Forex Mastery Course

Welcome to the traderstarter forex mastery fast track program, designed for people of all ages and experience levels to learn how to trade forex in a fun and interactive way.

If you want to develop a deeper understanding of the forex markets and learn from industry experts how you can earn an income from trading the currency markets, then you have come to the right place. You will develop all the necessary skills and strategies you need to help you trade the forex markets consistently and successfully and learn how to create another source of income for yourself.

In this course, we will guide you through the basics, all the way to advanced understanding. So that you can finally hit the markets yourself – fully equipped with the tools you need to succeed and secure your own financial freedom.

However, it is important to keep in mind that this is not a get rich quick scheme! In fact, it is quite the opposite. In order to be a successful forex trader, you must have the right skills, but you must also have the right mindset and a whole lot of discipline.

This is not for the faint-hearted, so bring your A-game and aim for consistency if you want to make it as a forex trader. We recommend that you open up a free $2,500 practice trading account for the purpose of this course so that you can supplement the theory with some first-hand trading experience, risk-free.

So, without further ado, let’s get to it

For those of you who are complete newbies to Forex trading and are trying to learn the ropes, it can often be an overwhelming and daunting world, but it doesn’t have to be.

To put it very simply, Forex, otherwise known as foreign exchange (FX), is simply the practice of exchanging one currency for another.

Have you ever been on a trip abroad and had to swap your Dollars (USD) for Euro (EUR)? Or how about exchanging your British Pounds (GBP) for Australian Dollars (AUD)? If you answered yes, then guess what?

You’ve already had your first experience as a Forex trader, although it’s pretty likely that you didn’t make any money in this trade.

The Forex market that you are here to learn how to trade is made up of a huge decentralized trading network that allows you to trade currencies from all over the world. And when we say huge, we mean enormous.

The Forex market has a daily trading volume of just over $5 trillion USD. This is pretty staggering when you compare it with the stock exchange market that has around $250 billion USD of daily trading volume.

This makes Forex the largest and most liquid trading market in the entire world, so the opportunity to make profits are aplenty! One of the main reasons why it is so popular is due to it being open for business 24 hours a day, 5 days a week.

Don’t worry you don’t have to be glued to your screen all day. The market is closed over the weekend which gives you time to take some rest, reflect on your past trades and step away from the charts for a little while.

Who trades Forex? Central banks are a very big player in this space as they must try to regulate and control the price fluctuations of their own currency.

The central bank’s decision making, such as their interest rate policies, can bring huge price swings and fluctuations in the market. Their main aim is to stabilize inflation and to stimulate their own economy via the Forex markets and their currencies market value.

Commercial and investment banks are also huge players in foreign exchange. They have their own trading desks where they try to capitalize on price fluctuations and they also hedge their own portfolios.

Corporations are also heavily involved in Forex markets. When they conduct business on a global scale, companies will typically import and export with countries using different currencies than their own.

This means that when they pay for goods and services they must use foreign exchange to do so.

And then there is the retail trader. Psst, that’s us!

There are many different strategies that individual investors employ when trading Forex, but the main objective is typically to gain a profit by correctly forecasting market movements and price fluctuations.

Something to bear in mind – there is a big difference between who trades Forex and who successfully trades Forex, this is particularly true for retail traders. With the aid of this course, we will hopefully be turning you into the latter.

Why trade Forex? Forex is the biggest trading market in the world in terms of daily trading volume – and by some distance, too. Being the largest market in the world, there is almost always liquidity on a wide range of currency pairs, giving traders almost limitless opportunities to profit.

This liquidity means that you can trade with confidence, knowing that you will always be able to buy and sell your chosen currency pair with ease.

This high liquidity also means it is much harder for market prices to be manipulated and it also benefits traders with very low transaction costs.

The other reason Forex is so popular is that you can trade it 24 hours a day, 5 days a week. It’s one of the most openly available markets in the world.

This allows traders the opportunity to fit their trading around their full time or part-time jobs, unlike the stock exchange where their working hours would likely overlap.

Combining all of these factors together, it gives people the opportunity to make money from wherever they are in the world. It can help people to secure their financial freedom and gives them opportunities that they would not normally have access to.

As long as you have the drive, the will, and the determination, anybody can become successful in the Forex markets – and with the help of this course, we can take you there.

What moves the price and why?

Being the largest financial market in the world, Forex presents many opportunities for traders looking to make profits on the price fluctuations that occur each day. This is done by simply selling your currency for higher than your buy price if you are buying, and vice versa if you are selling.

The key to success in trading is consistency. It is vital that traders can routinely forecast market movements with high accuracy and post winning trades whilst keeping losses to a minimum. 

This plays down to one major factor, market understanding. If we know how and why the market moves, then we can more easily predict these movements and eventually profit from them.

Supply and demand

Like all markets, forex is at the mercy of simple supply and demand economics. If there are more people buying a currency then there are selling, then that currency is in demand and the price should rise.

Conversely, if there are more people selling than there are buying, then the currency has a lower demand and the price should fall.

Note: This is with the assumption that supply remains the same throughout.

Let’s break this down even further.

What is driving demand?

Demand for a currency can be driven by the perceived prospects for the currency’s nation as a whole. This is, of course, an extremely complicated set of factors that are very hard to break down, however, there are two main areas of focus.

One of them being the political landscape of the country at present and the other being the conditions of their economy.

In general, if these factors are considered to be positive, then demand will increase. If they are negative, then demand will fall. There are many factors that can come into play here, and some currencies are more sensitive to political news while others to economic.

As a very general rule of thumb, the most popular currencies with the highest trading volumes are more sensitive to economic data than the political landscape. This is due to the fact that the nations of these currencies are usually quite stable and would not be too affected by political news. Of course, this is not always the case.

What causes currencies to fluctuate?

As we touched upon, there are many things that may cause the market to fluctuate. Here are the main areas that

Interest Rate Changes

One of the biggest factors affecting the forex market is interest rate changes that are made by the central banks, specifically the eight global central banks. When these banks change their interest rates, it can lead to sudden and very volatile price changes.

Generally, central banks will raise their interest rates in an attempt to stifle the inflation of their currency. On the other hand, they will normally cut rates to try and stimulate their economy and by encouraging banks to lend.

If an interest rate in one currency is higher than in another, then that usually generates demand. The higher the interest rate, the higher the rate of return is and the higher the profit.

Economic and Political News

As mentioned earlier, the economic and political news can be huge factors in driving demand.

Some of the main factors influencing price include; the consumer price index (CPI), retail sales, quantitative easing, gross domestic product (GDP), and employment rates.

These are all big indicators to the health of a countries economy and its stability.

Trader/Market Sentiment

When it all boils down to it, it is really the institutional investors and traders that will move the price most heavily. Sometimes, all the political and economic news can suggest that the market will move in one direction yet the price does the opposite.

While this is unlikely, it is by no means rare.

As we will touch upon heavily in this course, there are many technical indicators that present buy and sell signals that a lot of traders will be reacting to. This creates massive intraday trading opportunities for short term scalps and profitable day trading positions.

In these short term instances, the political and economic landscape of the currency’s country does not hold as much weight – in other words, the macroeconomics become less important. When we look at shorter time frames, it is better to have one eye on the fundamentals while paying closer attention to the market trends, support and resistance, moving averages and other technical indicators that can help determine the future price movements.

