FOREX OVERVIEW

Currencies are traded in pairs, meaning that you are really trading one currency for another. A simple way to understand this is to consider what you do when you go on foreign vacations. If you are an American (for example), and you plan to travel to another country, say Canada, then you might take say $1, 000 USD to the bank to change it for Canadian dollars. Let’s say the exchange rate is 1.4000, then for your $1,000 USD they would give you $1,400 CAD (ignore bank spreads/commissions). Now let’s say you didn’t spend the money and upon coming home you decide to change it back to USD currency. Now let’s say the exchange rate is 1.3700 (a change of 300 pips that could happen in a week), so your $1,400 CAD would convert back to $1,021.89 US (again, ignore bank preads/commissions). Therefore you just made $21.89, a 2.19% increase in funds (not bad).

In the Forex market you could have simply traded the “Currency Pair” called USD/CAD, first selling USD for CAD, and then later buying back USD with the CAD you have. Basically, you are trading one currency for the other.

Usually currencies are traded against the US dollar (USD), so you may be trading the US dollar against the Euro (EUR), British Pound (GBP), Swiss Franc (CHF), Japanese Yen (JPY), Australian Dollar (AUD), New Zealand Dollar (NZD), and of course Canadian Dollar (CAD). There are other currency pairs, but you normally won’t be dealing with those.

When you are trading you are attempting to capture “PIPs” (Price Interest Points), which is one/one-hundredth of a cent (for dollars). You will notice that the exchange has two extra decimals at the end. From our example above, there is a one-pip difference between 1.4000 and 1.4001.

One pip may not seem like much, but when you are trading large volumes of currency, say $100,000, then one pip times 100,000 is equal to $10 (less on certain currency pairs). When you are trading currencies the broker gives you typically a 100:1 ratio meaning that to “control” one lot of $100,000 all you need is $1,000 on margin.

Now, if you don’t have at least $2,000 to open a regular Forex trading account, or can’t afford potential 10 pip losses, then you may want to consider a “mini” account. Most online brokers offer mini trading accounts that you can open for as little as $300. With a mini account you are trading lot sizes one-tenth of a regular lot (10,000 vs. 100,000), with risk being one-tenth as well as your rewards one-tenth. Trading a mini account means that 1 pip equals roughly $1. If this is the only way you can afford to start trading then open a mini account. Remember, as your account quickly grows you can trade multiple mini lots, and trading ten mini lots is the same as trading one regular lot. You could open a mini account with say $300 and experience 100% to 200% gains in your first month, quickly building your account to be able to trade larger lot sizes.

Please remember to exercise good equity management in all your trades, never risking more than 2% of your margin account on any single trade, however if you have a small mini account you may bend this rule to 5%. For example, if you have $300 in your account, 2% is $6, equal to 6 pips loss.

Once you get your account to $600 or more then definitely limit your risk to only 2% of your margin account on any single trade. Don’t be greedy and you’ll survive a few losses to continue your gains. Please don’t trade money you can’t afford to loose.

If you need more explanations about any of the above then simply surf the web a little, particularly looking at online Forex brokers websites as there you should be able to learn more about the basics of how currency pairs work, or enroll in a good Forex training program to make sure you understand all this. I have also included valuable bonus you can download from the Resources website (see Appendix A) that gives you a lot of Forex training, and should answer your questions (I’ve had over $10,000 worth of Forex training and can say with knowledge that the resources I’ve provided you there will teach you everything you need to know).

A couple more things before we continue with explaining this amazing trading system. You should have the following three things already set up. (1) An actual trading account with real money in it, (2) a demo trading account with fake money in it, and (3) access to charts. I would personally recommend opening up an account with one of my recommended brokers (listed in the Resources Section – see Appendix A), however any of the other major brokers may do, or whatever favorite you have.

They will also provide you free charts that will be more than good enough for the purposes of this strategy. You don’t need expensive charts; the free ones really are all you need.

It is best to use charts provided by your broker as the Forex market is decentralized and the trading rates differ slightly from broker to broker, and for this strategy you need accurate prices based on your broker’s dealing rates to succeed.

Before you commit any real money to trading this strategy you should practice it for at least ten successful trades to make sure you understand everything perfectly. Go to a broker website and register for a free demo account, preferably with the company you actually use or plan to use for your real trades. You can register for a regular demo account if you plan to trade regular lots as explained above, or register for a mini demo account if you plan to start with a mini account. In your demo account you can practice making trades in real-time without worrying about losing any real money.

Make sure to play around with making trades in your demo account, don’t worry about making losses just practice entering trades to get familiar with the steps to entering a trade. You don’t want to miss out on a great trading opportunity because you don’t know how to enter a trade. Also play around getting familiar with your charts. I will explain shortly how you will use them.