BASIC FOREX

Full Course
Table of content

CHAPTER 1……………………………………………………WHAT IS FOREX

WHAT IS TRADED IN THE FOREX MARKET

CHAPTER 2…………………………………………………WHO IS A BROKER?

TRADING TIMES & SESSIONS
TERMS USED IN FOREX

CHAPTER 3………………………………………………FORMS OF TRADING

CHAPTER 4…………………………………………………CURRENCY PAIRS

WHEN DO YOU BUY/SELL?

CHAPTER 5…………………………………………………………………….PIPS
BID AND ASK PRICE
SPREAD

CHAPTER 6…………………………………………………..TRADING ORDERS

CHAPTER 7……………………………………………………………….LOT SIZE

LEVERAGE/MARGIN

CHAPTER 8……………………………………………………….TRADING PLAN

TRADING JOURNAL
COMMON MISTAKES TRADERS MAKE
RISK MANAGEMENT

CHAPTER 9……………………………………………………….TIME FRAMES

CHAPTER 10………………………………………CANDLESTICK ANALYSIS
CANDLESTICK PATTERNS

CHAPTER 11………………………………………SUPPORT & RESISTANCE

CHAPTER 12………………………………………………………FIBONNACCI

CHAPTER 13…………………………………………..MARKET STRUCTURE

CHAPTER 14……………………………………………….CHART PATTERNS

CHAPTER 15………………………………………….DEMAND AND SUPPLY

 CHAPTER 1

WHAT IS FOREX

Forex is the short form of “FOREIGN EXCHANGE”

The foreign exchange market, which is usually known as “forex”

or “FX,” is the largest financial market in the world.

With a total daily liquidity of over $6.6 Trillion. Liquidity here refers
to how much money is traded daily.

Why do we say forex is the biggest financial market in the world?

Other financial markets like the New York stock exchange which is
the second largest financial market as you can see in the statistical
image above is having a daily trading volume of $22.4 billion

While the Crypto market, has a total market cap of just $262 Billion
as of the time of this writing.

That is to show you the massive daily Liquidity which is in the Forex
Market.

WHAT IS TRADED IN THE FOREX MARKET

The simple answer is MONEY.

This is not the form of market where you buy or sell cloths or bags.

In the Forex market we Trade currencies against each other.

Currencies such as:

USD
EUR
GBP
NZD
JPY
CHF
CAD
AUD etc…
So what we actually do is that we are constantly transacting in the
items listed above.
And they are traded against each other in pairs.

CHAPTER 2

WHO IS A BROKER?

Let's say that is you (left), and your broker (centre) and the Forex
market (right)

The broker gives you the ability to trade with other liquidity
providers in the forex market.

Forex Brokers are firms that give you access to the forex market, by
providing a trading account for you.
They also give traders Leverage

There are various Brokers in the Forex Market

We have
Hotforex
Fxtm
Exness
IC markets
FBS
LiteForex
Oanda etc…

TRADING TIMES AND TRADING SESSIONS

There are various trading times and trading sessions in forex

They include:

SYDNEY SESSION

TOKYO SESSION

LONDON SESSION

FRANKFURT SESSION

NEW YORK SESSION

The Sessions names are derived from the major cities in the world
from which most of the transactions are done e.g:
Sydney session represents Australia and other countries around
that time zone

Tokyo session sometimes called ASIAN Session represents Japan

and some of the Asian countries.

London session represents the United Kingdom and the countries

within it.

Frankfurt session which is in Germany represents Europe.

NewYork session represents the United State of America

The forex market is a 24 hour market, it is regarded as the Market

that never sleeps because it's open 24 hours a day and 5 days a
week, only closing down during the weekend.
So unlike other financial markets like the stock or bond markets, the
forex market does NOT close at the end of each business day.

So no matter where you are around the world, no matter your time
zone… you can actually Trade this Large, Highly Liquid market

Trading Times
Each of these session have their opening and closing times

SESSIONS OPENING TIMES CLOSING TIMES

Sydney 9pm GMT 6am GMT
Asian 11pm GMT 8am GMT
London 7am GMT 4pm GMT
Frankfurt 8am GMT 5pm GMT
New York 1pm GMT 10pm GMT
All sessions lasts for 9 hours.
It’s best to trade the market when two or more sessions are open at
the same time because there’s usually more volatility during such
times.

For instance…
At 12AM GMT
Sydney and Tokyo session would be open together and it would
have more volatility than between 9PM to 11PM GMT

At 8AM GMT
London and Frankfurt session would be open, in fact even Tokyo
would be with them briefly, so you would notice that volatility would
increase during such times.

At 1PM GMT
New York, Tokyo session and Sydney session would be open
together.

TERMINOLOGIES USED IN FOREX

Just like every other new field you find yourself, you would have to
get accustomed to its terms and terminologies

So also is the field of Forex, you would need to learn about the
terminologies so as to be able to communicate with fellow traders.

Long………BUY

Short………SELL

Open a position…….means to either BUY or SELL

Bullish market……. a market that is moving upwards

Bearish market…….a market that is moving downwards.

Bulls..... The buyers are referred to as Bulls

Bears..... The sellers are referred to as Bears

Ranging…..the market is said to be ranging, if it does not have any

particular directions it's neither moving upwards nor downwards

Trending…… A Market that has direction, it’s either moving upwards

or downwards
Hawkish……This term is mostly used when referring to the central
bank governor or personnel of a country, when they are hawkish
they tend to be liberal on interest rate and are willing to increase it.
This is good news for investors because they would be willing to
invest when they know they will get more interest

Dovish……..This is the opposite of hawkish, financial personnel

who are dovish are very restrictive, they do not want to tamper with
the interest rate.
This is bad news for investors, they wouldn’t want to invest in this
scenario, they would rather pull out their investment.

FOMO…….Fear Of Missing Out

NFP…. This is an acronym for Non-Farm Payroll, a very important

news event in the US.

Some of the currencies have nicknames:

The dollar (USD)is called Greenback or Buck

The Pounds (GBP) is called Sterling

The New Zealand dollars (NZD) is called the Kiwi

The Australian dollars (AUD) is the Aussie

The Canadian dollars (CAD)is called the Loonie

EURUSD is called Fibre

GBPUSD is called Cable
USDJPY is called Ninja etc…

CHAPTER 3

FORMS OF TRADING

By forms of trading I mean the strategies that we use to analyse the

market to determine when to buy or sell in the market. Remember I
said that what we forex traders are constantly doing is buying and
selling but then you don’t just buy or sell whenever you please,
there are some factors that helps you determine the right time to
either buy or sell any currency pair.
There are 3 forms of analysis namely:

Technical analysis

Fundamental analysis

Sentimental analysis

TECHNICAL ANALYSIS

Technical analysis is the most popular form of analysis that traders

use to determine the movements of the market and the possible
direction that the market will move to so that they can either buy or
sell. And that is what we will be learning about mostly.

With technical analysis, we can look back at historical price action

(ie things that had happened in the market in the past) and
determine the current market conditions and potential price
movements.

It is believed that anything happening currently in the market had

happened before, in other words “history tends to repeat itself”
so it’s up to you as a price action trader to study those past history
and be able to identify them in current situation and know what to
do when you see them.

So we technically analyse the market with the use of chart patterns,

Fibonacci, candlesticks etc…

FUNDAMENTAL ANALYSIS

With fundamental analysis, traders analyse the market based on

economic data and news reports.
Each country has some news release that affects their currency
either positively or negatively. When the effect of the news report is
a positive one, the country’s currency would appreciate in value
meanwhile if the impact of the news report is negative, the currency
would depreciate.
So with these, traders can make trading decisions based on these
news reports.

In fundamental analysis, a tweet post from someone of importance

like a world leader, World Bank Governor etc can also cause some
significant price movements in the market.

SENTIMENTAL ANALYSIS
With sentimental analysis, we analyse the market based on what
other traders feel about a particular currency pair.
When the general sentiments of market participants is positive, we
can define the market as bullish and when the general sentiment is
negative, we can define the market as bearish

Traders can determine market sentiment by using a range of tools

such as the Commitment of Traders (COT) data. So with
sentimental analysis, we look at the positions that most traders are
taking to influence our trading decisions.
 CHAPTER 4

CURRENCY PAIRS

There are three categories of currency pairs:

The “majors“
The “crosses“
The “exotics“

The major currency pairs always include the US dollar.

Cross-currency pairs do not include the U.S. dollar. Crosses that

involve any of the major currencies are also known as ”minors”.

Exotic currency pairs consist of one major currency and one

currency from an emerging market (EM).

