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Chapter 1:
OPENING THE GATES OF FOREX

Chapter 2:
CURRENCY, THE MAIN TRADED INSTRUMENT

Chapter 3:
WELCOME TO THE UNPREDICTABLE WORLD OF TRADING

Chapter 4:
TOOLS NECESSARY TO PREDICT THE MARKET

Chapter 5:
TRADING IN ACTION: 5 THINGS YOU MUST KNOW

Chapter 6:
READY TO START

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OPENING THE GATES OF FOREX
CHAPTER 1
You may have asked yourself why you are getting interested in the Forex market, what attracts you that much and why you have
decided to start trading. Actually, there may be many reasons, but let us note that the most important one is the independence.
The advancement of the Internet made the market available around the globe and thus possible for people to trade online. The
reason of the growing interest is the financial independence which is possible to gain through going deep into Forex and trading
wisely. No matter you are a doctor, teacher, manager or a journalist, still you may be involved in this limitless market. Here you do
not have to deal with any boss and bare someones appeal or anger; you are accountable only to your personality and thus are free
to make your own decisions.

Are you interested? Let us introduce you some important features about Forex market, which will help you in studying this interest-
ing area and obtaining profit from it.

What? Who?
For ordinary person not engaged in Forex trading, it is In general, the Forex market is comprised of four different
very easy to explain the definition of Forex with an ex- groups. The most influential participants of the market are the
ample of travelling to different countries. When arriving major banks, bank associations (like HSBC, Citigroup, Barclays
at one country, the first thing to do for a visitor is to ex- Capital, JP Morgan), and a few central banks, such as the Euro-
change the money of his/her country with the currency pean Central Bank, the Bank of England, and the Federal Reserve
of the particular country. This process is itself participa- of the US. The whole bank community, dealing with currency ex-
tion in Forex market- exchange one currency for another. change and credit operations, forms the inter-bank market. The
aim of such market players as central banks is not getting a prof-
The term Forex stands for the Foreign Exchange and can it, but adjusting the currency rates, and thus, the economy of
be defined as an international currency market. Forex is their countries. Very often, central banks make deals not directly,
very unique in its essence because it is everywhere ne- but through major commercial banks, concealing their activities.
glecting the factor of time zone and geography. In con- In fact, it becomes obvious that the banks of this group are not
trast to other physical markets, where monopoly can just making deals, but also suggest their own prices. Active par-
exist, in Forex market despite the very different market ticipants of the market, as usual, make deals up to millions and
participants, there is no any dominance, and the market milliards of USD and trade with their own, not borrowed money.
remains out of any control. In Forex, such participants, offering their own prices and making
deals of almost unlimited volume, are called market makers.
A question may arise: what is exchanged on Forex? The
answer may be quite surprising for you: absolutely noth- The second layer belongs to the investment, insurance, pen-
ing. All the instruments, including the most popular sion funds, medium-sized banks and large corporations.
currencies are not physically exchanged on the foreign These market participants perform currency exchange opera-
exchange market. Market participants just conclude a tions for the investment purposes and for business deals, some-
bet among each other on the currency changes, leaving times for long-term speculations. One of the largest investment
a margin hundreds times less than the volumes of this funds in the world is Quantum of George Soros. Funds can at-
betting, and later one participant pays another the sum tract billions of dollars of borrowings and can withstand even the
of the gain (such scheme is known as a margin trading). intervention of central banks in the foreign exchange market.

The rate of the currency is always changing, fluctuates, The third group of participants is the financial companies. In
and this happens because of different factors. Due to fact, they are the intermediates between the individuals and
these fluctuations it becomes possible to make a profit the market. These individuals, both physical and legal, form the
from speculative trades. Foreign Exchange is the Worlds fourth group of participants in the Forex market. In fact, financial
largest and most active market. It operates every day ex- companies have overcome the barrier of engagement into the
cept the weekends, and its volume reaches up to $5 tril- Forex market for the individuals. In addition, Internet develop-
lion a day and surely, the volume is different for various ment made brokerage services available for everyone around
participants. the world.

