Smart Money Insight-3 1

https://www.atcautomation.co.
za/
Changing, broadening your perspective of

retail trading.
Unlike all the other copy and pasted,

repeated courses.
DECODING
ATC TRADING
THE RETAIL
TRADING
JOURNEY
Smart Money Insight
0
https://www.atcautomation.co.za/
Disclaimer:
The information provided in this book is for educational and informational purposes
only. It is not intended as financial or investment advice. Trading foreign exchange
(forex) on margin carries a high level of risk and may not be suitable for all investors.
Before deciding to trade forex, you should carefully consider your investment
objectives, level of experience, and risk appetite.
Trading forex involves substantial risk of loss and is not suitable for everyone. Past
performance is not indicative of future results. The strategies and techniques discussed
in this book are based on historical data and analysis, and there is no guarantee that
they will be successful in the future.
The author, publisher, and any associated parties do not make any representations or
warranties regarding the accuracy, completeness, or suitability of the information
provided. They shall not be held liable for any errors, omissions, or damages arising
from the use of the information contained in this book.
It is recommended that you seek advice from a qualified financial advisor or broker
before making any investment decisions. You should carefully consider your financial
situation, investment goals, and risk tolerance before engaging in forex trading.
Trading forex involves the risk of losing all or a portion of your investment. You should
only trade with money that you can afford to lose. Do not invest funds that you cannot
afford to lose.
By reading this book, you acknowledge and agree that the author, publisher, and any
associated parties shall not be held responsible for any losses incurred because of the
use of the information provided herein.
---
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The information in this book is based on my opinion, and experience in the financial
markets. Below are the relevant subjects I have excelled in during my studies.
Understanding the Economy

Business Management
Commercial Law
Economics
Financial Accounting Principles
Sustainability and Greed
Money and Banking
Treasury Management
Macroeconomics
South African Economic Indicators
Business Numerical Skills
Personal Financial Management
Enterprise Risk Management
Risk Financing and Short-Term Insurance
Monetary Economics
Fundamentals of Investment
Fixed Income Analysis
Derivatives
General Management
Econometrics
I’m a funded trader with various prop firms, and I was previously funded by Funding
Talent, My Forex Funds and First Class Forex Funds. Averaging 8% -15% monthly.
2
Welcome to a journey that will transform your

understanding of the financial markets.
Improving your decision making when embarking on your trading journey.
"Smart Money
Insight – Decoding the retail trading journey" is a comprehensive
guide designed to arm retail traders, and financial
enthusiasts with the knowledge to interpret and navigate.
the complex world of financial markets.
In the modern era, where the global economy is intricately

connected, understanding the structure of financial markets
is not just beneficial, but essential. This book aims to bridge
the gap between the layman and the expert, demystifying
the complex interactions, rules, and systems that drive the
world's markets.
"Decoding the retail trading journey" delves into the mechanics of

The financial market, providing a detailed analysis of
how they operate, their strengths, weaknesses, and the overall perspective on what to
expect, realistically and staring with the right mindset in the correct steps. Whether you
are a novice trader, a seasoned trader, or a student of
finance, this book will provide valuable insights and
practical tools to enhance your understanding of the
marketplace.
This book is not just about theory; it's about practical

application. It will challenge you to question your
assumptions, broaden your perspective, and ultimately
make more informed trading decisions. With real-world
examples, case studies, and easy-to-understand
explanations, "Smart Money Insight" makes the complex
world of market structure analysis accessible to everyone.
Prepare to embark on an enlightening journey into the
inner workings of financial markets. Equip yourself with
the knowledge to navigate the ever-changing financial
landscape, and unlock the potential to make smarter, more
informed trading decisions. "Smart Money Insight" is more than just a book; it's
your roadmap to escape the retail way of thinking.
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In the captivating realm of trading and investments, understanding the financial

markets environment is akin to unravelling the DNA of a complex organism. It provides
the framework through which we decipher the intricate dynamics of supply and
demand, price movements, and market trends. Market structure serves as the bedrock
upon which the financial market operates, setting the stage for the interaction of buyers
and sellers, thereby shaping investment decisions and returns.
Market structure, in broad strokes, refers to the anatomical characteristics of a market.

It encompasses factors such as the number and strength of buyers and sellers, the level
of collusion among them, the availability of market information, and the ease of
mobility within the market. These variables collectively define the level of competition
within the market, influencing the pricing of goods and services, and ultimately, the
profitability of investments.
Market structure isn't a uniform entity but rather spans a spectrum from perfect
competition to monopoly. Perfect competition, a theoretical ideal, boasts a multitude of
buyers and sellers, with no single entity having the power to sway prices. Conversely,
monopoly occurs when a single seller reigns supreme, dictating prices without
competition. Between these extremes lie oligopoly, characterized by a few dominant
sellers, and monopolistic competition, featuring numerous sellers with differentiated
products. (in retail terms, market makers, big banks, hedge funds … or the stop loss
hunters conspiring against us)
Understanding these market structures is pivotal for investors, as each presents unique
opportunities and challenges. Investing in monopolistic markets may yield higher
returns due to limited competition but entails regulatory risks. Conversely, perfectly
competitive markets offer lower returns but are less prone to regulatory intervention.
Moreover, market structure provides insights into the broader economic landscape,
aiding investors in making informed decisions. For instance, a market dominated by a
few large firms may signal a less competitive and dynamic economy.
In essence, market structure is a cornerstone concept in investing, shaping market

dynamics, influencing pricing, and impacting investment outcomes. Armed with an
understanding of market structure, investors can navigate financial markets with
heightened acumen and confidence.
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Contents
Contents ................................................................................................................. 5
What is CFD trading? ................................................................................................ 8
Here's how CFD trading typically works: ................................................................. 8
Types of derivatives............................................................................................. 10
Choosing the right broker for you: ............................................................................ 12
Types of brokers: ................................................................................................ 12
1. A-Book Brokers: ........................................................................................... 12
2. B-Book Brokers:........................................................................................... 12
Execution methods/policies: ............................................................................... 12
1. Internal Order Matching (B book): ................................................................. 12
2. Dealing (Dealing Desk - DD) (B book): ............................................................ 12
3. Market Making (B book): ............................................................................... 13
4. STP (Straight Through Processing) (A book): ................................................... 13
5. DMA (Direct Market Access) (A book): ........................................................... 13
6. ECN (Electronic Communication Network) (A book): ...................................... 13
7. Aggregation (Varies): .................................................................................... 13
Other Relevant Broker Participants ...................................................................... 14
Liquidity Providers: .......................................................................................... 14
Technology Providers: ...................................................................................... 14
Regulators and Compliance Services: .............................................................. 14
White labelling services: .................................................................................. 14
Proprietary trading firms ......................................................................................... 15
Choosing prop firms and its potential implications:............................................... 17
Types of orders used in CFD trading: ........................................................................ 18
Trading platforms: .................................................................................................. 19
1. MetaTrader 4 (MT4): ......................................................................................... 19
2. MetaTrader 5 (MT5): ......................................................................................... 19
3. TradingView: ................................................................................................... 19
4. cTrader: .......................................................................................................... 19
5. dxTrade: ......................................................................................................... 20
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Expert advisors in meta trader ............................................................................. 21

Key participants in the global foreign exchange market: ............................................ 22
Dynamics of forex trading ....................................................................................... 24
Analysing Trade Opportunities ............................................................................. 26
Effects of Economic Indicators on Currency Demand and Supply: ......................... 27
Chain of Events in Macroeconomics: ................................................................... 29
The relationship between interest rates and foreign direct investment (FDI) ............ 31
Interest rates ...................................................................................................... 32
monetary policy mechanisms and policies ........................................................... 33
US bond yields ................................................................................................... 34
US bond yields and stock prices .......................................................................... 37
Interest rate effects on the US dollar .................................................................... 38
Seasonality ........................................................................................................ 39
Technical analysis and volume analysis ................................................................... 40
Technical Analysis: ............................................................................................. 40
Technical market indicators................................................................................. 40
Divergence Tools ............................................................................................. 41
Volume Analysis: ................................................................................................ 41
Fibbonachi Tools: ............................................................................................... 42
The Commitments of Traders (COT) report ............................................................... 44
Purpose of the COT Report: ................................................................................. 44
Content of the COT Report: ................................................................................. 44
Interpreting the COT Report: ................................................................................ 45
Personal funds or prop firm capital? ........................................................................ 46
Cultivating a trading strategy, .................................................................................. 47
Collecting data on your trades ............................................................................. 49
Portfolio management ........................................................................................ 52
Types of trading styles ......................................................................................... 53
Trading psychology ............................................................................................. 54
Free trading resources ............................................................................................ 57
Recommended brokers .......................................................................................... 58
Recommended prop firms ...................................................................................... 58
6
When to trade: ....................................................................................................... 59

Asian Trading Session: ........................................................................................ 59
European Trading Session: .................................................................................. 59
US Trading Session: ............................................................................................ 59
Overlap Sessions:............................................................................................... 59
Simple analysing examples ..................................................................................... 61
Key levels ........................................................................................................... 61
Market structure ................................................................................................. 62
bullish trend ................................................................................................... 62
bearish trend .................................................................................................. 62
Ranging market ............................................................................................... 62
Demand and Supply ........................................................................................... 64
Imbalance.......................................................................................................... 65
Liquidity ............................................................................................................. 66
Stop loss sizes and win rates ............................................................................... 69
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What is CFD trading?

Majority of retail traders, trade CFDs. Contract for Difference (CFD) trading is a form of
derivative trading where investors can speculate on the price movements of various
financial assets without owning the underlying asset itself. CFDs allow traders to profit
from both rising and falling markets, offering flexibility and potential returns.
In retail terms, we consider market structure as the pure technical movement of price,
trending, ranging etc. but let’s take a step back and understand the broader financial
markets that we seek participation in.
Here's how CFD trading typically works:
Choosing an Asset: Traders select an underlying asset, such as stocks, indices,

currencies, commodities, or cryptocurrencies, on which they want to trade CFDs.
Misconception: Forex trading / Trading is trading forex, or foreign exchange. This

wouldn’t remotely make any sense, purely as mentioned above trading has a wide array
of financial instruments. Not just currencies.
Opening a Position: Traders decide whether they believe the price of the chosen asset
will rise (going long) or fall (going short). They then enter a contract with a CFD provider
to buy or sell a specified number of units of the asset.
Leverage: CFDs are traded on margin, which means traders only need to deposit a
fraction of the total trade value (margin requirement) to open a position. This allows
traders to leverage their capital, potentially amplifying both gains and losses.
Profit and Loss: The profit or loss from a CFD trade is determined by the difference
between the opening and closing prices of the contract, multiplied by the number of
units traded. If the price moves in the direction predicted by the trader, they make a
profit; if it moves against them, they incur a loss.
Closing a Position: Traders can close their CFD positions at any time during market
hours. The profit or loss is realized once the position is closed.
Now, let's illustrate CFD trading with a simple example:
Example: Trading CFDs on Company ATC Stock
Suppose you believe that the price of Company ATC stock, currently trading at $50 per
share, will rise soon.
Opening Position:
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You decide to buy 1000 CFDs on Company ATC stock at the current price of $50 per
share.
Leverage:
Your CFD provider offers a leverage ratio of 10:1. This means you only need to deposit
10% of the total trade value as margin.
Total Trade Value = Number of CFDs × Price per CFD

= 1000 CFDs × $50 per CFD
= $50,000
(when you click on symbol properties in your trading platform you will see the contract
size which usually 100 000 for currencies, 1 – 100 for commodities and 1 – 100 for
indices)
Margin Required = Total Trade Value × Margin Requirement

= $50,000 × 10%
= $5,000
With a $5,000 margin deposit, you can control a $50,000 position in Company ATC
stock.
Profit and Loss:

Let's say the price of Company ATC stock rises to $55 per share, and you decide to close
your position.
Profit = (Closing Price - Opening Price) × Number of CFDs