The currency pairs listed in the table below are considered the
“majors.”
These pairs all contain the U.S. dollar (USD) on one side and are
the most frequently traded.
CURRENCY COUNTRIES FX GEEK
PAIR SPEAK

United Kingdom / United

GBP/USD “pound dollar”
States

New Zealand / United

NZD/USD “kiwi dollar”
States

Eurozone / United
EUR/USD “euro dollar”
States

USD/JPY United States / Japan “dollar yen”

United States/
USD/CHF “dollar swissy”
Switzerland

USD/CAD United States / Canada “dollar loonie”

AUD/USD Australia / United States “aussie dollar”

The majors are the most liquid in the world.

What is liquidity?

Liquidity is used to describe the level of activity in the financial/forex

market.
In forex, it’s based on the number of active traders buying and
selling a specific currency pair and the volume being traded.

The more frequently traded a currency pair is, the higher its liquidity.

For example, more people trade the EUR/USD currency pair and at
higher volumes, than the AUD/USD currency pair.

This means that EUR/USD is more liquid than AUD/USD.

The Cross-Currency Pairs or Minor Currency Pairs

Currency pairs that don’t contain the U.S. dollar are known as
cross-currency pairs or simply as the “crosses.” Or minor
currency pairs
They are not as frequently traded as the majors, but they are still
liquid and profitable.
They include pairs like:
EURCHF
EURGBP
GBPJPY
CADJPY
GBPNZD
AUDCAD
NZDCHF etc…

Exotic Currency Pairs

Exotic currency pairs are made up of one major currency paired up

with the currency of an emerging economy, such as Brazil, Mexico,
Chile, Turkey, or Hungary.

They include pairs like:

USDZAR
USDMXN
USDRUB
USDCLP etc…
These are some of the popular currencies traded in the Forex
market
If you Look at those currencies listed up there, you would notice
that they are listed in pairs. Among those pairs of currencies the first
currency within the pair is called the base currency while the
second currency within the pair is the quote currency.

The Base currency is always stronger/higher in value than the

Quote currency (with few exceptions which we would see soon)

Let's take EURUSD as an example

The Euro is stronger than the US Dollars, hence Euro is the base
while USD is the quote.

Another instance is USDJPY

US dollar is the base while Japanese yen is the quote because the
USD is stronger than the Japanese yen.

Beside each of those pairs, you would notice some numbers…

In this EURUSD below...
It's written EURUSD.... 1.1870

That first set of numbers is telling you how many units of the quote
currency (USD), you would need to get 1 unit of the base currency
(EUR).

Here’s another example:

Take a Look at USDJPY above, it's Currently at 105.54

It's means that you would need 105.54 Japanese yen to obtain one
US Dollars
Like I said earlier, the base is always stronger than the quote,
however there are occasions where the arrangement is reversed
and the stronger ones come second as the quote.
Examples are:
AUDUSD
US dollars is stronger than Australian dollar

NZDUSD
US dollars is stronger than New Zealand dollar

EURGBP
Pounds is stronger than Euro

Don't bother about the arrangements it doesn’t affect your trades,

its just for the sake of knowledge.
Also no matter which one is written first always note that the first
price you see beside it is how many of the quote currency you
would need to get 1 unit of the base currency.

WHEN DO YOU BUY/SELL?

You buy when you know the market would go up and you sell
when you know the market would go down.

Let me explain to you what forex traders actually do in very simple

terms.
Few years ago, dollar to naira was valued at 200 naira per dollar
Fast forward to now, the dollar is currently valued at 500 naira per
dollar.
Assuming you knew the Dollar would appreciate against the Naira
and you had say 2 million Naira lying fallow in your bank account,
and you used this your 2 million to buy dollar and kept it, It would
get you about $10,000.
Now years later, Dollar escalated to 500 Naira per dollar.
And you went back to the Bank, cashed out your $10,000 and
exchanged it for Naira, it would now yield you 5 Million Naira
(remember you only used 2 million Naira to stock up dollar) so you
made 3 million Naira profit

Did you invest in any business?

The answer is NO

You practically did nothing, what just happened right there was
Forex, you leveraged on the fluctuations in the Price of Dollar to
Naira to make yourself money.

This is just an illustration because in the Forex market it's even

more interesting, you don't have to wait for years or months to make
your money because these currencies are constantly fluctuating in
seconds and it's these fluctuations in price of one currencies
against each other that enables traders make their money.
In summary, we have seen that we buy when we know a currency
pair would rise and we sell when we know a currency pair would
fall.
The big question now is how do you know when it would rise and
when it would fall?

That is where technical analysis comes in

Chart Patterns

Candlesticks

Fibonacci etc…
 CHAPTER 5

PIPS
Understanding the concept and calculation of pips is one of the
bedrock of forex for any aspiring forex trader.
The appreciation and depreciation of currencies are gauged in pips,
trade orders are placed in pips, profits/losses are calculated in pips,
basically everything we do in forex involves pips.

So I implore you to take your time to understand this very Important

topic.

A pip is the smallest unit in which the price of a currency pair can
change/move.
It’s also said to be a standardised unit and the smallest amount by
which a currency pair in the forex market can change.

For most currency pairs in forex, we start calculating the pips from
the 4th decimal place, however there are few exceptions..
Ignore the superscript numbers, those are called micro pips.
So to calculate pips for the EURUSD pair in the image above...
You’ll start calculating (adding or subtracting) from the 4th decimal
digit there which is "0"

So if EURUSD which is currently at 1.1870

Makes a move of 1 pip

It's new value would become 1.1871

How did I get 1.1871?

I added 1 to the 4th decimal place number there and it increased

from "0" to “1"
Let's see another example

Let's take a look at EURGBP above, which is at a Current market

value of 0.9041 in the image above

If EURGBP makes a move of 5 pips from that value of 0.9041

The New market value would be at 0.9046

How did I get that value?

Once again, I added "5" to the 4th decimal placed number which
was "1" and we got "6"
Hence our new value became 0.9046

For the first example we saw where EURUSD moved 1 PIP.

The actual calculation is 0.0000 + 1 = 0.0001

Therefore you add 0.0001 to that original value of 1.1870

So we have.
1.1870 + 0.0001 = 1.1871

You see that this method looks longer, but it’s the actual method of
calculating it.
We still arrived at the same answer

In the first method

We directly added 1 to the last decimal place number of that value

of 1.1870

And we immediately got 1.1871

Let's go a little bit higher

Assuming we were told that EURGBP made a move of 10 pips
from 0.9041

We would as usual add 10 to the 4th decimal number and we would

have our new value as

0.9041 >>>> 0.9051

Let's see the actual calculation

The move made was 10 pips

Remember that 1 PIP = 0.0001

So 10 pips would be

0.0001 * 10 = 0.001

(notice the zeros reduced)

So to get the new value of EURGBP we have

0.001 + 0.9041 = 0.9051

same answer

It’s good to know how it is calculated both ways so you won’t find it
difficult when you encounter large number of pip moves

For most currency pairs in forex, the pip calculation starts from the
4th decimal place, however there are some currency pairs that don’t
have up to 4 decimal places so we calculate their pips differently

Example is the JPY pairs

USDJPY

EURJPY

GBPJPY
AUDJPY

NZDJPY etc

Another example is Gold ie XAUUSD

For JPY pairs Eg USDJPY, the pips calculation starts from the 2nd
decimal place digit. If you notice, it doesn’t have up to 4 decimal
places like the rest.

From the image of USDJPY above... It's currently at 105.54 as

pointed at by the arrow

From that value... If it makes a move of 2 pips.

The new value would be at 105.56

How did we get this value?

We added "2" to the second decimal place number which is "4"

and it increased to "6"

That's how we got 105.56

Let's see the actual method

For this method you should take note that

For JPY pairs

1 PIP = 0.01

No longer 0.0001 like we saw for other general pairs

So let's use this method to solve the example above...

Remember that for JPY pairs

1 pip equals 0.01

Hence from the above example, since it made a move of 2 pips.

We have

0.01 * 2 = 0.02

Adding 0.02 to the original figure, it would now become

105.54 + 0.02 = 105.56

same answer

Let's go a little bit higher

Assuming USDJPY made a move of 10 pips from that Value of

105.54

The new value by simply adding 10 to the 2nd decimal place

number would be

105.64

Using the actual method

For JPY pairs 1 PIP = 0.01

Hence 0.01 * 10 = 0.1
Adding 0.1 to the original value we now have
105.54 + 0.1 = 105.64

same answer

Let's now see how to calculate pips for Gold

Gold is represented as XAUUSD

It is one of the most volatile pairs

From the Gold pair that I pointed at above, the price is currently at
2038.83
If it makes a move of 1 pip.

The New value would be 2038.93

How did we get this??

