Forex trading strategies obviously play an important role when you work with the best forex brokers. If you are looking for some forex strategies to apply to your trading plan, here are some forex trading strategies PDF that most traders in this market use. Price action trading - learn a new strategy now. Forex scalping strategies - forex trading strategies for beginners PDF. Scalping is a popular trading strategy that focuses on smaller market movements.

This strategy works by opening a large number of trades with the aim of making a small profit on each trade. As a result, scalpers make better profits by generating large numbers of small words. This trading strategy is the exact opposite of holding on a position for a long time, days or even weeks. Scalping is very popular in Forex due to their liquidity and volatility. Investors looking for constantly moving valuation field variations to capitalize on small-incremental turns for swing trading.

This type of trader tends to focus on profits of around 5 pips per trade. However, they hope that a large number of trades will succeed because profits are unchanged, stable and easy to achieve. One defining downside of the job expansion rate is that you can't stay in a trade for too long. In addition, the conventional scaling model requires a lot of time and annotation, as you have to constantly analyze the charts looking for opportunities for new trades.

Now let's demonstrate how scalping works in practice. The ratio trading strategy is based on the idea that we are looking to sell any attempt of the price movement to move above the period moving average MA.

In about 3 hours we created 4 trading opportunities. Each time, the action rallied above the period moving average slightly before pivoting lower. The stop loss is 5 pips above the moving average, when the price does not exceed the MA more than 3. The take profit level is also 5 pips because we focus on getting a large number of successful trades with smaller profits.

Thus, 20 pips total was collected with the scalping trading strategy. Day trading involves the process of buying and selling currencies in just 1 trading day. While applicable on all markets, day trading strategies are mainly used in Forex.

This trading method recommends opening and closing all trades within one day. Not keeping any positions overnight reduces the risk. Unlike those who use scalping strategies, day traders often monitor and control the open trades during the day. Day traders mainly use the 30 minute and 1 hour time frames to generate trading ideas. Many day traders tend to base their trading strategies on news. Scheduled events like economic statistics, interest rates, GDP, elections, etc. In addition to the limit placed on each position, day traders tend to set a daily risk limit.

This helps protect your account and capital. This trading strategy is based on finding horizontal support and resistance lines on the chart. In this particular case, we focus on the resistance area as the price is moving up.

The price movement attaches to horizontal resistance and immediately swings lower. Our stop loss is above the previous high to allow for a minor breach of the resistance line.

Therefore, the stop loss is placed 25 pips above the entry point. On the other hand, we use the support level to place a Take Profit order. Ultimately, the price action pivoted lower to give us around 65 pips of profit. Position trading is a long term strategy. Unlike scalping and day trading, this trading strategy mainly focuses on fundamentals. It is one of the successful forex trading strategies PDF.

Weak market moves are not tracked in this type of strategy as they have little effect on the broader market picture. Position traders have the ability to monitor central bank monetary policies, political developments and other fundamental factors to identify cyclical trends. Effective position traders may need to open only a handful of trades during the course of the year.

However, the profit target in these trades can be as little as a few hundred pips per trade. This trading strategy is reserved for more patient traders as their positions can take weeks, months or even years to take effect. Price action trading is trading based on the study of price history to build technical trading strategies.

Price action can be used as a standalone technique or in conjunction with an indicator. The fundamentals are rarely used; however, they are still used in conjunction with economic events and are an important factor.

There are several other strategies that fall within the price action framework as outlined above. Price action trading can be used for different time periods long term, medium term and short term. The ability to use multiple timeframes for analysis makes price action trading popular with many traders. Trading between price zones is about identifying support and resistance points.

Accordingly, traders will make trades around these support and resistance areas. This strategy works well in markets with no significant volatility and no obvious trends. Show me exactly how you want something done and after a few lessons, I will do it automatically. I am the servant of great people, and alas, of all failures as well. Those who are great, I have made great.

Those who are failures, I have made failures. I am not a machine though I work with the precision of a machine plus the intelligence of a person.

You may run me for profit or run me for ruin — it makes no difference to me. Take me, train me, be firm with me, and I will place the world at your feet. Be easy with me and I will destroy you. All you need is to have your live account verified! Of course, you need to open a live account USD30 from each Forex Broker Below.

Both Forex Brokers have excellent rating! Broker 1. The trick is to ensure that your losses are kept small so that you do not harm both your trading account and your state of mind. A trader does not have to be right. It does not matter at all whether he or she is right or wrong; what counts is whether he or she is profitable in the long run. Traders should not be hung up on the outcome of single trades, or even a few trades, as trading performance has to be assessed over a period of time.

What matters is that you end up profitable over a period of time. Once you place less emphasis on being correct on a current trade, your fear of making wrong decisions should abate, thus enabling you to make better trading decisions without feeling burdened by the overwhelming pressure to be correct in that trade. Remember that there will be times of losses and times of profits, which is why it is so important to enter only trades that have a high probability of success.

