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Future Success © Copyright Future Success & Daniel Dwase All Rights Reserved www.future-success.org Forex for Beginners: How to Make Money Trading Forex

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Page 1: Forex for Beginners: How to Make Money Trading · PDF fileForex for Beginners: How to Make Money Trading ... it from the comfort of your home, ... This represents where a particular

Future Success

© Copyright Future Success & Daniel Dwase – All Rights Reserved www.future-success.org

Forex for Beginners:

How to Make Money Trading Forex

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© Copyright Future Success & Daniel Dwase – All Rights Reserved www.future-success.org

General Disclaimer

Any and all information provided within this book is for general information purposes

only and are only the opinions of its author. They are not recommendations to buy or

sell any types of investments. We are not Financial Advisors. We do not warrant the

accuracy, timeliness or suitability of any information provided nor should any of the

provided information be deemed to constitute financial advice or recommendations by

us. It is also not meant to be investment advice or recommendations to establish market

positions. We recommend that independent professional advice is obtained before you

make any investment or trading decisions.

Limit of Liability / Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult a professional where appropriate. Neither the publisher nor the author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. Risk Disclosure: The information in this book is for educational purpose only. Past

performances do not guarantee future results. FOREX Trading involves substantial risk

and there is always the potential for loss. Your trading results may vary. Trade only

capital you can afford to lose. We assume no liability for losses incurred using the

information in this book.

Copyright © Future Success & Daniel Dwase

All rights reserved. No part of this work may be reproduced in any material form

(including photocopying or storing in any medium by electronic means and whether or

not transiently or incidentally to some other use of this publication) without the written

permission of the copyright holder except in accordance with the provisions of the

Copyright Designs and Patent Act 1988. Applications for the copyright holder’s written

permission to reproduce any part of this publication should be addressed to the

publishers.

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How Do You Make Money Trading Forex?

Forex trading is the buying and selling of international currencies. Traditionally, participation in the Forex market was confined to major banking and trading institutions. But in recent years, technological developments have opened up this once exclusive arena to smaller companies and even individuals by allowing them to trade currencies online. All you need to start trading Forex is a computer and an Internet connection. You can do it from the comfort of your home, in your spare time without leaving your day job. And you don't need a large sum of money to start, you can trade initially with a minimal sum, or better off, you can start practicing with a demo account without the need to deposit any money. Once you consider to start Forex trading, one of the first things you need to do is choose a broker, choosing a reliable broker is the single most critical factor to Forex success. There are dozens of online brokers out there but your best bet is to go with one of the leaders. Here’s an online broker that is very reputable and is most suitable for beginners and pros alike… XM.com - The best broker for traders from all over the world (If the link doesn't work, copy and paste the following URL into a browser: http://www.future-success.org/xm Now I would strongly encourage you to go and visit these broker's sites right now even if you are not yet decided whether you want to go into Forex trading. Why? Because they provide tons of free educational materials, videos and best of all a demo account that allows you to practice Forex trading for free without the need to deposit any money. It has several different account levels that make it easy for anyone to open an account. XM is an excellent broker suitable for beginners and pros alike. Simply go to the broker’s website, register for a free demo account and start "trading" - by actually practicing and experiencing it firsthand you'll be able to decide whether Forex trading is for you. In any case, before starting to trade for real, it is advisable that you practice with a demo account. Once you build some skill and feel more comfortable with the system you can start trading gradually with real money.

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The Basics of Forex Trading

The world‘s currency rates are not fixed. They follow a floating exchange rate and are always traded in pairs— Euro/Dollar, Dollar/Yen, etc. Most international transactions are exchanges of the world‘s major currencies. When it comes to Forex trading, there are a number of major currency pairs: Euro v. US dollar, US dollar v. Japanese yen, British pound v. US dollar, and US dollar v. Swiss franc. These currency pairs are considered major in comparison to the other currency pairs because of their trading volume. In the Forex market, these relationships are shortened: EUR/USD, USD/JPY, GBP/USD, and USD/CHF. They may also be listed as follows (without the slash): EURUSD, USDJPY, GBPUSD, and USDCHF. Below is a chart of 4 major currency pairs clearly illustrating their relationship to each

other.

It is also important to remember that there are no dividends paid on currencies. If you are a trader in the Forex market, you look to see whether one currency‘s value will appreciate against another currency. When this is the case, you exchange the latter for the first. Ideally, you will be able to exchange the first currency for the other at a later time and collect a profit from the trade. Forex transactions are typically conducted by professionals at major banks and brokerage firms. Forex trading has long been an important feature of the international market. At all hours of the day, currencies are being traded by brokers around the

world.