As usual using the shortcut method we added "1" to the 1st

decimal place number which is the figure “8" and we got “9”

Let's get to the actual method of calculating it

For Gold 1 pip = 0.1

Hence for that 1 pip move, we have

0.1 * 1 = 0.1

Adding this 0.1 to the original value of 2038.83

We have

0.1 + 2038.83 = 2038.93

Lets go a bit Higher

Assuming XAUUSD made a move of 10 pips from that same Value
of 2038.83

It would be as follows

For Gold 1 pip = 0.1

Hence for that 10 pips move, we have

0.1 * 10 = 1.0

Adding this 1.0 to the original value of 2038.83

We have

1.0 + 2038.83 = 2039.83

BID PRICE AND ASK PRICE

Lets find out why there are 2 prices beside each currency pair and
what those prices stand for.
Bid price is the price that buyers are willing to buy while ask price
is the price that sellers are willing to sell

Lets break it down…

From the Image above you would see

EURUSD . 1.1870 1.1872

1.1870 Is the Bid Price while

1.1872 Is the Ask Price
To illustrate…

Lets say you went to buy a new iPhone because your old one
needs an upgrade. At the apple store, the salesperson asks for
$1000 as price for the iPhone you chose. But you happened to
have only $600, so you decide to trade your old iPhone to add to
the money you have so that you can purchase the new one. So
when you present your old iPhone to the same dealer, he now bids
$500 for it. Notice how the ask price was the price he was willing to
sell to you and bid price was the price he was willing to buy from
you.

So if you buy the new iPhone, it means you bought it using the ask
price
And if you sell your old iPhone to him, it means you sold it using the
bid price.
Here’s another scenario, when you go into the bank, you usually
would see a notice board like the one above where they display
their exchange rates.

You’d see written on one side of the notice board WE BUY

and on the other side WE SELL…

Thats their bid and ask price respectively

Lets say you want to travel to the USA and you need to exchange
your naira for dollar, so you go into the bank and they tell you that
their ask price for dollar to naira is 500 naira, and you decided to
buy $10,000 which is 5 million naira, so they ask for 5 million in
exchange for $10,000

The next day perhaps your trip got cancelled so you go back to the
same bank to sell that $10,000 since you won’t be travelling again
and their bid price was 450 naira per dollar so they pay you 4.5
million naira in exchange for your $10,000

In this situation, 450 was the Bid price, while 500 was the Ask
price.

So In Forex, the Bid and Ask price work same way.

However not as exuberant as the one banks exploit us with.
The difference between the bid and ask price in forex is minimal
So bid price is the price that buyers also in Forex are willing to buy
while ask price is the price that the sellers are willing to sell. Here
the buyer and seller is you and the market, so you buy from the
market and sell to the market. This means that when you place a
buy order in the market it would activate using the Ask price
(remember that the Ask price is the price that sellers are willing to
sell to you who is now the Buyer).

In reverse, when you place a sell order in the market, it would

activate using the Bid price
(remember that the Bid price is the price that buyers are willing to
buy from you who is the seller)

Let's relate it to our example of the bank transaction above

In the example above, when you came to the bank to buy $10,000
You were the buyer and the bank was the seller
So they gave you their ask price of 500 naira because that’s the
price they are willing to sell to you and when you brought your
$10,000 back to the bank the next day because your trip was
cancelled, you became the seller while the bank became the buyer,
so they gave you their bid price of 450 naira because that is the
price they are willing to buy from you.

From the example above 500 Naira was the Ask price and it's
higher than the Bid price which was 450 Naira
So also in the forex market, the Ask price is also always higher than
the Bid price...

Just like we saw in the example of EURUSD

EURUSD..... 1.1870 1.1872

WHAT IS SPREAD?

Spread is the difference between the Bid and the Ask price.

In the example I gave above.

The Spread is #500 - #450 = #50

So the Spread is 50 Naira and that’s the profit of the bank.

Also in forex, the Spread is the profit of the broker, however in this
case, it's very small because it's measured in pips.
The Spread also varies between trading sessions.
When there is high volatility in the market, the spread is always very
low (meaning that you pay brokers lesser commissions) that is
another advantage of trading when more than one session is open.
 CHAPTER 6

TRADING ORDERS
There are 5 Type of Trading Orders

INSTANT MARKET EXECUTION

LIMIT ORDERS
STOP ORDERS
TAKE PROFIT
STOP LOSS

INSTANT MARKET EXECUTION

Instant market execution is used when you are buying or selling at
the current market price.

Let's say a currency pair is currently at $50 and you clicked the buy
or sell button, you have just placed an Instant Market Execution
order because you bought at the current price.

LIMIT ORDER
A limit order is an order placed to either buy below the market
price or sell above the market price.
This is an order to buy or sell once the market reaches the “limit
price”.

You place a “Buy Limit” order to buy below market price, while you
place a “Sell Limit” order to sell above market price.

Once the market reaches the “limit price” the order is triggered and
executed at the “limit price”
STOP ORDERS
A stop order “stops” an order from executing until price reaches a
stop price.

You would use a stop order when you want to buy only after price
rises to the stop price or sell only after the price falls to the stop
price.

A stop entry order is an order placed to buy above the market or

sell below the market at a certain price.

You place a “Buy Stop” order to buy at a price above the market
price, and it is triggered when the market price touches or goes
through the Buy Stop price.

You place a “Sell Stop” order to sell when a specified price is

reached.
TAKE PROFIT AND STOP LOSS
Take profit and Stop loss are forms of market orders

TAKE PROFIT
As a trader, you would not always be on screen to monitor all your
trades, you might have other engagements and things to attend to,
so that’s where market orders come in to play.

Take profit is a form of market order that tells your broker to close
your trade(s) for you even if you are not online and lock in your
profit when your trade moves a certain number of pips in your
desired direction.

Remember in the forex market we are always doing 2 things…

Buying and Selling
Let's take a buy scenario for instance, let's say you took a buy
position on a currency pair and it's current price is at $40 and from
your technical analysis you anticipate price to rise so and your
target for the trade is 50 pips, for you to set a target profit at 50 pips
you add 50 to the price you entered at, which was $40, so your TP
would be at $90.
So once that currency pair rises and gets to $90, even if you are not
online, your broker would close the trade for you automatically and
add the $50 profit to your account immediately. That is how the take
profit order works
Let's see some practical examples on how to calculate Take profit
Assuming I want to buy EURUSD at that current ask price of
1.1872 seen in the image above and I want a Take profit of 30 pips.

I would add 30 pips to the current value of 1.1872 and I would have
1.1902

So my TP for that trade would be

1.1902
So once EURUSD rises to 1.1902, my broker would automatically
close the trade for me, whether or not I’m online.
(notice that I used Ask price because I was buying, if I’m selling I’d
use the Bid price)

Let's see another example

Let's take a look at USDCAD at the current Ask price of 1.3274

Let's say I want to buy the pair and I want a Profit of 50 pips.

For me to get a TP of 50 pips from that trade

I would need USDCAD to rise to 1.3324 ie (1.3274 + 50 pips)

Hence I would input 1.3324 as my TP

So when USDCAD rises to 1.3324, my broker would automatically
close my trade and add my profit to my account.

Let's see a sell scenario

When selling a currency pair in the Forex market, you are selling
after you have found out from your technical analysis that the price
would likely fall. So as the price is falls you are make money.

Let's see practical examples

Let's say after technical analysis, we anticipate AUDUSD to fall, so

we decided to short AUDUSD pair. Now we are interested in the
Bid price because we are selling and the Bid price is currently at
0.7190 in the image above and we want a TP of 60 pips.

Because we are expecting it to fall, our TP would be below not

above the current price.
So subtracting 60 pips from 0.7190
We have 0.7130
So when AUDUSD falls and reaches 0.7130, the broker would
automatically close the trade and add my profit to my account.

Let's see another example using the image above...

Let's say after our analysis, we arrived at a bearish bias and we

want to Short USDJPY...
And we only want a TP of 40 pips from that current Bid price of
105.54

Take note : Bid price, because we are selling

We’d subtract 40 pips from that current Bid price and we’d get
105.14
So when price falls to 105.14, the trades would close automatically.
In summary we have seen that when buying our TP is above the
current price and when selling our TP is below the current price

STOP LOSS
Stop loss is another form of market order, which is the opposite of
Take profit. Here you are giving your broker instruction to close your
trade when the market goes against you.

Let's say I want to buy a currency pair and the price is currently at
$40 and I want a TP of 50 pips, it means I would set my TP at $90.

After setting my TP, I would also set my Stop Loss, telling my broker
that just in case price tries to go down (since I’m buying) by let's say
20 pips from my entry point, my trade should be closed to minimise
my loss.
Remember the initial price was $40,
So for a Stop loss of 20 pips, I would set it at $20. So if eventlly the
price starts to fall, once it gets to $20, my trade would be closed
automatically preventing me from loosing further even if I’m not
online.

Technology has made it easy for you to control how much you make
and also how much you loose in the market.
Let’s see an example

Let's say I want to Buy USDJPY in the image above

At that Ask price of 105.56 with a TP of 40 pips and I don't want to
loose more than 5 pips.

