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DISCLAIMER THE CONTENTS OF THIS MANUAL REFLECT THE AUTHOR’S VIEWS ACQUIRED THROUGH HIS EXPERIENCE ON THE TOPIC UNDER DISCUSSION. THE AUTHOR OR PUBLISHER DISCLAIMS ANY PERSONAL LOSS OR LIABILITY CAUSED BY THE UTILIZATION OF ANY INFORMATION PRESENTED HEREIN. THE AUTHOR IS NOT ENGAGED IN RENDERING ANY LEGAL OR PROFESSIONAL ADVICE. THE SERVICES OF A PROFESSIONAL PERSON ARE RECOMMENDED IF LEGAL ADVICE OR ASSISTANCE IS NEEDED. WHILE THE SOURCES MENTIONED HEREIN ARE ASSUMED TO BE RELIABLE AT THE TIME OF WRITING, THE AUTHOR AND PUBLISHER, OR THEIR AFFILIATES ARE NOT RESPONSIBLE FOR THEIR ACTIVITIES. FROM TIME TO TIME, SOURCES MAY TERMINATE OR MOVE AND PRICES MAY CHANGE WITHOUT NOTICE. SOURCES CAN ONLY BE CONFIRMED RELIABLE AT THE TIME OF ORIGINAL PUBLICATION OF THIS MANUAL. THIS MANUAL IS A GUIDE ONLY AND, AS SUCH, SHOULD BE CONSIDERED SOLELY FOR BASIC INFORMATION. EARNINGS OR
 PROFITS DERIVED FROM PARTICIPATING IN THE FOLLOWING PROGRAM ARE ENTIRELY GENERATED BY THE AMBITIONS, MOTIVATION, DESIRES, AND ABILITIES OF THE INDIVIDUAL READER. NO PART OF THIS MANUAL MAY BE ALTERED, COPIED, OR DISTRIBUTED, WITHOUT PRIOR WRITTEN PERMISSION OF THE AUTHOR OR PUBLISHER. ALL PRODUCT NAMES, LOGOS, AND TRADEMARKS ARE PROPERTY OF THEIR RESPECTIVE OWNERS WHO HAVE NOT NECESSARILY ENDORSED, SPONSORED, OR APPROVED THIS PUBLICATION. TEXT AND IMAGES AVAILABLE OVER THE INTERNET AND USED IN THIS MANUAL MAY BE SUBJECT TO INTELLECTUAL RIGHTS AND MAY NOT BE COPIED FROM THIS MANUAL. COPYRIGHT © 2016 ALL RIGHTS RESERVED.

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Introduction.........................................................6 Getting Started..................................................................................................................6

Fundamentals of Currency Trading ....................7 Introduction to Forex............................................................ 7 What is Forex? ..................................................................................................................7 Stock Market vs. Forex Market ........................................................................................8 Advantages of Trading Forex ...........................................................................................8

The Currencies ...................................................10 The Most Commonly Traded Currencies ...........................10 The US Dollar (USD) ...................................................................................................... 10 The Euro (EUR) .............................................................................................................. 10 The Sterling Pound (GBP) ..............................................................................................10 The Japanese Yen (JPY) ................................................................................................. 10 The Australian Dollar (AUD) .......................................................................................... 11 The Swiss Franc (CHF)....................................................................................................11 The Canadian Dollar (CAD) ............................................................................................11 The New Zealand Dollar (NZD) ......................................................................................11

Forex Basic Concepts .........................................12 How Forex Trading Works .................................................12 Forex trades in pairs ....................................................................................................... 12 Counting the pips ............................................................................................................ 12 Value of a pip ...................................................................................................................13 How does Forex price change? ....................................................................................... 14 How to trade Forex?........................................................................................................ 14

The Economic Fundamentals ............................ 15 Fundamental Factors that move the Forex Market...........15 Economic data .................................................................................................................15 Where to get schedules of news announcements........................................................... 18

Technical Analysis .............................................20 Chart Reading .................................................................... 20 What is a chart? ..............................................................................................................20 danielhuangtrades.com

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Why you need to learn to read charts ............................................................................20 Simple chart reading ....................................................................................................... 21 Candlestick chart reading ............................................................................................... 21

Candlestick Analysis ...........................................................22 How to read a candlestick .............................................................................................. 22 Candlestick Patterns .......................................................................................................24

Support and Resistance ......................................................28 What is support and resistance? ....................................................................................28 Support level ...................................................................................................................28 Resistance level...............................................................................................................29 How to draw support and resistance levels ...................................................................30 Trend Lines .....................................................................................................................32 Higher highs/lows and lower highs/lows ......................................................................33 Identifying Phases of Market Trend...............................................................................36 Timeframes ..................................................................................................................... 37 Technical Indicators .......................................................................................................38

Preparing your first account .............................39 How to start your account .................................................39 Opening a trading account ............................................................................................. 39 Start with a demo account .............................................................................................. 39 Start Trading................................................................................................................... 39

General Trading Platform Basics ......................................40 Bid / Ask .........................................................................................................................40 Position size .................................................................................................................... 40 Stop loss ..........................................................................................................................40 Take profit ......................................................................................................................40 Margin ............................................................................................................................. 41 Equity .............................................................................................................................. 41 Carry trade ......................................................................................................................41

Money Management ..........................................42 How to manage your money during trading.................... 42 Mistakes that most traders make ...................................................................................42 How to calculate risk ...................................................................................................... 43 danielhuangtrades.com

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How to calculate lot size ................................................................................................. 43

Starting your trades ........................................... 45 Trading using charts .......................................................... 45 Buy trade .........................................................................................................................45 Short-sell trade ...............................................................................................................48

Trading Live .......................................................51 Moving on to real trades.....................................................51 How much capital needed to start trading? ................................................................... 51 Do I have to keep staring at charts?................................................................................ 51 Why do I lose a few times in a row?................................................................................ 51

