Part 1 Forex Trading. What is Forex?

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1 Part 1 Forex Trading What is Forex? Forex or Foreign Exchange market, is the world's largest financial market. Forex market has a daily turnover of over four trillion dollars a day, traded globally by many individuals and organizations. Unlike other financial markets like the ASX or the New York Stock Exchange, the forex market is considered an Over-the-Counter (OTC) or Interbank market. This means that the entire market is run electronically, within a network of banks, continuously over a 24-hour period. What is Forex Trading? Money is a core element of the foreign exchange market. Foreign currency trading is the act of simultaneously buying one currency whilst selling another, mainly for speculation. The value of the currency appreciates or depreciate towards one another as a result of variety of factors such as economic and geopolitical reasons. Unlike other financial markets, trading activity continues to happen 24 hours a day 5 day a week. This allows you to trade anytime that works best for you. How to make profit trading forex? In the forex market, you are buying or selling a currency. Placing a trade in the forex market is simple. The mechanics of a trade are very similar to those found in other markets such as the stock market or commodities market. You are anticipating that the price will change so that the value of the currency you bought will increase in value compared to the one you sold. Part 2 Foreign Exchange Market vs. Stock Market Strong Market liquidity Foreign exchange market with a daily trading volume of over four trillion dollars, is the world's most liquid market. Daily trading volume in forex market is equivalent to one month's trading volume on Wall Street. Forex market operates day and night and attracts traders from all around the world. Raising funds in global stock markets are limited and the settlement time on stock market takes several business days whereas settlement takes place immediately when trading spot forex. 24 Hour 5 Day trading Foreign exchange market runs 24 hours around the clock as opposed to the stock market that has set trading hours. The forex prices move with the international political situation, press releases of major central banks and various government economic reports. When traders in some areas (eg. Australia in Asian Session) finish trading for the day, others in the opposite side of the world (eg. European session or US Session) start their trading session ensuring that the forex market will remain liquid.

2 Forex can be profitable in both bullish or bearish market The other disadvantage of investing in equity market is that a lot of exchanges/brokers do not allow investors and speculators to short sell. During economic recession, investors can only hold their shares as they watch the economy go through a downturn. You can long (buy) or short (sell) in forex trading which means that there are opportunities to be profitable during both economic upturn and downturn. Using leverage In the forex market, investors often have opportunity to use higher leverage than other market, such as stock market. By using leverage, investors could gain large portion of return with very low cost. However, this can work in both ways. High leverage could mean that the potential loss could also be greater. Part 3 Forex Quotes Currency exchange rate: The price of a nation s currency in terms of another currency. World's major currencies and their standard codes: Major Currency Nick Name Code US Dollar Greenback USD Euro Euro, Fiber EUR Japanese Yen Yen JPY British Pound Sterling, Quid, Cable GBP Swiss Franc Swissy CHF Australian Dollar Aussie AUD New Zealand Dollar Kiwi NZD Canadian Dollar Loonie CAD Base Currency: The first currency quoted in a currency pair on forex. It is also typically considered the domestic currency or accounting currency. Counter Currency: The currency used as the reference or second currency in a currency pair. Here are the most globally traded major currency pairs. The pairs below accounts for nearly 80% of global forex trading volume. Most traded major currency pairs Rank Currency pair % of daily volume traded 1 EUR/USD 24.1% 2 USD/JPY 18.3% 3 GBP/USD 8.8% 4 AUD/USD 6.8% 5 USD/CAD 3.7% 6 USD/CHF 3.4%