What would be my TP and SL?

My TP would be at 105.96
(after adding 40 pips to the current price)

And my SL
Would be at 105.51
(after Subtracting 5 pips, from the current price)
Let's see how to calculate Stop-loss in a sell scenario.
Remember when selling, you are only making money when price is
falling, so let's assume I want to sell a currency pair and its current
price is $80 and I want a TP of 50 pips.

Remember here I am selling so my TP is below, so I’d set it at $30

which is 50 pips below the initial price of $80

And the Stop-loss, while selling I don't want price to rise because
that would be going against me so I set my Stop-loss above the
current price.

So assuming I don't want to loose more than 5 pips, I would set my

Stop loss 5 pips above the initial price of $80, hence my Stop-loss
would now be at $85.

Let's see an example

Let's assume I want to Sell AUDUSD, and we are Selling from the
current Bid price of 0.7190 and I want a TP of 40 pips and a SL of
10 pips.

Thus my TP would be at 0.7150 (subtracted 40 pips from the Ask

price of 0.7190)

While the SL would be at 0.7200 (added 10 pips to the Bid price of

0.7190
 CHAPTER 7

LOT SIZE
Lot size is the amount/quantity of a trade that you bought or sold. It's
sometimes called your position size / trade size.
In the Forex market, currency pairs are not bought or sold singly.
They are bought and sold in packs called Lot sizes/position sizes.

That is what makes the gain appreciable/tangible.

There are 3 types of Lot sizes:

STANDARD LOT
MINI LOT
MICRO LOT

STANDARD LOT contains 100,000 units and is represented as 1.0.

MINI LOT contains 10,000 units and is represented as 0.1.

MICRO LOT contains 1,000 units and is represented as 0.01.

To illustrate…

Let's assume 3 Traders, A B and C deal on phones, for them to

make tangible profit from the business, they can't just buy a single
phone to sell, they need to buy these phones in bundles for the
profit made to be appreciable/tangible.
Those bundles are what we refer to in forex as LOT SIZES

Assuming trader A buys a bundle of 100,000 phones

Trader B buys a bundle of 10,000 phones

Trader C buys a bundle of 1,000 phones.

You’d agree with me that trader A would make more money than
trader B who will in turn make more money than trader C.
And what determines how many bundles of phones they buy is the
capital they invested in the business.
That is a typical illustration of how Lot sizes work. In the illustration
trader A bought a standard Lot size, trader B bought a mini Lot size
while trader C bought a micro Lot size

Pip equivalent of each lot size

For a STANDARD LOT SIZE

1 PIP = $10

For a MINI LOT SIZE

1 PIP = $1

For a MICRO LOT SIZE

1 PIP = $0.1

So If 3 traders traded same currency pair and the 3 of them made

50 pips assuming that trader A traded 1 standard lot size, trader B
traded 1 mini lot size and trader C, traded 1 micro lot size.

Trader A would make 50 pips x $10 = $500

Trader B would make 50 pips x $1 = $50

Trader C would make 50 pips x $0.1 = $5

So even though they participated in the same trade and the market
moved in their direction for the same amount of pips, there profit
levels were different because the amount of that particular currency
they bought was different.

LEVERAGE
Leverage is the ability to use something small to control something
big. In the case of Forex, using a small capital base to control a
large lot size.
Your broker offers you leverage, allowing you to control larger lot
sizes with little capital.
The principle of Leverage is virtually multiplying your little capital so
that you can use it to buy something worth bigger value
When you will be opening a live Trading account, you would see
leverage options like
1:100
1:200
1: 500
1:1000 etc
The lesser the leverage, the less exposed to risk your account is so
don’t choose really high leverage because that exposes your
account to higher risk of loss. Leverage like 1:100 and 1:200 is
ideal.
 CHAPTER 8

TRADING PLAN

In everything one does in life, there’s need for a plan.There is a

saying that “when one fails to plan, one plans to fail”.

Same applies to your business as a forex trader, you need a plan

and not just a verbal plan or one you hold in your mind but a
written plan, which you’d have to adhere to strictly.

That is why sometimes you hear traders say “plan your trade and
trade your plan”
Because these are two different ball games, its good to plan a
trade, but what’s even better is trading what you’ve planned, and
not trying to adjust it to suit your present market condition or bias.

This also requires some level of discipline.

Most traders neglect this vital aspect of Forex, I did as well but I
learnt the hard way how important it was to have a trading plan, so I
want you to do better, to get it right from this onset.

The reason you started trading the forex market is to build/grow

your account from a certain small amount of money to a bigger one,
and for you to achieve that, you’ll need a plan that highlights the
process.

The first thing you’ll need to think about when creating your trading
plan is your overall trading routine.

What are your trading goals?

What are you trying to achieve?
And what is the main focus?

The reason these types of questions are important is because it will

help you create a trading plan that is personalised for you and your
trading plan as every trader is different in style, psychology and
every other angle.

Your trading plan needs to be:

Specific
Achievable
Realistic and
Time bound
You need to factor all the above into consideration
Here’s a typical trading plan template to help you create yours.
 FOREX TRADING PLAN
QUICK OUTLINE OF YOUR TRADING PLAN

What are your goals:

What is your trading style:

TRADING ROUTINE

Time Frames you’ll like to analyse and trade:

Trading Sessions you prefer:

TRADING STRATEGY

Setups you’ll enter:

Preferred pairs:

RISK/MONEY MANAGEMENT

Risk per trade:

Stop Loss method:

Profit Target method:

Risk to Reward:

How you exit a trade(manually or fixed target):

This trading plan template should serve as a guide to help you
create yours.
It’s also good to have it printed and placed where you can always
see it and refer to it when need be.

It is also important to review your plan, as you make progress, your

trading strategies, routine and other aspects might begin to change
as you evolve, so you review and amend your plan in line with your
progress.

TRADING JOURNAL

A trading journal is a log that you can use to record your trades, it
can be done with an exercise book or a mobile device. Your trading
plan can be contained within your journal.

Journals are a useful form of record keeping for traders, you can
use it to keep records of your trades so that you can reflect on them
later on and evaluate your overall actions during the trades, and be
able to find out where you faulted during the cause of your trading
and improve on them.
Here are some reasons why a trading journal is useful:

It helps you identify weak points and strong points in your trading.

It’s a way of keeping yourself accountable.

Its a mirror through which you can see your faults and thereby
make amendments.
It can help you choose your best strategy or strong points and work
with it.

Here’s a typical journal template to help you create yours

JOURNAL TEMPLATE

Pair Date Positi Size Entry Stop Take Risk/ Profit/ Result
on Loss Profit Rewar Loss
d

USDJ 16-05- Long 0,01 104,56 104,46 104,86 1:2 $10 Won
PY 21

EURU 18-05- Short 1,0 1,9031 1,9041 1,9010 1:2 -$100 Lost
SD 21

GBPJ 01-06- Long 0,5 153,95 153,85 154,78 1:4 $415 Won
PY 21

XAUU 03-06- Short 0,02 1907,9 1914,7 1859,8 1:7 $96 Won
SD 21 8 7 8
COMMON MISTAKES TRADERS MAKE

Another important principle in life, is to learn from other people’s

mistakes, never wait to learn from your own mistakes..

These are some mistakes made by those who have gone through
this path before you which didn't yield positive results. Its left for you
to learn from them and modify your own actions.

1. Not having a trading plan: Not having a trading plan is as

good as trying to build a house without an architectural design/

plan. A trading plan is to a trader like a compass to a captain.

2. Not using a stop loss: The forex market is as risky as it is

profitable, chances of loosing money in the market abound, that

is why you need to keep your risk management in check by

placing a stop loss to control how much you loose and avoid

loosing your entire equity.

3. Trading several pairs at once: This is brought about by greed,

trying to catch all the pips in the market, this only exposes you

to more risks so learn to trade only a few pairs at a time. Add a

few pairs to your watchlist and only trade the best probable

setups. Rather than opening a position on several different

 pairs, open multiple positions on 1 or 2 pairs, that way you

reduce your risk exposure and also you can comfortably monitor

few pairs than multiple pairs.

4. Not having a trading journal: Trading the forex market is a

business not a hobby, if you see it as a business, you’ll see the

need to keep a journal. Just as stocktaking is important to

business/store owners, so is journaling to you as a forex trader,

because if you don’t keep a record of your trading actions, how

would you find errors and mistakes you’ve made in order to

correct them?

These are some of the mistakes traders make, you’ll learn more as
you make progress and also learn how to be on the safe side.

RISK MANAGEMENT

This is one of the most important topics you’ll ever read about forex
trading.
We are in a business of making money and in order to make
money, you have to manage risks (losses) because in a business
where there’s money to be made, there’s also money to be lost.
Most folks who come into this forex business are always so eager
to make money that they neglect the aspects of risk management
and this is known as the “Gamblish mentality”.