Trading Tips....................................................... 52 Tips to help you stay in the trade .......................................52 1. Develop clear and concise trading method................................................................. 52 2. You must have the discipline to follow the method ................................................... 52 3. Have realistic expectations .........................................................................................52 4. Be patient .................................................................................................................... 53 5. Manage your risk by managing your money ..............................................................53 6. Concentrate on being good at trading first ................................................................53 7. Manage your emotions ............................................................................................... 53

Conclusion ......................................................... 54 Appendix ............................................................ 55 Pips Reference ................................................................................................................55 Useful Websites .............................................................................................................. 55

About..................................................................56

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Introduction Thank you for purchasing this book! I hope you will learn how Forex works and know how to trade Forex after reading what I will be going to teach you in this book. All the knowledge here is a result of many reading, testing and experiences in the market. If you are reading this book and thinking of trading Forex for the first time, this book will be your very first starting guide for you to know how Forex trading works and also apply some of the most fundamental yet most effective trading technique ever taught to many Forex traders. It is important to keep in mind and follow the steps I am willing to teach and share with you. As we go along in the lessons, you will learn that trading Forex is not that difficult as it seems and the techniques here will help you to gain confidence in trading Forex. What I need to you have, is an open mind and the willingness to read and absorb the things that is taught in this book. In the following chapters, I will teach you about the basics of Forex knowledge. Next you will learn how to read charts to tell you when to buy and sell. Shall we get started? First let’s have you prepare some of the things you need in Forex Trading.

Getting Started To get started in your Forex learning journey, you’ll need a few basic items: • A computer (you’ll be using the computer to execute your trades. Don’t worry, you don’t need the next-generation computing device, you just need one which decent enough for your trading platform to run) • Fast internet access (you’ll need a decent internet access so that you’ll get accurate prices during trading) • A trading account (you need a trading account to execute your trades) • Calculator (to do some simple calculations) • Pen and a notepad (for you to take notes!)

Are you prepared? Let’s start!


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Chapter 1

Fundamentals of Currency Trading Introduction to Forex In this chapter we will learn about what is currency trading, in which is called Forex. We will learn how it is similar, yet different to stock trading. If you do not have stock trading experience or knowledge, don’t worry! With Forex trading knowledge, you can trade in any markets in the the future!

What is Forex? The forex market, also known as the foreign exchange or the FX market, is the place where currencies are traded. It is the largest, most liquid market in the world with an average traded value of over 5.3 trillion per day and includes all of the currencies in the world. Compare that to the $25 billion per day that the New York Stock Exchange trades and you can easily see how enormous the forex market really is. It actually equates to more than 3 times the total amount of stocks and futures markets combined. Forex is awesome! So what is traded on the Forex market? MONEY. In forex trading, you are trading in the currency of various countries. In general, it is the simultaneous buying of one kind of currency and selling another at the same time. Many would be confused by this definition. To put it simply, imagine you are going for a holiday in Japan and you needed to change some of your cash in to the Japanese Yen. So you go to a money changer and exchange USD to YEN. What you are doing is actually trading in forex! Therefore, you are buying one currency and selling another. Currencies are always traded in pairs through a broker. Similar to a stock market, when you buy a currency, you are betting on the future health of the country’s economy. “In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country’s economy, compared to other countries’ economies.”

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Stock Market vs. Forex Market What is a stock market? The definition of the stock market is simply the business of buying and selling stock for the financial aspect. Stock refers to a supply of money that a company has raised. Investors (or stock holders) give the company this supply of money in order to help that company grow, therefore increasing the value of their stock and in turn making a profit. The Stock market is one of the more traditional ways of creating profit through investing in companies. However, there are thousands of companies to choose from and the number can be overwhelming for a normal investor, and you never know if the company is going bankrupt or fold in the next moment. There can be a lot of risk and uncertainty when you want to go for short term gains in the stock market and you need a huge amount of capital to invest in the stock market. The stock market is country specific and deals only in business and currency in the region. It follows the country’s business working day and is closed on holidays and weekends. Overall, the stock market is a good way for you to invest slowly over time with a long period of 10-20 years. You must have a longer time period for stock market. Most of the time, people will lose money if they try to trade short term in the stock market. Hence, the stock market is not suitable for traders with shorter term profit expectations.

Advantages of Trading Forex There are many advantages of trading the Forex market. Let us learn of the advantages: 1. 24-hour market Unlike the stock market, the forex market is open 24 hours, 5 days a week! This is ideal for those who want to trade part or full time because you can choose any time to enter the market wherever you are in the world. This is happens because the trading hours are overlapping in major markets.

Figure 1: Forex market hours (based on GMT +8 Time Zone)

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2. Low transaction costs The retail transaction cost (the bid/ask spread) is typically less than 0.1% under normal market conditions. At larger dealers, the spread could be as low as 0.07%. Also, usually there are no commissions if you are trading on variable spreads. 3. No Fixed Lot Size In most markets such as the stock market. There the lot or contract sizes are determined by the exchanges. In spot Forex, you determine your own lot or position size. 4. High Liquidity Because the Forex market is so huge and everyone trades in currency, the Forex market is extremely liquid. This is an advantage to you because under normal market conditions, with a click of your mouse button you can instantaneously buy and sell at will and someone in the market will be willing to take your order. You are never stuck it the trade. In a more advanced stage of trading, you can even set your online trading platform to automatically close your position once your desired profit level has been reached and/or close a trade if a trade is going against you. 5. High Leverage In Forex trading, a small deposit can trade with a much larger contract value. Leverage gives the trader the ability to make nice profits, and at the same time keep capital risk to a minimum. For example, a Forex broker may offer 50:1 leverage, which means a $50 margin deposit would enable a trader to buy or sell $2,500 worth of currencies. Similarly with $500, one could trade with $25,000 with a 50:1 leverage. While leverage sounds nice, remember that it is a double-edged sword. Without proper risk management, this high degree of leverage can lead to large losses as well as gains. 6. Profit In Bull or Bear Market Usually in the stock market, there may be limitations set by the country to prevent trading when there is a bear market. In Forex, you can buy or sell anytime and you can do a “short-sell� which means in simple term, betting the market price falls and making a profit. This is a huge advantage over common stock traders who are only trained in buying up and not selling down. 7. Recession Proof There are not many recession proof businesses in the world. Stock traders will usually lose money during economic downturns as their share prices are dependent on company profit. Differently, Forex allows you to make money whether the economy is good or bad. 