3 7 EUR/JPY 2.8% 8 CNY/USD 2.1% 9 EUR/GBP 1.9% 10 NZD/USD 1.5% The following are the top ten most frequently traded currencies: Top ten most frequently traded currencies Rank Currency Symbol % of daily volume traded 1 US Dollar USD ($) 42% 2 Euro EUR ( ) 20% 3 Japanese Yen JPY ( ) 10% 4 British Pound GBP ( ) 6% 5 Australian Dollar AUD ($) 4% 6 Swiss Franc CHF (Fr) 3% 7 Canadian Dollar CAD ($) 3% 8 Hong Kong Dollar HKD ($) 1% 9 Swedish Krona SEK (kr) 1% 10 New Zealand Dollar NZD ($) 1% Others 9% Total 100% Part 4: Fundamental Analysis What is fundamental analysis? Fundamental analysis is focused on understanding the relationship between market supply and demand. It is a technique that attempts to determine the value of the underlying asset by assessing its current and future events that may determine the direction of the market. This can be applied when trading in spot forex or commodities market. Fundamental analysis can be divided into three main categories: Economic Factors Financial factors Geopolitics Major economic indicators for fundamental analysis Macroeconomic Indicators Currency trend if Data frequency figure increases Interest Rate, Cash Rate Monthly GDP,Gross Domestic Product Quarterly GNP,Gross National Product Quarterly

4 New Durable Goods Orders Monthly Retail Sales Indicator Monthly Building Permits Monthly New Home Sales Monthly Inflation Indicators CPI,Consumer Price Index Monthly PPI,Producer Price Index Monthly Average Hourly Earnings Monthly Employment Market Indicators Unemployment Rate Monthly Non-Farm Employment Change Monthly ADP Non-Farm Employment Change Monthly Unemployment Claims Weekly Trade Balance Index Trade Balance Monthly Current Account Monthly PMI, Purchase Managers' Index Monthly Industrial Production Index Monthly Below are some of the websites that has the economic calendar for you to utilize: (can download as an app on Apple App store or Google Play) Part 5 Technical Analysis Technical analysis is a method of predicting price movements and future market trends by studying charts of past market action. Technical analysis is concerned with what has happened in the market, rather than what should happen and takes into account the price of instruments and the volume of trading, and creates charts from that data to use as the primary tool. One major advantage of technical analysis is that experienced analysts can follow many markets and market instruments simultaneously. Technical analysis is built on three essential principles: 1. Market action discounts everything! This means that the actual price is a reflection of everything that is known to the market that could affect it, for example, supply and demand, political factors

5 and market sentiment. However, the pure technical analyst is only concerned with price movements, not with the reasons for any changes. 2. Prices move in trends Technical analysis is used to identify patterns of market behaviour that have long been recognized as significant. For many given patterns, there is a high probability that they will produce the expected results. 3. History repeats itself. Forex chart patterns have been recognized and categorized for over 100 years and the manner in which many patterns are repeated leads to the conclusion that human psychology changes little over time. Candlestick Charts Candlestick bars still indicate the high-to-low range with a vertical line. However, in candlestick charting, the larger block in the middle indicates the range between the opening and closing prices. Traditionally, if the block in the middle is filled or coloured in, then the currency closed lower than it opened. In the following example, the filled colour is black. For our filled blocks, the top of the block is the opening price, and the bottom of the block is the closing price. If the closing price is higher than the opening price, then the block in the middle will be white or hollow or unfilled. Support and resistance A support level is level where the price tends to find support as it is going down. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely to continue dropping until it finds another support level. A resistance level is the opposite of a support level. It is where the price tends to find resistance as it is going up. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely that it will continue rising until it finds another resistance level.

6 Double Top and Double Bottom The double-top pattern is found at the peaks of an upward trend and is a clear signal that the preceding upward trend is weakening and that buyers are losing interest. Upon completion of this pattern, the trend is considered to be reversed and the security is expected to move lower. The double bottom is formed when a downtrend sets a new low in the price movement. This downward move will find support, which prevents the security from moving lower. Upon finding support, the security will rally to a new high, which forms the security's resistance point. Remember that the security needs to break through the support line to signal a reversal in the downward trend and should be done on higher volume. As in the double top, do not be surprised if the price returns to the breakout point to test the new support level in the upward trend. Rounded Tops and Rounded Bottoms The rounded top and bottom are reversal patterns designed to catch the end of a trend and signal a potential reversal point on a price chart. The rounded top pattern appears as an inverted 'U' shape and is often referred to as an inverse saucer in some technical analysis books. It signals the end of an uptrend and the possible start of a downtrend. This means that the rounded top can indicate an opportunity to go short. The rounded bottom pattern appears as a clear 'U' formation on the price chart and is also referred to as a saucer. It signals the end of a downtrend and the possible start of an uptrend. This means that the rounded bottom can indicate an opportunity to go long.

