The Forex LifestyleForex made Simple

for Beginners-- Edition 2.0 --

Michael R. PilinskiCopyright © 2012

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No part of this document may be copied or republishedwithout the prior written permission of the Author.

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Contact the author: Michael R. Pilinski for more information

Table of ContentsIntroduction: Foreign Exchange Currency TradingA Raging River of Money Spinning ElectronicallyAround the World

What is Forex Currency Trading? Who are the Main Players in Forex? Why Should You Get Involved in Forex? Forex is High Tech All the Way Advantages of Forex vs. the Stock Market If you like Action, You're gonna Love Forex!

Chap 1: The Mechanics of the Forex MarketplaceHow is Money Actually Made Swapping Currencies?

Pips Explained Leverage Explained Pip Value Explained Lot Size Explained Reading A Forex Quote and Understanding Spreads Best Trading Times of the Forex Week

Chap 2: Technical Analysis in ForexDeciding When to Buy and Sell Currency Pairs

Market Price Contains All the Information Charting and Analyzing Currency Movements Trendlines, Vertical, Horizontal and Channel Lines Fibonacci Pattern Tool Average True Range (ATR) Moving Averages Average Directional Indicator (ADX)

One Final ADX Trick Color My World of Currency

Chap 3: Fundamental Analysis in ForexEconomic Factors That Effect Currency Prices

Forex-Relevant News Services Playing the News

Chap 4: Managing Risk, Fear and GreedLearning How to be a Prosperous Trader

Two Stage Trading for Maximum Fear And Greed Control A Crash Refresher Course Keep Forex Trading Fun by Mentally Re-Framing Your Losses Some Closing Thoughts

MetaTrader Video Training Tutorials

Disclaimer

FOREX -- an acronym FOReign EXchange -- is the world's all-encompassing, virtualcurrency exchange marketplace, with a volume of cash moved through it's electronicnetwork valued at approximately four trillion dollars every day. Yes, I said trillion witha "T". That would be four thousand Billion dollars per day, and if that sounds big, that'sbecause it is... VERY big. This number represents thirty times the transfer value of theNASDAQ and New York Stock Exchanges put together -- which combine for piddling$25-35 billion dollars being swished around daily.

What is Forex and where did this thing come from? When I first heard the term Forexback in February of 2010, I thought it was some new phone like the android that wouldsoon be in everyone's pocket. That's how clueless I was. How amazing it was for me todiscover the rich and thrilling universe of Foreign Exchange Currency trading. I hadno idea of the depth of analysis and computerized tools that were now readily availableto people. Hell, I didn't even know it was possible for ordinary people to even getinvolved in this market -- I thought it was something that only banks could do.

It turns out I used to be right, but not any more. Up until recently (the last 10 years) itreally hasn't been possible for small time investors -- guys like you and me -- to play theForex market at all. Forex was mainly an electronic underground of cash accessibleonly to banks, major financial institutions, governments and a very few rich traders withmillions of dollars of cash to toss around. Originally the whole concept of trading in theForeign Exchange market was only intended for huge companies and banks, but with therise of globalization and the inter-connectivity of the net, trading has become accessibleto anyone with a home computer, and on a purely speculative basis.

So move over Bank of America, do-it-yourself at-home foreign exchange currencytrading for retail cowboys like us has landed squarely in the lap of the still infant (andhighly colic!) 21st century... with the sound of a sack of gold coins thumping down onCaesar's dinner table!

What is Forex Currency Trading?

The foreign exchange market is the mechanism by which all the world's currencies are

valued relative to one another, and then exchanged in a way that adjusts for disparitiesin that value by requiring more of one currency to be swapped for another. Thiscorrection between currency values is expressed as the exchange rate, which denoteshow much of the second currency in a pair is required to buy one base unit of the first.

For example, regarding the EUR/USD (Euro vs. US dollar) currency pair, the rate mightbe shown on a price chart as 1.2495. This means it takes $1.24 and 95/100ths dollar tobuy a single Euro -- meaning that the Euro is precisely this much more valuable on theworld market. Prices are calculated to a precision of 4 places beyond the decimal point,and these prices change from moment-to-moment depending on the level of tradingvolume worldwide.

The exchange rate itself is determined through the interaction of market forces dealingwith supply and demand, plus the general economic strength of one nation vs. the otheras measured by such factors as gross domestic product, national debt load (or surplus),economic growth, trade (im)balance, unemployment, use of natural resources, primeinterest rate and political stability -- to name just a few. In addition, there are periodicreports which come out from all these various different countries which affect themovement, and thus the exchange rates, of their currencies.

The Forex market does not rely on the special performance of any one particularcurrency or economy, although the US Dollar does hold a pivotal role and appears inmany pairs because it is the world's "reserve currency", meaning that it is commonlyused in pricing commodities such as oil and food products. A person can earn money byeither buying or selling a particular currency. Fundamental-style trading entails buyingor selling in response to long or short term economic or political events -- whiletechnical trading is based on a trader's analysis of historical price movement and hisprojection of future moves. The value of any foreign currency, in its' simplestexplanation, is a reflection of a country's economy with respect to other majoreconomies... in the LONG term, and by supply and demand imbalances in the SHORTterm.

Trading Forex is quickly becoming an integral and even critical part of many people’scurrent financial picture, especially when it's becoming increasingly more difficult tomake a living out there in the real world. Traders seek to create profits by speculatingon whether a currency will rise or fall in value in comparison to another currency. Atrader will buy a currency which he anticipates will gain in value, or sell the currencywhich he thinks will lose value in the near term relative to another currency. Thisthrilling, sometimes maddening, always fascinating widespread practice of 'retailtrading' has enabled some of the most savvy among us to make a small fortune right from

their home computers.

At 2 p.m. EST each Sunday, trading begins as markets open for the week in Wellington,New Zealand... followed by Sydney and Singapore. At 7 p.m. EST the Tokyo marketopens, followed by London at 2 a.m. and finally New York at 8 a.m. This overlappingmovement of currency trading among market centers allows traders to react to newsimmediately and also provides the flexibility of determining trading schedules. Ifimportant overseas news occurs while the U.S. currency futures markets are closed forinstance, the next day’s opening could be a wild ride -- and this is exactly the type ofactivity which the short term (intraday) retail Forex speculator attempts to seize uponand exploit for profit.

Who are the Main Players in Forex?

The day to day business of banks around the world facilitate 90 percent of the tradingaction in the Forex market. Forex trading itself is conducted over an electronic“interbank” computer network that is surprisingly not regulated by any central exchangelike the stock or commodity markets. That's because currencies aren't securities (i.e.,tangible properties in and of themselves) but just cash running through an exchangenetwork. Their prices will fluctuate against one another based upon supply and demandfactors as banks and governments move various different currencies back and forth inthe course of their normal activities. They are not necessarily trying to manipulate theprice with such actions, but this is of course EXACTLY what happens as a result oflarge enough (millions, billions) of units of currency being swapped.

It is within these price fluctuations that the opportunity for profit is created. And, aswith any commodity, price movement is what creates all the money-making possibility.Since the instantaneous swapping of money around the world creates second-by-secondchanges in the available global SUPPLY of one currency vs. another, their prices areconstantly changing relative to one another to reflect these supply variations. Demand(trading volume) also adds to this volatility. Here are three of the most influential forcesmoving the marketplace:

Typical FOREX Investment Trading Floor

CENTRAL BANKS -- Big national banks like the US Federal Reserve play animportant role in the workings of the Forex market. They control the supply of a nation'smoney, and will often attempt to influence factors like inflation by manipulating interestrates, etc. They have desired target rates for their own currencies, and are responsiblefor stabilizing the Forex market through the use of foreign exchange reserves. Theirintervention in the market can be enough to stabilize a currency if it's price is getting outof control, for instance. Exchange rates are not just simple numbers to be taken lightly:they are very important to exporters and international traders for establishing tradebalances between countries, and for people holding foreign investments and property.

INVESTMENT FIRMS -- Financial companies who manage very large accounts onbehalf of their clients, such as endowments and pension funds, commonly make use ofthe Forex market to facilitate several types of transactions. For example, an investmentmanager with an international portfolio might need to buy or sell foreign currencies inorder to pay for foreign securities, etc. This manipulation if large enough can causemovements and even trends in the priceline.

SPECULATORS -- This would be guys like me and you... individuals who buy andsell currencies for profit by exploiting fluctuations in their prices -- as opposed toinvesting in the usual sort of investment instruments like stocks, bonds or optioncontracts. Speculators perform the important role of accepting a floating currency'sprice risk from individuals and businesses who do not wish to bear it.

For instance, a US-based business sells a $1,000,000 piece of equipment to a Canadian

mining company, who agree to pay 1 million Canadian dollars for it. The manufacturingcompany's profit margin on such a heavy machine might be 10%, or $100,000. Theydeliver the equipment and expect payment within 90 days. If, however, the value ofCanadian money falls 10% relative to US money during the course of the 90 days beforepayment is secured, this would wipe out all their profit margin!

To protect itself from this happening, the manufacturing company will SELL enough ofthe USD/CAD pair (they will sell Canadian dollars for US dollars) to cover their$100,000 profit margin. In other words if the CAD falls in value before they get paid forthe job they will make enough profit on this trade to cover and offset the lost 10% (orwhatever amount by which it's lost value during the 90 day interim). This is calledhedging and is very common in the world of international trading and manufacturing. Itis one of the major reasons why the Forex market even exists in the first place -- tofacilitate just this sort of hedging activity, which acts as an insurance policy to protectprofits from fluctuations in currency prices. We'll learn more about all this later in thebook.

Why Should You Get Involved in Forex?

For me the idea of being able to enter into an investment vehicle without having to slapdown $5,000 (or even much more) just to get on the playing field, was the instantattraction of currency trading. Try opening a "mini" $250 trading account for stocks orcommodity trading and you'll get laughed off the phone. These types of equities arecontrolled by the rules of the exchanges and can generally only be purchased inminimum lots of 100 shares or so. This means that even a small $10 stock purchaserequires a $1000 opening buy-in for one lot -- and probably with little or no leveragebeing offered. (Especially to small players that are viewed as more risky unknowns forthe brokerage.)

Forex brokers, on the other hand, allow tremendous leverage for even small mini-players who are just starting out, to help them learn the ropes until they can fullyparticipate in bigger money plays. Typical leverage is still as much as 50 to 1, evenafter the new US financial reforms of 2010 were implemented in October. Andremember that you can open an account with as little as a few hundred dollars (micro-accounts) and practice trading with just a small amount of money at risk. Then as you getbetter and build up some winnings you can begin to increase your trading numbers. Thisis an awesome advantage for those of us who can't bring a big wad to cash to table tostart off with!

In fact, you can actually practice trading Forex at almost any broker of your choice with

a 2-3 month demo account and trade with virtual "play" money. So anyone with even theslightest interest in investigating currency trading can now do so without spending adime for a full 90 days (the typical trial period for demo accounts).

You can GROW into becoming a skilled Forex trader rather than having to plungeinto it with your life savings!

So comon' and dip your toe into the torrent of currencies out there, and see if it's foryou! ;-)

Forex is High Tech All the Way

And by that I'm talking about the sophisticated software tools that are now available toany trader for virtually no cost at all.

Long gone are the stone-aged days of traders plotting prices with a pencil, ruler and asheet of graph paper. Nor are we talking about the old, relatively low-tech Forex of2002 or '03 when access to the global currency network was just becoming available tothe individual home trader. Now we have algorithms crunching out massive amounts ofdata in real time and generating highly processed data, which can be tapped into withany home computer or mobile device.

One of the most common and popular trading platforms is the MetaTrader 4 (or thenewer 5.0) application, which is open source and free. When you sign up for a typicaldemo account, you'll download a copy of MT4 that is all set to hook into thatbrokerage's data stream so you can watch the currencies move around in real time. Andof course you can open trades and get a feel for how it works no risk whatsoever, youjust input your username and password to configure the app and you're all set to begintrading.

MetaTrader 4 ::: Most popular FREE trading software

I should tell you that not all brokers use MetaTrader, some have their own proprietarysoftware platforms and this fact will be one of your major considerations in choosing abroker.

One of the truly incredible facets of the MT4 app is the ability for anyone with sometrading knowledge and a little programming skill to create software routines calledExpert Advisors -- which automate the trading process to various extents and removemuch of the technical analysis AND emotional burdens from the trader. These EA's, asthey are known, are plug-ins for the core MT4 app that work in the same way thatbrowser plugins for Firefox or Internet Explorer, (or Wordpress plugins for all youbloggers out there) expand the functionality of the original baseline application. They doso in a thousand-and-one creative new ways that could not have been anticipated by theoriginal software designers. This allows for endless upgrades in the way in whichtraders can analyze the market with greater and greater ease and precision.

