci
Introduction to Psychology
Leading and Lagging Indicators
Live Analysis & Conclusions Part 1
Live Analysis & Conclusions Part 2
Live Analysis & Conclusions Part 3
Live Analysis & Conclusions Part 4
Live Market Analysis
Major Currency Pairs
Market Stop and Limit Orders
New CFTC Law
Over Bought and Over Sold Levels
Planning your time
Position Based Trading
Psychology of Trading - Objectivity
Psychology of Trading - Risks
Psychology of Trading - Self Discipline
Psychology of Trading Part 1
Psychology of Trading Part 2
Psychology of Trading Part 3
Putting it all Together
Putting Yourself in the Scenario
Rollovers Spot and Forward
Rule of Eight Analyse and Develop
Rule of Eight Techniques Part 1
Rule of Eight Techniques Part 2
See forex as a business
See Forex as a Business and Risk
Settings Goals (Short, Medium, Long Term)
Strengthening & Weakening currency pairs
Successful Trading Part 1 – the traders
Successful Trading Part 2 – trading
system with an edge
Successful Trading Part 3 – money
Successful Trading Part 4 – putting it
Support & Resistance
The Basics for a Trading System
The Bigger Picture
The Dangers Around Indicators
The Trader’s Network
Time Frame and Example
Trading Announcements Yes or No
Trend and Move Direction
Trend and Thrust Moves
What is a Trading Plan ?
Why do I need my own Trading System ?
Winning Traders Routine
Your Final checklist
Your final step
Your next step
Your Trading Business
A Guideline to CFD
Simply stated, each country has its own
currency. Currency trading occurs when one
country's currency is traded for another
country's currency at the prevailing exchange
All currency trading is traded in LOTS. Each
lot has a different amount of currency. For
example, a Swiss Franc lot has 125,000 Swiss
Francs in it. A trader does not buy lots in
order to buy and sell it or trade it. A trader
opens a margin account, enabling him the right
to trade it.
Foreign exchange is the simultaneous purchase of
one currency and sale of another – currencies
are always traded in pairs. International
currencies are traded on floating exchange
rates. There is a daily average turnover of
about US$1.5 trillion in the foreign exchange
markets. The foreign exchange market is known
as the "Forex," or "FX" market. It is the
largest financial market in the world.
Forex trading is not managed through an
exchange. Since transactions are conducted
between two counterparts, the FX market is an
“inter-bank,” or over the counter (OTC) market.
Central, commercial and investment banks have
traditionally dominated the Forex market. Other
market participation is rapidly increasing, and
now includes international money managers and
brokers, multinational corporations, registered
dealers, options and futures traders, and
Forex is a true global 24-hour marketplace. The
trading day begins in Sydney, and moves around
the globe as each financial center comes to
life. Tokyo follows, then London, and finally
New York. Investors can respond in real time to
any fluctuations caused by current economic,
social and political events.
The most “liquid” currencies in the Forex market
are those of countries with low inflation,
stable governments, and respected central
banks. Nearly 85% of daily transactions involve
the major currencies, including the U.S. Dollar,
Japanese Yen, the European Union Euro, British
Pound, Swiss Franc, and the Canadian and
A margin account is a bond account. Before you
can trade, you need to place a certain amount of
money in what is called a margin account. You
are guaranteeing other traders that you can pay
all of the money deposited into the margin
if you lose. That account is overseen by your
broker. He monitors your account when you
trade. He usually will not allow you to risk
more than what is in your margin account. The
margin account exists so, as you win on a daily
basis, they have a place to deposit your money.
Similarly, when you lose, they have an account
to withdraw the money.
Currencies are traded on a point or pip system.
A pip is another word for a point in the
currency trading arena. Traders are trying to
capture points. Depending on the currency, each
point is worth a different amount. For example,
the British Pound is worth about $10 per point
that is traded per lot. If you trade 1 lot and
capture 40 points, you just made $400. If you
trade 10 lots and capture 40 points, you just
made $4,000.00, etc.
Short positions are taken
when a trader sells currency in anticipation of
a downturn in price. Making this move allows
the investor to benefit from a decline. Long
positions are taken when a trader buys a
currency at a low price in anticipation of
selling it later for more. Making these moves
allows the investor to benefit from changing
market prices. Remember! Since currencies are
traded in pairs, every Forex position inevitably
requires the investor to go short in one
currency and long in the other.
Currencies are the money that represents the
monetary system from different countries; for
example; the Japanese Yen, Canadian dollar,
Brazilian Real, Swiss Franc, etc. Futures
trading of currencies are done in trading pits,
where you are trading those currencies today,
but for future prices. FOREX trading is trading
actual currencies at today's exchange rate with
banks. All trades are done through brokers or
No. With your margin account, you are buying
the right to trade one "lot" of a currency.
Each lot equals a different amount of currency,
depending on the currency being traded verses
the US dollar.
Day Trading is when a trader buys and sells his
lots or stocks that same day. He is in and out
of the market that same day. He does not hold
his position overnight or for a week, etc.
Intraday positions are all positions opened
anytime during the 24-hour period AFTER the
close of normal trading hours at 5:00pm EST.
Overnight positions are positions that are still
on at the end of normal trading hours (5:00pm
EST), which are automatically rolled over.
The full range of economic and political
conditions impact currency pricing. It is
generally held that interest rates, inflation
rates and political stability are top among
important factors. At times, governments
participate in the Forex market in order to
influence the traded value of their currencies.
These and other market factors such as very
large orders can cause extreme relative
volatility in currency prices. The sheer size
of the Forex market prevents any single factor
from dominating the market for any length of
While exact percentages are difficult to know,
it is fair to say that most people lose money
trading Forex, while a unique few make money
Most traders who enter the market are driven by
emotions such as greed and fear. They lack a
sound equity management plan and know very
little about the techniques of trading. The
fact is they are lacking adequate and proper
education for the task at hand.
Most Professional Traders are part of the unique
few making money. As Forex is a zero sum game,
those that win take from those that lose. Giving
that most people lose, it goes without saying
that professional traders are handsomely
Absolutely! Trading is a profession that almost
anyone can learn. However, it doesn't happen
over night or in a few weeks. You must go
through the same processes of education and
mentoring that all professionals go through.
Generally, we are becoming conditioned by
numerous national ads into believing that
trading is simple. If it is that easy why do we
hear the horror stories about most people
All forms of trading and investment can be
construed as a form of gambling, although
neither are the same as playing the lottery,
roulette nor betting. Traders seek price
fluctuations and investors seek return on
investment. Both require a calculated risk that
is minimized by knowledge. You are always
gambling when you don't know what you are doing,
uneducated, trading emotionally or with a " hot
tip". Calculated risks are taken in all
investments. People risk huge sums of money and
not every one succeeds. Even when there is a
track record of success as in many franchises
there is still no guarantee. Their investment
becomes a calculated risk.
The FOREX market is no different. When you
trade not knowing what you are doing, or off a
tip, you are gambling. When you trade after you
have been educated or mentored by a successful
program, or by other successful traders, you are
now taking a calculated risk.
No. You can't lose everything you own. The
under-educated will more than likely lose their
margin account. The educated will more than
likely capture the loser's margin account
The most common risk management tools in Forex
trading are the stop-loss order and the limit
order. The stop-loss order directs that a
position be automatically liquidated at a
certain price in order to guard against dramatic
changes against the position. A limit order
sets the maximum price that the investor is
willing to pay in a transaction, as well as a
minimum price to be received in exchange. The
foreign exchange marketplace is so liquid that
it is easy to execute stop-loss and limit
Both economic fundamentals and technical factors
influence the decisions of currency traders.