When you trade without risk management rules, you are gambling.
If you want to remain in this business long term then you need to
know how to manage risks appropriately.

First of all, you need to ascertain how much your trading capital is
and how much of it you can risk on a single trade. The best option
is to risk only 1-2% of your equity.

So for instance you’re trading a $100 account and you are risking
1-2% of it on a trade, it means that if the trade goes against you,
you’ll only loose $1-$2 respectively. This way you’re in control of
your loses and not just leaving the window open for whatever
happens.

You also need to factor in a good risk/reward ratio. So if in a trade

you are risking 1% of your account, your profit target should be at
least 2% and above i.e a 1:2 risk/reward.

Let me explain this with a breakdown.

Lets assume that you took 10 trades in a month and you used a 1:2
risk/reward ratio in all 10 trades, and in the end you won 5 out of the
10 trades and lost 5 as well….
Trades taken = 10
Trades won = 5
Trades lost = 5
Risk/reward = 1:2

So for each trade you loose you lost -$1, and since you lost 5, that
would sum up to -$5

And for each trade you win you won +$2, and since you won 5, that
would sum up to +$10

Wins-losses ($10-$5) = $5

So you see that with a good risk/reward ratio, you are able to stay in
profit even though you lost and won equal number of trades.

This is why proper risk management is key to your staying profitable

and growing your trading account.
 CHAPTER 9

TIME FRAME ANALYSIS

It is important to understand the idea behind the multiple
timeframes we have in forex in order to be able to analyse and
trade the market effectively with them.

You might have noticed sometimes on the charts, you open a 15

minutes time frame on a particular pair and you see a downtrend,
you switch to the 1 hour time frame on the same pair and you see
an uptrend and you begin to wonder why the different timeframes
have different setups whereas its the same pair.

The answer is that they are both showing you what is happening
with respect to different times, they are analysing the same data but
with respect to different times.

There are numerous timeframes, but the following ones are the
most common through different platforms:

M1, M5, M15, M30, H1, H4, D1, W1 and MN

In M1, every candlestick forms within 1 minute

In M5, every candlestick forms within 5 minutes
In H1, every candlestick forms within 1 hour
In MN, every candlestick forms within 1 month and so on for the
rest of the timeframes.
That is why in our previous instance, the 15 minutes timeframe was
showing a downtrend while 1 hour was showing an uptrend, what is
shown as a downtrend in 15 minutes could be a 2 hour retracement
or pullback of the uptrend in the 1 hour timeframe.

Now the Next Question is…

What is the Best Time Frame to use?

The answer is, there is no such thing as the best time frame to use
It all depends on you
What kind of trader you are and your trading personality
Do you like the fast actions and the adrenaline spikes of the moving
charts?
Or do you want it calm and steady?
Secondly are you are a scalper, an intraday, swing (short term) or
position trader
The smaller time frame charts are suitable for short term traders
The higher ones are suitable for long term traders
A scalper may prefer to use H1 to M15
An intraday trader may stick to H4 to M15
A swing trader may use W1 to H1
While a Long term trader (Investment Banks hedgers etc) may be
more comfortable with Weekly and Monthly charts
HOW TO ANALYSE USING MULTIPLE TIMEFRAMES
While trading, do you open the chart on only one timeframe and
analyse?
Let's say you are an intraday trader, do you open M15, draw all your
analysis on M15 and then blindly open a trade without looking at
other timeframes?
Thats a wrong approach

Let’s see the right way to analyse the market using multiple
timeframes
Let's say you are an intraday trader
You want to analyse EURUSD
You open your MT4 app or tradingview, depending on where you
prefer to carry out your analysis, first thing to do is to go to a higher
timeframe and start your analysis. Why because you want to look at
the bigger picture, you don't want to have a narrow vision by
focusing on one timeframe alone.

You would need to ascertain what the current trend/market structure

of EURUSD is first and the best timeframe to determine the overall
trend is the higher timeframes.
“The trend is your friend, never go against the trend”

As an intraday trader you can use H4 and D1

As a swing trader you can use D1 and above
As a Scalper you can use H1 and H4
Trends are generally best followed on larger time frames.
In the Forex market, because the market is in an uptrend does not
mean it would continue to go up like a one way traffic. It can
retrace, go down a little bit before going up again.

That period it's retracing, a smaller time frame would regard it as a

downtrend (it's not wrong), it's just showing you what is happening
based on its own time. However it’s left for you to decipher that this
is just a temporary pullback, keeping in mind that you are on a
smaller time frame.
So after getting to know the trend on the higher timeframes, you
can come down to the smaller timeframes to look for possible
entries.
Let's say on D1 you've seen that EURUSD is in an uptrend, so that
means you are only looking for Buy signals
So when you come down to smaller timeframes, you will only be
interested in Buy signals. Even if you see a downtrend, you won't
sell because you already know that the sell is a short term
retracement, you rather wait.
Patience is part of trading
You monitor the pair carefully until the retracement is over and you
start to see the Buy signals you’ve been waiting for, you can then
confidently buy.

Taking your entries from the smaller timeframes will ensure that you
buy or sell at the lowest or highest price possible respectively for a
better risk to reward. And you’ll also get a tighter stop loss.
 CHAPTER 10

CANDLESTICK ANALYSIS
Candlestick analysis is an important form of technical analysis that
helps you read meaning into the market’s price action through
candlestick patterns and formations.

There are basically 3 types of graphs on your chart

Line Chart
Bar Chart
Candlesticks Chart
However because of how detailed candlesticks are and because of
the tons of information they give by just merely looking at them, it is
now one of the most popular charts used.

Candlesticks was initially used by the ancient Japanese to study the

price of cereal, traders who deal in Agricultural products then used it
to monitor and make trading decisions. That's why its sometimes
called Japanese Candlesticks
Structure of Candlesticks

Candlesticks are made of some components namely:

The Open
High
Low
Close
A candlestick is basically composed of a body and a wick
These are formed by the Open, High, Low and Close of the
market price of a particular currency pair
The Open refers to the opening price of the candlestick in a
particular period
Let's say you are on a 1 hour timeframe
Every hour, a new candlestick forms, so immediately we enter a
new hour and a new candlestick starts forming, that particular
market price at which it starts forming is the Opening price (also
called the Open of a candlestick)

The High of a candlestick is the highest price reached by the

currency pair within a period of time

The Low of a candlestick is the Lowest price reached by the

currency pair within a period of time
While
The Close of a candlestick refers to the closing price of the
candlestick in a particular period
Like I highlighted earlier, in a 1 hour timeframe, the candles would
close every 1 hour.
In 30 minutes timeframe, the candles would close every 30 minutes
and so on.....
So the closing price of that currency pair in that period would form
the close of the candlestick

Now you would notice that the candles are coloured

The default colours are either Red and Green or White and Black
depending your settings

The White Or Green candles (depending on your settings) are

called the Bullish Candles

The Red or Black candles are called the Bearish Candles

How do the bullish and bearish candles form?

The Bullish candlesticks are formed when the Close of that candle
is above the Open
That means that the Closing price in that particular period was
higher than the Opening price (that means price went up)
The Bearish Candles are formed when the Close of that candle is
below the Open
That means that the Closing price in that particular period was
lower than the Opening price (that means price went down )

That's how they are constantly formed as the fluctuations in the

market occur

Types of Candlesticks

There are Various types of Candlesticks and they are:

Haramis
Marabuzo
Spinning top
Hammer
Inverted hammer (hanging man)
Shooting star
Doji
Let's take them one after the other
Haramis
It's also Known as Big Bullish Candle or Big Bearish Candle

This is a Bullish or Bearish candle with Large body and small wicks
on both sides
Wicks are those projections, pointing up and down on both sides of
the candle, sometimes referred to as Shadow

MARABOZU
This is Another Strong Bullish or Bearish Candle

It has no shadows (or wicks)

They signify Intense Buying or Selling Pressure

In Bullish Marabozu, the Close is the same as the High while the
Low is same as the Open (because it has no wicks)

In Bearish Marabozu the Close is the same as the Low while the
High is same as the Open (because it has no wicks)

When you see them forming on the charts, they signify intense
Buying or Selling pressure

For a Bullish Marabozu, it tells you that the Bulls are in control at
that period while for bearish Marabozu it tells you that the Bears are
in control at that period.

DOJI

This is Another Significant Candlestick

It has little or no body and has wicks on both sides. It signifies low
momentum in the market, it shows that neither buyers nor sellers
had the upper hand during that period
The Bulls dragged the price up to a High, the Bears also dragged
the price down to form the Low, but in the end they ended up at a
tie and closed back at or very near to the opening price, it signifies
indecision.