As this course goes on, we will go into much greater detail on these topics and will discuss technical analysis in Units 3 and 4.

Unlike Wall Street, the Forex markets are open 24 hours a day, 5 days a week. This provides traders with a huge window of potential trading time to work with, which can be both a blessing and a curse.

Many new traders get hooked to the screen, morning, noon, and night searching for every small edge they can find and entering hundreds of positions each and every day.

While this can be a profitable strategy, it is highly unlikely that it can remain profitable over the long run as you will inevitably run into trading burnout.

As always in life, quality over quantity.

With that being said, the main appeal of forex is its availability and accessibility on a global scale.

No matter where you are in the world you will likely be able to trade the foreign exchange during sociable hours – something which cannot always be said for the other international markets.

Opening hours

The major trading centres for forex around the globe are London, New York, Tokyo, and Sydney. The diversity of these geographical locations is what makes forex a 24-hour market.

Each of the four regions have their own official hours. It is important to be aware of these as it can affect the volume traded and the volatility of the currency associated with that nation’s currency.

Let’s take a look at these four trading centres and their opening times. All times are in GMT (Greenwich Mean Time).

• London – 08:00 – 17:00
• New York – 13:00 – 22:00
• Sydney – 22:00 – 07:00          
• Tokyo – 00:00 – 09:00

NOTE: These times vary throughout the year based on daylight savings times.

Forex trading sessions

As you can see from the times above, there are overlaps between the opening hours which is what leads to forex’s 24-hour market. However, not all of the 24 hours in the day are made equal when it comes to forex.

When it comes to trading, it is important to take note of volatility. This what traders thrive off as it means the price is moving around aggressively and thus there are more opportunities to take advantage of.

Each of these opening hours signifies the start of a new trading session. During these official hours, trading the currency associated with each region brings increased volatility and bigger price movements.

Here are the currencies associated with each trading session.

• UK & Europe – British Pound (GBP), Euro (EUR), Swiss Franc (CHF)
• US & Canada – US Dollar (USD), Candian Dollar (CAD)
• Australasia – Australian Dollar (AUD), New Zealand Dollar (NZD)
• Japan – Japanese Yen (JPY)

When is the best time to trade Forex?

Forex prime time is typically thought to be between 13:00-17:00.

This is considered to be the best time of the day trade the foreign markets as this is when five of the major currencies are all being actively traded simultaneously – GBP, EUR, CHF, USD, and CAD.

When there is more activity there is more volatility which provides a greater number of profitable trading opportunities that we can take advantage of.

TIP: The first hour of each new trading session usually brings the highest volatility as traders will be scrambling to react to out of hours events.

Trading is all about information. The more of it you have, the more informed your decision is on where the market is going to move and thus the higher the likelihood that your trade will be a successful one.

It’s worth taking a bit of time to go over the main forex country profiles so you can understand how they may react to news and events that occur while you are trading.

Here is a quick overview of the main currencies nations/regions and what to look out for.

United Kingdom

Central Bank – The Bank of England

Currency – Great British Pound (GBP)

London is the biggest Forex trading centre in the world and accounts for around 35% of the worldwide trading volume – impressive stuff. That suggests that the market will be most active during UK trading hours, which are between 08:00-17:00 GMT.

One thing to keep an eye on is the interest rates set by the Bank of England. As London is such a huge global centre for trading, these rate fluctuations and monetary policy changes can send huge shockwaves through the whole market.

United States of America

Central Bank – The Federal Reserve

Currency – U.S Dollar (USD)

 The USD is part of an estimated 87% of all currency trades.

That is truly staggering when you consider that the foreign exchange market accounts for $5 trillion of trading volume, per day.

New York is the main trading centre in the USA and is the second-largest in the world after London. It is for this reason that you should always pay close attention to the New York session and be aware of what is going on in the US news – if you are trading the US Dollar.

Aside from looking for interest rate changes and monetary policy updates, one thing to pay attention to is the New York Stock Exchange (NYSE). This is heavily correlated to the price of the US Dollar.

The Eurozone

Central Bank – European Central Bank

Currency – Euro (EUR)

At the time of writing, the Euro is the official currency for 19 out of 28 EU member countries. This makes the Euro one of the biggest and most widely used currencies in the world.

Even now there are still many countries seeking membership to the EU and wanting to use the Euro as their main currency. One of the main benefits of the Euro is that the European Central Bank (ECB) must balance the needs of all of the member nations.

This avoids problems arising from the individual political instability of nations and makes it less likely that the Euro will be manipulated or deliberately inflated for the gain of one particular country.

It is for this reason that the Euro is typically less volatile than some currencies, but not always.

Switzerland

Central Bank – Swiss National Bank

Currency – Swiss Franc (CHF)

Despite it being located right in the middle of Europe, Switzerland is not a part of the European Union. A country notorious for its neutrality, Switzerland is one of the richest countries in the world.

As you would expect, their main trade is with their fellow European countries, namely Germany, France, and the U.K. They also do considerable trade with the USA.

Watch for the price of gold – a quarter of Switzerland’s cash is backed with gold reserves, so the prices are heavily correlated with the price of gold (XAU/USD).

Canada

Central Bank – Bank of Canada

Currency – Canadian Dollar (CAD)

Canada is reported to have the 10th largest economy in the world, which is not bad for a country of 38 million people. As you would expect, the US and Canada have strong ties, with Canada exporting 70% of their goods to their neighbour.

Canada is a massive exporter of crude oil, so as you would expect, the CAD’s movements is heavily tied to any price changes or events in the crude oil industry. Keep an eye on this, especially if you are trading USD/CAD.

Australia

Central Bank – Reserve Bank of Australia

Currency – Australian Dollar (AUD)

The AUD offers one of the highest interest rates out of all the main currencies. It is for this reason than the AUD is often used as part of currency carry trades, which is where traders try to take advantage of interest rate differences between currencies.

The main premise of a currency carry trade is to sell a currency with a low-interest rate and then use those same funds to buy a currency, such as the AUD, that has a higher interest rate. This is usually done with leverage.

The AUD is a typically stable currency, with the central bank aiming to keep inflation at 2%. The AUD is heavily tied to gold as it is one of the biggest exporters of gold in the world.

Japan

Central Bank – Bank of Japan

Currency – Japanese Yen (JPY) 

A true powerhouse, Japan is ranked at number three out of the world’s largest economies.

As the Yen is known to offer typically low-interest rates, it is often used in currency carry trades. This makes it especially important to pay attention to the Bank of Japan’s monetary policies and interest rate updates.

There is plenty of volumes traded on the Yen, so you will never be short of liquidity. In fact, the USD/JPY is the 2nd most traded currency pair in the world.

It would be best to keep in mind how China’s economy is performing as China is one of Japan’s largest trading partners.

When trading forex, it is vital that we are aware of something called currency correlation. This is the relationship between two or more currency pairs, and how when one pair moves it usually signifies a move in the other currency pair.

However, it does NOT always mean that the correlated currency pair will move in the same direction.

We have three types of currency correction, these are:

Perfect positive currency correlation

This signifies that every time the currency pair moves, the second pair will move in the SAME direction 100% of the time.

Perfect negative currency correlation

This signifies that every time the currency pair moves, the second pair will move in the OPPOSITE direction 100% of the time.

Zero currency correlation

This signifies that there is NO correlation between the two currency pairs and that the movements between them are totally random.

