The aim of this presentation is to help build a better understanding of Forex trading and guide you through the necessary steps needed to become a responsible and successful trader in the foreign exchange market.

1. Introduction to Forex
Trading
By Michalis Markides, BSc, MSc
m.markides@oxmarkets.com

2. Definition
What is “Forex – FX”
The forex trading market is an international decentralized financial market whereby one currency is exchanged for
another. The forex market is the largest, most liquid market in the world, with average traded values that can be trillions
of dollars per day. It includes all of the currencies in the world.
The foreign exchange market is often referred to as 'FOREX', 'FX', 'Spot FX' or plainly 'Spot‘.
Historically, only large financial institutions, corporations, central banks, hedge funds and extremely wealthy individuals
had the resources to participate in the forex market. However, now, with the emergence and popularization of the
internet and mainstream computing technology, it is possible for average investors to buy and sell currencies with the
click of a mouse from the comfort of their own home.
The factors that will affect the value of the currencies, to increase or decrease, are the supply and the demand of these
two specific currencies that will be involved in the conversion process.

3. Forex History
Gold Standard System
The Gold Standard Monetary System was implemented in 1876. Before the gold standard was created, countries would
commonly use gold and silver as method of international payment.
A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price. That fixed price is
used to determine the value of he currency.
Example: in the era of gold standard system, before World War I $ 1 ≈ 1/20 oz. To be more precise 1 oz ≈ $20.67
Britain stopped using the gold standard in 1931 and the US abandoned the system in 1971.

4. Forex History
Bretton Woods Agreement
Before the end of World War II, the Allied nations believed that there would be a need to set up a new financial system.
In July 1944, 44 countries sent delegates to a conference held in Bretton Woods, New Hampshire to deliberate over what
would be called the Bretton Woods system of international monetary management.
To simplify, Bretton Woods led to the formation of the following:
• A method of fixed exchange rates;
• The U.S. dollar replacing the gold standard to become a primary reserve currency; and
• The creation of two international agencies to oversee economic activity: the International Monetary Fund (IMF),
International Bank for Reconstruction and Development

5. Market Sessions
01 Forex starts its working hours
when the Pacific session opens
on Monday local time. This
session is characterized by a
rather low volatility, and, as a
matter of fact, this is the most
peaceful time on the market.
Pacific Session
Overlapping Sessions
The highest liquidity is when these sessions overlap. Many professional traders consider 14:00 GMT to be the finest time as London is preparing to
close and traders are getting ready to move to New York’s market. This creates big swings in the currency prices thus opening greater opportunities
for profits. But one must be careful as in the very end of London’s session the movements can become quite choppy and harder to predict.
02 The Pacific session is followed by
the Asian session. Currency pairs
that include USD, EUR, JPY and AUD
are traded actively during this
period. The trading activity of AUD
is caused by the intersection of the
working time of this session with
the Pacific one.
Tokyo Session
04 The most active time on the
foreign exchange market is the
beginning of the American session,
because it reaches the opening of
trading in New York and the
renewal of trading in Europe.
Fundamental news of special
importance are released in the
beginning of the American session.
New York Session
The opening of the European session
starts in financial centers such as
those in Frankfurt, Zürich, and Paris.
However, trading gets more active
only after trading starts in London. A
fairly strong volatility may be noticed
during this session, because the
European zone has a sufficiently large
amount of money turnover.
London Session

6. Market Sessions
Session Open (GMT) Close (GMT)
Sydney 10:00 PM 7:00 AM
Tokyo 11:00 PM 8:00 AM
London 7:00 AM 4:00 PM
New York 12:00 PM 9:00 PM
Session Open (GMT) Close (GMT)
Sydney 9:00 PM 6:00 AM
Tokyo 11:00 PM 8:00 AM
London 8:00 AM 5:00 PM
New York 1:00 PM 10:00 PM
Winter (approx. April – October)
Winter (approx. October – April)

7. Currency Quotation
Base and Quote Currency
In forex, the base currency represents how much of the quote currency is needed for you to get one unit of the base
currency. For example, if you were looking at the EUR/USD currency pair, the Euro would be the base currency and the
U.S. dollar would be the quote currency.
EUR / USD = 1.0676
Buy Sell
Base is Always 1
Quote
100 EUR 106.76 USD

