Forex Trading Basics

Forex Trading Basics
FOREX TRADING BASICS
What You Need To Know Before Executing
Your First Trade
by
Coleen Powell
2

Table of contents
Page
Acknowledgments
Disclaimer
Introduction
Section 1: The Forex Market
The Forex market 16
What is Forex trading? 16
What affects Forex trading? 17
What are the best times to trade? 18
What are the best months to trade? 18
Who is a Forex Broker? 18
How do I succeed in trading? 18-21
Trading internationally 21
Section 2: Candlesticks, Pips and
Patterns
Some Forex Terms 23
A pip: what is it? 24
What are Japanese candlesticks? 25
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Page
Types of charts 25
The candlestick chart 26
A list of candlestick patterns 27-29
How to calculate pip value 30
How to determine position size 31
Leverage, Balance, Equity, Free
Margin, Margin Level & Margin
32-33
Support and Resistance 34
What are trend lines? 35
What is consolidation/breakout? 35
Reversal patterns 36
What are forex technical indicators? 37
Moving averages 38
There are many ways to utilizing the
moving average
39
MACD (Moving Average
Convergence Divergence)
40
RSI (Relative Strength Index) 41-42
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Page
Fibonacci Retracement and Extension 42-43
Types of orders 44-45
Section 3: Look! I'm trading!
Getting started with your broker 47
Demo first 48
Upon starting a live account 48
Copying trades 49
Grouping trades 49
Trading do's and dont's 50-57
Road map to success 58-59
An indicator-free trading strategy for
complete beginners
60-66
My personal favorite trading strategy
for the more seasoned trader
67-69
Section 4: The Forextrepreneur in me
Life as a Forex Entrepreneur 71-74
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Page
List of resources for your further
forex training development
75
List of brokers I recommend 76
About the author 77
6

Copyright © 2018, Coleen Powell
First electronic publication: February, 2018
First updated: May 2018
All rights reserved. No part of this publication
may be reproduced, distributed, or transmitted
in any form or by any means, including
photocopying, recording, or other electronic or
mechanical methods, without the prior written
permission of the publisher, except in the case
of brief quotations embodied in critical reviews
and certain other noncommercial uses
permitted by copyright law. No part of this book
may be scanned, uploaded, or distributed via
the Internet or any other means, electronic or
print, without the author’s permission.
This work was written from the writer's
personal experience and knowledge. Any
resemblance to any other work would be purely
coincidental.
7

“The goal of a successful trader is to make the
best trades. Money is secondary.” – Alexander
Elder
“Risk comes from not knowing what you’re
doing.” – Warren Buffett
“Luck is preparation meeting opportunity.” –
Oprah
“The biggest risk is not taking a risk. In a
world that’s changing really quickly, the only
strategy that is guaranteed to fail is not taking
risks.” – Mark Zuckerberg
“It is not the strongest or the most intelligent
who will survive but those who can best
manage change.” – Charles Darwin
8

Acknowledgments
My sincerest gratitude to everyone who
supported me on my Forex trading journey.
Thank you to my dear friend, Carol D.
Cameron, who initially introduced me to
network marketing. Because of her, I met
Dolphy Blackwell and Shankie D. Chin who in
turn introduced me to Paulet Lewis. It was my
friend, Paulet, who introduced me to the
fascinating world of forex years later, and along
with her brother, Richard, introduced me to
cryptocurrency trading. I will be forever
grateful to them both.
I owe great appreciation to Michael Webb,
for his always loyal and unending support.
Thanks also to my very wonderful students
who inspire me even more than I inspire them.
And special mention to Marcia, and her
husband Richard of ExcursionOchoRios.net for
helping me to see and realize new horizons and
accomplish much more for my trading and
coaching business.
It is great to know that there are still such
wonderful people in this world.
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Thank you also to my Facebook following
and all those who came to me showing an
interest in trading forex.
This first edition is dedicated to all of you, as
well as to all my readers.
10

Disclaimer
This book is not meant to be an official
expert trading source. It is simply based on my
own personal experience, and what I wished
someone would have told me when I first began
my Forex trading journey. Therefore, I will not
take responsibility for any claims of trading
losses as a result of your claiming to use this
book as an official trading source.
Trading is at best a risk.
All trades should be entered into only after
perceiving the right trading conditions with a
planned trading strategy, and preferably with
the assistance of an experienced trading mentor.
No-one should start live trading with actual
money without practicing on a demo account
for a minimum of four to six months.
I wish all traders, whether new or
experienced, the greatest of success based on
your individual goals.
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Introduction
Welcome to the world of currency trading!
When I began learning to trade Forex, it was
difficult to say the least. I had no mentor, and
information, although available, was scattered
across the internet. Some information was
absolutely necessary and eye-opening, others
created short-term success and were
unsustainable, while still others proved quite
ineffective when it came time to trade.
During my learning journey, I came across
persons who really wanted to learn how to
trade, but thought it either way too difficult and
for the highly intelligent, very intellectual type,
or not worth the time and effort. But, I believe
blessings from above can only come when we
open our hearts and minds to becoming a
cheerful sharer of our knowledge. It is this
belief that has led to me to meeting some of the
greatest people in the world and to extending
my coaching business.
I believe that anyone who can read, has the
patience and willingness to learn how to trade,
can do so with the right tools.
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Now, if I were to introduce the concept of
Forex Trading to individuals, I had much work
to do. So, aside from coaching individuals
and/or groups, and offering online courses, what
better way to have more people become aware
of trading than through a book? And that is how
the idea of this book was born.
Forex Trading is a vast topic and individuals
whom I met (who were working individuals
leading busy lives)were urgently seeking a
simple, easy to go to guide that could assist
them on their road to trading success.
Hence, you should consider this book as
merely a stepping stone or introduction to Forex
Currency Trading, and to point you in the right
direction for you to start your own successful
Forex trading journey. I have endeavored to
keep this first edition short and to the point.
Aside from the courses that we have available
through our website, there are many more
advanced resources, training websites and
videos that are at your disposal to assist you in
your continuing Forex trading education, a few
of which are outlined at the end of this book.
Happy reading and I hope you learn a lot
through this short book that will help widen
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your understanding of trading and assist you on
the road to trading success.
14

