$1000 to $1 million in 80 days E-book V1-2011

1000 to $1 million in 80 days

An Easy Guide to Trading Currencies Online

David Shepherd and Paul Barratt

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 $1000 to $1 million in 80 days E-book V1-2011

Disclaimer

All the information, techniques, skills and concepts contained within this
publication are of the nature of general comment only, and are not in any
way recommended as individual advice. The intent is to offer a variety of
information to provide a wider range of choices now and in the future,
recognising that we all have widely diverse circumstances and viewpoints.
Should any reader choose to make use of the information contained herein,
this is their decision and the contributors (and their companies), authors
and publishers do not assume any responsibilities whatsoever under any
conditions or circumstances. It is recommended that the reader obtain their
own independent advice.

No representation is being made that any account will or is likely to

achieve profits or losses similar to those discussed in this book. The past
performances of any trading system or methodology are not necessarily
indicative of future results.

CFTC RULE 4.41

Hypothetical or simulated performance results have certain inherent

limitations. Unlike an actual performance record, simulated results do not
represent actual trading. Also, since the trades have not actually 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 profits or losses
similar to those shown.

First edition 2009.

Copyright 2009 David Shepherd and Paul Barratt.

Ebook Version 2011

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All rights reserved. No part of this publication may be reproduced, stored

in a retrieval system, or transmitted in any form or by any means,
electronic, mechanical, photocopying, recording or otherwise, without the
prior written permission from the publisher.

National library of Australia

cataloguing in publication entry:

$1000 to $1 million in 80 days/David Shepherd and Paul Barratt

ISBN:9781921630187(pbk)

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 $1000 to $1 million in 80 days E-book V1-2011

DEDICATIONS

To my totally amazing and very special wife Joanne and my incredibly

supportive son Chris. Thank you very much for your encouragement, hands-on
support and love. Looking forward to a continuing life of adventures.

This book is also dedicated to all those who worked with us to complete it.
It has provided new friendships with amazing people that make the journey
of life worthwhile.

Paul Barratt

A special thanks to Carole for your support during this process and thank
you to all the traders who are just human. It is the human effect that has
provided a great source of growth for everyone involved in this project.

A special thank to all the people worldwide who take part in the foreign
exchange markets every day. Without you the world would not be as happy a
place as it is.

David Shepherd

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ACKNOWLEDGEMENTS
I sat down to write this page and became daunted by the number of people
that I really had to acknowledge in putting this book together. First of
all and most importantly I need to thank Mr David Shepherd, my co-author,
teacher and trading mentor. If it wasn't for David's passion and knowledge
I would not have started this project. I was impressed with the easy
methods and clear explanations that David was able to give when he was
teaching me how to trade the Forex market. The more I worked with David
more I realised how many of the existing books and methodologies in trading
were unnecessarily complex. I trust that as you read this book you
understand there is a simple path or way of trading and that is the way of
the successful professional Forex trader.

The many other people that I need to acknowledge with this book include all
those professional traders and beginning traders who lend their experiences
to the contents of this book. In particular contributions and guidance from
people like trader Bob and trader Tony have helped bring a sense of
reality, clarity and understanding.

I also need to extend a thank you to Carole Adele for her support and
assistance during the entire project. There are also numerous other people
involved in putting this book together including Darren, Daryl, Andrew and
the entire team.

And finally to the thousands of readers who will pick this book up, be
inspired, be educated and make a difference to their bank balance as well
as the world. I thank you all. Remember the more you give, the more you get
back.

Paul Barratt

The essence of knowledge is, having it, to use it.

Confucius

It is hard to come in with an additional acknowledgement with what has been

already written. Paul has pretty much covered it. However, I must thank two

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trading masters who have played a major part in my development as a

professional trader. They are Daryl Guppy and Dr Joe DiNapoli. Both men
have trading styles that are easy to understand and apply to the Forex
market. The development of my trading mindset has also been a very
important factor over the years. Dr Van Tharp and his work has been
instrumental in developing the successful mindset that I use every day when
I trade. Just as importantly my work with Anthony Robbins over the years
has helped me focus during this journey.

I could not finish without making special mention of my good friends Tony
and Warren. I have been grateful that they have been so accessible to share
ideas that are “outside the box”. They are both forward thinkers and
their friendship and contribution is greatly appreciated.

David Shepherd

The real voyage of discovery consists not in seeing new landscapes,

but in having new eyes.
Proust

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TABLE OF CONTENTS
Forward

Introduction

Chapter 1 Why Trade the Foreign Exchange (FOREX) market?

Chapter 2 Trading Platforms

Chapter 3 Entry & Exits

Chapter 4 Different Types of Trader

Chapter 5 Currency Characteristic

Chapter 6 Different Trading Methods

Chapter 7 Trading Strategies That You Can Use

Chapter 8 Expert Advisors (Robots)

Chapter 9 Trading Plans

Chapter 10 Mindset

Chapter 11 HeikiAshi Explanation

Chapter 12 The Little Gold Trader

Appendix 1 Sample Trading Plan

Appendix 2 Forex Glossary

Final Thoughts

About the Authors

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FOREWORD
Trading is a simple word that can be viewed in so many different ways.
After all, trading, in all its forms, is what keeps the economy moving.