8. Leverage
What is Leverage?
In finance, leverage refers to borrowing money to supplement existing funds for investments in such a way that the
potential positive or negative outcome is magnified and/or enhanced. Leverage is vitally important to your trading
activities since choosing the incorrect leverage could result in large losses and damage potential profits.
The amount of leverage on your account partly determines the amount of funds you need to put up for a trade.
Leverage gives the trader the ability to trade larger amounts of currency with a smaller deposit amount.
For example with a $200 deposit and a leverage of 1:500 this would allow you to trade up to $10,000 worth of currency.

9. Margin
What is Margin?
It is the necessary amount you need to have in your trading account in order to open relevant transaction.
Free Margin is the available amount of money, which can be used to open new positions.
Leverage= 1/Margin or Margin= 1/Leverage

10. PIP
What is a PIP?
“PIP” stands for Point In Percentage.
Pips relate to the smallest price movement any exchange rate can make and is what we would consider a “point” for
calculating profits and losses.
A pip is usually the last decimal place of a quotation. Most pairs go out to 4 decimal places, but there are some
exceptions like Japanese Yen pairs (they go out to two decimal places).
Exceptions include:
- JPY,HUF; second decimal (0.01)
- CZK; third decimal (0.001)
There are brokers that quote currency pairs beyond the standard “4 and 2” decimal places to “5 and 3” decimal places.
They are quoting FRACTIONAL PIPS, also called “pipettes”.

11. Bid/Ask
Bid Price
Bid represents the price at which a trader can sell the base currency, shown to the left in a currency pair.
For example, in the quote USD/JPY 113.67/69, the base currency is USD, and the Bid price is 113.67, meaning you can
sell one US Dollar for 113.67 Japanese Yen.
Ask (Offer) Price
Ask represents the price at which a trader can buy the base currency, shown to the left in a currency pair.
For example, in the quote USD/CHF 0.9997/99 the base currency is USD. And the Ask price is 0.9999, meaning you can
buy one US dollar for 0.9999 Swiss francs.
The difference between these two is called “spread” and goes to the broker that handles the transaction.

12. Lot
What is a Lot?
Lot is the way to measure the position size or the volume of a trade.
- A standard lot size (= 100,000) causes an approximately $10 per pip gain or loss.
- A mini lot size (= 10,000) causes an approximately $1 per pip gain or loss.
- A micro lot size (= 1,000) causes an approximately $0, 1 per pip gain or loss.

13. Pending Orders
Buy Stop
Stop buy orders are useful when the investor believes e.g. with the help of technical or fundamental analysis that if the
market reaches a certain level price which is above the current levels then it will go further up.
BUY STOP
Order placed above price and
price keeps going up

14. Pending Orders
Sell Stop
Stop sell orders are useful when the investor believes e.g. with the help of technical or fundamental analysis that if the
market reaches a certain level price which is below the current levels then it will go further down.
SELL STOP
Order placed below price and
price keeps going down

15. Pending Orders
Buy Limit
Limit buy orders are useful when the investor believes e.g. with the help of technical or fundamental analysis that if the
market reaches a certain level price which is below the current levels then it will turn to go up.
BUY LIMIT
Order placed below price and
price then goes up

16. Pending Orders
Sell Limit
Limit sell orders are useful when the investor believes e.g. with the help of technical or fundamental analysis that if the
market reaches a certain level price which is above the current levels then it will turn to go down.
SELL LIMIT
Order placed above price and
price then goes down

17. PIP Calculations
For Forex
Pip Value = (Pip in decimal places * Trade Size) / Market Price
Example:
Trading 1 lot of EUR/USD with an account denominated in EUR
One pip in decimals = 0.0001, Trade Size = 100,000, Exchange Rate = 1.13798
0.0001 * 100,000 = 10 => 10 / 1.13798 = 8.78750
Each pip is worth €8.79
For Metals
Tick Value = Tick in decimals (0.01) * Number of Oz
Example:
Trading 1 lot (100 Oz) of GOLD with an account denominated in USD
0.01 * 100 = 1
Each tick is worth $1