Those who follow economic fundamentals use
government issued reports, current news, and
broad economic trends to anticipate movements in
price. Technical traders rely on trend lines,
support and resistance levels, and a variety of
charts and mathematical analysis to identify
trading opportunities. Over time, the most
significant price movements occur in close
association with unexpected events. Perhaps the
central bank changes rates without warning, or
an election puts an unexpected candidate in
power. News from conflicts certainly impacts
currency pricing. More often than not, it is
the expectation of a certain event rather than
the actual event that drives price pressures.
As one might expect, trading activity on any
particular day is dictated by current market
conditions. Some small to medium size traders
might make as many as 10 transactions in a day.
By institutions not charging commission and
offering tight spreads, investors can take
positions as often as is necessary without
concern for excessive transaction costs.
Forex traders generally hold positions until one
of three criteria is met:
A sufficient profit has been
realized from the position.
A pre-set stop-loss order is
A better potential position
emerges and the trader needs to liquidate
funds to take advantage of it.
A margin call is generated when the equity
balance in an account drops below the margin
requirement for that size account. If the
maximum allowable leverage has been exceeded,
any open positions are immediately liquidated,
regardless of the nature or size of the
Reliable sources indicate that about 3 trillion
dollars of currency is traded daily on the FOREX
market. The majority of the volume historically
is generated by major investors, banks,
financial institutions and governments. Thanks
to the Internet, more and more people like us
are beginning to learn of the opportunities and
are getting involved.
You need to be very careful and exercise due
diligence. There are growing numbers of
international firms offering various approaches
to FOREX trading. Look before you leap. Do
your homework and check references. Many
companies prey on the greedy promising
phenomenal returns that are the exception, not
the rule! Find a company that doesn't promise
the moon. If it sounds too good to be true, it
usually is. Reputable firms have credentials.
Beware of "Black Box" systems. It is against
regulations for a firm to offer any guarantee of
performance of any system. What one can
guarantee and offer is that their trading
methodology is sound, productive and designed to
be profitable. Trading decisions should not be
made by computer only. A professional trader is
a human being, with emotions, intuition and a
brain to interpret what the computer tells
him/her. A trader is not a computer. A
professional trader has been educated and is
disciplined to live by his or her trading
methodology of good judgment trading.
Good judgment trading is the exact opposite of a
Black Box System. It's a complete understanding
of the market and its constantly changing
environment. It is a clear trading methodology
utilizing high probabilities. When a trader is
educated, he no longer takes a shotgun approach
to the market. He takes a very focused "rifle
and target" approach.
If you get involved with the right company
offering the proper education and mentoring, you
can expect to create a financial performance
expectation plan. Your plan will depend on how
much you start out with, how knowledgeable and
how unemotional you are.
Never enter the market without first paper
trading, which is trading pretend money. Once
you achieve a track record of consistently
completing successful trades and prove to
yourself you can trade, then and only then,
should you enter the market with your own
Where money is involved so are emotions. Many
people are quite knowledgeable about trading but
can't handle the emotions. Your emotions will
be your biggest obstacle to successful trading.
Not the techniques. To be a successful trader
you cannot trade emotionally. You must trade
logically. Our egos drive us to be successful
100% of the time, but in reality no one is
successful 100% of the time. Not even the
professionals. Successful professional traders
clearly understand the market is about logic,
not emotions. They trade logically, not
emotionally and they are the minority who trade
successfully all the time!
Hundreds of books are available and we encourage
you to read. However, no one has written a "how
to - step by step" book on how to become a
millionaire over night or even in a month. Why?
Because successful trading is a process, it does
not happen over night. The market is vast and
complex. Hundreds of authors have written books
about most of the characteristics of the
markets. There is a lot to know. Success in
trading comes by focusing on one or two markets
and specializing in those markets. One must
decide what they want to trade, educate
themselves and then focus in on that area of the
You will begin a personal involvement with a
reputable firm and successful professional
traders. We will teach you all the processes
for becoming successful. We will provide you
with personal continuing support, research and
education as well as offer advanced trading
courses as you progress.
A CFD is an agreement between two parties to
settle, at the close of the contract, the
difference between the opening and closing
prices of the contract, multiplied by the number
of underlying shares specified in the contract.
CFD’s are traded in a similar way to ordinary
shares. The prices quoted by many CFD providers
is the same as the underlying market price and
you can trade in any quantity just as you would
with an ordinary share, you will usually be
charged a commission on the trade and the total
value of the transaction is simply the number of
CFD’s bought or sold multiplied by the market
price. However, there are some distinct
differences from trading ordinary shares that
have made them increasingly popular as an
alternative instrument to speculate on the
movements of shares or indices.
Contracts For Difference (CFD’s) are traded
on margin so you can maximize your trading
NO Stamp duty is payable (saving 0.5%
compared to a traditional share purchase).
You can profit from falling or rising
markets by trading long or short
A single account can give you access to far
greater range of financial markets.
You can limit & manage your risk using Stop
Losses and Limit orders
Risks of Contracts For Difference (CFD’s)
The geared nature of margin trading markets
means that both profits and losses can be
magnified and unless you place a stop loss
you could incur very large losses if your
position moves against you.
It is less suited to the long term investor,
if you hold a CFD open over a long period of
time the costs associated increase and it
may be more beneficial to have bought the
You have no rights as an investor, including
no voting rights.
Features of Contracts for Difference (CFD’s)
Rather than pay the full value of a transaction
you only need to pay a percentage when opening
the position called Initial Margin. The key
point is that margin allows leverage, so that
you can access a larger amount of shares than
you would be able to if buying or selling the
The margin on all open positions must be
maintained at the required level over and above
any market profits or losses in order to keep
the position open. If a position moves against
you and reduces your cash balance so that you
are below the required margin level on a
particular trade, you will be subject to a
“Margin Call” and will have to pay additional
money into your account to keep the position
open or you may be forced to close your
CFD’s allow you to trade LONG or SHORT. A Long
Trade is where you BUY an asset with the
expectation that it will rise, just as you would
when buying a normal share. A Short Trade is
where you SELL an asset that you do not own in
the expectation that the price will fall and you
can buy the asset back at a cheaper price.
Shorting in the ordinary share market is almost
impossible. With CFD’s, however, you can go
short as easily as you go long. Giving you the
ability to profit even if a share price falls if
you trade the right way.
Because with CFD’s, you don’t actually
physically buy the underlying shares, you don’t
have to pay stamp duty. Saving 0.5% when
compared to a traditional share deal.
Commission is charged on CFD’s just like on an
ordinary share trade, the commission is
calculated on the total position value not the
Because CFD’s are traded on margin if you hold a
position open overnight it will be subject to a
finance charge. Long CFD positions are charged
interest if they are held overnight, Short CFD
positions will be paid interest.
The rate of interest charged or paid will vary
between different brokers and is usually set at
a % above or below the current LIBOR (London
Inter Bank Offered Rate).
The interest on position is calculated daily, by
applying the applicable interest rate to the
daily closing value of the position. The daily
closing value is the number of shares multiplied
by the closing price. Each day's interest
calculation will be different unless there is no
change at all in the share price.
CFD’s allow you to take a view on shares and
indices and some CFD providers also allow
trading on currencies and sectors.
Because of the higher risk nature of trading on
margin, many CFD providers offer comprehensive
Stop Loss and Limit Order Facilities so that
Investors can manage their risk in fast moving
The best way to demonstrate how a CFD works is
to look at some key examples:
A long trade is a position that is opened with a
buy in the expectation that the share price will
Vodafone is currently trading 140 – 140.5
Investor A believes that Vodafone is going to
rise and places a trade to buy 10000 shares as a
CFD at 140.5p. The total value of the contract
would be £14050 but they would only need to make
an initial 10% deposit (initial margin) £1405.