In fact, the Forex market operates virtually twenty-four hours a day and five days a week with traders at international banking institutions working a number of separate shifts.

EUR/USD Daily Chart

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The Forex market is different from the normal stock market in the fact that price shifts are much smoother and do not result in significant gaps. Each day the Forex market turns over trillions of dollars, allowing traders to enter and exit certain position very easily. As you can see, the Forex market is a dynamic and continuous system that basically never sleeps. To be sure, even on September 11 in 2001 it was still possible to obtain currency quotes. The foreign exchange market, which is usually known as “Forex” or “FX” is the largest

financial market in the world. Compared to the measly $22.4 billion a day volume of the

New York Stock Exchange, the foreign exchange market looks absolutely gigantic with

its $5 TRILLION a day trade volume.

Check out the graph of the average daily trading volume for the Forex market, New York

Stock Exchange, Tokyo Stock Exchange, and London Stock Exchange:

Trades are brokered between major banking groups and circulate around the globe, from America to Australia, to Asia, to Europe, and back to the U.S. For a long time, financial prerequisites and hefty minimum transaction amounts put the Forex market out of reach of small traders. Consequently, at one time major banks and financial institutions were the only parties that could benefit from participation in the Forex market‘s fluidness and strong exchange rates. Today is a different story. Forex market dealers can divide large units within the market, allowing smaller corporations and even individuals the ability to trade these smaller units. Even though it is the oldest financial market in the world, the Forex market has evolved a great deal in a short amount of time.

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High-speed internet connections and sophisticated online Forex trading platforms has definitely made it easier for individual traders to get involved in Forex trading and possibly be very successful at it.

Advantages of Forex Trading

Around the clock market: A trader can trade anytime that they think market conditions are favourable. Forex offers a 24-hour market. This is particularly convenient for those who wish to trade Forex on a part-time basis. You could easily find markets to trade that will not conflict with your work schedule. There is basically no schedule that the Forex market‘s trading hours can‘t accommodate. Easy in-Easy out: A trader can enter or exit the market almost totally at will; no other market offers as much liquidity. There are very few execution barriers and no limits are placed on daily trading. The leverage available in Forex is much higher than equity markets. A leverage ratio of up to 400:1 in comparison to 2:1 in the equity markets. Although the risk of using greater leverage can be higher in FOREX trading, the potential for profit is there as well! A low-cost transaction: Compared to other markets the Forex market has some of the lowest transaction costs available. Always an opportunity to profit: Forex trading actually consists of buying or selling one currency against another, and there is always a profit opportunity for one currency pair or another.

Global market: With no organized exchanges like the New York Stock Exchange, trading is facilitated by electronic communication and telephones. No market monopoly: Because of the size of the Forex market, no single trader or bank can control the market price for any length of time. Because of the ineffectiveness of bank interventions to manipulate prices, they have diminished. It is basically unregulated: There are no specific Forex regulations for daily operations. Of course, banks are always regulated through banking laws. There are also many different advantages to trading Forex instead of futures or stocks, such as: There are no exchange fees and no commission: You pay exchange and brokerage fees in the futures market, but Forex trading is commission free with most Forex brokers. You benefit from free access to this worldwide network where buyers and sellers are matched almost instantly. Although the trading is commission free, the spread (difference between the asking price and the bidding price) is larger than futures.

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Guaranteed stops and limiting risk: Unlike the sometimes unlimited risk involved in the futures market, Forex is said to have guaranteed stops that can be utilized to limit risk.

Reasons To Trade In The FOREX Market If you asked Forex traders the number one reason they traded Forex most of them would say, “profit potential”

Daily GBP/USD Data

The chart above shows the daily GBP/USD (British Pound/US Dollar) currency pair. This chart shows the ―BUY entry where the blue arrow is (the bottom left of the chart). This represents where a particular Forex trading system went long (bought). The profit so far in this trade is approximately $20,000 per Forex contract. This is from just one simple trade in the Forex market! So as you can see the profit potential is there and opportunities such as these exist in all Forex currency pairs. There is a unique and potentially very profitable opportunity offered through cash/spot Forex markets regardless of the condition of the market.