18. Margin Calculations
For Forex
Required Margin = Trade Size x Margin x Market Price
Example:
Trading 1 lot of EUR/USD using 1:50 leverage with an account denominated in USD
Trade size: 100,000
Market Price: 1.0729
Required Margin: 100,000 x 0.02 x 1.0729 = $ 2145.8
For Metals
Required Margin = Trade Size (Oz) x Margin x Market Price
Example:
Trading 1 lot (100 Oz) of GOLD using 1:50 leverage with an account denominated in USD
Trade size = 100 Oz
Market Price = 1212.78
Required margin: 100 x 0.02 x 1212.78 = $2425.56

19. Basic Concepts of Trend
01
An uptrend is made up of
ascending peaks and troughs.
Higher highs and higher lows.
Uptrend
02
A downtrend is made up of
descending peaks and troughs.
Lower highs and lower lows.
Downtrend
01
Periodicity: more than a year
Timeframe: Monthly Chart
Long Term/Primary/Major Trend
02
Periodicity: three weeks to as
many months
Timeframe: Weekly Chart
Medium Term/Intermediate Trend
03
Periodicity: anything less than two
or three weeks
Timeframe: Daily Chart
Short Term/Minor Trend
03
Consolidations is when prices
move sideways in a horizontal
range.
Sideways trend (Consolidation)
Three directions of trend
Three lengths of trend

20. Uptrend
An uptrend line has a positive slope and is formed by
connecting two or more low points. The second low must
be higher than the first for the line to have a positive slope.
Uptrend lines act as support and indicate that net-demand
(demand less supply) is increasing even as the price rises. A
rising price combined with increasing demand is very
bullish, and shows a strong determination on the part of the
buyers.
As long as prices remain above the trend line, the uptrend is
considered solid and intact. A break below the uptrend line
indicates that net-demand has weakened and a change in
trend could be imminent.

21. Downtrend
A downtrend line has a negative slope and is formed by
connecting two or more high points. The second high must
be lower than the first for the line to have a negative slope.
Downtrend lines act as resistance, and indicate that net-
supply (supply less demand) is increasing even as the price
declines.
A declining price combined with increasing supply is very
bearish, and shows the strong resolve of the sellers. As long
as prices remain below the downtrend line, the downtrend
is solid and intact. A break above the downtrend line
indicates that net-supply is decreasing and that a change of
trend could be imminent.

22. Consolidation
Sideways trend or Consolidation is used in technical analysis
to describe the movement of an asset’s price within a well-
defined pattern of trading levels.
Consolidation is generally regarded as a period of indecision,
which ends when the price of the asset moves above or below
the prices in the trading pattern.
The upper and lower bounds of the asset’s price create the
levels of resistance and support within the consolidation. A
resistance level is the top end of the price pattern, while the
support level is the lower end of the pattern.
Once the price of the asset breaks through the identified areas
of support or resistance, volatility quickly increases, and so
does the opportunity for short-term traders to generate a
profit.

23. Support and Resistance
Support and resistance represent key junctures where the forces of supply and demand meet. In the financial
markets, prices are driven by excessive supply (down) and demand (up).
• Supply is synonymous with bearish, bears and selling
• Demand is synonymous with bullish, bulls and buying
As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal,
prices move sideways as bulls and bears slug it out for control.

24. Support
Support is the price level at which demand is thought to be strong enough to prevent the price from declining
further.
The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined to buy
and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand
will overcome supply and prevent the price from falling below support.
Support does not always hold and a break below support
signals that the bears have won out over the bulls. A decline
below support indicates a new willingness to sell and/or a lack
of incentive to buy. Support breaks and new lows signal that
sellers have reduced their expectations and are willing sell at
even lower prices. In addition, buyers could not be coerced
into buying until prices declined below support or below the
previous low. Once support is broken, another support level
will have to be established at a lower level.

25. Resistance
Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising
further.
The logic dictates that as the price advances towards resistance, sellers become more inclined to sell and buyers
become less inclined to buy. By the time the price reaches the resistance level, it is believed that supply will
overcome demand and prevent the price from rising above resistance.
Resistance does not always hold and a break above
resistance signals that the bulls have won out over the
bears. A break above resistance shows a new willingness to
buy and/or a lack of incentive to sell. Resistance breaks and
new highs indicate buyers have increased their
expectations and are willing to buy at even higher prices. In
addition, sellers could not be coerced into selling until
prices rose above resistance or above the previous high.
Once resistance is broken, another resistance level will
have to be established at a higher level.