The commission on the trade is £28.10 (£14050 x
.20%) and because they are buying a CFD there is
no stamp duty to pay.
A week later Investor A’s prediction was correct
and Vodafone rise to 145 – 145.5 and they decide
to close their position. By selling 10,000
Vodafone CFD’s at 145p. The commission on the
trade is £29 (£14500 .20%).
The profit on the trade is calculated as
Profit on trade,
(4.5p x 10,000)
To take calculate the overall profit you must
take into account the commission and financing
charges on the deal.
Profit On Trade
Overall Profit On the Trade
A short trade is a position that is opened with
a sell transaction in the expectation that the
share price will fall.
Barclays is currently trading at 555 – 556.
Investor B believes that Barclays is over valued
and is going to fall and places a trade to SELL
2000 shares as a CFD at 555p. The total value
of the contract would be £11,100. Even though
they are selling short, they would only need to
make an initial 10% deposit (initial margin)
£1,110. The commission on the trade would be
£22.20 (£11,100 x .20%).
A week later Investor B’s prediction was correct
and Barclays falls to 545 – 546 and they decide
to close their position. By Buying 2000
Barclays CFD’s at 546p, the commission would be
The profit on the trade is calculated as
Profit on trade,
To calculate the overall profit you must take
into account the commission and financing
charges on the deal, remember with a “Short”
sell the financing charge is credited to the
Profit On Trade
Overall Profit On the Trade
Although indices are not quoted like ordinary
shares with a BID and ASK price, CFD providers
will quote a BID and ASK price for index CFD’s
and allow you to trade indices as a CFD.
The FTSE 100 is currently trading at 4890 and
XYZ CFD.com is quoting a spread of 4887 – 4893
on the FTSE.
The price of 1 CFD is £4890., because of the
size of an Index Trade and the reduced
volatility when compared to an individual share
the margin requirements are usually lower, we
have used a margin level of 5% in this example.
Investor A believes that the FTSE is going to
rise and buys 3 Index CFD’s at £4890. A total
value of £14670, the margin required is just %5,
A week later the FTSE has risen and the daily
FTSE spread is now 4990 – 4996.
The profit on the trade is calculated as
Profit on trade,
(£100 x 3)
To calculate the overall profit you must take
into account the commission and financing
charges on the deal, however not all CFD
providers charge commission on Index CFD’s.
Because of the geared nature of trading on
margin it is essential to have access to
facilities that let you open or close positions
if certain levels are reached.
A Limit order is one that is executed at a
better price than the prevailing market price,
i.e. for a Long CFD Trade when the stock drops
to a certain level or for a Short CFD Trade when
the stock rises to a certain level.
Vodafone is currently trading at 140 – 140.5.
Investor A wishes to buy 10000 Vodafone as a CFD
with a limit of 135, therefore they do not wish
the order to be opened unless Vodafone reaches
This order is held by the CFD Provider until the
limit level is reached.
The next day the Vodafone is 134.5 – 135 and an
opening trade of 10000 Vodafone is opened at the
limit level of 135.
A stop order is one that is executed at a worse
price than the prevailing market price one of
the most common uses of this is a stop loss
order. It is possible to make substantial
profits when trading CFD’s as well as
substantial losses, which is why many CFD
providers allow you to place a stop loss when
you open a trade:
A stop loss is a price level set by the client
on a particular trade that if reached
automatically closes out the particular position
at the desired price.
Once a stop is triggered, it becomes an At Best
market order, and there is no
guarantee it will be
filled at any particular given price. Therefore,
stop orders may
depending on market conditions.
Lloyds TSB is trading at 467 – 468.
Investor A and
Investor B both believe that Barclays will rise
and both buy
2000 Lloyds TSB at 468 as a CFD.
"However, Investor B also places
stop loss at 457 when he opens the
The following day Lloyds drops steeply during
the day trading down from 467 to 430.
Investor A has not been watching the price of
Lloyds all day and therefore when he checks the
price at the end of the day it is now 430 – 431
and he is running a £760 loss. Investor B has
not been watching the market either however his
position has been automatically closed out at
his stop loss level of 457 limiting his loss to
A stop order can also be used to open a trade
for instance if you wished to open Long CFD
position you may wait until a stock was moving
in the right direction and set a level higher
than the prevailing market price.
Once a stop is triggered, it becomes an At Best
market order, and there is no
guarantee it will be
filled at any particular given price. Therefore,
stop orders may
depending on market conditions.
The ability to gear up your trading capital by
trading on a margin combined with no stamp duty
makes the CFD an ideal instrument for short-term
You can also use a CFD to protect your
long-term holdings against variable market
conditions. It may be cheaper to open a short
CFD position in the shares rather than sell the
physical shares in order to buy them back
If you believe that one company is undervalued
compared to another company (e.g. Barclays
against Lloyds) you can use CFD’s to go long on
the cheaper stock whilst going short the more
If you have a holding of physical shares you
can sell CFD’s against this without
crystallising a potentially taxable capital
gain. This enables you to control the time at
which you realize capital gains or losses and
may reduce your tax liability.
Two of the first words the new
trader learns are the market terms; bull & bear
markets and how they are characterized. Very
few actually stop to think how and why these
terms are used and where they originate.
Although there are several explanations, there
are some that tend to pop up more frequently
than others. Here they are:
One of the earliest
documentations of the terms being used is from
the book: Every Man His Own Trader written by
Thomas Mortimer. During the 1800’s London’s
equivalent to Wall Street was called The Alley.
According to the writings in this book a bull
wasn’t someone that merely thought that the
market was going up but was the same as an
investor who uses margin. These “bulls” hoped
to buy stock with no money and to sell them
before the payment became due. The two quotes
below might give more insight in to the
description of bulls and bears in the 1750’s:
“a man who in March buys in the
Alley 40 000 pounds in May, and at the same time
is not worth ten pounds in the world … is a
Bull, till such time as he can discharge himself
of his heavy burden by selling it to another
person, and so adjusting his account, which, if
the whole house be Bulls, he will be obliged to
do at a considerable loss; and in the interim
(while he is betwixt hope and fear, and is
watching every opportunity to ease himself of
his load on advantageous terms, and when the
fatal day is approaching that he must sell, let
the price be what it will) he goes lowering up
and down the Stock Exchange, and from office to
office; and if he is asked a civil question, he
answers with a surly look, and by his dejected,
gloomy aspect and moroseness, he not badly
represents the animal he is named after.”
A bear was seen as:
A person who has agreed to sell
any quantity of the public funds more than he is
possessed of, and often without being possessed
of any at all, which, nevertheless, he is
obliged to deliver against a certain time:
before this time arrives, he is continually
going up and down seeking whom, or.whose
property he can devour; you will find him in a
continual hurry; always with alarm, surprise,
and eagerness painted on his countenance;
greedily swallowing the last report of bad news;
rejoicing in mischief, or any misfortune that
may bring about the wished – for chance of
falling stocks, that he may buy in low, and so
settle his accounts to advantage.
The second probable explanation
comes from further back than the 1750’s. This
refers to a time where people exchanged and sold
fur skins. Usually the middleman who sold the
bearskins would sell the skins although he has
not yet received them. This by definition will
in fact make him a “short seller”. The sellers
would promise their customers to deliver these
already paid for bearskins while hoping that the
future purchase price will decrease from the
current market price. If and when the purchase
price decreased by the time the middleman bought
the actual skins from the trapper/hunter the
middleman will actually make a profit on the
“spread” between the purchase and sell price.