Many EA's operate with particular currency pairs (which we will discuss soon) --applying precise analytical algorithms and money management frameworks to theincoming data streams. Then they either execute automated trades (opening or closingpositions automatically), or present trade setups for the trader to evaluate and act uponmanually, if he or she so chooses. You can set up any "robot" to work at whatever levelof trust that you prefer.

Again, you'll find the world of Forex to be an endlessly fascinating hobby as well as agreat new way to make money for yourself... even if you're just starting out as a "littleguy".

MetaTrader can be a bit overwhelming when you first begin playing around with it, ithas a fair amount of hidden functions that are not always obvious. I have an excellent21-part video training series that will get you schooled-up quickly and accurately withall the in's-and-out's of the MetaTrader app called The MetaTrader 4 Quick MasteryVideo Training Series. Give it a look, it will get you right up to speed on this powerfultrading software fast.

Advantages of Forex vs. the Stock Market

Basically in Forex you can begin trading with no real money at risk in a demo account...start small with a mini-account, literally playing for 'nickle and dimes' as you learn, thengraduate to a larger account and trade for higher stakes. And again, you set the size andthe pace of all this activity on your own since all the trading is done through softwarescreens. There's no actual broker to call and yell "buy!... no, sell!" into the phone. Ofcourse there is always a phone number where you can call for support or to make abackup trading order in the event you lose your internet access for some reason(computer crash, storm blackouts, etc.) You can't really start small in the stock marketbecause lot sizes are both fixed and larger and there isn't remotely enough leverageavailable, especially for the novice trader. But anyway...

As if you needed any more reasons to avoid the wild and crazy Dow, here's a few more:

Outstanding Liquidity

Forex is a computerized network that can handle a very large volume of transactions,representing nearly 4 trillion dollars a day on average, as noted earlier. This means thatbuyers and sellers are almost instantly available when you want to open or close atrade. Any stock market trader can give you nightmare stories of not being able to get anorder filled at a price he wanted due to little or no action being available for theparticular stock or option he was looking to move. These requests are known as "fills".Well, fills usually occur within seconds on the Forex market, especially among themajor pairs.

Unbelievable Leverage

Unlike the stock and futures markets where leverages are relatively small (5:1 , 10:1...but only for the bigger players with lots of equity to collateralize), Forex tradingroutinely allows for much higher leverages: as large as 50:1 max after the regulatorychanges of 2010. These new rules apply to US-based brokers only -- many offshore

brokers still offer 50:1+, but these are off limits to US-based traders now anyway asthose same rules require us to stick with domestic brokerages. These new rules willlikely remain in force for at least a decade I would imagine, barring some economicdisaster that might cause Congress to go back in and make still more legislative changesto further control the financial markets.

Regardless, that's a lot of borrowing power. This is made possible because therelatively small daily movements of currency prices (a 1% daily move would beconsidered enormous, whereas stock prices can easily change 15-20% in a day undervolatile circumstances) make it safe for the broker to lend the trader a large block ofcash so that his pip value makes it worthwhile to trade. I'll explain how all the mathworks in a moment to make this clearer. Just know that the high leverage in Forextrading provides an entry point into the market for the small trader that justdoesn't exist in the stock, commodity and to a lesser extent the futures markets.

Of course, leverage can cut both ways and wipe you out as fast as it makes you a fortuneif you are reckless and don't manage your risk appropriately. It's this leveraged potentialthat creates both the higher risk in Forex and the ability to make a large amount of moneystarting with a small amount of seed capital. Make sure you are clear on this concept.

24/7 Action

The Forex market is operational around the clock for five days a week. It effectivelycloses from about 3PM EST on Friday and re-opens at 5PM Sunday at the start of thenew trading week (which is Monday morning in Sidney and Tokyo). This timeframegenerally follows the schedule of the world's banking industry. You can play with yourForex account early in the morning or in the middle of the night. Somewhere on Earththe banks are humming along!

Simplified Trading Choices

There are approximately 4,500 stocks listed on the New York Stock exchange. Another3,500 are listed on the NASDAQ. Which one of these 8000 possible companies willyou trade? Ugh. In currency trading the majority of the market trades the 4-6 major pairs.Aren't four pairs much easier to keep an eye on than thousands of stocks?

No Standard Commissions

Forex brokers earn their money by setting spreads between the BID and ASK priceswhich they buy and sell the various currencies at. I'll explain all this in a moment, butbriefly it works like this: when you open a trade with a BUY order, you must purchase

the currency at what is known as the ASK price. When you eventually close this tradeyou will then sell back into the market at the BID price.

To clarify, you can buy a currency at the market ASK price (you must "give themwhat they're asking"), or sell it at the BID price (the highest "bid" the market offers).This means that whenever you open a trade you are automatically down by the spread --and must recover this amount to reach breakeven. From that point on it's all profit.

No Inside-Trading Cheaters

Forex trading is considered to be the perfect system of competition since all players arepresented with an equal and level playing field. Fundamental information about anation's economic policies and the scheduled release of economic news that affectscurrency prices is all public knowledge and completely accessible to every trader onthe planet who cares to keep tabs on it, large or small. This means that nobody can cheatby possessing "insider information" of any sort. There's no such thing in Forex.

In addition, the fact that financial decisions within banks and governments are usuallykept private until being executed with little or no prior warning makes it impossible toknow WHEN these price-effecting events will actually occur. We can know when theyare LIKELY to occur -- but can never know exactly when, for instance, a banker inSidney is about to dump 5 million Yen on the market or a government official in Zurichhas instructed his financial minister to buy up 2 billion Euros that afternoon. The privatenature of money creates permanent uncertainty about the movement of prices that cannever be completely eliminated, and therefore affects all players in the market equally.The trick is to analyze the market for signals that improve your odds of knowing what'sabout to happen next -- but you can never be 100% certain. If that were the case themarket would collapse because it's essentially a zero sum game requiring a loser forevery winner.

* * *A massive torrent of foreign currencies moves along a vast electronic global network inthe blink of an eye. It's this speed that makes the Forex market so completely unlike thesnail-like trading pace of buying and hold stock positions for months and years, orsetting up elaborate "iron condors" and calendar spreads in the futures exchanges...which are still plays that take anywhere from a few weeks to a couple months to unfold.

Not so in Forex, in this market MINUTES matter. Sometimes even seconds dependingon how tight you're playing a scalp. A 'long position' trade in Forex is one in which thetrader holds his currency overnight before closing the next day. This is known as'rollover' and there's an interest cost (or gain) involved, but most retail speculatorsnever keep a trade open that long. This is a market that can move fast when it's trendingand is perfect for anyone who's idea of investing is more akin to a rapid fire video gamerather than buying stocks and stuffing them in a safe deposit box like Aunt Betty.

If you like Action, You're gonna Love Forex!

No matter what your trading style the important thing to remember is this: that ragingriver of cash flying around the globe has no single owner -- it is just a mindless,uncaring torrent. The Forex market is an expression of the decisions and the actions ofthousands and millions of individuals all going about the business of global commerce...doing so on an individual case-by-case basis and for their own self-interested reasons.From companies hedging to protect export profits, banks and individuals speculating tomake money, governments managing their economies, mega-wealthy people like sheiksand oil barons moving money through their Swiss bank accounts, and even large drugcartels and criminals laundering their ill-gained holdings... it's all just about peopledoing things with money, 24/7.

And as a free individual with an internet connection you can now stick your nose intothis maelstrom for the first time ever in history and chip a little piece out of it foryourself. Free money? Only in the sense that's it's hanging their ripe for the picking --butyou have to be both smart and sane about how you approach it without getting drowned.

The 20th century brought us aviation, mass-produced technology, the atom bomb, radio-TV-the internet and a man on the moon. In the sense that it can be so potentially life-altering for the ordinary common man, this to me is the first truly unique innovation ofthe 21st Century.

Now let's go see how it works.

Okay let's back up a little and start from the beginning. How is money actually made inForex? It's pretty cool really...

What is traded on the foreign exchange market of course is currency itself ... Dollars,Euros, Yen, Swiss Francs, Pesos, Pound Sterling and dozens of other minor currenciesfrom around the world. These are moved around by large banks, investment houses andgovernments in the course of facilitating international trade. For instance, if Honda isbuilding some of it's cars in the USA somewhere, you can be sure that the employees donot want to be paid in Yen come Friday afternoon. They want their salaries in dollars,but since Honda is a Japanese company based in Japan that deals with Yen.

So to make their payrolls in the US they have to change a quantity of Yen into dollars,and if this movement entails a large enough sum of cash (millions) it will cause theprice differential between the two currencies to change slightly, and that creates anopportunity for speculators to make money. This is the typical sort of routine transactionthat goes on in the course of doing international trade involving thousands of companiesall over the world, and this swapping action causes the prices to change literally fromsecond to second.

Gold and silver are usually offered as trading options by many brokerages. In fact, it'seasy to understand how trading currencies works by considering the simple act ofbuying gold. When you buy gold you exchange an amount of currency for a weight ofgold. Why do you so this? What do you want to see happen? You hope that while youare holding it the gold increases in value so that when you sell it back to the market(close the trade) you get back the money than you paid for it PLUS SOMETHINGMORE. Now just replace gold with a currency and you have the essence of a Forextrade (a BUY trade, that is.) You can also make money by selling a currency as well asbuying it, hoping that it's value falls in the interim.

Here's how it works: when you buy and HOLD a currency you want the price to go UPso you can sell it back (close the trade) to the market for more than you paid for it(which could have been only minutes earlier). When you SELL a currency, you wantthat currency to LOSE value WHILE THE OTHER GUY HOLDS IT so that whenyou buy it back from the market (i.e., the act of closing the trade) you will pay less thanyou sold it for and keep the remainder as profit. This is essentially how the Forexcurrency exchange market creates an opportunity to make money. It can happen withprices either going up or down, you just gotta guess right.

Yes, you could actually flip a coin to decide what to do since there are only twopossible choices to make on any trade, but we'd like to be a little more scientific thanthat in our approach to things!

Pips Explained

Before we go any further, let me explain what a PIP is if you don't already know. Simplystated, a pip is the smallest price increment that a currency pair can move in eitherdirection up or down. With the exception of the Japanese Yen, a single pip represents

the 4th decimal place of the price quoted for any given currency. For the US Dollar thiswould be the equivalent of 1/100 of a penny, or 1/10,000 of a dollar. As an example,if the Canadian dollar is quoted against the US dollar as $1.0673, the smallest incrementof movement there, the smallest pip, is represented by the "3". If the price went up to$1.0693 it would have increased by 20 pips. (This means the Canadian dollar wouldhave LOST value by the way, because it now takes 20 more pips of Canadian money tobuy one US dollar. See how it works?).

Currencies move so slightly against one another that even a penny is too coarse anincrement to use as a measurement, so we use pips instead which are 100 times smallerthan a penny.

One of the few places I can think of where you'll actually see pips being displayed inthe "real" world outside of Forex is in the price typically quoted for a gallon of gasolineat your local station. If regular gas is listed as $2.99 for instance, you'll always see thatlittle super-scripted "9" trailing the price, and you may've wondered what that is. Well,that represents the EXACT price of the gallon all the way down to the pip level, and inthe case of gas it's always 90 pips. So the price of a gallon of gas in this example isactually $2 dollars, 99 cents and 90 pips. Another way to look at it would be as beingten pips short of $3.

And that's really all there is to understanding the wonderful world of Forex pips!

NOTE: As mentioned a moment ago and to avoid any bewilderment once you beginlooking over Forex quotes, you'll see that the Japanese Yen is only shown to 2 decimal

places instead of the usual 4. The Yen as a currency unit is unique among the world'scurrencies in that it is more like our US penny than our dollar, and therefore is the onlypair that expresses pips to TWO decimal places instead of four. Using only 2 decimalplaces automatically corrects for this discrepancy in base unit size. (Imagine if thepenny were our base unit for quoting all prices: a hamburger and fries might cost you662 cents instead of $6.62, the way that we would normally quote it in dollars and afraction thereof to 2 decimal places.)

Currently the Yen is trading at 86.55, which means that it is more valuable than thedollar. If the Yen were to lose value against the dollar to the point where it cost exactly100 yen to buy a dollar, the two currencies would be at Par (equal) value.

One final note: Some brokers are now offering fractional pips, which means that alltheir prices are quoted to 5 decimal places instead of four. You could essentially setyour stop loss to be 11.6 pips from your opening price, for instance. Don't ask me whysuch precision is necessary, the extra math involved with this is already making my headhurt. I'll stick with a broker like my own, FXDD, who uses good old fashioned 4decimal places in their quotes.