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Chapter 2

The Currencies The Most Commonly Traded Currencies There are so many countries in the world with their own currencies. Did you know there are a huge number different currencies in the world? And all of them are traded in the Foreign Exchange market. So which are the currencies to trade? Here we will introduce the 8 most commonly traded currencies in terms of liquidity and impact in the Forex world.

The US Dollar (USD) The US Dollar is the most used currency in international trading and is the world’s primary reserve currency. Several countries though have their own currencies, prefer to use the US dollar as their currency as it holds much more value compared to their own currency. The US dollar is one of the safe haven currency which investors would prefer as it is stable enough to maintain its value compared to other currencies during economic uncertainty.

The Euro (EUR) The Euro was introduced in 1999 to facilitate the cross-border trading between European countries. It is the official currency of the Eurozone, which consist of 19 of 28 member states of the European Union. The Euro is the 2nd largest reserve currency and also the 2nd most traded currency in the world after the US dollar.

The Sterling Pound (GBP) The Sterling Pound, commonly known as the Pound, is the official currency of the United Kingdom and some of the British country. The Sterling Pound is one of the oldest currencies still in use and is the 4th most traded currency in the world. The Sterling is also the 3rd most held reserve currency.

The Japanese Yen (JPY) The Japanese Yen is the official currency of Japan. It is the 3rd most traded currency in the world after the US dollar and Euro. It is considered one of the safe haven currency danielhuangtrades.com

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which investors will flee towards during economic uncertainty. The Japanese Yen is an extremely popular currency to trade in Forex due to it’s low interest rate in which investors will borrow Yen and invest in other currency to earn interest rate (known as carry trade).

The Australian Dollar (AUD) The Australian Dollar, also known as the Aussie, is the official currency of the Commonwealth of Australia. It is the 5th most traded currency in the world and is very popular with currency traders due its high interest rate. The Australian dollar is a commodity currency as it is greatly exposed to commodity trading because of it’s resource rich country. It is also serves as a “risk on” currency which investors will buy when the economy is doing well.

The Swiss Franc (CHF) The Swiss Franc is the official currency of Switzerland. The Franc is also one of the reserve currency in the world and is also considered as the safe haven currency especially during the Eurozone crisis.

The Canadian Dollar (CAD) The currency of Canada, also known as the Loonie. It is also one of the reserve currency in the world. The notable mention about Canadian dollar is that is closely related to the prices of crude oil as Canada is one of the major oil producer in the world.

The New Zealand Dollar (NZD) The currency of New Zealand, also known as Kiwi. It is one of the most traded currency in the world. Like the Australian dollar, it is also a popular among currency traders to do carry trade due to the favourable interest rate it offers.

“When trading in currency, you need to consider the liquidity of the currency. The more liquid currencies have better spreads and cost less to trade.”


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Chapter 3

Forex Basic Concepts How Forex Trading Works In this chapter we will learn how Forex trading works and how to read the currency quotes in a trading platform.

Forex trades in pairs So how does forex trading work? In Forex trading, you trade contracts of currency in pairs. Why pairs? It is because you need to borrow one currency to buy another currency. It's like exchanging with a money changer. When you see quotes in Forex trading platform, you will see one currency is paired with another currency (e.g EUR/USD). Since there are so many combination of currency to make a pair, we will just want to concentrate on the major currency pairs. 7 Major Currency Pairs 1. EUR/USD (Euro vs. US dollar) 2. USD/JPY (US dollar vs. Japanese Yen) 3. GBP/USD (Pound vs. US dollar) 4. AUD/USD (Aussie vs. US dollar) 5. USD/CHF (US dollar vs. Swiss Franc) 6. USD/CAD (US dollar vs. Canadian dollar) 7. NZD/USD (New Zealand dollar vs. US dollar)

Counting the pips As explained, Forex contracts are quoted in pairs and in usually 3 or more decimal places. For example, if the quote is given as GBP/USD = 1.5711, then the currency on the left is known as the 'base currency' while the currency on the right is known as the 'counter currency'.

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GBP/USD = 1.5711 USD

Base Currency

Counter Currency

The base currency always has a value of 1. So when you are buying the currency pair, the quote is telling you how much you need to pay in order to buy 1 unit of the base currency. When you are selling, then you will receive 1.5711 USD for selling 1 GBP. When you see a quote, the last decimal place of the currency pair, it is called a pip (price interest point). A pip measures the amount of change in the quote of the currency pair. Hence for a currency pair of 4 decimal place, 1 pip equals to 0.0001. Hence when traders say that the currency pair has moved 3 pips. It means that the currency pair has moved by 0.0003 of its price. For Yen pairs, the decimal places are up to 2 decimal. So a movement in USD/JPY of 2 pips is 0.02. Some brokers have more decimal places in their quotes. This is because the offer some additional digits called 'fractional pips'. Its just extra decimal places to allow more precise quoting of prices.

Value of a pip The value of 1 pip is different for different currency pairs. The value of each pip will depend on several factors: • The currency pair • The exchange rate • The number of contracts Calculating the pip value might be very complex to first time traders as value always change. You can find pip value calculator online to help you calculate how much worth is 1 pip of your currency pair.

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How does Forex price change? Each currency is always moving in ever changing market conditions. Either currency in the pair can strengthen or weaken depending on market condition or change in country's monetary policy. Hence one currency can be stronger than the other during such change. For example GBP/USD, when the quote moves from 1.5711 to 1.5715, this means that GBP is stronger than USD or USD is weaker than GBP.

How to trade Forex? Trading in Forex is similar to trading in the stock market. You have a broker platform, you key in the required lots to buy or sell. Close the position once you obtained a profit or loss. More details will be taught in the later chapters.

“Remember: Learn the basics of this chapter first to understand how Forex works. This will help you much in understanding how to trade Forex when the time comes.”


