All Rights Reserved No part of this report may be reproduced or transmitted in any form

whatsoever, electronic, or mechanical, including photocopying, recording, or by any informational

storage or retrieval system without expressed written, dated and signed permission from the author.
You may not use this report as web content nor sell, give away, or re-package this report in any form.
This report is for your own personal use and may not be distributed to others. This is copyrighted
material. You do not have permission to resell this report nor do you own any rights to this report.
Legal Notices The information presented herein represents the views of the author as of the date of
publication. Because conditions change, the author reserves the right to alter and update their opinions
based on new conditions. This report is for informational purposes only and the author does not accept
any responsibilities for any liabilities resulting from the use of this information. While every attempt has
been made to verify the information provided here, the author cannot assume any responsibility for
errors, inaccuracies or omissions. Any slights of people or organizations are unintentional.
U.S. Government Required Disclaimer Trading foreign exchange on margin carries a high level of
risk and may not be suitable for all investors. The high degree of leverage can work against you as well
as for you. Before deciding to invest in foreign exchange you should carefully consider your investment
objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of
some or all of your initial investment and therefore you should not invest money that you cannot afford
to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice
from an independent financial advisor if you have any doubts. Information contained within this report is
not an invitation to trade any specific investments. Trading requires risking money in pursuit of future
gain. That is your decision. Do not risk any money you cannot afford to lose. This document does not
take into account your own individual financial and personal circumstances. It is intended for
educational purposes only and NOT as individual investment advice. Do not act on this without advice
from your investment professional, who will verify what is suitable for your particular needs &
circumstances. Failure to seek detailed professional personally tailored advice prior to acting could lead
to you acting contrary to your own best interests & could lead to losses of capital.
*CFTC RULE 4.41 HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN
LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT
REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE
RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF
CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS
IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE
BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR
IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
Past Performance Past performance is not indicative of future results. This report does not make
any representation whatsoever that trading might be or is suitable or that it would be profitable for you.
Please realize the risk involved with trading Forex investments and consult an investment professional
before proceeding. Any trading systems herein described have been developed for sophisticated
traders who fully understand the nature and the scope of the risks that are associated with trading.
Should you decide to trade any or all of these systems, it is your decision.

Table of Contents
Introduction ................................................................................................................... Pg. 4
Forex Basics ................................................................................................................. Pg. 5
10 Reasons Why You Should Be Trading The Forex ................................................... Pg. 7
How Do I Make Money & What Are the Risks? ............................................................

Pg. 8

Reading A Currency Quote .........................................................................................

Pg. 9

Choosing The Right Broker ..........................................................................................

Pg. 10

The Continuation Method Trading Strategy .................................................................. Pg. 11

Position Size & Money Management ............................................................................ Pg. 22
Quick Start Checklist ............................................................................

Pg. 24

Forex Lingo - A Glossary of Terms ............................................................................... Pg. 25

Introduction
Allow me to be blunt... because you won't achieve trading success if you aren't willing to call a
spade a spade.
With that said, the report you have in your hands is not like the majority of the Forex fluff or
hype youll find on the Internet.
When you apply this information, youll get more value out of this free report than you have
probably gotten out of many of the books, products and courses youve actually paid for.
What's more, when you follow the simple strategy inside youll be well on your way to making
consistent Forex profits and winning as many as 7 out of 10 trades you place.
The report is broken down into a four different sections:
Section 1: Forex Basics Whether you are new to Forex trading or have some experience
under your belt, this section helps lay a solid foundation.
Section 2: The Continuation Method This trading strategy has been one of my closely
guarded secrets until now. Read and re-read this section and then put the strategy to the test.
Section 3: Three-Step Quick Start Checklist Follow these simple steps to implement this
strategy, whether you paper trade at first or you're ready to put real money on the line.
Section 4: Forex Lingo This is a glossary of some important Forex-related words and
phrases.. Bone up on these as you begin and/or advance your trading journey.
AlrightG lets get you started.