What does this mean for our trading?

• More knowledge means that we have a higher likelihood of being able to develop more profitable trading strategies as a result.
• In Forex, it is entirely plausible to trade positions that effectively cancel each other out. If two currency pairs have a negative correlation with one another, then their moves will directly counteract one another, and it will leave you at a loss.
• Can be used to show how much risk we are exposed to. If we have several currency pairs trading at the same time and they all have high positive correlations, then we will be overexposed and often doubling or even tripling our risk.
• You can effectively hedge and manage your existing positions.

Currency Pairs that typically have a positive correlation (SAME direction)

• EUR/USD and GBP/USD
• EUR/USD and AUD/USD
• USD/CHF and USD/JPY

Currency Pairs that typically have a negative correlation (OPPOSITE direction)

• EUR/USD and USD/CHF
• GBP/USD and USD/JPY
• GBP/USD and USD/CHF

NOTE: Currency correlations change. Do not take these for gospel. It’s important to be vigilant when trading, never assume that these numbers will remain the same forever.

Correlated Commodities

One important thing to bear in mind is how certain currencies can be heavily correlated with commodities.

Some country’s economies rely heavily on exports of a certain commodity, so if they particular industry takes a hit then you can pretty safely assume that the currency will follow in the same direction, and vice versa.

Two famous examples of this are:

• AUD and Gold
• CAD and Crude Oil

Knowing which currency is tied with what commodity can give traders an advantage and can help you understand why the market moves the way that it does.

When we talk about currencies, we can break them down into three main categories; Major, Minor and the Exotics.

Let’s look at some examples in each category and dive a little deeper into what each category means.

Majors

As we have defined several times in this course so far, there are seven major currencies in Forex. For clarity, these are:

• USD
• GBP
• EUR
• JPY
• AUD
• CAD
• CHF

Some people also include New Zealand Dollar (NZD) in this list, too.

As you know from earlier in the course, we only trade forex using currency pairs.

A major currency pair is any of the major currencies paired with the US Dollar. For example, GBP/USD, EUR/USD or USD/JPY

As USD cannot be paired with itself, we only have six major currency pairs, or seven if you include the NZD.

You will find that all of these pairs benefit from near-constant liquidity due to their high levels of trade with the U.S. A lot of the money you will see on the market will be from importers and exporters as well as speculators and investors.

Minors

Minors are any two of the major currencies listed above (that are NOT USD) paired with each other.  For example, GBP/EUR or GBP/JPY.

Here is where the liquidity starts to drop off, but you can still find substantially liquid and busy markets in the minors. Look for countries that regularly trade with each other for the most liquid markets. Minors such as GBP/EUR, AUD/JPY and GBP/CAD.

There will be others with far less liquidity as the countries may have no real trading relationship.

Exotics

As you may have guessed, exotics are any of the currencies that aren’t listed above. The Exotic currencies are always traded in a pair with Major currency.

Typically, most of the exotic pairs have low volume, a large spread and can be extremely volatile due to their lack of market depth – but that is the very reason why a lot of people enjoy trading them.

However, there are still plenty of Exotics that are widely traded and have high trading volumes. These are usually the larger economies that do plenty of international trade.

Here are some of the most popular Exotic currencies:

• Norwegian Krone (NOK)
• Brazilian Real (BRL)
• Mexican Peso (MXN)
• Singapore Dollar (SGD)
• Indian Rupee (INR)
• Chinese Yuan (CNY)
• Turkish Lira (TRY)
• South Korean Won (KRW)
• South African Rand (ZAR)
• Danish Krone (DKK)

Forex may be the only place where you would get away with calling Norway and Denmark exotic!

There are three (or possibly four) main trading methods for you to choose from when you are looking to enter a position. These are scalping, day trading, swing trading, and position trading.

For the sake, of course, we will be looking at the first three methods just mentioned. This is because position trading involves holding a position for months and possibly even years – it’s a buy and hold method that doesn’t really qualify as active trading.

With that being said, let’s break down the three individual methods and explain what each one entails.

Scalping Scalping is a highly active and fast-paced trading style. The idea of scalping is to take 10’s or 100’s of small profits each day, aiming to take advantage of tiny market movements.

Typically, a scalper will be in and out of the market within a few seconds up to a maximum of a few minutes.

It is for this reason that a scalper will predominantly be looking at the charts on very low time frames, such as the 1 minute, 5 minute, and the 15 minute. Some traders even prefer to go lower than that.

To be a successful scalper you must be able to react quickly to market movements and have a high level of discipline. You must know when to take your profit and know when to cut your losses.

One small blip can ruin a whole day of successful scalping, which can be very frustrating. If you can maintain high levels of focus and can concentrate for long periods of time without getting distracted, then scalping may be a good option for you.

Screen time: High

Number of trades per day: 25+

Timeframes: M1, M5, M15

Day trading As the name suggests, day trading is the opening and closing of trades within the same day. Day traders normally scan the market for a trade, set up a position, enter it, and then close it all on the same day.

You don’t need to have the same laser focus and concentration that a scalper would, however, it does still require discipline.

Typically, day trading is best suited to those of us who don’t like to keep our trading positions open overnight. If you prefer to get a good night’s sleep without worrying about what your trade is doing, then day trading is probably your best bet.

This is the reason why day trading is so popular – you can open your positions, make a profit, close your laptop down, and the job is done.

Screen time: Medium

Number of trades per day: 0-5

Timeframes: M30, H1, H4

Swing trading Last but not least, we have swing trading. This is very similar to day trading however the positions are kept open overnight and can be held anywhere between two to six days – sometimes even a few weeks.

As this is a more hands-off approach, it is best suited for people who don’t want to be staring at a screen all-day yet don’t mind having open positions.

The markets tend to fluctuate quite a lot, so swing positions may be at a loss for days at a time before finally turning into profit. This requires a certain mental toughness and the discipline to stick with your trade and to trust your own analysis.

This is a very popular form of trading as it does not require a lot of time to manage, however, it does leave traders at risk during the weekends and during market closes, which upon reopening can produce volatile and abrupt market movements.

Screen time: Low

Number of trades per day: 0-3

What timeframes: H1, H4, D1, WK

When we are trading, we never enter the market blindly. No successful trader has ever made a living out of trading based on gut instinct.

We must analyse the market, the currencies and their countries in order to best predict how the market will behave and where the price will move.

There are two main types of analysis when it comes to trading, these are; fundamental and technical. Let’s break each one down.

What is fundamental analysis?

Fundamental analysts are concerned with the macroeconomic forces that can influence a country and its currency value.

The three main areas that fundamental analysts will look towards are the political, economic and social factors that influence the currency they are looking to trade.

To put things simple, if a country’s economic indicators are looking good, such as low unemployment rates, growing GDP, and low inflation rates, then their currency should strengthen. On the other hand, if these things aren’t looking so good then that could point towards a slightly bleaker future for that currency and it should weaken.

Naturally, fundamental analysis is more commonly used in traders that open long-term trades, such as position trades. Swing traders should also be mindful of the fundamentals as any significant news could heavily impact their open positions.

Here are some of the key areas that fundamental analysts pay close attention to:

• Interest rate changes
• Inflation rate
• GDP
• Retail sales
• CPI (Consumer price index)
• Unemployment rates
• Political stability and key election dates

What is technical analysis?