Section 1
The Forex Market
15

The Forex Market
Whenever you exchange one country's
currency for another country's currency, you are
engaging in the global Forex Market (otherwise
called the Foreign Currency Market).
In existence since 1976, as we know it today,
the Forex market is the most liquid market in
the world. It has an average daily turnover of
$5.3 trillion dollars, and operates in a
decentralized environment. It has no central
exchange, instead there are trading centers
located in various parts of the world including
New York, London, Tokyo, Hong Kong,
Singapore, Paris, Zurich, and Frankfurt.
The Forex market exists primarily because
businesses from different countries around the
globe need to trade with each other. Hence, the
important need to exchange currencies.
What is Forex Trading?
The skillful prediction of price action in the
Forex market. It's true that trading is the
exchange of currencies at a price set by the
major banks.
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However, for the average person learning to
trade on their own, they must realize that
trading is, in fact, a learned skill. The better and
more advanced your skill and understanding of
how to trade the Forex market, the more
successful you will be.
What affects Forex Trading?
Simply put, businesses, governments, banks,
corporations all carry on business, exchange
currencies and make decisions that affect the
forex markets. Banks, professional (and other)
traders all make decisions to buy or sell in the
market based on news events and other factors.
Buying and selling is really a matter of
psychology. When the buyers are in control, a
trade is said to be bullish or trending higher and
when sellers are in control, a trade is said to be
bearish or trending lower. When there are few
buyers or sellers in the market, then a choppy or
sideways markets takes place or extremely low
volatility. These are just some of the factors
that affects trading and the pricing that we see
on our trading charts. What we have to do as
individual traders is study the charts for the
story being told by our selected forex pairs.
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What are the best times to trade?
In my experience, the best trading days are
Tuesdays, Wednesdays, and Thursdays. The
best trading periods are usually between 3am
and noon EST while the London and New York
sessions are open and mostly overlapping.
What are the best months to trade?
How I wish I had known this as a new
trader! The months of the year to completely
avoid trading are: June, July, and especially
August.
Months you would do well to trade: From
September until the first two weeks in
December, then around the second week in
January until May.
Who is a Forex Broker?
Forex brokers are businesses that provide
access to Forex trading platforms for individual
currency traders. These traders use the online
trading platforms to buy or sell currencies.
How do I succeed in trading?
Ever heard of the quote, if you fail to plan, you
plan to fail? To be a successful trader does not
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only mean being able to catch a few pips, it
means to be able to correctly predict the
market's direction. To succeed in Forex trading,
you must do the following:
1. Educate yourself. Familiarize yourself
with the individual currencies and Forex
pairs you intend to trade. Look for their
back story from left to right. For
example, are you aware of their price
action, exhaustion points, support and
resistance zones, volatility, momentum,
and dominant trends? Do you know how
to effectively use pending orders?
Studying the market, requires extensive
reading. Is that something you are
willing to do? If so, then babypips.com,
and Investopedia are great places to
start. DailyFx.com is helpful with
current happenings and events affecting
the currencies. Also helpful are the wide
variety of training videos on
YouTube.com.
2. Design a personal plan, system of
trading, or set of rules, that you will
strictly adhere to. This must also take
into consideration your schedule as we
19

are all surrounded by an array of
distractions.
3. Please take your emotions out of your
trades. I think the biggest hurdle I had
to conquer when first learning to trade
was my emotions. It was paramount, in
fact, crucial for me to take my emotions
out of my trades, and it definitely was
not the easiest thing to do. Good news is
that you can learn to control, or better
yet, get over this with time. The Forex
market is impersonal, and does not care
about your thoughts or feelings. So,
determinedly adhere to your trading
plan, set your pending order(s) and stop
loss, and allow the market to do what it
does best, that is, fluctuate or swing
back and forth in waves until it hits your
take profit. Have confidence in your
chosen trading system and unless
something goes awry, let the market take
you out of your trades.
4. Lastly, but perhaps most importantly,
you must adopt the correct mindset.
Are you a decisively consistent positive
thinker? Are you always hoping for the
best against all odds? Are you persistent,
20

determined and passionate about
achieving your goals? Are you
emotionally stable? Do you think
outside of the box like an entrepreneur?
If your answer to all the above questions
are yes, then, welcome and
congratulations because you have won
half the battle and are well on your way
to becoming a successful Forex trader.
Note: This is also the time to realize that
Forex trading is not for everyone.
Trading internationally
Not all countries allow individuals to trade
Forex, and some brokers do not accept members
from some countries. So, you will need to be
aware of this when creating your Forex trading
account.
21