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When? How?
In general, the Forex market operates 24/5 (from Monday to You may have a question how to be involved in Forex mar-
Friday). However, 3 market sessions are distinguished: Asian, ket? The answer is quite simple: through brokerage firms!
European and American sessions.
Brokers are the ones who give an opportunity to small in-
=American (New York) opens at 8:00 am to 5:00 pm EST (EDT) vestors to initiate operations on the Forex market.

=Asian (Tokyo) opens at 7:00 pm to 4:00 am EST (EDT) For becoming a client of a broker, one needs to open an
account and make a deposit. The deposit requirements
European (London) opens at 3:00 am to 12:00 noon EST (EDT) vary from broker to broker. For instance, IFC Markets re-
quires a minimum of $1 per starting trading. For the pur-
The most active session is the European, then American,
pose of increasing the clients profits, every company es-
and the least active is the Asian. Market participants had
tablishes certain credit level, which is called leverage. The
better trade in times of high market activity, when trades on
deposited amount is multiplied with the leverage size,
the major stock exchanges around the world take place and
when there is a high probability of publication of interest-
and the trader trades with greater lot, while losing only
ing macroeconomic data - this information can be learned the money he has invested on his/her own. Thus, it may
from the economic calendars in the websites of financial be concluded that for trading with 100,000lot in case of
companies. 1:100 leverage, $1000 deposit is required.

Why?
LIQUIDITY: Forex market is different from the markets weekends Forex market is closed, thus hurry up to man-
where people buy or sell products, property, etc. For in- age your trading until Friday night.
stance, when selling an apartment, how many buyers can
COSTS: The client sells the traded currency with the Bid price
you find for only 1 second? Zero How many of them
can you find during a day? Maybe 3-4. In contrast, Forex and buys with the Ask price. The difference between them is
market does not have such limits, as a trader may open called Spread. Surely, this spread is different depending on
positions and make deals with the market maker only in the currency pair and the clients prefer low spread, because,
1 second. High liquidity is highly attractive point for every in fact, it affects the results of trading. The spread is greater
investor because it enables the possibility to trade with for those currencies that are traded less frequently, thus the
any volume. spreads of major currencies is quite low. IFC Markets offers
low and fixed spreads to its clients.
PROMPTNESS AND AVAILABILITY: As Forex market op-
erates for 24 hours, the access is possible at any time in LEVERAGE: All traders have an opportunity to trade with
contrast to stock market, which is open only during trad- greater volume due to the leverage which is provided by
ing hours, which surely may not be convenient for your the broker. More precisely saying, it is the availability to
time zone. Forex traders do not need to wait to react on make profit from a large position in the market for a small
an unexpected event as it happens in other markets. 24 cost, known as margin. Different companies provide dif-
hours operation lets traders trade whenever they like: ferent leverage sizes. For instance, IFC Markets suggests
after work, at nights, during their leisure time, etc. For up to 1:400 leverage. There are some leverage limitations
trading one needs just to have a laptop or a mobile and depending on the account types and the volume of the
Internet connection. Take into consideration that at the deals.

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CURRENCY, THE MAIN TRADED INSTRUMENT
CHAPTER 2
Currencies: Prices and the Pips
The main object of trading in the Foreign Exchange is the the BUY position - these currencies are given temporarily by
currency. Currencies are written in Latin symbols (ISO codes), the company, in which the trader opened a trading account.
which have become a traditional international practice.
When opening a BUY position, the trader makes his/her de-
These codes have only 3 characters: the first two characters
cision based on the exchange rate (currency price), which
stand for the country name and the last character stands for
provides information about the number of required units of
the currency name.
the quote currency to BUY one unit of base currency. In SELL
In Forex market all the currencies are priced (quoted) and position, as well, the decision is based on the exchange rate,
traded in pairs (like EUR/USD, GBP/USD), because in trading which shows how many units of the quote currency you will
one needs to sell one currency for buying another, or vice get when selling one unit of base currency. Certainly you
versa. The first currency is known to be the base currency, buy a pair when you predict it will appreciate and sell it,
whereas the second one is the quote currency. In the nota- when you think that it will depreciate. In most currency pairs
tion it is possible to write without a separating sign /. the quoted currency is USD (U.S. dollar). For example, in the
EURUSD pair the base currency is EUR, and the quoted one-
When a trader has bought a currency pair (bought a certain
USD. But there are a few exceptions, where the base currency
volume of base currency and paid for it with the quoted
is the USD - for example, USDCHF (U.S. dollar / Swiss franc).
currency), this is called open a BUY position. When, in the
future, a trader will sell back the same currency pair (will sell The cost of the base currency is measured by the quoted cur-
the same volume of base currency and get for it the quot- rency with certain accuracy. This accuracy or the minimum
ed currency), this is called close a BUY position. Similarly, increment value of the currency price change is called a pip.
when a trader sold a currency pair (sold a certain volume of For example, the cost of most currency pairs is given with
base currency and paid for it with the quoted currency) it an accuracy of 0.0001. But there are exceptions these are
is called open a SELL position, and when a trader bought the pairs with Yen, ie. pairs in which the quoted currency is
the same currency pair (bought the same volume of the the Japanese Yen (JPY), for example, GBPJPY (British pound
base currency and paid for it with the quoted currency) / Japanese yen). 1 point in the Yen pairs equals to 0.01. It
it is called close a SELL position. Note that the trader does should also be noted that now in many trading terminals the
not have to worry about where to take the base currency for value of currencies is increased by one more point (5 digits
opening a SELL position or opening the quoted currency for for most pairs, and 3 digits after the coma for the Yen pairs).