The men were known as “bears” or “bearskin
jobbers” which described a person who expects
for a decrease in the market’s value.
The most probable story dates
from the early years in Spain and Mexico.
During these times one of the favorite pastimes
was to put a bull and bear against each other in
an arena to fight to the death. Usually the
caught bear’s hind leg was tied to a raging
bull’s front leg while the spectators place
their bets. One such account is shown below as
described by the nephew of ranchero Mariano
“The bull began the fight by
charging the grizzly with his horns. A blow
from the grizzly’s paw did not stop the onset.
In a moment they were rolling over each other in
But the bear finally, though
badly gored, got his teeth fastened into the
bull’s neck, and bull was pulled to his knees.
The bull’s tongue hung out. This was what the
bear wanted. He got his claw into the bull’s
mouth, pulled the tongue out still further, and
then bit it off. With this the bull gave up the
contest, and soon after both animals were
Reading this it becomes quite
clear why the typical market movements are
described using this terminology as the bull
would storm his enemy thrusting upwards with
The bear on the other hand will
rise to his hind legs and swat downward on to
its enemy usually falling on top of it before
they sank their teeth to seal the prey’s fate.
Market Makers will typically
“make a market” by quoting their won prices, a
tow-way price – i.e. a “buy” price and a “sell”
price. This price will be valid until they make
a new price. The gap between the buy and the
sell price represent their profit after
providing for costs, and can be seen as the
“fee” payable per roundtrip transaction.
Forex Brokers find good prices
for their clients to deal at, thus acting as
conduit putting the best bid and offer together
to provide the most competitive quotation.
They will also provide some value
added service to the clients in the form of
research, news etc.
When a client requests to buy a
certain amount of lots of a currency at a
certain quoted price, the dealer will typically
have to offset this position:
What it means: “To offset an
initial purchase, a sale is made, and to offset
an initial sale, a purchase is made” Example:
If you want to offset a long position, a sale of
equal size will be made; thus – there will no
longer be a participation in any gains or losses
to the position.
It is for the above reason that
one can experience slippage in fast moving
markets (where the price you get, differs from
the price quoted). When requesting a certain
lot size in a very fast moving market, the
dealer needs to offset that same size with its
dealing partners, and this could be a difficult
task when the market is moving 100 points in a
matter of seconds, and the outcome – Slippage
It sounds pretty devastating that
one can be slipped in certain market conditions,
but understanding the role of Market Makers and
Brokers, and how transactions takes place clears
up a lot of questions investors raise daily.
A “Trading Checklist” of
prioritized criteria not only will help you
decide when to execute a trade, but will also
help you identify potential winning trades.
You’d be surprised how a visual checklist can
resolve uncertainty in your mind.
What kind of stuff should a
trader put on a Trading Checklist? That depends
on the individual trader. Each trader should
have his or her own set of criteria that helps
determine a market to trade and the direction to
trade it – including when to get in.
In trading terms, the more you
know about chart patterns, technical indicators,
fundamental factors, etc., the more tools you
will have in your “trading checklist” and at
your disposal when trading the markets.
Every trader should have at least
a few trading “tools” that help determine a
Listing those tools on paper, in
order of importance, and then examining that
list when deciding each trade, should make
easier the sometimes –difficult task of “pulling
Every trader knows that a trading
day can be hectic, which emphasizes the
importance of making split second decisions.
This however, is easier said than done. Let’s
look at a practical example:
Trader A has trouble
understanding the most important part of his
trading. On the surface he is doing everything
according to the book. He does a market
assessment, defines where his system could give
him possible entry points and outlines his
trading plan and risk assessment. He is calm
and collected during the planning stages but
chokes as soon as he needs to pull the trigger.
This is a common ailment even
along not so novice players as all the careful
planning that has gone into this is to no avail
when the traders fails to enter the trade at
that moment. The truth is that anxiety and
uneasiness does not need to have an influence on
your trading. One way of doing this is by
applying a technique of mental rehearsal to help
you cope with the emotions that handicap your
During hectic market movements
the trader might easily be caught off guard,
which in most cases seriously hampers his / her
ability to stay calm and rational. Neutralizing
this feeling by means of mental rehearsal can be
done in the following manner. Mental rehearsal
consists of pretending a set of conditions is
occurring while in a safe and quite place. This
can be described as making a videotape of a set
of market events and to replay it in your mind
over and over again. For example, you can
imagine having to make a trade in a split second
and enter and exit under stressful conditions.
IF you are the kind of person who would find
making a trade under these conditions difficult,
you can try practicing making the trade
effortlessly through your imagination.
By rehearsing these conditions
under ones own terms and conditions you can
learn to control these conditions. AS soon as
you feel anxious during these situations, you
can start using relaxation techniques. These
include deep breaths or tensing the muscles and
then relaxing them gradually.
With practice you will be able to
replay the movie without any sense of anxiety or
Over time you will be able to
face actual stressful events during the trading
day, with ease. Do not trade against yourself
by giving heed to your emotions, rather
neutralize them and soon you will be navigating
your trading to profitability effortlessly.
As soon as a trader is
overconfident he/ she falsely believe that they
can trade beyond their skill set. The problem
with over confidence is that it gives an
exaggerated view of the person’s abilities,
which is fatal for trading. It is of utmost
importance that one has to have an accurate and
realistic perception in the trading world. When
people feel inadequate, they often tell
themselves that they are superior so as to
bolster their feelings of incompetence. Every
person feels inadequate at a certain stage, and
the “I’m doing great” mental view soothes the
feelings of incompetence. Telling yourself that
you are a smart and brilliant trader has its
time and place. It’s fun occasionally, but if
you do it too often, you may never look at your
trading skills objectively, and take the
necessary steps to build the skills you need to
become a successful trader. It is best to
restrict such self –enhancing strategies to off
hours rather than during the trading day.
Being overly optimistic is not a
very useful tool during the trading day, but can
prove to be very useful in the off hours.
During off hours, it can be used as an effective
motivator, especially when you encounter a
transitory set of losing trades and feel
unrealistically disappointed about your current
circumstances. During these times, you may want
to convince yourself that if you take specific
action and trade a detailed trading plan, you
can get yourself out of a minor rut, and should
you make a few more trades, things will turn
Overconfidence is a big problem,
however, when you overtrade and do so
impulsively. The overconfident trader may put
on trades that just won’t pan out. Over time, a
great deal of money is lost, and it is hard to
get out of the hole. You must gain an accurate
assessment of your skills, identify your
weaknesses, and build skills to compensate.
Focus on performance rather than
potential rewards to your ego and social
status. Doing so will help you develop an
accurate view of your skills and a realistic
level of confidence. And if you have an
accurate level of self-confidence, you will
trade more profitably.
Traders become very cynical, and
believe that intra-day trading is nothing more
than gambling with randomness and noise in
general. That does not mean that money cannot
be made, but frenetic punting to end up a few
dollars ahead at the end of the day does not
represent a good return for the stress involved?
At least not for some of us! Breakouts and trend
following with positions lasting a few days to a
week or two is better for the temperament!
Mark Douglas once said that there
is no such thing as a Holy Grail, an edge is all
you can ever really get but it’s all you really
Add some money management skill
and the ability to recognize trend, warning
signs and higher degree support and resistance
levels and the trader stands within an arms
grasp of the “holy grail”.
That may be as close as he ever
gets but that is frequently close enough!