HAMMER & HANGING MAN

We list both together because they have the same structure,
however they differ in that they occur in different aspects of the
market.

A Hammer occurs in a Downtrend

while a Hanging man occurs in an Uptrend

They consist of a Body a long Wick that is below the body and a
very small or non existent wick above
They are majorly reversal signal candlesticks
When you see a Hammer form after a downtrend, you should
expect a possible reversal. They are however not telling you to Buy
the pair yet, they are however giving a sign that the price is been
rejected.

A Hammer formed because the Bears dragged the price down to

form that long Lower wick which is the Low, but the Bulls dragged
the price up again to a higher close. The Colour of the hammer
does not matter.

A Hanging man has the same structure as the Hammer however it

is seen at the top of an Uptrend
It's a sign that price is been rejected from the upside and their could
be a possible reversal.
A Hanging man form because Sellers dragged the Price down
forming same lower wick, however Buyers still pushed it Up but
couldn't push it any higher, signifying low buying pressure.

SHOOTING STAR & INVERTED HAMMER

This also consists of a small body and a long upper wick
with a small or no lower wick.
They are also reversal candlesticks
Shooting star occurs at the top of an uptrend while inverted
Hammer occurs at the bottom of a downtrend
If after an uptrend you see a shooting star, it's a sign that the trend
would possibly reverse

However, you don't sell until you have confirmed that the trend has
reversed
Shooting star form because the buyers pushed the price very high
up, forming a high which corresponds to the end of that long wick,
but couldn't sustain the momentum, so the sellers took charge and
pushed the price lower towards the Open

Inverted Hammer is found at the bottom of a downward trend, it

also signifies a possible reversal to the upside.
It formed because, buyers pushed price upwards forming the upper
wick, but seller dragged it down near the open but couldn't push it
any lower, signalling a weakening of the selling pressure

SPINNING TOPS
This consists of a body and two long upper and
lower shadows

When they occur, the market could go either way

It signifies equilibrium between buyers and sellers. Some could lead
to reversals, however further confirmation is needed to know where
the market would continue to.
Candlesticks can provide useful information only if you learn to
understand them.
CANDLESTICK PATTERNS
We’ve seen single candlesticks and what they signify, however
there is better confirmation when they are combined in different
ways that will be outlined below.

They include:
Bullish Engulfing and Bearish Engulfing

Tweezer Tops and Tweezer Bottoms

Morning Star and Evening Star

Bullish Rejection and Bearish Rejection Patterns

We are going to discuss each of this patterns one after the other
and we would be making it clearer by seeing them on real charts
where they have occurred before.

Bullish Engulfing
This is a candlestick pattern that indicates possible bullish trend
reversal in the market. When you spot this pattern, you should
expect a possible trend reversal, hence it's a bullish reversal
candlestick pattern

It forms after the market has been in a downtrend, then a bullish

candle forms that totally engulfs the body of the previous bearish
candle in the opposite side.
You could see that a bullish candle formed after a downward trend
and engulfed a previous bearish candle and the market went up
afterwards.

It signifies that the bulls have gained momentum and taken charge.
Traders normally open their buy position when the next candle
starts forming and place a SL below the low of the engulfing bullish
candle

Criteria to watch out for to confirm that it's a bullish engulfing pattern
1) The market must be in a downtrend

2) The 2nd candle engulfs the previous candles body in the

opposite side

3) Stronger if 2 or 3 previous candles are engulfed

Bearish Engulfing Pattern
This is the opposite of bullish engulfing pattern, it is a bearish
reversal pattern.
It occurs when a bearish candle engulfs a previous bullish candle in
the opposite direction.

So when this occurs it signifies that the sellers have gained

momentum and are pushing price to the downside.
Criteria to Watch out for to confirm that it's a Bearish Engulfing
Pattern

1) The market must be in an uptrend

2) The 2nd candle engulfs the previous candle in the opposite side

3)The more previous candles engulfed, the stronger the

momentum.

So when this occurs, you place a sell order as the next bearish
candle forms and place your SL at the high of the engulfing candle.

Tweezer Tops
This is another reversal pattern, they are 2 candlesticks with
matching Tops and they signify a bearish reversal.
When tweezer tops occur usually after an uptrend, it signifies the
beginning of a possible downtrend.

Tweezer Bottoms
They are 2 candlesticks with matching Bottoms and they signify a
bullish reversal.

They are formed by 2 or more candles with matching bottoms either

on the body or the Wicks.

They signify that price is rejected at a support (for Tweezers

bottom) or at a resistance (for Tweezer Top)
So when you see this pattern occurring it's a signal a possible
reversal to the opposite.

Morning Star
This is a bullish reversal candlestick pattern, when it occurs it
signifies reversal of a downward trend.

It includes a Hammer or doji in its structure

Seeing a hammer or doji or shooting star or an inverted hammer
alone isn't enough to confirm a reversal sometimes, if you look
around them, you might find a conjunction of other candlesticks
forming a pattern, this would further increase your precision

They are formed by a bearish candle to the left, a doji or a hammer

or an inverted hammer or a spinning top in the middle, then a
bullish candle to the right. You spot them at the end of downtrends
and they signify a possible bullish reversal. It further strengthens
the reversal signal given by the Hammer or Inverted Hammer or
doji.
You place your buy order as the next bullish candle forms and your
SL just below the low of the Hammer or dojo

Evening Star
This is the opposite of the morning star, it is a bearish reversal
pattern.
It signifies a possible reversal to a downtrend
It is formed by a bullish candle with a Shooting star, Hanging man
or doji in between, then a bearish candle

Sometimes you could see 2 reversal candlesticks in between the

bullish and bearish candles, for instance, you could see a doji and a
shooting star in between the bullish and bearish candles, it further
strengthens the reversal sign. This also applies to the Morning Star
pattern.
Bearish and Bullish Rejection Patterns
These occur at areas of resistance or support, price is rejected to
form candlesticks with long wicks.

Candlesticks are very important tool for any trader and as a Forex
trader, you need to be very well acquainted with them as they are
always speaking to you about current market conditions.
 CHAPTER 11

SUPPORT AND RESISTANCE

This is a price action concept that has many trading strategies built
around it, you should do well to understand this concept because
it's the basis for so many forms of technical analysis in forex.

Support and resistance are regarded as strongholds in the market,

they are considered as zones that would either push price to a
downward or upward direction.

Whenever price is moving up, the highest price level it reaches

before turning back down is called RESISTANCE. In reverse, when
price is moving down, the lowest price level it reaches before
turning back up is called SUPPORT.

The resistance is like a barricade pushing price down, just as the

name implies, it RESISTS price from going further up so also the
support acts like a barricade pushing price up, just as the name
implies, it SUPPORTS price, to support someone/something means
to lift the person/thing so that’s what that zone does to price.

however, supports and resistance zones don't last forever as they

would sooner or later be broken and price would get past them, no
matter how much someone supports you or resists you, there will
come a time the person supporting you will grow weary and let you
down and the person resisting will give in.

How to draw support and resistance zones

To draw support and resistance levels you would need to identify

swing highs and swing lows because that is where you want to
draw your tool across.

Remember that support and resistance zones can be broken

When a Resistance is broken it becomes Support
While
When a Support is broken it becomes Resistance

As can be seen in the image above

Another point to note about resistance and support is that the more
price tests a support or resistance zone, the stronger the zone
becomes

Trendlines are also used to connect support and resistance zones

in a trending market to show diagonal support and resistance.

See images below

How to trade using Support and Resistance
Support and Resistance can be traded using two methods:

The bounce method and

The breakout method

The bounce method

We trade support and resistance using the bounce method in belief
that a support or resistance zone would hold price and we
anticipate a reversal.

The principle basically is, you buy when price bounces off support
upon candlestick confirmations and you sell when price bounces off
a resistance zone also upon candlestick confirmation

So in the bounce method, we buy at support and sell at resistance

after confirmations
 The breakout method

We trade the breakout method when the support or resistance zone

is compromised/broken.

To confirm that a support or resistance zone has been broken, you

wait for at least 2-3 candles to close above/below the resistance or
support respectively, then you buy or sell.
For a more conservative entry, you wait for a retest after the break
and then enter upon the retest.
With stop loss should be placed a few pips above or below entry.