Focus on the big picture Do not get caught up in feeling invincible or pessimistic after a win or a loss. As trading is a very highly charged and emotional activity, it is very easy for traders to oscillate between emotional highs and lows. The outcome of just one trade should not affect your overall performance, unless you have violated proper risk management guidelines by betting the farm on a single trade or by over-leveraging.

A trade is just one of many trades. When you are wrong on one trade or several trades, try not to beat yourself up or feel regret. Instead, analyze to see where and how you could have done better in those trades or what mistakes you may have made, and record what you have learnt from them.

If there was really nothing that could have been preventable, just accept that the market is unpredictable. The outcome of one or a few winning or losing trades should not be magnified. Other trades will surely come. I strongly believe that once a trader has honed his or her trading skills, the ultimate factor that will affect his or her overall profitability is money management skills.

Money management is all about managing the possible risks, and it is the defining factor that separates winners and losers in forex trading. Novice traders think of how much they can harvest from the market; experienced traders think of how much they can lose to the market. Many traders are so eager to trade to make big money that they completely overlook money management.

Poor money management also explains why so many traders get wiped out by the market. Money management is about fully optimising your trading capital. It allows you to be proactive in managing risks, and to cope with trading losses — which are part and parcel of the game. It is an essential tool to ensure that you will have more than enough to last another day in the trading game. No matter how good a trading system may be, there will be times when you will experience a series of losses.

Success comes to those who have set down rules for money management, and have the discipline to follow them through their trading. Preserve your capital The shining light that attracts all traders to the forex market is the prospect of being able to grow their money by tapping into the online trading platform as their own in-house money tree.

In almost any field, it is true that most people are drawn to short-term benefits, but are myopic when it comes to long-term planning.

Trading is no exception. When risk capital is put aside for trading, you are hoping that this amount of money could be transformed into a much bigger amount; otherwise, what would be the point of risking it? But if this capital runs out, what can you bank on to make your desired profits? After all, money begets money. To drive home the importance of capital preservation, I will discuss the concept of drawdown, and how that is relevant to money management.

In other words, it is the amount of money that you lose — it is usually expressed as a percentage of your total trading equity at any given time. Drawdown is not an indication of your overall trading performance, as it is calculated when you have a losing trade against your new equity high or your original equity, depending on which is higher.

Recovering from drawdown As drawdown gets bigger and bigger, it becomes increasingly difficult to recover the equity. Many people are not aware that in order to recoup the percentage of equity that they lose, they will need to gain a bigger percentage just to break even. The answer is no. It will require an Let me show you with numbers. OK, that is not scary yet, but if you start losing more and more of your capital bigger and bigger drawdowns , the faster you will go down the rabbit hole.

While many traders hope for that One Big Win that will magically transform them into millionaires overnight, they are more likely to be confronted with the One Big Loss that will threaten their survival in the forex market if they do not exercise careful money management.

If a trader has a big loss, he or she will have to spend more time to get back to where he or she was before, instead of using the time to make profits. Traders who burn out quickly in the market are those who do not show respect for risk. On the other hand, traders who have flourished are those who fully understand the importance of stringent money management and incorporate that into their trading approach.

There is no way around to recouping slowly, unless you want to drive yourself to total destruction by risking more and more of your equity to try to make back your losses. Holding on to a losing trade for too long is the biggest cause of a big drawdown. Be well-capitalised Most new traders run out of money even before they see any profits in their trading account. Indeed, those who are new to trading most likely do not have a good understanding of the risks and dangers that are lurking in the market, and few even know what drawdown means or have even heard of this word.

Many of them do know that trading can be very risky if they do not know what they are doing or how things work in the currency market and, to them, one of the obvious but incorrect ways to limit this risk is by allocating just a small amount of money to their trading account. There are also many new traders who begin their trading business with little initial capital as they simply do not have enough money.

Whatever their reasons may be, being under-capitalised will be more than just a mistake; it is often the prelude to trading failure. Forex traders who want to set themselves up for success must be well-capitalised. Never mind that some retail brokers are offering a minimum account deposit of just a few hundred dollars — a paltry amount that almost every one can afford. Sufficient initial capital must be available to cushion the impact of a string of consecutive losses, so that you do not wipe out your trading account.

A series of losses is really not that uncommon in trading, and all traders must be financially prepared for it. Those with insufficient trading capital tend to set really tight stops, which will naturally then lead to a higher probability of being stopped out.

They also tend to have a good chunk of their account eaten away by unreasonably large losses in relation to their trading account, if they do not set tight stops.

So it seems that whichever way they turn, they are setting themselves up for failure, unless they are willing to trade smaller lot sizes. Looking outside of trading, many other businesses fail because the owners often do not have enough capital to tide them over the initial starting phase.