Unfortunately, however, it is the emotional
aspects of trading and an inability to think in
probabilities that most stumble over in their
quest for consistent results. When you are able
to design a study that measures the trader’s
emotions and issues a “stop trading” alert, you
will have indeed found the “holy grail”!
What separates the world’s best
Traders from the average investor? Can the
average investor learn from these traders? We
would like to think so. Here are few traders
deemed as being the best in their fields:
Nicolas Darvas turned a $ 36 000
account into $ 2 000 000.00 in 18 months.
Ed Seykota, Turtle Trader, turned
$ 5 000 into $ 15 000 000.00 in 12 years.
Jesse Livermore made several
multi-million dollar fortunes in the early
Richard Dennis, another Turtle
Trader, made between $ 100 and $ 200 million.
George Soros is believed to be
one of the greatest Traders of all time
Impressed? The question one needs
to ask at this stage is; how were they able to
achieve such enormous success?
They have a system which they strictly
Most of them have a trend following trading
Most of them have a mid- to long –term
They have no fear and greed mentality.
They have absolute discipline and stick 100%
to their system.
Their trades are fully planed; they are
prepared for all scenarios in advance.
They know that a system goes through bad
times and good times. Cut losses early and
let profits run.
Their systems fit to their personality.
Although these factors have been
hammered into our heads, the truth is that the
average investor does not behave in this
manner. Traders wiped themselves out completely
before the achieved success. Let’s look at a
few behavior patterns that could cause this:
Losses are not cut early enough.
Investment with a short-term horizon becomes
a long – term horizon in hope of raising
People listen to the advice of their
investment Brokers and Analysts.
People have no plan for their investments.
Money Management is not considered at all.
People use trading styles that do not fit
Greed and fear is omnipresent.
Taking this into consideration
one can derive at the next few points to help
the average trader to learn from these giants,
and thus better their own trading:
Each trader has his / her own
personality. Some of the traders have a very
aggressive trading style and are trading very
frequently. Others only spend a minimum of
effort. Any trader needs to reflect on his /
her own personality profile and choose a trading
approach, which fits his / her personality.
A trade needs to be completely
planned in advance. People plan a lot of their
activities, but do they have a plan when they
enter the market? A trader needs to have a
system that helps him to be prepared for all
scenarios of a trade. One needs to know in
advance when to buy, how much to buy, and when
The most important component of a
trading system is Money Management. Surprised?
Lots of traders spend most of
their time developing very sophisticated trade
The most important question of a
Trading System is how much to invest and how
many positions to trade at the same time. A
“can do” attitude is required to trade
successfully. Most people probably have this
dream of being financially free, but only a few
reach it. Why?
Because of phrases like ”~it
would be great, but I can’t” or “one day perhaps
I will win in the lottery, but until then I must
work hard~? They have already lost. A positive
mindset is lacking.
Changes in a countries economic
state will directly affect the price and volume
of that country’s currency. It is very
important to realize that these economic
indicators are not the only things that
influence a currency’s price. One has to keep
in mind that there are technical factors, third
party reports, and other things that can also
drastically affect a currency’s valuation.
When conducting Fundamental
Analysis keep these tips in mind:
Always keep an economic calendar on hand, listing
the indicators and the RIGHT times they are due
for release. Keep an eye on future events as
markets often moves in anticipation of a certain
indicator or report due for release at a later
Be informed of the indicators attracting the most
market attention at any given time. These are
normally the ones causing large price and volume
Know market expectations for data, and pay
attention to whether or not these expectations
are met. If there is a drastic difference
between expectations and the actual result, be
aware of the possible justifications for this
Do not react too quickly to any news. Often the
numbers are released and then revised, changing
things very quickly. Pay attention to these
revisions, as they may be useful in seeing
trends. It is important to look at all these
economic indicators, private reports and more
important, to understand these numbers, what
they mean, and how they influence a nation’s
Leading and Lagging Indicators
These types of indicators
generally signal future events, in other words
anticipating future direction of an economy.
Here are some examples of Leading
Weekly Manufacturing Hours: The average
hours worked per week by production
workers. They lead the business cycle as
the hours will normally be adjusted before
the changes are made in a workforce.
Building permits, and housing: Number of
residential permits issued gives a pretty
good idea on construction activity =
Consumer Expectation: Reflects the
consumer’s attitude towards economic
conditions. Data is collected monthly and
classified as positive, negative or
New order – Manufacturing, consumer goods
and materials: Goods used by the consumer.
Money Supply: If money supply does not keep
up with inflation, bank lending may fall =
difficult economic expansion.
An indicator showing change after
a down or upturn in the economy has begun, and
helps economists predict the duration of the
Examples of Lagging Indicators
Duration of Unemployment: Measures the
number of weeks that individuals counted as
unemployed have been out of work. Decreases
occur after expansion gains strength, and
increases after a recession has begun.
Average Prime rate charged by banks: Prime
rate is considered to be a benchmark in
establishing interest rates, but changes
tend to lag behind movements of general
Commercial and industrial loans Outstanding:
Measures the volume of business loans held
by banks and commercial paper issued by non-
Change in Consumer Price Index for service:
Measures rate of change in service component
of the CPI.
It is very important for the
Investor to have a pretty good idea on the
Economic Indicators influencing the market
place. These sections on “Leading and Lagging
Indicators” gives the investor examples of some
of these indicators, thus making the investor
aware that looking out for these indicators
forms an important part of market Analysis.
The number of jobs created can
give quite a bit of information on the economy:
Is it improving
Or is it wanting
The report itself is often
revised long after the initial release and it
therefore very difficult to predict as
confirmation of economic conditions. Numbers
can swing quite unexpectedly from month to month
being way off from expectations for months in a
A post recession Scenario:
New jobs may come in far below
There might finally be a month
where 3 times as many as expected might show up.
The Federal Reserve raises interest rates and takes turns to
The next month might be a
situation where a horrible figure comes out and
information from the business and household
surveys could be increasingly divergent.
The Employment report does
however provide worthwhile information, and
expected results often indicate that something
unusual is going on with the economy and
Large divergence between
household and establishment surveys and was
perhaps caused by a rapid shift in the nature of
employment: Reduced willingness in employers to
hire permanent fulltime workers caused by the
following possible factors:
An economy that has been
struggling for several years.
New technology making it possible
for employees to work remotely.
Increases in hiring efficiency
making it easier to find skilled employees.
The trend moved to employing
people of all skill levels on a contract basis,
recognized by the household survey, but not the
establishment survey creating an illusion of a
jobless economic recovery.
A 1995 study by the Federal
Reserve Bank of New York showed that the market
most driven by the Employment Report is the
Currency Market, which noted several ways in
which the report impacted this market.
An unanticipated rise in the
Employment Report signals a rise in the dollar
for example, and reactions to surprises are
related to the implications on short-term
interest rates. The Currency market has become
very sensitive to the data and pays attention to
the establishment survey.
The Bond market is concerned with
the report in relation to inflation and interest
rates: A strong report indicates an economy that
is heating up too quickly creating fears of
inflationary pressure. It can also create
concerns on tighter monetary policy and
forthcoming interest rate increases.
– Interviews 60 000 households. This survey
includes just about every kind of employed
person, including those that are self-employed,
agricultural workers and those working at home
raising a family.
Takes data from 160 000
businesses + government agencies covering 400
000 work sites or one third of all non – farm
payroll workers. Only includes employees of
companies that provide payroll counts, so it
misses a significant demographic and can
misrepresent the rate of employment when the
number of self-employed people hits the roof.
The Employment Report is released
monthly but the actual Surveys only covers a
single week that includes the 12th of the month.