Technical analysts focus on how historical price movements and previous market behaviours may help to predict where the market will move next.

This is the main type of analysis that scalpers, day traders and swing traders use, and therefore it is the main form of analysis that we will cover in this course.

There are a vast variety number of technical indicators to pick from, each of which uses historical data obtained from the market to try and determine where the market will move next.

History does tend to repeat itself, so using data obtained from this analysis can prove very profitable to those who implement it wisely.

The vast majority of the technical analysis is done by computers and the algorithms that can be found in trading and charting software. The skill is not in obtaining the data, but more in how that data is used.

Here are some of the top trading indicators that are most commonly used in the forex markets:

• Support and resistance
• Price action
• Fibonacci
• Moving averages
• Moving average convergence divergence (MACD)
• Relative strength index (RSI)
• Bollinger band

Technical vs fundamental analysis

It seems that there is always debate over which type of analysis will produce the best trading results. You will often hear technical traders saying that fundamental analysis is unnecessary as all of the information is already factored into the price.

On the other hand, you will get fundamental analysts claiming that none of the technical indicators work and that trading based on technical analysis is futile.

As always, the truth lies somewhere in between.

There are a lot of technical indicators that are not worth their salt, in fact, the majority of them are quite useless.

However, there are some indicators that give extremely valuable information that provides a great insight into the market dynamics and allow us to make high probability trades. We will be covering these key indicators in this course.

Similarly, it is never a bad thing to have an eye on the fundamentals. It definitely pays to be aware of key dates and how each country’s economy is performing and its current political situation.

The more information you have, the better.

For the sake of scalping, day trading, and swing trading, it is recommended to focus upon the technical analysis and supplement that with a solid understanding of the fundamentals.

There is no need to become an expert economist, but a rudimentary knowledge of what is going on with the currencies and their nations will go a long way.

Whenever you are trading in any sort of market you will likely come across the terms “going long” and “going short”. But what exactly do they mean?

Buy/ Long

To “go long” in forex is to BUY a currency with the expectation that it’s value will RISE so you can then close your trade for profit. The aim – Buy low, sell high.

Sell/ Short

To “go short” in forex is to SELL a currency with the expectation that its value will FALL so you can then close your trade  for a profit. The aim – Sell high, buy low.

How does a trade work?

Whenever we make a trade, we can also call it entering a position. A position is the amount of currency that you own that is subjected to market exposure and thus its value will fluctuate against other currencies in the market.

Important: Every currency trade that we make involves a pair. This means that you will always be going long on one currency while simultaneously going short on the other.

In other words, when we enter a long position, we are hoping that the base currency strengthens against the quote currency.

For example, we buy EUR/USD at 1.114 – This means that we are long on the Euro while simultaneously being short on the US Dollar.

In its essence, we are betting that 1 EUR would be worth more than 1.114 USD at the end of the trade.

This may seem complicated, but this is in fact how all of the trading markets work across the globe. Let’s take an example from the London Stock Exchange.

Let’s say we buy some shares in GlaxoSmithKline(GSK) at £18. This means we are going long on GlaxoSmithKline against GBP – in other words, we are going long on GSK shares while shorting GBP because we feel that the value of the GSK shares will grow in value faster than GBP will.

If this was a forex currency pair we would call it GSK/GBP.

Shorting Explained

While longing is a relatively straightforward concept, people tend to have a harder time understanding the concept behind shorting.

At its most basic level, shorting is the exact opposite of longing, but for the sake of clarity let’s clear it up here.

When you short a currency pair, the base currency is SOLD while the quote currency is bought. This is what gives the simultaneously longing and shorting in every trade.

Example:

Shorting USD/JPY = selling USD and buying JPY.

We are effectively betting that the USD will decrease in value against JPY.

When we trade the forex markets, we are always looking for the optimal moment to enter our positions. At the end of the day, trading is all about timing. If we mistime our trade then we can miss out on potential profits, or worse, we can take a loss.

The best way to ensure our trades have the best chance of being timed correctly is to conduct top-down or bottom-up analysis.

They are both relatively simple concepts, however, you must make sure that you apply these strategies to the majority of your trades if you wish to have the best chance of success.

Here’s how each one works.

What is top-down analysis?

Top-down analysis is a trading style where you start your analysis from the larger time frames “the top”.

When you are looking for trade setups, you will be looking at the higher time frames, such as the daily or even the weekly. This gives you a very zoomed out view of the market which allows you analyze it on a macro scale.

Once you have found your ideal set up, you must then zoom in and analysis the next time frame down to make sure that the set up is still valid. Picture it like zooming in with a magnifying glass to confirm your initial theory.

As we mentioned in the last unit, the more confluent reasons you have to enter the trade, the more likely it is your trade will be successful.

If you have found a trade set up on the daily chart and it is still valid to enter on the H4 and H1 then you can enter a position with a higher level of confidence.

Benefits

• Focus on the bigger picture
• Less noise when compared to the lower time frames
• Easier to see the key levels
• The levels on higher time frames are typically more crucial therefore it is vital that we have an understanding of where they are and how they will likely impact the market when they reach these levels.

What is bottom-up

If you haven’t already guessed it, bottom-up analysis is when we start with our eye on the lower time frames and then work our way up from there.

Let’s say you are scanning the 15 minute time frame chart and you find a great trading set up. Maybe the price is just about to hit a huge support that your analysis has highlighted and you are looking to enter a long position.

Would this be enough information alone to enter a trade? The answer is no, it wouldn’t.

In this case, it would be much better to go one-time frame higher to have a look at the 30-minute chart to see if our trade is still valid. It would be better yet and much safer to go even higher and look at the 1HR and 4HR time frames, too.

The reason why we do this is to make sure that the route is clear for our trade. The smaller time frame may be screaming BUY but on the higher time frames, there could be a huge resistance in the way that could seriously impact your trade.

Remember, the trend is your friend. If you are looking to buy then make sure that the trend on the higher time frames is upwards, too. You’ll be making your life a lot easier if you do.

Benefits

• Much easier to spot setups on lower time frames
• Helps to avoid overtrading
• Ensures that your trades aren’t going to run into problem areas that are contradicting your setups
• It gives you more confidence and will likely see you maintain a much higher win rate.

The moving average is one of the most commonly used technical indicators, and for good reason. They are relatively simple concepts to grasp and they give us a simple view of the market trends and the recent price history.

So what is a moving average?

A moving average is simply a line on our chart that signifies the closing price of each candle over a specific period of time.

You will notice that the charts we view can often seem chaotic with wild price fluctuations which make the graphs somewhat hard to read. Moving averages help to make sense of this by creating a smooth line that shows the historical price action.

The main purpose of a moving average is to be able to more easily identify trends and to spot reversals as they are happening.

First things first, we need to create a trading plan. As the old saying goes, “fail to prepare, prepare to fail.”

If we just hit the markets any time we like without giving much thought to what our plan is and why we are doing what we are doing, then you can guarantee that you will be recording losses before you know it.

Granted, you may get lucky for the first few times, but eventually, that luck will run out, and the lack of planning and a clear strategy will undoubtedly show.

A trading plan, not a trading strategy

When we say trading plan we don’t mean that you need a clear idea of where you will enter and exit a trade, instead we mean you need to have an overall sense of what your goals and ambitions are for trading and what sort of funds and time you can allocate towards these goals.