Forex Basics
In case you're wondering, "Forex" stands for the "Foreign Exchange Market."
Although it doesnt get as much media attention as the stock and bond markets, The Forex is
actually the largest financial market in the world. There are over $5 trillion in transactions
occurring everyday.
On the simplest level, Forex is the market in which currencies are traded. When you trade the
Forex you are essentially buying and selling money.
The currency market used to only be the playground of central banks, large institutional banks,
hedge funds, and international companies with a lot of money. This all began to change in the
early 2000s due to the widespread access to the Internet.
Now the average investor can gain access to this incredibly exciting market 24 hours a day 5
days a week. All you need is a computer and Internet access.
If youve ever traveled to another country and you exchanged your home currency for that of
the place you were visiting then youve already participated in the Forex market.

Compared to the stock market currency pairs dont move as much. In fact on average most
currencies fluctuate less than 1% per day.
This may not sound very exciting but a 1% movement can equate to 100 or more pips. Pips
are similar to ticks or points in the stock market.
In other words, you can make some serious bank trading these small movements!
Here is where it gets really interesting...
5

Trading the Forex requires most traders to use leverage (using margin) to increase their
potential return for small moves in the exchange rate.
If you live in the U.S. then you can trade with as high as 50:1 leverage. Traders who live
outside of the U.S. can use as much as 500:1 leverage (this is not suggested).
For example, to trade $100,000 worth of currency with a broker that requires 2% margin, you
would only need $2,000 deposited into your account giving you leverage of 50:1.

This is not as risky as it may initially sound and here's why:

Currencies dont fluctuate as much as stocks
The currency market rarely gap stops
I'll show you how to cut your losses quickly and let your profits ride
When you place a position to buy a currency 9 times out of 10 you are going to get your
position filled at that exact price.
Also, unlike the stock market, there is no central market location. Trades are conducted
through a lot of individual dealers or financial centers.

10 Reasons Why
You Should Be Trading The Forex
1. Non-Correlated Price Movement: For the most part, currency prices are uncorrelated to
the stock market. This means that if you are a stock trader who is long the stock market,
you can benefit from fluctuating currency prices that are completely uncorrelated.
2. Fewer Rules: Unlike the trading of stocks, futures or options, currency trading does not
take place on an exchange with rules like the NYSE or CME. In fact, if you had exclusive
information, and it was used to make a lot of money, legal issues would not arise, like they
would in the stock market. In other words there are no insider trading rules in the Forex.
3. No to low commissions: For the most part there are no exchange, brokerage or clearing
fees in the Forex market. Instead, brokers make money on the difference in price you pay
to buy, or the amount you receive when you sell, currencies, also known as the spread.
4. 24 Hour-Market: The Forex market is a 24 hour market which means that you can trade
when best suits you. If you are a night owl you can trade at 3 AM if you want to.
5. Less Market Manipulation: Because the Forex market is so large there is less market
manipulation, with the only real manipulation coming from the Central Banks. This kind of
manipulation is actually good because it creates large trends in the market.
6. Buy and Sell With Ease: Unlike the stock market there is no uptick rule in Forex. This
means that you can sell just as easily as you can buy. In other words you can make just as
much if not more money by shorting a currency as you can by buying it.
7. Tax Benefits: When you trade Forex, 60% of your gains are taxed as capital gains and
the remaining 40% is taxed at your regular income tax rate. I am not a tax specialist so
make sure to consult your tax preparer to confirm that this will work for your situation.
8. Historically A Trending Market: There has been no shortage of trends in the Global
Currency Market since the end of the Nixon era gold standard. Trends are where the
money is made and the Forex market usually has at least 2-3 big trends every year.
9. Technical Traders Dream: Technical analysis tends to work very well for currency
trading. This allows short-term traders to pull quick and precise profits from the market and
long-term trend followers to profit along the way of the big trends.
10. Low Barrier of Entry: Unlike other markets such as the stock and futures market, the
Forex market doesnt require much capital to start with. There are some brokers that will
allow you to trade with as little as $250. The beauty is that you can add to your account
regularly and use the power of compounding to grow your wealth over time.