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Chapter 3

The Economic Fundamentals Fundamental Factors that move the Forex Market In Forex, there are many factors that move the prices of the market. These usually are the fundamentals that made up the daily movements of the Forex market. When a trader trades in Forex, they are betting on the future of the country's economy. A good economic state will allow the currency to rise while a bleak outlook on the economy will bring the currency down. It may be complicated to first time Forex traders but take time to slowly understand and absorb it like reading of a textbook.

Economic data Countries release economic data which are useful to traders because they tell much about the state of the country's economic situation whether it is in an economic boom or heading into a recession. Many times the release of such data can make big movements in the market, regardless of the Forex or stock market. Let's take a look at some of these factors.

1. Interest rates Central banks (The country's monetary bank) usually raise or lower interest rates to achieve a particular inflation target. So if businesses are not doing well and the inflation rate is below expectation, the bank will cut interest rates to entice consumers to spend more (as borrowing rate is lower), to push up the economy. If the inflation is too high, then the Central bank will increase the interest rate to make borrowing more expensive and curb spending. When the Central bank lowers interest rate, usually the respective currency will tend to fall and when they increase interest rate, the currency usually will strengthen.

2. Central Bank Minutes/Meeting The Central bank is responsible for implementing monetary policies for the nation. Examples are the European Central Bank for Europe, FOMC (Federal Open Market Committee). So whenever they release a press statement, there are will be big movements in the Forex market. Make sure you are aware when are they going to happen.

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3. Employment Figures Forex traders will also look out for employment figures, such as the "Non-Farm Payrolls" (NFP), which will tell you how many jobs are created for the previous month. The NFP is released on the first Friday of every month and will move the USD pairs when it is released. Another important data is the "Unemployment data" which tells the percentage of the total labour force that is unemployed but actively seeking employment. The lower the unemployment numbers, the better the state of economy. Usually, good employment data will drive the currency up.

4. Retail Sales Retail sales is an aggregated measure of the sales of retail goods over a stated time period. The US retail sales data is important as it tells if the consumers are spending. If sales figures are bad, this can mean a recession is inbound. Retail sales data is especially important when it is released after the US 'Black Friday' sales, which will point out if businesses are making or losing money after the big sales.

5. PMI Manufacturing Report The Purchasing Manager Index (PMI) is an indicator of economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. A PMI of more than 50 represents and expansion of the manufacturing sector, compared to the previous month. A reading of less than 50 will indicate a contraction. Observing the PMI indicator will tell you if the country is doing strong in manufacturing.

6. GDP Report The monetary value of all the finished goods and services produced within a country's borders in a specific time period. Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well. GDP includes all of private and public consumption, government outlays, investments and exports minus imports that occur within a defined territory. Put simply, GDP is a broad measurement of a nation's overall economic activity. When GDP figures are worse than expected, the currency will tend to weaken.

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7. Trade Balance Trade balance is a measure of the ratio of exports to imports for a given country's economy. If exports are higher than imports (a trade surplus), the trade balance will be positive, causing the currency to strengthen. Because exports/imports are mostly related to trades between two countries, one trade balance result of a country may affect another country's currency as well. Example: If China has a negative trade balance data, it means that China has reduced its imports, in which will cause a downward movement in Australia's currency movement as Australia exports goods to China.

8. Central Bank Intervention Sometimes, the central bank will issue policies that will cause massive movements in the Forex market. Some of the things they might do to move currencies: • Raise/cut interest rates • Officials from central bank or politicians talk about planning to take an action, which they may or may not take in the end • Actual buying or selling of currency by the central bank • Concerted coordination with many countries (e.g. G7) to drive currencies up or down • Buying or selling of Government bonds by the central banks

9. Natural Disasters Natural disasters can impact the currency market. This is because disasters can cause huge monetary damage for the country and hence some investors will like to move to safer currencies to protect their wealth. Some examples are: • Earthquakes • Floods • Tsunami • Typhoon • Volcanic eruption

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10. Political Factors Usually in times of political turmoil or scandals, money will move out of the country and into other assets. Political instability will cause the currency to fall as businesses shut down and people are putting their money into other assets such as gold. Wars will cause crude oil prices to rise as countries need to use oil to power their war weapons.

Where to get schedules of news announcements There will be many news announcements during the day. In time as you get more experience, you'll understand how the news will affect the currency movement and will need to be aware of when the news will be announced. To get the latest upcoming announcement timetable, you can bookmark this site: www.forexfactory.com This site homepage has a timetable of what news will be coming in a very easy to visualise timetable.

It will list the time that the news will be released and the importance of the news announcements. If the news is marked as red, it means that the news coming out will be important and will affect the prices of the market greatly.

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How to change the timezone in Forex Factory If you are in a different timezone, you can set the timezone that you are in the webpage.

1. First you just click the time at the top right hand corner of the webpage.

2. It will take you to a page where you can change the timezone which you are located in. Just change the timezone. The second option is the DST. If you have daylight savings time in your zone, switch it on. If not, switch it off. After that save your settings and the next time you load the webpage, the timings of the news announcements will be according to your timezone. “Economic fundamentals will always be the base of market direction. It’s important to have a good grasp of economic fundamentals to know what direction the market is going.”


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Chapter 4

Technical Analysis Chart Reading When trading Forex or any other market products, in the age of technological advancement, trading now is siding more towards the technical aspects as it’s what many traders are now using to analyse what are they going to trade. Technical analysis is a very big chapter in this book as it forms a very important point of your trading journey. Here you will learn the basic fundamentals of technical trading that one trader has to master before moving on to other analysis.

What is a chart? Charts are data points that contains prices of the market and converts them into visual data to allow a trader to read and analyse the market easily. Without charts it’s tedious to manually analyse data points for a market.

Why you need to learn to read charts For a “newbie” or a new trader, one would be definitely clueless of chart reading. Most of the beginner traders will start by listening to what others are telling to buy or sell. This is a very dangerous way to start your trading journey as you WILL definitely burn your money without knowing why it happened. Usually there will be many “expert” analysis from brokers and banks which will provide you with buy or sell advice. But are all of them trustworthy? If you have a very experienced broker or relationship manager, then you might have an edge over the other traders. If not you will be blindly falling into their trap of buying what they are dumping. I would call this fake news and I have seen many big institutions doing that to retail traders. That’s where you need to learn skills of chart reading and economic fundamentals to detect “bullshit” analysis.