Leverage Explained

It wasn't all that long ago that currency trading was out of the investment reach for mostindividuals of ordinary means. It was an exclusive VIP money club for banks, largefinancial institutions, government central banks (the ones that disperse physical cashinto society from their nations' mints in the form of loans) and a few select wealthyindividuals. No more. The internet has allowed access to the market via any homecomputer to anyone interested in getting involved.

But the real sea-change has been due to regulatory modernization, which has allowedpeople with lesser means to participate in the market by allowing brokerages to offerhigh-leverage trading. Whereas a typical stock broker might offer 2:1 leverage on youaccount (meaning that you would need to have $500 in your account to buy $1,000 worthof stock), most Forex brokers will offer leverage as high as 50:1 to all accounts. At50:1, you would only need to have $2,000 in your account in order to buy one standardlot of 100,000 currency units (dollars, Euros, Francs, etc.). What's unique is that youcan buy much smaller fractional lots as well and trade with modest amounts ofmoney while you learn. You can trade with as little as $200 on margin, a great way toget your "training wheels".

High-leverage trading is what favorably distinguishes retail Forex from other

markets.

How is this possible? Why would some broker allow you to borrow $49 for every $1that you put into your own trade? It's safe for the broker to do this because the amountthat a currency changes in any given day is quite small. A one cent (or approximately100 pip) change in the value of a currency is considered a large move. Therefore, Forexdealers can afford to hold a fairly small amount of collateral for any given position. Ifthe market moves against a trader resulting in losses such that the trader lacks asufficient amount of margin, there is an automatic margin call, followed by the dealerclosing your position. (You don't get to lose the broker's money on your trade!)

Pip Value Explained

Opening a leveraged trade involves putting down collateral known as margin which inessence covers your 2% of the cash being used in that trade, assuming 50:1. Currencypairs are usually traded in 100,000 unit standard lots, although you can also trademini-accounts with lots as small as .01 of a standard lot, which involves only $1000 inplay. At 50:1 leverage this allows you to open a small trade with a mere $20 of yourmoney at risk.

Adjusting your lot size sets the value for a pip. A standard 100,000 unit tradeproduces a pip value of $10. A half lot (.50) creates a $5 pip value. A mini-lot which isone-tenth of a standard lot (.01) creates a pip value of $1. See how it works? Thesmaller the amount of money at play in the trade, the smaller the pip value, which meansthat it takes a larger move in price to make a significant amount of money.

Big risk = Small pip move required to produce a significant profit... while, Smallrisk = Big pip move necessary to make a useful profit. Everything is always atradeoff, and this is where a lot of the judgement involved in trading currencycomes into play.

Although in Forex we often talk about "buying and selling" Pounds, Euros, Dollars, Yenand Francs... these transactions as far as retail traders such as ourselves are concerned,are only enacted in a virtual sense. That's to say, if you open a trade to "buy" 100,000Euros, neither you nor the broker actually expects you to take physical delivery of thiscurrency at any point like a genuine business such as Ford Motor's might. The trade isconducted on paper only (although the resulting profits and losses are very real!)

Bank rules typically state that physical delivery of cash must take place within 48 hoursof making a buy or sell market order. But your broker will perform what's called a

"rollover" to keep the trade refreshed from day-to-day. This will continually keepresetting the actual delivery date of the cash into the future. A rollover will cost you afee, or it could MAKE you a small fee depending on the differential between thebaseline interest rates of the nations represented by the two currencies in play. As anexample, say the US prime interest rate (the one the Fed sets) is 5.0%, and the Euro'sprime rate is 6.2%. If you buy Euro's with dollars and hold them overnight you will becredited with 1.2% interest on the amount you're holding, the difference between thetwo prime rates, which happens to be in your favor in this case. If you sold Euro's thenyou would be charged a 1.2% fee every rollover (24 hours). See how that works?

For big institutional players like your friendly neighborhood bank this is actually a "surebet" sort of way for them to make money in the Forex market. They just simply look atthe prime rate differentials of various currencies/countries, select the biggest one theycan find and then buy up X millions worth of those units. Then just sit there rolling thetrade over making a steady x% interest every day.

They don't even care where the actual currency prices go! Nice to have big bucks toplay with, isn't it?

Lot Size Explained

To open any trade, one currency is purchased with (or sold for) another. For instance, anumerical amount of Euros such as 100,000 (a standard "lot" in the parlance) ispurchased with the required amount of a second currency, such as the US Dollar. Thislot size sets the actual value of a pip. For every $10,000 of currency in the trade, apip of movement in price will be worth $1. This means a standard lot of $100,000would make each pip of price movement worth $10 to you. A net 10 pip "scalper"move (10 pips plus the spread) would bag you $100 bucks. A day's pay for a lot of us.But remember this can also blow back in your face and spank you for $100 (or moredepending on where your stop loss is set), and therein lies the great risk of Forextrading that you read disclaimers about everywhere.

So it's generally a good idea to work with far less scary amounts while you learn. One-tenth (0.1) lot = $1 per pip and that's good enough for a beginner. You can even playwith small $300 micro accounts and set your pips as low as a nickle or ten cents if abuck is too much. All depends on your tolerance for risk (or thirst for it!).

One type of money management strategy consists of opening a trade with a small lot, andthen adding on lots (by opening parallel trades... lot size cannot be changed on an opentrade in progress). Once the trade begins moving in your direction, however, you may

wish to grab a bigger piece of it by opening parallel trades.

Where to actually set your stops is another aspect where a lot of the art and skill oftrading really comes into play. This is why you must first practice with virtual demomoney before you put your hard-earned money at risk. You need to get a sense of how todo certain things and make tricky decisions to control your risk, and this requires thesort of real-life experience that only hands-on trading can provide.

Reading A Forex Quote and Understanding Spreads

The foreign exchange market can be a baffling place for newcomers, and one of the mainsources of early confusion is the way in which the Forex QUOTE is written, so let meexplain that right now. When we talk about an exchange rate, what we're expressing isthe relative value between two currencies -- how much of one is needed to buy theother. So the quoted rate is to a Forex trader is like lumber to a carpenter... somethingessential that he needs to do his job.

MetaTrader 4 ::: Price Window

A quote always first identifies the pairing, then is followed by a number for the value.For example, you might see the EUR/USD pair have a value expressed as: 1.2259 / 64This means that it requires one dollar and twenty-two point five nine cents to buy 1Euro, or $1.22 and 59 pips... we'll get to that hanging "/64" in a moment. (It also meansthe Euro is currently about 22% more valuable than the US dollar, BTW). This valuechanges daily and hourly of course... and we often follow it moment-by-moment as thistells us the instantaneous state of our trade. Are we making or losing money?

The particular currency pairings themselves are pre-established by the broker, and as atrader you can choose from among whichever are offered. Every broker should at leasthave these major pairings (called "major" because one of the currencies involved is theUS Dollar):

Euro vs US Dollar (EUR/USD)British Pound vs USD (GBP/USD)USD vs. Japanese Yen (USD/JPY)USD vs. Swiss Franc (USD/CHF)USD vs. Aussie dollar (USD/AUD)USD vs. Canadian (USD/CAD)

These currencies can also be mixed into various combinations without the USD beinginvolved (example: British Pound vs. Yen GBP/JPY). These are called cross-pairingsand involve a currency conversion during both the open and closing of trade (assumingthat your account with the brokerage is in USD). This calculation is a bit complicatedmathematically if you were to try and figure it out yourself, but fortunately the softwaredoes all the heavy math with perfect precision for you and just spits out the answers.This is a big improvement over the 'old days' of Forex when traders (bankers mostly)had to figure everything out with calculators and apply head-scratching math formulas.Hey, back then they made their money the old fashioned way... they EARRRRRNED it ;-)

Anyway, back to our quote dissection: the first currency listed in the pair is called theBASE, and the second one is the COUNTER currency (sometimes called the "quote"currency). The number presented is always a price expression of how much of thecounter (second) currency is required to buy 1 UNIT of the base (first) pair. Thequote is written with an appended value after a slash because it's actually shorthand fortwo numbers: the price that YOU can buy the currency for (the Ask), and the pricewhich the MARKET will buy the currency from you for (the Bid). In this example, youcan sell a Euro for $1.2259 to the market but it will cost you $1.2264 to buy one. Youwill always pay more for a currency than you can sell it for. Why is that? Thatdifference represents the broker's commission on the trade.

The gap between these two prices (expressed in pips) is called the BID-ASK Spread --and this value constitutes a commission to the broker for facilitating your trade. In thiscase it's 5 pips (which BTW means that you are "in the red" automatically by 5 pipsonce you open the trade, regardless of whether you buy-in or sell-in to open.) Evenwhen the actual price numbers change and go up and down the bid-ask spread remains 5pips apart, so it tracks the price movement. The actual price at the start and close of a

trade doesn't matter (so far as the spread is concerned, anyway). Naturally you want thisspread number to be as small as possible because this value needs to be covered with afavorable price move in your direction before you can begin to log any profit.

Remember that in Forex, sometimes you get paid for a trade, sometimes you don't... butthe broker always gets paid his spread no matter what! You're the one always taking therisk remember, not him.

The value of the Bid-Ask spread is directly related to the liquidity of the market for thatparticular pairing of currencies. The more liquid the market is (i.e., the EASIER it isto buy in or cash out) the smaller the spread. That's because there is a risk to thebroker in an illiquid market of a bad trade cutting into his contribution to the lot in play.Imagine a trade losing money rapidly and the broker not being able to close the trade outas a margin call approached because of an inability to find a buyer or seller. That's arisk to the broker and the spread reflects this risk. Typically the Euro-Dollar is the mosthighly traded currency pair and the spread is usually about 2 pips. Other pairings withthe US Dollar are often in the 5-8 pip range.

The costliest trades involve currency pairings of what are known as "exotics" -- pairs ofcurrencies from smaller countries that may see limited trading action and low volumesthat make timely fills difficult, like the Polish Zlotych for instance. The spread for aback alley pair like the Slovakia Koruny and Thai Baht (huh?) could be as high as 50pips! You better be right on a trade like this, and you better be VERY right because youwill be starting off 50 pips down as soon as you open the trade! Needless to say suchtrades would have to be long term and would rollover many times to completion.

And THAT, my friend, is all you basically need to know as far as reading a Forex pricequote is concerned, and how the broker's spread works.

Best Trading Times of the Forex Week

London is the main banking center in Europe (along with Zurich and Frankfurt), butother key banking centers in New York, San Francisco, Tokyo and Sidney are alsoimportant to watch. Trading activity tends to peak and ebb in terms of volume based onthe time of day that corresponds to regular banking hours in these geographic locations.The chart below shows the trading times and how they overlap to create zones of highactivity where profits are most likely to be made. The crib-notes version of all this datawould simply be to say that the hottest time in the Forex market corresponds to between6AM and 11AM Eastern time USA (-5 from GMT). This time slot catches the tail end ofthe London session (which runs from about 3AM to 11AM New York time) plus the bulk

of the New York business day, which is about 7AM to 3PM.

(O=open C=close)

Here are some important Forex time windows for active trading chances:

• New York – 8am to 4pm EST• London – 2am to 10am EST• Tokyo – 8pm to 4am EST• Australia – 7pm to 3am EST

As I mentioned, you will see that there are two instances where a couple of the majormarkets overlap their prime trading hours. These occur between 2am and 4am ESTinvolving the Asian and European markets, and from 7am to 11am EST when theEuropean afternoon session overlaps with the start of the North American session.

It is during these times, and especially at the start of these time windows, that thehighest volume of trading activity occurs. This is when sharp up or down trends takehold and currency prices can really start to pop... which of course is what you need, i.e.,price movement. Between these highly active times the various currencies will go tosleep tend to "range" horizontally within a narrow band of prices. It's difficult to makeany money when prices are ranging except for those who engage in very tight scalping-type trading schemes. Otherwise it's safer to wait for a trend to establish itself and thenjust go with the flow.

Basically the Forex market "closes" (becomes inactive actually) around 3PM Eastern onFriday when the US banks begin to shut down for the weekend, and then re-opens at5PM on Sunday -- which corresponds to the opening of the Tokyo and Sidney banks on(their) Monday morning. There is no activity on a Saturday and many brokers deactivatetheir live data feeds, so your MetaTrader or other platform cannot update during thisdown time. When the market comes alive again on Sunday evening prices sometimeswill "gap" and jump significantly from their Friday close as pent-up orders are suddenlycleared. This can present an opportunity to make a fast profit if you guess right, but

there is also a danger here that open orders and stops will not be activated as the pricevalues in-between the close and open are skipped over instantly without ever passingthrough them. This can result in a big loss as easily as a large gain if you guessedwrong, but is an example of the sort of high risk play many Forex traders do thrive on.

"I realized that technical analysis didn't work when I turned the charts upside downand failed to get a different answer."