Section 2
Candlesticks,
Pips
&
Patterns
22

Some Forex Terms
Major currencies
The eight most traded currencies are: USD,
EUR, JPY, GBP, CHF, CAD, NZD, and AUD
Minor currencies
All other currencies are Forex minors
Cross currency
If neither currency in the pair is a USD, the pair
is called a cross currency (eg. AUD/NZD)
Base currency
The first currency in any currency pair
Quote currency
The second currency in any currency pair, for
example the JPY in USD/JPY.
Bid price
Shown on the left, this is the price at which the
specified pair is bought in the Forex Market. It
is the price at which the trader sells the base
currency.
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Ask price
Shown on the right, this is the price at which the
specified pair is sold in the Forex Market. It is
the price at which the trader buys the base
currency.
Bid-Ask Spread
This is the difference between the bid and ask
price
Quote convention
A specific format is used for expressing
exchange rates in the Forex market, namely,
Base currency/Quote currency, or Bid/Ask
price.
A Pip: What is it?
The smallest unit of price for a currency used as
the determining measurement for a value
change between two currencies. Also, the last
decimal place of a quotation is the pip.
Whereas most pairs have up to four (4) decimal
places, the Japanese Yen pairs have up to two
(2) decimal places. For example,
EUR/USD=1.8569, the '9' is the pip.
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What is a Pipette?
A fractional pip or one-tenth of a pip. Eg. .
00001 USD=1 pipette
What are Japanese candlesticks?
Images used to describe price action for a given
time period. These resemble a candle (hence
the the term, 'candlestick'). They can be hollow
or filled, with wicks or shadows attached. If the
body of the candle is hollow, it simply means
that the price closed higher than the open. If the
body (otherwise called real body) is filled or
black, it means that the price closed lower than
the open.
Types of charts
There are three main types of Forex charts used
by traders.
• Line chart
• Bar chart
• Candlestick chart
25

The Candlestick Chart
This most popular Forex chart shows the high,
low, opening and closing prices of a given time
period. The wicks or shadows of the candlestick
displays the high and low price of the day and
their comparison to the open and close prices.
Hence, the resulting shape of the candlestick.
Financial analysts use the candlesticks to
determine when to enter or exit a trade. The
technique was developed in the 1700s in Japan.
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A list of Candlestick Patterns
All candlestick patterns mentioned here can be
found at Investopedia.com with their
explanations and accompanying images.
Please read through these reversal patterns
prior to commencing trading.
(Note: Traders should use patterns in
conjunction with other patterns or technical
indicators).
• Bullish Belt Hold
• Bullish abandoned baby
• Bearish abandoned baby
• Dark Cloud Cover
• Upside Tasuki Gap
• Downside Tasuki Gap
• Bullish Homing Pigeon
• Evening Star
• Morning Star
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• Rising Three Methods
• Red Candlestick (otherwise called black
or closed candlestick)
• Bearish Harami
• Three Outside Up/Down
• Three Inside Up/Down
• Up/Down Gap Side-by-Side White
Lines
• Unique Three River
• Short Line Candle
• Advance Block
• On Neck Pattern
• Thrusting Pattern
• Three Stars in the South
• Hanging Man
28

• Matching Low
• Ladder Bottom
• Bullish Engulfing Pattern
• Counterattack
• Real Body
• Shooting Star
• Hammer
• Bearish Hanging Man
29

How to calculate pip value
Some believe that this is one of the hardest
topics to grasp when learning forex trading,
aside from learning how to use indicators.
A pip is a unit of measurement used to
calculate currency movement. In most pairs, the
pip is the fourth decimal place and the fifth
decimal place is a pipette or half of a pip.
(Example: EUR/USD 1.23456, 6 is the pipette).
However, in the Japanese Yen currency (JPY)
the pip falls in the second decimal place and the
pipette in the third. (Example: USD/JPY
109.254, 4 is the pipette).
The fixed pip amounts as related to USD
quote currency (eg. EUR/USD) are:
$10 (standard lot) = $100,000.00 worth of
currency
$1 (mini lot) = $10,000 worth
$0.10 (micro lot) = $1,000 worth
For USD as a base currency, divide the pip
value by the pair exchange rate to get the pip
value. If the pair includes the JPY, multiply the
result by 10.
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How to determine position size
The formula is: Pips at risk X Pip Value X
Lots traded = $ at risk. So, for example, your $
at risk is $30. Pips at risk is the number of pip
difference between your entry point and your
stop loss point or level. Say for example sake,
10 pips. Your Pip Value for example for a
standard lot is 10. Then, your lot traded should
be: $30/100 (10x10)= 0.30. So, you will need to
calculate your position size as well as set your
stop loss and entry point.
Note: Babypips offers a handy pip value
calculator as well as a position size calculator.
Please see links below:
https://www.babypips.com/tools/pip-value-
calculator
https://www.babypips.com/tools/position-size-
calculator
31

Leverage, Balance, Equity, Free Margin,
Margin Level & Margin
Leverage – Brokers offer leverage on all
trading accounts opened. It allows traders to
trade a larger amount than their actual account
balance. For example, if you have $1000 in your
account and your broker offers you 500:1
leverage then you are able to get leverage of 5
lots at $100,000 each or $500,000 in leverage.
Traders usually give you a choice to select your
preferred leverage from a list. So, once you
decide the leverage it will automatically kick in
for each trade.
Balance – The equity + the unrealized profit
and loss amount being actively traded.
Equity – The value of a trading account during
active trade. While a trade is open, the account
equity = Trade Margin + Free Margin (referred
to as equity on the MT4 platform). When there
are no trades open, equity = free margin or
amount of the account balance.
Free Margin – Equity-Margin, or funds in an
account that are available for trade.
32