Use this free charting website website to learn and practice reading charts https://www.dailyfx.com/forex-rates

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Simple chart reading

The most basic chart you’ll see is just a line chart which will plot the direction of the market to have you visualise where the market is going. In this chart one can see where the highs and lows of the market by looking at peaks and troughs. On the right of the chart is the prices of the selected product, which is the currency pair EUR/USD. This line chart is usually very basic and does not give much information to a trader.

Candlestick chart reading

We move on to a more complex chart which is called the Candlestick Chart. Candlestick charting is more complicated for a new chart reader as there are more data points to see. Don’t worry as we will move on to teaching you how to read a candlestick. Here one can see the highs and lows and also the opening price and closing price of the market. With enough learning and experience, one can also read patterns on the chart to determine when is it time to buy or sell. 

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Candlestick Analysis Candlestick trading was created hundreds of years ago by a Japanese rice trader to predict the prices of rice. Because of his invention, he was able to predict the supply and demand of rice and link it to the prices of rice. Reading candlestick is a technique and an art. There are books that has very in-depth information on candlestick reading. Here you’ll learn the basic of reading candlestick to help you in chart analysis.

How to read a candlestick

A candlestick has a few important parts. It has a body, an upper wick and a lower wick. A typical candlestick will look like this in the diagram. The body will consist of a closing price (where the market will close at the end of the time point) and an opening price (where the market will open at the start of the time point). There will be a wick which the top of it will be the highest price of the time point and the bottom which will indicate the lowest price at the given time point. Let’s breakdown the two kinds of candlestick: Bullish Candle (Left) • Closing price is higher than opening price • Have a wick/tail of the highest and lowest price

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Bearish Candle (Right) • Closing price is lower than opening price • Have a wick/tail of the highest and lowest price

In the mentioned candle is just a typical size of a normal behaviour. When there are different price movements, the candlestick will change in size and pattern. Let’s take a look at the chart again.

As you can see in the chart there are different sizes of the candlestick. Some have longer body and shorter wicks. Others have long wicks and short body. Just remember the basics of a candlestick - opening price, closing price, high price and low price. Once you get it in your head, we can move on to some of the candlestick patterns.

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Candlestick Patterns As mentioned, candlesticks will have different size when prices move differently. Here’s some of other templates that help you understand price behaviour via candlestick pattern.

Doji

Usually appears with very small body or no body with almost equal length of wick and tail. This indicates prices are stuck in a big range due to market indecision of direction.

Example of Doji formation

Here’s an example of a chart showing several dojis. You can see that the formation of doji is indicating the indecisiveness of the currency pair in that period of time. Only when the market has a direction, it will break away from the doji formation.

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Bullish Pin Bar

One of my favourite candlestick patterns. The appearance of this is an indication of a reversal of prices and a potential reversal of trend towards the bull side. It has a short body and a long tail at the end. To newbies, I like to call it the “ice cream” to help them understand how it looks. Most books will call it the “Hammer”. When this appears at the bottom of the falling market trend, it indicates that market is now looking to push prices up. The longer the tail, the higher possibility of a trend change.

Example of Bullish Pin Bar formation

In this chart we have a single bullish pin bar formation, indicating a possible change of trend. A few bars later, the trend has indeed changed from prices falling to moving up of prices for this currency pair.

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Bearish Pin Bar

The opposite of the bullish pin bar. The appearance of this candlestick indicates the reversal of prices and potential change in trend towards the bear side. It has a short body and long wick at the top. Most books call it the “Shooting Star�. When this appears at the top of a bull market, you can expect a change of direction soon as market choose to push prices down. The longer the wick, the higher possibility of trend changing.

Example of Bearish Pin Bar formation

In this chart example, you can see the formation of the bearish pin bar. This formation indicates that there is a possibility that the trend is changing from bullish to bearish. After some time, indeed the trend moves from a positive upslope to a downslope of decreasing prices.

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Inside Bar

The appearance of such pattern indicates that prices are stuck in the range and waiting for it to break out from the previous larger bar. You will see that the smaller body of the candle bar is within the body of the large bar.

Example of Inside Bar formation

In this example there is a formation of inside bar with several bars trapped in the big red bar until it breaks out and move up. So until the prices break out of the bar, the price will be stuck in that range. 

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Support and Resistance Next lesson of technical analysis you will learn is how to identify and draw support and resistance in your chart.

What is support and resistance? In technical analysis, traders believe that prices are controlled somehow by psychological levels and mathematics. They also believe that history will repeat itself and there will be price level that prices seem to bounce on them. They are called support and resistance levels.

Support level

Support levels are price levels where buyers have shown or likely to show strength in defending the price from dropping further. Support levels are basically giving the market a “floor� where buyers appear to be strong. If the current price is at a very strong support, then one can expect more buyers to step in and push the price up. Support levels can become resistance levels once the prices has broken below them.

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Resistance level

Resistance levels are price levels where sellers are strong. Resistance levels are basically the opposite of support levels, giving the market a “ceiling� where sellers selling strongly. If the current price is at a very strong resistance level, one can expect traders to be short selling or taking profit at that level. Resistance levels can become support levels once prices has broken above them.

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How to draw support and resistance levels Step #1: Look for common points where the highest or lowest points of the candlestick seem to be at.

Step #2: Draw the lines at the end of the tails. If you are drawing from the chart. Look for the drawing tool in your chart and choose “horizontal line�.

Draw a horizontal line that touches the top of the common points. Now you have a resistance line.

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Step #3: Look for the next low points of the candle. See any?

Step #4: Draw the support line. There you go! You got your support and resistance lines!

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Trend Lines Trend lines are similar to support and resistance, it the line where it tells you that a trend is there. Drawing a trend line is similar to drawing a support/resistance line. Only that you click the “trend line” button when you want to draw the line. Step #1: Identify the highest and lowest prices of the candlesticks

Step #2: Use the “trend line” tool to draw lines against the highest and lowest price.