Types of Currencies: Major, Minor and Commodity

The list of Major Currencies includes all those currencies that materials-oil, gas, metals, etc. Actually, there is a quite large
are most actively traded in the market. range of such currencies, but the most important ones are
Australian dollar, Canadian dollar and the New Zealand dollar.
USD American Dollar
EUR International European Currency Euro There is also a classification of currency pairs by the USD pres-
AUD Aussie, Australian Dollar ence in them. The major currency pairs are those in which
CAD Canadian Dollar there is the U.S. dollar (as a base or as the quoted currency).
GBP British Pound Sterling
Currency pairs having USD neither in base nor in quote curren-
CHF SWF Swissie, Swiss Frank
cy are called cross pairs. The beginners had better trade with
JPY YEN Japanese Yen the major currencies, and the experienced traders deal with
The rest currencies are considered to be the Minor Currencies. cross pairs, as for effective trading with them it is required to
And, finally the Commodity currencies are of those countries, have good economic knowledge of different countries. Here are
the internal trading of which is based on the export of raw some examples of cross pairs: GBP/JPY, EUR/JPY and GBP/EUR.

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WELCOME TO THE UNPREDICTABLE WORLD OF TRADING
CHAPTER 3
Basically, currency pairs are traded in volumes of 100,000 units of base currency (standard lots), 10,000 units (mini lots) or 1,000
units (micro lots).
Standard = 1 lot = 100000
Mini = 0.1 lot =10 000
Micro = 0.01 lot = 1000
Just for keeping in mind lets bring an example. If you open a position of 1 lot for GBP/USD for the ask price of 1.5000, you are pur-
chasing 100,000 British Pound while selling 150,000 USD. In case of opening a micro position (0.01 lot), for GBP/USD for the bid
price of 1,5000 you are selling 1000 British Pounds, while purchasing 1,500 US Dollars.

Buy/Sell = Long/Short
Before opening any position, every trader has to determine two prices- Bid Price and Ask Price. These pairs are usually
whether to open a BUY or SELL position. If you want to buy denoted by a slash /, where at front stands the rate of Buy,
the base currency and sell the quoted currency, this means and after- the rate of Sell, such as USD / JPY 104.75/104.85.
that you are expecting the base currency to rise so as to sell The bid price is the price at which the broker is ready to buy
it back at higher price. Such positions are used to be known the base currency for the quote one, while the ask price is
as Long positions. In contrast, if you want to sell the base the price at which the company is selling the base curren-
currency for buying a quote currency, this means that you cy for the quote one. So it can be understood that the con-
want the base currency to fall in price so as to buy it at a low- cepts of buying and selling in relation to you are actually
er price. Such positions are known to be as Short positions.
reversed. Buying and selling in this formulation is not per-
So, keep in mind, that Buy=Long and Sell=Short.
formed by you, but by the party offering you a quotation.
When speaking about the prices of the currencies, we have More precisely saying, if you need to buy a base currency,
already mentioned that they are called rates. Anyway, it is you can do it by Ask price, while selling, you need to do it
very important to mention that in Forex every quotation has through Bid price.