26. ADX
The major target of the traders is to find the trend. Welles Wilder outlines an approach that tries to determine at least when a market
is likely to break out of a trading range. He calls it the “Directional Movement System”. The objective of the system is to categorize a
number of different markets by their trending characteristics. This system measures each security on a scale from 0 to 100.
In order to measure directional movement, we need at least two periods (like days, weeks or months) for comparison purposes. Its
principles can be applied to any timeframe.
Directional Movement system uses too many complicated formulas so we will concentrate on the simple use of their results. Their
results generate an indicator, called ADX.
The ADX is a shortcut for “Average Directional Index” and it is a leading indicator for trend recognition.
It is used in order to detect the existence of a trend, its direction, its velocity and where it ends.
It uses three lines in order to succeed in this vital trading tack.
The Positive Directional Movement, the green line, (+DI) is the line for positive direction and it represents the power of buyers in the
market.
The Negative Directional Movement, the red line,(-DI) is the line for negative direction and it represents the power of sellers in the
market.
The ADX measures the difference between +DI and –DI. It shows the strength of a trend and it bounces between 0 and 100, even if
levels above 60 are very rarely seen. (which is the black line)

27. How to trade ADX
• ADX has to be above of both Dis
• If ADX is lower than 20 then there is no trend
• If ADX lies between 20 and 25 levels then there is a very weak trend
• If ADX lies between 25 and 30 levels then there is a moderate trend
• If ADX is above 30 then there is a trend
• If ADX is above 35 then there is strong trend
• Then compare the DIs i.e. if +DI is above –DI then there is a positive tension in the market, unless vice versa
• If this positive tension is compared with an ADX level above 30, then we have an uptrend.
• ADX can remain on Trend mode even if the trend changes direction.

28. How to trade ADX

29. Ichimoku Kinko Hyo
The Ichimoku Cloud, also known as Ichimoku Kinko Hyo, is a versatile indicator that defines support and resistance,
identifies trend direction, gauges momentum and provides trading signals.
Ichimoku Kinko Hyo translates into “one look equilibrium chart”. With one look, chartists can identify the trend and look
for potential signals within that trend.
This charting technique was created by a Japanese newspaper writer. It does look very complicated when a trader sees
the indicator for the first time, but don't hesitate to give this indicator a try because the complexity quickly disappears
once you gain an understanding of what the various lines mean and why they are used.

30. Components
Ichimoku consists of a candle chart and five lines
(1) Conversion line – (highest high + lowest low)/2 in the last nine periods (including the current period)
(2) Base line – (highest high + lowest low)/2 in the last 26 periods (including the current period)
• Base line and Conversion line are plotted in the current period.
(3) Leading Span 1 – (Conversion line + Base line)/2
(4) Leading span 2 – (highest high + lowest low)/2 in the last 52 periods (including the current period)
*Leading spans 1 and 2 are plotted 26 periods ahead (including the current period).
(5) Lagging-span – Current price plotted 26 periods back (including the current period)
• It becomes a line that runs parallel to the current price line.
(6) Cloud – The space between Leading span 1 and 2

31. Components

32. The Five Basic Lines and Their Uses/Functions
(a) The direction of the Base line should be taken as the direction of the market. Even if the Conversion line
has crossed above the Base line, it is not really bullish if the Base line fails to turn up. More often than not, a
rally not accompanied by an upturn in the Base line ends up short-lived. By the same token, even if the
Conversion line has crossed below the Base line, it is not really bearish if the Base line keeps trending upward.
More often than not, a downswing not accompanied by a downturn in the Base line also ends up short-lived.
(b) The Base line often serves as support when the price corrects downward in a bull market. It serves as
resistance when the price corrects upward in a bear market.
(c) In a strongly bullish or bearish market, the Conversion line often serves as support or resistance, and that is
often enough to terminate any corrective moves.
(1) Base line and Conversion line