7 FLAGS A technical charting pattern that looks like a flag with a mast on either side. Flags result from price fluctuations within a narrow range and mark a consolidation before the previous move resumes. Likewise, "pennant" formations are usually treated like flag formations because they are very similar in appearance, tend to show up at the same place in an existing trend, and have the same volume and measuring criteria. Rectangles A technical trading pattern in which a security's value ranges between two horizontal price points, creating a rectangle on a trader's screen. Rectangles occur in situations where a security is consistently bought up, when a lower price value is established, and sold down, when an upper value is similarly established. These price values remain "hard" values for a definite period, which is what creates the rectangular pattern. Triangle patterns Triangles are some of the most well-known chart patterns used in technical analysis. The three types of triangles, which vary in construct and implication, are the symmetrical triangle, ascending and descending triangle. These chart patterns are considered to last anywhere from a couple of weeks to several months. Ascending triangle The ascending triangle is a bullish pattern, which gives an indication that the price of the security is headed higher upon completion. The pattern is formed by two trendlines: a flat trendline being a point of resistance and an ascending trendline acting as a price support.

8 Symmetrical triangle The symmetrical triangle is mainly considered to be a continuation pattern that signals a period of consolidation in a trend followed by a resumption of the prior trend. It is formed by the convergence of a descending resistance line and an ascending support line. The two trendlines in the formation of this triangle should have a similar slope converging at a point known as the apex. The price of the security will bounce between these trendlines, towards the apex, and typically breakout in the direction of the prior trend. Descending triangle The descending triangle is the opposite of the ascending triangle in that it gives a bearish signal to chartists, suggesting that the price will trend downward upon completion of the pattern. The descending triangle is constructed with a flat support line and a downward-sloping resistance line. Ascending Triangle Symmetrical Triangle Descending Triangle Part 6: Contract Specifications and Examples Forex specifications Contract (lot) size 100,000 Minimum tradable lot 0.01 lot Minimum incremental lot 0.01 lot Margin required 0.25%,0.5% or 1% of amount transacted Nearest level from which orders can be placed Profit and loss calculation Roll-over calculation Trading hours 10 points Example of a Forex contract trade (EURUSD) Mark-to-market real time Done daily and at prevailing market cost GMT Time:24 hour non-stop from Monday to Friday. Daylight saving hours apply. Day Profit / Loss Day 1 Buy 1 lot EURUSD at

9 Day 2 Sell 1 lot EURUSD at Profit / Loss $10 x 82.5 pips = USD Swap USD 0.70 Net Profit / Loss USD USD 0.70 = USD Gold (XAUUSD) contract specifications Contract symbol XAUUSD Contract size Target spread Minimum trade (lot) Minimum incremental lot 100 ounce per lot US$ US$ lot 0.01 lot Minimum fluctuation 0.01 US$ per minimum fluctuation (per 1 $ 10 lot) US$ per minimum fluctuation (per $ lot) Margin required 1% Profit / loss calculation Swap charge Delivery Mark-to-market real time Please refer to the information on MT4 Non-deliverable Trading hours GMT Time:Sunday 22:15 Friday 20:30 Example of a gold contract trade Day Profit / Loss Day 1 Buy 1 lot XAUUSD at 1, USD 4,320 Day end rate :1, Day 2 Interest cost:usd USD 8.99 Sell 1 lot XAUUSD at 1, USD 3,040 Total profit / loss +USD 7, Silver (XAGUSD) contract specifications Contact symbol Lot size Target spread Minimum trade XAGUSD 100 ounce per lot US$0.01- US$ lot