For example, a new restaurant owner must set aside enough money to pay the rent of the restaurant for at least a few months to a few years, assuming that the restaurant would not make any net profits in that period of time.

If the owner only has enough to pay for two months rent from his or her own pocket, and the restaurant is still not making enough to cover the rent and other expenses in the third month, how do you think the business is going to sustain itself? The entire business could fail, not because of the business model, but because of the lack of sufficient capital to keep the business running while the customer base builds up.

Trading, as I have mentioned before, must be treated just like any other business, not a frivolous casual pursuit. The point is this: by starting off sufficiently capitalised, you are more likely to adhere to your money management rules and, by doing so, you are really giving yourself a good fighting chance in the market.

Losses are really just part of the trading game. If trading losses are kept manageable and reasonable, they should not dent your trading account too much, provided that you are well-capitalised.

Knowing when to get out of a losing position in the currency market is a very important tool of risk management. Stop-loss orders allow traders to set an exit point for a losing trade, and are the best weapon against emotional trading. While I recommend that traders place a stop-loss order at the time of placing their entry order, mental stops may also be used — but preferably by traders who are more disciplined. From experience, it is much wiser to have a wider but reasonable stop than to have an unreasonably tight stop.

Generally, a stop-loss order should not be shifted in the losing direction while a position is opened. A good trader should know beforehand when to cut his or her losses, and also when to get out of the market with profits. It is indeed the elusive factor that courts the relentless determination of its seekers. Want to know where it lies? It only exists in the creative part of the mind — together with fairies and gnomes. There is no perfect formula or strategy that can achieve that unrealistic goal because people who are involved in the financial markets evolve with changing market circumstances, even though certain old habits die hard.

Despite the non- existence of the magic formula, there are certainly high probability ways of trading the forex market. While the bulk of this book is focused on the Method part, you need to combine Method with both Money and Mind in order to attain success in the trading business. The old question: technicals or fundamentals? There are generally three broad categories of forex traders pertaining to what they base their trading decisions on: 1.

the technical trader, 2. the fundamental trader, 3. the trader who combines both technicals and fundamentals. Each type of trader has a distinctively different way of interpreting the currency market based on his or her own opinions. Technical trading A technical trader believes that historical data has a big role in the forecasting of future price action, and is thus devoted to currency price chart analysis, making use of various charting tools such as support and resistance levels, trendlines and a myriad of chart indicators to understand past price behaviour so as to predict what the market will do next.

Most forex traders employ some kind of technical analysis to help them make trading decisions. Technical traders assume that everything that is to be known about the market has already been factored into the current price. Fundamental traders believe that the exchange rate of currencies are largely driven by economic and geopolitical conditions, aside from central bank interventions, and will keep track of economic data such as trade balances, inflation, Gross Domestic Product GDP , unemployment rates, interest rates and so on.

They are also concerned about what policymakers have to say regarding the monetary policy of the country, and will keep on top of these when speeches are scheduled.

Combing technicals and fundamentals Since there are advantages of analyzing the forex market from these two different fields, it would be too restrictive to just side with one area and ignore the other. The most effective traders tend to make trading decisions based on a combination of both technical and fundamental factors in order to get a feel of the overall market sentiment, and then decide to either trade that sentiment or to trade against it taking a contrarian approach.

The strategies taught in this book must always be combined with the prevailing market sentiment, which is influenced mainly by fundamentals. Some strategies may work well for some traders, but may not have the same results for others over a period of time.

This may seem puzzling for some people who are wondering that if something works for someone, then it should work for other people as well. In trading, there are so many other factors specific to each trader that can influence the overall trading performance — his or her emotions, psychology, trading time frame, money management rules, lifestyle, trading capital and so on.

The strategies included in this book are open to customisation according to your own personal preference. Many traders do not give themselves the fighting chance and time to stay in the game as they are prone to getting wiped out very quickly. The Ten Rules For Forex Trading I list here ten rules that I think are important for trading forex.

Dos 1. When trying out a new trading strategy, always test it in a demo account, or with a small amount of money, before you commit more money to it.

Always keep a record of each of your trades, with details of: why you got in, how you got out and why it turned out the way it did. Have a personalised trading plan and update it as you learn from the market. If you are unsure of a trade, stay out. It is better to miss an opportunity than to have a loss. When trading, keep up-to-date with both the fundamentals and technicals affecting the market. A trader in the dark is a trader in the red.

It will affect you emotionally, and you will most likely lose it to irrational trading. Always know why you are getting into a trade, and how you are going to get out of it.

Just be concerned about being profitable. Chances are that your account will be decimated before you can recoup your losses and go into profit. Vent your frustrations elsewhere after a loss. Do you see it as a big mechanical matrix which is devoid of emotions?

Or do you think of it in mathematical and probability terms? Perhaps, you may even view it as just a vast network of computers which are designed to cheat the trader sitting in front of his or her computer and trading electronically. Most traders I know have a love-hate relationship with the forex market, thinking that the market is, in turn, either against them or for them.