How Do I Make Money &

What Are The Risks?
Understanding how to make money by trading Forex is pretty simple. In Forex, unlike stocks or
futures, you are trading two countries rather than one stock or one instrument.
Essentially you are betting that the value of one countries currency will go up or down relative
to the value of another countries currency. Since currencies are traded in pairs, when you buy
one currency you are simultaneously selling the other currency.
Lets take a look at an example of how you can make money from a Forex transaction:
Lets suppose that you have $900 U.S. dollars and you exchange that for $1,000 Australian
dollars. One week later, the AUD/USD exchange rate goes up from 0.90 to 1.0/
In this example, the Australian dollar has increased in value to the U.S. dollar. You could then
exchange back the $1,000 AUD back to U.S. dollars and you would have received a $100
profit. Essentially, you started with $900 and you now have $1,000.
If the AUD had decreased in value to the USD you would have lost money on the transaction
instead of making a profit.
You can also look at the process of buying currencies as buying shares in a country in that you
are betting on the success or failure of a particular countrys economy.
Forex trading, like any form of trading, is not without risk. Some may even suggest that trading
in the Forex market actually carries above-average risk. There are two reasons for this:
1. No Central Exchange While having no central exchange can be a benefit there is also a
risk involved. The main risk from this comes from less regulation which means that some
brokers are unscrupulous. That is why choosing the right broker is so important. Ill
show you how to make sure you choose the right broker below.
2. Leverage Leverage (margin trading) can be a double-edged sword. When the new trader
starts trading with leverage there will often notice right away that the dollars in their account
generally stretch a lot farther. This can lead to two things:
a. Taking too much risk on a position and/or
b. Overtrading. These are both things that can really decimate your account.
Trading with margin is no different than trading without it as long as you respect it and use it
wisely. Ill teach you how to do this using proper money management techniques.

Reading A Currency Quote

You may have seen a symbol like this one before: EUR/USD. This is called a currency pair
and each three letter abbreviation stands for the currency represented. In this case this quote
represents the Euro/U.S. dollar currency pair.
The first currency, the Euro, is called the base currency, and the second is called the quote
currency. The price of the currency pair represents how much of the quote currency is needed
to purchase one unit of the base currency.
For example, let's say the EUR/USD = 1.3500. If you purchase this pair then you need roughly
$1.35 to buy 1.00. If you sell this currency pair then you will receive $1.35 for every 1.00.
Currencies are quoted using either two or hour decimal places. Any currency paired with the
Japanese yen will always have two decimal places. All other currencies with have at least four.
The smallest increment of a currencies movement is called a pip. Pip stands for price in point.
In the case of a four decimal currency quote a pip is equivalent to 1/100 of one percent, or one
basis point. Now you can see why currencies rarely move more than 2% in any one day.
Just like the stock market, when trading currency pairs, the Forex quote will have a bid and an
ask price. The bid and the ask price are always quoted in relation to the base currency.
When you sell a base currency the bid price is the price the dealer is willing to pay you to buy
the currency. Its the price youll receive if you sell. When you buy the base currency, the ask
price is the price the dealer is willing to pay to buy the base currency from you. Its the price
you receive if you want to buy the base currency.
When reading a currency quote the bid price is usually displayed on the left and the ask price
is displayed on the right. Heres a screenshot from a popular Forex charting platform:

In this case we would be trading the AUD/USD and the Bid = 0.93756 and the Ask = 0.93765 a
difference of roughly 0.9 pips. In this case the quote is displayed using five decimal places and
uses a fraction of a pip as the smallest increment of movement.