Great uncertainty in the economy comes when politicians tell us that this
is “the recession that we had to have" or “there is a severe economic
downturn”, coupled with spiralling interest costs. In recent years the sub-
prime crisis has impacted many businesses and individuals so severely that
it has forced them to close down or put other severe financial strains on
the personal and family life of those involved.

One major downturn such as this had such an impact on my life. It not only
affected my businesses but as an indirect result, I also experienced
serious financial setbacks, a broken marriage and retrenchment when the
company that I was later with had to drastically cut its workforce in order
to survive.

Sometimes we can be so busy supporting families and building businesses

that we lose focus on the things that are really important in life.

I believe that health, family and lifestyle without stress are the most
important things in life. However we cannot always just focus on these
without having the financial support to ensure long-term stability.

I saw that my future financial stability could only be achieved with a

sound financial education. Amongst my other activities, I took courses
covering various markets including stock and options trading. I
painstakingly studied a wide range of books and attended many workshops,
webinars and other forms of training. With the knowledge gained in this way
I carefully took up trading, eventually becoming quite active as an options
trader principally on the US market because of the enormous wealth of
information, greater liquidity that this market offered.

Unfortunately, because of the time differences between Australia and the

US, I frequently had to stay up for long hours at night-time, often trading
all-night so I could properly monitor my positions. While I enjoyed
significant success, I found the all-night trading schedule to be a real
challenge as it was disruptive to work, family, social life and eventually
had a negative impact on my quality of life.

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Additionally, I found that decisions in the early hours of the morning were
not always good decisions and this in turn affected my trading, my mindset
and emotional state.

I was searching for a solution to this dilemma. I was looking for a way
that I continue trading without the penalty of having to stay awake most of
the night. A mutual friend introduced me to David Shepherd, a highly
experienced, successful and clever Forex trader who revealed the wonders of
Forex trading. David generously taught me his elegant, yet extremely
simple, trading strategies.

At last, here was the solution to my trading challenges!

Because the Forex markets are open 24 hours a day, five days a week, I was
now able to trade when and when I wanted; I was able to fit trading into my
life rather than making my life fit my trading, which was important as I am
also involved in a range of other activities. After all, I "trade to live"
rather than "live to trade".

The time has come for each of us to take personal responsibility for our
own financial well-being. While seeking advice and learning from others is
an important part of this process, in the end "the buck stops with us". It
is our money and our well-being and so we can't expect anyone else to care
about it as much as we do.

It is unlikely in the future that we will simply be able to rely on a

trending stock market to secure our financial freedom. We are going to have
to take a much more direct hands-on approach and to be more actively
involved. With this in mind, I believe that this timely book “$1000 to $1
million in 80 Days" will go a long way towards providing you with a simple
and effective means of taking greater control over your financial well-
being.

I have found the methods outlined in this book to be extremely well thought
out and elegant in their simplicity. They are consistent and holistic in
their approach and rely on steady and regular practices that will take the
investor/trader in small manageable steps from trading small amounts while
they gain confidence and practice with the methods up to larger amounts as
their confidence and skill grows.

It has been said that about 80% of success while trading is due to
emotional maturity and intelligence and the graduated steps employed with

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this program should enable the investor/trader to grow emotionally in

proportion to the growth in his or her funds.

Trading the Forex market is one way I use to survive the financial
meltdown. I trust that you will enjoy this book whilst implementing the
methods that are outlined and I wish you every success with your trading.

Leigh D. Wilson
BE (Hons), FIEAust, CPEng,
Author of "Surviving Financial Meltdown"
(www.survivingfinancialmeltdown.com)
Executive coach, public speaker, lecturer
Master NLP Practitioner, Master Results Coach,
Trainer and Performance Consultant

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Introduction
$1000 to $1 million dollars in 80 days. It is a bold statement and most
likely it is what had you pick up the book to see what we are all about.

This book is unlike most books on trading. To start with, we believe that
trading the foreign-exchange market (Forex) should be easy. When we
started, we found that the most successful traders have a number of things
in common. Amongst these commonalities are that trading is approached as a
business, trading did not have to be hard work, trading should be simple
and most importantly trading should be profitable.

The professional traders that we spoke to as we wrote the book have all
achieved $1000 to $1 million dollars in 80 days or less. (David Shepherd -
co-author amongst them.) This book aims to reveal to you many of the tips,
strategies and money management techniques that professional traders use
every day.

This is not a theoretical book, we do not provide an analytical approach to

trading and most importantly, this is not a get rich quick method of
trading. Throughout the book we tell stories, both good and bad, from real
traders.