There you go! You have your trend lines! Trend lines are useful if you want to know if you can continue to buy or short sell and ride trend for bigger profits.


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Higher highs/lows and lower highs/lows The existence of a trend depend on a series of higher highs/lows and lower highs/lows. It’s quite easy to identify them in an ongoing trend.

Upward trend

In this chart of EUR/USD, we can see that there is an upward trend that last for a long time. So when you want to know if the trend is still on going, look for bounces of higher lows and tops of higher highs. When you want to earn the biggest profit, the trend is your friend.

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Downtrend

In the same chart, after the uptrend, comes the downtrend. One can identify the downtrend by looking for lower highs and lower lows. The easy trick is to quickly identify the lower higher so that you can enter the short trades which will be taught in the later chapters. However, the market doesn’t always move in upward or downward trends. There will be another trend which is the sideways trend. 

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Sideways trend

It is very important to keep in mid that the market will not always move in an upward or downward trend. They spend a lot of time fluctuating between already established highs and lows, resulting in a range bound market. When these happens, market will wait for someone or an event to push the price out of the range which is called a “breakout”.


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Identifying Phases of Market Trend There is a physical law stating that an object in motion tends to continue in that motion until some extreme force causes it to change direction. Price trends are no different. A strong price trend will continue in it’s current direction unless there is a price reversal indication. There are 3 phases of major trends that you should be aware of in your analysis. They are: • Accumulation • Public participation • Distribution

The accumulation phase is the first part of the trend which represents those who are well informed that will buy or sell. Meaning simply that if the well informed or more seasoned, experienced traders recognise that a current downward trend is coming to an end, they would buy, and vice versa. The public participation is essentially when the masses would recognise the same and follow suit. The third and final phase - the distribution phase, occurs when everyone else catches on and public participation increases even further. It is at this point that the well-informed, seasoned investors who accumulated during the accumulation phase would begin to sell, or vice versa.

Participation Distribution Accumulation

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Timeframes When you are doing technical analysis, you have the option to switch to different timeframes to view how the market is doing at different time duration. Every timeframe will tell a slightly different story of what the market is doing. Most common timeframes are usually 5 min, 15 min, 30 min, 1 hour, 4 hour and Daily. The rule of the thumb is that the larger timeframe you go, the bigger picture you’ll see on how the market is moving. Below we show you how different timeframe will affect how you analyse the market.

Here is a chart of EURUSD at 1 hour timeframe. We’ve drawn a box that engulf the whole chart for comparison.

Now we move on to 4 hour chart. Look how the box only take up a part of the chart. And now you see more of market behaviour in the chart.

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Now we move on to the daily chart. See how the picture becomes bigger and we can see clearer trends. The box is only a tiny movement compared to the other movement. Larger timeframes are better for beginners to read charts and trade. Stick to daily, 4 hourly or 1 hourly as a start.

Technical Indicators In technical trading, there are tools that help to provide certain analysis to help you better figure out the market movement. There are many tools that seem to be the “holy grail” of trading which will give you an illusion that just following the rules of this technical tool will sure to profit. However, technical indicators cannot make money for you but only help you in your analysis to a certain degree. This is because technical indicators are lagging and will only give you signals slower than the market. I would advise not to use indicators in your starting journey as it will serve to confuse you rather than help you. Stick to the basic support and resistance first. Click on the link to read on about why you should not use this technical indicator. http://danielhuangtrades.com/why-you-should-not-use-the-macd-to-trade/

“Remember: Reading a chart is always 10/10 hindsight. However, you will never know what are the changes market might pull. Always be prepared for the things to come. With proper support and resistance training, you can prepare for such changes.”

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Chapter 5

Preparing your first account How to start your account In this chapter, you will learn how to place a trade and make your trade.

Opening a trading account First you will need to open a trading account in order for you to trade. Look for a reputable Forex broker that is available in your country and open a trading account with them. It should be easy as they will guide you long on how to open an account.

Start with a demo account Look for a broker that allow you to open a demo account. A demo account is an account with virtual money that allow you to practice trading without risking your real money. Some of the popular broker firms with demo accounts are: • Oanda • CMC Markets You can also try: • Super Online Trading • Fullerton Markets Once you have opened your demo account, start getting use to the trading platform that they provide so that you know what to click. They have videos and trainings to teach you on how to use their platform to trade. Some of them have Metatrader 4 platform which you can install in your computer. Example, Oanda has their own platform, but also offers Metatrader 4 account for you to use Metatrader 4 to trade.

Start Trading Once you have all set up, you can start using the platform and try buying or selling the currency pairs that you have been taught. Importantly practice with a demo account first.

“Rule of trading is to practice, practice, practice.”
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General Trading Platform Basics Bid / Ask

You will see this quote button where you will click buy or sell. You will hear about bid and ask during trading. Bid price (Sell) - Is the price which the market will buy the specific currency pair from you. Hence, you are selling your position. Ask price (Buy) - Is the price which you will buy the specific currency pair from the market. Hence, you are buying your position. Bid/Ask Spread - The difference of price between the bid and ask price (Ask - Bid = Spread). This is the “commission” that brokers get from you to execute your trades efficiently. Different brokers offers different spreads to you, some may be fixed, some may be viable during different timings. So it’s better to choose a broker with low spreads as possible so that you do not lose much at the start when you buy/sell the counter.

Position size Position size is the number of lots that you are going to enter with when trading the counter. When trading, best is to use a position size calculator to calculate the number of lots you are allowed to enter.

Stop loss Most Forex broker allow you to put in advance orders such as stop loss to protect your position from excessive losses. When you enter a trade, there should be an option where you can input the price that the trade will close if the price reached your threshold point.

Take profit Similar to stop loss, it is an advance order that automatically closes your position once the price has reached the threshold that you have input. This will allow you spend less time worrying and monitoring your trades.

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Margin In Forex, you are playing with leverage. Hence, in your account, you will need to have some money to maintain the account. The amount that is available to enter a trade is called “free margin”. If your open losses are exceeding the free margin, you’ll encounter a “margin call” which means you will need to top up or reduce your trades to maintain your open positions. If not, any positions will be closed by your broker to maintain the account margin.