To me, the forex market is nothing more than the compressed display of emotions at any one time emanating from currency speculators around the world. It is similar to a big living organism, like a human being, which is made up of numerous cells, with each cell carrying out its own function and interacting with other cells of the body, working to keep the body alive with round-the-clock chemical and biological processes.

The forex market is alive as a macro living organism, which comprises a vast number of market participants acting out their perceptions and emotions, thus driving the blood around the invisible entity. The participation of each player, whether the player is an institutional dealer or an independent trader, is akin to the individual functioning of a cell, which collectively will constitute the whole organism — the forex market in this case. Knowing what the market thinks and how it thinks is crucial to trading success because, ultimately, the trader is dealing with other traders out there, and needs to know what they are thinking.

Even if you see the market as an enemy, what could be better than knowing the weak points and being able to read the mind of your adversary? In this chapter, I shall focus on how you can better understand the market, and use that knowledge as one of your trading weapons. Market sentiment is simply what the majority of the market is perceived to be thinking or feeling about the market — it is the most important factor that drives the currency market.

This is so because traders tend to act based on what they feel and think of certain currencies, regarding their strength or weakness relative to other currencies. Market sentiment sums up the overall dominating emotion of the majority of the market participants, and explains the current actions of the market, as well as the future course of actions of the market.

The trend adopted by the forex market is actually a reflection of the current market sentiment, which in turn guides the trading decisions of other traders, whether they should long or short a currency pair. In the process of making educated trading decisions, traders have to weigh a multitude of factors which could influence the bias of a currency, before making up their minds about the current and future state of certain currencies.

There are three main types of sentiment when it comes to forming opinions in the forex market: 1. bullish, 2. bearish or 3. just plain confused. If the majority of the market wants to sell that currency, the market sentiment is deemed to be bearish; if the majority wants to buy that currency, the market sentiment is bullish; and when most market participants are unsure of what to do at the moment, the sentiment ends up being mixed.

Market sentiment acts like a fickle lover, capable of changing its mind based on certain incoming new information which can upset the existing sentiment. One moment everyone could be buying the US dollar in anticipation of a stronger dollar; the next second they could all be dumping it as they fear the dollar would start to weaken due to the impact of some new piece of information, which is almost always some fundamental news.

Interest rates Trends in interest rates are one of the most significant factors influencing market sentiment, as interest rates play a huge role affecting the supply and demand of currencies.

Every currency in the world has interest rates attached to them, and these rates are decided by central banks. Some currencies have higher interest rates than others, and these are usually the currencies that attract the most attention from savvy international investors who are always looking across the global landscape in the continual search for a better interest rate yield on fixed-income investments.

This, of course, also depends on the geopolitical or economic risks of that particular currency. Just like when a bank lends money to a higher-risk borrower, high-risk currencies require a significantly higher interest rate for investors to consider keeping money in those currencies. What causes fluctuations in interest rates? The value of money can and does decrease when there is an upward revision of prices of most goods and services in a country. The nice word for this erosion in value is, of course, inflation.

Controlling inflation Central banks are responsible for ensuring price stability in their own country, and one of the ways they employ to fight inflationary pressures is through the setting of interest rates. If inflation risks are seen to be edging upward in, say, the US, the Fed would raise the federal funds rate, which is the rate at which banks charge each other for overnight loans. When the overnight rate is changed, retail banks will change their prime lending rates accordingly, hence affecting businesses and individuals.

An increase in interest rates is an attempt to make money more expensive to borrow so that there will be a gradual decrease in demand for that currency, thus slowing down an overheated economy. Interest rates and currencies The most important way in which interest rates can influence currency prices is through the widespread practice of the carry trade.

A carry trade involves the borrowing and subsequent selling of a certain currency with a relatively low interest rate, then using the funds to buy a currency which gives a higher interest rate, in an attempt to gain the difference between these two rates — which is known as the interest rate differential. The trader is paid interest on the currency he or she is long in, and must pay interest on the currency he or she is shorting.

This difference is the cost of carry. Therefore, a currency with a higher interest rate tends to be highly sought after by investors looking for a higher return on their investments. The increased demand for that particular currency will thus push up the currency price against other currencies. For instance, in there was a strong interest among Japanese investors to invest in New Zealand dollar-denominated assets due to rising interest rates in New Zealand.

The then near-zero interest rates in Japan forced a lot of Japanese investors to look outside of their country for better yields on cash deposits or fixed- income instruments. See Figure 5. When forex traders anticipate this kind of situation, they become more inclined to buy that high-interest-rate currency as well, knowing that there is likely to be massive buying interest for that currency.

So, in general, rising interest rates in a country should boost the market sentiment regarding the currency of that country. The opposite is true too: when interest rates are cut in a country, that would result in quite a bearish sentiment regarding the currency of that country, and traders would be more willing to sell than buy that particular currency.