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Basic Forex Terminology

Pip: Pip stands for “Percentage in point”. In the Forex scene, the words “Pip” and “Point” are interchangeable. A pip is measured as the fourth decimal place of the exchange rate. For instance, a currency quote may look like this: GBP/USD 1.6505 The 5 is the fourth decimal place and the price increment that we are trading. The only exception to this is when there are trading pairs that include the Japanese Yen (JPY). When the JPY is traded the exchange rate will only have two decimal places. It will look like this: USD/JPY 91.57

Principle: When the chart is up, the base currency is up and the quote currency is down. When the chart is down, the base currency is down and the quote currency is up.

Long/Short

First, you should determine whether you want to buy or sell.

If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader’s talk, this is called “going long” or taking a “long position.” Just remember: long = buy.

If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called “going short” or taking a “short position”. Just remember: short = sell.

Bid/Ask

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All Forex quotes are quoted with two prices: the bid and ask. For the most part, the bid is lower than the ask price.

The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency. This means the bid is the best available price at which you (the trader) will sell to the market.

The ask is the price at which your broker will sell the base currency in exchange for the quote currency. This means the ask price is the best available price at which you will buy from the market. Another word for ask is the offer price.

doing so you have bought U.S. dollars in the expectation that they will appreciate versus the Swiss Franc.

If you believe that the U.S. housing market weakness will hurt future economic growth, which will weaken the dollar, you would execute a SELL USD/CHF order. By doing so you have sold U.S. dollars in the expectation that they will depreciate against the Swiss franc.

Trend Trading: The Ultimate Trading System

When you are a trend trader, you follow a trading system and you stick with it for the duration that the system requires. You also trade with the trend not against it… as the saying goes “the trend is your friend”.

Don't get me wrong, trend trading isn't rocket science. It is a tried-and-true investment strategy that has made billions of dollars over decades.

It uses various indicators to determine market trends and benefit from both sides of that market, enjoying the profits from both ups and downs of the markets.

This up and down movement, the volatility, is what makes successful trades, rather than how well the market is doing on a given day.

We all have an idea in mind when we hear the word "trend," but for investing, it's about much more than what is "hot" at a given time like Summer Fashions or current video games.

It's more about sticking with a system and its trends, as it is about spotting a trend.

It's about using a system, sticking with that system no matter what until you ride out the trend, and you can make profits similar to world class hedge funds.

For example, Warren Buffett is a very famous trend trader and it's not unusual for large funds to make over 1000% profits. Really.

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My Elite Trend Trading Strategy

Using a "trend trading system" is the best way to make money as a Forex trader, and it’s also the best path for beginners and those who have yet to be consistently profitable. The reason why is that trending currency pairs are more stable, more predictable, and more forgiving if you make mistakes. Here's the trading setup…

Timeframe: 15 minutes & 1 hour

In this system, we use 60-period Simple Moving Average (60 SMA) applied to the Close.

Entry Rules for Buy (Long) Trades:

Enter a buy (long) trade when prices cross above 60 SMA (blue line) to the upside. The

ideal entry point is right after prices break above 60 SMA line.

60 SMA

The ideal entry point is right after

prices break above 60 SMA line.

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Entry Rules for Sell (Short) Trades:

Enter sell (short) trade when prices cross below 60 SMA (blue line) to the downside.

The ideal entry point is right after prices break below 60 SMA line.

This system is trend-following in nature, guaranteeing you will never miss a major move. The system buys rising prices and sells falling prices.

Patience If there's one thing I've seen destroy traders, it is a lack of patience. If your trade setup isn’t producing any good signals, then just sit and wait. The person who makes the most money is usually not the person who trades the most. Patience = Profits!!! Follow the sequence of test. If any of the tests fail then move on. Yes you WILL miss out on a few good trades here and there, but so what. You don't win any prizes for making the most trades. You will however win the prize of financial freedom if you learn to be extremely accurate and profitable.

The ideal entry point is right after

prices break below 60 SMA line.

60 SMA

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Golden Rules of Forex Trading

Here are some golden rules I would like to set out that I have found many successful

traders use.

Rule #1: Only use money you can afford to lose It’s virtually impossible to succeed in the Forex market if you trade with “scared money”. One of the keys to successful trading is mental independence. So only use money you can afford to lose.

Rule #2: Get real ASAP

Demo accounts are not real. If you ever tried to pay your bills with your demo profits you will know what I mean. Also, demo accounts can be a shill game of sorts; they're sometimes not as time sensitive as real accounts and therefore give the impression that time sensitive trading systems, such as short-term moving average cross-overs, can be consistently profitably traded; once you start dealing with real money reality is quick to set in. Rule #3: Set your risk level How much are you prepared to risk on any one trade? This point must be well defined in your trading plan. How much of your portfolio are you ready to invest in a given trading period? Never risk more than 1-2% of your trading capital. The key here is that any time during a given trading period, you happen to hit the mark that you have set for loss, you get out right then. There should be no waiting to see what will happen.