Equity The amount of money you have left with open profits or losses.

Carry trade When you trade a currency pair, you are trading in the currency’s interest rate. When you buy a currency pair, you will pay or earn the interest rate difference between the 2 currencies. In carry trade, speculators borrow low interest rate currencies and buy high interest rate currencies. These positions ensure that each day rollover interest will be posted to the traders accounts. It has the potential to significantly enhance returns.

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Chapter 6

Money Management How to manage your money during trading In this chapter, you will learn about managing your money during trading so that your account will survive during bad trading days. It is a very important chapter in this book so do read well.

Mistakes that most traders make Many traders blow their accounts during losses because they don’t have money management. Here are some of the mistakes that they make.

Mistake #1: They don’t use stop loss This is a very common and deadly mistake. Many new Forex traders came from the background of stock market trading. As mostly of the time, stock market platforms do not have stop loss feature. Hence, these traders were conditioned not to include any stop loss in their trades. Therefore, their losses will become big loss. Most of the time their reason is that if they don’t put a stop loss, they will still have a chance to profit when the price bounce back. Big mistake.

Mistake #2: They do not know how to calculate risk This is because no one taught them how. It is an interesting observation that brokers have so many lessons on using indicators, strategies, new gadgets but never had a lesson on money management. This is because they will want you to lose and trade more with them!

Mistake #3: They are too lazy to calculate risk This is a very common mistake too with traders. To calculate risk, you will need some basic maths and a calculator. However, most of the time, they are too concerned with getting into the action of trading and forgoing some calculation that takes some time to do. Clicking a button is much easier than punching some numbers in the calculator right?

Are you one of the traders who make these 3 mistakes? I’m going to show you how to calculate risk so that you can take minimal losses when you are trading big.


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How to calculate risk

This is the formula to calculate the risk you are taking for each trade. In trading, many of the greatest traders never risk more that 2% of their capital. So when we want to open a trade, we have to set a risk percentage in order to determine the number of lots you can enter. We just need to rearrange the formula.

How to calculate lot size

This is the formula to calculate lot size. With this formula you can now calculate the lot size you need to enter for every trade. Now let’s take an example of a trade.

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In this trade we have a stop loss of 1.1501 (we round the last decimal as EUR/USD is 4 decimal places). Entry price is 1.1441 (round up to 4 decimal place for EUR/USD). So calculate the difference in price and you will get 0.0060. This translates to 60 pips (0.0001 = 1 pip for EUR/USD). In this trade we want to have a risk of 2% only for a $10,000 USD account. So we use the formula:

Where: Lot size = Position size to trade Risk = percentage of risk in terms of decimal place Capital = amount of cash you have in your trading account Stop loss (# of pips) = number of pips calculated from between stop loss price and entry price Pip value = value of 1 pip for the currency pair (eg. for EUR/USD, 1 pip = 10 USD)

So let’s calculate: Lot size = (0.02 x $10,000)/(60 pips x 10USD) And the answer is: 0.33 lots When the stop loss is hit, this will translate to 2% loss of your account, which is $200. A very small loss within your $10,000 USD account. It can be quite tedious to calculate manually. But if you do it right, it will benefit your account in the long term. Thankfully, we have technology to calculate it for you instantly. Click the link to get to the calculator app. http://danielhuangtrades.com/position-lot-size-calculator-2/ All you need to do is to calculate the stop loss (# of pips) and then enter the values and select the currency pair you want to trade in. Click calculate and it will give you the lot size.

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Chapter 7

Starting your trades Trading using charts When you start a trade, all you have to do is to buy and sell. However you will need to time your entry in order to profit. building on the lessons on support and resistance, you can use it to time your entry for trading.

Buy trade In a buy trade, what you are doing is buying the currency pair or “going long”. “Go long” means that you are buying the currency pair expecting the price to rise. Here’s the steps to take when going long: Step #1: Identify and draw your support and resistance lines.

Step #2: Look for breakouts from of the resistance line or false breaks from the support line.

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Step #3: Estimate where your stop loss and target profit is and calculate the number of lots to enter. You should have a good risk/reward ratio of 2.

From the chart, you can see that the stop loss is 0.01543 from your entry price. This translates to about 154.3 pips (1 pip = 0.0001 for USD pairs). So you take the formula and calculate your lot size. So you calculate this: Assume you have $10,000 in your account. Lot size = (0.02 x $10,000)/(154.3 x 10USD) Lot size = 0.13 This means you’ll risk 2% of your $10,000 account and have to trade 0.13 lots in this trade.

Step #4: Open your order quote. Input the number of lots, stop loss price and target profit price in the quote and click buy. If matched, your order will be executed with an advance order of stop loss in place. Therefore, you input lot size of 0.13 or 13,000 units depending on your broker, stop loss price of 0.72732 and take profit target of 0.77604. Click buy.

Step #5: You can close the position anytime if you see fit. Best is to wait till it reaches the target price. But if you feel that something is wrong with the trade, you can close the trade. Remember in real trading you cannot see the future of the price unlike in this book, hence you have to estimate your profit target.

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Examples of long trades Example 1:

NZD/USD: Buy on confirmed breakout from the resistance.

Example 2:

USD/CAD: Buy on bounce from support line.

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Short-sell trade In Forex, you can short-sell or “go short� a currency pair. In simple terms means selling the pair at a high price first, then covering your position by buying it back at a low price. When you are short-selling, you are betting that the price of the currency pair will fall. The steps are similar to a buy trade but opposite. Here are the steps: Step #1: Identify and draw your support and resistance lines.

Step #2: Look for breakouts from the support line or false breaks/bounce from the resistance line.

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Step #3: Estimate where your stop loss and target profit is and calculate the number of lots to enter.

From the chart, you see your stop loss distance is 2.683. This translates to 268.3 pips (1 pip = 0.01 for JPY pairs). Take this value and calculate the lot size. (pip value of USDJPY is $8.95) Lot size = (0.02 x $10,000)/(268.3 x 8.95) Lot size = 0.08 This means to have a risk of 2% your lot size must be 0.08 lot or 8000 units.