Choosing The Right Broker

As discussed earlier the broker you choose can make you or they can break you. Here are
some things to look for in a broker:
Low Spreads: The spread, calculated in pips, is essentially the price you pay your broker for
facilitating the transaction and making the market. The spread is the difference between the
bid and the ask price. You want to trade with a broker that uses the ECN or Electronic
Communication Network to always display the best price feed and lowest possible spreads.
By choosing a broker like this you may pay a small commission on each transaction but you
will ensure that the broker is not making their money by sniping or hunting stops.
Choose The Right Account: Currencies are traded in an increment known as a Lot.
A standard lot represents 100,000 units of any currency, whereas a mini-lot represents 10,000
units and a micro-lot represents 1,000 units of any currency.
A one-pip movement for a standard lot corresponds with a $10 change in your account for the
positive or the negative. For example if you bought one lot of the EUR/USD at 1.3500 and it
moved 100 pips to 1.3600 then you would make $1,000. However if it moved to 1.3400 you
would lose $1,000.
A one-pip movement for a mini-lot corresponds with a $1 change in your account and a onepip movement for a micro-lot corresponds with a $.10 change in your account.
Choosing the right account type based on the amount of money you are trading is critical to
your long-term money management. As a basic rule of thumb your account should stay at a
micro account until your account balance is above $20,000 or more.
Trade Only With Regulated Brokers
When selecting a Forex broker make sure they are regulated and in good standing with the
recognized regulator of their country.
Here is a list of reputable Forex regulators by country:
Country
Australia
United States
Great Britain
Japan
Singapore
Hong Kong
Canada

Regulator
Australian Securities & Investment Commission
Commodity Futures Trading Commission (CFTC)
National Futures Association (NFA)
Financial Conduct Authority (FCA)
Financial Services Agency (FSA)
Monetary Authority of Singapore (MAS)
Hong Kong Securities Futures Commission (SFC)
Investment Industry Regulatory Association of Canada (IIROC)

10

The Continuation Method Trading Strategy

Laying The Foundation for Winning 7 Out of 10 Trades
The Continuation Method is a trend following technique that works across all markets. Using
this method gives you good odds of winning from 50-70% of the time and even up to 80%.
Trend following is a scientific and mechanical way to approach trading that removes most of
the guesswork. It has a strong history of performance during crisis periods and is at the core of
most of my trading methods.
The idea behind the Continuation Method is to wait for a setback in the market and then jump
in the direction of the trend. We are using only technical analysis meaning that we are going to
be looking at price charts for different currency pairs to make our decisions.
You can trade this method based on long-term or medium-term trends (this means that it
doesnt have to take a lot of time).

Tools You Will Use

1. The Williams % R Williams % R or just %R, is a technical analysis oscillator showing the
current closing price in relation to the high and low of the past N days (for a given N). Its
purpose is to tell whether a commodity or currency market is trading near the high or the
low, or somewhere in between, of its recent trading range.
We will use this in combination with a simple trend finding technique to determine the best
possible entry during a correction in the trend.
2. The 50 Exponential Moving Average EMA is a type of infinite impulse response filter
that applies weighting factors, which decrease exponentially. The weighting for each older
datum decreases exponentially, never reaching zero. This helps us to measure trend by
taking all previous data into account.
3. The 5 Simple Moving Average The Simple Moving Average is the unweighted mean of
the previous N data. We will use this as a way to exit the market and trail our stop loss to
protect profits.
4. These indicators can be found in most charting software programs. Our preferred
software for trading currencies is Meta Trader 4, which is free or Ninja Trader, which has a
small monthly cost for the data feed but gives you a larger range of instruments to trade.

11

Chart Setup
Your charts should look very clean with these indicators on there. Here is a screenshot
showing how the chart looks with each of the indicators in place.

Parameters For Indicators On Your Charts

Below you will find screenshots for each indicator's parameters inside of the MT4 platform.