Trading Example
Lets assume that the EUR/USD current exchange rate is for providing you with higher virtual credit amount. For
1.3088 / 1.3090. Based on some technical analysis you example, you may have leverage of 1:100. In this case you
have assumed that the euro is going to rise in value. That need to have only 130.9$ deposited on your account so
is why you make a decision to buy 10,000 EUR (0, 1 lot) as to open such position.
at 1.3090 (the ask price). So, you bought 10,000EUR and
If your predictions come true, and Euro has risen to
paid 13,090 US Dollars for that.
1.3199/1.4001, you then decide to sell it. In this case you
No one has to have that 13,090 US Dollars in order to buy have to sell your Euros at Bid price (1.3199). Thus, you
Euro. Your deposited money may be much less, but due are buying back the USD, but selling the Euro at high-
to the leverage provided by the broker you will have the er price (1. 3199). So, we end up with 13,199 USD. As
opportunity to trade with high volumes. You just need to the company takes the 13,090 USD, our profit becomes
deposit an amount, which is considered to be the margin 109$.

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TOOLS NECESSARY TO PREDICT THE MARKET
CHAPTER 4
Price movements depend on very many factors such as economic conditions, political policies, macro statistics of economic an-
nouncements made by influential officials, and many more. So, it is still possible to predict the market. There are mainly 2 analyti-
cal methods in Forex market: Technical and Fundamental. We will refer to all of them separately.

Technical Analysis
This type of analysis is based on the assumption that the trend Speaking about technical analysis it is highly important
of the exchange rate is already incorporated in the history of to mention the tools that are used by the traders most of-
their past fluctuations. The basis of such an assumption is that, ten: technical indicators and patterns. There is a quite large
fist of all, any complex object (market is a very complex object) range of such tools, but we will illustrate the most used ones:
is inertial, and secondly, the history tends to repeat. A trader, us-
TREND LINES - lines joining higher and higher low points
ing technical analysis, builds charts of currency rates, finds trend
(uptrend) or lower and lower high points (downtrend). Pric-
lines on those charts, determines the shape of a trend reversal
es breaking through these lines can point out the beginning
and calculates various mathematical indicators, on the basis of
of a possible change in price direction.
which makes the decision to open a long or short position.
MOVING AVERAGES - smooth out past movements and
Certainly it is important to understand that the concrete pre-
indicate a possible new trend.
diction is impossible, because the factors affecting the currency
rates are physiological, political, economic, and so on. There is REVERSAL PATTERNS - sequences of maximums and min-
no any physical law that affects the market, based on which an- imums, such as head-and-shoulders.
alytics could make 100% predictions.
SUPPORT AND RESISTANCE - the price levels at which the
Technical analysis is based on the time series of the sequence of future dynamics of prices tends to stop and / or reverse.
currency pairs prices, each point of which is a relatively short pe-
riod of time- time frame. In fact, the time frames are the follow- RELATIVE STRENGTH INDICATORS - show overbought or
ing: 1 minute, 5 minutes, 15, 30, 60, 1 day, 1 week and 1 month. oversold condition of the market.
These numeric price series are analyzed by mathematical meth- FIBONACCI LEVELS - price levels that indicate the purpose
ods or evaluated by traders visually from the graphs. of possible corrective movements from previous large price
By Chart analysis it is implied that for predicting the market movement.
solely graphical images of the market are used (price graphics, MACD or Moving Average Convergences/divergerence-
volume graphics) and its graphical models. Actually these are Comparison of the dynamics of the two moving averages to
the simplest methods as they require minimum software. So, 4 identify early trends and trend reversals.
basic types of charts may be distinguished:
CYCLICITY INDICATORS - Often prices oscillate; pass a
Tick chart
phase of growth, decline, keeping the overall long trend. Cy-
Line chart clical indicators help to find such cycles.
Bar chart
Note also that the growing market is often called the bull
Japanese candlesticks market, and falling market - bearish.

