1. Forex Trading
Intermediate

2. Concepts

3. Major trading sessions
Tokyo: 11PM - 8AM (GMT)
Slow-paced market
6% of daily transaction volume
London: 8AM - 5PM (GMT)
The most volatile market
35% of daily transaction volume
New York: 1PM – 9PM (GMT)
Most volatile during the US/Europe overlap
17% of daily transaction volume

4. Currency types
Safe haven currencies: they outperform in times of crisis or uncertainty, investors buying them is known as flight-to-quality
Commodity currencies: from countries which depend heavily on the export of certain raw materials
CHF
JPY
USD
XAU
AUD
NZD
CAD

5. Markets correlation
USD index: the USD’s performance against a basket of six currencies provides sentiment of the overall FX markets
Gold: more than a commodity, gold is a currency and tends to be inversely correlated to the dollar
Oil: priced in dollar, the two markets tend to be inversely correlated
Knowing different markets helps the trader gauge the market conditions and take on appropriate exposure
Positive correlation: move in the same direction
Negative or inverse correlation: move in opposite direction

6. Swap A swap/rollover is an interest fee for overnight open positions
Swap rate is the interest rate differential between the two paired currencies
Swap = (Pip Value * Swap Rate * Number of Nights) / 10
Example: short 1 lot of EUR/USD with an account in EUR
1 lot = 100,000, Pip value = $10, Swap rate = 0.54, Number of nights = 1
Swap fee: (10 * 0.54 * 1) / 10 = $0.54

7. Order fill An order is filled when it is executed in the market
You buy at the Ask price, and close by selling at the Bid price
You sell at the Bid price, and close by buying back at the Ask price
The spread can affect your fills
MT4 charts are drawn on bid price
If you sold at and your take profit is (green line), it would not have been filled here
Same if you had a buy limit order at , it would have been missed
Ask price
Bid price

8. Strategies

9. Common chart patterns Head & Shoulder is a reversal pattern Head
Left shoulder
Right shoulder
H&S necklace
H&S necklace
Right shoulder
Left shoulder
Head

10. Continuation triangle
Common chart patterns
Triangles, wedges, rectangles and flags are consolidation patterns, can be used in range or breakout trading
Reversal wedge
Continuation triangle

11. Trade breakouts
Longs and shorts exchange hands in consolidation and positions are built for the next move
A breakout likely leads to a directional move
The longer the consolidation the larger the breakout move
The stop-loss should be placed outside the range
The trendline suggest a downtrend
Market consolidates for more sellers to jump in
Flag
Descending triangle
Sharp drops suggest trend continuation

12. A simple indicator: MA crossing
An indicator is best used in conjunction with patterns
Moving averages reveal the current market conditions
The faster MA crossing over the slower one may signal an uptrend
The faster MA crossing under the slower one may signal a downtrend
SMA 50
SMA 20

13. Market sentiment
The market is crowd psychology driven by emotions, it is not always in line with fundamentals
An overcrowded market is meant to reverse as it will run out of buyers or sellers
The reversal can be swift and brutal when everyone tries to get out
Bullish: buyers-controlled market, the price can go above its fundamental-justified value
Bearish: sellers-controlled market, the price can go below its fundamental-justified value

14. Use the sentiment at your advantage
Sentiment reveals players’ positions and can be used to join a trend or spot a potential reversal
First bull/bear can easily get killed, so avoid or trade smaller than usual
Once the market has chosen its side, volume will increase, amplifying the directional move
First bears
More bears
More bears confirmation
Bears’ train about to leave
Late partiers
Last bulls
Last bulls out
Bulls stopped out
Bears take profit and rush for exit
Consolidation
Trend

15. Combine fundamental & technical
Fundamental analysis provides directions, to buy or sell
Technical analysis gives confirmation and trading signals
Even if the RBA kept the rate unchanged for months, only when the price started to turn offered safer entry opportunities
Head
Left shoulder
MA crossing
The market topped as traders expect RBA to keep the rate unchanged for a foreseeable future. AUD started a downtrend
Right shoulder