Margin Level – Equity/Used Margin x 100.
Brokers use this to determine whether a trader
can take on additional trades or positions.
Margin – the money 'loaned' by the broker on a
trade. Also considered to be collateral or
leverage.
These concepts are particularly important when
trades are open. They are all wrapped together
or intertwined.
Profits and/or losses are unrealized until a trade
is closed. That is when they become realized as
they are added or subtracted from the account
balance.
When a trade is closed, the trader's actual equity
becomes known.
33

Support and resistance
Support and resistance is an accepted concept
whereby price moves between predetermined
price points, levels or zones. When price enters
these zones multiple times without breaking
through, it is said to have reached resistance
(high price point) or support (low price point).
For example, see diagram below showing price
movement in between two red trend lines. The
curvy red line is the moving average.
Diagram 2-001
What are trend lines?
Trend Lines are tools used in Forex for
analyzing price trends. A trend line is a straight
line connecting two or more price points or
levels and then extends into the future to act as a
line of support or resistance. Trend lines are
found on trading charts.
34

What is consolidation/breakout?
Consolidation is a period of price indecision
when the price generally goes in a sideways
direction instead of up or down.
A breakout is when price movement breaks
above a resistance level or below a level of
support.
35

Reversal Patterns
A reversal pattern is a recognizable change in
price structure that identifies a reversal or
correction in trend on a price chart.
For example, in an uptrend, a series of higher
highs and higher lows, reverses into a
downtrend by changing to a series of lower
highs and lower lows. The opposite is true in a
downtrend whereby a series of lower highs and
lower lows, reverses into an uptrend by
changing to a series of higher highs and higher
lows.
Reversals usually happen rather quickly, but
they can also occur over days or weeks of
trading. Intra-day reversals are usually caused
by news events.
By watching the candlestick movements on a
chart, traders can identify when a reversal is
occurring. The candlestick represents the
trading price range throughout the day, with the
top being its highest price and the bottom being
its lowest price.
36

What are Forex Technical Indicators?
Forex indicators are tools used on a candlestick
chart for analyzing price movement. Four main
types of indicators are: Moving average,
Relative Strength Index, Slow Stochastic and
MACD (Moving Average Convergence and
Divergence). Fibonacci Retracements are also
very popular indicators among professional
traders.
Below we discuss three commonly used
indicators. You are welcome to use these
strategies in your personal trading once you
fully understand them. Indicators are oftentimes
used in conjunction with each other for
maximum profit benefit. Some indicators as
those above-mentioned have been tried, tested
and proven. These are still used in line with
market sentiment or trading psychology.
37

Moving Averages
Moving averages "smooth out" price data by
creating a single flowing line. The line
represents the average price over a period of
time. The trader determines which moving
average he or she will use based on the his or
her own trading time frame. Popular choices
among traders are the 200-day, 100-day and 50-
day simple moving average.
There are many ways to utilize the moving
average:
1. By examining the angle of the moving
average. If it generally moves horizontally for
an extended amount of time, then the price is
not trending, but ranging. If it is angled up, an
uptrend is occurring. Moving averages do not
predict price movement, however, they do show
what the price is doing on average over a period
of time.
2. Price Crossovers are yet another way in
which to use moving averages. For example, by
plotting both a 200-day and 50-day moving
average on your candlestick chart, a buy signal
occurs whenever the 50-day crosses above the
200-day. However, a sell signal occurs when the
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50-day falls below the 200-day. Time frames
can be changed to suit your individual trading
time frame.
Note: When price crosses above a moving
average, it may be used as a buy signal, and
whenever price crosses below a moving
average, it may be used as a sell signal. This
method is likely to produce false signals since
price is much more volatile than the moving
average. Moving averages can also provide
support or resistance to the price level.
39

MACD (Moving Average Convergence
Divergence)
The MACD is:
• an oscillating indicator
• fluctuates above and below zero
• follows the trend
• a momentum indicator
MACD strategies include:
• looking at which side of zero the MACD
lines are on. Being above zero for a
sustained period of time means that the
trend is likely up (watch out for buy
signal) whereas being below zero for a
sustained period of time means that the
trend is likely down (watch out for sell
signal).
• While signal line crossovers provide
additional buy and sell signals, a MACD
has two lines, a fast line and a slow line.
A buy signal occurs when the fast line
crosses through and above the slow line.
40

A sell signal occurs when the fast line
crosses through and below the slow line.
RSI (Relative Strength Index)
The RSI is:
• an oscillator, but because its movement
is contained between zero and 100, it
provides some different information
from the MACD.
• You can interpret the RSI by viewing
the price as "overbought", and due for a
correction, when the indicator is above
70, and the price as oversold, and due
for a bounce when the indicator is below
30. In a strong uptrend, the price will
often reach 70 and beyond for sustained
periods, and downtrends can remain at
30 or below for a long time. Generally,
overbought and oversold levels can be
accurate, however, they may not provide
the best signals for trend traders.
A trader can choose to buy near oversold
conditions when the trend is up, and take short
trades near overbought conditions in a
downtrend.
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For example, in an uptrend, a buy signal occurs
when the RSI moves below 50 and then back
above it. What this means is a pullback in price
has happened, and the trader is buying when the
pullback seems to have ended (according to the
RSI reading) and hence the trend is resuming.
50 is used because the RSI does not typically
reach 30 in an uptrend unless there is a potential
reversal underway. A short-trade signal
happens when the trend is down and the RSI
moves above 50 and then back below it.
We do not recommend only using one indicator
by itself. Be sure to test out the indicators in
your demo and prior to entering a live market.
Fibonacci Retracement and Extension
A famous Italian mathematician named
Leonardo Fibonacci discovered the golden
mean. Fibonacci Retracement levels are: 0.236,
0.382, 0.500, 0.618, 0.764. Fibonacci
Extension levels are: 0, 0.382, 0.618, 1.000,
1.382, 1.618.
Traders use Fibonacci Retracement and
extension levels to predict resistance and
support levels or zones and to decide take profit.
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To measure the take profit for a bullish trend,
use the Fib tool on the chart and measure from
the highest high of a swing down to the lowest
point of the same swing. Your profit would be
equal to the wherever the next levels above the
100 would be, for example, 1.382 or 1.618 and
the opposite in a downtrend.
The Fib tool is to be used in conjunction with
other indicators to help the trader decide on the
most trade worthy and/or profitable trade. See
example below.
Diagram 2-002
43