= ($55 - $50) × 1000
= $5,000
You've made a profit of $5,000 from the trade.
Closing Position:
You close your position by selling 1000 CFDs on Company ATC stock at the current price
of $55 per share.
In this example, you've successfully profited from the price increase of Company ATC
stock through CFD trading. However, it's important to remember that leverage can
amplify both gains and losses, so risk management is crucial when trading CFDs.
Additionally, trading CFDs involves costs such as spreads and overnight financing
charges, which should be considered when assessing potential profits or losses.
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Types of derivatives
Financial engineering has led to the development of various derivative products

designed to meet specific risk management, investment, and trading needs. Here are
some examples of derivative products:
Options:
Options are derivative contracts that give the holder the right, but not the obligation, to
buy (call option) or sell (put option) an underlying asset at a predetermined price (strike
price) within a specified period (expiration date). Options are widely used for hedging,
speculation, and generating income through option premium.
Futures Contracts:
Futures contracts are standardized derivative contracts traded on organized exchanges,
obligating the buyer to purchase and the seller to sell an underlying asset at a
predetermined price and date in the future. Futures contracts are commonly used for
hedging against price fluctuations in commodities, currencies, interest rates, and stock
indices.
Swaps:
Swaps are derivative contracts where two parties agree to exchange cash flows or other
financial instruments based on predetermined terms. Common types of swaps include
interest rate swaps, currency swaps, and commodity swaps. Swaps are utilized for
managing interest rate risk, currency risk, and credit risk, as well as for speculative
purposes.
Forward Contracts:
Forward contracts are customized derivative contracts between two parties to buy or
sell an underlying asset at a specified price on a future date. Unlike futures contracts,
forward contracts are traded over-the-counter (OTC) and are not standardized. Forward
contracts are commonly used for hedging and managing specific risks tailored to the
needs of the parties involved.
Interest Rate Derivatives:

Interest rate derivatives include a wide range of products such as interest rate swaps,
forward rate agreements (FRAs), and interest rate options. These derivatives are used to
manage interest rate risk associated with changes in market interest rates, including
borrowing costs, investment returns, and bond prices.
Credit Derivatives:
Credit derivatives enable investors to manage credit risk associated with default or
credit deterioration of a borrower or an underlying financial instrument. Examples of
credit derivatives include credit default swaps (CDS), collateralized debt obligations
(CDOs), and credit-linked notes (CLNs). Credit derivatives are used for hedging credit
exposure, synthetic portfolio replication, and speculation on credit spreads.
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Structured Products:
Structured products are customized financial instruments that combine derivatives
with traditional securities, such as stocks, bonds, or currencies, to offer specific risk-
return profiles tailored to investor preferences. Examples of structured products include
equity-linked notes (ELNs), reverse convertibles, and principal-protected notes (PPNs).
These are just a few examples of derivative products created through financial
engineering. Derivatives play a vital role in modern finance by providing risk
management tools, investment opportunities, and liquidity to market participants, while
also introducing complexities and challenges in risk assessment and regulation.
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Choosing the right broker for you:

In the retail brokerage space, Over-the-Counter (OTC) brokers facilitate trades between
individual traders and the broader financial markets. These brokers make money
through various revenue streams and operate under different business models. Here's
an explanation of different types of brokers and how they generate revenue:
Types of brokers:
1. A-Book Brokers:
A-Book brokers, also known as Straight Through Processing (STP) brokers, pass clients'
orders directly to the market without intervention. They earn money primarily through
spreads, which are the differences between the bid and ask prices of financial
instruments. A-Book brokers typically charge clients a small markup on the spread or a
commission on each trade executed. Additionally, they may earn interest on client
deposits held in trading accounts.
2. B-Book Brokers:
B-Book brokers, also known as market makers or dealing desk brokers, take the other
side of their clients' trades, effectively becoming the counterparty to client transactions.
They profit from the spread as well as from client losses. B-Book brokers may execute
client orders internally, matching buy and sell orders within their own system, or they
may hedge their exposure in the broader market. By taking on client risk, B-Book brokers
may face conflicts of interest, as they profit when clients lose money.
Execution methods/policies:
1. Internal Order Matching (B book):

Internal order matching refers to the process of matching buy and sell orders within a
single brokerage firm's system without routing orders to external liquidity providers. This
model is commonly associated with B book brokers (Dealing Desk - DD), where the
broker matches client orders internally and takes the opposite side of client trades.
2. Dealing (Dealing Desk - DD) (B book):

Dealing, or Dealing Desk (DD), refers to a brokerage model where client orders are
executed internally by the broker. In this model, the broker acts as the counterparty to
client trades, taking the opposite side of client positions. Dealing desks are typically B
book brokers (DD) that execute client trades internally and may profit from client losses.
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3. Market Making (B book):

Market making involves providing liquidity by continuously quoting bid and ask prices
for financial instruments. Market makers stand ready to buy or sell assets at quoted
prices, thereby facilitating trading and ensuring market liquidity. Market makers are
commonly associated with B book brokers (Dealing Desk - DD), where they execute
client trades internally and profit from the bid-ask spread.
4. STP (Straight Through Processing) (A book):

Straight Through Processing (STP) is an order execution model where client orders are
routed directly to external liquidity providers, such as banks, financial institutions, or
electronic communication networks (ECNs). STP brokers act as intermediaries,
forwarding client orders to the interbank market without intervention. STP brokers
typically operate as A book brokers, routing client orders to external liquidity providers
and offering transparent pricing.
5. DMA (Direct Market Access) (A book):

Direct Market Access (DMA) refers to a trading arrangement where clients have direct
access to the order books of exchanges or other trading venues. DMA allows traders to
execute orders directly on the exchange without intermediaries, providing transparency
and control over order execution. DMA brokers typically operate as A book brokers,
offering clients direct access to market liquidity and order execution without
intervention.
6. ECN (Electronic Communication Network) (A book):

An Electronic Communication Network (ECN) is a type of trading platform that
connects multiple liquidity providers, traders, and institutions, allowing them to trade
directly with each other. ECNs aggregate buy and sell orders from various market
participants and match them based on price and execution priority. ECN brokers
typically operate as A book brokers, providing access to ECNs and allowing clients to
trade directly with other market participants.
7. Aggregation (Varies):
Aggregation involves combining liquidity from multiple sources, such as liquidity
providers, banks, and ECNs, to offer clients access to deeper liquidity pools and better
execution prices. Brokers offering liquidity aggregation services may operate as A book
brokers, STP brokers, or ECN brokers, depending on their business model and execution
method.
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Other Relevant Broker Participants
Liquidity Providers:
Liquidity providers play a crucial role in the retail brokerage ecosystem by offering prices
at which brokers can execute client orders. These providers include banks, financial
institutions, hedge funds, and other market participants that contribute liquidity to the
market. Liquidity providers earn money through bid-ask spreads, transaction fees, and
interest on funds deposited with them.
Technology Providers:
Technology providers offer trading platforms, software solutions, and infrastructure to
retail brokers, enabling them to offer trading services to clients. These providers may
charge brokers licensing fees, subscription fees, or transaction-based fees for the use
of their technology. Additionally, technology providers may offer value-added services
such as analytics, risk management tools, and customer support.
Regulators and Compliance Services:

Regulators and compliance services play a crucial role in the retail brokerage industry
by ensuring that brokers adhere to regulatory requirements and maintain the integrity of
the financial markets. Brokers may incur costs associated with compliance, such as
registration fees, ongoing monitoring, and audits conducted by regulatory authorities.
Additionally, brokers may engage third-party compliance services to help them navigate
complex regulatory frameworks and ensure compliance with applicable laws and
regulations.
White labelling services:

White label brokers offer brokerage solutions to clients under their own branding. They
provide the necessary infrastructure, technology, and regulatory framework, while
clients market the services under their brand. The white label broker handles
compliance, infrastructure, and support, while clients focus on branding and marketing.
Revenue is typically shared between the parties. This arrangement benefits both parties
by expanding market reach for the white label broker and providing a cost-effective
entry into the brokerage business for clients.
Overall, OTC brokers generate revenue through spreads, commissions, interest on

client funds, and other ancillary services. The specific revenue model adopted by a
broker depends on factors such as its business model, target market, regulatory
environment, and competitive landscape. When choosing a broker their execution
policies are usually on their websites, you can also ask them who their liquidity
providers are and at times you can request to have a STP account if they don’t mention it
on their account options. Overall, you want to go with a, A book broker.
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Proprietary trading firms, often referred to as prop firms, are companies

that trade financial instruments with their own capital rather than on behalf of clients.
These firms typically employ professional traders who use proprietary trading strategies
to generate profits for the firm. Prop trading firms may engage in various markets,
including stocks, futures, options, currencies, and commodities.
Here's an explanation of prop firms and the potential conflicts of interest associated
with them:
Proprietary Trading:
Prop firms engage in proprietary trading, where traders use the firm's capital to buy and
sell financial instruments in the hope of making a profit. Traders at prop firms are
typically compensated based on their trading performance, often receiving a share of
the profits they generate for the firm.
Lack of Client Orders:

Unlike traditional retail brokers, prop firms do not handle client orders or act as
intermediaries between clients and the market. Instead, they trade directly with the
market using their own capital. As a result, prop firms do not have a conflict of interest
related to order execution or trade execution quality for clients.
Demo Accounts and Conflicts of Interest:

Some prop firms may offer demo accounts to potential traders as part of their
recruitment and training process. While demo accounts can be useful for practicing
trading strategies and gaining familiarity with the firm's platform, there may be conflicts
of interest if the firm uses demo accounts to mislead traders or inflate their
performance.
Potential for Fraudulent Activities:

In rare cases, prop firms may engage in fraudulent activities, such as operating Ponzi
schemes or misappropriating client funds. These activities can occur when firms
promise guaranteed returns, offer excessively high leverage, or fail to segregate client
funds from the firm's capital. Traders should be cautious when dealing with prop firms
that make unrealistic promises or exhibit suspicious behaviours.
Regulatory Oversight:
Proprietary trading firms are subject to regulatory oversight to ensure compliance with
securities laws and regulations. Regulatory authorities may require prop firms to
maintain adequate capital, implement risk management controls, and disclose
potential conflicts of interest to traders. Traders should conduct due diligence on prop
firms and verify their regulatory status before engaging in trading activities.
Prop firms engage in proprietary trading using their own capital and employ traders to
generate profits for the firm. While prop firms do not handle client orders or act as
intermediaries, there may be conflicts of interest related to demo accounts and
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potentially fraudulent activities. Traders should exercise caution and conduct thorough
research before selecting a prop firm to build a trading career with.
It's essential to recognize that the financial industry is highly regulated, and fraudulent
activities, such as misusing client funds, are illegal and subject to severe penalties.
However, there have been instances where retail proprietary trading firms (prop firms)
have faced allegations or investigations related to mishandling client funds or
misleading traders.
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Choosing prop firms and its potential implications:
1. Using Client Fees to Payout Profitable Clients:

Retail prop firms may be accused of using client fees to pay out profits to traders rather
than generating revenue through actual trading activity. This practice, if proven true,
could indicate financial mismanagement, lack of transparency, or potential fraud within
the firm.
2. Misuse of Client Funds:

If a prop firm uses client fees or funds for purposes other than trading activities, such as
paying out profits to traders or covering operating expenses, it could constitute a misuse
of client funds. This behaviour is illegal and violates regulatory requirements designed
to protect investors and ensure the integrity of financial markets.
3. Conflict of Interest:
Using client fees to payout profitable clients without actual trading activity can create a
significant conflict of interest. It incentivizes the firm to prioritize attracting new clients
and collecting fees over generating profits through legitimate trading activity. This
practice can erode trust in the firm and harm the interests of traders who rely on the
firm for fair and transparent trading opportunities.
4. Regulatory Oversight and Legal Consequences:

Proprietary trading firms are subject to regulatory oversight by government agencies
such as the Securities and Exchange Commission (SEC) in the United States or the
Financial Conduct Authority (FCA) in the United Kingdom. If a prop firm is found to have
engaged in fraudulent activities or misused client funds, it may face severe legal
consequences, including fines, license revocation, and criminal charges against
responsible individuals.
5. Protecting Investor Interests:

Traders should exercise caution when dealing with prop firms and conduct thorough
due diligence before investing funds or trading with a firm. It's essential to verify the
firm's regulatory status, track record, and reputation within the trading community.
Additionally, traders should be wary of firms that make unrealistic promises or offer
guaranteed returns, as these could be red flags indicating potential fraudulent
behaviours.
Traders should prioritize working with reputable firms that prioritize transparency,
compliance, and investor protection.
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Types of orders used in CFD trading:

In CFD (Contract for Difference) trading, traders have various types of orders at their
disposal to execute their trading strategies effectively. Here are some common
1. Market Order:
A market order is an instruction to buy or sell a CFD at the current market price. This
order is executed immediately at the best available price in the market. Market orders
guarantee execution but do not guarantee a specific price.
2. Limit Order:
A limit order is an instruction to buy or sell a CFD at a specified price or better. For a buy
limit order, the specified price must be below the current market price, while for a sell
limit order, it must be above the market price. Limit orders ensure that the trade is
executed at a specific price or better, but there is no guarantee of execution if the
specified price is not reached.
3. Stop Order:
A stop order, also known as a stop-loss order or a stop-entry order, is triggered when the
market reaches a specified price level. For a buy stop order, the specified price is above
the current market price, while for a sell stop order, it is below the market price. Stop
orders are used to limit losses or enter a trade once a certain price level is reached.
4. Stop-Limit Order:
A stop-limit order combines features of both stop and limit orders. It consists of two
components: a stop price and a limit price. When the stop price is reached, the order
becomes a limit order, and it is executed at the specified limit price or better. Stop-limit
orders provide control over the execution price but may not guarantee execution if the
limit price is not met after the stop price is triggered.
5. Trailing Stop Order:

A trailing stop order is a dynamic stop order that automatically adjusts its stop price as
the market price moves in Favor of the trade. For a long position, the stop price trails the
market price at a specified distance below it, while for a short position, it trails above
the market price. Trailing stop orders help lock in profits while allowing for potential
further gains.
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Trading platforms:
MetaTrader 4 (MT4), MetaTrader 5 (MT5), TradingView, cTrader, and dxTrade are popular
trading platforms used by traders to access financial markets, execute trades, analyze
market data, and implement trading strategies. Here's an explanation of each platform:
1. MetaTrader 4 (MT4):
MetaTrader 4 is a widely-used trading platform developed by MetaQuotes Software
Corp. It is renowned for its user-friendly interface, extensive charting capabilities, and
customizable features. MT4 supports algorithmic trading through the use of Expert
Advisors (EAs), which are automated trading systems programmed in MQL4 language.
Traders can access a wide range of markets, including Forex, stocks, commodities, and
indices, and benefit from real-time market data, technical analysis tools, and a large
community of traders.
2. MetaTrader 5 (MT5):
MetaTrader 5 is the successor to MT4, offering additional features and functionalities.
MT5 provides access to more markets, including equities and futures, and supports
more order types and timeframes. It introduces an improved user interface, enhanced
charting tools, and built-in economic calendar and news feed. MT5 also supports multi-
threaded strategy testing and optimization, making it suitable for more advanced
trading strategies. While MT4 remains popular among Forex traders, MT5 is favored by
traders seeking access to a broader range of asset classes.
3. TradingView:
TradingView is a web-based charting platform and social network for traders and
investors. It offers interactive charts with a wide range of technical indicators and
drawing tools, allowing users to perform in-depth technical analysis. TradingView also
features a social networking component where traders can share ideas, collaborate,
and follow other traders' analysis. Additionally, TradingView offers a marketplace where
users can access third-party trading tools, indicators, and strategies. While TradingView
does not support direct trading, it integrates with various brokerage platforms, allowing
users to execute trades directly from the platform.
4. cTrader:
cTrader is a trading platform developed by Spotware Systems Ltd., known for its intuitive
interface and advanced trading features. cTrader offers a wide range of charting tools,
technical indicators, and order types, catering to both beginner and experienced
traders. It supports algorithmic trading through cAlgo, its integrated algorithmic trading
platform, allowing users to develop and deploy automated trading strategies. cTrader
19
also provides access to a network of liquidity providers, offering competitive pricing and
fast order execution.
5. dxTrade:
dxTrade is a trading platform offered by Devexperts LLC, designed for brokers and
financial institutions to build customized trading solutions. dxTrade is highly
customizable and scalable, allowing brokers to tailor the platform to their specific
requirements and branding. It offers advanced trading features, including multi-asset
support, risk management tools, and integration with liquidity providers and clearing
systems. dxTrade also supports algorithmic trading through its API and scripting
capabilities, enabling brokers to offer a wide range of trading products and services to
their clients.
Each of these trading platforms has its unique features, strengths, and target
audiences. Traders should consider factors such as usability, charting capabilities,
asset coverage, and integration with brokerage services when choosing a trading
platform that best suits their needs and preferences.
20
Expert advisors in meta trader

Expert Advisors, commonly known as EAs, are powerful automated trading systems
designed to execute trades on the MetaTrader platform based on pre-defined trading
rules and algorithms. These EAs enable traders to automate their trading strategies,
eliminating the need for manual intervention and allowing for round-the-clock trading
without human oversight. Traders can develop their own EAs using the MetaQuotes
Language (MQL) or choose from a wide range of commercially available EAs from the
MetaTrader marketplace. With the ability to backtest strategies, optimize parameters,
and deploy EAs directly onto live trading accounts, MetaTrader EAs offer traders a
convenient and efficient way to implement and manage their trading strategies with
precision and reliability.
You can view EA backtests on https://www.atcautomation.co.za/ aswell as EA

MYFXBOOK trading metrics at:
https://www.myfxbook.com/members/ATCCAPITAL/eurusd-alpha-2-test/10689996
Traders have access to a diverse array of Expert Advisors (EAs), both paid and free, to
automate their trading strategies. Paid EAs typically offer advanced features, extensive
customization options, and dedicated customer support from the developer. These
premium EAs may undergo rigorous testing and optimization, promising higher
accuracy and reliability in executing trades.
On the other hand, free EAs provide traders with a cost-effective alternative, offering
basic functionality and limited customization options. While free EAs may lack some of
the advanced features found in paid versions, they still offer valuable automation
capabilities, allowing traders to explore and implement various trading strategies
without financial commitment.
Whether opting for a paid or free EA, traders should conduct thorough research,
evaluate performance metrics, and consider user reviews before making a decision.
Additionally, it's essential to test EAs in a demo environment to ensure compatibility
with trading objectives and risk tolerance before deploying them on live accounts.
21
Key participants in the global foreign exchange market:
The global foreign exchange (forex) market is the largest and most liquid
financial market in the world, with a daily trading volume exceeding trillions of dollars.
Participants in the forex market include a diverse range of entities, each playing a
specific role in the market ecosystem.
1. Central Banks:
Central banks play a crucial role in the forex market by implementing monetary policies,
managing currency reserves, and intervening in the foreign exchange market to stabilize
exchange rates or address macroeconomic imbalances. Central banks often conduct
open market operations, including buying or selling currencies, to influence interest
rates and money supply.
2. Commercial Banks:
Commercial banks are major participants in the forex market, facilitating currency
transactions for their clients, including corporations, governments, and individuals.
Banks engage in currency trading for various purposes, such as hedging foreign
exchange risk, facilitating international trade, and generating trading profits.
Commercial banks also contribute to price discovery and liquidity provision in the forex
market.
3. Investment Banks:
Investment banks operate in the forex market as market makers, providing liquidity,
executing trades, and offering advisory services to institutional clients. Investment
banks also engage in proprietary trading, speculation, and currency arbitrage to
capitalize on market opportunities and generate profits.
4. Hedge Funds:
Hedge funds are active participants in the forex market, employing various trading
strategies to generate alpha and manage portfolio risk. Hedge funds trade currencies
based on fundamental analysis, technical analysis, macroeconomic trends, and
geopolitical developments. Hedge funds often use leverage to amplify returns and may
engage in high-frequency trading (HFT) to exploit short-term market inefficiencies.
5. Asset Managers:
Asset management firms trade currencies on behalf of their clients, including pension
funds, mutual funds, and insurance companies. Asset managers engage in forex trading
to diversify portfolios, hedge currency risk, and enhance returns. Asset managers may
employ both active and passive currency management strategies, depending on their
investment objectives and risk preferences.
6. Corporations:
Multinational corporations engage in currency trading to manage foreign exchange risk
arising from international trade, foreign investments, and cross-border transactions.
Corporations use forex hedging techniques, such as forward contracts, options, and
22
swaps, to mitigate the impact of exchange rate fluctuations on their business

operations and financial performance.
7. Retail Traders:
Individual retail traders participate in the forex market through online retail brokers,
accessing the market via trading platforms such as MetaTrader, cTrader, and
TradingView. Retail traders engage in currency trading for speculative purposes, seeking
to profit from exchange rate movements based on technical analysis, chart patterns,
and trading signals. Retail traders typically trade smaller volumes compared to
institutional participants and may use leverage to amplify returns.
8. Governments and Sovereign Wealth Funds:

Governments and sovereign wealth funds participate in the forex market to manage
foreign exchange reserves, invest surplus funds, and influence exchange rates.
Sovereign entities may engage in currency intervention, such as buying or selling
currencies, to maintain stability in the foreign exchange market or achieve strategic
objectives related to trade competitiveness and economic policy.
These are some of the key participants in the global foreign exchange market, each
contributing to market liquidity, price discovery, and efficient allocation of capital
across borders. The forex market operates 24 hours a day, five days a week, allowing
participants from around the world to engage in currency trading across different time
zones.
23
Dynamics of forex trading

In the foreign exchange market, the exchange rate of a currency pair is determined by
the interaction of demand and supply for those currencies. Let's break down how
demand and supply affect exchange rates and how equilibrium is reached in the forex
market:
1. Demand for Currency:

Demand for a currency refers to the desire of market participants to acquire that
currency. Demand for a currency can arise from various factors, including:
- Importers needing to pay for goods and services denominated in that currency.
- Investors seeking to invest in assets denominated in that currency.
- Speculators anticipating future appreciation of the currency.
- Central banks or governments purchasing the currency for reserve holdings.
2. Supply of Currency:
Supply of a currency refers to the quantity of that currency offered for sale in the forex
market. Supply of a currency can come from:
- Exporters receiving payments in that currency for goods and services sold abroad.
- Investors selling assets denominated in that currency.
- Speculators betting on the depreciation of the currency.
- Central banks or governments selling the currency to stabilize exchange rates or
manage monetary policy objectives.
3. Changes in Demand and Supply:

The demand and supply of currencies can change dynamically due to various factors
such as:
-Economic indicators: Changes in economic data, such as GDP growth, inflation,
employment, and trade balances, can impact currency demand and supply.
-Interest rates: Higher interest rates in a country can attract foreign capital inflows,
increasing demand for the currency.
- Geopolitical events: Political instability, conflicts, or geopolitical tensions can
influence investor sentiment and affect currency demand and supply.
-Market sentiment: Speculative trading and investor sentiment can lead to short-term
fluctuations in currency demand and supply.
4. Equilibrium Exchange Rate:

Equilibrium in the forex market occurs when the quantity of currency demanded equals
the quantity supplied, resulting in a stable exchange rate. At equilibrium, buyers and
sellers agree on a price at which transactions can occur without excess demand or
supply. This equilibrium exchange rate represents the fair value of the currency pair
based on prevailing market conditions.
24
5. Ranging Market:
In a ranging market, also known as a sideways or flat market, the exchange rate of a
currency pair remains within a relatively narrow price range over a period of time.
Ranging markets often occur when supply and demand for the currency pair are roughly
balanced, leading to price consolidation and limited directional movement. Traders
may use technical analysis tools such as support and resistance levels, trendlines, and
oscillators to identify trading opportunities within a ranging market.
The forex market is characterized by constant fluctuations in currency demand and

supply, driven by various economic, financial, and geopolitical factors. Understanding
the dynamics of demand, supply, and equilibrium exchange rates is essential for traders
and investors to navigate the forex market effectively and capitalize on trading
opportunities.
25
Analysing Trade Opportunities

Sentiment Analysis
This involves gauging market sentiment or the overall attitude of investors towards a
particular asset or market. Sentiment analysis can be bullish (positive) or bearish
(negative) and is often measured through surveys, sentiment indices, or social media
sentiment analysis tools. (A good rule of thumb when it comes to retail traders’
sentiment tools is to be in the opposite direction of retail traders)
Event-Based Analysis
Event-based analysis focuses on significant events that can impact financial markets,
such as economic releases, corporate earnings reports, geopolitical developments, or
central bank announcements. Traders analyse these events to anticipate market
reactions and adjust their trading strategies accordingly.
Global Economic Indicators