Just as it's labelled entry point and exit point in the image above
 CHAPTER 12

FIBONACCI
Leonardo Fibonacci was a famous Italian mathematician. He
invented the concept of fibonacci numbers when he discovered a
simple series of numbers that created ratios describing the natural
proportions of things in the universe.
Fibonacci numbers are as follows:

0 , 1, 1, 2 , 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377......etc

This was gotten by adding up 2 digits consecutively in that
sequence to get the next
So after 0 and 1, you start add the last number + the preceding
number.
Thus

0+1=1
1+1=2
1+2=3
2+3=5
3+5=8
8+5=13
13+8=21
21+34=55
34+55=89
55+89=144 etc…
That's how he got these set of numbers up to infinity
He discovered a recurring concept in these set of numbers
After the initial few numbers, if you measure the ratio of any number
to the succeeding higher number, you get 0.618

Eg

34/55= 0.618
55/89= 0.618
89/144=0.618 etc…

Also he discovered that when you measure the ratio between 2

alternate numbers you would get 0.382
Eg

34/89= 0.382

55/144 = 0.382

Etc
He called these ratios....
THE GOLDEN RATIO
From these set of Golden ratio he brought out certain important
Numbers which forms the Fibonacci Ratios
But for the purpose of our study, we are only concerned with one of
them
Fibonacci retracement

The Fibonacci retracement consist of some set of important

numbers which include....

0.236

0.382

0.50

0.618

0.764

How to draw Fibonacci retracement tool

To effectively draw the Fibonacci tools on your chart, you need to

identify the swing high and swing low of price.
A swing high is a candlestick with at least two lower highs on both
the left and right of itself, it is the highest candlestick in the set of
candles around it.

A swing low is a candlestick with at least two higher lows on both

the left and right of itself
It is the lowest candlestick in the set of candles around it

Fibonacci retracement levels work on the idea that after price move
in one direction, it will retrace or pull back to a previous price level
before resuming in the original direction. Traders use them as
Potential support and resistance areas.

To draw the fibonacci in a downtrend, you place the tool on the

swing high and drag it to the swing low
For uptrends you place the tool on the swing low and drag the it to
the swing high.
 How to trade using Fibonacci

The Fibonacci tool is used in a trending market to identify a

possible area of support or resistance after a retracement.
So traders who didn't follow the trend from the beginning would
always wait for retracement into a fib level to enable them join in on
the trend.

How the Fibonacci works?

The fibonacci levels are potential support and resistance levels, the
levels are:
0.236 or 23.6%

0.382 or 38.2%

0.500 or 50.0%

0.618 or 61.8%

0.764 or 76.4%

When the market makes a retracements after an impulse, it tends

to find potential support or resistance at these Fibonacci levels
Let's take an uptrend for an example
For an upward trend, after price has rallied for a while, the next
thing for it to do is to retrace or pull back and where those
retracement always stops or encounter support is usually at a
Fibonacci level.

This is a GBPUSD Daily chart

The pair is in an uptrend...It reached a Swing high at 1.2829 and
retraced.

Here I plotted the Fibonacci retracement levels by clicking on the

swing low at 1.1400 and I dragged the cursor to the swing hight at
1.1289 and the charting software automatically drew the fib. levels
as you can see.
The expectation is that if GBPUSD retraces from that recent swing
high, it would find support at one of those fibonacci retracement
levels.

Let’s look at an after picture to see what happened later.

So price pulled back to the 61.8% fib. Level as you can see pointed
at by the green arrow. And it resumed it’s upward trend onand
created a new swing high. Clearly buying at the 61.8% fib. level
would have been a profitable long term trade with a good risk to
reward.
Here is another GBPUSD Daily chart, as you can see we found our
swing high at 1.6344 and our swing low at 1.4828.

The expectation for a downtrend is that if price retraces from this

low, it could possibly encounter resistance at one of the Fibonacci
levels.

So let’s take a look at what happened later

Price did try to rally, stalled a bit at the 78.6 and 61.85% fib. Levels
but made its way to the 50% fib level (as labeled by the first red
arrow)and found resistance there, before continuing on its way
down, got to the 78.6% fib level on its way down, hit it and still
retraced back up again where it found a second resistance this time
at the 38.2 fib. Level (as labeled by the second red arrow). Then it
came back down and created a new swing low.

So entering your sell at that 50% fib level and the 38.2% after
confirmations would have been a very profitable trade with good
risk to reward (notice its a daily time frame so those small moves
are a lot of pips).

In these 2 examples, we see that price found temporary support

and resistance at Fibonacci retracement levels.
 CHAPTER 13

MARKET STRUCTURE
The forex market in general doesn't move in a straight line, price
never makes a one way traffic movement
The movement of price is always going up and coming down as can
be observed from all time frames.
Market structure is the simplest form of price movement in the
market and its essential to be able to read and understand current
market structure. Market structure is the best trend following tool
that traders use to follow price movement.

There are 2 major market structure

1. Bullish structure
2. Bearish structure

Price movements in these 2 structure is comprised of:

HH ➡ Higher high
HL ➡ Higher low
LH ➡ Lower high
LL ➡ Lower low

Bullish structure
A bullish structure occurs when the market is seen to be making
series of higher highs (HH) and higher lows (HL) as seen below.
A bearish structure occurs when the market is seen to be making
series of lower highs (LH) and lower lows(LL) as seen below.
You should be looking for buy opportunities in a bullish structure
and sell opportunities in a bearish structure.
Not that you buy or sell immediately, you wait for pull backs so as to
buy or sell at a better price.

As a Rule of no defilement, never buy in a selling market and never

sell in a buying market, unless there is a break of structure. This is
because it is safer buying an uptrend than selling an uptrend and
vice versa.

BREAK OF STRUCTURE
Structure is said to be broken when either of the following occurs
In a downtrend, structure is said to be broken when the market
attains a higher high which moves past the previous high and
subsequently creates a higher low, higher than the previous low.
In an uptrend, structure is said to be broken when the market
attains a lower low which is lower than the previous low and
subsequently creates a lower high lower than the previous high
 CHAPTER 14

CHART PATTERNS
Chart pasterns play a great role in technical analysis, they will help
you spot conditions where the market is ready to break out.
They can also indicate whether the market will continue in its
current direction or reverse.

Chart patterns are classified into 3

Reversal patterns
Continuation patterns
Neutral patterns

Reversal patterns include:

Head and shoulder and inverse head and shoulder
Double tops and double bottoms
Rising and falling wedge
Continuation patterns include:
Channels and rectangles
Flags and pennants
Triangles

Neutral patterns include:

Ascending and descending triangles
Symmetrical triangle
Symmetrical expanding triangle
 Reversal Patterns
Head and shoulders
This is a trend reversal chart pattern that is formed by a peak (left
shoulder), followed by a higher peak (head), and then another
lower peak (right shoulder).

It can be for a bullish market or bearish

For bearish market, we call it Inverted/inverse head and shoulder
Let's see some images

Let's take the Bullish market as an example

Here price rallies up and meets a resistance, then it falls forming
the first peak, then it rallies up again, bypasses the first peak and
still meets another resistance, on meeting this 2nd higher
resistance, It couldn't surpass it and it falls again forming the 2nd
peak. After the fall, it rallies up for the 3rd time, this time the
momentum is not much and hence it couldn't reach the previous
peak made by the 2nd move upwards then it falls again forming the
3rd peak.
The 1st and 3rd peaks are the shoulders while the 2nd peak is the
head
Then a “neckline” is drawn by connecting the lowest points of the
two troughs.

When you see a pattern like this, you should be on alert for a
possible trend reversal.
To enter this trade, you wait for a break and retest of the neckline
then you enter your sell order. Your minimum profit target can be
determined by measuring the distance from the head to the
neckline and place SL above the High of the left shoulder.

Inverse head and shoulder

As the name implies, it is the opposite of the head and
shoulder, this one is however upside down.
Here, a valley is formed (left shoulder), followed by an even lower
valley (head), and then another higher valley (right shoulder).
The same principle in trading head and shoulder applies here but in
reverse, so you buy when price breaks and retests the neckline and
put your SL below the right shoulder.

Double tops an bottoms

When a double top or double bottom chart pattern is formed, it
indicates a possible trend reversal.
When it forms in an uptrend it's called double tops while for
downtrends it's called double bottoms.
Here are some images

Double top or bottom forms

when price rises or fall to meet a strong resistance or support
respectively.
The “tops” are peaks which are formed when price hits a certain
level of resistance. After hitting this level, price will bounce off it
slightly, but then return back up to test the level again, if price
bounces off that level again, then you have a double top!

In the images above you can see that two peaks or “tops” were
formed after a strong push up.
Notice how the second top was not able to break and close above
the high of the first top, this is a sign that a reversal is likely to
occur so you’d place your sell order once price breaks and retests
the neckline and SL above the double top.
Double bottom
The “bottoms” are lows which are formed when price hits a certain
level of support. After hitting this level, price will bounce off it
slightly, but then return back down to test the level again, if price
bounces off that level again, then you have a double bottom!

The same principle in trading double tops apply in trading double

bottoms as well.
You’d place your buy order once price breaks and retests the
neckline and SL below the double bottom.

Rising and falling wedges

These are also reversal patterns
They form when price is being compressed into a narrow range.
When you see this pattern form, it signals exhaustion in the current
trend or indecision.
Wedges can also serve as continuation patterns, if a rising wedge
forms in an uptrend, it leads to reversal but if it forms in a
downtrend, it results in trend continuation.