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Fundamental Analysis
This type of analysis studies the macroeconomic events, The volume and dynamics
political news and other events of the world which some- of income to the state budget
how affect the rates of the currencies. The main differ- Deficit / surplus of the budget
ence between the fundamental and Technical analysis is The aggregate consumption
that the Fundamental one is based on the principle that The aggregate private investment
the prices of the currencies on the Forex market are the The level of private savings
reflection of supply and demand, which in their turns The volume of the export
depend on fundamental factors of the economy. In con- The volume of the import
trast, technical analysts do not consider the study of the Unemployment
reasons of price changes important and put an emphasis Inflation
only on the study of the price dynamics and history of
It should be mentioned that traders may not wish to
price movements.
spend their time on studying Fundamental analysis and
Events affecting the market may be distinguished be- doing it themselves. Most of all they prefer following the
tween 2 groups: expected and unexpected. These events professional financial analysts. Such kind of analysis is
include the publication of various economic indicators, available, because it is published in newspapers, is pres-
which contribute to prediction of upcoming important ent in Web, on TV and Radio. In addition, there are bro-
events. In contrast, unexpected events may not be fore- kers which provide their own analytics on their websites
casted in any way because the group of such events in- which makes the process of trading much more easy for
cludes natural disasters, political revolutions, acts of ter- the traders.
rorism, etc.
An important part of the market analysis is the analysis
According to Fundamental analysis predicting the chang- of expectations, which deals with the mood and emo-
es of the prices is possible through predicting the factors tions of market participants (traders). In contrast to con-
which affect the supply and demand. So, the difference ventional methods of analysis, by learning expectations,
between the two analysis methods is the following: for we are trying to understand and measure (for example,
technical analysts if the prices have changed, then some- through surveys) what traders expect for today and for
thing has changed in supply or demand, and the rea- the nearest future. During the trading, each participant
son is longer important because the prices have already has an opinion, and of course, these opinions of large
changed. In contrast, fundamental analysts pay high at- groups of market participants may have an impact on
tention to the factors affecting that change. the market itself, and trading results as well. These views
form the overall mood of the market. Understanding and
So, what factors have the most focal affect on the currency appreciation of these sentiments are quite effective for
price changes? understanding the actions of market participants in the
GDP (Gross Domestic Product) present and in the nearest future. A variety of indices of
The volume and dynamics expectations (this is a part of macro-economic statistics)
of government expenditure is regularly published in the Internet.

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TRADING IN ACTION: 5 THINGS YOU MUST KNOW
CHAPTER 5

1
When you know better you do better.
Different people think about Forex market in dif- who have economic education, are able to be involved in
ferent ways. Some of them judge the market as Forex. Every individual may start studying Forex and needs
a very confusing sphere, and think that trading in to know the basic things in order to start. The most import-
Forex is very difficult. In contrast, others think that trading ant thing is to learn how to analyze the market situation and
is very easy and does not require any knowledge. So, who to coordinate actions in accordance with this situation. Be-
is right? sides the analytics, the beginners should understand that
Actually, both views are wrong: Forex market is not a compli- even when starting trading they may always develop their
cated and difficult one, but at the same time everyone who skills, because Forex is not an area with any limits in terms
wants to start trading needs to have knowledge about the of advancement, thus every day is possible to learn a new
market so as to be able to make profit rather than losses from thing, which has become quite easy with the help of Internet
it. Surely, this does not mean that, for example, only those, through the company websites and other traders as well.

2
Just Do it yourself. Trading plan.
Trading in Foreign Exchange market is a very Your objective in trading it should be your target or an
risky process. Mainly, the reason people lose at expected result (in terms of profit) from your trading.
the beginning is that they do not have enough Use of trading strategies that have been proved to work in
knowledge, have not ever trained and studied the market, your trading experience.
do not know how it works. Of course in this case it is easy to Trading strategies, use of analysis based on which you will
suffer losses. decide to enter the market.
You should have your trading plan before starting trading. Trading analytics, based on which you enter the market
Never follow someones experience, because somebodys (open a trading position).
strategy will not necessarily work for you. You had better fol- The formation of own risk management system - you have
low your own market views, risk tolerance level and make to know in advance how much the risk may reach for any of
your own trading plan. Your trading lan should include the your position and what proportion of your deposit you are
following essential aspects: willing to take under the risk.