Business Cycle Survey
The business cycle can create a
situation where the number of self- employed
persons fluctuates greatly:
Due to recession, layoffs and a
tight labor market, a number of people could go
into business for themselves, and many skilled
laborers become consultants. These people are
often unaccounted for in the establishment
survey, and a move in that direction tends to
exaggerate the unemployment rate.
In an accelerating economy
companies will start hiring again, and self –
employed individuals may decide to go back on
the payrolls for security reasons. This causes
the divergence between the households and
establishment surveys to reverse.
The rate of employee turnover is
also a factor influencing the payroll survey,
where people changing jobs within the reporting
period could be counted twice, once by each
employer, and this is ongoing influencing the
longer period turnover rates throughout the
The Bureau for Labor Statistics
responds to criticism by issuing new data such
Job openings and Labor Turnover Survey –
states the number of hires, separations and
job openings and is released mid month.
Quarterly Services Survey – Provides
statistics about the service industry,
responsible for about 55% of a nation’s
economic activity. Initially providing data
for the following service sectors:
Information sector services
Professional, scientific and technical services
Administrative and support, waste management
Contingent and Alternative Employment Arrangements
the number of self- employed persons, but only
released every two years.
The Treasury International
Capital Report is very important to the Forex
The TIC report tracks the flows
of financial instruments into and out of the
United States, and includes:
The data has been issued for the
past 30 years, but due to a rise in foreign
participation in our markets, grabbed the
attention of the international financial markets
only recently. TIC offers a measure of foreign
demand for debt and assets, and bonds and the
dollar is most sensitive to the data; therefore
Bond and Forex Markets are more likely to react
to the report.
A demand for US Securities is
necessary to keep downward pressure on interest
rates, and also underpin the value of the dollar
since foreigners must purchase dollars in order
to buy securities.
A strong dollar maintains
stability in US financial markets, and since
foreign ownership of US equities is
comparatively small, the equity market is less
concerned about this report.
Let’s talk about an event
that causes quite a bit of stir in the market,
and answer the following questions:
What is it?
What does it mean?
Why do investors watch it carefully?
The Bank of England Monetary
Policy Committee generally meets the first week
of every month, to determine the near term
direction of monetary Policy. Any changes would
be announced immediately after the meetings.
Interest Rates are determined at
these meetings, and that creates a lot of
attention from investors all around the globe.
The Bank of England has an
established fixed inflation target of 2.5%, and
the Bank’s measure of inflation is the Retail
Price Index less Mortgage interest Payments.
Market participants tend to
speculate about the possibility of an interest
change, and if the outcome is different than
expected, the result in the market can be
dramatic and far reaching. High interest rates
tend to slow economic activity, and lower
interest rates tend to stimulate economic
Typically in the consumer
section, few homes or cars will be purchased
when interest rates rise. Interest rate costs
are also a crucial factor in the business world
e.g. companies with high debt loans, and this
has a direct impact on corporate profits.
It is believed that higher
interest rates usually have a bearish effect on
the markets, whereas lower interest rates
stimulate Bullish behavior.
The Gross National Product (GNP)
Regarded as one of the most
significant Economic Indicators, the GNP
“measures the economic performance of the whole
consists of the sum of:
Consumption spending – The spending by
consumers, and is made possible by personal
and discretionary income.
Investment Spending – Consists of fixed
investments and inventories. (I)
Government Spending – Very influential in
terms of size and impact on other economic
Net Trade – Flow of product and flow of cost
Thus: GNP = C+ I + G + T
The Gross domestic Product (GDP)
GDP refers to the sum of all
goods and services produced in the U.S. by
domestic or foreign companies. The GDP figures
are considered to be more popular outside of the
The United States releases the
Gross Domestic Product, to make it easier to
compare the performances of different
One can certainly say that
exchange rates are one of the most important
determinants of a country’s level of economic
health, and play a vital role in the level of
trade. The latter is the reason why it is so
closely watched, analyzed and governmentally
Let’s look at forces behind
Determinants of Exchange Rates:
All of the factors are related to
the trading relationship between two countries,
and the following are some principle
determinants of the exchange rate.
Inflation Differentials: The country with
the lower inflation rate exhibits a rising
currency value due to an increased
Interest Rate Differentials: Central Banks
manipulating interest rates exert an
influence over both inflation and the
exchange rates, and a change in interest
rate would impact inflation and the currency
Higher Interest Rates – offer lenders a
higher return to other countries = influx of
foreign Capital causing the Exchange to
rise. Note: Other factors might drive the
Opposite is true with Lower Interest rates.
Current Account Deficits: Balance
of trade between a country and its trading
partners, reflecting payments between countries
for goods, services, interest and dividends. An
increased deficit indicates that a country is
spending more on foreign trade than it is
earning, and borrowing capital from foreign
sources to make up the deficit. This will lower
the country’s exchange rate until domestic goods
and services are cheap enough for foreigners.
Terms of Trade: A ratio comparing
export and import prices, related to the current
accounts and balance of payments.
Exports rises by a greater rate
than imports = terms of trade favorable shows a
greater demand for the country’s exports, which
results in rising revenues from exports creating
an increased demand for the currency.
Political Stability and economic
Performance: An Investor will always search for
a stable country with strong economic
performance in which to invest capital, and such
a country will draw investment funds away from
other countries. Political turmoil can cause
such an outflow of capital and move to the
currency of a more stable country.
Retail Sales measure the total
receipts at stores that sell durable and non-
durable goods, which will in turn have an
influence on the consumers spending.
The reason why the Retail Sales
is of interest is because Consumer spending
accounts for two thirds of the economy, which
means that if one had some insight into where
the consumer is going it is safe to say that one
might have a pretty good idea as to where the
economy is heading. This might be the just the
heads up that an investor might need to take
The pattern is consumer spending
is often the foremost influence on stock and
bond markets. For stocks, strong economic
growth translates to healthy corporate profits
and higher stock prices. For bonds, the focus
is whether economic growth goes overboard and
leads to inflation. Ideally, the economy walks
that fine line between strong growth and
inflationary growth. This correlation has been
achieved through a large chunk of the nineties.
It is thus no wonder that stock and bond
investors enjoyed huge gains during the bullish
nineties. Retail sales growth did slow down in
correlation with the equity market in 2000 and
Retail sales not only give one a
better glimpse of the bigger picture, but also
trends among different types of retailers.
Looking at the marketplace, one
often find times the market moves in a static
motion where indecision rules.
We all know that this indecision
is called a consolidation period or a static
trend, but looking more closely at it one can
actually divide this indecision into
First up we look at market
indecision where one would typically find
candles/bars in a static motion with no
significant high or lows. In other words the
candles/bars would be in line next to each
The example below shows this type
The second type of consolidation
is that of a typical static trend where one can
see significant highs and lows in a static
motion. One can draw in a support and
resistance level connecting at least two
highs/lows, to identify this period of
indecision or consolidation.
The example below shows this type
The arrows indicate the
significant highs/lows within the static trend.
Take note that a violation of this trend would
signal the start of a new trend, which would not
necessarily mean the market thrusts out of this
consolidation. The above example shows a
violation of the support and then a lower high,
showing the start of a possible new Bearish
trend in this case.
It is very easy to get confused
with indecisions in the markets, but following
simple rules and seeing the logic behind it,
would make it much easier to analyze such a
period in the market.
The MACD is built on exponential
Moving Averages, developed by Gerald Appel,
plotted on an open scale against the zero line.
The Stochastic on the other hand
was developed by George Lane and consists of two
lines: %K and % D, its moving average.