The trading plan should be personal to you, honest, and realistic. This is what is going to help you decide, what, when, and how much you want to trade.

This should be the foundation of your trading and should be referred back to when you feel yourself getting into a rut, or even to stop yourself getting carried away when you’re on a winning streak.

A solid trading plan should help you to keep a logical trading mind and keep your emotions in check by helping you to make more objective decisions and fostering a trading discipline which is so vital to becoming a profitable trader.

How to make a trading plan

Here is a template to follow when making your plan, be sure to include all of these elements and anything else you feel is important.

1.   Write down your main motivation for wanting to trade

As with anything in life, it never hurts to stop and take stock of what we are doing and why it is we are doing it.

Why do you want to start trading? Do you want to become a full-time trader, add a little extra income to your full-time job, or do you want to become a fully-fledged expert, and find a job on Wall Street?

Whatever it is, write it down and keep this in mind when you are trading. It helps to keep things in perspective later down the line.

2.   How much time can you commit to your new trading career?

How much time are you willing to commit to this new hobby/career? Are you a stay at home parent who can commit 40 hours per week or do you run five jobs and have only a few hours spare? Can you trade during work hours, or not?

If you only have a limited amount of time you need to plan efficiently and make sure you are fully concentrated when doing so. Set aside some dedicated trading time and stick to it, no more, no less.

3.   Clearly outline your goals and what you want to achieve

Similar to the first point, but this time you should write down exactly what you want. Use numbers!

For example, “I want to increase my trading balance by 20% within the first 12 months”. That way you can hold yourself accountable and refer back to your goal when you need to.

4.   How much capital can you raise for trading?

This is important. Never risk what you cannot afford to lose. Seriously.

This gets said a lot but it is one of the most important factors in trading. If you are overinvested that you will not be trading efficiency, it is simply impossible.

Losses will be harder to take and you will likely be trading with scared money which could lead you to setting stop-losses too tight and taking profits too soon. Keep it realistic.

5.   Risk tolerance

We will go into this in more detail later on in the unit, but for now, right down how much you are willing to lose on one trade. The smaller the better of course. Somewhere around 1-2% per trade is reasonable.

It also makes sense to have a daily loss limit. If you lose 2% of your trading balance then call off the trading for the day. If you don’t you will likely chase your losses and trade poorly.

6.   Pick a currency pair and a time frame

Don’t be the jack of all trades and the master of none!

It can be very overwhelming to have 30 markets up on your screen with indicators all over the place.

Save yourself the stress and stick to one currency pair and one time frame. That way you can quickly learn how that market behaves and how you can best exploit it.

When you get more comfortable you can branch out when you are ready.

7.   Create a trading diary

Last but most certainly not least, create a trading diary. Keep track of everything. There are alot of great tools that you can use online to help you keep account of your trades.

Some of the most important things to write down are the reasons for entering a trade (hopefully there is more than one), how the trade performed, and a post-trade analysis.

By doing this we keep ourselves accountable for every trade and it highly reduces the risk of erratic and sub-optimal trading.

Be sure to go over your diary regularly. This will help you to highlight any weak points that you need to improve on.

Forex is all about having a plan and sticking to it. As soon as veer away from the plan you are unnecessarily exposing yourself to the market in ways that you didn’t prepare for.

Whether that be trading with more money that you are prepared to lose, or using a different strategy than you have practiced and planned to stick to, straying from your plan can be costly.

That said, let’s look at some key areas of risk management for you to follow when trading the markets.

Position size

You need to work out exactly what percentage of your trading balance you are willing to risk on each trade, once you have that information you can decide what size of lot you are going to buy and how many of them you will purchase.

Most professional traders risk 1% or less of their account every time they enter a trade.

So if you have a $10,000 account then you should be risking no more than $100.

You should keep this number consistent at all times. Do not risk 4% on one trade, 1% on the next and then 3% after that.

Choose your account risk and then stick to that at all times. Consistency is key.

Setting stop losses/ pip risk

Now that we know how much we are willing to lose on our trade we need to calculate where to set our stop loss.

We will go into much more detail on stop losses in the next section, but for now just remember that the stop loss should be set at a predetermined distance from our entry point that signifies our maximum amount of risk per trade.

To do this, we must calculate how much one pip movement is worth to our account and then set our stop loss accordingly.

For example, if one pip is worth $1 to us and we have a $10,000 dollar account then the maximum we can afford to lose using a 1% risk is 100 pips.

Taking profit

This is secretly one of the hardest parts of trading, where to exit when we are in profit. We must use ur indicators and trade research to determine key points to exit our trades.

We should always enter a trade with a key idea of where our entry and exit points are, both stop-losses and profit taking areas.

Again, we will go over this in detail in a few sections time.

Keeping disciplined

As we have mentioned many times over this course, consistency and discipline is vital. Follow your trading plan, stick to your risk management strategy with effective position sizes and always place appropriate entry and exit points.

Why is it important

Having a solid risk management strategy that you adhere to is probably one of the most important aspects of successful trading.

Making a mistake with a trading indicator, placing a support or resistance incorrectly, or even hitting short instead of long are all redeemable errors. We are human, we all make mistakes. However, if we don’t stick to our risk management strategies, these small mistakes can wipe out our entire trading balance. This is exactly what we are trying to avoid.

Good things come to those who wait. Trade patiently, diligently, and with discipline and you will be half of the way there.

Note: If you stick to these tips and practice proper risk management you will likely never put yourself in a position of wiping out your account.

We have mentioned stop-losses many times in this course so far, and for good reason, we need them! Time to dive a little deeper into the specifics.

As you know, the forex market can be volatile and difficult to predict at times. Even the best traders get it wrong and find that the market moves in the exact opposite direction to what they predicted.

Even if all our indicators are pointing in one direction it is still entirely possible that the market can move violently in the other. A major economic event, a new banking policy, and even strong rumours can affect the price out of nowhere, we must be prepared for this.

A lot of newbie traders will make the mistake of riding the trade it and hoping (praying) that the market will turn back in their favour. Others will cut their loss immediately as soon as they see it turn red and unfortunately, both of these strategies are incorrect.

What we need is a stop-loss. Simply put, a stop loss is an order that we place into the market that automatically executes when the price hits a certain level. It removes all the stress and anxiety from trading without a stop loss and acting the market run away with our entire trading balance at risk.

Sometimes it’s best to cut your losses and live to fight another day.

Where to place our stop loss

As we touched upon earlier, we can calculate precisely how many pips we are willing to lose for each trade.

If we know that we only want to risk 1% of our account, we should calculate how many pips that equate to, and then we know the maximum point at which we can place our stop loss. However, this is NOT the best strategy. We should always set our stop-loss at the point of invalidation.

This means that we should place our stop loss at the point where the reasons why we entered our trade are no longer valid.

For example, let’s say that we expect the price to bounce off a support and reverse into an uptrend. Rather than setting our stop loss at 100 pips below the support, we could set it at maybe 10-15 pips below the support.

That way, we know that our initial trade theory has been proven to be wrong (the support did not hold), and we can exit for a small 10-15 pip loss.

For the sake of this trade, it would be unnecessary to lose all 100 of our allocated pips based on our risk management strategy.

This is the MAXIMUM you are willing to lose on a trade, not how much you should lose each time.

Trailing stop-loss

Other than a setting a regular set stop-loss we can also utilize what is called a trailing stop loss.