~ Warren Buffett

Judging from that rather rude comment, I suppose Mr. Buffett is more a fan offundamental analysis than he is technical charting. Of course a super rich guy has theluxury of making wide-open, long term position trades based on factors such asinternational trade imbalances since his massive wall of money protects him from anyserious loss. For the very rich, investing might be a game of monopoly, but for the restof us with the rent money at risk it's serious business -- and that's exactly the way inwhich YOU should always approach it. (BTW, don't bet the rent money -- you shouldonly be trading with risk capital. There, now you've been scolded...)

And when it comes to serious consideration of the market, there are a lot of Forextraders who beg to differ with guys like Warren Buffet and for good reason: they knowthat technical analysis WORKS.

Market Price Contains All the Information

There are two basic philosophies on how to forecast the financial markets as youprobably know. One is known as technical analysis, which studies the historical pricedata to look for trends, and the other is fundamental analysis... which considers muchlarger scale economic factors that can effect a nation's currency values over the longterm. And while fundamentals might be of more interest to the bigger position traders,the casual technical trader still needs to keep an eye on the important world events thatcan effect currency prices as well, or risk be run over by them. We'll look atfundamental factors more closely in the next chapter.

The technical analytical approach to trading, by contrast, examines past market actionand attempts to use that data to predict the future. The technical analyst's creed is thateverything that you need to know about where a currency's price is headed can bedivined by studying where it's been in the recent past. In other words, historical price

action contains ALL the information that you need to understand when it comes todeciding where a currency's price is going.

The Big Trick, of course, is to discover where all that magic knowledge is hiding in thedata!

Using fundamental analysis to forecast Forex markets is also more difficult in the sensethat it takes considerable bloodhound work to uncover all the various sources ofinformation that you'll need to consider, but can be highly accurate in the long term. Thistype of analysis looks to forecast the market based on various factors that effect theeconomic strength of nations: political moves, government financial actions (via centralbanks), social movements, even the effects of the weather and climate (big storms orearthquakes that could interfere with agriculture or offshore oil production, etc.).Anything that can effect a nation's macro-economy will eventually move its exchangerates.

Naturally, this means having to know when key financial reports about farm production,manufacturing growth, interest rates, GDP, unemployment figures, tax rates, bondstability and other similar indicators are coming out for those countries whose currencyyou are watching. Such reports are regularly scheduled for various different countries --and the trader's task is to find a good online news source and watch it regularly forclues as to which currencies are likely to gain in value vs. others.

The point is that good traders must use a mixture of both technical and fundamental data,but for now lets explore the tools and techniques of the technical analyst first.

The cornerstone of technical analysis is the idea that a currency's price is a reflection ofchanges in the balance between short term supply and demand. This factor is eithersupported or resisted by speculative reactions to economic, political or psychologicalchanges in the world. To an extent, traders tend to create self fulfilling prophecies byacting en-mass in ways that support the very trend which they're following, eitherbullish or bearish. They will therefore tend to take actions that cause prices to stop andreverse at certain levels -- as "shorts" (sellers), for instance, take their profits -- causingprice reversals known as retracements. These can be scalped for quick profits ifsuccessfully predicted.

This idea is what lies behind the slavish devotion to support and resistance lines,channels and especially Fibonacci levels.

See, while much of the price action of currencies is due to the actions of institutions andindividuals who keep the intent of these actions private up until they are executed (and

therefore create eternal market uncertainty), a certain amount of it is created by the herd-like actions of global traders. One thing that we assume about this phenomenon is thatthey are all staring at both the same historical currency data -- because this data is bothpublicly available and rigidly unmodified in it's presentation. In other words, it's thesame everywhere across the planet and every trader is staring at the exact same pricepatterns on his or her computer screen. This creates the likelihood that many people aredrawing similar trendlines and Fibonacci levels and using 100-200 bar MovingAverages to make the exact same judgements of the current price situation as everyoneelse is doing.

For instance, if I draw a Fibonacci pattern (see below) based on very clear peak andnadir points that have occurred on a particular currency chart over the past week, I canfeel some confidence that many other traders have done exactly the same thing. Thismeans that all of our collective 50% and 33.8% levels, etc. are pretty much inagreement across thousands of trader's charts everywhere. This also means that tradersare likely to have set their stops and take profit marks at very similar price points,which means that these levels are now likely to mark points where prices are poised toeither reverse or keep on going strong, as the interpretation may indicate. Thisinformation gives us a very strong clue or "signal" that we can then exploit by planningto buy or sell at these particular points, joining the herd.

This is essentially what charting is all about: trying to read the tea leaves and determinewhat all those OTHER invisible players out there are about to do -- and then take actionto turn that knowledge into a profitable play for ourselves as well -- either by moving inconcert with them or against them as the situation may dictate.

MetaTrader 4 ::: Fibonacci Tool

Charting and Analyzing Currency Movements

Technical analysis of the movement of securities like stocks and futures is a fineblending of art and science, with the ultimate goal of generating accurate buy or sellsignals that traders can act upon with some degree of confidence. In Forex there are 4main items of price that are tracked: the open, close, high and low prices based on somespecific time increment... minutes, hours, days etc. Volume and open interest areadditional factors used in stock trading -- but these are a bit tricky to measure accuratelyin Forex and are somewhat devalued as useful tools as a result. Volume is mainly usefulfor determining when there are a lot of players on the field, and thus when prices aremore likely to be volatile. Times of low volume usually correspond to a currency"ranging" or moving along a narrow sideways channel, which usually offers littleopportunity for profit and marks a good time to stay OUT of the market.

Trends are where most of the money is made in Forex. A variety of indicators can beapplied to a price chart which can reveal many interesting things going on beneath theobvious, and these are mostly useful for visualizing trends and patterns. This is the"science" part of charting. It is then up to the savvy of the individual trader and hisexperienced eye to make judgements as to what to do next with this information. This isthe "art" part.

Technical analysis, when you boil it all down, is really the study of human psychology.Chart patterns that reflect bearish or bullish market movements are as much a responseto trader mass psychology as they are economic factors, and this is what makes them sovaluable: because they give us a peek into the collective activity of people actingaround the world who are otherwise invisible to each other. We need to be able tosomehow read what the 'herd' is doing and infer what they are thinking in order tounderstand what they may be intending to do next. Assuming that the innate nature ofhuman behavior when it comes to dealing with money never changes all that much,patterns that have worked in the past are assumed to be viable forecasting tools forcoming price movements.

Any free trading market is governed by four basic human emotions: fear, greed, euphoriaand desperation. The interactions of these emotions and how they play out are depictedon the charts in both short and long time frames. Extreme actions, such as panic sellingor a torrid uptrend are associated with particular emotions -- and we look to the chartsfor evidence. It's why we try to plot support and resistance levels, for instance, becausewe know that others are watching these points as well and that they may've set theirstops or take profit points at these marks. That means these could likely be points wherethe price will rebound and change direction OR burst through and move onwards.

There are two ways to play this knowledge: either look to ride it or go against it. Thisis known as having a trend-following or contrarian-style trading philosophy. Trendfollowing is mostly about identifying persistent directional price movements andjumping on them before they become exhausted, trying to catch the middle third of theentire movement. The trouble is you can never know for sure how long these rides willlast, but again, the historical data will contain clues that can help you make an educatedguess as to where to get on and off. You can really only hope to cut the middle third (theguts) out of any strong trend move -- the sort that lasts from maybe 4 to 12 candlesticks.Much more than that would require you to be a mind reader.

You'll find that it can sometimes be difficult to control your emotions when you aresweating over a trade in real time with real money on the line. Technical analysisattempts to take some of the blind guessing (and thus the fear) out of the system andreplace it with hard data which, while far from infallible, can shade the odds in yourfavor. You're looking to give yourself just a bit of an edge so that in the LONG RUN youwill show an overall profit. Get it out of your head that you are going to figure out somenew and clever way to "beat" the market time after time. It simply can't be done. Youhave to learn how to finesse it instead -- making more on the gains than you lose on thelosses over time.

Start poking around with your MetaTrader and you'll discover a mind-bogging array offascinating indicators... which you will probably have no idea of what they are at firstglance. Fortunately there are excellent help files that explain all of these better than Ican. Just go to Help Topics on the HELP menu item, then follow: ANALYITICS >TECHNICAL INDICATORS and you will see about 30 different ones from the"Alligator" to the "Williams Percent Range". I've experimented around with a lot ofthese indicators and you should too, if only to learn how they work. I've found someindispensable, some bewildering and others totally useless. But they were all in someway educational.

With that in mind, here are some common indicators that I like to use on my own charts:

Trendlines, Vertical, Horizontal and Channel Lines

A trendline is a sloping line of support or resistance that is used to visualize thetrajectory of price movements, while horizontal lines are necessary for marking supportand resistance levels -- places where the price looks like it may do something that youcan use to open a trade. I also like to apply vertical lines to mark the starting and endingpoints of trades, for pointing out ADX "criss-crosses" (see below), and for performingforensic reviews of past trades.

Channels describe a pair of parallel trendlines which can be useful for visualizingpoints where you think price breakouts will occur off of a long period of lateral ranging.You'll find all sorts of uses for these basic tools of the chartists' trade.

On the USD/AUD sample chart below I've drawn in and labeled a few of these lines onmy MetaTrader. The blue horizontal line along the top is used for denoting support andresistance levels (you can make these lines any color, thickness and style - solid ordotted - that you may wish, BTW...), whereas a vertical line marks a notable criss-crossing point on the ADX indicator (the squiggly green, grey and pale yellow linesrunning along the bottom of the window). I'll explain more about how this favoriteindicator of mine works in a moment.

I've also displayed an equidistant channel -- which was drawn around the high and lowpoints of the currency price as it was ranging along horizontally. Notice how the pricesuddenly broke out? A lot of people will draw these channels and wait for a breakoutsuch as this to happen, then open a trade -- either buying or selling depending on if theprice goes up or down. I would wait until the price moved maybe 20% or so beyond theedge of such a channel just to confirm that a trend is solidly underway, but this is atrader's own unique judgement call.

MetaTrader 4 ::: Trendline Tool

Fibonacci Pattern Tool

The Fibo tool draws a line between two points -- usually a high and low price over acertain block of time -- and then marks horizontal lines at 3 levels that are calledretracement points. These are located at positions 38.2%, 50% and 61.8% betweenthe high and low limits. What you're looking to uncover with these levels are commonfocal points of herd mentality and trade opening/closing activity that will affect theprice in some way. The one's at 50% and 38.2% especially are considered to be"magic" in some way.

I think the only thing magic about a Fibo graph on a chart is that a lot of players arelooking at the same levels and have set their buy-ins, sell-ins, stops, etc. at thesepoints... and so prices will respond predictably as a result, IF enough traders acttogether in unison to make the prediction happen. So this tool gives me yet another wayto watch for the actions of that "invisible herd" that I am looking to run either with or betagainst.

On the sample USD/CHF chart below I've drawn a Fibo off a high and low point (seethat diagonal dashed line?... that marks the points between which I drew the fibo pattern,the 0 & 100% levels). You'll notice that the price went down to almost the 38.2 line andbounced back. The whole trick to this tool is guessing where other traders havelikely selected their own high and low points on the chart. This gets everyone lookingat the same pattern and possibly setting their own stops and profit points at those sameretracement points that you are seeing on your chart.

Determine where the masses are likely going, and you can piggyback your own tradesatop their trends and ride them to profit!

Average True Range (ATR)

This tool is a measure of volatility and shows how much average pip movement hasoccurred during the past X bars. It helps me set my stop loss points, and also helps todefine a price range when I'm looking to set my pending buy or sell opening prices --

places where I will automatically have a trade open if the price gets there. Theseautomatic tripwires are called "buy stops" and "sell stops" in the trading parlance.(Read your MT4 Help files to better understand these functions...).

The ATR is pretty simple to grasp once you see it in action (but a bit tough to illustratewith a static image... though I've tried my best for you!). As you roll your mouse overeach bar it pops up a data flag showing the average pip movement of the past X numberof candlesticks from that point backwards in time.

In the GBP/USD image below for instance you'll see that I've marked two points withvertical red lines where I took a pair of different Average True Range readings. The lowpoint reads 24 pips, which was the average of that 20 bar run during a ranging period ofvery little price movement. You can see I pointed out the actual bar that I measured atthe end of that rather quiet run.

Farther to the right I measured another bar which included a big 91 pip move during thattime span, so while the actual bar being measured (and really the ten bars leading up toit) were rather small, the average of the past 20 bars, as you can see by the ATR linerising up, was 39 pips -- a value that's skewed somewhat by the inclusion of that singlebig 91 pip bar. See how this works? Working with these indicators on a live screen willmake it much clearer if you're still a bit uncertain about all this.