The 50 Exponential Moving Average

12

The 5 Simple Moving Average

Williams % R

For a free MT4 template that will allow you to instantly set your charts up like this for MT4 click
here. Once you have installed the template for MT4 simply right click on any chart and select
template. Then select the Continuation Method template.

13

Rules of Engagement
Now it is time to learn how to use this simple system. With this method you have the option of
trading in multiple time frames. Here is a breakdown for how to use the different time frames.

End of Day Trading This means you will look at the charts one time a day at the end of
the day. You will be in trades for 4-30 days.
Charts to use: Weekly and Daily Charts Confirm trend on the weekly and trade the daily.

Swing Trading This means that you will look at the charts a few times a day and you will
be in trades from 1-4 days.
Charts to use: Daily and 4-Hour Charts Confirm trend on the daily and trade the 1-hour.

Intra-Day Trading This means that you will look at the charts several times a day and
you will be in trades from 1-2 days.
Charts to use: Daily and Hourly Charts Confirm trend on the daily and trade the 1-hour.

14

Rule #1:

Find the trend on the higher time frame.

If you are doing End of Day trading then you will be using the weekly and daily chart. The first
thing you want to do is find the trend on the higher time frame chart (weekly).
The way you do this is very simple. You look at the 50 EMA and count back ten bars and
determine whether or not it was sloping up more over the last ten bars or if it was sloping down
more over the last ten bars.
If the 50 EMA was is sloping up then the trend is up. If the 50 EMA is sloping down the trend is
down. If the trend is up you can only take buy trades. If the trend is down you can only take sell
trades. Here is a look at the GBP/USD weekly chart:

The 50 EMA (red line) on the chart begins to change at bar one by beginning to slope up,
however you won't consider a trend change until bar ten. After bar ten you can begin to look for
buy trades on the Daily Chart. This leads to Rule 2.

15

Rules #2:

Move down to the lower time frame (daily chart in this

example) and look for a pull back against the trend.
A pullback is identified by anytime a candle closes on the opposite side of the 50 EMA against
the trend. Lets look at a chart example:

The first thing you want to verify is that the trend on the Daily chart is the same as the trend on
the Weekly chart. The trend on the weekly chart turned up and the trend on the Daily chart is
up as well.
The next thing that you want to do is to look for a pull back against the trend. The way you
identify this is very simple. If a candle closes below the 50 EMA while the trend is up then this
is considered a pullback against the trend. If a candle closes above the 50 EMA while the trend
is down, then this is a pullback against the trend.
This leads to Rule #3.

16

Rule #3:

Verify where the Williams %R

is in relation to the -80 level or the -20 level.
In the case of this current example you can see an uptrend and you are looking to buy the
market. So you will be looking for the Williams %R to go below the -80 level. Once it goes
below the -80 level you are now looking for it to rise back above the -80 level.
The bar that corresponds with the rise of the Williams %R back above the -80 level will be your
signal candle.

The green dotted line shows where you would place our entry and the red dotted line shows
where you would place our stop loss.
Y would place a buy stop above the high of the signal candle (or below the low for a sell). The
stop loss will go below the low of the closest swing point in the opposite direction. A swing
point is defined as a candle with a lower low than the previous candle and the following candle.

17

Notice that the previous example was a loss. Not every trade will be a winner. I wanted to
show you a losing trade right off so that when you see all of the winners you will understand
that losses will happen.
Lets look at another example.

This is the very next trade that happens just a few days later. In this case you can see that the
trade makes a tidy profit.
Here's the process again to get to this point:
1.
2.
3.
4.

Is the trend up in-line with the weekly chart? Yes

Do we have a pullback? Yes a candle closed below the 50 EMA
Did the Williams %R go below the -80? Yes
Did the Williams %R go back above the -80 Yes

As you can see, all of the requirements of the first 3 rules of engagement have been met.
Lets look at the profit taking strategy next.