The Forex market is unlike any other market because it is the only market
that has 24 hour trading five days a week. It is the largest liquid market
in the world, there are no trading commissions, leveraged trading is
available and traders are able to profit from up market trends as well as
down market trends.

Our objective is to educate people about the Forex market and to show that
trading can be easy. What we cover in this book can provide enough
information so that you can get started trading a free demonstration
account to see if trading the Forex market is really for you.

Now I invite you to enjoy reading the following pages. We believe you will
be enlightened, educated, moved and even amused.

Enjoy the journey.

David Shepherd and Paul Barratt.

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Chapter 1

Why trade the Foreign Exchange

(Forex) market?
“Winners learn from the past and enjoy working in the present toward the
future.”
Denis Waitley

As you begin the journey of reading this book you can be very confident
that by the time you finish you will not only understand why the foreign-
exchange market came into existence, but you will also understand how you
can profit from it. Contained in the following pages you will find
everything you need to start trading on the foreign-exchange market. Most
importantly, we encourage you to explore the world of foreign exchange
(Forex) trading. You can do this by getting a free online test account to
see first-hand how the market works and how the principles we outline in
this book can be used.

When this book was put together it seemed appropriate that the first
chapter should talk about why you would wish to trade the Forex market.

There are, in fact, a number of ways we can look at the question: Why trade
Forex? You see, why is usually the big question in life. Since you are
interested enough to start on the journey of reading this book we will
answer that why from a technical point of view; we will show you the how
and will even give you the tools, systems and strategies to get started. We
will also add little stories and examples from successful traders, plus
some stories and examples from people who decided that trading on the Forex
market is not for them.

We believe that the most important why? in “why trade Forex?”, is the
reason why you want to trade. Everyone is different. Answering this
question, however difficult, will help establish the mindset that you need

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to be able to trade effectively. So why do you want to trade? If you can

answer this question it could help set up your mindset. Do you want to earn
a little bit of extra money, replace your current income and have Forex
trading as a career change, create trading as a new business venture or
develop long-term personal financial security? Only you can answer that
question.

Trader story

Why Susan started to trade.

Some of the strongest reasons that people learn to trade come from needs
that exist in other areas of life. Trader Susan was faced with a dilemma.
Susan had worked hard all her life, and had been successful with her career
as well as raising a family. Over the years there were considerable
challenges like having to look after other family who were unable to care
for themselves and deal with her own medical issues. As things resolved in
her life, Susan found herself single, alone and rapidly approaching 54. To
add to this Susan did not have any superannuation and no immediate
prospects of being able to change her life the way that she wanted to.
Money was scarce and with the mounting bills coming in every month there
was a very real possibility that she could lose her house. Susan was
living from pay cheque to pay cheque with no prospect of being able to save
anything for the coming years or for her retirement.

Susan was looking around and couldn’t find anything that would fit in with
everything she had to do each day as well generating a sufficient income
stream. The truth was that all Susan really needed, to start with, was an
additional $500 a month to cover the escalating mortgage and general living
costs.

A friend of Susan's took her to a motivational seminar. It was at this

seminar that Susan had the idea of looking at some way of trading in the
share market or something else like that. While looking at shares and
options Susan stumbled upon the idea of Forex trading. Initially, Susan was
very sceptical and, unsurprisingly, very scared to give anything like this
a try. The one thing that drove her on was her why. The last thing Susan
wanted was to lose her home. So she took the bold step to learn about Forex
trading.

I can tell you it wasn't instant success. There were challenges and indeed
some failures along the way. Having a very strong why, educating herself
about Forex trading and clearly understanding what it was that she needed
to do, gave Susan what she needed to start. Susan kept learning and

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applying the learnings. Eventually after many months of winning and losing
trades, she was able to consistently generate $1000 a month. This soon
turned into $1000 a week and then the biggest breakthrough for her was when
she made $1000 in a day.

Susan was now financially more secure than she was when she started.

Susan’s story shows one person's reason why. In order to understand how to
trade properly, you need to understand some of the reasons why you want to
do Forex trading. In the following pages you will find why and how other
traders go about their trading.

Right now take a deep breath and a minute to consider why you would like to
trade Forex? What is the why in your life that will drive you to be
successful?

While you consider your personal why, we will start to discuss another why
- why did the Forex market come into existence?

We thought this was a sensible place to start. If we understand how the

Forex market started this will assist us in understanding where we are now
and where we can be. We will look just briefly at how the market started.
If you would like to understand more of the intricacies of the beginning
there are a vast range of resources in the library and on the Internet that
can expand on what we cover here.

History of Forex

The Beginning of the Free-Floating System

Signing the European

Monetary System
agreement at the Bank
for International
Settlements,
13 March 1979.

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In 1944 an agreement was signed in Bretton Woods, New Hampshire (USA),

which helped to establish a fixed exchange rate in terms of gold for major
currencies. At the same time the International Monetary Fund (IMF) was also
established.