Economic growth Besides interest rates, economic growth of countries can also have a big impact on the overall currency market sentiment. Since the United States has the largest economy in the world, the US economy is a key factor in determining the overall market sentiment, especially of currency pairs that have the USD component.

A robust economic expansion, coupled with a healthy labour market, tends to boost consumer spending in that country, and this helps companies and businesses to flourish. A country with a strong economy is in a better position to attract more overseas investments into the country, as investors generally prefer to invest in a solid economy that is growing at a steady pace.

Forex traders, expecting this consequence, will put on their bullish cap to buy that currency before the investors do. Gross Domestic Product GDP , 2. the unemployment rate, and 3. trade balance data. These are explained below. Unemployment rate The unemployment data reports the state of the labour market of a country.

Trade balance data Another widely watched economic indicator is the trade balance data. Trade balance measures the difference between the value of imports and exports of goods and services of a country. If a country exports more than it imports, it has a trade surplus. For example, if the US imports an increased amount of goods and services from Europe, US dollars will have to be sold in exchange to buy euros to pay for those imports.

The resulting outflow of US dollars from the United States could potentially cause a depreciation of the US dollar against the euro or other currencies, and that can affect market sentiment surrounding the USD. The opposite scenario is true for a country that is experiencing a trade surplus.

Global geopolitical uncertainties such as terrorism, transitional change of government or nuclear threats can cause investors to lose faith in some particular currencies, and they may prefer to shift their assets into a safe haven currency when these circumstances arise. Market sentiment is very sensitive to such geopolitical developments, and can cause a strong bias towards a particular currency. For example, during periods of high tension in the Middle East in , the market formed a very bullish sentiment towards the US dollar, which became the preferred currency to hold in such turbulent times, replacing the traditional status of the Swiss franc as the safe haven currency.

Forex traders should be keenly aware of the current geopolitical environment in order to keep track of any potential change in market sentiment, which could impact currency prices.

But how can you get an idea of the overall sentiment of the market? You can do so by reading reports by analysts and financial journalists in news wires or by visiting online trading forums to see what other traders are discussing. However, these ways of getting a feel of the current market sentiment are not too accurate; you may think that other traders are in a buying or selling mood, but that may not be what is really happening in reality.

Here are some of the more effective ways of gauging market sentiment: 1. The Commitment of Traders COT report 2.

Commitment Of Traders COT report What is the COT? The COT report provides traders with detailed positioning information about the futures market, and is, in my opinion, one of the most underrated tools that forex traders can make use of to enhance their trading performance.

The report is compiled and released weekly by the Commodity Futures Trading Commission CFTC in the United States every Friday at Eastern Time, and records open interest information about the futures market based on the previous Tuesday.

Anyone can access the COT report for free on the CFTC website www. There are basically two types of reports available: the futures-only COT report and the futures-and-options-combined COT report. I usually just access the futures- only report for a glimpse of what has happened in the futures dimension of the forex market.

In order to get through to the currency futures data, you have to wade past other commodities like milk, feeder cattle and so on, so a little patience is required. Even though the data arrives three days late, the information nonetheless can be helpful since many traders spend their weekend analyzing the COT report. The time lag between reporting and release is the main handicap of the COT data, but despite this limitation, you can still use it as a sentiment tool.

Figure 5. You can see the long and short positions held by traders in each of the three main categories defined by the CFTC, as explained below. Some notes to the figure above. For example, a German car-maker, who exports to the US, expects to receive 10 million euros worth of sales within the next quarter.

To hedge against the possibility of a US dollar decline which would affect the amount of euros it would receive once converted, the German car-maker would short 10 million in Euro FX futures. On the other hand, if a US car manufacturer exports 10 million US dollars worth of cars within the next quarter, it would long the equivalent in Euro FX futures contracts. The COT report tells you the long and short positions undertaken by participants from each category.

When it comes to analyzing information pertaining to currency futures in the COT report, it is generally more relevant for traders to focus on the non- commercial participants rather than on the commercial participants. The reason behind this is that these large speculators trade the futures contracts mainly for profits, and do not have the intention to take delivery of the underlying asset, which in this case would be cash.

Large speculators, however, will usually close their losing positions instead of rolling them over to the next month. Why use The COT? The COT report allows you to gauge market sentiment in the currency futures market, which also influences the spot forex market. Currency futures are basically spot prices which are adjusted by the forwards derived by interest rate differentials to arrive at a future delivery price.

Unlike spot forex which does not have a centralised exchange at the time of writing, currency futures are cleared at the Chicago Mercantile Exchange. Price quotation One of the many differences between spot forex and currency futures lies in their quoting convention. In the currency futures market, currency futures are mostly quoted as the foreign currency directly against the US dollar.