3
Knowledge is of no value unless you put it into practice.
No matter how curious you are towards the Demo account without any deadline. By this way you
Forex market, you should understand that in will study everything you will need in future real trad-
order to have a better understanding of the ing. Thus, open a real account and invest real money
market, you need first of all trade in Demo account. only when you feel sure you are ready for entering the
IFC Markets gives you an opportunity to try yourself in world of trading.

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4
Youd better manage your risks!
You do not need to risk more than 2- 20% of your Determine your position size based on how much you
total capital (deposit). Risk management will help will lose if the stop- loss has worked at the set price.
you to avoid suffering high losses on any trade. This loss should not exceed a pre-determined level of
risk.
Use of stop losses. These orders are for automatic clos-
ing of your positions at a particular price so as to limiting Control your emotions, which may overrule the sit-
losses at the times you do not follow the market. Stop uation and make your trading stressful and nervous.
losses are essential for risk management, and require Dont forget that rationality is the key to successful
close study. trading.

5
Confidence half the battle.
It was already mentioned about the risky charac- may go in another direction, thus resulting in high losses.
ter of trading. In spite of the different methods Anyway, the most important think while trading is to remain
of analysis that are used by the traders, still ev- psychologically balanced and strong, because when falling
eryone should know that the market cannot be predicted into depression, you may not make a rational decision. You
by 100%. Surely, people invest much money in Forex, and it just need to be relaxed so as not act nervously and irratio-
sometimes turn to be very ineffective because the market nally.

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READY TO START
CHAPTER 6
Choose a Financial Company
The choice of a financial company is very important be- uities, indices and commodities. One more thing to take
cause the trader deals with it regarding any matter and into account is low spreads.
surely it is very important to refer to a trusted one, with
DEPOSIT AND WITHDRAWAL METHODS the com-
which you may work for a long time. Here are the most
pany should provide convenient deposit methods to its
important features to take into consideration:
clients.
FOREX EDUCATION in this section one is able to get
Another important point is the REGISTRATION NUM-
a general notion about Forex trading, particularly how
BER AND PLACE OF REGISTRATION of the company.
trading is realized in Forex, what the Forex analysis meth-
The legality of the company is an important attributor.
ods are, how to handle them, what margin trade is, what
one needs to know about currency pairs etc. CONTACT MEANS without any contact means a finan-
PLATFORMS every financial company suggests one or cial company cannot be considered a properly operating
several trading platforms, moreover a financial company one. Among all contact means (Telephone, E-Mail, Skype,
providing its own platform is likely to have an advantage Callback, and Live Chat) live support plays a very signifi-
over others. Procedures for opening an account in each cant role. It partially represents the companys image, its
platform should be described in details; otherwise, trad- quality. Chat of the company with a high rating should be
ers will face difficulties. multilingual and punctual in response.

ACCOUNT TYPES each financial company has various The rating of the company also depends on the ability
account types. They differ from each other by minimum TO TRANSFER MONEY AS FAST AS POSSIBLE. The ve-
and maximum deposits, as well as by minimum and max- locity of transfers is one of the indicators of a financial
imum leverage ratios and other parameters. company to have highly-qualified.

TRADING INSTRUMENTS this is a very significant point, Having all the information above written in mind and the
since they are not the same for all brokers. They greatly feeling of enthusiasm, you may already start studying
differ among the brokerage companies. That difference this interesting market. For some of you it may be a new
lies in the variety of currency pairs available for trading, sphere of activity, and you will need to be patient and
as well as in the variety of Contract for Difference trading. positive in order to succeed. Spend your time effectively
The best financial companies provide an opportunity for and you will definitely make high profits from Forex. Be
traders to trade not only currencies, but also CFDs on eq- risky, as Nothing ventured nothing gained.

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 Foreign Exchange Books
Forex for the Beginners
By Viktor Barishpolets

Currency Operations
By Souren Liselott

Essentials of Foreign Exchange Trading

By James Chen

Currency Trading for Dummies

By Mark Galant and Brian Dolan

An Introduction to Equity Markets

By Reuters

Fundamental Analysis of International Currency markets

By Likhovidov V. N.

Internet Sources
http://www.ifcmarkets.com/en/trading-psychology

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