Types of Orders
There are different ways to enter the Forex
Market or execute a trade. Here we will discuss
five (5) ways:
• Market Execution or Instant Order –
This type of order allows a trader to
enter an order into the market
immediately at the available price
offered by the broker.
• Buy Order – This type of order allows
the trader to enter a trade based on the
belief that the price is heading higher for
a sustained period of time, whether a
few hours, days or weeks
• Sell Order – This type of order allows
the trader to enter a trade based on the
belief that the price is heading lower for
a sustained period of time, whether a
few hours, days or weeks
• Buy Limit – This type of order allows
the trader to use predictability in the
trading process. Based on repetitive
price movement between two price
points (support and resistance), the
44

trader can predict that when the price
retraces to support, then price will head
higher toward resistance levels. So, the
buy limit is set to enter the market in the
support zone and the take profit is set in
the resistance zone.
• Sell Limit – This type of order allows
the trader to use predictability in the
trading process. Based on repetitive
price movement between two price
points (resistance and support), the
trader can predict that when the price
hits resistance, price will then head
down to the support zone. So, the sell
limit is set to enter the market in the
resistance zone and the take profit is set
in the support zone.
45

Section 3
Look! I'm trading!
46

Getting started with your broker
Before selecting a broker, it is best to do
your research. Not all brokers are created equal.
Therefore, you want to find out a broker's
business location, and preferably, whether they
are regulated.
Some unregulated brokers may be cheaper
and easier to help you get started on your
trading, but are deceptive. So take your time to
find a reputable broker such as Trader's Way.
After signing up with your broker, you will
need to download the Meta Trader 4 app onto
your trading device, such as your smart phone
or tablet. If you are using a computer, you may
download the trading software provided by your
broker or use their online web terminal to access
your chart.
You will receive an identification number
and password from your broker to login to your
account, as well as the brokers live trade and
demo platform numbers for the Meta trader 4
app.
47

Demo first
Starting your trading with a demo account
cannot be overemphasized. Opening and
practicing on a demo account is like doing your
practicals for a college course. The more you
practice, the more experience you get, then the
better and more skilled you become. For the
average new trader, frequent, consistent practice
for a minimum of four to six months is
necessary. Trading practice trains the trader's
perceptive skills, and with time he or she is able
to observe patterns in price action that
previously were unseen or undetectable.
Upon starting a live account
After many months of practice, and
consistent profitability (with an approximate
profit/loss ratio of 6:1 or higher) on your demo
account, then the more seasoned trader can now
embark on trading with actual money. The
initial amount to start with in your trading
account is based on you (how much of your
discretionary funds you are willing to risk), and
the rules of your Forex broker. Some brokers,
such as Trader's Way allows traders to start with
$10.
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Copying trades
Some websites allow you to shadow or copy
other successful traders. The aim of this
opportunity is not for you to bypass learning
how to trade the Forex market but instead to
increase your trading experience, and hopefully,
measure of success. There is usually a small
fee.
Grouping trades
This is not recommended for beginners.
There are brokers who allow traders to trade
more than one account at the same time as a
group. You will need to check with your
preferred broker to find out if they allow this
type of trading.
49

TRADING DO'S AND DONT'S
DO'S
• Always prepare for trades before
executing them.
• Keep abreast of market trends and
market direction for each currency pair
you are trading.
• Follow the story of the pair on the chart.
Look for patterns. Examine support and
resistance levels/zones for each selected
pair and notice how price moves
between these levels from left to right.
• Go to Finviz.com, then the Forex tab
and look for the strongest and weakest
currency to pair during your scheduled
trading session.
• Examine the chosen pair on the
candlestick chart. Look out for breakout
candles. Look out for price action
returning to hit the support or resistance
at least twice before placing your trade.
Add your preferred indicators if you
50

like. What is the pair's general trend? Is
it at a support or resistance zone or is it
in retracement or heading for an
extension? Are you unsure of it's next
move and then prefer for a proper trade
to clearly set up itself on the chart before
you enter? What is it's volatility or
momentum? What does your gut feeling
or intuition tell you? Build your
confidence.
• For up trends, look for higher highs and
higher lows. Trade bullish in an uptrend.
Wait for retracement at least twice
before entering trade.
• For downtrends, look for lower highs
and lower lows. Trade bearish in a
downtrend. Wait for retracement at least
twice after breakout candle. Trade
bearish after seeing clear reversal
followed by confirmation candle.
• Look to buy in oversold conditions, and
to sell in overbought conditions with the
help of the RSI indicator.
51