A trailing stop loss will move based on fluctuations that occur during the trade.

For example, if you set a BUY order on EUR/USD at 1.1000 with a 50 pip trailing stop at and the market moved up to 1.1050 then the trailing stop would move up to 1.1000.

Every-time the trade moves in your favour the trailing stop loss will trail behind by 50 pips. This is a great way to lock in profits and attempt to ride successful trades out for as long as possible.

The stop loss will only trigger once the market has moved against you by 50 pips.

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Moving your stop-loss to your entry position

One thing that traders like to do is to move their stop loss to the point of entry when a trade goes in the favour. This can be a great tactic as it essentially removes all risk from the trade and it effectively a “free shot” at making extra profits.

While this can often be a good idea and can real help remove the stress from a trade it can also mean that you turn some winning trades into break even ones

Sometimes the market can fluctuate violently and it can take out your stop loss before carrying back on its trajectory.

If this happens you can see your trade closing before you get to your profit taking zone and you have just missed out on a winning trade.

While it’s okay to do this sometimes, it’s almost always better to set your stop loss at the point of invalidation.

What is a take-profit?

Taking profit is essentially what we want to be doing each and every trade we take. A take profit is the place where we set our exit trade to get out of the market for a profit.

Similar to a stop loss, we should set our take profit trade at a predetermined place and not just a random point.

Newbie traders often make the mistake at aiming for a certain price level or a predetermined percentage gain.

These are just arbitrary levels and are not based on any sort of technical analysis and will almost certainly mean that you’re leaving money on the table.

Why is it important?

Taking profit is arguably one of the most emotionally and technically challenging aspects of forex trading.

People often struggle with taking profits early and seeing their trade run away on a huge move that they have now missed out on. This can really test even the best trader’s mental strength.

Mastering the art of taking profits is crucial for successful forex trading. If we get out too soon we could see our trade run away and we have missed out on profits.

On the other hand, if we don’t set appropriate take profit levels we could see our winning trades become losing trades if we have unrealistic targets.

Where to set our take profit trades?

There are many methods that we can use to take our take profit levels, here are a few of the most common:

• The key support and resistance levels
• MACD crossovers
• RSI overbought/oversold levels
• RSI divergences
• Use your predetermined risk rewards ratio (more on this in the next section)

Look for critical levels in the market that could prove as obvious obstacles. If you are in a long position, it probably wouldn’t be a good idea to set your sell order above a significant resistance point.

Every trade you take will present a delicate balancing act between being over cautious and being too greedy. To eliminate this, set your targets at key levels in the market that take out the subjectivity in your trades.

Multiple take profit zones

Some traders find it beneficial to spread out there take profit orders over two or more areas in order to take their profit incrementally.

This can really help with the mental side of trading as once you have reached your first TP (take profit) level your trade will remain in profit even if it dips below your initial entry point.

This is usually more common in swing trades that are targeting larg pip movements over one to a couple of days. If you plan to do this then it makes sense to set the TP orders at or just before key levels in the market.

In the next section, we will look at risk-reward ratios that will help you to set better targets for your take profit orders.

What is risk vs reward ratio?

If you have spent some time trading before or if you have studied other traders then you will likely have come across the term “risk reward ratio”. This is a crucial aspect of trading that we must understand if we are to become profitable in the long run.

The risk reward ratio is simply the amount of capital that we are risking for the potential gain that we are targeting.

How to calculate R-R-R

Whenever we want to enter a trade we should calculate our risk/reward ratio first. All we need to have is our entry price, stop loss price, and our target price.

Example one

For the sake of simplicity, let’s use round numbers to explain how this works.

Let’s say we are going long on a currency with an entry price of $100.

First we need to ask, how much would we lose if we lost our trade:

Next, how much would we profit if our trade won? From this we can work out what our risk/reward ratio is 60/20 = 3:1. In this example our reward is three times the size of the risk.

Now let’s use an example using pips. Let’s say we are entering a scalping position trying to make a 10 pip gain and we set our stop loss at five pips.

In this case we stand to lose five pips if our trade loses and we win 10 pips if our trade wins.

10/5 = 2:1

In this example, our risk to reward ratio for the scalp would be 2:1.

Easy enough, right? But what does this mean and how can it help with our trading?

Why is risk vs reward important?

When we know what risk reward ratio we will be trading with we can easily find out what winning percentage we need in order to be profitable traders. This is very handy to know as you can always stop and take stock of how you are performing and just how far away you are from becoming a winning trader.

Let’s take a look at what we would need to do to break even if we trade at some different risk to reward ratio.

The problem with too high a RRR

As you can see, the required winning rate drastically reduces as we increase our risk to reward ratio.

Sometimes when newbie traders see this, their eyes light up with the sight of the low winning rates, and they think that it would be easy to attain these levels and instantly become a winning trader. While there is some logic to be found in this, there are a few drawbacks that we need to consider.

Firstly, the higher we go with the RRR, the longer our trades will last, and the more exposure we have to the market. As we have mentioned many times throughout this unit, trading is mostly a mental game.

The longer we expose ourselves to the market, and the longer we have open positions, then the more chance there is that our emotions will get the better of us and interfere without trading.

Secondly, if we have a long RRR, we will get stopped out more often than not, and we will have to overcome dealing with many consecutive losses, which can be a tough burden for even the most seasoned of traders.

Lastly, traders will often cut their trades short when they are in these types of trades and will take their profit early. While at first, this may seem like a bad idea, but what they are actually doing is dooming themselves to being massively unprofitable.

If they cut their winning trades short every time, they will not be reaching that four, five, or six times target that they were aiming for.

That means that they will not be making up for all of those small losses that they have racked up, and they will often never reach the high targets that they set.

Note: It is entirely possible to be a winning trader using high risk to reward ratios, but it is much more difficult. For newbie traders, it is recommended to stick to a lower ratio while starting out until you can find your sweet spot.

What RRR should I use?

It all depends on what type of trader you want to be, however, most traders seem to agree that somewhere around the 3:1 RRR is somewhat of a sweet spot.

When selecting a 3:1 RRR, you will still hit a large portion of your trades without getting continually stopped out and left feeling demoralised.

A 25% win rate using this RRR is definitely achievable using the strategies that we have already brought you in this course, you just need to stick to your trading plan and ensure you trade with discipline every time.

One of the main dangers comes with cutting your winning trades short, so be aware of moving your stop loss to a breakeven position when you don’t need to.

Constantly manage your trade for signs that your initial theory has now become invalid. If it has, it is perfectly fine to exit.

Final word on RRR’s

At the end of the day, the risk to reward ratios are not set in stone. You should chop and change them to fit in with your trading plan and set your targets based upon key levels that you identify in the market.

If you want to set a trade up with a RRR of 3:1 but you see that there is a significant resistance level where 2:1 RRR would be then it would certainly make sense to adjust your trade to avoid that.

The risk to reward ratios should be used as a tool to guide us with our targets and help us trade, not to hinder us from applying solid trading fundamentals to each trade.

Most of the information you will find when you begin your trading journey will be on how to best spot market opportunities and identify signals when they present themselves.

While, of course, that is extremely useful information, it could be argued that it is equally important to know when NOT to trade and to avoid the market all together.

Whether it be for a personal reason or due to macroeconomic events out of your control, there are certainly moments where you would be better waiting on the sidelines to trade another day.