That said, spot forex and currency futures do have one similarity: the spot and futures prices of a currency tend to move in tandem. When either the spot or futures price of a currency rises, the other also tends to rise, and when either falls, the other also tends to fall. What is of concern to us is whether the non-commercials are net long or short in that currency futures. In order to determine the volume of contracts that these large speculators are holding net long or short positions of for that particular currency futures, you just need to calculate the difference between the longs and shorts, that is, subtract the number of short contracts from the number of long contracts.

A positive figure shows the number of net long contracts, while a negative figure shows the number of net short contracts. As you can see in Figure 5. The non-commercials are long 98, contracts and short 12, contracts. Therefore, they are overall net long 85, contracts - Usually, when a particular currency is trending up against the US dollar, the non- commercials tend to register a net long position since these large speculators tend to ride on the existing trend.

The opposite situation is true too: the non-commercials tend to register a net short position when a particular currency is trending down against the US dollar. Knowing whether this category has been net long or short a few days ago only indicates to us the positioning in retrospect; this information is only useful if you compare the latest net positioning with the positioning figures from the past few weeks or months.

By comparing the latest net positioning with that of the past few weeks or months, you can tell if the latest net long or net short positioning is skewing towards an extreme reading.

My observation of the financial markets is that dramatic price moves, usually at major turning points, tend to occur when the majority of the market is positioned incorrectly. And since the large speculators are more inclined to close their losing positions than the commercial hedgers, it is beneficial for us to keep an eye on their net directional positioning as well as their net contract volume in the currency futures market.

If these large non-commercials are positioned on the wrong side of the market, you can expect liquidation of these positions, with the extent of liquidation depending on the total volume of contracts traded in the wrong direction. Such mass unwinding of positions tends to bring about a powerful price move in the opposite direction which could last for a few days, and it is this turning point that you could detect with the COT data before the reversal scene actually plays out.

Example: COT — using extreme position An example of this was played out in the week through November 17, In this case, all those who had the intention to go long on GBP had already done so.

X-axis displays the dates for every three weeks even though the data for every week is shown on the chart. Y-axis displays the net number of speculative contracts. Positive numbers indicate net long positioning, while negative numbers indicate net short positioning. The presence of an extreme reading allows you to be prepared for a possible trend reversal which could occur when large speculators liquidate their positions. A mere increase or decrease of contracts for a particular currency futures does not indicate anything which could be of predictive value, as it simply shows you what has happened, but not what could possibly happen in a high-probability scenario.

COT data is a diamond in the rough What deters many traders from using the COT report is its raw organisation of data, but that is not good enough an excuse to completely neglect this little treasure trove. The information from the COT report can be transferred into a spreadsheet so that further analysis can be conducted in a more suitable format.

Analysis of the COT report does not always throw up trading opportunities in the spot forex market, but when it does, you will be better prepared for a potential turn of tide, and be more confident in your trades. Even though entries and exits cannot be timed solely based on the COT data, it can be an extremely useful tool to have in your toolbox to gauge the overall market sentiment.

The forex market is very efficient at discounting future expectations by incorporating them into current prices. Very often, when news comes out better than is expected by economists and analysts, the currency of that country is more likely to soar against another currency. When the news is worse than expected, that currency is more likely to fall against another currency. However, if the news or data turn out to be worse than expected and still the currency price soars, that is, the market reacts in a very bullish way to worse than expected data, a bright red flag should be waving at you.

The opposite situation also applies: if price action remains very bearish to much better than expected news, it signals a highly suspect price move. In short, you should look out for a contrarian market reaction to better or worse than expected news. Under these circumstances, it is better to assume that the price move is hardly supported by substance, and could reverse sometime soon.

A bullish price move that is not accompanied by evidence will soon be due for a reality check, just like a bearish price move that is not accompanied by evidence is very likely to be corrected very soon. For example, if a piece of news turns out to be worse than expected, and assuming that there are no pre-release rumours or leaks of the news, and the currency pair rallies to break above a significant resistance level, you have reasons to suspect that the breakout move is likely to be false and unsustainable.

Even if the currency pair manages to make new highs later on, you should be prepared for a possible trend reversal very soon. The relative significance of news will vary from time to time. Summary As you have seen, market sentiment can be used, and should be used, to time your trade and identify profitable trading conditions. The Market Sentiment Strategy has to be applied in conjunction with other strategies as it does not have precise entry and exit signals.

Once you get a sense of the current market sentiment, you can then decide whether it is best to trade with or against the sentiment, taking into account all other factors. While it may be sensible to trade in the direction of the current sentiment, sometimes, trading against the sentiment can also be a profitable strategy, provided that you have valid reasons to do so.

For example, when the COT report indicates extreme positioning of the market, or when the market seems to be feeding off false euphoria on worse than expected news, it may be better to trade against the overall sentiment.