18

Rule #4:

Profit Taking
Once you are in a trade you will look to trail your stop using the 5 Simple Moving Average.
First, before you can consider trailing your stop you must reach a 2/1 reward to risk ratio. In
this example your pip risk is 233 pips. That means the price must move 466 pips in your favor
before you can move your stop.
Heres how it breaks down:
Entry = 1.60773
Stop = 1.58439
Difference = 233 pips
Price must reach 1.65430 in order to move your stop using the trailing stop method.
Once price reaches this price you will use what I call the Money Line Close in order to trail
your stop. This enables you to dynamically follow the market as far as possible before cashing
out and taking profits.
This way you can let our winners run and cut your losses short.
Once price reaches 1.65430 you will only movey our stop once there are two full candle closes
below the 5 SMA. Lets look at this same example.

19

Once price reaches the green line level above you can then look to use the Money Line Close.
Notice that price is above the 5 SMA at the point of the green line. Then abruptly it closes
below the 5 SMA. The next day it closes below the 5 SMA again. At this point you move your
stop to the lowest of the two closes as identified by the green dotted line.
The following day price breaches the lowest of the two closes and you are stopped out of the
trade with a profit of 310 pips. The end reward to risk ratio is 1.16.
In other words, for every $100 you risk on this trade you make back $116.

20

Lets look at some more examples:

In this example we will look at this same strategy but how it works for swing trading using the
4-hour chart. As youll see nothing changes between how we use it for end of day trading and
for swing trading.
In case you arent familiar with the terms swing trading and end of day trading let me give you
a definition:
End of Day Trading Order: A buy or sell order that specifies a price for the security, and
keeps the transaction open until the end of the trading day. If a transaction is not made as the
desired price is not met by the close of trading, the end of day order will be canceled.
You can keep an end of day order open by making it a Good Till Cancelled order (GTC for
short). In this case the order will not be cancelled until it is filled or until you manually cancel it.
Swing Trading: A short-term strategy used by traders to buy and sell a market whose
technical indicators suggest an upward or downward trend in the near future -- generally one
day to two weeks.

21

In this example you can see how everything works the same no matter what chart you are on.
If you want to spend even less time in a trade you can drop down to the 60 minute chart and
do the exact same thing.
The key is trading in the direction of the trend and being precise on following the rules.
Remember... you are trying to capture the big trades with this that earn you much more money
than you risk. By doing this you could be right less than 50% of the time and still win. However
youll find that by using this method you will win 6 to 8 times out of 10.

22

Position Sizing
Position sizing (also known as money management) is critical to your success as a Forex
Trader. When trading the Forex you are using high leverage and position sizing becomes even
more critical.
Position size is the only real determining factor as to how much you will win and how much you
will lose on a trade. I recommend using a fixed fractional position sizing method. This means
that on every trade, no matter where your stop loss goes youll always trade a percentage of
your account value.
As to percentages, I recommend never risking more than 1% of your starting account balance
on any trade. Here is a simple example of how to use Fixed Fractional Position Sizing:
Account Balance = $10,000
Dollar Risk of Trade = $100 or 1%
Pip Risk of Trade = 100 pips
Position Size = Dollar Risk / Pip Risk or $100/100 = 1
So in this example you would risk 1 mini lot which equates to $1 per pip.
Thats it. You are ready to start this wonderful and potentially very profitable journey of Forex
trading. The Continuation Method has been responsible for hundreds of thousands of dollars in
profit for myself and many other traders and investors... and it can be for you too.
But you have to take action today. You have to take a risk if you want to get any kind of
reward. Dont procrastinate and dont waste any more time.
Use the quick start checklist on the next page as your motivator to move forward with your
dreams and goals of a bright financial future trading the Forex.

23

Quick Start Checklist

Now that you have some working knowledge on the subject of Forex trading its time to get
started. Below is a simple Quick Start Checklist to help you get moving fast.
Get started today.

Step 1: Choose A Broker & Open A Demo Account

I recommend starting with a demo account first. This is going to allow you to get familiar with
how to read quotes and place trades on their platform.