Personal reasons to avoid trading

First of all let’s look at some times when you shouldn’t trade due to personal reasons. Some of these may seem obvious but you would be surprised how many people ignore these warning signs and blow away their entire trading capital.

Trading when highly stressed/ tired

If you are stressed/tired then you will not be performing at your best and your decision making will be sub par. It’s far better to take a rest and come back when you are feeling fresh again.

If you must do something to do with trading then it would be far better to use this time to study or to paper trade rather than using live funds.

During emotional times

Trading is no different to any other job that you may have in the real world. If you have some serious family issues or if you are under a lot of mental pressure then it would be better to take some time off.

If you ever feel like your emotions are getting the better of you then save the trading for another day.

Trading when surrounded by too many distractions

It’s essential that you are 100% focused when you are trading. You should always be monitoring your positions for how your trades are performing and how the market behaves. It’s hard to learn from the market if you are constantly distracted.

Trading after a heavy loss or during a continued losing streak

After a big loss there is no way you can trade with a clear head. Step away from the computer and come back another day when you have refocused and recovered from the loss.

It would be even better to analyse the trade to see what you did wrong so that you can avoid making a similar mistake in the future.

When you are at work

This ties in with a few of the aforementioned points. If you are at work you likely will not be able to focus and you will be distracted on multiple fronts. Also, we don’t want you to lose your job just yet! Wait until you’re bringing in the big bucks first.

Fundamental and technical reasons to avoid trading

The market reasons for not taking a trade are situations that are way out of your control.  Certain events have the potential to send shockwaves through the market, causing huge swings and periods of volatility.

Here are a few examples of such events. During these times, it’s almost always better so sit out and watch from the sidelines.

Large news events

News often plays a big role in the price fluctuations in the market. Some currencies are heavily tied to commodities while others will move depending on how their stock markets perform or sometimes even individual companies.

Keep one eye on the news and make sure you understand what impacts the currencies that you are trading.

Political elections results

This is one goes without saying. Keep an eye on key election dates as the price can fluctuate wildly based on election results.

High profile speeches and budget releases

High profile speeches and budget releases can affect the market considerably. Be aware of when they take place and wait for them to pass by so you can avoid the market uncertainty and resulting speculation.

Bank holidays

A large portion of the trading volume comes from the banks. When they are closed during the bank holiday it means the markets are far less liquid than usual. This can cause market stagnation and occasionally erratic price movements.

Market open/ close

It’s a good idea to try and avoid the market/open close as it can often bring increased volatility. Traders are frantically trying to open/close their positions which can cause erratic price movements.

A word on overtrading

As the markets are open 24 hours a day, five days a week, there are a huge number of opportunities for traders to take advantage of. This is both a blessing and a curse.

Overtrading is one of the major reasons why traders lose money. You should not be entering a position at every signal that you see. As the old saying goes, “good things come to those who wait.”

It pays to wait for clear cut setups where a number of your indicators are all pointing in the same direction. Stick to your trading plan religiously, don’t chase your losses, and keep your trading decisions as objective as possible.

Consistency is absolutely crucial to becoming a winning trader, especially in the long run. So how do we achieve this?

Well, we should be aiming to make our trading as OBJECTIVE as possible. This means we need to take our emotions out of the trading process as much as we can by having a clear trading plan and a set strategy to follow.

This means that a large part of the decision-making process has been removed from the equation, and we can simply focus on scanning the market for good setups, and we can monitor the performance of our trades.

Consistent risk

One of the most vital areas we must maintain consistency in is with our level of risk. If we overexpose ourselves on a trade and end up losing, then we can wipe out a considerable part of our trading capital. This is something we want to avoid.

Calculate how much of your trading balance you are willing to risk on each trade. As we have suggested, this should be somewhere close to the1% mark.

Once you have this figured out, it is best advised to trade with consistent lot sizes so that you can keep your market exposure at the same level each time you trade.

This way, you will become more comfortable with trading that lot size until you are ready to increase your stakes.

Consistent risk-reward ratio

Many people like to trade with a consistent risk-reward ratio as it allows them to analyse their trades on a macro level and compare their actual win rate with their desired win rate.

For example, if you trade with a 2:1 risk-reward ratio, you know that you need a 33% win rate to break even. If you keep track of all your trades, you can easily see how you are performing and just how far above or below breakeven you are hitting.

If you switch between RRRs, it can become hard to keep track of your win rate for each ratio. 

The best way to overcome this is to keep track of your trades and write them into your trading journal every time. Make a note of the RRR you used and record the outcome; that way, you can split test your results and see which RRR is performing best for you.

If you stick to one RRR then you will be able to understand how the market behaves during these types of trades and this will help you improve as a trader much quicker.

The skills required to become a great 1:1 RRR trader are far different than those who trade at a 10:1 RRR – stick to one area and hone your skills there. 

Note: As always, the RRR is not the be-all and end-all. Set your entry and exit points strategically and be aware of key market levels.

As we mentioned previously, fundamental analysis is an approach to analysing the market by looking into the social, economic, and political issues that may affect a country and its currency.

These are all vital components that drastically influence the supply and demand of the currency, so it is worth keeping an eye on them for the periods that you’re trading.

Fundamental analysis vs technical analysis

The main style of analysis that we have covered in this course has been technical. This is the use of indicators, oscillators, as well as the analysis of price action and candlestick reading.

While this is great for short/medium term trading, fundamental factors will always have the biggest effect on the markets.

Truth be told, most traders ignore the fundamentals of the currencies that they are trading. The general argument is that they do not need to concern themselves with macroeconomics while they are trading the smaller time frames.

While there is certainly some logic to this, it is a flawed and naive outlook. The more knowledge we have and the better understanding we have of the markets, the better.

Fundamental analysis can help us to identify potentially turbulent times in the market, shifts in sentiment, and times of great uncertainty – all of which are situations we would be better off watching from the sidelines.

Trading using technical analysis alone is kind of like trading with one eye open. Eventually, you will miss something and run into an unpleasant surprise.

After all, the support and resistance lines you draw on your chart are no match for a central bank adjusting its interest rate or a shock referendum result (ahem, Brexit).

Economic calendar

So how do you keep up with all of these events? Well, the good news is that you don’t need to be an Oxford certified economist. After all, this is “fundamental analysis” not expert, in-depth analysis.

You can simply follow an economic calendar to keep an eye on all of the key dates and important events that happen in the forex world.

An economic calendar is one of the most important tools for traders who wish to keep an eye of the market fundamentals. It essentially lists all of the major economic events that occur across the globe in one easy to read format.

Rather than trolling through all of the news sources yourself and creating your own diary, you can simply take a look at an economic calendar and see all of the important upcoming events for the currency pair you’re trading.

Some of the things that a good economic calendar will list are:

• Interest rate changes
• Central bank announcements
• Political elections
• Economic indicators (GDP, CPI, employment rates etc.)
• Company quarterly earnings reports
• Key speech dates

This is a massive time saver. It brings together all of the information you need in one place. With some economic calendars, you can even filter the results to display the exact event you are looking for. Very handy.

Tip: Even with the use of an economic calendar it is still better to stick to one or two currency pairs when you first start out. It’s easy to get overwhelmed and fall into a state of analysis paralysis. Save yourself the hassle and knuckle down on one pair and become a master of that before you move on.

