A SKILL FOR THE FUTURE (Your Stop loss would have gotten you out at -$10) Do you see the logic behind risk management? Risk management calculations are varied. Some calculate using pips (Point in percentage) while some of us choose to go the easier way. When you have the exact number of pips that you want to risk, then you can use the link below to calculate for you the lot size. https://www.myfxbook.com/en/forex- calculators/position-size 50
A SKILL FOR THE FUTURE Trading Plan A trading plan is a tool used for planning your trades. One of the secrets to making consistent profits is having a clear plan on when to take action, and when to stay out of the market. The discipline in strictly following your trading plan results to consistent profit. Below is a very simplified trading plan template . Trading Plan • H4 Time frame • Enter when the fast EMA (10) crosses above or below the Entry slow EMA (50). • Risk only 2 % of your equity per position. • Do not place more than 5 trades at once, unless profits have Exit and Risk been locked. 51 Management • Trail S.L or exit after your Stop loss is hit. • Trail using the CN5 indicator
A SKILL FOR THE FUTURE Trading Journal In order to be confident in your trading plan, you need to be able to weigh your profits and losses. A trading journal is the best tool for this kind of work, since all you need to do is record your trades, every time you place them. At the end of your trial period, you will be able to judge if your trading plan is giving you consistent profits or losses. Always test a new strategy on your Demo account. Below is a sample template of a Trading Journal. 52
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A SKILL FOR THE FUTURE Pending Orders We have 2 types of pending orders; Stops and limits. In this course, I am going to cover Stops because from my experience, they are more widely used compared to limits, and easier to understand. Pending orders are advantageous in that they give you time to analyze the market and plan your trade, in regards to stop losses and take profits placement. The other type of order is Market execution where you enter a trade instant. 54
A SKILL FOR THE FUTURE Buy Stop A buy stop is a pending order placed when price has a strong bullish (Upwards trend) trend, with the intention to enter a buy order. When the order is activated, the market will either go towards point C or point A. Point B to Point C means the order will make profits. Point B to Point A means the order will make losses. If the price does not get to your pending order, the order will not be activated. C Next zone B (Buy stop pending order) A 55 Current market price
A SKILL FOR THE FUTURE Sell Stop A sell stop is a pending order placed when price has a strong bearish (downwards trend) trend, with the intention to enter a sell order. When the order is activated, the market will either go towards point C or point A. Point B to Point C means the traders will make profits. Point B to Point A means the trader will make losses. If the price does not get to your pending order, the order will not be activated. A Current market price B (Sell Stop pending order) C 56 (Next Zone)
A SKILL FOR THE FUTURE What Kind of Trader Are You? Scalpers Target: 5- 10 pips per trade, and they mostly use M1 and M5 charts with a time duration of less than 10 minutes. Day traders. Target: 20- 40 pips per trade and they mostly use M15, H1 and H4 charts, and they close their position by end of day. Swing traders Target: 50-150 pips per trade and they mostly use H1 and H4 charts with a time duration of about a week of holding on to their trades. Position traders Target: 500-1000 pips per trade and they mostly use the Daily charts with a time duration of about weeks to months of holding on to their trades. 57
A SKILL FOR THE FUTURE SECTION 11: SKILLS NEEDED TO BE A SUCCESSFUL FOREX TRADER 1. Opening a live account only after making consistent profits for a period of not less than 2 months on a Demo account. 2. Practicing Risk Management. 3. Realism to knowing that there’s no strategy that is 100% profitable. 4. Trading with the Trend. 5. Trading with higher time frames. 6. The focus to concentrate on your trading plan. 7. Patience to wait for only the highest probability set ups. 8. The ability to take a loss without being affected emotionally. 9. Realism to not think it’s a get rich quick scheme. 10. Self-control to not over trade. 11. The confidence to believe in yourself and your trading strategy. 12. The dedication to become the best forex trader you can be. 58
A SKILL FOR THE FUTURE SECTION 12: HOW DOES YOUR TRADE GET TO THE MARKETS ON THE GROUND? Introduction to Forex Brokers A forex broker works as an intermediary between you and the interbank system. A broker makes it possible for a trader to open a trade by buying a currency pair, and close the trade by selling that same pair. Before trading, a forex broker will require customers to put money into their accounts. Brokers make money through the spread. (The difference between the bid and the ask price), and commissions. 59
A SKILL FOR THE FUTURE What Do You Need to Open an Account? The traders connect their accounts through a registration process, on the specific brokers website. Once your account is registered, you have a choice to open a Demo account. For a trader to open a real account, a process of verifications has to be followed. Requirements for Account Verification Include: Identification card or a Passport. Proof of residence. (Utility bill/ KRA Pin/ Bank statement) Mode of withdrawal and deposit verification. The whole verification process takes a few days depending on the broker. 60
A SKILL FOR THE FUTURE Regulations Among Forex Brokers It is only wise to do a research on the broker you want to trade your account with, before funding your account. It is very important to choose a broker that has a good reputation and has the functionality that you are looking for in a broker. One can research this by checking out the NFA's homepage, and looking over Investopedia's broker reviews. Most major forex brokers will allow prospective clients to use a Demo account for practice. Furthermore, most quality forex brokers will provide 24-hour customer service. 61
A SKILL FOR THE FUTURE What Should You Consider When Choosing a Broker? Is the broker regulated by Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA)? Account details a. How much Leverage does the broker offer? b. How are the Commission and spread? c. What is the least amount one can deposit? d. What are the modes of payment during deposits and withdrawals? e. How many accounts can you open? f.Do they have a swift customer care service? g. What Currencies are offered? h. Which trading platforms do they offer? 62
A SKILL FOR THE FUTURE Types of Brokers in The Market DD - Dealing Desk: This kind of brokers make money through fixed spreads. They are also called the market makers. NDD - No Dealing Desk: This brokers provide direct access to interbank market. They do not have a dealing desk and they can trade during economic announcements without any restrictions. The spreads offered are lower and not fixed, so they can increase significantly when volatility is increasing during major economic announcements. 63
A SKILL FOR THE FUTURE STP - Straight through Processing: In STP mode, transactions are fully computerized. ECN - Electronic Communication Network: ECN brokers provide and display real-time order book information. ECN brokers usually make their money by charging a commission on the traded volume. With ECN brokers, all transactions are directly processed on the interbank market in No Dealing Desk mode. Below is a link of my most preferred ECN broker of all time. https://www.icmarkets.com/sc/en 64
A SKILL FOR THE FUTURE SECTION 13: CONCLUSION Congratulation if you have made it this far. I have shared with you a skill that can feed you and your generation for the rest of your life. With that being said, you must put in some work. A doctor also has to go through seven years of hard work, before he/she can fully own the title, right? Apart from this knowledge, you will need to have the patience and discipline which happens to be very personal. You also need to have a passion for success and enjoy the thrill that comes with it. Remember trading is like any other business where you have good days and bad days, so don’t let a few bad days make you give up on 65
A SKILL FOR THE FUTURE the future. Keep practicing and learning from your mistakes. My advice to you is once you’ve done enough practice on your demo account, fund your real account with only money you can afford to lose. The trick here is to start small, since if you can grow an account of $100 dollars with your trading plan, then you can grow even bigger account. Let your focus move away from making a lot of money, to having a strategy that gives you consistent profits. Some traders spend years to become profitable traders, while others don’t even get results. Fortunately for you, I have provided you with the knowledge and the map to consistent profits. First we Learn, then we earn. All the best. 66
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