These are key economic data points that provide insights into the health of the global
economy, including GDP growth rates, inflation rates, unemployment figures, consumer
spending, manufacturing activity, and trade balances. Traders monitor these indicators
to assess economic trends and make informed trading decisions.
Geopolitical Risks
Geopolitical risks refer to political events or tensions between countries that can affect
financial markets. Examples include trade disputes, geopolitical conflicts, terrorism,
and regime changes. Geopolitical risks can lead to market volatility and impact investor
confidence, particularly in sensitive sectors such as commodities or currencies.
Central Bank Policies

Central banks play a crucial role in shaping monetary policy, which influences interest
rates, money supply, and currency values. Traders closely monitor central bank
decisions, such as interest rate changes, quantitative easing programs, or forward
guidance, as these policies can have significant impacts on asset prices and market
volatility.
Government Policies
Government policies, including fiscal policies (taxation, government spending) and
regulatory policies (financial regulations, trade policies), can also impact financial
markets. Changes in government policies can affect consumer behaviour, business
investments, and market sentiment, leading to market reactions and price movements.
26
Effects of Economic Indicators on Currency Demand and Supply:
Economic Effect of Effect of Explanation

Indicator Increase Decrease
Gross Domestic Increase Decrease A strong GDP growth indicates a robust
Product (GDP) in in demandeconomy, attracting foreign investors
demand and increasing demand for the
currency. High GDP growth boosts
investor confidence and stimulates
economic activity. However, a
decrease in GDP growth signals
economic weakness, reducing investor
confidence and demand for the
currency.
Consumer Price Decrease Increase in High inflation, as indicated by CPI,
Index (CPI) in demand erodes purchasing power, reducing
demand demand for the currency as
consumers seek alternatives to
preserve value. Conversely, low
inflation or deflation increases
purchasing power, leading to
increased demand for the currency.
Unemployment Decrease Increase in High unemployment suggests
Rate in demand economic weakness, leading to
demand decreased consumer spending and
investment, reducing demand for the
currency. Conversely, low
unemployment indicates a strong
economy, increasing consumer
confidence and demand for the
currency.
Interest Rates Increase Decrease Higher interest rates attract foreign
in in demand investment seeking higher returns,
demand increasing demand for the currency.
Conversely, lower interest rates may
discourage investment, reducing
demand
Balance of Trade Increase Decrease A positive balance of trade, indicating
in in demand exports exceeding imports, increases
demand demand for the currency as foreign
buyers need it to purchase goods and
services. Conversely, a negative
balance decreases demand.
Political Stability Increase Decrease Political stability fosters investor
in in demand confidence, attracting foreign
demand investment and increasing demand for
27
the currency. Conversely, political

instability may lead to capital flight and
reduced demand
Central Bank Increase Decrease Hawkish policies, such as tightening
Policy Decisions in in demand monetary policy, may increase
demand demand for the currency due to higher
interest rates. Conversely, dovish
policies may decrease demand by
lowering interest rates.
Trade Agreements Increase Decrease Favourable trade agreements may
in in demand boost exports, increasing demand for
demand the currency. Additionally, increased
trade activity generally strengthens the
economy, further supporting demand.
Conversely, unfavourable trade
agreements may reduce exports and
decrease demand
Foreign Direct Increase Decrease Significant FDI inflows indicate
Investment (FDI) in in demand investor confidence in the country's
demand economy, increasing demand for the
currency. FDI may also stimulate
economic growth and improve trade
balances, further bolstering demand.
Conversely, a decrease in FDI
indicates reduced investor confidence
and decreased demand for the
currency.
28
Chain of Events in Macroeconomics:
Event Effect Explanation

Increase in Interest ↓ Decrease in Higher interest rates increase
Rates consumer spending borrowing costs for consumers and
and investment ↓ businesses, leading to reduced
spending and investment.
Decrease in ↓ Decrease in GDP Reduced consumer spending leads
Consumer to a decline in GDP as consumer
Spending spending is a significant component
of economic output
Decrease in GDP ↑ Increase in A decrease in GDP results in reduced
Unemployment economic activity, leading to higher
unemployment due to decreased
demand for labour.
Increase in ↓ Decrease in Reduced consumer confidence leads
Unemployment Consumer Confidence to cautious spending behaviour,
reducing demand for goods and
services in the economy.
Decrease in ↓ Decrease in Demand Reduced consumer confidence leads
Consumer for Goods and to cautious spending behaviour,
Confidence Services reducing demand for goods and
services in the economy
Decrease in ↓ Decrease in Reduced demand for goods and
Demand for Goods Business Revenue services results in lower revenue for
businesses, impacting profitability
and growth prospects.
Decrease in ↑ Increase in Business Declining revenue may lead to
Business Revenue Closures financial difficulties for businesses,
resulting in closures and job losses
Increase in ↓ Decrease in Business closures reduce economic
Business Closures Economic Activity activity, leading to further declines in
GDP, employment, and consumer
confidence.
In the realm of financial markets, economic indicators play a pivotal role in shaping
investor sentiment and influencing asset prices, including stocks and currencies. Macro
and microeconomic factors interplay in a complex web of cause and effect, driving
market dynamics. Macroeconomics examines the broader economic factors affecting
entire economies, such as Gross Domestic Product (GDP), unemployment rates, and
inflation. Changes in these indicators can have significant impacts on stock markets.
For instance, a rise in GDP may signal economic expansion, leading to bullish
sentiments in stocks. Conversely, microeconomics focuses on the behaviour of
individual consumers and firms, impacting currency markets. Factors like consumer
29
confidence, corporate earnings, and trade balances influence currency demand and
supply. Positive consumer sentiment may boost spending, strengthening a currency.
Conversely, widening trade deficits may weaken a currency due to increased import
demand. Understanding the interplay between macro and microeconomic factors is
essential for investors to navigate financial markets effectively, as each economic
indicator can set off a chain reaction of cause and effect across asset classes.
30
The relationship between interest rates and foreign direct investment

(FDI) is complex and multifaceted, as both factors influence each other and play
crucial roles in the global economy. Here's how changes in interest rates can impact
FDI:
1. Cost of Borrowing: Interest rates directly affect the cost of borrowing money. When
interest rates are low, borrowing becomes cheaper, encouraging businesses to invest in
foreign markets through FDI. Lower borrowing costs reduce the financial burden on
firms seeking to expand operations overseas, making FDI more attractive.
2. Return on Investment: Higher interest rates typically offer higher returns on

investments in domestic financial assets, such as government bonds or savings
accounts. As a result, investors may prefer to allocate capital domestically rather than
investing in FDI ventures abroad. Conversely, when interest rates in foreign markets are
relatively higher, it may incentivize FDI as investors seek better returns on their
investments.
3. Currency Exchange Rates: Interest rate differentials between countries can

influence currency exchange rates, affecting the attractiveness of FDI. Higher interest
rates in one country relative to another can lead to capital inflows, driving up the value
of the local currency. This appreciation can reduce the cost of FDI for foreign investors
while potentially making domestic assets less attractive to international investors.
4. Economic Stability: Interest rates are often used as a tool by central banks to
manage inflation and promote economic stability. Stable and predictable interest rate
environments are generally favourable for FDI, as they reduce uncertainty and provide a
conducive investment climate. Conversely, sharp or unpredictable changes in interest
rates can increase risk and deter foreign investors.
5. Credit Availability: Changes in interest rates can affect credit availability and
liquidity in financial markets. When interest rates are low, credit conditions are typically
more favourable, making it easier for businesses to obtain financing for FDI projects.
Conversely, higher interest rates may tighten credit conditions, potentially limiting
access to capital for FDI ventures.
The relationship between interest rates and FDI is influenced by a variety of factors,
including borrowing costs, return on investment, currency exchange rates, economic
stability, and credit availability. While low interest rates can stimulate FDI by reducing
borrowing costs and encouraging investment, higher interest rates may attract capital
inflows and support domestic financial markets. Traders and investors monitor interest
rate trends and their impact on FDI to assess investment opportunities and make
informed decisions in the global marketplace.
31
Interest rates play a significant role in both microeconomics and macroeconomics,

influencing various aspects of economic activity and decision-making at different
scales.
In microeconomics, interest rates affect individual consumers, businesses, and

financial institutions:
1. Consumers: Interest rates impact borrowing costs for consumers, influencing

decisions such as taking out loans for mortgages, car purchases, or personal expenses.
Lower interest rates encourage borrowing and spending, stimulating consumption and
investment. Conversely, higher interest rates may discourage borrowing and incentivize
saving, leading to reduced consumption and investment.
2. Businesses: Interest rates influence the cost of capital for businesses, affecting
investment decisions such as expanding operations, purchasing equipment, or
launching new projects. Lower interest rates reduce the cost of borrowing for
businesses, encouraging investment and expansion. Conversely, higher interest rates
increase the cost of borrowing, potentially slowing investment and economic growth.
3. Financial Institutions: Interest rates impact the profitability of financial institutions,

including banks and lending institutions. Lower interest rates reduce the income
generated from lending activities, potentially squeezing profit margins. Conversely,
higher interest rates may boost profitability by increasing the spread between borrowing
and lending rates.
In macroeconomics, interest rates affect broader economic indicators and policy

decisions:
1. Monetary Policy: Central banks use interest rates as a tool to implement monetary
policy and achieve macroeconomic objectives such as price stability, full employment,
and economic growth. Lowering interest rates (accommodative policy) stimulates
borrowing, spending, and investment, supporting economic activity. Conversely, raising
interest rates (tightening policy) can curb inflationary pressures and cool down an
overheating economy.
2. Inflation: Interest rates influence inflationary pressures by affecting consumer

spending, investment, and borrowing costs. Lower interest rates stimulate economic
activity and may contribute to higher inflation if demand outpaces supply. Conversely,
higher interest rates can help control inflation by reducing demand and cooling down
the economy.
3. Exchange Rates: Interest rate differentials between countries impact currency

exchange rates. Higher interest rates tend to attract foreign investment, leading to
capital inflows and appreciation of the local currency. Conversely, lower interest rates
may lead to capital outflows and depreciation of the currency.
32
monetary policy mechanisms and policies
1. Interest Rates: Central banks adjust short-term interest rates, such as the federal
funds rate in the United States or the benchmark interest rate in other countries, to
influence borrowing and lending in the economy. Lowering interest rates encourages
borrowing and spending, stimulating economic activity, while raising interest rates can
cool down an overheating economy by reducing borrowing and spending.
2. Open Market Operations (OMO): Central banks buy or sell government securities
(bonds) in the open market to control the money supply and influence interest rates.
When a central bank buys bonds, it injects money into the economy, increasing the
money supply and lowering interest rates. Conversely, selling bonds reduces the money
supply and raises interest rates.
3. Reserve Requirements: Central banks mandate that commercial banks hold a

certain percentage of their deposits as reserves. By adjusting reserve requirements,
central banks can control the amount of money banks can lend out. Lowering reserve
requirements increases the amount of money banks can lend, boosting economic
activity, while raising requirements restricts lending and slows down economic growth.
4. Forward Guidance: Central banks communicate their future monetary policy

intentions to the public to influence expectations and behaviour. By signalling their
intentions to keep interest rates low or to tighten monetary policy in the future, central
banks can influence borrowing and spending decisions in the present.
5. Quantitative Easing (QE): During times of economic crisis or recession, central

banks may implement QE programs, where they purchase large quantities of
government bonds or other assets from the market. QE aims to lower long-term interest
rates, stimulate lending and investment, and boost economic growth.
6. Currency Intervention: Central banks may intervene in foreign exchange markets to