You should, however, wait for a more precise signal that the current sentiment is wearing off before going against it, as sometimes false euphoria can last for quite some time before resulting in a reversal. This signal could be a failed breakout of some sort or some other pattern failure. Always keep in mind that currency prices are, after all, the expressed perceptions of traders and market sentiment is really the blood that drives the market on the whole.

Being able to ride on a trend is akin to making full use of the wind direction to steer your ship towards your destination. For a ship to go against the wind requires a tremendous amount of effort — one has to fight the stubborn resistance from the opposing wind. Indeed, for most of the time, it pays more to be on the side of the current trend than to go against it.

In the forex market, trend riders can capture any trend regardless of whether it is rising or falling in an attempt to generate trading profits. Forex tends to have quite trending markets, regardless of which time frame you are looking at — trends are often formed on hourly, daily or weekly charts. With trends possibly having a long lifespan stretching to months, or even years, it is no wonder that many traders and fund managers exalt the strategy of hitching onto trends, with the glorious aim of capturing enormous profits from start to finish.

Trend riding is one of my favourite trading approaches, and I often ride the uptrend or downtrend after the trend has been established, rather than anticipating the move before it happens. I would say that even though the trend is your friend most of the times, one has to use a variety of methods to distinguish between a continuation of the trend and a possible trend reversal. But before you can ride on trends, you first need to identify what the current trend is, and to determine the time frame of the trend.

The question of what kind of trend is in place cannot be separated from the time frame that a trend is in. Trends are, after all, used to determine the relative direction of prices in a market over different time periods.

edu no longer supports Internet Explorer. To browse Academia. edu and the wider internet faster and more securely, please take a few seconds to upgrade your browser. Frequently, they will complain that a strategy doesn't work. Few people understand that successful trading of the FOREX market entails the application of the right strategy for the right market condition.

Grace Cheng highlights seven trading strategies, each of which is to be applied in a unique way and is designed for differing market conditions. She shows how traders can use the various market conditions to their advantage by tailoring the strategy to suit each one. This revealing book also sheds light on how the FOREX market works, how you can incorporate sentiment analysis into your trading, and how trading in the direction of institutional activity can give you a competitive edge in the trading arena.

This invaluable book is ideal for new and current traders wanting to improve their trading performance. Filled with practical advice, this book is a must-read for traders who want to know exactly how they can make money in the FOREX market. wilson putra. this is something you have looking for when making serious decision about Dollar investment stuff. Jose Antonio Muñoz. Channa Khieng. Log in with Facebook Log in with Google. Remember me on this computer.

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The 10 Essentials of Forex Trading -free-ebook-download. com Website: www. com First published in Great Britain in by Harriman House. Copyright © Harriman House Ltd The right of Grace Cheng to be identified as the author has been asserted in accordance with the Copyright, Design and Patents Act ISBN British Library Cataloguing in Publication Data A CIP catalogue record for this book can be obtained from the British Library.

All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publisher.

This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published without the prior written consent of the Publisher.

Printed and bound in Great Britain by Biddles Ltd, Kings Lynn, Norfolk. Index by Indexing Specialists UK Ltd No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading material in this book can be accepted by the Publisher, by the Author, or by the employer of the Author.

Designated trademarks and brands are the property of their respective owners. Dedication I dedicate this book to my husband, Pedro. Thank you for your constant encouragement, support and love. This book is also dedicated to my loving parents who have always believed in me. She has also been featured in newspapers, magazines, newsletters and on TV. Grace is the creator of the PowerFX Course which is designed for both new and intermediate traders to jump-start their trading performance.

Grace has mentored hundreds of independent traders through her PowerFX Course. Her web site is at: www. And the development of sophisticated online foreign exchange trading platforms in recent years has attracted many traders to the market — traders who seek an income in addition to their day job or those who wish to trade a new market besides stocks and futures.

Who this book is for This book is primarily for those who are new to the world of currency trading and are curious about how they can make money from the forex market. Existing traders who are trading on demo or live accounts should also find some useful advice in this book.

Some knowledge of candlestick charting is assumed as I will be using candlesticks to display the high, low, opening and closing prices in the charts throughout the book. All you need to start is a computer with fast and stable internet access and a relatively small account with a broker. About this book This book describes seven fundamental and technical trading strategies for trading the foreign exchange markets.

The purpose of this book is to show you how you can trade forex with these winning strategies. I will share with you some new ideas, interesting concepts, and the nuts and bolts of how you can implement each strategy more effectively.

This book is quite different from traditional technical analysis books because, while those books may document the reliability of certain technical patterns, I will explain in this book why certain technical patterns do not work as well in the forex market and therefore need adapting. For example, I have increasingly noticed that in recent times the first attempt of a price breakout more often than not results in a failure.

The strategies that I am going to share with you are suitable for trading the forex market in any time frame — ranging from minutes to weeks. Throughout the book I also explain certain aspects of the forex market so that you can gain an insight into how the market behaves.