• Select a Forex pair with a low spread. A
higher spread means it will take longer
for you to achieve profit.
• How much money do wish to risk on a
trade? It should be less than but no more
than 1 per cent of your account balance.
For example, if your account balance is
$3000, do not risk more than $30.
• You will need to calculate your position
size and set your stop loss and entry
point.
• If using indicators, decide your take
profit after looking at your indicators
such as your Fib and trend lines,
MACD, and support/resistance levels.
• Trade with the trend. If the trend shows
bearish on the daily chart, examine the
H4 (four-hour) chart and enter trade
appropriately. Time it and enter in the
direction of the trend.
• In a downtrend, use your sell limit
and/or sell stop pending orders.
52

• In an uptrend, use your buy limit and/or
buy stop pending orders.
• Use the buy stop and sell stop for
breakouts and when anticipating news
events. Research prior to news events so
that you have an idea how the currency
will be affected. What type of event is
it? Will it cause low or high or no
volatility? Is the currency likely to
reverse in the opposite direction after
seemingly jumping in one direction? Pay
attention to news events!
• Use the buy limit and sell limit to enter
from retracement points if you discern a
pattern of the price movement moving
predictably between resistance and
support, especially on the H4 or Daily
chart, then that's a good time to use your
buy or sell limit order.
• When trading from reversal points, only
do so after noticing confirmation candle.
• Using meta trader 4 is great for on the
go purposes. If you work from a home
office, it may be advantageous to you to
53

have a monitor or multiple monitors that
may give a more close-up view of what
is happening with a particular currency
pair. You can also add indicators and
alerts as you see fit.
• Be disciplined and patient
• Create a personal trading system and
follow it strictly
• Keep a log of all your trades, reasons
entered, losses or profits gained
• When trading small accounts, it is okay
to take your profits in small increments
• Make weekly, quarterly, annual
projections
• Trade the higher time-frames (H4, daily,
weekly, monthly). Only use smaller time
frames such as the five minute as entry
point.
• Choose the best days and times of the
day to enter trades (eg. Tuesdays,
Wednesdays, Thursdays 4 am. - 9 am.
54

• Search for one (1) good trade per week
or per month. Wait only on good trades
or proper trade setups according to the
rules you set.
• Think of trading in terms of days, weeks
and months INSTEAD OF only minutes
and hours
• Keep in mind that the most profitable
and stress-free trades are done from the
higher time-frame charts. Professional
traders use higher time frames such as
the monthly chart.
• Trade during the months of September
to December and January to May
(excluding the major holiday periods)
• Slowly compound your rewards.
Trading is not about making money fast.
Same as with driving, speed kills your
trading account.
• Keep increasing your trading knowledge
for as long as you want to be a trader.
55

DONT'S
• Never enter a trade based on emotion or
while you are unprepared
• Do not try to catch every pip.
• Do not get into the habit of trading only
from smaller time-frames no matter how
tempting without checking your higher
time-frames first. You WILL suffer
losses. The reason for this is that smaller
time frames do not provide sufficient
information to make proper trading
decisions.
• Do NOT trade a choppy market or when
volatility is so low it is virtually a
straight line.
• Do NOT trade during the months of
June, July and August or during the
Christmas holidays.
• Never jump back into the market after
losing a trade. Stop trading for the
remainder of that day.
56

• Do not over-trade or jump in and out of
the market. It causes anxiety and creates
more and more losses. Trading higher
time-frames prevents this.
• Do not set your volume too high. The
higher the volume, the higher the risk of
losses. For example, if you have $300 in
your account, your volume or lot size
should not exceed 0.03. If you have
$3000 in your account, your lot size
should either be lower than or not
exceed 0.30.
• Do not forget to set your stop loss for
each trade. This helps to prevent your
account being wiped out should the trade
go against your predictions. You should
not lose more than 1% of your account
in any one trade.
57

Road map to Success
What's the real secret to success in trading?
It's hard to name just one thing. It is
definitely more of a combination of things that
contribute greatly to the success of a trader. But
if I were to be so bold as to name one thing it
would be being able to read the chart properly.
Why? There are thousands and thousands of
factors that affect price movement at any given
time. It is your skilled ability to read how the
chart is being affected from left to right that will
determine your long-term success. The more
skilled you get at reading the chart the higher
your success rate will be.
Also, try to be aware of what's happening with
the currencies you trade regularly. Plan your
trades. Plan under what circumstances you will
enter a trade. Search for patterns in price
movement. Increase your opportunities for
trading success by trading the strongest
currency and against the weakest. If you are a
long-term trader, patiently trade the higher time
frames such as the daily, weekly or monthly. If
you are a scalper or day trader, use the daily and
four hour chart religiously for support and
58

resistance zones and use the smaller time frames
for entry points along these zones.
It is important too to trade momentum ahead of
price. Momentum precedes price. Momentum is
also greater during the sessions when the
London and New York trading sessions overlap.
Momentum is also higher when the strongest
currency is paired with the weakest.
Lastly, have a set of rules that you use to do
your personal trades. Discipline is the most
important quality, perhaps skill, to have when
trading. Just as discipline makes you a better
driver on the road, so does discipline increase
your chances of trading success. Trading could
also be likened to fishing. Do your research
first so you have a better idea where to 'cast
your net'. Write down your personal trading
rules, your do's and don't s, and use them
religiously. For example, trading only when a
particular pattern is formed, and only entering
the market upon seeing a confirmation candle.
Write down your guidelines and use them as a
trading bible. You may surprise yourself on how
successful you become at trading.
59