influence the value of their currency. By buying or selling their own currency in the forex
market, central banks can stabilize exchange rates or pursue specific exchange rate
targets.
These are some of the key monetary policy mechanisms and policies used by central
banks to achieve their economic objectives, such as price stability, full employment,
and sustainable economic growth. Each mechanism has its strengths and limitations,
and central banks often use a combination of these tools to implement effective
monetary policy.
33
US bond yields can be used as a barometer for gauging the strength of the US dollar.
When US bond yields rise, it indicates that investors are receiving higher returns on their
investments in US bonds. This can attract foreign capital inflows, leading to increased
demand for the US dollar. As a result, the dollar tends to appreciate in value relative to
other currencies.
Conversely, when US bond yields fall, it suggests lower returns on US bond investments,
potentially leading investors to seek higher yields elsewhere. This could result in capital
outflows from the US, reducing demand for the dollar and causing it to depreciate
against other currencies.
Therefore, the relationship between US bond yields and the US dollar is often inverse:
rising bond yields tend to strengthen the dollar, while falling bond yields may weaken it.
Traders and investors closely monitor changes in US bond yields as part of their analysis
of currency movements and may use this correlation to inform their trading decisions in
the foreign exchange market.
while changes in yields and the dollar index often exhibit a correlation, it's essential to
recognize that this relationship isn't always perfectly aligned, and correlations can
fluctuate over time. Several factors contribute to this phenomenon:
Market Sentiment: Changes in market sentiment can override the usual relationship
between yields and the dollar index. For example, during periods of heightened risk
aversion, investors may flock to safe-haven assets like US Treasury bonds, leading to
higher bond prices (and lower yields) alongside a stronger US dollar.
Relative Yield Differentials: While higher yields may generally attract capital inflows
and strengthen the currency, the magnitude of this effect can vary depending on yield
differentials between the US and other countries. If other major economies experience
even more significant yield increases, it may mitigate the impact on the dollar index.
Central Bank Policies: Monetary policy decisions by central banks, both in the US and
abroad, can influence yields and currency values independently. Changes in interest
rates or unconventional policy measures can affect investor expectations and shift
market dynamics, potentially decoupling yields and the dollar index.
Economic Fundamentals: Macroeconomic factors such as inflation expectations,

growth prospects, and trade dynamics also play a crucial role. If economic data
diverges from market expectations, it can lead to discrepancies between yield
movements and currency valuations.
Market Participants: The composition of market participants and their trading

strategies can introduce noise and disrupt correlations. Hedge funds, institutional
investors, speculators, and algorithmic trading systems all contribute to market
dynamics, sometimes leading to short-term dislocations between yields and the dollar
index.
34
US TREASURY 10 YEAR YEILDS
AMERICAN DOLLAR INDEX
35
Changes in US bond yields can also have an impact on stock prices, although the
relationship is not always straightforward and can vary depending on market
conditions. Here's how bond yields can affect stock prices:
1. Interest Rate Sensitivity: Stocks and bonds are competing investment options for
investors. When bond yields rise, bonds become more attractive relative to stocks
because they offer higher returns with lower risk. As a result, some investors may shift
their investment from stocks to bonds, leading to a decrease in stock prices.
2. Discount Rate: Changes in bond yields can influence the discount rate used in stock
valuation models, such as the discounted cash flow (DCF) model. A higher discount
rate (corresponding to higher bond yields) can reduce the present value of future cash
flows, leading to lower stock prices.
3. Cost of Capital: Rising bond yields can increase borrowing costs for companies that
rely on debt financing. Higher borrowing costs can negatively impact corporate earnings
and profitability, which can put downward pressure on stock prices.
4. Inflation Expectations: Changes in bond yields can reflect changes in inflation

expectations. If bond yields rise due to expectations of higher inflation, it may lead to
higher input costs for companies, potentially squeezing profit margins and dampening
stock prices.
5. Overall Market Sentiment: Changes in bond yields can also influence overall market
sentiment and risk appetite. If rising bond yields are interpreted as a sign of economic
strength and growth prospects, it may bolster investor confidence and support higher
stock prices. Conversely, if bond yields rise due to concerns about inflation or fiscal
instability, it may lead to a risk-off sentiment, prompting investors to sell stocks and
seek safer assets.
The relationship between bond yields and stock prices is complex and multifaceted.
While rising bond yields can sometimes lead to lower stock prices, the impact depends
on various factors, including investors' perceptions of the underlying reasons for the
change in bond yields, overall market conditions, and economic fundamentals. Traders
and investors need to carefully assess these factors and their interplay to understand
how changes in bond yields may affect stock prices.
36
US bond yields and stock prices
1. Rising Bond Yields and Technology Stocks (2021):

- Case Study: In early 2021, US bond yields began to rise as investors anticipated
higher inflation and economic growth prospects. This led to a rotation out of growth and
technology stocks, which are sensitive to changes in interest rates, and into value and
cyclical stocks.
- Impact: Technology stocks, which typically have higher valuations and rely on future
earnings for their valuation, experienced a decline in prices. Investors shifted their focus
to sectors such as financials, industrials, and energy, which tend to benefit from higher
interest rates and economic expansion.
2. Falling Bond Yields and Dividend-Paying Stocks (2020):

- Case Study: In response to the COVID-19 pandemic in 2020, US bond yields
plummeted as central banks implemented aggressive monetary policy measures to
support the economy. As a result, investors sought safety in dividend-paying stocks,
such as utilities and consumer staples, which offer relatively stable returns compared
to bonds.
- Impact: Dividend-paying stocks, which are often seen as defensive investments
during periods of uncertainty, experienced strong demand, leading to an increase in
their prices. Companies with consistent dividend payments and strong balance sheets
attracted investor attention as alternatives to low-yielding bonds.
3. Rising Bond Yields and Financial Stocks (2016):

- Case Study: Following the US presidential election in 2016, bond yields surged as
investors anticipated fiscal stimulus and higher government spending under the new
administration. Financial stocks, particularly banks, were among the biggest
beneficiaries of rising bond yields due to expectations of higher interest rates and
improved profitability.
- Impact: Financial stocks rallied significantly, driven by expectations of higher net
interest margins and increased lending activity in a rising interest rate environment.
Banks' stock prices soared as investors anticipated stronger earnings growth and
improved prospects for the sector.
These examples highlight how changes in US bond yields can influence investor
sentiment, sector rotations, and stock prices across different market environments.
Traders and investors need to closely monitor bond market dynamics and assess their
potential implications for stock market performance to make informed investment
decisions.
37
Interest rate effects on the US dollar
1. Volcker's Tightening (Late 1970s - Early 1980s):

- Case Study: In the late 1970s and early 1980s, US Federal Reserve Chairman Paul
Volcker implemented a series of aggressive interest rate hikes to combat high inflation.
The Federal Reserve's tightening policy led to a significant increase in US bond yields.
- Impact: The higher US bond yields attracted foreign capital inflows, strengthening the
US dollar. The dollar appreciated sharply against major currencies, reaching historic
highs. The strong dollar helped contain inflation by making imports cheaper and
contributed to a reduction in the US trade deficit.
2. Greenspan's "Taper Tantrum" (2013):

- Case Study: In 2013, then-Federal Reserve Chairman Ben Bernanke hinted at
tapering the central bank's bond-buying program (quantitative easing), causing US bond
yields to spike. The prospect of reduced monetary stimulus led to a sharp rise in US
Treasury yields.
- Impact: The surge in US bond yields attracted capital flows into the US, leading to a
rally in the US dollar. Emerging market currencies, particularly those with large current
account deficits, experienced significant depreciation against the dollar as investors
exited riskier assets.
3. COVID-19 Pandemic (2020):

- Case Study: In response to the economic fallout from the COVID-19 pandemic in
2020, the US Federal Reserve slashed interest rates to near-zero and implemented
various monetary stimulus measures to support the economy. Despite the Fed's
accommodative stance, US bond yields initially fell due to safe-haven demand.
- Impact: The initial decline in US bond yields, coupled with global risk aversion, led to
a surge in demand for the US dollar as a safe-haven asset. The dollar appreciated
against major currencies, reflecting its status as the world's reserve currency and
investor flight to safety during the crisis.
38
Seasonality in trading refers to recurring patterns or trends in asset prices and

market behaviour that occur at specific times of the year. While seasonality effects can
vary across different assets and markets, they are often influenced by factors such as
weather patterns, holidays, and economic cycles. Here's an explanation of seasonality
in trading, using gold as an example:
1. Gold Seasonality:
- Gold, being a precious metal with both investment and industrial uses, exhibits
seasonal patterns in its price behaviour.
- Historically, gold prices have shown tendencies to be influenced by various factors
throughout the year, leading to seasonal trends.
- One common seasonal pattern observed in gold trading is the tendency for prices to
be stronger during the first and fourth quarters of the year.
- This bullish seasonality during the first and fourth quarters can be attributed to several
factors:
- Increased jewellery demand: The first quarter often sees higher demand for gold
jewellery, particularly in regions where cultural events, weddings, and festivals occur
during this time.
- Festival and holiday demand: Cultural festivals and holidays, such as Diwali in India
and the Chinese New Year, often lead to increased gold purchases for gifts and
celebrations, boosting demand and supporting prices.
- Investment demand: Investors may increase their allocations to gold during the first
and fourth quarters due to factors like portfolio rebalancing, tax considerations, or
seeking safe-haven assets amid economic uncertainties.
- Supply constraints: Seasonal factors, such as adverse weather conditions affecting
mining operations or logistical challenges, can impact gold supply, contributing to price
strength.
2. Trading Strategies Based on Seasonality:

- Traders and investors may incorporate seasonal patterns into their trading strategies
by analysing historical price data and identifying recurring trends.
- For example, some traders may look to buy gold at the beginning of the first quarter or
towards the end of the third quarter, anticipating a potential uptrend based on historical
seasonality.
- Conversely, they may consider reducing exposure to gold or implementing hedging
strategies during periods of expected weakness, such as the summer months when
demand may be subdued.
It's important to note that while seasonality can provide insights into potential price
trends, it is not a guaranteed predictor of future market movements. Other fundamental
and technical factors, as well as unexpected events, can influence asset prices and
override seasonal patterns. Therefore, traders should use seasonality analysis as one
tool among others in their trading toolkit and exercise caution when making trading
decisions based solely on seasonal trends.
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Technical analysis and volume analysis are two essential

methodologies used by traders to analyse financial markets, including stocks, forex,
commodities, and cryptocurrencies. Here's an explanation of each:
Technical Analysis:
Technical analysis is a method of evaluating securities by analysing historical price
and volume data to forecast future price movements. It is based on the premise that
past price movements, trading patterns, and market trends tend to repeat over time.
Technical analysts use various tools and techniques to identify patterns, trends,
support and resistance levels, and other indicators that may help predict future price
movements. Some common tools and techniques used in technical analysis include:
- Chart Patterns: Chart patterns, such as head and shoulders, triangles, flags, and
pennants, are formations that indicate potential price reversals or continuations.
- Support and Resistance Levels: Support and resistance levels are price levels at
which buying or selling pressure is expected to be significant, leading to potential price
reversals or breakouts.
- Trendlines: Trendlines are diagonal lines drawn on a price chart to connect significant
highs or lows, indicating the direction of the trend and potential entry or exit points.
- Candlestick Patterns: Candlestick patterns, such as doji, engulfing, hammer, and
shooting star, provide insights into market sentiment and potential reversals based on
the shape and formation of individual candlesticks.
Technical market indicators analyse historical price data and trading volumes to
identify patterns, trends, and potential price movements in financial markets. Technical
indicators help traders make informed decisions about when to buy or sell assets based
on price momentum and market trends. Examples include:
Moving Averages: A moving average is a trend-following indicator that smooths out

price data by creating a constantly updated average price. It helps traders identify
trends and potential trend reversals.
Relative Strength Index (RSI): RSI is a momentum oscillator that measures the speed
and change of price movements. It ranges from 0 to 100 and is used to identify
overbought or oversold conditions in the market.
MACD (Moving Average Convergence Divergence): MACD is a trend-following
momentum indicator that shows the relationship between two moving averages of a
security’s price. It consists of the MACD line, signal line, and histogram, which help
identify trend changes and momentum shifts.
Bollinger Bands: Bollinger Bands consist of a middle band (simple moving average) and
two outer bands that are standard deviations away from the middle band. They expand
and contract based on volatility, providing a visual representation of price volatility and
potential reversal points.
Stochastic Oscillator: The stochastic oscillator is a momentum indicator that
compares a security's closing price to its price range over a specific period. It oscillates
between 0 and 100 and helps identify overbought or oversold conditions.
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Average Directional Index (ADX): ADX is a trend strength indicator that measures the
strength of a trend, regardless of its direction. It ranges from 0 to 100 and is used to
identify strong trends and potential trend reversals.
Divergence Tools
Regular Divergence: Regular divergence occurs when the price of an asset moves in
the opposite direction of an oscillator, such as RSI or MACD. It suggests a potential
trend reversal or continuation.
Hidden Divergence: Hidden divergence occurs when the price of an asset moves in the
same direction as an oscillator but with higher highs or lower lows. It indicates a
continuation of the current trend.
Volume Divergence: Volume divergence occurs when price movements are not
supported by corresponding changes in trading volume. It suggests a potential
weakening of the current trend.
These technical indicators and divergence tools help traders analyse price movements,
identify potential entry and exit points, and make informed trading decisions based on
market trends and momentum. By combining multiple indicators and tools, traders can
develop robust trading strategies and effectively manage risk in dynamic financial
markets.
Volume Analysis:
Volume analysis is a method of analysing trading volume, which represents the number
of shares or contracts traded in a particular security or market over a specified period.
Volume analysis helps traders gauge the strength and conviction behind price
movements and identify potential trend reversals or continuations. High trading volume
often accompanies significant price movements, indicating strong market participation
and increased buying or selling pressure. Conversely, low trading volume may signal a
lack of interest or conviction in the market, leading to price consolidation or indecision.
Volume analysis is often used in conjunction with other technical analysis tools to
confirm signals and enhance trading decisions. Some common volume-based
indicators and techniques include:
- Volume Bars: Volume bars on a price chart represent the amount of trading activity
occurring during each time period, such as a day, week, or month.
- Volume Oscillators: Volume oscillators, such as the On-Balance Volume (OBV) and
Volume-Weighted Average Price (VWAP), are indicators that measure the relationship
between price and volume to identify trends and divergence patterns.
VWAP is a trading benchmark that gives the average price a security has traded at
throughout the day, weighted by volume. It is often used by institutional traders to
assess whether they got good prices on their trades relative to market conditions.
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- Volume Profile: Volume profile is a graphical representation of trading volume at