Average True Range Indicator

The big "trick" to using the ATR then is deciding what value to input for averaging.Do you average the past 10 bars, or 20? Maybe 30? In this particular case, if I werelooking at that bar on the right I may want to reset the average to 15 to get rid of that 91pip bar, because it's distorting my shorter range average. ("Lately" the price hasn't reallybeen ranging 39 pips, more like 25.) Generally the shorter the time frame you'reworking the shorter this averaging period should be. If I'm scalping and looking to get inand out within 5 bars let's say, then I'm more concerned with the very latest range valuebecause I'm looking to get on a short term trend or play a quick reversal in price. Somaybe I just want to see the average range of the past 10-15 bars. If I'm a position traderholding a trade open over a few days, however, then I'd be more interested in what theaverage of the last 30, 40 or maybe even 80 bars is -- and would I would set my ATRvalue accordingly. Judgement call baby!

This indicator puts a hard number to volatility, which is easy to see visually, but stillneeds to have an actual numerical value hung on it sometimes. That number is useful forsetting your stops and take profit points x number of pips BEYOND that range forinstance, for a stop -- or somewhere WITHIN that range for a profit mark. The thinkingis that if this range continues to hold steady for the next few bars as well, you will besafe from stopping out on a retracement and your profit point has a reasonable chance ofbeing reached. A handy tool I think. It's on all my charts.

Moving Averages

I'm sort of lukewarm when it comes to Moving Averages... I do use them and have triedall different setups, but I'm still not sure if they're telling me anything really useful,especially when it comes to intraday trading. I always draw at least one MA linebecause my charts look naked without them. I've used the standard 2 lines set at 10-20or 7-14 (periods) and watched them criss-cross away, but the ADX criss-cross signal(see next item below) is easier to read and holds more predictive data I feel in the angleat which they intersect -- which I just don't see in the MA lines. They seem to lag a lotmore and are useless for short trends, which are essentially over before the criss-crossing becomes fully apparent.

I've seen Moving Averages set up for very long periods like 100 and 200 bar MA's,which produces these slowly rolling waves that may be good for analyzing longer termtrades, but like I said don't seem very useful for scalping. Maybe I'm missing somethingwhen it comes to MA's, but they are widely used and watched by traders -- and they DOprovide a solid logic for setting points of support and resistance on your charts, so fordrawing general long-range support and resistance lines they are good.

One thing you can do is determine if a price is beginning to trend significantly upwardsor downwards relative to where it's been. If you set an MA to produce a curve thatrepresents an average of the past 50 bars say, and the price moves ABOVE this line, youmay feel comfortable opening a long (BUY) position. If it drops below you would goshort. How far above or below it must move to confirm the move, well, that's whereyour trader's sixth sense born of experience will come in.

I've illustrated this with a screen capture from a USD/JPY chart. The blue line on thechart is a 50 bar Moving Average line and you can see that a powerful trend favoring thedollar finally formed after some back a forth ranging activity, and that the candlesticksmoved up and away from the line. Notice how the line gradually follows the price on ashallow upward track, but it cannot stay with such a quick movement because itrepresents the average of the previous 50 bars, of which the move is just a small part. Ifthis MA were set to a smaller value like 20 bars the line would be more lively and trackthe candlesticks more closely.

Many traders like to use this as a signal that a new trend is beginning, and it workssometimes to improve your odds of catching a trend at its' start, but like anything else inForex there is enough uncertainty so that any "rule" will be repeatedly violated.

For example: you can see the upper arrow pointing out another breakout above the MAline, which looked similar to the previous one, but this time the price turned right backand went against the long position trader. The lesson here: don't get fooled into thinkingthat just because something worked for you once you've discovered some sort ofinviolate "rule" in Forex. The market will delight in punk-slapping you down next time.You should always look for a convergence of several signals you prefer to watch, neverjust one "magic" indicator.

Moving Average Indicator (50 bar)

Average Directional Indicator (ADX)

This is my favorite indicator and for one main reason: it's the only metric that I'veplayed around with which seems to have just a bit of predictive power. In other words,it doesn't lag like most indicators seem to (well, at least certain aspects of it don't lag).You'll soon discover looking at all these various MT4-5 indicators that they aregenerally showing you what just happened, not necessarily what's going to happen next.This of course is the holy grail of Forex... finding some indicator that doesn't just plotthe past but seems to point with some accuracy towards the future.

Now don't go too crazy with this ADX and treat is as an absolute sure thing, becauseyou should know that in any sort of trading market there is no such thing as a sure thing.What any indicator such as this does is give you a signal that improves your odds ofknowing what's likely to happen next. We're talking maybe 60% to 70% odds in yourfavor, which is what you're looking for... just a way to shade the odds. Some "surething" looking trades will always go back against you so you still have to practice goodmoney management, keep your lot sizes in order and your stop loss points reasonable.

Okay, that said, now let's see how this works...

The ADX is an indicator which produces a measurement of a trend's strength as well asa portrait of which currency happens to be stronger than the other at any particular

moment in time. The silver-grey line is the strength indicator. The longer a trend persists(either moving up or down in actual price) the higher this line will rise. Anything overlevel "40" is considered very strong, but it could also signal a trend that is approachingit's end as well, so you don't want to wait around watching it too long or you may missthe move and enter a trade just as it reverses on you. I have a better way to read thisindicator which I'll show you in a moment.

The two currencies on this chart, the US dollar and the Euro, are represented by goldcandles (Euro) and green candles (dollar). The ADX lines match these colors so it'seasy to know which currency is represented by which line. Notice how the lines weaveup and down and criss-cross each other. This trace displays the price changes betweenthe currencies, so while one lines move up (in value) the other is moving in the oppositedirection until the price reverses -- then the lines converge and cross.

These criss-crosses contain a tantalizing clue, I feel, as to when a major moveMAY be underway -- but of course like anything else this signal is never 100%accurate, and you will encounter numerous "fake outs" where the price lines cross andthen immediately zig back in the opposite direction and re-cross -- nullifying the firstmove.

There are two major things I look for in the crazy zig-zaggy trace of these two lineswhich helps me to decide whether to open a trade or not: the angle at which the twolines are about to intersect with each other, and the number of "false alarms"... thathave built up, which seems to presage that a legitimate move is likely "due". This "due"number will be somewhat different for the various currency pairs: all part of theirparticular 'characters'. Take a look at this chart, which illustrates this pattern:

Average Directional Indicator (ADX)

Well that was the happy part, now for the bummer: things don't always lay down andreveal themselves for you quite that easy. There are numerous false alarms to contendwith. The chart below shows you a neat little row of these "fake outs". The best way tounderstand the impact of these false moves on your decision-making process is to goback through the historical data at the timeframe you wish to trade (hourly charts,weekly, 5 minute ,etc.) and the currency pair (they will all be different as they each havetheir own "character") and mark all the false alarms in one color with a vertical line,and the good trades with another. Now count the number of false alarms that occur onaverage between the good moves. This will give you a sense of how many such movesgenerally have to accumulate before a good move is "due". This gives you something tograsp hold of in the form of predictive data.

For instance, I have established after some head-scratching study on the EUR/USDHourly that 5.5 false alarm criss-crosses generally is the longest run of fakes before agood move appears. So if I see the green dollar line turning upwards on the ADX andthe gold Euro line heading down and the two look to be on a collision course like acouple of trains headed for a wreck... AND I count back and see that the preceding 6criss-crosses were all short-lived head fakes, I am feeling pretty confident that a strongmove is next and it's looks to be in favor of the USD, so I get ready to open up a shortposition and SELL. This is how I read the ADX.

ADX Ranging vs. Powerful Trend Signal

The grey main ADX line is an indicator of trend strength. Notice how the line staysdown below 20 when the currency strength lines stay tangled close together? Thisindicates a ranging price with no particular trend... as the bears and bulls are tusslingback and forth. Notice just before this happened though the Euro made a strong moveand the grey line ballooned over the 40 line indicating a strong trend?

You get your best trading clues from the ADX by watching the trajectory of the twocurrency lines as they approach each other on a collision course. I ignore theshallow approaches and look for an impending 90 degree crossing. That's when I lookto open a trade, especially if there have been a number of "fakes" building up in therecent past. What this shows is that after a long stretch of equal strength between thebull and bear forces, a sharp price move is about to take place. You can also see whichway the break is setting up to happen...

For instance, if the base currency is on an upward trajectory, a BUY trade would be inorder -- whereas if the counter currency is on an upward path then a SELL would be thecorrect trade. You could even set up a pending order if a nearby resistance line is alsoabout to be broken. Set the opening price x pips beyond the resistance to assure thatyou've captured a real move. If it's a sell called for, then the opening price should be setx pips below some other indicator such as a support trendline or a Fibonacci level. Thisis how you can use indicators such as the ADX to design a trade for yourself.

Now notice there was another cross on the right side of the chart that resulted in a strongmove by the Euro, but the grey ADX line was still very low -- indicating that there wasno established trend going on at the time. So this play, obvious now in historicalhindsight, would've seemed like something of a gamble to jump on. Also notice themove over on the left side of the chart marked by the red vertical line: another crosswith a low grey line in the background signaling no trade, but the move turned out to bea good one for the Euro.

This illustrates why the grey trend strength line is of limited value on this indicator, inmy opinion.

Why? Because when you're coming out of a long period of ranging where the currencieshave been fighting back and forth (bulls vs. bears), the grey ADX line will havenaturally fallen down to near or below 20 -- but remember what this line is supposed tobe showing you: trend strength. If the price is ranging along horizontally THERE IS NOTREND and you wouldn't expect to see one. Most good setups come after a period ofranging when a trend is absent. This makes this line not nearly as valuable as the twocurrency lines themselves, and you should expect it to be low at the start of a goodopportunity.

What you're looking for are crosses that distinguish themselves in some way. I believe agood trade opportunity becomes evident at the end of a string of fake outs when a goodmove becomes "due". So how do you judge this? That's the $64,000 dollar question ofcourse, and where all your trader sixth sense comes in. You need to become a student ofyour favorite pairs and try to get a feel for what they like to do. Studying charts is good,but nothing focuses the mind like having a little money (even virtual money) in play. Sodon't just study, hop into the market now and then and DO!

Also remember that a good trader would not be looking at this signal in a vacuum butwould consider this as one piece of the puzzle alongside complimentary data. If youhave other data to support a trade in addition to an impending cross off a long ("x")string of fakes, such as those nearby support or resistance lines that I mentioned earlier,then that would only add to your confidence. It's not a good idea to trade off just onesignal in isolation -- that's gambling and you may as well just flip a coin to generateyour buy-sell signals. Maybe you want to see where prices are positioned relative tosome moving average line, or have a stochastic or RSI (relative strength indicator) toshow you if a currency is overbought or oversold. You can read up on all theseindicators in the MetaTrader help files and see what they offer and how they work. Popthem onto your charts and play around with them. Toss out the one's you don't like andkeep the ones that seem to show you something valuable.

That's how you learn to trade Forex: by experimentation and self-educating.

ADX Ranging Signal, No Trade

I make the +D1 and -D1 lines the same color as the currencies which they track toprevent any confusion and make it obvious as to which is which. +D1 is always set asthe Bull (base) currency and is your BUY signal when it is going up, while the -D1 lineis the Bear (counter) currency, and when it is going up that's your SELL signal.

Don't get this confused, when the base currency line is going UP that's a BUY, andwhen the counter currency line is going UP (not down) that's a SELL.

Here's how I configure my ADX indicator (colors shown are for the EUR/USD):

Parameters -- Set the period to 10, Apply to: Close, and I use a dark grey for the trendline (except for GBP/USD where it's yellow because the GBP already uses that color)

Colors -- Set +D1 to base (first) currency color, and the -D1 to the counter (second)currency color. In this example it's goldenrod for the Euro and Lime for the Dollar.

Levels -- Use the Add button to create 3 levels at 10, 20 and 40. Use a silver dashedline. These levels mark trend strength: anything over 40 is a very strong trend, 20 is agood trend and anything 10 or less is a very weak trend and denotes a ranging pricemoving horizontally on the chart.

That will pretty much set your indicator up the same as mine. One adjustment you canmake is the "period" value which I have set for the default 10 bars (the previous 10 barsare averaged to plot the lines). Making the period longer produces a different angle ofattack between the lines which you may find easier or more accurate to read -- playaround and see. If you set the period to 5 for instance the line traces will look muchmore exaggerated and cartoon-like. Set it down to 1 and the lines squish together andbecome unreadable. Try it... this is how you learn!