The Bretton Woods Accord

This accord governed currency relationships until the early 1970s, when a
floating exchange rate system was adopted. Before its breakdown, the accord
was useful in maintaining order and accomplishing common objectives among the
States that created it.

In December of 1971, following the demise of the Bretton Woods Accord, the
Smithsonian Agreement was created. The Smithsonian Agreement was similar to
the Bretton Woods Accord, but more flexible. This agreement opened the
doors for greater movements in the currency (aka currency fluctuations).

In 1972, the European community made an effort to move away from its
dependency on the US dollar. The European Joint Float was established by
West Germany, France, Italy, the Netherlands, Belgium and Luxembourg. Both
the European Joint Float and the Smithsonian Agreement collapsed in 1973
for many of the same reasons that led to the failure of the Bretton Woods
Accord. With no new agreements to replace them, there was a switch to a
free-floating system. In 1978, this system was officially mandated,
allowing governments to either peg or semi-peg their currencies, or simply
allow them to float freely.

That same year, European countries created the European Monetary System in
one last effort to gain independence from the dollar. It failed in 1993,
but spurred an evolution from a combination of the European Monetary System
and the Bretton Woods Accord.

Today, the major currencies move independently from other currencies.

Currencies such as the US dollar, Euro, British pound, Swiss franc and the
Japanese yen are traded by anyone who wishes to do so. This trading ranges
from brokerage houses through to individuals. It is only occasionally that
some of the central banks intervene or attempt to move currencies to a
desired level.

However, the single most integral factor that drives today's Forex markets
is simply supply and demand. The free-floating system is ideal for today's
Forex markets. Three factors drive the supply and demand of currencies:

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interest rates and interest rate differentials; commodities; and global

trade. The Forex market is the prime market of the world and it can be
considered that all other markets, such as futures and options, came from
this prime market.

Here endeth the brief history lesson. Not too painful was it?
But what does it mean to you today?

Money is the basis of all trading: everything from physical goods through
to an exchange of your time for activities that you do in your everyday
work. Put very simply, money is used to exchange goods and services all
around the world.

Forex is considered to be a principal market on which many others are

based. This is because when you purchase goods or services you need a
financial instrument (in this case a currency) that can be used in the
local economy. For instance, if you are purchasing left-handed widgets and
importing them from a country that does not use your currency then you need
to be able exchange your local currency into the currency of the country
you are purchasing the item from. This way the local manufacturer can be
paid in a form that he can use and you get the goods that you need in your
country. In many cases these transactions start by exchanging your currency
for the currency of another country.

Forex is the largest, most liquid market in the world, almost eliminating
the likelihood of any one fund, bank or company controlling a particular
currency. Stating that the Forex is the largest and most liquid market in
the world may seem like a bold claim. We are looking – conservatively - at
a market with a turnover of over $3.2 trillion per day, which is what
qualifies it as the most liquid market in the world. This extreme liquidity
stems from the many large participants from around the world, including
banks, futures commission merchants (FCMs), hedge funds and governments.

The Forex market offers some of the smoothest trends available in any
market. There is no other market in the world that can compare with the
sheer volume of trading or the number of people who trade all around the
world each and every day. The Forex market is a haven for a trader seeking
fewer price gaps or erratic spikes or any of the other choppy conditions
found in lower volume markets such as the futures or options markets. In
addition to this, because the market is closed only briefly on weekends,
market gaps (although possible) are very limited which results in smooth
trends and more consistent pricing.

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Technical and fundamental traders alike find the Forex market appealing due
to its trending nature. In addition, because of the trending nature of the
Forex, anyone from short-term traders through to long-term “buy and hold”
position traders can easily find trading opportunities in the market.

Forex trading can be a natural transition for those who already have some
trading experience as the Forex market allows traders in any time zone to
trade at any time of day or night. If you can picture it, as one market
closes (in one time zone) another market is opening (in the next time
zone). Thus, when the Australian market begins to slow, the European
markets are just beginning. Then, finally, several hours after the European
markets start to slow and close, the North American markets open. As you
can appreciate, as the North American markets start to close, the Asian
markets then start to open completing the 24 hour cycle. The Forex market,
therefore, becomes a 24 hour a day market, five days a week (nearly six
days a week when you take into account the different time zones).

Unlike trading on the futures market or several other markets available,

the Forex market allows you to react instantly when news hits the wires as
opposed to having to wait for the market to open. Additionally, you don't
have to stop trading because that particular exchange or market is closed
for that day. You will be able to enjoy continuous market opportunities and
added flexibility that is not offered in other markets.