33. The Five Basic Lines and Their Uses/Functions
(a) The Cloud is used to determine the market direction. When the price is above the Cloud, it is judged that
the market is in a longer term bull market. When the price is below the Cloud, it is judged that the market is in
a longer term bear market.
(b) The Cloud serves as longer term support in a bull market and longer term resistance in a bear market. A
break through the Cloud signals a change in the longer term market trend. A break above the Cloud signals
that the longer term trend has turned from bearish to bullish. A break below the Cloud signals that the longer
term trend has turned from bullish to bearish.
(c) The degree of thickness of the Cloud indicates the degree of strength of the support or resistance it
provides. When the Cloud is thin, it is weak as a support/resistance zone. The price can break through it with
relative ease. When the Cloud is thick, it serves as a strong support/resistance zone. In a bull market, down
corrections often stop in the Cloud. In a bear market, upward corrections often stop in the Cloud.
(2) “Cloud” (Space between Leading span 1 and Leading span 2)

34. The Five Basic Lines and Their Uses/Functions
(d) Changes in the shape of the Cloud provide useful insights into what is happening in the market. As the
result of the two lines constituting the Cloud (the Leading span 1 and the Leading span 2) interacting with
each other in various ways (e.g., approaching each other, diverging, crossing, moving in parallel to each other),
the shape of the Cloud changes constantly. For instance, it is observed in many markets that when the Cloud
“twists”, as the two lines constituting the Cloud (the Leading span 1 and the Leading span 2) cross each other,
a trend change takes place at relatively high frequencies. So is the case when the Base line and the Leading
span 2 approach each other.
(2) “Cloud” (Space between Leading span 1 and Leading span 2)

35. The Five Basic Lines and Their Uses/Functions
(a) Lagging span vs. Current price (of 26 periods ago)
If the Lagging span is above the current price (of 26 periods ago), it is bullish. If the Lagging span is below the
current price (of 26 periods ago), it is bearish.
(b) Lagging span vs. Cloud
If the Lagging span is above the Cloud, the longer term trend is upward. If the Lagging span is below the Cloud,
the longer term trend is downward.
(3) Lagging span

36. The Five Basic Lines and Their Uses/Functions
According to the Ichimoku theory, when the following three conditions are in place, one can safely judge that
the market is in a bullish (bearish) state.
(a) The Conversion line is above (below) the Base line, which is trending up (down) or at least flat.
(b) The Lagging span is above (below) the current price (of 26 periods ago).
(c) The price is above (below) the Cloud.
(4) Three Conditions to Make a Safe Bull (Bear) Call

37. The Five Basic Lines and Their Uses/Functions
Fig. 2 illustrates a typical bottoming-out pattern, with the price starting to rise sharply after hitting the second bottom
(C) without falling below the previous low (A). (The horizontal line drawn from the first bottom is called “Border line”
in the Ichimoku terminology.)
(5) Typical Bottoming-out (or Top-forming) Pattern

38. The Five Basic Lines and Their Uses/Functions
(5) Typical Bottoming-out (or Top-forming) Pattern
● The second bottom (C) is formed within 26 days of the first bottom (A).
● Within several days of the second bottom (C) forming, the Conversion line crosses above the Base line, the
Lagging span crosses above the current price (of 26 days ago), and the price crosses above the Cloud.
● After the price crosses above the Cloud, the price starts rising at an accelerated rate. The price may correct
downward, but it gets supported by the Cloud and resumes the rally within nine days.
● It is ideal if a breakaway gap develops after the price hits the second bottom (C) and even better if consecutive
gaps appear.
● Ideally, the price does not fall below the Base line.
The reverse applies in the case of a top-forming pattern.

39. Bollinger Bands
Bollinger Bands consist of a center line and two price channels (bands) above and below it. The center line is an
exponential moving average; the price channels are the standard deviations of the stock being studied. The bands will
expand and contract as the price action of an issue becomes volatile (expansion) or becomes bound into a tight trading
pattern (contraction).
Bollinger Bands Calculation:
• Upper Band = Middle band + 2 standard deviations
• Middle Band = 20 period moving average
(most charting packages use the simple moving average)
• Lower Band = Middle band - 2 standard deviations

40. The Bollinger Bounce
One thing you should know about Bollinger Bands is that price tends to return to the middle of the bands. That is the
whole idea behind the Bollinger bounce. If this is the case, then by looking at the chart below, we can determine that the
price will go down.
As you can see, the price settled back down towards the middle area of the bands.
This is a classic Bollinger bounce. The reason these bounces occur is because
Bollinger Bands act like mini support and resistance levels. The longer the time
frame you are in, the stronger these bands are. Many investors trading Bollinger
bands have developed systems that thrive on these bounces, and this strategy is
best used when the market is ranging and there is no clear trend.