Step #4: Open your order quote. Input the number of lots, stop loss price and target profit price in the quote and click sell. If matched, your order will be executed with an advance order of stop loss in place. Therefore, you place your trade at 117.40 with stop loss at 120.083 and profit target at 112.035. Click sell.

Step #5: You can close the position anytime if you see fit. Best is to wait till it reaches the target price. But if you feel that something is wrong with the trade, you can close the trade. Remember in real trading you cannot see future price so you will have to estimate your profit target. If you need calculator, you can click this link to calculate your lot size. http://danielhuangtrades.com/position-lot-size-calculator-2/

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Examples of short-sell trades Example 1:

USD/CAD: Short on breakout of support line.

Example 2:

EUR/USD: Short on retest of the resistance line

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Chapter 8

Trading Live Moving on to real trades Once you have practiced enough and ready to step into the world of real money, the first thing to do is to fund your account. You can do so via various methods by reading your broker’s instructions on how to fund your account. Remember to switch to your real account when trading.

How much capital needed to start trading? There is no fixed capital needed for you to start trading. You can start as small as $200 if your margin allows. I would recommend starting with at least US$500 - $2,000. If you really just want to try out, the minimum I would suggest would be US$300. Take note though, at $300, sometimes the account value is too small to be able to calculate a suitable lot size. Hence money management might not be applicable as the smallest lot size is 0.01 in some trading accounts. A bigger account size will allow you to compound your profits and minimise losses as long as money management is in place.

Do I have to keep staring at charts? No you don’t really have to. Most likely you are working in a full time day job and the only time you can trade is after or before work. The strategy taught in here is for people who do not have the time to trade every minute. As long as your money management is in place, you can sleep soundly every night without worrying. As a start, trade only twice a day using the daily timeframe, once in the morning and the other in the night. Once you get used to trading, you can then start moving into faster time frames.

Why do I lose a few times in a row? The market is always dynamic and it’s a game of numbers. There will be times that you will lose a few times in a row despite a perfect strategy. Do not lose heart and panic, learn from those failed trades and stick to the strategy that works. If you have good money management and risk/reward ratio, your winning trades will cover the losses you made.

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Chapter 9

Trading Tips Tips to help you stay in the trade The market is always changing and there are times that you will be affected by the markets. Here are some tips that help you stay on top of the game.

1. Develop clear and concise trading method In order for for you to become a successful trader, you must have a clear and concise trading method. When you enter a trade, you must know why are you entering the trade. Guessing or going by gut instinct might work occasionally, but if you don’t have a specific method, then you don’t have a way what constitute a buy or sell signal. They way to go about this is to write it down. You need to define in writing what your analytical tools are and how to use them. • What reason to buy • What reason to sell • Where to put a stop • When to exit Write them down and keep it simple. Don’t make it too complicated.

2. You must have the discipline to follow the method Once you have clearly and concisely defined your trading methodology, you must have the discipline to follow through that method. In this book, you have learnt the method of looking at support and resistance and using it to trade. Use that method and follow it through.

3. Have realistic expectations Don’t be greedy! We’ve all seen ads that may get us excited with promises of becoming very wealthy overnight while we sleep, or investing in a few bucks in stock market and making millions in a week. What usually sounds too good to be true is usually is! It is danielhuangtrades.com

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possible to experience above average returns on some trades, although it may be difficult to do without risk. The goal for every trader is not to lose money! In other words, don’t allow yourself to get greedy! This is the downfall of many traders. They start to feel over confident and start taking higher risks and end up blowing their account.

4. Be patient One of the reasons that most of us get into trading is because making money is exciting. And we want to make money fast. As a result, you will get tempted to start looking and take shortcuts on your method. You’ll start making trades of lesser and lesser quality, seriously adding to your levels of risk and inherently over trading! Lesson is be patient and the next trading opportunity will exist.

5. Manage your risk by managing your money In this book, you have already learnt how to manage your money in trading. Remember to continue with the money management to keep your account going. Make sure you have stop losses.

6. Concentrate on being good at trading first Focus on the process of being a trader rather making money. The rewards will come once you have established a successful trading method.

7. Manage your emotions Trading can be very emotional as you are dealing in money. We need money to pay bills and losing money can be very painful experience for us. Hence you need a very clear, concise method to follow so that you will not be involved emotionally. It takes years of training to manage those emotions.

“By following these 7 tips, you can be sure that you will stay in the trade and grow as a trader!”

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Chapter 10

Conclusion Thank you for reading this book! I hope you have enjoyed the lessons from this book and learnt much. Practice what is taught in this book and you will profit much in the Forex market! Remember, Forex is not a quick-rich solution but a journey to help you to earn a side income and also the financial freedom that you always wanted. Finally good luck and happy trading!

Your friend,

http://danielhuangtrades.com/

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Appendix Pips Reference 1 pip equals to: Currency Pair

Value

EUR/USD

0.0001

GBP/USD

0.0001

USD/JPY

0.01

USD/CHF

0.0001

USD/CAD

0.0001

AUD/USD

0.0001

NZD/USD

0.0001

Useful Websites News http://www.forexfactory.com/

Position size calculator http://danielhuangtrades.com/position-lot-size-calculator-2/

Charting https://www.dailyfx.com/

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About

Daniel Huang is an online forex trader with over 10 years of experience in the forex and stock market. He began his first journey in the Singapore stock market before specialising in Forex, Indices and Commodities. His passion for trading has helped many who wanted to start trading forex but don’t know how to start. He has also helped them in their journey to trade profitably. He has started blog of his journey in trading where he shares techniques and articles for novices who are learning to trade and also for experienced traders who want to hone their skills in forex trading. To find out more about trading forex, please visit: Website: http://danielhuangtrades.com/ Email: daniel@danielhuangtrades.com Facebook: www.facebook.com/danielhuangtrades

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The hitchhikers guide to forex trading v1 0  
The hitchhikers guide to forex trading v1 0  
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