10 Minimum trade increment 0.01 lot Nearest level from which orders can 0.01 be placed US$ per minimum fluctuation US$ 5 Margin required 1% Swap charge Please refer to the information on MT4 Trading hours GMT Time:18:00-17:00+1 Monday to Friday Example of a sliver contract trade Day Profit / Loss Day 1 Buy 50 lots XAGUSD at Day 2 Sell 50 lots XAGUSD at Profit / Loss 50 x 100 x ($16.68 $15.35) = USD 6, Swap (50 x 100 x x 2.75%)/360 = USD 5.86 Net Profit / Loss USD 6, USD 5.86 = USD 6, Crude Oil (XTIUSD) contract specifications Contact symbol XTIUSD Lot size 100 barrels per lot Target spread US$0.06- US$0.07 Minimum trade 0.01 lot Minimum trade increment 0.01 lot Nearest level from which orders can 0.01 be placed US$ per minimum fluctuation US$ 1 per lot Margin required 2% Swap charge Please refer to the information on MT4 Roll-over Yes Trading hours (GMT) Sunday 22:15 24:00 Monday - Thursday 00:00 20:45; 22:15 24:00 Friday 00:00 20:30 Example of a crude oil contract trade Day Profit / Loss Day 1 Buy 10 lot XTIUSD at Day 2 Sell 10 lot XTIUSD at 52.60

11 Profit / Loss 10 lots x $1 x ($52.60 $47.22) = USD Swap USD 4.06 Net Profit / Loss USD USD 4.06 = USD Target Spread will vary based on market conditions. GCG reserves the right to change Target Spread and margin requirement subject to market conditions. ** SWAP please refer to the information on the trading platform. GCG reserves the right to change SWAP (storage cost) subject to market conditions. Remark: Contract specifications may be changed without prior notice to clients. Part 7 Forex Terminology Trading Products Key Definitions for FX Bid and Ask -Bid is what we will pay to buy the currency pair (= buy the base currency, sell the quote currency) -Offer is what we are offering to sell the currency pair (= sell the base currency, buy the quote currency) Pip -The smallest price increment a currency can make for most currencies, for pair with RUB+CZK and 0.01 for pairs with JPY+ HUF Fractional Pip -Some brokers now offer fractional pips to provide an extra digit of precision when quoting exchange rates for certain currency pairs -A fractional pip is equivalent to 1/10 of a pip Spread -The difference between the bid and offer price EUR/USD bid offer spread is 3 pips -Spread are higher after 23:00 to 02:00 as all markets are closed and therefore very low liquidity Tick -The minimum upward or downward movement in the price of a security or contract -The term "tick" also refers to the change in the price of a security from trade to trade Trading Sizes -Currencies are traded in fixed contract sizes, specifically called lot sizes, or multiples thereof -The standard lot size is 100,000 units of the base currency. Many retail trading firms also offer 10,000 unit (mini lot) trading accounts and a few even 1,000 unit (micro lot)

12 Base Currency Means the main currency of the Client s account Balance Means the total financial result of all fully executed transaction and deposits/withdrawals to/from an account Equity -Means the secure part of Client s account: -Balance +/- Open Positions +/- Swap - Commission Swap -A Swap or a Rollover is the interest paid or earned for extending a position at the end of the day (5pm ET) without settling. -The swap rates are calculated as the overnight interest rate differential between the two currencies. Swaps rates can potentially generate extra profit or loss to one s trade -On Wednesdays swapped charged is triple in order to take the weekend into account Leverage Leverage is used to increase the buying power and the potential risk of losses of a trader, even if they can only provide a small deposit. On every Friday between 21:00 until 24:00 maximum leverage is 1:100 for any new positions opened during this period Bull Market A financial market in which prices are rising or are expected to rise Bear Market A market condition in which the prices are falling Buy Buy = Go Long (Bulls) Sell Sell Go short (Bears) Requote In the forex world means that the broker you are dealing with is not able or willing to give you a trade based upon the price you entered. Generally this happens in a fast-moving market, usually around the time of a big news announcement or some kind of shock to the system Slippage In forex, slippage occurs when a limit order or stop loss occurs at a worse rate than originally set in the order. Slippage often occurs when volatility, perhaps due to news events, makes an order at a specific price impossible to execute. In this situation, most forex dealers will execute the trade at the next best price Margin -The required funds that a Client will need to open a position -Current market quote X volume / leverage = $ Margin required Margin Level -Means: (Equity/Margin) * 100; it determines the conditions of the Client s account

Stop out level -Is a certain required margin level in %, at which a trading platform will start to automatically close trading positions in order to prevent further account losses into the negative