One Final ADX Trick

The ADX is an average of price fluctuation going back a certain amount of time don'tforget, so you can use it to define points of maximum and minimum price range withinthat period, and then use those to judge the start of a breakout in either direction andpossibly a new trend. The longer the timeframe the more conservative the rule-set. For

instance, say I was to check the ADX along with the candlestick patterns to find thehighest and lowest price points that were made yesterday. I now draw a horizontalchannel using the channel tool (naturally!) with the walls set at these high and lowmarks. I've now defined a range that I believe a price would have to break out of inorder to be seen as a new trend setting off. The width of this channel is maybe 150 pips,indicating that yesterday was a fairly quiet day without any really big trends on themove.

Now you need to create another rule for yourself that essentially says "I will open atrade once the price reaches "x" number of pips beyond either channel edge." Forinstance, when it breaks 5 or 10 or 20 pips beyond the channel edges, I'm in. The largerthis number the more conservative your rule-set. You're essentially saying: "I'm notopening a trade until the price is 20 pips ( or 30, or 50 pips) beyond yesterday's top orbottom price!" So this number actually represents an expression of your taste for risk.

Another way to engage a conservative approach is to use longer timeframes to set yourchannel edges. Instead of going back 24 hours to find hi-lo points, suppose you baseyour channel on the high and low marks from last week? This will be a much biggerchannel, maybe 500 pips wide, and a puny 10 pip breaking of this channel would beinsignificant and meaningless, so your rule for this would be something like a 50-80 pipbreakout before opening a trade. Now you're saying: "I'm not opening a trade until theprice exceeds last week's highest or lowest price by at least 80 pips... now that's whatI call a trend!" See? You must use these tools to find a way to trade that is comfortablefor you and within your risk temperament (and your account size, which we'll discusslater).

ADX Channel Setup

Color My World of Currency

Finally, (although this is something that you can't really see on your black-and-white e-reader screen very well) I don't use the standard red and green candlestick colors on allmy charts to denote bull and bear bars, and I have a good reason for that: I once tradedthe wrong pair by accident! I had all my charts set up with the same standard red-greencolors and didn't notice along the bottom of the screen that I had selected the USD/JPYpair when I was actually looking to trade the EUR/USD pair. This mistake occurredafter some lengthy analysis that had me switching back and forth to various differentscreens looking for patterns or whatever... I forget exactly what I was doing on thatparticular trade. The point is that keeping everything looking the same made it easy fortired and bleary-eyed ol' me to place an order off the wrong chart.

Because my charts all looked the same it was a simple mistake to make I suppose, butthis did nothing to stem my fury when I saw that I had played the wrong pair only afterhaving already opened the trade (and immediately being down $40 bucks due to an 8pip spread as well!). By sheer luck I could've still made a profit of course, but thatdidn't happen (because I stink at luck), and the trade was eventually stopped-out for aloss...

...and that was the end of letting all my charts look the same!

So I came up with a color-coding system for the currencies which I will now share withyou so you can either copy it... or be inspired to dream up your own system that mightmake more sense to you.

One thing I did was standardize the US Dollar as green on every chart where it appears(LIME is the actual color from the MetaTrader color chart -- it shows up better against ablack background... I like using a black background because it looks high tech andcool!) A dark green might look better on a white background, try it and see what youlike.

Anyway, here's my color schemes on the 6 pairs that I mostly trade:

Sample chart colors for the 6 major pairs

Any sort of news that has an impact on the economy of a nation can effect the value ofits' currency, and is therefore considered a fundamental factor as far as Forex tradersare concerned. Such fundamentals are separated into three major categories: economicfactors, political factors and environmental factors such as natural disasters.

Publication of key financial data is closely watched by investors. For instance, will thatreport on German bond ratings have consequences for the Euro? Is that hurricane in theGulf going to disrupt the supply of oil for several weeks? Government economic reportsare kept under strict secrecy up until the time of their release to prevent any 'insidertrading' type unfairness to occur. Central banks in many countries for example changetheir prime discount rates confidentially and with little warning, sending differentcurrency pairs into turmoil. And of course this opens the opportunity for profit as weneed vertical price movements to play.

The deciding factor when it comes to whether or not the release of an important bit ofeconomic news will have an effect on a currency is how closely the actual results cometo economists' prior expectations. If the news matches widespread predictions fairlyclosely then it should have already been "priced in" to the market beforehand. However,if the release deviates significantly from the anticipated numbers, then it has thepotential to have a bigger impact on the market. This is true of the stock and futuresmarkets as well as Forex.

In Forex, traders are essentially speculating on the health of various countries'economies by proxy of their currencies. In order to have an understanding of aneconomy's strength one needs to consider manufacturing, retail sales, housingconstruction, consumer spending and the status of the labor market. Data on thesedifferent sectors are found in reports released by government agencies, academicinstitutions, and private data-collection firms.

I'll be the first to admit that all this stuff is about as exciting as watching paint dry, but alot of the energy that creates price action is generated off the reactions that businesses,banks, governments, investors and speculators have to such data contained in thesereports -- and so they cannot be ignored even by the most strident technical analyst. A

well-rounded Forex trader must pay at least some attention to economic reports, andespecially must have an idea of when they are scheduled for release. Even if you don'twish to trade the news, you may want to know when to stay away to avoid theuncertainty and possible volatility during these times if you're a cautious trader.

Forex-Relevant News Services

An informed trader is a successful trader. To make logical decisions on when to buy andsell currencies, you'll have to keep an eye on at least some of the above financial newsreports, especially those from the US and Europe. Reports out of Japan, Singapore,Sidney and Hong Kong will also need to be followed if you like to play those Asian-Pacific currencies. There are many sites that make it quick and easy to keep up on all theforex-relevant news that you can possibly handle.

But it isn't just financial news that we have to keep a watch on. Any sort of big newsstory can potentially affect the Forex market -- and the sharp-eyed trader is always onthe lookout for any major event that might impact his trading. You should try to stay upon world affairs, monitor political, social and economic developments in many differentcountries, and take note of how the FX markets tend to respond to these events.

Be sure to keep notes!

Ninety percent of this activity might be done "sitting on your hands" so to speak, i.e.,without actually trading. But the other 10% could involve taking action when you feelthat the time is ripe to open a trade. You can get the "Forex spin" on the impact of majornews events from any of these various sources:

The Nation Bureau of Economic Research http://www.nber.org/releases

FX Street http://www.fxstreet.com

WM Financial Strategies http://www.munibondadvisor.com/EconomicIndicators.htm

Forex Capital News http://wn.com/s/forexcapitalnews/index.html

Playing the News

The best way I believe to trade on any news announcement which you think may resultin a sharp price movement or trend breakout for any particular currency is to place 2pending orders in anticipation of this event both above and below the current pricerange by "X" amount of pips. This "x" value will be determined by how much youanticipate a particular currency to range around before really jumping out on either sideof the current price.

I call such a trade a "pip trap" and how it works is fairly straightforward: you set up apending buy order some distance above the current price or channel, and a mirror-imagesell order an equal distance below it. Such a trade is ideal for using what they call anOCO-type ordering format (IF your broker allows it, mine doesn't). OCO means 'OneCancels Other'... meaning, for instance, that if the live priceline triggers the pendingBUY order to open, then the pending SELL order will be instantly cancelled out (or viceversa).

In essence you are anticipating that the market will make a significant move in onedirection or the other immediately AFTER an announcement is made, but you don'tknow which way it will go for sure and you're simply covering both possibilities. Themagnitude of this move will relate to how closely the news matches expectations -- ifit's as expected then the impact will have pretty much been "priced in" already andthings may not get too crazy -- but if not... then you could be in for a 200+ pip rocketride.

Pip Trap:Set OCO pending orders above and below channeland wait for breakout on News, etc.

The EUR/USD pair is ideal for news-style trading because many importantannouncements occur between 8:00 AM and 11:00 AM Eastern Time USA, and it is inthis time window that both the "big mama" London and the New York financial marketsare open and humming.

If you look at a 15-minute EUR/USD chart for instance you will see that there areusually a great many pips worth of movement in the morning hours. What if you couldconsistently capture the first twenty or fifty pips of any announcement-provoked move?Opportunities for this sort of trading do not happen every day, but for those with a morestudious trading temperament this type of philosophy could be an ideal fit. Make sureyou stay up on the announcement schedules using those sources I just detailed, andobserve what happens and keep notes. You'll begin to see patterns and connectionsforming that link typical moves to particular news reports, and that's the sort ofknowledge that can make you consistent money in the long run.

It is critically important before you go plunging headlong into the world of currencytrading that you get your brain wrapped around the idea of risk control and moneymanagement. The standard advice you often hear is that the size of your trades (interms of "lots" placed at risk) should reflect no more than 2-3% of your entire accountequity. This sounds nice, but if you run the numbers you'll see that this 'rule' is reallyonly viable for accounts of at least $5000. That's because lot size controls the value ofthe pips that you're trading for, which I think needs to be at least $2 bucks per pip inorder to make trading even worthwhile, and such a rule restricts the distance that youcan back your protective stop loss points out and therefore limits your ability to tradefor larger amounts.

You'll soon discover that your stop-losses need to be set back as far as 20-25 pips fromyour entry price in order to give the trade room to survive those back-and-forth jigglesand wiggles in price known as "market noise". Otherwise you'll just keep gettingstopped out for small losses trade after trade. Think of it as the vibration in the priceline-- which gets more pronounced the closer that you "zoom in"... i.e., the shorter that thetimeframe you're using on your chart becomes, 15 minutes, 5 minutes, etc. You've got tostay clear of this wiggle until the price starts trending in your favor.

And while none of these carefully managed negative trades may be enough to wipe youout, it can play havoc with your emotions and confidence levels because you'll besuffering from a "death by a thousand cuts" -- a slow and steady bleeding away of youraccount equity. You don't want to go too long between winning trades. The bottom lineis you've got to give your trades room to breathe and stay alive every time or there's nosense even bothering to open them. Then, once they move a little ways into profit, youcan pull your stops in tighter -- first to the break even point, and then to lock inthat first juicy chunk of profit. My two stage trading strategy which I will show you ina moment will illustrate all this clearly.

So how do we judge how much to place at risk for any given trade? Smart moneymanagement dictates that you should arrange your stops and take profit positionsimmediately after opening any trade so that you have the opportunity to make $2-3

dollars worth of profit for every $1 you have at risk. This is considered a properrisk-to-reward ratio. That way even if only 50% of your trades hit your "take profit"target and the other half are stopped-out for a loss, you should still be showing anoverall profit at the end of any given number of trades. You always have to keep this bigpicture in mind and try not to let yourself get too wrapped up in the results of individualtrades, good or bad. This is how you maintain a steady emotional keel in trading.

Well, we can use our good friend the Average True Range again which we talkedabout earlier. I usually set this indicator at a value of 10, which means that any graphpoint will represent the average pip range of the past ten bars -- but you could use asetting of 20 to give you a smoother, less volatile indicator line if you wanted to. BTW,when you roll the mouse across this line (or any chart line in MT4 for that matter) apop-up box will read out a numeric value at the various bars, so there's no need to tryand puzzle out what number is actually being represented by the squiggly blue chart linethat runs across the bottom of the frame.

Also note the 2 measured bars being pointed out by the vertical red lines: the line on theleft marks a low spot on the indicator with a value of 24 pips. This represents theaverage pip movement of the past 20 bars, which you can see shows very little action,since the price had been ranging in a narrow channel for most of that time. The verticalred line on the right however shows an ATR point of 39 pips, which is considerablyhigher. This is so because the past 20 bars looking back from THIS point included somemuch taller candlesticks -- especially a single 91 pip bar. You may recall seeing thischart from Chapter 2.

The ATR is a measure of the volatility of the priceline over the past "X" chunk of time,in this case 20 bars. The actual real "clock time" that 20 bars represents depends on thechart that you're viewing. Since this is an hourly chart (see the "GBPUSD H1" tag atthe very top left corner?) this would be a measure of the past 20 hours of price action onthe British Pound vs. US Dollar. On a 5 minute chart these same 20 bars would bemeasuring the past 100 minutes of price movement. So it's all relative to the scale atwhich you are viewing the priceline. When you are using shorter timeframe charts youare essentially "zooming in" closer and closer to the moving tip of the priceline andseeing a more microscopic view of things. remember.

Because this average can represent minutes or weeks depending on the timeframe, if youset this up and play around a little bit you'll note potential range values typically such asthese (I'm displaying the Euro-Dollar as an example here, each pair must be analyzedseparately as they all have their different characteristics):

Monthly range: 600-750 pips (6 to 7.5 whole cents)Weekly range: 300-375 pipsDaily range: 130-150 pipsHourly: 20-35 pips15 Minute: 11-15 pips5 Minute: 4-5 pips

See what's happening here? The longer the timeframe the greater the room whichthe currency needs to roam around in, which is entirely logical, right? Currencyprices can only change so fast and they need time to move around, and so the larger theslice of time that you examine the greater they will have potentially moved.