In practice each of these have
their own function, but together make a very
The Stochastic indicates possible
turning points within a specific trend and
The MACD would show you the
general direction of that specific trend. A
cross in the MACD and the two lines moving apart
would suggest a new trend/move.
The attached chart represents a 5
min timeframe with a MACD and a stochastic
Note the first two arrows showing
the turning points within the Trend and a
Stochastic reflecting that with a cross of the
The MACD shows a steady movement
upwards never crossing except where the trend
actually changes, as indicated with the last
The general direction stays
bullish i.e. MACD stays bullish.
Turning points within the Trend
i.e. stochastic crossing.
Let’s discuss two indicators that
are fairly similar but also totally different.
George C Lane developed the original Stochastic
Oscillator in the 1950’s as a momentum indicator
that shows the location of a close, relative to
the high /low range over a set number of
periods. The indicator values range between 0
and 100, with readings below 20 generally
considered oversold and readings above 80
The fast stochastic consists of %
K and a % D. To clarify this we will refer to
the % K as the fast line and % D as the slow
line. In the example shown the fast Stochastic
is shown in the middle of the chart. The black
line represents the fast line (%K) while the
purple line indicates the slow line (%D). The
slow line is known as the trigger line and is a
smoothed version of the fast line.
To smooth %K (fast) and create %D
(Fast), a 3 period simple moving average was
applied to %(fast). Notice how reactive the % K
line is as it pierces the slow line on a number
This type of behavior might give
some false breaks, which gave way for the
development of the Slow Stochastic.
The slow Stochastic is displayed
at the bottom of the chart with the % K as the
red line and the % D as the purple line. To
obtain the slower % K a 3 period SMA was used
with the fast % K to obtain the smoothed
version. If one examines the example closely
one can clearly see that the % K on the slow
version is exactly the same as the % D on the
fast version. The % D (trigger line) is then
formed by applying a 3 period MVA to the slower
% K. One can also note that the false breaks
are significantly less.
In general a reading below 20 is
considered as oversold and readings above 80 as
George C Lane did not believe
that these readings did not necessarily indicate
bearish or bullish readings as a security can
continue to rise beyond the 80 level and
continue to fall beyond the 20 level. Lane
believed that some of the best signals occurred
when the oscillator moved from overbought
territory back below 80 and from oversold
territory back above 20.
One of the most reliable signals
is to wait for a divergence to develop from
overbought or over sold levels. Once the
oscillator reaches overbought levels, wait for a
negative divergence to develop and then a cross
Fibonacci ratios in everyday life
Scientists and mathematicians
have proven that a special ratio exists that can
be used to describe proportions of anything we
can find in nature from atoms to large celestial
bodies. This ratio is used by nature to provide
balance. This ratio was first discovered by
Leonardo Fibonacci who discovered a sequence by
simply adding a number to the number preceding
Although the sequence is very
significant on its own, it is the quotient of
the adjacent term that gives a proportion that
has been described as the golden ratio, golden
mean and divine proportion.
proportion is roughly 1.618 with its inverse
0.618. This ratio has been proven to be a
fundamental function in the building blocks of
every aspect of nature. Let’s look at some
If you should take honeybees and
divide the female bees by the male bees in any
given hive, you will get 1.618.
Sunflowers, which have opposing
spirals of seeds, have a 1.618 ratio between the
diameters of each rotation.
Need a more practical
application? Try measuring from you shoulders to
your fingertips, and then divide this number by
the length from your elbow to your fingertips.
Or try measuring from you head to your feet, and
divide that by the length from your belly button
to your feet. The result will be somewhere in
the area of 1.618. Stranger still is the
rotation effect of this ratio in financial
markets. This ratio is normally used in three
percentages: 38.2%, 50% and 61.8% although other
multiples are also used. Let’s look at 4 tools
that are widely used to apply these ratios to
This tool draws horizontal lines
that indicate possible support or resistance
levels or where they might manifest. When this
tool is drawn on an up or down move it is
normally interesting to note that support or
resistance manifest near these levels.
The key to composing the
Fibonacci arcs is finding the high and low of a
chart. This tool then draws level representing
the areas discussed earlier in a compass like
motion. These areas that anticipate the areas
of support and resistance or where areas may
manifest where the market could be range bound.
The fans are composed of diagonal
lines forming from a line drawn from the low of
the chart to the high of the chart. Once again
these areas indicate future areas for support or
In general the Fibonacci studies
are not intended as primary indication of timing
to enter a position but mainly as a very useful
tool of estimating support or resistance areas.
A range of analysts and traders use combinations
of these tools to obtain a more forecasts-
future movement. Some research on these tools
might prove to be very useful as these tools can
be very efficient in your trading arsenal.
The basics of Wave Analysis
Correctly follow and interpret
the development of patterns in the markets. The
Wave principles form a basis for
interpreting the market, as well as trading
Elliot stated that a market
typically unfolds in a pattern of five waves in
the direction of a trend, on a larger scale, and
three waves against the trend.
A rising market = 5 Waves upwards
and 3 waves downwards, completing a Bull
market/Bear market Cycle.
5 Wave upward movement = impulse
3 Wave countertrend = corrective
One can even go further and say
that each of these waves can be subdivided into
The above chart represents a
DAILY timeframe, so let us look at the market in
The Chart shows a Down Trend,
followed by a Correction on that Downtrend.
In other words the Downtrend,
consisting of 5 waves will be known as the
impulse Wave, and the upwards market movement,
consisting of 3 waves (labeled A, B and C) will
be known as the Corrective Wave.
Remember the following:
The second wave may not retrace more than
100% of the first one.
The fourth Wave may not significantly move
into the price range of the first wave.
ache in High Probability
Using Basic Fibonacci Analysis together with
Basic Analysis we can accurately pin point high
probability environments in the market, and if
used in conjunction with other tools can add to
the individual Trader’s edge in the market
Above we see a Daily chart with
The dashed lines indicate the
basic Trend Channel – Bearish
Using Basic Wave Analysis we
identify the 5 waves of the move forming the
basis for the Bearish Trend.
Using the first two waves of the
Analysis, we have a lower high identifying the
start of the Trend.
As previously discussed a larger
wave movement consists of smaller impulse and
corrective waves. Thus: Using a Basic Fib Tool
we can anticipate where the corrective wave
might find resistance (Bear Trend), in
preparation for a new Bearish move. This is
clearly seen looking at the chart, where the Fib
Tool is drawn on wave 2.
Using basic analysis tools we
identified a high probability area for further
Bearish activity, and this is yet again where
the Trader can create a high probability
approach in the market place.
Designing a trading system could
be a very complex initiative. We will be
looking at some principals to consider before
attempting to develop a successful system.
Most freshman traders think that
trading is a very complex business, and this is
also the way they want to develop their system.
By adding too many rules to the system, makes it
too complex and also too difficult to trade.
You need to be able to mentally understand and
remember the rules. If you cannot remember all
the rules, and don’t immediately recognize the
reason for the signal, then the system is too
complex. Follow the KISS approach “Keep it
Ever heard of a bunch of people
who agree on the same thing all the time??? This
in fact does not happen and developing a system
is no different. A simple reason being that
some traders have longer –term outlook whilst
others focus on the shorter –term and both with
different risk management. The purpose of
designing a system is to develop something that
works for YOU.
Once emotional decisions are
made, you are on the wrong path. Mechanical
systems do not have emotion or intuition, which
can be both an advantage and a penalty. The
mental tug-of-war between fear and greed can be
debilitating. You find yourself willing to
concede, “pulling the trigger” to make the
trade. So the first and most fundamental
principal in designing a trading system, is that
every rule of reason for entering and exiting a
trade must be defined by mathematics.