13 Stop out level -Is a certain required margin level in %, at which a trading platform will start to automatically close trading positions in order to prevent further account losses into the negative territory. -When margin level is equal to or less than 20% then Client s positions are automatically closed. -For zero fixed spread accounts when the margin level is equal to or less than 80% Free Margin -Amount of funds in the Client s account that can be used for trading -Free Margin = Equity Margin -Pending orders are deleted if the free margin is not enough to cover the margin required for the opening the specific order Margin Call -The Warning from a broker that your account has slipped pass the required margin in %, and that there is not enough equity. The broker has the right to start closing Client s positions starting from the most unprofitable, when the margin level is less than 40% and less than 100% for zero fixed spread account Basic Navigations around MT4: Placing a trade There are two ways to placing a trade. 1. One-Click Trading When you are on a chart, hold ALT + T and the SELL/BUY button will appear on the top left-hand corner. This will allow you to place trades quickly and you will be able to adjust the stop losses and take profits after.

2. Order Pad By pressing F9 on your keyboard or by clicking on New Order on the standard tool bar of MT4, order pad will pop up as shown in the screenshot below.

Enter the size of the position you want to open. Keep in mind that volume, which indicates the size of your position, is expressed in terms of standard lot sizes.

14 2. Order Pad By pressing F9 on your keyboard or by clicking on New Order on the standard tool bar of MT4, order pad will pop up as shown in the screenshot below. A dialogue box should appear. From the drop-down list, select the currency pair you want to trade. Next, select Market Execution in the Order Type drop-down list. Enter the size of the position you want to open. Keep in mind that volume, which indicates the size of your position, is expressed in terms of standard lot sizes. Remember, one standard lot is worth 100,000 units. Hence, if you wish to buy 5,000 units of a certain currency pair, you would enter 0.05 in the volume field.

If you have any remarks or notes you would like to include about your trade, you can do so in the comment field. This is optional. Finally, determine whether to BUY or SELL the currency pair.

15 If you have any remarks or notes you would like to include about your trade, you can do so in the comment field. This is optional. Finally, determine whether to BUY or SELL the currency pair. A dialogue box will appear to confirm that your trade has been executed. Pending Order If you believe that now is not the best time to BUY/SELL, you may set a pending order to a specific price level so that the order will only execute when it reaches that price. This can be done by opening the order pad and clicking on the type of the pending order. There are four types of pending orders. Buy Limit if you plan on going long at a level lower than market price Sell Limit if you plan on going short at a level higher than market price Buy Stop if you plan on going long at a level higher than market price Sell Stop if you plan on going short at a level lower than market price After you have selected the type of order, punch in the price at which you wish to enter the market. Then, enter the size of the position you want to open in the volume field. Fill in the stop loss and take profit fields. Once you ve filled everything out, click the Place button to enter your trade. A dialogue box will appear to confirm that your trade has been executed.

Following multiple markets MT4 allows you to customize the layout of your charts. Feel free to try out different layout to see which one suits you best.

historical prices. Closing your trades All your trades that are open will appear under the Trade Tab. You may close your orders by clicking on the x button on the right-hand side of your trades.

16 Following multiple markets MT4 allows you to customize the layout of your charts. Feel free to try out different layout to see which one suits you best. By default, when you first logon to your trading account on MT4, there will only be four charts but you can add more and drag and drop any instrument from Market watch to the Chart to see the historical prices. Closing your trades All your trades that are open will appear under the Trade Tab. You may close your orders by clicking on the x button on the right-hand side of your trades. You may also access your trading accounts through the MT4 App on Apple Appstore or Google Play. You will be able to monitor, place and close any trades on your account. (To close your order, you will need to hold onto your existing order till options appear on screen to close or modify your order)

17 Then select GCG Demo Place your Account number and password MT4 Trading Platform for the competition will not support Mac OS so for Mac users, you will need to place your trades on your phone and track the price movements of the market through MT4 App on phone.

Forex Currency Pairs Forex Terminology Spread Lot Size. Margin and Leverage Pip Value Volume. BearBullTraders.com. All Right Reserved.

Forex Currency Pairs Forex Terminology Spread Lot Size Margin and Leverage Pip Value Volume Forex = Foreign Exchange Forex Trading = Buy or Sell contracts for a currency pair based on fundamental and technical