Rule #4: Define your goal Just like setting your risk level, you should also set a goal for profit. At what point would you consider that you have gained enough profit to get out? Aim for 20 points per trade.

Example Trading Plan

I am buying/selling GBP/USD because _______ (prices have broken

above/below the 60 SMA). I will only risk 1% of my trading capital.

My profit target is _____ (20 points per trade). I will exit this trade

immediately when I reach my profit target.

Winners are those who stick with their

written plans and know when to pull the trigger.

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Rule #5: Set entry rules At what point do you want to enter the trade? Of course, the point is to enter low and exit high; however, how low must it be before you will enter? Watch for the signals to enter at your set point and don't let your feelings or apprehensions get in the way. Rule #6: Never Be Afraid of Taking Profits If you find yourself getting out of a trade at a profit and the trend continues, then let the other traders out there fight over the last part of the move. At least you will have made a profit, which is a lot better for your account balance than making a loss! If you continue to worry that you are missing out on profits after you exit, then you could design and test a re-entry technique that you can build some confidence around. If you find yourself making profits on a daily basis then it’s going to be very difficult to lose money in the long term. So, as long as you’re making more profits than losses, you shouldn’t worry too much about taking profits a little bit early sometimes. Rule #7: Keep accurate records If you were successful at a trade, you will want to know how you did it so that you can do it again. Keeping records of your trades will help you to research your efforts and help you to become a better trader by revealing your habits, whether good or bad. Rule #8: At the end of the trading period, always add up your profits and losses. This is a must for keeping accurate records as well. It will also let you know where you stand.

Rule #9: Concentrate on major currency pairs

It gets far too complicated to keep tabs on more than one currency pair when you first start trading. Stick with major currency pairs.

EURUSD GBPUSD USDJPY

NZDUSD USDCAD AUDUSD

Forex Trading is NOT a Get-Rich-Quick Scheme

Forex trading is a SKILL that takes TIME to learn.

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The Power of

Compounding

Compounded Forex Profits

You are going to take advantage of the one central investment strategy that’s

mathematically certain to produce a fortune over time. I’m talking about

“compounding”.

Compounding is referred to as “the most powerful force in the universe,” “the royal road

to riches,” and “the greatest mathematical discovery in human history.”

Albert Einstein said that compound interest is the greatest invention in the history of

mankind and called compounding the eighth wonder of the world. Compounding is a

simple investment strategy in which you put your money in an investment that pays a

return.

At the end of the month/year, you take your return and reinvest it with your original

stake. Your dividend, or interest, earns a return, too, building a bigger dividend—or

higher interest payments—the next month/year.

A snowball is the best analogy for compounding. As you roll the ball through the snow,

the surface area gets bigger.

The more surface area on the snowball, the more snow it picks up. The snowball gains

mass slowly at first... but pretty soon, it’s so large you can’t move it. Compounding is

slow and boring at first. But gradually, the dividends grow, and your reinvestments

increase.

One day, you wake up to find your account producing thousands of dollars per month in

dividends and your wealth a giant snowball.

Even a relatively modest return of 1% per month can make you rich if compounded

over a long enough period of time. Obviously with this strategy you are going to make

more than 1% per month, but even with just 1% per month you can really start to make

substantial profits in your trading account.

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This strategy is a compounding strategy that generates cashflow month after month. It’s

very ethical and legal and I think you are going to see the power of it in this section.

Averaging 10% per month and re-investing the income…

For compounding to work, you need to:

Start now. Invest regularly. Be patient.

Patience

The thing with the Elite Forex Pro Trading System is that it only takes 5-10 minutes max

to actually do it per day and once you get good at it, it takes even less. It’s very hard to

be patient.

What you need to learn is patience. You can double your money in about 15 months if

you’re getting 5% per month. That’s pretty powerful. In less than a year and a half you

would have doubled the money you started with.

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It is a game of patience, and it rewards the patient and punishes the impatient. If you

are impatient and you get greedy you are going to get burnt.

Be patient and allow the power of compounding to take effect. It’s one of those things

you must learn as an investor.

For more info go to…

www.future-success.org

or call

Daniel on 07960511057,

Josephine on 07930617036

Or email

[email protected]