Flexibility is required for the trader to adapt his or her strategies to different market conditions, as well as for the trader to customise trading strategies to suit his or her own trading style and personality. Therefore, feel free to tweak or modify any of the parameters of these strategies to suit your own preferences. The 7 strategies in this book must be applied with discipline and a huge dose of common sense.

Their rules and guidelines are not set in stone. What I provide is a guide to implementing these strategies so that you can tilt the odds of success to your side. How this book is structured The book contains the following chapters. Getting Started Find out why the forex market is constantly growing, and why an increasing number of people are turning to trade this particular asset class in their quest to accumulate wealth.

For those who are new to trading, take a look at the differences between investing and trading, and the various choices of trading time frames. Spot Forex Market Structure The forex market has long been the exclusive playground of the big players, namely banks, institutional investors and hedge funds. But the playground is no longer restricted to just them; individuals can also participate in this speculative game.

It is essential to know where you, the trader, stand in the overall big picture. How To Overcome The Odds Of Trading Forex How are you going to tackle the odds that are stacked against you from the start in the forex trading business? In this chapter, I will highlight the three Ms that have brought me success in this field: Mind, Money and Method. Many traders, especially the inexperienced ones, are too fixated on finding the perfect trade setup, the perfect trading system or the strategy that never fails, thus neglecting the other more important aspects that are crucial to good trading performance.

Find out what defines the current market sentiment, and how you can incorporate market sentiment analysis into your trading. Strategy 2 — Trend Riding There is so much more to riding trends than simply closing your eyes and buying at any point during an uptrend or short-selling at any point during a downtrend.

This chapter shows you how you can jump on a trend when the trend is the most robust, rather than when it is about to end. This way you can ride a trend with a higher chance of success. Strategy 3 — Breakout Fading Many false breakouts occur in forex price charts, and the occurrence of these fakeouts provides the perfect opportunity for fading breakouts, that is, trading against those breakouts.

In this chapter, I explain why most breakouts fail, and how you can identify high-probability fading opportunities. Strategy 4 — Breakout Trading When currency prices break out of certain price levels, a large sustained move in the direction of the breakout may occur, giving rise to a situation whereby big profits could potentially be captured in the least amount of time.

The main problem with trading breakouts is that many of these breakout attempts fail. In this chapter I walk you through several guidelines of how you can better identify potential breakout opportunities for this strategy. This particular strategy, however, requires that the forex market registers a period of relative calm and low volatility before the strategy is to be implemented.

Strategy 6 — Carry Trade This is a fundamental trading strategy that is highly favoured by institutional investors. In this chapter, I explain how a carry trade works, and highlight some points which you should keep in mind when adopting this strategy in the forex market. Strategy 7 — News Straddling The forex market is extremely sensitive to economic and geopolitical news from around the world, especially those which relate to the industrialised countries. Find out how you can trade news releases with a higher probability of success.

Risk disclosure Trading forex involves substantial risk, and there is always the potential for loss. Your trading results may vary. No representation is made that any information in this book will guarantee profits or prevent losses from trading forex.

You should be aware that no trading strategy can guarantee profits. Further information For more information about my trading strategies, the proprietary PowerFX Course and other forex market information, please visit the following website where I also host a daily forex blog — www.

This book, however, shall focus on the trading of spot forex. The most significant difference between spot forex and futures is that spot forex contracts are traded over-the-counter at no central location, while forex futures are traded on an exchange. This gives rise to another unique aspect of spot forex — the hour non-stop action; this is one major reason why I enjoy trading spot forex.

With round-the-clock trading a person in any time-zone can trade spot forex at any time — whether during the day or night.

The best career decision I have made was to trade forex full-time. Forex trading has brought me both financial and emotional satisfaction, even though my initial learning journey was long and arduous. When I started in forex, I could only find one book on forex trading.

Forex was not as popular as stocks or options trading, so there were very few articles in magazines that focused on this field. I spent the first one and a half years learning how to trade forex and honing my skills on a demo account, before progressing to a real account, when I became consistently profitable. The breakthrough came when I incorporated fundamental and sentiment analysis into my predominantly technical-based analysis.

Even though I was able to dedicate myself to full-time trading, I found the initial learning curve to be extremely steep, as I had no mentor and had to learn all the ways of losing in the market before I learnt how to profit from it.

I hope that through this book, aspiring and current traders are able to fast-track their learning, and greatly improve their trading performance.

iii MACD Divergence: This is the best signal any trader can get from MACD: Divergence. A trader does not have to be right. The amount of trading capital needed is relative. This can easily occur in fast-moving markets, usually during or after some news release, for any non-limit orders. The ratio trading strategy is based on the idea that we are looking to sell any attempt of the price movement to move above the period moving average MA. WHO ARE THE SWAP FREE FOREX BROKERS? In this chapter, I explain how a carry trade works, and highlight some points which you should keep in mind when adopting this strategy in the forex market.

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