different price levels, providing insights into support and resistance zones and price
acceptance areas.
- Volume Accumulation/Distribution: Volume accumulation/distribution indicators,
such as the Accumulation/Distribution Line (ADL) and Chaikin Money Flow (CMF),
measure the flow of funds into or out of a security based on volume and price data.
By combining technical analysis with volume analysis, traders can gain a deeper
understanding of market dynamics, identify trading opportunities, and make more
informed decisions based on a comprehensive analysis of price and volume data.
Fibbonachi Tools:
Fibonacci retracement and expansion tools are widely used in technical analysis to
identify potential levels of support and resistance in financial markets. Here's a brief
explanation of each:
1. Fibonacci Retracement
- Fibonacci retracement is based on the Fibonacci sequence, a mathematical pattern
where each number is the sum of the two preceding ones (0, 1, 1, 2, 3, 5, 8, 13, etc.).
- In technical analysis, Fibonacci retracement levels (typically 23.6%, 38.2%, 50%,
61.8%, and 78.6%) are drawn on a price chart from a swing low to a swing high (in an
uptrend) or from a swing high to a swing low (in a downtrend).
- These levels represent potential areas where a financial asset may experience
support or resistance as it retraces a portion of its previous move. Traders often look for
price reversals or bounce opportunities near these Fibonacci levels.
2. Fibonacci Expansion
- Fibonacci expansion, also known as Fibonacci extension, is used to identify potential
price targets or projection levels beyond the initial price move.
- Similar to Fibonacci retracement, Fibonacci expansion levels are derived from the
Fibonacci sequence. Common expansion levels include 61.8%, 100%, 161.8%, and
261.8%.
- Traders draw Fibonacci expansion levels on a price chart by identifying significant
swing points (e.g., a swing low to a swing high in an uptrend) and projecting potential
future price targets based on Fibonacci ratios.
- Fibonacci expansion levels can help traders anticipate where a financial asset may
encounter resistance or where a trend may potentially reverse.
Fibonacci retracement and expansion tools are used by technical analysts to identify
key levels of support and resistance, as well as potential price targets, based on the
Fibonacci sequence and ratios. These tools are often used in conjunction with other
technical indicators and analysis techniques to make trading decisions and identify
potential entry and exit points in the market.
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In addition to Fibonacci retracement and expansion tools, traders often utilize other
Fibonacci-based tools to analyse price movements and identify potential support and
resistance levels in financial markets. These additional Fibonacci tools include
Fibonacci arcs, Fibonacci fans, and Fibonacci time zones. Fibonacci arcs are curved
lines that extend from a trend's starting point and pass through the peak or trough,
indicating potential areas of future support or resistance. Fibonacci fans consist of
diagonal lines drawn from a trend's low to high or high to low, creating fan-like patterns
that highlight potential price reversal zones. Fibonacci time zones are vertical lines
spaced at Fibonacci intervals, indicating potential time-based support or resistance
levels. These tools complement Fibonacci retracement and expansion levels, providing
traders with a comprehensive toolkit for analysing market trends and making informed
trading decisions.
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The Commitments of Traders (COT) report is a weekly

publication issued by the Commodity Futures Trading Commission (CFTC) in the United
States. It provides valuable insights into the positions held by various types of market
participants in the futures markets, including commercial hedgers, large speculators,
and small speculators. Here's an explanation of the COT report and its significance:
Purpose of the COT Report:

The primary purpose of the COT report is to enhance transparency and promote market
integrity by providing market participants with information about the positioning of
different types of traders in the futures markets. The report helps traders and investors
gauge market sentiment, identify potential trends, and assess the degree of market
participation by different market participants.
Content of the COT Report:

The COT report categorizes traders into three main groups based on the size and nature
of their positions:
- Commercial Hedgers: These are businesses or institutions that use futures contracts
to hedge against price risk in their core business operations. Commercial hedgers
include producers, consumers, and merchants who have a vested interest in the
underlying commodity.
- Large Speculators (Non-Commercial Traders): These are institutional or individual
traders who take speculative positions in the futures markets for profit-seeking
purposes. Large speculators include hedge funds, commodity trading advisors (CTAs),
and other institutional investors.
- Small Speculators (Nonreportable Positions): These are individual traders or small
institutions whose positions do not meet the reporting thresholds set by the CFTC.
Small speculators typically have smaller positions compared to commercial hedgers
and large speculators.
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Interpreting the COT Report:

Traders and investors use the COT report to gain insights into market sentiment and
positioning trends. Key factors to consider when interpreting the COT report include:
- Changes in Positioning: Monitoring changes in the net positions of commercial
hedgers, large speculators, and small speculators can provide clues about potential
shifts in market sentiment and future price movements.
- Extreme Positions: Extreme positioning by large speculators or commercial hedgers
may indicate overbought or oversold conditions in the market, suggesting potential
reversals or corrections.
- Divergence: Divergence between the positioning of commercial hedgers and large
speculators may signal potential trend reversals or continuation patterns.
- Volume and Price Action: Combining COT data with volume analysis and price action
can provide a more comprehensive view of market dynamics and confirm trading
signals.
Overall, the COT report is a valuable tool for traders and investors to assess market
sentiment, identify potential trends, and make more informed trading decisions based
on the positioning of different types of market participants in the futures markets.
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Personal funds or prop firm capital?

The most important question you will find yourself asking is whether to opt for trading
personal funds or prop firm capital. It’s important to understand that a small deposit of
$100 or $500 isn’t going to make you money overnight or lead to a full-time trading
career anytime soon.
With the rise of social media trading personalities this is the “recommended norm”,
leading to gambling trading behaviour and the beginning or a long gruelling process of
trying to flip trading accounts with over leveraged tactics. All though it is possible, it is
not a sustainable route.
If you can stay disciplined trading a small account of $100 - $500 with proper risk
management and develop good trading habits, then this would make sense. Then slowly
increasing your deposits as you find consistency.
But on the other hand, if you have developed consistency, it would make more sense to
opt for a prop firm account and using portions of the payouts towards a funding a bigger
personal account. Especially if you don’t have $5000 - $10 000 to fund a personal
account.
Both would have its pros and cons but using a prop firms capital to scale up your
personal account faster is a good route to go, especially since you have no liability in the
prop firm account besides the fees you pay.
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Cultivating a trading strategy, no strategy is the best strategy. But when

creating or choosing a strategy the following factors need to be considered:
1. Statistical Probability:
Statistical probability in trading refers to the likelihood of a particular outcome
occurring based on historical data and mathematical analysis. It involves using
statistical techniques to assess the probability of success or failure of a trading strategy.
Traders analyze past market data, such as price movements, patterns, and indicators,
to identify patterns or setups with a statistical edge. By quantifying the probability of
success, traders can make more informed decisions and manage risk effectively.
2. Risk-Reward Ratio:
Risk-reward ratio is a key metric used by traders to assess the potential profitability of a
trade relative to the amount of risk undertaken. It represents the ratio of potential profit
to potential loss on a trade. A favorable risk-reward ratio typically means that the
potential reward outweighs the potential risk, making the trade potentially profitable
over the long term. Traders aim to maintain a positive risk-reward ratio by setting profit
targets that are at least equal to or greater than the amount of risk taken on each trade.
3. Strategy Profitability and Statistical Significance:

A trading strategy is considered profitable if it consistently generates positive returns
over many trades. Achieving profitability requires identifying setups or patterns with a
statistical edge and applying proper risk management techniques. Traders use back
testing and forward testing to assess the historical performance of their strategies and
ensure statistical significance. A strategy with a proven track record of profitability and a
positive risk-reward ratio is more likely to be profitable in the future if market conditions
remain consistent.
4. Adjusting Risk-Reward Ratio According to Win Rate:

Traders often adjust their risk-reward ratios based on their strategy's win rate and risk
tolerance. A higher win rate allows for a narrower risk-reward ratio, as the likelihood of
winning trades compensates for smaller potential profits. Conversely, a lower win rate
may require a wider risk-reward ratio to account for potential losses and maintain
profitability. By aligning risk-reward ratios with win rates, traders can optimize their
trading strategies for maximum profitability and risk management.
5. Trading Psychology and Risk Management:

Trading psychology plays a crucial role in executing trading strategies effectively and
managing risk. Emotional discipline, patience, and confidence are essential for
maintaining consistency and adhering to trading plans. Traders must control emotions
such as fear, greed, and overconfidence, which can lead to impulsive decision-making
and poor risk management. Establishing clear trading goals, maintaining realistic
expectations, and adhering to strict risk management principles are key aspects of
developing a strong trading psychology.
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6. Trade Management:
Effective trade management involves monitoring open positions, adjusting stop-loss
and take-profit levels, and making timely decisions based on changing market
conditions. Traders use various techniques such as trailing stops, scaling in/out of
positions, and adjusting position size based on volatility and risk exposure. By actively
managing trades and responding to market developments, traders can maximize profits,
minimize losses, and optimize overall portfolio performance.
In summary, achieving profitability in trading requires a combination of statistical

analysis, risk management, trading psychology, and effective trade management.
Traders must develop and refine their strategies based on statistical probability,
maintain positive risk-reward ratios, and adhere to sound risk management principles
to succeed in the dynamic and challenging world of financial markets.
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Collecting data on your trades is essential for traders to gain insights into their
performance, identify strengths and weaknesses, and improve their trading strategies
over time. Using platforms like Myfxbook or similar trade tracking tools allows traders to
analyze various aspects of their trading activity, including entry times, trade durations,
profitability metrics, risk management parameters, and more. Here's why collecting
data on your trades is important:
1. Performance Analysis:
By tracking trades over time, traders can conduct thorough performance analysis to
evaluate their overall profitability and consistency. Analyzing key metrics such as profit
factors, average holding period return (AHPR), geometric holding period return (GHPR),
and expectancy helps traders assess the effectiveness of their trading strategies and
identify areas for improvement.
2. Identifying Patterns and Trends:

Examining data on times of entry, days of entry, and trade durations allows traders to
identify patterns and trends in their trading activity. For example, traders may discover
that they have higher success rates during specific times of the day or days of the week,
enabling them to capitalize on favourable market conditions and avoid less profitable
trading periods.
3. Risk Management Assessment:

Tracking risk-related metrics such as z-score, risk of ruin, maximum adverse excursion
(MAE), and maximum favourable excursion (MFE) helps traders evaluate their risk
management practices and adjust position sizing accordingly. Understanding the
distribution of gains and losses and assessing the probability of ruin helps traders
maintain sustainable risk levels and preserve capital over the long term.
4. Trade Psychology Insights:

Analysing trading data can provide valuable insights into trader psychology and
behaviour. Traders can review their decision-making process, emotional reactions to
winning and losing trades, and adherence to trading plans. Recognizing patterns of
behaviour, such as impulsive trading or emotional biases, allows traders to develop
strategies to mitigate psychological barriers and improve discipline and consistency.
5. Strategy Optimization:
Data collection enables traders to optimize their trading strategies based on empirical
evidence rather than subjective beliefs or intuition. By analysing performance metrics
and identifying which factors contribute to profitability or drawdowns, traders can refine
their entry and exit criteria, adjust risk management parameters, and implement
improvements to enhance overall strategy performance.
6. Goal Setting and Accountability:

Tracking trading data provides a basis for setting specific performance goals and
holding oneself accountable for achieving them. By establishing measurable objectives
based on historical performance metrics, traders can track their progress, stay focused
on continuous improvement, and maintain discipline in executing their trading plans.
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here's a few more significant areas to watch to understand and optimize your
trading:
1. Profit Factor: The profit factor is a measure of the ratio of gross profits to gross losses
in a trading strategy. A higher profit factor indicates that the strategy generates more
profits relative to losses.
2. Standard Deviation: Standard deviation measures the dispersion or variability of

returns from the average return of a trading strategy. It provides insight into the volatility
or riskiness of the strategy's returns.
3. GHPR (Geometric Holding Period Return): GHPR calculates the compounded rate
of return over multiple periods, accounting for the effect of compounding. It reflects the
growth rate of an investment over time.
4. AHPR (Average Holding Period Return): AHPR measures the average return per
period for a trading strategy. It represents the average profit or loss earned per unit of
time.
5. Z-score: Z-score measures the number of standard deviations a data point is from
the mean of a dataset. In trading, it is often used to assess the statistical significance of
a trading strategy's performance relative to its historical data.
6. Sharpe Ratio: The Sharpe ratio is a measure of risk-adjusted return that compares
the excess return of an investment or trading strategy to its standard deviation of
returns. A higher Sharpe ratio indicates better risk-adjusted performance.
7. Win Rate: Win rate, also known as the percentage of winning trades, measures the
proportion of trades that result in profits relative to the total number of trades executed.
8. Drawdown: Drawdown refers to the peak-to-trough decline in the value of a trading

account or investment portfolio during a specific period. It measures the maximum loss
incurred before a new peak is reached.
9. Average Winning Trade: Average winning trade calculates the average profit earned
per winning trade in a trading strategy. It provides insight into the profit potential of
winning trades.
10. Average Losing Trade: Average losing trade calculates the average loss incurred per
losing trade in a trading strategy. It helps assess the risk exposure and potential
downside of the strategy.
11. Consecutive Losses: Consecutive losses measure the number of losing trades that
occur sequentially without an intervening winning trade. It reflects the streaks of losses
experienced in a trading strategy.
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12. Consecutive Wins: Consecutive wins measure the number of winning trades that
occur sequentially without an intervening losing trade. It reflects the streaks of gains
experienced in a trading strategy.
13. Expectancy Score: Expectancy score calculates the expected value or average
return per unit of risk in a trading strategy. It helps traders assess the profitability and
effectiveness of their trading systems over the long term.
In summary, collecting data on your trades through platforms like Myfxbook facilitates
comprehensive performance analysis, risk management assessment, trade psychology
evaluation, win/loss streak investigation and strategy optimization. By leveraging
empirical evidence and quantitative analysis, traders can make more informed
decisions, improve their trading outcomes, and ultimately achieve long-term success in
the financial markets.
Here you can have a look how the data on MYFXBOOK looks , this is our EURUSD
algorithm running on a test account:
https://www.myfxbook.com/members/ATCCAPITAL/eurusd-alpha-2-test/10689996
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Portfolio management
Portfolio management in the context of retail trading involves strategically managing
multiple trading accounts to achieve specific financial objectives while minimizing risk
and maximizing returns. This approach may include:
1. Account Allocation: Allocating funds across different trading accounts to diversify

exposure to various financial instruments, markets, and trading strategies. For example,
funds may be distributed among accounts trading stocks, forex, commodities, or
options, each employing different trading methodologies.
2. Risk Management: Implementing risk management techniques across the portfolio

to protect capital and mitigate losses. This includes setting position sizes,
implementing stop-loss orders, and diversifying across assets and strategies to reduce
overall exposure of your trading portfolio.
3. Profit Distribution: Reinvesting profits from successful trades into other trading
accounts within the portfolio to build capital and increase trading opportunities. This
may involve transferring funds between accounts or using profits from one account to
fund new accounts trading different instruments or trading styles.
4. Diversification: Ensuring the portfolio is diversified across different asset classes,

markets, and trading strategies to spread risk and optimize returns. This diversification
helps reduce the impact of adverse market movements on overall portfolio
performance.
5. Prop Firm Payouts: Utilizing payouts from proprietary trading firms (prop firms) to
increase personal capital and expand the trading portfolio. Prop firm payouts can
provide additional capital for trading activities, allowing traders to scale their operations
and diversify their portfolios further.
6. Performance Monitoring: Regularly monitoring the performance of each trading

account within the portfolio and adjusting as needed to optimize performance and align
with financial goals. This includes evaluating account profitability, analysing trading
metrics, and adjusting strategies based on market conditions.
By effectively managing multiple trading accounts and employing a diversified portfolio

approach, retail traders can enhance their trading outcomes, minimize risk, and work
towards achieving their financial objectives in the dynamic world of trading.
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Types of trading styles

Trading styles encompass various approaches to buying and selling financial assets,
each characterized by its time horizon, frequency of trades, and underlying strategies.
Scalping: Scalping is a lower time frame trading style focused on making small profits
from numerous short-term trades. Traders typically aim to capitalize on small price
movements by entering and exiting positions within seconds to minutes. Scalpers often
rely on technical analysis, such as price action and order flow, to identify short-term
trading opportunities. Due to the high volume of trades, scalping requires quick
decision-making, disciplined risk management, and access to low-cost trading
platforms with fast execution.
Intraday Trading: Intraday trading, also known as day trading, involves buying and
selling financial assets within the same trading day, with all positions closed before the
market closes. Intraday traders focus on capturing intraday price movements and
exploiting short-term market inefficiencies. They often use technical analysis, including
intraday charts, volume analysis, and momentum indicators, to identify short-term
trading opportunities. Intraday trading requires quick decision-making, strong risk
management skills, and the ability to react swiftly to changing market conditions.
Swing Trading: Swing trading involves holding positions for several days to weeks to
profit from medium-term price fluctuations. Swing traders aim to capture "swings" or
price moves within established trends or ranges. They often use a combination of
technical analysis tools, such as chart patterns, trendlines, and moving averages, to
identify entry and exit points. Swing trading requires patience and discipline to ride out
short-term price fluctuations while aiming to capitalize on broader market trends.
Position Trading: Position trading is a long-term trading style that involves holding
positions for weeks, months, or even years to capitalize on significant market trends.
Position traders aim to identify and participate in major market moves, often based on
fundamental analysis and macroeconomic factors. Position traders take a more hands-
off approach compared to other trading styles, allowing trades to unfold over extended
periods without frequent monitoring. Position trading requires a thorough
understanding of market fundamentals, patience, and the ability to withstand short-
term volatility.
Each trading style has its unique characteristics, advantages, and challenges, and
traders often choose a style that aligns with their personality, risk tolerance, and goals.
TIP: for each trading style, it is helpful to understand what the trading style just before
you are doing. It’s helpful for an intra-day trader to understand the potential bias of a
swing trader.
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Trading psychology
Trading psychology plays a critical role in the success of traders in financial markets. It
encompasses a wide range of emotions, behaviours, and mental attitudes that can
influence decision-making and performance. Here's a closer look at some key aspects
of trading psychology:
1. Fear of Missing Out (FOMO):

FOMO is a common psychological phenomenon among traders, characterized by the
fear of missing out on potential profits or opportunities. It can lead traders to make
impulsive decisions, chase trades, or enter positions hastily without proper analysis.
Overcoming FOMO requires discipline, patience, and a rational approach to trading.
2. Marrying a Bias:
Marrying a bias refers to becoming overly attached to a particular viewpoint or trading
strategy, even when evidence suggests otherwise. Traders may develop biases based on
past successes, personal beliefs, or emotional attachment to a position. It's essential
for traders to remain flexible, open-minded, and willing to adapt their strategies based
on new information and market conditions.
3. Greed:
Greed is a powerful emotion that can drive traders to take excessive risks, overleverage
their positions, or hold onto winning trades for too long in pursuit of higher profits. While
ambition and aspiration are essential in trading, unchecked greed can lead to poor
decision-making and substantial losses. Managing greed involves setting realistic goals,
sticking to a disciplined trading plan, and avoiding reckless behaviour.
4. Fear:
Fear is another common emotion that can affect traders, leading to hesitation,
indecision, or avoidance of risk. Fear of losing money, fear of being wrong, or fear of
uncertainty can all undermine trading performance. Overcoming fear requires
developing confidence in one's abilities, managing risk effectively, and maintaining a
rational mindset in the face of adversity.
5. Pressure:
Trading can often involve high levels of pressure, whether from financial goals,
performance expectations, or external influences. Traders may feel pressure to perform,
meet targets, or outperform peers, which can lead to stress, anxiety, or burnout.
Managing pressure involves setting realistic expectations, maintaining a balanced
lifestyle, and focusing on the process rather than solely on outcomes.
6. Impatience:
Impatience can be detrimental to traders, leading to premature entries or exits,
overtrading, or disregarding proper risk management practices. Developing patience is
crucial in trading, as it allows traders to wait for optimal opportunities, exercise
discipline, and avoid impulsive decision-making.
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7. Overconfidence:
Overconfidence occurs when traders exhibit excessive belief in their abilities, leading
them to take on too much risk or neglect proper analysis. While confidence is essential
for success, overconfidence can result in complacency, arrogance, or a disregard for
risk. It's important for traders to remain humble, continuously learn and improve, and
maintain a healthy level of self-awareness.
8. Pride:
Pride can prevent traders from admitting mistakes, seeking help, or adjusting their
approach when necessary. It can lead to stubbornness, resistance to feedback, and a
reluctance to acknowledge weaknesses. Overcoming pride requires humility, a
willingness to learn from failures, and a focus on continuous self-improvement.
9. Revenge trading:
Revenge trading refers to a psychological phenomenon where traders make impulsive
and emotionally driven trades to recover losses incurred from previous trades. It often
occurs after experiencing a significant loss, frustration, or disappointment in the
market. Instead of adhering to their trading plan and risk management strategies,
revenge traders seek to recoup their losses quickly by taking excessive risks or deviating
from their usual trading methods.
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trading psychology encompasses a wide range of emotions, behaviours, and

attitudes that can impact trading performance. Successful traders recognize the
importance of mastering their emotions, managing psychological biases, and
maintaining a disciplined mindset to achieve long-term success in the financial
markets.
Create a perception of realistic trading expectations, avoid gambling behaviour, using

benchmark returns for comparison, and have a long-term perspective.
Establishing realistic trading expectations is paramount for traders, with success often
requiring time, effort, and discipline. It's essential to recognize that trading is not a get-
rich-quick endeavour, and losses are inevitable; hence, setting achievable goals is
crucial. According to research, approximately 90% of day traders fail to be consistently
profitable, with only a small percentage earning significant profits. Traders should avoid
speculative or impulsive behaviours, which can lead to significant losses, with studies
indicating that over 70% of day traders incur losses. Instead, traders should focus on
disciplined execution, proper risk management, and adherence to a well-defined
trading plan. Benchmarking returns against market indices, such as the S&P 500 or
sector-specific benchmarks, provides a valuable reference point for performance
evaluation. Moreover, while hedge funds are often regarded as benchmarks for
professional traders, it's essential to approach their returns realistically, considering
that average hedge fund returns over the past decade have ranged from 5% to 10%
annually, on average some high performing hedge funds have returns of 50% - 75% per
annum. This alone should give you the understanding that YOU WILL NOT HAVE A 10%
MONTH EVERY MONTH, this also gives you insights to why 20%-30% of hedge funds fail.
By adopting a long-term perspective and avoiding the allure of quick money, traders can
increase their chances of sustainable success in the financial markets.
Having a realistic target of 3% - 5% (10% at occasionally) a month puts you in the top
performing bracket. Do not fall into the trap of trading influencers opting for 100%
months.
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Free trading resources