For wedge reversal patterns...

When you see a rising wedge in an uptrend then price would fall
and when you see a falling wedge in a downtrend then you should
know that the price would rise.
Meanwhile for wedge continuation patterns, when you see a falling
wedge in an uptrend, it means that price would continue bullish and
when you see a rising wedge in a downtrend, it means that price
would continue down.

How do you trade using this pattern?

As you see price forming a wedge, you wait for a breakout of the
wedge, once a full body candle breaks and closes outside of the
wedge in your direction, you can now open a position upon
formation of the next candle.
SL should be placed directly above or below the wedge.

The next set of chart patterns are continuation patterns

They include:
Channels/rectangles
flags/pennants
Triangles

Channels/rectangles
These are continuation chart patterns, although in some situations,
they lead to reversal
This pattern occurs after a prolonged trend when the market stall
and consolidates for a while before break-ing out to reverse or
continue a trend.
This shows that price has been moving up and down within a
narrow support and resistance range, so just like with the wedges,
you wait for the breakout and a possible retest then you open your
position.

Flags and pennants

Similar to rectangles and channels, flags and pennants are
continuation chart patterns formed after a strong move. A Flag
pattern forms when price range in a tight consolidation before
continuation.
When such patterns as this occur, it's signifying that price is taking a
break while gathering momentum to continue in its overall trend.
So you either place a stop order in the direction of the trend or wait
for it to breakout.

Triangles
There are 3 types of triangle chart pattern
Symmetrical
Ascending
Descending

symmetrical Triangle
The slope of the price highs and the slope of the price lows
converge together to create what looks like a triangle.
This happens because buyers and sellers are in equilibrium thus
creating lower highs and higher lows until they get to the point
where either of the party decides to take the upper hand and push
price to their direction. Therefore price can break out on any of the
sides.
Ascending Triangle
Here there is a fixed resistance point that price can't seem to
exceed, while the lower slope is creating higher lows and ascending
as it goes into a tapering end.
As buyers continue to put pressure on that resistance level as they
keep creating higher lows, they gain strength and at such, this
pressure becomes so much that this resistance point gets broken
and price move up, since its ascending triangle and a continuation
pattern.
The Descending Triangle
This is the direct opposite of the ascending triangle
Here there is a Fixed support level that price is struggling to break
while price is consistently making lower highs trying to break that
support hence forming what looks like a descending slope hence
the name descending triangle
 CHAPTER 15

DEMAND AND SUPPLY

Demand and supply are believed to be the market force that drives
the price of a commodity. Let’s do a little rewind back to our high
school economics.
In your basic economics, you were taught that supply refers to how
much of something you have while demand refers to how much of
something people want, let’s say you’re a trader and you deal on
jeans and you happen to have 50 pairs of jeans (supply).
But your buyers only want 30 pairs (demand)

The law states that all things being equal, in a competitive market,
the unit price for a particular good, or other traded item such as
labour or liquid financial assets, will vary until it settles at a point
where the quantity demanded (at the current price) will equal the
quantity supplied (at the current price), resulting in an economic
equilibrium for price and quantity transacted.
This Invariably means that the higher the price of a given item, the
lesser the demand meanwhile the higher the price of an item, the
more producers would like to supply because from their
perspective, higher price equals higher profit but from the consumer
perspective, the higher the price of an item, the less likely for them
to purchase it. This goes on until equilibrium for price and quantity
demanded is reached.
This leads us to the 4 basic laws of supply and demand

1. If demand increases and supply remains the same, it leads to

shortage which leads to an increase in price.
2. If demand decreases and supply remains the same, it leads to
surplus which leads to a decrease in price.
3. If demand remains the same and supply increases, it leads to
surplus which leads to a decrease in price.
4. If demand remains the same and supply decreases, it leads to
scarcity which leads to an increase in price.

How does this apply in the financial market?

When applied to Forex, demand represents the willing buyers while
supply represents the willing sellers. This means that if the supply
of a currency pair is high and the demand is low, price would
decline and vice versa.

What are demand and supply zones

Demand and supply zones are price levels created by banks and
institutions where unfilled orders are waiting to get filled. The idea is
that when price gets back to those levels, it would fill the unfilled
orders and reverse.
How to identify supply and demand zones
The general idea is to locate points on the chart where price has
made a strong rally or decline, the origin/source of the move is
marked as a supply/demand zone.
A demand zone is typically formed after a strong rally upwards.
In reverse, a supply zone is effectively created following a strong
push to the downside.

There are four key areas of interest on the charts to look for
1. The rally base rally (RBR- continuation formation)
2. The drop base rally (DBR- reversal formation)
3. The drop base drop (DBD- continuation formation)
4. The rally base drop (RBD- reversal formation)

The first two (RBR and DBR) forms a demand zone while the last 2
(DBD and RBD) forms a supply zone
A RBR demand zone forms within an uptrend.

This forms after price rallies for a while then consolidates within a
range, this area of consolidation or range becomes a base. The
general idea is that buyers and sellers had a moment of equilibrium/
balance during the period of the range until the buyers gained
momentum to push price up, this happened because demand
exceeded supply at that price level thus price went up leaving a
base which becomes a fresh level of demand. So it is expected that
when price comes back into that level, it would rally back up again
since there would be unfilled buy orders at the demand zone
waiting to get filled.

A DBD supply zone is essentially the same formation as a RBR

area, but formed within a down trending environment.

This forms after price declines for a while then consolidates within a
range, this area of consolidation or range becomes a base. The
general idea is that buyers and sellers had a moment of equilibrium/
balance during the period of the range until the sellers in this case
gained momentum to push price further down, this happened
because supply exceeded demand at that price level thus price
went down leaving a base which becomes a fresh level of supply.
So it is expected that when price comes back into that level, it
would fall back down again since there would be unfilled sell orders
at the supply zone waiting to get filled.

This forms after price declines for a while then consolidates within a
range, this area of consolidation or range becomes a base. The
general idea is that buyers and sellers had a moment of equilibrium/
balance during the period of the range until the buyers gained
momentum to push price up, this happened because demand
exceeded supply at that price level thus price went up leaving a
base which becomes a fresh level of demand. So it is expected that
when price comes back into that level, it would rally back up again
since there would be unfilled buy orders at the demand zone
waiting to get filled.
This forms after price rallies for a while then consolidates within a
range, this area of consolidation or range becomes a base. The
general idea is that buyers and sellers had a moment of equilibrium/
balance during the period of the range until the sellers in this case
gained momentum to push price down, this happened because
supply exceeded demand at that price level thus price went down
leaving a base which becomes a fresh level of supply. So it is
expected that when price comes back into that level, it would fall
back down again since there would be unfilled sell orders at the
supply zone waiting to get filled.

Lets see some chart examples…

In the image above, noticed how prices created a RBD supply zone
and as price went back into that level, we see a decline.

Here price created a DBR demand zone and as price returned it to

it the first and second time, we see a push to the upside.

HOW TO DETERMINE THE STRENGTH OF A SUPPLY/DEMAND ZONE

The concept of demand and supply proposes that changes in the
direction of a trend occurs whenever there is an imbalance between
supply and demand
In this concept, every time price moves into a supply or demand
zone. The excess sellers or buyers (ie buy and sell orders) are
being used up until they eventually get exhausted and price breaks
through the zone
So we need to estimate the strength of a zone so that we would
know the likelihood of price reversal next time we return to the zone

The first method of determining the strength of a zone is to look for

areas where price has moved away swiftly/sharply.
This is even better confirmed, if price moved into that particular
zone quickly before leaving and how much time price spends at the
zone before moving out of it.

How did price leave the zone/strength of the move

The Logic is that the faster price moves away from a zone, the
more imbalance supply/demand are at that zone, meaning that
there is heavy pending orders at the area.

How much time did the price spend at the zone?

The logic here is that the less time price spends at a zone, the more
imbalance supply and demand are at the price level. So the more
the imbalance at a zone, the least time price would spend there.
How fresh is the zone?
Another way of determining a strong demand or supply zone is by
checking how "Fresh" the zone is
By Fresh, we mean the number of times the zone has been tested
in the past.
Trading the first time price returns to a zone is seen as the highest
probability trading.

As you can see in the image above, a RBD supply zone was
created by the initial uptrend, the first test was a strong zone, so we
sell at that point. However when price came back to test it the
second time, it broke above it because the zone was no longer
strong.

Bottom line is, the shorter time price spends in a zone before
leaving the better.
You wouldn't want to draw a zone where price spent so much time
before breaking out

Also note that higher time frames are more reliable when drawing
your supply and demand zones.

Contact trader Nancy

IG: @naturallynancy_
Tel/WhatsApp: +2348135398386