These pip ranges tell us something else though don't they? They tell us approximatelyhow far we'll need to back our stop loss points out on any given trade in order to give ita chance to stay alive, and that will directly effect the amount of money that we willneed to place into the trade. Otherwise we risk being stopped out too soon... our deathby a thousand cuts dilemma, remember? Suppose we want to play for $2 a pip so that ifwe capture a 20 pip move we can at least make $40 bucks for our trouble. Heck, you

can set your lot size so small that you can play for 10 cents a pip if you want to (whichis great, btw, for testing out new trading strategies, etc.). I'm not against trading smalllots for experimentation like this, but for actual trading?

Comon, got to have at least $2 bucks a pip or I'm wasting my time!

Anyway, if I want to trade the daily chart then I should probably back my stop loss outfrom my entry price about 150 pips. At $2 a pip this means I must put $300 at risk. Does$300 represent 2% of my total account equity? It does if I happen to have 15 grand inmy account. If I have only $5000 then this trade represents placing 6% of my account atrisk -- somewhat larger, but not entirely crazy I don't think.

However, if I have only $1000 available, this same setup represents an unacceptable30% risk! Three bad trades like this and my entire account is toast! See how easy it isto get wiped out if you approach trading Forex without practicing risk management andmaintaining trading discipline? Temperament my friend, emotional control. We'll talkabout this subject in detail later in the book when we look at the psychology of trading.For now, let's work this problem backwards and determine how I should manage mymoney.

If my account consists of $1000 and I want to risk no more than 2% on any one trade,well that's $20 bucks. At $2 dollars a pip, that means I can set my stop out to amaximum of 10 pips. That's shaving it pretty close -- any more than that though and I'mpotentially losing more than 2% if the trade explodes in my face and hits the stop. Take alook at the above pip chart again and you'll see that you'll probably have to work on anhourly or shorter timeframe with a $1000 account in order to keep from putting too muchat risk per trade. You're pretty much scalping at this level, which is cool... it's how Ipersonally trade (of course, only because I'm impatient and hate having open tradesgoing -- I want them over and done with or I keep incessantly checking on them!...).

So remember this important principle: the less money you have to work with theshorter the timeframes that you must work on in order to avoid an unacceptablerisk per trade. Richie rich boy with his $500,000 bankroll can set up a weekly playwith his stops pulled out 500 pips and check back next week after he gets back fromholiday in Aruba to see how he did, you can't. Not with a small account anyway. Theless money you have to work with, the more you have to watch every trade like a hawk!

If you want to trade a larger lot size, well okay... but to stay within the 2% rule you'llnow have to cut your stops even closer. At $5 per pip (.50 lot size, a half standard lot)that $20 only buys you a measly 4 pips, which may in fact be too small and you'rebroker won't accept the trade because they have a 5 pip stop loss minimum. (You'll

discover that right away as the trade window will reject your order until you set thestop value out further.)

The solution here is obvious: you have to risk a greater percentage than 2% on a smalleraccount, or set your pip value down to under a dollar. So if we risk 5% of our $1000account now we have $50 at risk but at least we've got 25 pips available (at $2 per pip)for our stop loss setup, and we can reasonably play the hourly chart. Read all this againslowly if it went over your head and follow along with the math on a piece of paper --it's important that you understand all this.

So please do your own analysis of the particular currency pairs that you are consideringtrading using the ATR indicator and make a little chart like the one above. It's criticalfor you to know just how much "pip swing room" you will need to give the marketroom to breathe at that particular level and not just quickly stop you out. You willsoon begin to see and understand the relationship between how much money you have totrade with (your account size) and the timeframe at which you will likely be able to playwithout creating a lot of hairy-scary risk for yourself.

Small losses are part of the deal in Forex -- the trick is to make the winners bigger thanthe losers so that your account is always building equity. A stop loss set at -25 pips (ona BUY) means a take profit setting of +50 or +75 pips, comprende?

Another thing you'll need to develop a bit of feel for is the psychological level ofaccount drawdown that you're willing to tolerate. A very aggressive trader may bewilling to take on big risk to shoot for a larger reward. He may be ready to sustain adrawdown of 50% of his account to chase a trend that he's "sure" is overdue -- whereasa more conservative trader may only be willing to risk 5% max on ANY trade... nomatter what. Where do you fall on this scale? You may have to start trading with realmoney to find out -- a demo account of virtual money might not have the same emotionaleffect on you. Try getting a mini-account of a few hundred bucks open as soon as youfeel comfortable doing so and get to work managing your emotions.

Generally I would say that if you have a larger account over $25,000 you can play on adaily or perhaps even weekly level (on a less volatile pair), because you can easilyafford to back your stop loss points out 100-250 pips (at $2 a pip) without the risk ofexceeding the holy 2% rule (or $500 in this example). If you want to play for $5 a pipthen you are back down into the 100 pip stop loss range and trading hourly. At $10 perpip (produced by trading a standard $100,000 lot) $500 will buy you 50 pips of stoploss protection -- so now you have to watch that trade closely and maybe even fly itmanually. See how all these elements interact with one another? No aspect of the system

changes in isolation without affecting something else.

Summary: smaller accounts will likely force you to break the 2% rule and drive yourstops tighter into the 25-50 pip range, therefore dictating that you must play the marketon an hourly or even minute-by-minute basis. This is just one of the many tradeoffs andcompromises that you will be dealing with during your Forex trading career, which youwill discover to be a string of such never-ending (and exciting!) judgement calls.

And as for playing the Forex long term on a MONTHLY level? Forget it... that's forbanks, investment firms and perhaps for good old Richie rich boy who's busy pissingaway his trust fund. Not for sensible traders like you and I my friend!

Two Stage Trading for Maximum Fear And Greed Control

Here's a little trading method that I devised myself (although I'm sure it's been codifiedin a book somewhere else, I doubt that I'm the first guy to think of anything new in thisfield) which I call a 2 Stage Trade.

My 2 Stage Trade consists of two simultaneous trades opened together on a currencypair at the exact same price (or as close as you can get to it, since it will take a fewseconds to open a second open order window during which time the price will haveprobably moved a bit). These 2 trades will then run side by side.

Like a two stage rocket shedding it's first stage once it's spent all it's fuel, the first tradewill be terminated at a particular take profit point... 'locking-in' a nice solid profit.Meanwhile the second stage will be allowed to fly on and capture more of the move.What's nice about this 2 stage trading method is that it controls the emotional tug of warbetween fear and greed which messes up a lot of traders.

Here's how it works...

I determine what size lot I would like to trade and then split that value in half, or asclose as possible if it's an odd number. For instance, if I want to trade 0.4 lots, an actionthat would produce a pip value of $4, I would do so by splitting that lot in half andopening 2 trades simultaneously on the same pair for 0.2 lots each... rather than a singletrade at 0.4 lot size. If I wanted to trade 0.5 lots instead, I would set Stage 1 at "0.3" andStage 2 at "0.2" lots respectively. I like to make Stage 1 bigger because the smallertake profit point has a greater odds of being reached, and so I want a greater shareof my money there. For that matter you could make that first trade: Stage 1 = 0.3 andStage 2 = 0.1 if you wanted to keep more of your money on the stage that has the shorter

distance to "fly" in order to be successful. This would be entirely your personalpreference, I have no data to suggest that either way is superior.

As an aside, do you know how much margin it would require for me to have in myaccount in order to trade 0.4 lot (~ $40,000)?

At 50:1 leverage, I would have to place $800 of my account on margin -- meaning thatthis sum would be at risk and therefore unavailable either to withdraw or use in anothertrade. This $800 represents my 1/50th contribution to the trade -- with the brokeragelending me the other 49 parts, or in this case $39,200. You will of course use stop losspoints to keep the actual amount of money you have at risk on this trade FAR smallerthan $800. You will never be allowed to lose any of the brokerage's money, btw... theywill automatically close your trade out once you've lost 95% of your $800... if you werefoolish enough to trade without any stop losses! We of course NEVER trade thiswantonly, and so this is really all a moot point -- but I'm just trying to show you howthings work.

A Crash Refresher Course

Figuring margin is pretty straightforward... because a standard lot is $100,000, a lot sizeof 0.4 would mean I have $40,000 in play on the trade (100,000 x .4 = 40,000). Sincewe are getting 50:1 leverage from the broker, you divide the $40,000 by 50 and theanswer is your margin requirement, in this case $800. And as I mentioned, you areloaned the other $39,200. Large amounts of money like this must be used to trade inForex because the actual movements of the currencies on a daily basis is so small. A"pip" don't forget is only 1/100th of a penny, or 1/10,000th of a dollar, so you needto swap around large blocks of cash in order to make this even worthwhile doing.

There's a good book that I recommend in the appendix called Getting Started inCurrency Trading by Michael Duane Archer that explains all this Forex math in greatdetail with numerous examples. This book would be a great investment in youreducation and I would consider adding it to your library. Many Forex books areexpensive but this one is less than $20, so it's a great deal as well. This link will takeyou to Amazon.com listing:

Getting Started in Currency Trading by Michael Duane Archer

Okay then, the first thing we have to do to launch our 2-stage Forex rocket is to calculateour stop loss and take profit points. These are price levels where the software willautomatically close the trade when reached. Stop losses are set back in the direction thatwe DON'T want to see the price go and will therefore limit our loss to a predictableamount of pips in the event it does -- whereas take profit target points are set in thedirection that we're hoping the price goes and will close the trade out at a certainamount of profit once we get there.

So suppose we set our stop loss on these 2 trades (what I call a "common stop": the redline at 1.2645 along the bottom of the graphic) at -15 pips -- figuring this will give usenough protection from market noise at this timeframe. This is a judgement call that youwill make depending on many different factors such as your risk tolerance, a need toplace the stop behind a level of resistance or support that you think the price will not

cross, etc. The 15 pips is just an example. This whole example is a BUY trade by theway so the stops are set 15 pips BELOW the current price -- for a SELL trade youwould flip everything around and set the common stops at +15 pips above the sell-in orentry price. Just refer to the graphic below as you read through all this and it shouldbecome clear to you.

Using a conservative "times 2" money management principle means that our take profitpoints should be at least double this stop loss value, or +30 pips. So +30 above the1.2660 entry price is where we would place our Stage 1 take profit mark: at 1.2690.Our Stage 2 Take Profit would be set higher still, how much higher would be anotherjudgement call depending on how much potential you believe a coming move could be.In this example I will set the Stage 2 Take Profit point at +50 pips or 1.2710 (x3.2),but you could go even higher if you felt strongly about the likely move that was comingbased on your analysis. This profit is going to be all "gravy" anyway, as you'll soon see.

Now the first thing I want to do on a trade is see it get into profit ASAP and thenimmediately reset my stops to the breakeven point. This way if the price suddenlyexplodes back in my face I've lost nothing. A push is better than a loss any day, and sothat's my initial goal: protect against a loss! There is a danger of getting your tradestopped out for no gain if market noise snaps the price back to breakeven and then ittakes off again in your desired direction, but I would rather be kicking myself in the assover playing it too cautious than be counting my loses.

How YOU decide to manage this will be up to you of course -- you may be willing torisk a bit more to get your move going and so draw your stops back, and that's fine. LikeI said, playing the currency market is equal parts logic (analysis) and emotion (courage)-- so practice as much as you can with a demo account at first and then with a micro-account (using fractional lot sizes like .05 for instance, which makes the pip value 50cents) to find your own temperamental set point.

The Breakeven point by the way is always your entry price plus the spread. So if Ienter a BUY trade on the EUR/USD at 1.2660 as per our example, (a very liquid pairwhich has a small 2 pip spread), then my breakeven is 1.2662. Once the price hits thismark you'll see that your balance has moved from a negative number up to zero. As itcontinues to move in your favor the numbers will become positive and this is yourrunning profit. Every trade opens with you down by the spread of course, because thisspread in pips determines the difference between the price that you can buy a currencyat to open a trade vs. the price you can perform the reverse action (sell) in order toclose out the trade. This difference is the broker's commission and represents HIS profiton the trade no matter what happens to you!

Unlike stocks, commodities and futures trading, there are no set commissions in Forextrading other than this spread. Right now the Euro / US Dollar is the most liquidcurrency pair in the world and therefore has the lowest spread offered by most brokers.Other pairs like the Swiss Franc, British Pound and Japanese Yen are also majorcurrencies which have high liquidity and usually carry 4-6 pip spreads. As a trader,you always want this spread to be as small as possible so that you can get intoprofit quickly. Some exotic currencies like the Mexican Peso vs. the Singapore Dollarfor instance may have spreads as high as 20-30 pips... which means that you are DOWN20-30 pips as soon as you open the trade and have to recover all this loss before youcan even begin to see a profit. You better have guessed correctly if you're going to messaround with exotics! (Not me, gulp... I stick with the majors!)