What is a Trading System?
A simple trading system is a set
of rules that defines conditions required to
initiate and exit a trade. More complex
systems, defines conditions for risk and money
management, potential profit and /or potential
loss calculation, risk evaluation etc.
A theoretically right and
practically useful system, should meet the
Complete Technical Theory &
A trading system should be based
on a complete technical theory, which can be
translated into one or several mathematical
formulas. Without a theoretical mathematical
reasoning and Logic, justifying and explaining
the results, a trading system can become
dangerous and cause serious losses.
Is it a system for long term,
medium term or short-term decision making and
In addition, what is the
definition the system gives to long-medium-short
Clarifications should be,
definitely, provided to the above.
Every signal provided, whether it
is “Go Long”, “Go Short” or “Take Profit” should
be accompanied by calculation about the
underlying risk. Without risk calculation and
characterization the signals are almost useless
and can turn to be extremely dangerous.
Specific strategy should be
provided, covering both the high and low risk
The system should provide clear
signals, at the timeframe chosen. Every signal
should be accompanied by the potential profit
and loss calculation.
Every period should be followed
by the equivalent signal, including the
potential profit/loss calculation. Buy and
sell, go long or short, are not the only signals
that should be given. The system should
generate “hold” and “stay aside” signals,
providing simultaneously potential profit-loss
calculations to the “hold on the current
Every day is a trading day and
even the “stay aside” recommendation is a
Most of the trading systems that
are sold nowadays, fail to meet these
StoTake Profit strategy
Although Stop Loss & Take Profit
are signals and could be included in the above
“Signal Generation Category”, the Federation
distinguishes them to emphasize their
importance. A trading system should follow a
specific Stop Loss- Take profit strategy.
The trading system must be
feasible and easy to use. Even if it is based
on the most complex calculations and
mathematics, the system should offer a
user-friendly interface and should provide its
recommendations in plain understandable
Our Training Courses are
specifically designed for persons who would like
to commence Trading the Forex and CFD Markets
knowing they have sufficient tools for an
ONGOING trading career providing for both basic
and advanced needs.
When approaching a career in
Trading it is important to understand the
different components of Trading and the
necessary steps to take in becoming a successful
trader. The components are typically as
1. Learn ALL the basics of the
specific Market you are trading and what you are
actually trading (Forex and CFD’s).
2. Learn how to analyze a
currency or instrument sufficiently placing you
in either a tradeable or a non-tradeable
scenario. In other words learn how to find
context for your actual trading.
3. Learn how trading systems
work in terms of Risk Management and how to
apply a successful trading system in the RIGHT
4. Have the means to practice
all of the above with the assistance of a DEMO
SYSTEM until you are confident that you are able
to trade successfully with real money.
5. Make sure of assistance in
opening a live account and continued assistance
while you are trading your own money.
The above components provide the
building blocks for successful trading, and that
is exactly how our training modules are set
We have a 6-Modular Novice course
set out as follows:
Module 1 – 2: Teaches the first Building
Block which is all the basics of the market
as well as the discipline that is involved
and how to approach trading as a business.
Module 3: Teaches the
second Building Block which is analyzing the
different markets and how to identify a
trade-able or non-tradeable scenario at that
specific time and for the rest of the day.
Module 4 – 5: Teaches part of Building Block
3 and certainly one of the most important
aspects in trading: Risk Management and how
it works within a Trading System.
Module 6: Completes the
teaching on Building Block 3 where we
explain actual successful trading systems
and how they are applied within the right
We will provide you with a full
DEMO TRADING SYSTEM to practice on while
learning with the assistance of the on-line
Trader Support Forum.
Ongoing support is of utmost
importance and brings all the theory together in
a special "practical package" where our traders
show you how analysis is done on a daily
basis and how the systems you have been taught
are applied in the real time market. In other
words you are always in a position to view the
practical aspects as well communicate with the
traders on the Support Forum on any trading
In addition to our Novice package
we also include an Advanced section consisting
of 4 more Modules aimed at the trader already
trading in the markets.
This package is packed with
additional features to maximize your profits,
such as fundamental trading and Fibonacci
techniques. Remember: Ongoing support is
provided throughout to enhance your learning
experience. Read more about support below.
Fact: Support is one of the most
important factors in a trader’s life and should
be effective enough to get Novice traders to
point where he/she feels confident to trade with
a real account as well as helping existing
traders improve on their techniques and
The Forex Worldwide Trader
Support Forum is a state of the art platform
specifically designed by traders for traders.
We know what it feels like to come fresh off the
learning phase facing a real time market where
price action is abundant and millions of players
are already making their decisions. The support
forum puts Novice traders in a position where
they can ask questions on ANY topic in trading,
big or small and have professionals available
that know exactly how to approach these
questions as they are, without adding complex
phrases and content.
Our Support Structure will show
traders how analysis (done in the training) is
done on the major currency pairs and CFD’s every
day, making it easier to follow and see how
training is applied in the real time market.
The question always is: How do I
see the steps in trading applied in the real
time market, without wondering where to start?
This is exactly what we offer on our Support
Forum which includes the following amazing
Daily Market analysis in the Forex Market
Fundamental announcements for the day.
Market sentiment report
System Application – This is critical as we
show traders when and where systems taught
in the Training are applied in the real time
Analysis in the CFD Market
All the aspects on how to develop a winning
trading strategy – This is critical in the
life of a trader.
A whole Tuition section that includes Video
Tutorials of the actual trading material.
A whole section on Trading Software
including video training
General Discussions and detail on the
Daily Trading Signals
Once you have opened an account
through us, we commit to the following:
Access to our 10 module online training from
Novice to advance Free of charge
Access to our support Forum to communicate
with the tutor and other traders.
The consistent support of your demo account
to ensure you are able to use this tool
Your logins will be sent in the
following format along with the latest link to
download the software.
The Forum can only be accessed by
your unique username and password.
As a live trader you have been
issued with login details to the forum:
The Demo account remains one of a
traders most valuable tools to test different
The demo account must ideally be
set up to reflect your live trading account is
Example: Your lot size, margin,
indicators and equity.
If trading with a mini account
your demo account should be set up in the exact
Your demo account can be extended
and funded as and when needed. The margin
settings, lot size and indicators can be set
according to your requirements. Simply send a
your specific requirements.
SOFTWARE DEMO LOGIN DETAILS
$ 50 000.00
If you cannot log in, contact us.
is of great necessity that traders refer back to
the fundamentals from time to time.
With this in mind we provide our
traders with their 10 module training free of
charge to ensure you have all the necessary
access to helpful information at your
You can access your training from
the following link, using your unique username
VIRT ONLINE TRAINING ACCESS
Forex Novice – Advance
Module 1 - 10
International Tel : +27217853452
International Fax : +27865576673
Margined currency and CFD trading are
some of the riskiest forms of investments
available in the financial markets and
are only suitable for sophisticated
individuals understanding financial markets and
financial institutions. Trading through Forex
Worldwide Training and Support permits you to
trade foreign currencies and CFDs on a
highly leveraged basis - up to 100 times your
account equity - an initial deposit of USD $
1000 for example will enable the account holder
to trade with USD $ 100 000 in the market place.
With this type of leverage and the swing of a
specific currency against other currency (or
the swing in the components of a CFD instrument)
changes by one half percent or more, could
result in you losing your entire investment.
Theoretically an account could even lose more
than the equity it contains if the account is
trading at the maximum leverage and positions
held in the account swing more than one percent
in value, therefore, you could lose more than
your entire investment and be held liable for
the resulting deficit.
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