An indicator-free trading strategy
for complete beginners
Note: This strategy is mostly based on using
support & resistance levels/zones, and reversal
patterns to trade. This strategy can be used for
both short-term trades as well as long-term
trades
Preparing for your trade
IMPORTANT! How well you prepare for a
trade determines your success rate or at least a
65% winning strategy. Proper preparation also
greatly reduces risk.
1. Start your trade preparation near the
beginning of the trading week, such as
on a Sunday or a Monday afternoon or
sometime before you start trading on a
Monday or Tuesday morning. Decide
whether you will be trading only events
or normal trades or both. Determine this
by looking at the week's Economic
calendar.
2. Set your trading schedule such as 5 am
to 9 am, determine your set volume such
0.01, determine your trading style and
60

trade set up. Stick religiously to your
choices.
3. Each morning before you begin trading,
go to finviz.com and go to the Forex tab.
Then, look for the strongest currency
and the weakest currency and trade that
pair.
4. Before entering the trade go the daily
and 4hour charts to determine where
your resistance and support levels or
zones are and where price action is.
5. When the trade comes in line with the
trade setup you are looking for enter
from the 5 minute chart. Be sure to
determine your take profit which should
be at the next level of support or
resistance depending whether the trade
is bearish or bullish. Also, be sure to set
up a stop loss of at least 10 to 15 pips.
The stop loss will ensure that, if
anything goes wrong, your account will
remain intact.
Note: Depending on the pair, best times to
trade are usually during the London and New
York sessions (best time period between 3 am -
61

2 pm EST). But trading opportunities can also
arise during the Asian session. Best days of the
week to trade are Tuesdays, Wednesdays, and
Thursdays.
6. If trading events, make a note of the
days and times that various events of
high importance will affect your chosen
currencies. You can do with the help of
the economic calendar on DailyFx.com.
7. You may also check DailyFx.com for
recently updated individual pair
resistance and support levels, pair trends
and volatility, popular market sentiment,
and analyst news and picks. (You can
compare the support and resistance
zones with your own analyses). This
gives you an idea of where the pair (or
its action) is in terms of price, its most
likely market direction, and overall
trend. The volatility helps you to
determine momentum. Be mindful that
low volatility is difficult to trade.
Personally, I prefer volatility to be
between 10 and 25 per cent. I have
found some pairs easier to trade than
others, such as the USD/JPY, I have also
62

found it helpful to read the analytical
articles (about the pairs I am interested
to trade) written by ForexLive currency
strategists and instructors, as well as
looking at the DailyFX Forex Economic
calendar for the upcoming week.
Using the demo to practice
Check the higher time-charts of the pair to see if
the trend aligns, for example, are the Monthly,
Weekly and Daily charts all trending up or in a
bullish direction or are they bearish? I
encourage you to go to Finviz.com and look for
the strongest and weakest currency, then pair
and trade that pair. Where is the pairs' price
action in terms of resistance and support zones,
and reversal points on these higher time-frames?
Are there any detectable patterns? Watch out for
breakout candles, wait for price action to return
to the previous resistance or support at least
twice before entering the trade from the smaller
time frames such as the five minute chart. Look
for consistency of price movement and a signal
that something is about to change. Is the 4hr
chart at a point of reversal, and confirmed to
also be moving in the direction of the general
market trend for that particular pair? If yes,
then it's now time to set up your demo trade.
63

Set up the trade on your demo account. To
execute your trade or pending order. Include, of
course, your volume (which you should keep
low, and this depends on the amount of money
in your account. Keeping your volume low
protects your account from heavy losses in the
event that a trade goes against you), your stop
loss and your take profit. You may simply set
your take profit at the next resistance level (in
uptrend) or support level (in downtrend). You
may use the Fibonacci tool in helping you to
decide where to set your take profit or you can
set it based on the nearest support or resistance
level on the chart you are using. Double-check
your reversal points to ensure that they are clear
and defined, and based on your support and
resistance zones.
Transitioning to a live trading account
Only trade on a live account after many months
of consistent profit on a demo account. This
will make things a lot easier on you and prevent
unnecessary losses. Learning to trade is like
learning to drive a car. You need tons of
practice because each time you go behind the
wheel you put your life and that of others at
risk. In trading, however, your money is at risk
if you don't learn how to trade correctly.
64

Exiting the trade
It is best to let the market take you out of the
trade by hitting your take profit. But since this is
not ideally always the case, you may exit the
trade as soon as you are comfortable with the
profits made. Then, do not re-enter the trade.
Fight the temptation. Relax from trading for the
rest of the day. Over-trading will allow your
emotions to take over your trading, and that is a
recipe for trading disaster. Never enter
unplanned trades and never be in a haste to
trade. It is better to watch and analyze the
market and wait for that one good trade for the
month or the week than getting anxious and
impatient which in turn leads to over-trading.
65

Extra trades
Additional trades can be used when setting up
the same trade. For example, when trading an
event, an extra trade can be set up with a higher
take profit in case the price action goes even
higher than expected. Keep a written record of
all your trades and the reasons you entered each
trade. This will reinforce your market analysis
skills.
Note: Doubling or tripling your trades,
otherwise called batching, is best left to very
advanced traders, especially since this practice
significantly increases the risk of losses or even
the risk of wiping out your account completely
if done incorrectly.
66