News sources

If you really want to get your teeth stuck into the fundamental analysis by keeping your ear to the ground on the latest of the forex markets then you will need to find a good news source.

Market news and data are available through many sources, you won’t be hard-pressed to find the information. If you prefer to use the TV to get your news then you will likely find some around the clock coverage on the markets.

Other than that, the internet is your best bet. Stick to the larger and more reputable sources for the most reliable information. Here are some examples of good sources for forex news.

• Bloomberg
• Reuters
• The Wall Street Journal
• UK Investing

When you’re out there conducting your fundamental analysis and researching the latest developments on the markets you are going to come across a lot of economic indicators. GDP, CPI, employment rates, etc, etc.

It’s all well and good finding this information, but what does it really mean and how does it impact the value of a currency?

In this section, we will break down the main economic indicators that you will come across and discuss what each of them signifies and how the markets will typically react to them.

Gross Domestic Product GDP

Let’s start with one of the big ones, GDP. Unless you have been hiding under a rock or you have never watched a news channel before, you will most likely have heard of GDP before.

Gross Domestic Product is the widest measure of the overall health of an economy. It is a way to measure the market value of a country’s goods and services. Because of this, it is used to determine how well or how poorly the country is performing economically.

It’s such an important indicator that this is what economists use to determine what stage of the business cycle we are currently in. If we see two consecutive months of negative GDP, this is what we call a recession. As soon as we enter a positive month the depression is considered to be over.

This is a good indication of the current sentiment around a currency. If the country’s economy is in a recession then there will be a higher likelihood that the value of that currency will fall. Something to keep in mind.

Note: It takes a long time to compile the data that goes into the GDP calculations. By the time the data is released most of the information is already known, so usually, it has little to no impact on the market. However, if the GDP figure is far from what is expected then it can certainly cause chaos in the market.

Non-farm payroll

Non-farm payroll, or NFP, is a key economic indicator for the United States economy. As the USD is by far the most traded currency in the world, chances are you will be trading using it at some point in the future.

NFP  is intended to signify the total number of paid workers in the U.S. excluding farm employees, government employees, private household employees and employees of nonprofit organizations.

It is one of the most significant economic indicators for the U.S. economy and the fluctuations in the market prove that.

It is normally released on the first Friday of every month at 8:30 am EST. You will definitely want to keep an eye on that date. Even in the days before the figure is released the market becomes particularly volatile in anticipation of the release as there are thousands of traders trying to second guess the market.

There will be a general expectation as to what the figure will be, but of course, this expectation is not always correct.

The higher the payroll number the better for the U.S. economy. This is definitely one to keep an eye out for, but be warned, the markets can get extremely volatile in these moments.

Consumer Price Index

The consumer price index, or CPI, measures the costs of goods and services by calculating the average price of a specific basket of goods or a service.

When the CPI changes this is a reflection of the rate of inflation which is a very important figure when it comes to currency trading.

It gives us an objective view of how quickly prices are rising or falling in the economy. This number is also released monthly in the United States and in the UK, so you need to keep an eye on these dates.

This metric is used to determine if the economy is on track with the projected inflation rates. If they are then this is good for the economy and will usually attract investment, if not then the currency may weaken.

Employment Indicators

Employment is one of the key indicators that signify the strength of a country’s economy and how well the government’s policies are performing.

There are a number of indicators you can follow to get employment statistics, one of the most significant is the NFP.

There is an Employment Monthly Report that is released once a month that displays the employment rate and the unemployment rate (given as a percentage of the total labour force).

The lower the unemployment rate the better it is for the country’s economy.

Interest Rates & Central Bank meeting

Any change in the interest rates is typically met with a huge reaction in the forex markets. These rate changes affect everybody and everything surrounding the currency; the buyers, sellers, importers and exporters.

The Central Bank of a lot of the major forex currencies has regular meetups each month to discuss the current state of the economy. Sometimes the bak can make drastic decisions such as altering exchange rates or implementing quantitative easing strategies.

These are huge events in the forex world and the markets will usually wait in anticipation during each of these regular meetings. Unless you have some key insider information, it’s best to be cautious and avoid trading around these periods.

Retail Sales

Retail sales measure exactly how much consumers are spending in stores that sell goods. It counts all the receipts from our high street spending, grocery store visits, DIY trips, you name it.

This gives a great insight into how consumers are behaving and essentially how the economy is performing. If consumers stop spending money, the economy will stop working. Money makes the world go around, after all.

Retail sales figures are crucial indicators to the strength of the economy because if the consumers are spending, it means the profits of companies will be up and share prices will follow. This will attract investment and usually gives a boost to the country’s currency.

Metatrader 4 is a massively popular trading software that you can download and use for free.

It’s a fantastic tool that forex traders can use to view real time price movements, open and close positions, view and edit charts and graphs, and access all of the technical indicators that we have mentioned throughout this course.

In the past it was solely for the use of forex trading, but now you can trade futures, equities, CFD’s, and more, all using this one platform.

It’s a great one stop shop for everything you need when you trade, so we highly recommend that you download it. It’s extremely user friendly and it offers a massive range of currency pairs – way more than you would ever need access to.

How to set it up

Okay, so let’s run through the steps that you need to take to get started.

Step 1: Download Metrader 4 (MT4.exe) – You can download it from https://www.metatrader4.com/en/download

NOTE: You can download MT4 for PC, iPhone, iPad & Android

Step 2: Open an account with MT4. Here you can decide if you want to use a live account or a demo account. If this is your first time trading then it is recommended that you start with a demo account to get to grips with things before going live.

Registering with MT4 will require that you upload some identification documents, so make sure you have those to hand.

Make a note of your account details, username and password for future reference,

Step 3: Now you need to link your broker account to MetaTrader 4. To do this, simply log in to your brokerage account from the MT4 interface.

NOTE: For those of you that don’t have a broker yet then check out or next section for our personal recommendation and how to get set up.

How to open a trade

Alright, now that we have our account set up with MT4 and our broker is linked to the software we need to learn how to open a trade.

Firstly, select the currency pair of your choice by clicking on the “Window” tab that you can find at the top of the interface.

Select the currency pair by clicking on the ‘Window’ tab at the top of the MT4 platform, and then select ‘New Window’. All of the main currency pairs that you should be trading are there.

You can then click ‘New Order’ on the MT4 toolbar or press F9 to open an ‘Order’ window.

The screenshot below displays the ‘Order’ window for the EUR/USD currency pair. From here it is a relatively straightforward process. Simply enter the trade size that you wish to open your position with and then choose either “Buy by Market” or “Sell by Market”.

Doing this type of order will automatically fill the order based on the current market price. While it’s okay to do this sometimes, it’s far better to enter a “limit” trade and choose your entry spot carefully with the technical analysis that you conducted.

To do this, open the drop down list by clicking on “type” and select “pending order”. Here you can set up a buy or a sell at specific price points in the market.

Set take profit & stop loss order

When you place your order you will be presented with the option to enter the price point for your take profit and stop loss orders. It is very important that you know these areas before you trade.

If you have followed our course properly then you will know the importance of discipline and trading consistently using the correct RRR. This is the point where the theory turns into practice.

Every time you open a position, make sure you have at least a stop-loss order placed at the same time. This will ensure that your trading account is safe from any flash crashes or big market swings while you are in your position.

You can enter your take profit and stop loss orders manually into the field or you can use the arrows to automatically populate it with the current market prices.