16. Multiple time frame analysis
Using both long and short time frames helps confirm market direction
In this daily chart, the oil is pulling back to the support line
If the line holds, the price is likely to revert back to its previous uptrend
The trader is waiting for a confirmation
In this H4 chart, the strong price momentum confirms the support as a valid entry point
This signal gives an buying opportunity to the trader to go long
D1 chart
H4 chart
Daily support
Daily support

17. Trade management

18. Define your risk Never let one single trade wreck your account
Before each trade, you need to define you risk parameter
% of your account equity, experienced traders never risk more than 2-3%
Number of pips as stop-loss
Your stop-loss must be specific to your strategy, based on:
Chart patterns
Indicators
Volatility
Don’t set your stop-loss purely based on a dollar amount, the market could not care less

19. How to set a stop-loss?
A stop-loss has to be relevant to the strategy, limiting the downside yet letting enough room for the price to develop
Sell into new low as market becomes bearish
Buy as market is in an upward channel
Good SL
SL too tight
SL too tight
Good SL

20. What is slippage?
Difference between the expected and the executed prices
Slippage can occur in normal and volatile markets, the amount of the slippage depends on the liquidity
In a volatile market, a trader’s expected stop price may not be available, the order will be filled at the next available price
Slippage can be positive (better price) and negative (worse price)
Actual filled price
Trader’s SL

21. Position sizing
Knowing your size for each trade is key to your risk management
You have a $10,000 account and you want to risk only 1% or $100 on a EURUSD trade, how many lots should you trade?
If your stop-loss is 20 pips ($200/lot)
Reduce the size by half to 0.5 lot ($50,000 nominal)
If your stop-loss is 5 pips ($50/lot)
Double the size to 2 lots ($200,000 nominal)
Equity risk (%)
Constant
Trade-dependent
Trade size
Point of risk
Strategy-dependent

22. How to manage winning trades?
Break-even point: stop-loss moved to your entry price, even if the market turns, you will be stopped at no loss
As the price goes in your favour, use a trailing stop to let your profit run while securing some profit
The trade is closed when stopped out with profit
SL moved higher
SL moved higher
SL moved higher
Break-even point
Initial SL

23. How to manage losing trades?
Never let a losing trade go beyond your risk parameter
Be careful with averaging down (buying more as price drops)
Buying cheap might get you great deals in street markets, but there usually is a good reason why traders are dumping a currency
If your risk threshold has been hit, get out, observe and reassess
Going against the market becomes emotional trading and no trader can afford that

24. Psychology

25. Making money is easy…
Keeping it is the challenge. Here are some common mistakes
Overconfidence
Beginner’s luck can lead to overconfidence and excessive risk-taking (high- levered position, no SL)
Lack of strategy
A strategy with clear rules of entry and exit keeps emotions at bay
Overtrading
Be selective and choose only high probability trades
Following the herd
Follow your own plan before jumping into any trend

26. Trading: a game of probability
Which game would you play?
60% chance of winning and get £10
40% chance of losing and pay £20
40% chance of winning and get £20
60% chance of losing and pay £10
Even with a lower win rate, each time you play B, you can expect to earn £2
B’s greater pay-out (higher risk-reward) makes the trader profitable over time

27. The significance of one trade
Each trade is significant in your learning process
Does your strategy fit your personality, schedule?
Did you follow your rules?
What needs to be improved for the next trade?
Each trade is insignificant in your P&L
Focus on making a good trade
A trade that is from your strategy
A trade executed by following your set rules
A good trade can be profitable or lost but a series of good trades is profitable over time

28. From beginner to profitable
High return
High win rate
Zero risk
Consistency
High risk-reward ratio
Small drawdowns

29. Thank you!