Before buying overpriced, copy and pasted courses. Theres a high possibility you could
find the same resources for free online. Though, it is important to mention finding a
reliable trustworthy and transparent mentor that’s tried, tested , and succeeded will
make your trading journey and goals more attainable, here are some free trading
resources available online:
Investopedia: A comprehensive financial education website offering articles, tutorials,

and educational content on various trading and investment topics, including tutorials
on technical analysis, fundamental analysis, and trading strategies.
TradingView: A popular platform that provides free charting tools, technical analysis
indicators, and social networking features for traders.
Babypips: A website offering free educational resources for forex traders, including
beginner-friendly tutorials, articles, quizzes, and a forex trading forum.
Investing.com: A website providing free financial news, analysis, and real-time data for
stocks, forex, cryptocurrencies, commodities, and indices. Investing.com offers
customizable charts, technical analysis tools, economic calendars, and portfolio
tracking features.
StockCharts.com: While StockCharts offers premium services, it also provides a

selection of free charting tools, technical analysis indicators, and educational
resources.
YouTube: There are numerous YouTube channels dedicated to trading education,

market analysis, and trading strategies. Many trading experts and educators share free
tutorials, webinars, and market insights on their channels.
Forex Factory: A website offering free forex trading resources, including an economic
calendar, forex news articles, market analysis, and a forex forum for traders to discuss
trading ideas and strategies.
Tradingster.com: An online platform offering free trading resources, including trading

articles, market analysis, COT reports and trading tools.
Joining free Telegram groups can also provide valuable insights and trading signals. For
more information and resources, visit https://www.atcautomation.co.za/. You can also
join our Discord community: https://discord.com/invite/wbUuzFYsmP and Free
telegram group: https://t.me/atlantictradingcompany Aswell as our free EA signals
group: https://t.me/+Nz9C3Ir0PJQ1YTg0
FREE FOREX COURSE:
https://youtube.com/playlist?list=PLijLsmHpLXq2cKOOcqApv3bK6ht1iz2Um&si=oQjFL
E4oV-LjCQb0
57
Recommended brokers
These are just a few examples of the many free trading resources available online.
Traders should explore different platforms and resources to find the ones that best suit
their trading needs and preferences.
Exness: https://one.exness.link/a/kw15bq7jiq
Multiple regulatory licenses
Ultra-fast execution
Swap free and Raw spread accounts.
Copy trading
Exness in app trading
Unlimited leverage
Established in 2008
HF Markets: https://register.hfm.com/za/en/new-live-account/?refid=10376090
Multi regulatory licenses
Ultra-fast execution
Swap free and Raw spread accounts.
Cent accounts
Copy trading
HF Markets in app trading
Free education and market analysis
Upto 1:2000 leverage
Established in 2010
Markets.com: https://go.markets.com/visit/?bta=39720&brand=markets
Multi regulatory licenses
Low spreads
Copy trading
Markets in app trading
Free education and market analysis
Established in 2008
Looking to partner with a broker? Look no further than markets.com for daily payments
and 50% commission with a 24/5 dedicate account manager for you and your clients
with favourable trading conditions:
https://go.markets.com/visit/?bta=39720&brand=marketsaffiliatesaffiliates
Recommended prop firms

FTMO: https://trader.ftmo.com/?affiliates=oeijbQJbswbvTVEFYzFd
$200 000 000 + paid out to FTMO traders
180+ countries
16 000 000 + trades placed every month
8 hour average payout processing times
Established in 2015
58
if you have an existing HF market and Exness profile, use our referral codes above if you
enjoyed this book.
When to trade:
The forex market operates 24 hours a day, five days a week, and is divided into several
major trading sessions, each with its own characteristics and volume profile.
Asian Trading Session:

- Time: Typically starts around 00:00 GMT and overlaps with the end of the US session.
- Major Financial Centers: Tokyo, Hong Kong, Singapore, Sydney.
- Characteristics: Generally, the Asian session is known for lower volatility and narrower
price ranges compared to other sessions. However, certain currency pairs, such as
USD/JPY and AUD/USD, may see increased activity during this time, especially when
economic data releases from Australia and Japan occur.
European Trading Session:

- Time: Begins around 07:00 GMT and overlaps with the end of the Asian session.
- Major Financial Centers: London, Frankfurt, Zurich, Paris.
- Characteristics: The European session is considered the most active and liquid
session of the forex market. It sees significant trading volume and volatility, particularly
during the overlap with the Asian session. The euro (EUR), pound sterling (GBP), and
Swiss franc (CHF) are among the most actively traded currencies during this session.
US Trading Session:
- Time: Starts around 13:00 GMT and overlaps with the end of the European session.
- Major Financial Centers: New York, Chicago.
- Characteristics: The US session is characterized by high trading volume and volatility,
driven by market participants from the United States, as well as overlaps with the
European session. Major economic data releases and news events from the US often
occur during this session, leading to significant price movements in currency pairs like
EUR/USD and USD/JPY.
Overlap Sessions:
- There are two main overlap sessions:
- Asian-European Overlap: Occurs from around 07:00 to 09:00 GMT, overlapping with
the end of the Asian session and the beginning of the European session. It tends to be
one of the busiest times for forex trading, with increased liquidity and volatility.
59
- European-US Overlap: Occurs from around 13:00 to 17:00 GMT, overlapping with the
end of the European session and the beginning of the US session. It is another period of
heightened trading activity, as traders from both regions are active simultaneously.
Overall, trading volume tends to be highest during the overlap sessions when multiple
major financial centers are open simultaneously. Traders often focus on these times for
increased liquidity and opportunities to capitalize on short-term price movements.
60
Simple analysing examples

In this section, we'll embark on an exhilarating journey into the heart of market
dynamics, exploring the tools and techniques that empower traders to decipher the
cryptic language of price charts.
Key levels
The first thing we want to do is have a look at our higher time frame on a line:
Where we ill look at major key levels. We will do this process on the weekly and monthly
time frame. Purely on the line chart.
We look for zones where the line chat behaves in 1 of the following ways:
Rejection that lines up , a rejection that overlaps or a rejection with a gap
Its important to note that most recent price is always more relevant than older price.
61
These area won’t be areas to enter but rather guide you to show you which price ranges
you are trading between.
Going down to the daily time frame you will notice these areas serve as zones of
rejection (reversals) or zones for potential continuations.
Now that you know how to add key levels, its important to understand simple market
structure and a few concepts that will help reading price action.
Market structure
bullish trend is considered a structure with higher highs and higher lows
bearish trend is considered a structure with lower highs and lower lows
Ranging market is considered a structure with relatively equal highs and lows or a
price range the market trading in within a given time period.
62
63
Demand and Supply
Before we get to identifying a reversal or continuation, its important to understand how

to spot a demand or supply zone. Or a zone that broke out of equilibrium in price. This
can be breaking out of a range, or a shift in structure. In the example below price breaks
a previous lower high. But its important that price closes above the high.
The zone that breaks price out or equilibrium or a range near a key level would be the
demand or supply zone. It’s the area where the strength of the bulls and bears need to
overpower each other with one leading direction.
64
Imbalance
It’s important that a demand or supply zone forms with a imbalance. This displays a
increase in volume. With bigger than usual candles (as the bears or bulls win) , leaving
unfilled orders during a breakaway/breakout or impulse. These candles should not have
the candle before and after with wicks touching.
You can think of it as the last point in each time frame of price range where the defeated
had a last chance to put up a fight, before structure reversed or continued.
For a demand zone it’s the last sell candle before the volume increased bullish
For a supply zone it’s the last buy candle before the volume increase bearish
65
Here is an example of a market entering a new trading range breaking a higher time
frame key level. You can see the increase in volume as the bulls take over and breaking
structure to the left and leaving an imbalance. The market must come back to mitigate
this area. This demand zone will be your entry.
Liquidity
Another beautiful confirmation or tool to use is looking at areas of liquidity.
Theres different points of liquidity you want to look at, or understand. This is Asian
liquidity, swing point liquidity, equal highs/lows liquidity, and trendline liquidity
66
Heres a example of a combination of asian liquidity and equal lows above a demand
zone.
The best time to catch these trades is during the London session. Although I personally
prefer trading the New York reversal.
Your demand or supply zone is only valid if it has an increase in volume that leaves a
imbalance and breaks structure. Either a (break of structure) or a (change of character),
A BOS for continuation trades and a ChOCh for reversal trades.
67
Your ChOCh needs to be followed by a break of structure to confirmation the trend

change.
Its important to understand the theory behind liquidity, to grasp why theres more
liquidity at certain price levels. These levels are areas where stop losses are placed
from retrial traders. The stop loss is a area where a buy needs to sell, or a seller needs to
buy a instrument. This completes the full transaction process of CFD trading as the
trader does not own the underlying asset but rather “borrows” it.
Often the market will build up liquidity before news events trapping early buyers or
sellers, sometimes even both! The lower the liquidity in a market the higher the volatility
will be. This is why news events are so volatile as prices can’t fill at each given price
increment and causes a huge imbalance in orders that will then be filled or corrected.
You will often see your pending orders fill at a different price level than you placed, or
you stop loss will only close your trade after a few pips, this is called slippage and often
occurs during high volatile news as your order cannot be matched at the given price to
close your trade (buy back or sell back)
68
Stop loss sizes and win rates
A common problem that occurs trading these types of entries on a lower time frame is
the win rates. With a tight stop loss comes a low win rates. This is because they are
positively correlated.
A smaller stop loss gives you a higher risk to reward ratio but a lower win rates , and as
bigger stop loss gives you a lower risk to reward ratio with a higher win rates. That’s
relationship between these 3 variables. It’s important to understand these to
understand the type of trader you are. And the time frame you should be trading.
A lower win rate does take a hit on your trading psychology.
So its important to choose your battles wisely in this case and understand that
randomness in the market based on probability will effect your trading psychology, but if
69
you journal and keep track of your trades you will breeze through it when you know the
minimum and average win rates your trading fluctuates through.
Trading psychology pressure can lead to a boat load of trading mistakes. The list would
be to long to list but keeping this relationship in mind will save you.
A example of a profitable win rate with smaller stop losses is 30%-40% with a risk to
reward of 1:3 – 1:5 – 1:10, you will probably average out at 1:3 – 1:5 if trailing stop losses
get hit.
70
71

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Changing, broadening your perspective of

Unlike all the other copy and pasted,

Understanding the Economy

Welcome to a journey that will transform your

In the modern era, where the global economy is intricately

"Decoding the retail trading journey" delves into the mechanics of

This book is not just about theory; it's about practical

In the captivating realm of trading and investments, understanding the financial

Market structure, in broad strokes, refers to the anatomical characteristics of a market.

In essence, market structure is a cornerstone concept in investing, shaping market

Expert advisors in meta trader ............................................................................. 21

When to trade: ....................................................................................................... 59

What is CFD trading?

Here's how CFD trading typically works:

Choosing an Asset: Traders select an underlying asset, such as stocks, indices,

Misconception: Forex trading / Trading is trading forex, or foreign exchange. This

Now, let's illustrate CFD trading with a simple example:

Example: Trading CFDs on Company ATC Stock

Total Trade Value = Number of CFDs × Price per CFD

Margin Required = Total Trade Value × Margin Requirement

Profit and Loss:

Profit = (Closing Price - Opening Price) × Number of CFDs

You've made a profit of $5,000 from the trade.

Financial engineering has led to the development of various derivative products

Interest Rate Derivatives:

Choosing the right broker for you:

1. Internal Order Matching (B book):

2. Dealing (Dealing Desk - DD) (B book):

3. Market Making (B book):

4. STP (Straight Through Processing) (A book):

5. DMA (Direct Market Access) (A book):

6. ECN (Electronic Communication Network) (A book):

Other Relevant Broker Participants

Regulators and Compliance Services:

White labelling services:

Overall, OTC brokers generate revenue through spreads, commissions, interest on

Proprietary trading firms, often referred to as prop firms, are companies

Lack of Client Orders:

Demo Accounts and Conflicts of Interest:

Potential for Fraudulent Activities:

Choosing prop firms and its potential implications:

1. Using Client Fees to Payout Profitable Clients:

2. Misuse of Client Funds:

4. Regulatory Oversight and Legal Consequences:

5. Protecting Investor Interests:

Types of orders used in CFD trading:

5. Trailing Stop Order:

Expert advisors in meta trader

You can view EA backtests on https://www.atcautomation.co.za/ aswell as EA

Key participants in the global foreign exchange market:

swaps, to mitigate the impact of exchange rate fluctuations on their business

8. Governments and Sovereign Wealth Funds:

Dynamics of forex trading

1. Demand for Currency:

3. Changes in Demand and Supply:

4. Equilibrium Exchange Rate:

The forex market is characterized by constant fluctuations in currency demand and

Analysing Trade Opportunities