Other advantages of trading the Forex market as opposed to shares/equities,

futures, commodities and so on, include:

 Greater leverage - from 50:1 to 400:1 depending on your broker. (NB:

Without appropriate risk management, a high degree of leverage can
lead to large losses as well as large gains.)
 No middlemen
o No clearing fees
o No exchange fees
o No government fees
o No brokerage fees
 Buy/Sell programs do not control the market.
 Commission free, you get the same price as the dealers at the dealer
desks.
 Trade 24 hours / five days per week.
 Lower entry costs.
 No exit costs.
 You can place orders directly with the market maker.

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A journey of a thousand miles begins with a single step.

Lao-tzu

The journey to become a successful and confident trader on the Forex market
is filled with a variety of challenges, successes, failures, barriers and
breakthroughs. No matter how you look at Forex trading it is just like life
- there will be some days where things just work perfectly and other days
you would have been better off staying in bed.

What will make you a successful and confident trader will be your passion,
understanding and continuing desire to learn. In many ways you need to
play a game of consistently improving your trading habits.

Just as with any other aspect of life, as a trader you will experience
emotional highs and lows, financial successes and failures. How you deal
with these things will impact how you relate to your friends and family as
well as how they relate to you. Forex trading can be the path to success
but if you are not very careful it can also lead to financial ruin.

The difference between the path to success and the path to financial ruin
is more related to your mindset, your focus and most importantly your
proper equity (money) management. Money management is the key. One of the
key things that we talk about is your money management. It is essential
that you minimise the risk on each and every trade.

Here is the first important tip:

Only trade one mini unit on one currency for every $1000 in your account.
Working on this principle if you have $2000 in the account you can either
trade two units on one currency or one unit on two different currencies.
We recommend that you learn to trade one currency really well before you
move on to a second or third currency. You will most likely find that
learning one currency will give you all the financial security and success
that you are looking for.

EQUITY MANAGEMENT excels spread sheets and a TRADING PLAN are the two
cornerstones of ALL successful traders. Its the sensible setting and
maintaining of your equity management parameters that will prove to be the
backbone of your success.

If you follow some of the simple methods in this book and use the tools
suggested you will not only educate yourself by understanding what

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currencies you work best for you, but it can also give some very sound
principles on which you can base your money management.

One important trap to be very careful about is that you do not end up on
the emotional rollercoaster of trading. If you trade on emotion you will
lose. The simple truth is that many renowned institutions and professional
traders (often considered as gurus in the market) are the very people who
benefit from traders who trade on emotion. They owe their success and their
commissions to the gut-wrenching emotional trading that can easily creep
into novices’ trading.

Trading on emotion can be financially crippling. The key is not to trade if

you are not centred, focused and have a clear plan to follow. I know how
devastating emotional trading can be. I, like many traders, have committed
the sin of emotional trading. The last time I traded on emotion I was
chasing a loss that I shouldn't have had because I omitted to lock away my
profit. From first-hand experience I can tell you that, at the end of the
day, the balance sheet does not look very pretty. The financial carnage
that emotional trading can inflict can easily trash a trading account from
thousands of dollars to nothing, zero, zilch in a matter of minutes.

Emotional trading is led by fear and/or greed. It is commonly said that the
markets are driven by fear and greed more than anything else. Two
statements that are certainly true is that fear causes a trader to make
mistakes, and greed makes the trader stay in the trade for longer than they
should. It is the greedy trader who usually loses money because they will
not ‘lock’ the profits away while they are there and will obstinately
stay in the trade for ‘just five more pips’. The greedy traders will pray
while they hold onto their trading position and wish and hope with all
their might that their trade gets to where they want it to be. The simple
truth is that as quickly as the market can give, it can also take away. It
is inevitable that if you don't lock profit away when it is there you will
lose it.

So, simply put: don't be afraid to trade and don't be greedy. Lock away
your profits as soon as you can. Now it would be nice to be able to say
that that is all the trader has to deal with on the emotional front,
however, there are many other emotional pitfalls. The other sorts of
emotions you need to deal with are as follows:

Boredom Leads to impatience and can cause unnecessary trades.

Euphoria and Can cause overconfidence, which is the shortest way to

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excitement over-trading. Over-trading can also lead to making the

wrong trades.

Frustration Can cause the trader to make completely irrational

decisions.

Depression Can lead to a downhill cycle. It is usually caused by a

series of losses. Unfortunately when this starts the
internal dialogue for the trader spirals down too: if I
had done this ... and then ... I would and it would ... I
could have and it would have ... and so on. This internal
dialogue can cause paralysis in trading as well as
completely irrational decisions around trading.

Revenge After a loss or series of losses the trader can start

revenge trading. The sort of internal dialogue that
happens is – “This currency is going to give back the
money it took.” And the trader starts to chase the
trades, which usually results in a series of losses before
the trader finally gives up.

Low self- Feeling that you are ‘not good enough’ can cause trading
esteem paralysis or have the trader get caught in a cycle of
making money, then losing it. A further consequence is
that it can also lead to revenge trading and give the
trader a first class ticket to an empty trading account.