41. Bollinger Band Squeeze
The Bollinger Band Squeeze occurs when volatility falls to low levels and the Bollinger Bands narrow. According to John
Bollinger, periods of low volatility are often followed by periods of high volatility. Therefore, a volatility contraction or
narrowing of the bands can foreshadow a significant advance or decline. Once the squeeze play is on, a subsequent
band break signals the start of a new move. A new advance starts with a squeeze and subsequent break above the
upper band. A new decline starts with a squeeze and subsequent break below the lower band.

42. Riding the Bands
The single biggest mistake that many bollinger band novices' make is that they sell the asset when the price touches the
upper band or conversely buy when it touches the lower band. Bollinger himself stated that a touch of the upper band or
lower band itself does not constitute a bollinger band signals of buy or sell. Using other technical indicators and chart
pattern recognition, you can actually trade in the direction of a stock that is closing above or below the upper and lower
band.
Take a look at this example and notice the tightening of the bollinger bands
right before the breakout and to my point above, a price penetration of the
bands cannot alone be considered a reason to short a stock or sell it. Notice
how the volume exploded on that breakout and the price began to trend
outside of the bands. These can be extremely profitable setups.
Conversely, the failure for the stock to continue to accelerate outside of the
bollinger bands indicates a weakening in strength of the stock. This would be
a good time to think about scaling out of a position or getting out entirely.
Additionally, we should look for higher highs and higher lows as we ride the
Bollinger bands.

43. Multi Time Frame Analysis
Multiple time-frame analysis involves monitoring the same currency pair across different frequencies.
Typically, using three different periods gives a broad enough reading on the market - using fewer than this
can result in a considerable loss of data, while using more typically provides redundant analysis. When
choosing the three time frequencies, a simple strategy can be to follow a "rule of four.“
This means that a medium-term period should first be determined and it should represent a standard as to
how long the average trade is held. From there, a shorter term time frame should be chosen and it should be
at least one-fourth the intermediate period (for example, a 15-minute chart for the short-term time frame
and 60-minute chart for the medium or intermediate time frame). Through the same calculation, the long-
term time frame should be at least four times greater than the intermediate one (so, keeping with the
previous example, the 240-minute, or four-hour, chart would round out the three time frequencies).
What is Multi Time Frame Analysis?

44. Long-Term Time Frame
By looking at the long-term time frame, the dominant trend is established. The largest time frame we
consider our main trend – this shows us the big picture of the pair we want to trade.
Positions should not be executed on this wide angled chart, but the trades that are taken should be in the
same direction as this frequency's trend is heading. This doesn't mean that trades can't be taken against the
larger trend, but that those that are will likely have a lower probability of success and the profit target
should be smaller than if it was heading in the direction of the overall trend.
What is Long-Term Time Frame

45. Medium-Term Time Frame
The next time frame is what we normally look at, and it signals to us the medium term buy or selling bias.
This is the most versatile of the three frequencies because a sense of both the short-term and longer-term
time frames can be obtained from this level.
In fact, this level should be the most frequently followed chart when planning a trade while the trade is on
and as the position nears either its profit target or stop loss.
What is Medium–Term Time Frame

46. Short – Term Time Frame
Finally, trades should be executed on the short-term time frame. As the smaller fluctuations in price action
become clearer, a trader is better able to pick an attractive entry for a position whose direction has already
been defined by the higher frequency charts.
The smallest time frame shows the short term trend and helps us find really good entry and exit points.
What is Short – Term Time Frame

47. Putting it all together
When all three time frames are combined to evaluate a currency pair, a trader will easily improve the odds of
success for a trade, regardless of the other rules applied for a strategy. This alone lowers risk as there is a
higher probability that price action will eventually continue on the longer trend.
Another clear benefit from incorporating multiple time frames into analysing trades is the ability to identify
support and resistance readings as well as strong entry and exit levels.