Step 2: Pick Your Trading Platform

The two recommended charting and trading platforms of choice are MetaTrader 4 and Ninja
Trader. MetaTrader 4, or MT4 for short, is the most widely used Forex charting and trading
platform in the world. Ninja Trader is another common charting and trading platform that can
be used with multiple brokers.
If you are using MetaTrader 4 then I have prepared a template that you can use to load The
Continuation Method indicators on your chart with. Click here to download it.
Once you have downloaded MetaTrader 4 from your broker of choice you can download and
install the template. To load the template on a chart simply follow the instructions here.

Step 3: Look For Trade Setups Using These Four Simple Steps
1. Identify the trend on the higher time-frame (see rule #1 above)
2. Move down 1-2 time frames and look for a pull-back against the larger trend (see rule
#2 above)
3. Verify that the Williams %R is at the -20 level (for selling) or -80 level (for buying) see
rule #3 above.
4. Enter the trade using no more than 1% risk and follow the Profit Taking Rules (see rule
#4 above). In this case you will use a buy stop to buy and a sell stop to sell.

24

Forex Lingo
Major Vs. Minor Currencies
The eight most frequently traded currencies are the USD, EUR, JPY, GBP, CHF, CAD, NZD
and AUD. These are called the Majors or Major Currencies. All other currencies are known as
minor currencies.
Pip
A pip is the smallest unit of price for any currency. Most brokers quote currency pairs in 4 or
5 digits. Most currency pairs have the first decimal point immediately after the first digit. For
instance the EUR/USD = 1.3565.
In this case, a single pip is represented by a change in the fourth decimal place. One pip is
also equal to 1/100th of a percent or in the case where the quote currency is the USD 1/100th
of a cent. The exception to this rule are all pairs that include the Japanese yen where a pip
equals 0.01.
Bid Price
The bid is the price at which the broker or market maker is prepared to buy a specific currency
pair. This is the price that you can sell the base currency. The bid price is always shown on the
left side of the equation.
Ask Price
The ask is the price at which the broker or market maker is prepared to sell a specific currency
pair. This is the price that you can buy the base currency at. It is always shown on the right
side of the equation.
Base Currency
The base currency is the first currency in the pair. The currency quote shows how much of the
base currency is worth as measured against the second currency. For example if we are
looking at the EUR/USD pair and it is trading at 1.3565 then $1.3565 is worth 1 euro.
Quote Currency
The quote currency is the second currency in the currency pair. Any unrealized profit or loss is
expressed in this currency.

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Forex Lingo
Bid/Ask Spread
The spread is the difference between the bid and the ask price. The spread is what you will
pay the broker for facilitating the transaction. There may be other costs involved as well such
as commission and swap.
Swap
The swap is the difference between the interest rates of two countries. For instance if the U.S.
has an interest rate of 3% and Japan has an interest rate of 0% then there is a swap rate.
If I buy the USD/JPY pair then I own the currency that has the higher interest rate, thus I am
paid interest on the amount I hold. If I sell the USD/JPY pair I own the currency that has the
lower interest rate, thus I am responsible for paying the interest rate.
Cross Currency
A cross currency pair is any pair in which neither currency is the U.S. dollar.
Margin
Margin is the amount of equity that a customer must keep in an account as required by the
broker to transact in the Forex market. This is usually based on a percentage of the currency
market value of the trades held in a margin account.
Once your margin runs out the broker will close all of your trades down even if they are in a
loss unless you deposit more funds. This is why it is important to follow our position sizing
guidelines and never overtrade your account.
Leverage
Leverage is the ratio of the amount capital used in a transaction to the required security
deposit (margin). It is the ability to control large dollar amounts of a security with a relatively
small amount of capital. Leveraging varies dramatically with different brokers, ranging from
2:1 to 500:1. U.S. brokers do not allow you to trade with more than 50:1 leverage.

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