Now this is by no means a definitive list. I'm sure that if you thought
about your own character you could think of other emotions that can come
forward that can impact on your trading. Every single emotion can affect a
person's ability to make rational decisions. It is important when you are
trading that you make rational decisions.

The emotional response, or way of being around trading, can influence about
80% of a decision. If your emotional state is not right then there is an
80% chance that your decision will not be right. Once you start in this
cycle you start to question your decisions, analyse your failures and
constantly torture yourself about choices or decisions you should have made
and didn't. The biggest problem with this whole cycle is the more that you
do it the worse your trading becomes.

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So the question is what can you do about it when you are impacted by
emotional trading? First of all and most important: Stop Trading! We are
very serious. It is essential that the first step you take is to stop
trading. Eighty percent of your effectiveness as a trader is determined by
your emotional state and state of mind or mindset. So if you are impacted
this way you can expect that 80% of your decisions are most likely to be
wrong.

Now, because your head is not in the right space you need to take steps to
set yourself in such a way that you are able to once again trade. Some of
the things to look at when you are kidding yourself into the right
headspace are:

1) Change the way you view your trading.

2) Change your mindset.
3) Quieten the internal dialogue. (The voice in your head that chatters
away throughout the day – if you are thinking, “What voice?” – then that
is it).

A very simple way of achieving all three is to relax, take a deep breath,
do some meditation and refocus. There are meditation tools and trading
audiotapes that can assist with this process. Seasoned traders use whatever
assistance, tools or processes that they can to make sure their mindset and
focus is right before they trade. If you do the same you will be ready to
trade in no time and with the correct mindset and focus you can be back on
your path to financial freedom or whatever else your goal is from trading.

Trading on the Forex market is a lesson in probability. It brings about

significant risk and may not be suitable for all traders. However, high
leverage may work for you as well as against you - just remember to not
trade any money you cannot afford to lose. We strongly recommend that if
you want to try Forex trading that you apply for a free test account (a
demonstration ‘demo’ account) with one of the brokers. This way you can
see if Forex trading is for you without any risk to you financially. It is
much better to lose on a pretend account than it is to lose on a live
account.

Now that we've dealt with some other facts around Forex trading we will
touch briefly on some of the myths.

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Myth 1
If you trade all day you will make more money.

On the face of it, it sounds logical but it is in fact a myth. Trading all
day is over-trading.

When you are sitting in front of a screen trading all day there is an
immense amount of information available for you to process. The simple
truth is that a human being can only process seven (plus or minus two)
pieces of information at any one time. The human brain is an amazing piece
of architecture as it works very hard to eliminate what is usually useless
information. For example, when walking down the street you are conscious of
items that can be important to you such as the footpath, the tree just in
front of you, the shop you're going to visit. What your brain is filtering
out are all the extraneous things that are not important at the time: the
thousands of individual blades of grass, the hundreds of insects that may
be crawling over the grass, and the numerous other things that are present
while you walk. With an understanding of how much the human brain can
process consciously, you will also understand that the brain gets fatigued
by doing that sort of processing all day every day. The simple effect is
that you, unfortunately, start to eliminate information that you previously
processed and is important. In a trading environment it means that you can
miss the simple and vital indicators that will make you successful.

It may sound like something you could do, but it is virtually impossible
for someone to concentrate for an entire day while trading. The mental
fatigue that ensues from over-trading leads to both mental and emotional
exhaustion. Being on the emotional rollercoaster will lead to bad decisions
and a flow of money from your bank account into the accounts of the world
markets. Losses will be inevitable.

Being in front of your chart for more than 1½ hours or even longer, will
cause confusion and you will not know what you are looking at any more. The
likelihood of mistakes increase exponentially. As a result you will
inevitably make mistakes and lose money. It is better to carefully select
trades and wait patiently for the right entry point so that you can
maximise profits on every single trade. Studies have shown that people who
concentrate for short bursts of time are more productive than those who are
trying to concentrate for extended periods of time. The simple truth is

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that the more successful traders will concentrate on trading for short
periods of time and in the long run will always be more profitable than the
trader who trades for extended periods of time.

If you really want to develop your Forex skills fast,

you have to be aware that here slower means faster.
Dariusz Swierk, PhD - Forex Trading. Professional

Myth 2
Losses cause bad emotions.

Also false. Emotions caused by high profits are even more dangerous than
the emotions created when you're losing. Trading euphoria blinds us and it
makes us feel that we are completely invincible. This is a delusion. As a
result of this delusion traders tend to think that they know everything
there is to know about the market and then start to open additional
positions or take positions that are too large for their trading account.
Good trading decisions are made when we are fresh and after a good night
sleep.

This is the time when our level of emotion is low or moderate. The best
process is slow and steady with a very systematic approach to your trading.
This way we are able to avoid heavy losses and the emotions associated with
that or the euphoria of making large temporary profits. The more we can
make clear trading decisions the more often we will be effective and
profitable in our trading

We have discussed the impact of the emotional rollercoaster. Very simply

put, large winning trades can be far more dangerous than a series of
losses. As a consequence of your success, your perception can become
impaired and the normal cool, analytical approach goes out the window along
with your carefully thought-out trading plan as you feel invincible.