Alright then, back to our 2 stage trade...

...but first all this talk of rockets and stagesreminds me of when we first landed on the moonback in 1969. Right after Neil Armstrong wentdown the ladder of the LEM and spoke his famouswords about the huge, amazing adventure being a"...giant leap for mankind", few people probablyremember that the very first order of business forthe 2 astronauts was gathering up a small quicksample of moondust and getting it passed back upto Buzz Aldrin -- who was waiting at the openlander door frame to receive it. Once Buzz tuckedaway the quickie lunar sample safely inside thecabin, he joined Neil out on the surface for an hourof low-gravity frolicking on the moon... NASAcalled this first pouch of rocks and dust a"contingency sample", and the idea was to get asmall bit of the lunar surface material immediatelystowed away just in case there was some

emergency like a spacesuit air leak that would have caused the two men to have to dropeverything and hustle back inside the safety of the lander. Fortunately things wentincredibly well for them and, well, the rest is history.

In the same way, my 2 stage trading method allows me to grab a "Contingency Profit"from a trade without having to surrender what I might feel is the lion's share of a muchbigger move by closing the trade out early. See, when you start trading Forex (andespecially if you're scalping short moves like this) there will be a battle going on inside

your head between Fear and Greed. Mr. Fear will want you quickly close out a tradeonce you get even a small way into profit because he's scared the price will snap backand wipe out everything he's gained in an eye blink (which can happen). But Mr. Greedwill be screaming at you to keep riding the trade to see if you can get more, more... andMORE!

The conflict between these two deeply felt emotions is what ruins many a trader -- theysimply can't deal with this sort of roller coaster of conflicting passions on a day-to-daybasis.

This is why the 2 stage trade is so ideal: I can set the Stage 1 profit target to areasonably small pip value (even x1) and be happy to see it hit and close out. Now I'vegot my contingency sample of moondust and Mr. Fear is satisfied! But there is no protestfrom Mr. Greed because he's still flying along on Stage 2, which hopefully continues toclimb on to the stars! I call this added gain from the second open trade the "GravyProfit".

The way I further protect my profits is to move both common stops (the red arrows) upto the breakeven point (1.2662) as soon as both trades make it about halfway (15 pips,1.2675) to the Stage 1 take profit mark. Then, once Stage 1 closes out while Stage 2continues to move in a favorable direction, I get that Stage 2 stop trailed up eventighter to shield my profits even more.

My goal is to get that Stage 2 stop set at the Stage 1 closeout point ASAP (+30 pips,1.2690 in this example). This locks in the exact same profit that I got from Stage 1...meaning that you now have made the same on the two 0.2 lot trades as you would havedone on a single 0.4 lot trade, except that NOW you've still got 0.2 lot in play and therest is all wavy gravy for Mr. Greed! Just study my little drawing and it should all beclear how 2 stage trading works, it's pretty straightforward.

Now all parties are happy and YOU can sleep soundly!

Keep Forex Trading Fun by Mentally Re-Framing Your Losses

So a trade blew up on you, your stops were backed out too far, you pushed the wrongbutton on an order window, and now you've taken a nasty loss. In any kind of freemarket that trades any sort of equity, it happens. A system that produced only winnerswould almost immediately collapse on itself as everyone in the world jumped in and"won" all the money out of the market, until there was nothing left. Can't happen, therehave to be losers. And we all get to take our turn at the wheel.

Now comes the profound part of trading -- the part where you get to see what you'remade of. The part that could be transformational if you play it right. That's becauseevery mistake we make in life can be either regarded as a hopeless random act of Fate,or as a learning experience... and none more so than when it comes to losing money.

Even if, in retrospect, the reason is some painfully obvious flaw in your thinking orcalculations that should've never happened, you can be sure there will be something ofvalue to be found in the smoldering rubble which will be worth filing away in the ol'memory bank. Engineers have this saying about living with a highly complextechnological system like the Space Shuttle: that they "get smarter" as both theirknowledge and decision-making ability matures over time as they continue to fly thesystem and 'wring out' all its idiosyncrasies.

This is the exact same attitude that you need to adopt for yourself in order to keepan even keel in the face of the inevitable setbacks that you will encounter tradingForex. These losses need to be re-framed in your mind and viewed as tuition paymentson your trading education, rather than failures to beat yourself up over. Engaging in thelater will have you dropping out of "school" in very short order and must be avoided atall costs.

Because Forex involves the movement of money, which is mostly done in private withno prior announcement, there is a built-in element of uncertainty that can never beremoved -- and this uncertainty can stress-out many undisciplined traders who approachForex more like a blackjack game than what it really is, an investment vehicle. Okay, Irealize it's not like buying a stack of bonds and sitting on them for 10 years, or opening asavings account and getting 1% interest and a free travel bag. You have to activelycreate your own interest rate using your ingenuity and trading savvy, and there's even arisk of creating a negative interest -- but you knew that going in, right? Well at least youdo now.

The world of Forex trading is one of fast money and high risks. When I first startedplaying around in Forex, I made stupid trades, left trades open overnight only to findthem stopped out for a loss in the morning... made quick trades after an entire 2 minutesof "analysis" and got crushed. As the negative thinking and uncertainty crept up andbecame more intense with each bad trade, I began to lose my confidence and startedtrimming down my lot sizes -- not out of a need to practice good money management, butout of simple fear.

And all this just messing around with a virtual demo account! But I soon discovered thata demo is an accurate emotional simulator as well as a practical training tool.

I soon lost all confidence in my ability to predict the market -- and for a time actuallycontemplated flipping a coin to generate buy and sell signals! I figured, what the heck?...couldn't be any worse than I was already doing, right? This kind of irrational, fear-centered thinking will lead to a complete loss of faith in the fairness of the marketitself after a while. I even began bailing out on winning trades too early because Iwould think: "My luck won't hold, it's coming back in my face in another second, get outnow!..."

But then I got hold of my frazzled emotions and went back to square one, and begantrading small. I made sure I was setting up trades with a 2:1 stop loss-to-take profit pipspread and maintained those stops with firm discipline. Soon things stabilized andstarted to get better. But only after I'd taught myself how to handle the ups and downs ofthe market because, while I was fascinated by the technology of trading, the action ofputting money on the line was becoming too stressful for me. My 2 stage trading patternthat I just showed you grew out of a need to control this stress, in fact.

Another reason I'll bet a lot of rookie traders get themselves into trouble is because --while they may say they have some solid plan to trade by -- they make exceptions totheir own rules far too often and eventually go off the rails. Once a trade is open and thepriceline gets to whipping around, fear takes over... and the plan goes flying out thewindow! Or maybe there really was no plan at all but just some fantasy of what wouldlikely happen -- and when it doesn't, panic takes hold.

The way to get around all this anxiety is to practice small and slowly desensitizeyourself to fear by exposing yourself to the "stressor" (trading!) as frequently as you canmanage to. Again, re-frame your thinking and consider your early losses "tuition"...the cost of schooling yourself up in this 'wild west' of foreign exchange currencytrading.

You're like an old timer mining a gold stake in the 1850's California -- never knowingfor sure if your own personal boom or bust is just around the corner.

In Forex, that's just the way it is.

* * *Some Closing Thoughts

Well I hope you enjoyed this introductory peek into the universe of foreign exchangecurrency trading, and that you have a little better understanding of some of themechanics of Forex and a realistic grasp of the potential that it holds. My hope is thatwhat you've just read will help you decide if investing in the currency markets issomething that you may wish to become more involved with by clearing up some of yourquestions.

I've tried to show you a little bit of what goes on under the technological hood ofcomputerized trading by making the scary financial math a bit less bewildering, andfinally, by addressing some of the misconceptions and fantasy elements that havesurrounded Forex in recent years.

With the downturn in the American and global economies triggered by the collapse ofLehman Brothers and the subsequent freeze-up of the credit markets in late 2008, theworld of investing has become shrouded in uncertainty and fear. This is especially sofor the "little guy" -- who for the most part has depended on professionals to manage hisfinances and his future. What we are seeing happen now I think is a convergence oftechnology in the form of widespread computing power... coming together with adisillusionment in the ability of established institutions that we'd once trusted to takecare of our money for us.

I believe that the explosive popularity of retail Forex trading in the past few years hasmuch to do with the desire to seek a workaround to the uncertainties inherent in handingyour money over to an investment company and letting them manage your portfolio like a"black box" without your having any detailed knowledge of what they're actually doingwith it.

Ask anyone whose IRA has recently been steamrolled along with their retirement planshow well all that's been working out.

People want to sit at the controls and manage their own investments now, as wasapparent even before the economic crash with the enthusiastic embrace of online stocktrading. The move to retail Forex is the natural second stage in that transformation Ibelieve, brought on by this marriage of technology and what many of us may now feel isa practical necessity.

And fueled, in the final analysis, by our relentless optimism for a better and more securefuture.

* * *Please take a look at this excellent MetaTrader Software Video Training

Series, a terrific value!

The MetaTrader Quick MasteryVideo Training Series

Many of today's best Forex brokers exclusivelyoffer the MetaTrader software as a platform fortheir retail traders, and so you will need tobecome skilled with it. MetaTrader is yourgateway into the Forex marketplace from thecomfort of your home computer, the place whereyou will analyze the market with a real-time datafeed and execute your trade orders.

If you're new to Forex and still a bit uncertainabout all the various "hidden" aspects of theMetaTrader software, you will find thiscomprehensive hands-on video training seriesextremely useful. After watching just a few shortlessons you will possess a complete understandingof how to use the many powerful analytical

features of MetaTrader quickly and effortlessly and get your trading career operating atfull power.

The MetaTrader Quick Mastery Video Series includes 21 videos with a total trainingtime of over 5 hours, plus a 56 page .PDF workbook. But it's more than just a softwaretutorial: there's a 6 part live example of a position trade monitored over several days,PLUS an eye-opening discussion of a fascinating trading strategy called correlationtrading - which is not widely understood even by many experienced traders. Here's asummary of the video contents:

Videos 1-11: Menu-by-menu Software Orientation and TrainingVideos 12-18: Live Multi-day Forex Trading DemonstrationVideos 19-21: Auto-trading and Correlation Trading

Program Highlights:

* Downloading MetaTrader and Quick Start Tutorial* Template and Profile Basics* Indicators, Charts, Tools, Menu and Windows Tutorials

* An Introduction to Risk Control and Money Management* Multi-day Live Position Trading Example, Parts 1 - 6* Understanding How to Read Support and Resistance Levels* Installing Custom Indicators and Expert Advisors* Correlation Trading Secrets

Forex Correlation Trading

I would like to emphasize the very important video oncorrelation trading: here you will learn a little known butcrucial fact about the Forex market that very fewexperienced traders even realize exists: the way in whichdifferent currency pairs - for example the EUR/USD andUSD/CHF - form mirror images of one another with theirprice charts. There exists a striking correlation betweendifferent pairs of currencies that you might think would beunrelated.

You'll see how to use this knowledge to offset your risk by carefully opening both BUYor SELL positions in two correlated currencies at the same time. By doing this youessentially create what's known as a "synthetic security" which allows you to partiallyhedge one position against the other, thus controlling your risk much more tightly andimprove your profit potential on every trade.

Also included with the 21-part video series is a Forex Quick Start Blueprint e-workbook. It will show you how to trade the currency market beginning as a small-time"hobbyist" speculator, and then build steadily upward from there. Loads of tradingcharts and illustrations for complete hands-on training.

The MetaTrader Quick Mastery Video Training Series is truly a wonder considering thetime it will save you trained on the world's best FREE trading application, one used bybrokers all over the world.

Order direct from Clickbank, the net's most trusted payment processor since 1998, only$19.95.

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Disclaimer

Please Read this Disclaimer...

Trading in the foreign exchange markets carries a fair amount of uncertainty and may notbe suitable for everyone depending on your tolerance for risk. The high degree ofleverage offered by Forex brokers (50:1 or more) can also work against you as well asfor you, so before getting involved in Forex you should learn everything you can andopen a practice account at any Forex broker (just Goggle up the one you like best). Thepossibility always exists that you could wipe out much of your account if you startplaying too recklessly. Do NOT invest money that you cannot afford to lose.

The information presented in The Forex Lifestyle is for educational purposes only andis not intended to provide financial advice. Nor is it to be considered any sort ofrecommendation to buy, sell or hold any particular position in the market. Anystatements about profits or income, expressed or implied, in no way represents aguarantee. No representation is being made that any method outlined in this book willproduce profits without risk of loss.

You should accept full responsibility for your decision to trade Forex and for any lossesyou may incur while doing so, and you agree to hold Kipling Kat Publishing Co. USAand the Author harmless for your actions.

PLEASE ONLY USE DISCRETIONARY CASH FOR TRADING FOREX

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