My personal favorite trading strategy
for the more seasoned trader
1. Read. Become aware of monetary and
other policies as well as bank decisions
affecting your selected currency. This
can be easily done by reading the latest
news on ForexLive and keeping abreast
of the economic calendar for each week.
Your goal is to understand the pair you
wish to trade. Each pair moves
differently as if having its own
personality. Understanding how your
pair moves and the story it is telling you
is crucial to your success.
2. Do your research and individual
currency analyses for the currency or
currencies you intend to trade.
3. I go to FinViz.com and then the Forex
menu to find the strongest and weakest
currencies to pair them for trading.
4. Follow the story of the chart from left to
right. Look for relevant signals or
patterns after price keeps hitting certain
price zones or levels repeatedly
(resistance or support). Use the higher
67

time frames such as the H4 and the
Daily chart as the resistance and support
zones on these charts are more
significant.
5. Some individuals only trade the weekly
or monthly chart. This requires great
discipline and patience. For this you
would check the full capacity level of a
pair by checking its height and depth
over the past several years, research
what is happening with the pair, check
support and resistance levels, then check
the chart at the beginning of the month
during the first week or ten days. Also,
check your trade at the end of the month.
6. Decide the amount of money you are
going to risk (less than or no more than
1% of your account value), your entry
point, number of risked pips (to
determine stop loss), pip value and lot to
be traded, and write them down. Decide
your take profit and write that down
also.
7. Wait for the confirmation candle, then
enter the market, preferably using a
pending order. If you are confident of
68

the direction in which it is headed (based
on your research and your gut feeling),
then go ahead and use either the buy or
sell order. If you see it retracing before
it heads in the favorable direction, then
you may use the appropriate buy or sell
limit order instead.
8. Be patient. Your trade may take from a
few minutes to a few days to play out in
your favor. Don't give up too quickly.
Allow the market to take you out,
hopefully profitably. If you lost a trade,
cut your losses and look for a more
profitable trade. You are aiming for a 65
to 75 per cent success rate. Not a 100%
success rate. Some failing trades are
inevitable. The more you learn to read
the charts and exercise discipline when
executing your trade, the higher your
success rate will be.
69

Section 4
The Forextrepreneur in me
70

Life as a Forex Entrepreneur
Trading Forex full-time requires working
smartly and skillfully. Fortunately, today's forex
entrepreneur can have more than one business,
or other additional employment, since the
flexibility of trading via one's smart device
allows one to trade easily and on the go.
However, keep in mind that the Forex
market is unpredictable and without emotion.
The market does not care what trades you
picked today. Therefore, your success rate will
increase significantly if you adjust your
approach to trading. You should never trade by
just looking at the chart and simply jumping in,
or try to recoup losses by constantly increasing
your volume. That would be gambling, and that
means even greater risk. Instead you should put
high priority on preparation and analysis.
Follow the story of the pair when reading the
chart. Stick religiously to your preset trading
style and setup. When you are satisfied with the
conclusions you have drawn and written down
your trading predictions with your set rules in
mind, then and only then, do you enter the trade.
There are times when trading might require
odd or late hours of work, watching the charts,
71

and an extra amount of patience. Some people
find larger or multiple monitors helpful, and
even color-coding candlestick charts. Whatever
works for you.
You might have to trade despite distractions,
and it can only help to schedule your time, if
possible, around important activities. Even
harder is that some persons close to you may
not take your trading seriously, and think you
are embarking on a hobby or simply wasting
your time and energy.
You have to teach persons by example.
When persons realize that you are taking this
seriously, and when they realize that you are
earning real money so that you will be able to
pay the bills and more, they will take your
choice of being a trader a lot more seriously.
Forex Trading is a serious skill with a steep
learning curve. A great advantage of trading,
however, is that you can trade from anywhere.
You are not tied down to one location. All you
need is an internet connection and a smart
device to execute your trades.
Be sure to treat trading as a business. Set
your monthly, quarterly and yearly projections,
72

and when withdrawing money set a budget. You
do not want to withdraw so much that you hurt
your account and have to rebuild from scratch.
Some individuals think mistakenly that being
a Forex Trader means fast money, and living the
hype life, but that is simply not true. The reality
is it that it may take weeks, months, even years
for you to make serious money with Forex
Trading, but the more disciplined a trader you
become, then the greater your rewards will be.
Your aim should be to get consistent small
rewards which will slowly add up or compound
over time.
So focus on becoming a skilled and
disciplined trader who takes the time to prepare
carefully before each trade. This only happens
with practice, time, experience and patience.
Pack along a great deal of patience because
there are times when you may have to wait on
price action for days even weeks before it gets
to the point where you want it to be in order for
you to enter the trade.
If you eventually get rich from trading, that's
great. But, keep in mind that with greater wealth
comes greater responsibility, and our focus
73

should always be on what we can do to help
others.
I wish you great success (and lots of fun) in
your trading!
74

List of Resources
for your further Forex training
development
Xtreme Trader (on Facebook & YouTube)
Finviz.com
Babypips.com
ForexLive.com
Investopedia.com
DailyFx.com
Mataf.net
Tradeciety.com
YouTube.com
75

List of brokers I have used
Trader's Way
Axitrader
76

About the Author
Jamaican-born writer, Coleen Powell, enjoys
trading Forex and is presently a Forex Trading
Coach.
Coleen is also the Founder of Saffrion Webb
books and ReadimadeNation.
Please feel free to join her Facebook group
@earnonlineja where she posts about how to
earn online, trading forex, and related subjects.
****
Thank you for taking the time to read "Forex
Trading Basics-What You Need To Know Before
Executing Your First Trade." If you enjoyed it,
please consider telling your friends or posting a
short review. Word of mouth is an author's best
friend and greatly appreciated. You would also be
helping others to learn the right approach to trading
as well. Thank you. - Coleen Powell
77

Have feedback or suggestions and would like to
contact the author?
Please send an email to
earnonlineja@gmail.com
or visit our website at
https://learnforexja.weebly.com
78

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