It is interesting that at times of high emotion and low emotion the first
thing to suffer is the trading plan. If you find that you are not following
your trading plan or you are in one of the extreme emotional states the

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best thing you can do is stop trading and walk away, although this is not
easy.

If you are cool and calm and only trade in that state you will be more
successful and more profitable.

Wait until the money is in the corner then walk over to it and pick it up.
Jim Rogers

Myth 3
The fear of missing the million dollar trade.

It is far more sensible to take small profits regularly and build stability
than it is to be always looking for that next big trade. The risk that you
run always looking for the big trade is that you force a trade or see a
trade where a trade really does not exist. This is another thing that can
lead to losses.

Because the Forex market is 24 hours a day five days a week, you can afford
to just wait a little longer because the next opportunity to trade will not
be very far away. Getting the next trade is very much like catching a bus.
If you miss it, another one will be along shortly.

Life consists not in holding good cards but in playing those you hold
well.
Josh Billings

Myth 4
Forex trading is a hobby, not a real business.

You need to treat Forex trading as a business and the object of any
business is to make money. When you are trading the Forex market, if you do
not have a goal of making money then do not trade.

The bad news is time flies. The good news is you're the pilot.
Michael Althsuler

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Myth 5
Trading the Forex market is exciting.

The simple truth is that most of the time trading is boring. When I say
boring, I mean really boring. Boring, boring, boring, watching lines go up
and down on a chart that changes a bit. This is not what I would call an
exciting day.

However, what can be exciting is watching a trade go the right way and
being able to lock away the profit. What is really exciting, is all
wonderful things you can do with the profit when you finish trading.

“Get excited and enthusiastic about your own dream.

This excitement is like a forest fire - you can smell it, taste it, and
see it from a mile away.”
Denis Waitley

Myth 6
There is a Holy Grail of trading.

Sorry to disappoint you. There is no Holy Grail or magical way of trading.

Trading successfully on the Forex market is much like anything else you
need to learn: The first step to take is to get a free demonstration
trading account with one of the brokers. Then you need to learn what to do
when trading, how to trade, and how and when to trade any currency.
Educating yourself is important. As you learn and practice on the
demonstration account the more you will understand and the better you will
become. That is the key.

“The more you chase the Holy Grail of short-term performance,

the less you get in long-term results”
Walter Cabot

I seek the Grail! I have seen it, here in this castle! Sir Galahad

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No, oh no! Bad, bad Zoot! Dingo

What is it? Sir Galahad
She has been setting light to our beacon, Dingo
which, I've just remembered, is Grail shaped.
It's not the real Grail? Sir Galahad

Monty Python and the Holy Grail (1975)

Successful traders should have a passion for trading. If you have a passion
for trading then the money will come. The trader, who is passionate, will
not only enjoy trading but analysing the charts and reviewing what they
have done. It is by doing this analysis that you will become a better
trader. If you think that trading the Forex market is just about making
money then you will not become a successful trader.

It is interesting that the main reason most people start trading is that
they want to get rich fast. Unfortunately, this motivation will disappear
fairly quickly - usually at the first sign of difficulties and problems. It
is also interesting that only those people have a passion for trading can
be truly successful. In fact if you're passionate about anything in life
you are more likely to be successful in that field or venture. Trading on
the Forex market is much the same and so, once you start trading, take the
necessary steps to protect and maintain your passion and avoid the
emotional rollercoaster.

Choose a job you love and you'll never have to work a day in your life.
Confucius

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Chapter 2
Trading Platforms

A desire to be in charge of our own lives, a need for control,

is born in each of us.

It is essential to our mental health, and our success, that we take
control.
Robert Foster Bennett

When we talk about a Forex trading platform we mean the software on which
online brokers and traders are able to perform daily trading online. The
beauty of this approach is that when you want to trade online you can do so
whenever you like. With the advent of laptop computers, technically
advanced mobile phones and the Internet, trading on the Forex market can
happen from anywhere at any time five days a week. Using these trading
platforms provide the trader with the opportunity to use “Advanced Online
Trading”. What we mean by “Advanced Online Trading” is that it provides
the individual trader an opportunity to trade not only on the Forex market
but also trade on the commodities, CFDs and numerous other markets.

In effect this allows the trader access to more opportunities and provides
more benefits to you as a trader. As this is a book about Forex trading we
will not be discussing trading of other financial instruments. That
information would be best coming directly from one of the brokers
responsible for their particular platform.