48. Example
John likes trading the EUR/USD pair the most, and feels most comfortable looking at the 1-hour chart. He thinks
that the 15-minute charts are too fast while the 4-hour take too long.
The first thing that John does is move up to check out the 4-hour chart of EUR/USD. This will help him determine
the overall trend. This signals to John that he should ONLY be looking for BUY signals.

49. Example
Now, he zooms back to her preferred time frame, the 1-hour, to help him spot an entry point. He also decides to
pop on the stochastic indicator.
Once he goes back down to the 1-hour chart, John sees that a doji candlestick has formed and the stochastic has
just crossed over out of oversold conditions!

50. Example
But John still isn’t quite sure – he wants to make sure he has a really good entry point, so he scales down to the
15-minute chart to help him find an even better entry and to give him more confirmation.
So now John is locking his eyes in on the 15-minute chart, and he sees that the trend line seems to be holding
pretty strongly. Not only that, but stochastic are showing oversold conditions on the 15-minute time frame as well.

51. Example
As it turns out, the uptrend continues, and EUR/USD continues to rise up the charts.
There is obviously a limit to how many time frames you can study. You don’t want a screen full of charts telling you
different things.
Use at least two, but not more than three time frames.

52. Conclusion
Using multiple time-frame analysis can drastically improve the odds of making a successful trade. It may be time for
many novice traders to revisit this method because it is a simple way to ensure that a position benefits from the
direction of the underlying trend.
Things to remember:
• You have to decide what the correct time frame is for YOU. This comes from trying different time frames out through
different market environments, recording your results, and analyzing those results to find what works for you.
• Once you’ve found your preferred time frame, go up to the next higher time frame. Then make a strategic decision to
go long or short based on the direction of the trend. Then return to your preferred time frame (or lower) to make
tactical decisions about where to enter and exit (place stop and profit target).

53. Conclusion
Adding the dimension of time to your analysis gives you an edge over the other tunnel vision forex traders who only
trade off on only one time frame.
Make it a habit to look at multiple time frames when trading.
Make sure you practice! You don’t want to get caught up in the heat of trading not knowing where the time frame
button is! Make sure you know how to shift quickly between them.
Choose a set of time frames that you are going to watch, and only concentrate on those time frames. Learn all you can
about how the market works during those time frames.
Don’t look at too many time frames, you’ll be overloaded with too much information and your brain will explode. And
you’ll end up with a messy desk since there will be blood splattered everywhere. Stick to two or three time frames. Any
more than that is overkill.

54. Correlation
What is Correlation?
In the forex market, currency correlation is one of the most important fundamental concepts.
Correlation means that two sets of data influence each other to a certain degree. The correlation coefficient ranges from -
1 to +1, sometimes expressed from -100 to 100.
In between -100 and 100 is different degrees of correlated relationship:
if the correlation is high (above 70) and positive then the currencies move in tandem.
if the correlation is high (above 70) and negative then the currencies move in opposite directions.
if the correlation is low (below 60) then the currencies don't move the same way.

55. Build your Portfolio
• GBPNZD
– NZDUSD -0.91
– EURNZD +0.89
Assume that I want to open 1 Lot
X = GBPNZD
X + (0.91x) + (0.89x)= 1 Lot
2.80x=1
X=0.3571
Since X = 0.3571
NZDUSD: 0.91x = 0.3249
EURNZD: 0.89x=0.3178
• GBPNZD = 0.35
• NZDUSD = 0.33
• EURNZD = 0.32

56. Conclusion
Currency correlation can hold advantages when trading, because observing one currency pair can give you an insight into
another, if they are correlated.
Currency correlation can be used for:
• Confirming trades and analysis
• Diversify risk
• Eliminate counterproductive trading

57. Feedback is Welcome!
By Michalis Markides, BSc, MSc
m.markides@oxmarkets.com
“The secret to being successful from
a trading perspective is to have an
indefatigable and an undying and
unquenchable thirst for information
and knowledge.” Paul Tudor Jones