The best Forex trading platform is one that assists the trader in
performing a trade effectively and efficiently to maximise profits. Using a
good platform you will be able to employ many strategies that are essential
for you to be successful in the Forex market. In addition to this, the
platform should also be able to help you evaluate/analyse trading results
and easily manage losses and profits. Having all of these tools at your
fingertips will provide for a better trading future. Remember that a well-
informed trader is a good trader who uses the right tools to determine

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which currencies and trading methods provide the best interpretation of the
market.

The trading platform connects the trader to the market, which then shows on
the trading screen the market position as the trades are occurring in real
time. You are then seeing on your screen the current information on the
Forex market, including any particular currency.

Every trader in the world has access to the same information as you at that
time. This can be a great advantage as you're using real-time data instead
of receiving information that can be more looking at the past rather than
being in the present allowing you to speculate into the future. The real-
time Forex trading platforms also offer flexibility to place orders in the
market immediately and will provide the trader with authentic market news
that can be further used to assist in effective and efficient trading.

Market announcements can also be used to enlighten a trader on the trading

history for any currency pair. The Forex trading platforms also offer
access to all major currency pairs and quick execution of all trades with
an unlimited transaction amount. Having said ‘an unlimited transaction
amount’ a responsible trader will always work within a conservative
trading plan that will maximise profits and minimise risk.

Forex trading has increased significantly with the coming of automated

software. It provides the trader the ability to enter and exit the market
according to defined investment strategies, profit levels or to minimise
losses when they occur. Automated Forex trading systems have become a
saviour to the trader who does not wish to take unreasonable risks.

The Forex trading software has an edge over other trading systems and, what
is more interesting; it works in favour of the online trader. The platform
is available to the Forex trader giving you the ability to position
yourself accurately in the market. This positioning also allows you to exit
the market with the same laser precision. With the positioning options
available it means that you can place trades ahead of an uptrend or
downtrend in the market.

What's more you can then place a limit on the trade so that you can
automatically close the trade and lock away profit when you have reached
your desired profit level. Just as with locking away profit you can also
limit the loss with the same level of precision. This way the trader can
determine when and how the trade will execute.

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The online trader also has the ability to set the level of leverage to be
applied and, most importantly, it also gives you the opportunity not to
trade at all if market conditions are not favourable. Other features of
these platforms for the online trader include: ease of use and they can be
accessed from virtually anywhere at any time - all you need is a laptop
computer and wireless modem or even some mobile phones provide this
capability.

Remember that Forex trading requires you to be a risk taker. However, you
have a choice as to how much risk you are prepared to take and you can take
steps to minimise that risk as you trade.

The main advantages of Forex trading platform systems are:

Coverage of financial markets

The Forex trading platform covers all brokerage and trading activities at
Forex, Futures and CFD markets.

Multi-currency basis
The system is designed on a multi-currency basis. This means that any
currency can serve as a general currency and can be used in Forex trading.
Effectively this means that any national currency or cross currency can be
traded.

Reliability
The Forex market and the platforms used are generally extremely stable and
reliable. Some outages do occur (times when you can't trade due to
technical difficulties) but these are fairly rare.

Safety
When you are trading on the Forex market the platforms are usually
encrypted by 128-bit keys. This provides a high level of security for your
trades.

Application Program Interfaces (API)

The API makes it possible to customise the work of the platform to meet
your specific requirements. The API can solve a wide range of problems by
allowing you to create additional analysis tools for finding a trend or
creating applications. These trends and applications can be integrated into
other systems.

Integration with web services

The integration of the platform with web services provides traders with

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data of higher quality and a more tightly integrated support structure.

This feature allows real-time publishing of quotations and charts on your
site, dynamic tables and many other features not available until recently.

Flexibility of the system

The platform possesses a wide range of customisable functions. You can set
all the parameters from a trading session, to time parameters, through to
detailed properties of financial instruments.

Retail Forex Trading Platform

The retail Forex trader allows software to be downloaded onto your PC or
laptop. These retail Forex trading platforms will give you full access to
all news and currency pairs.

Mobile Forex Trading Platform

By using the mobile platforms with the correct software, you have the
ability to access your trading account anywhere in the world provided you
have Internet access. These systems are also password protected. However,
being mobile, the programs may have limited features so it is important to
check with your provider as to what the limitations are and be prepared to
check your trades at a full access Internet connection (home, office,
Internet cafe, etc) if necessary.

PDA-Mobile Trading
Using Windows-based smart phone applications, you can access your trades
anywhere you can get a mobile phone-based internet signal.

Multi-terminal Access
This is a management program that allows the user to access multiple
accounts simultaneously. This access is your eyes when you need to manage
more than one account. It is most helpful for traders who manage other
investments or who work multiple accounts.

Institute/Professional Platforms
These platforms provide complex data feeds and are used by banks and
trading houses worldwide.

Trading story

The Terrific Tale of Trader Tony

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Trader Tony was a very successful businessman. One day Tony woke up and
decided he wanted to be a professional Forex trader so he gave away his
business and devoted his time to become a better trader. Tony had his
laptop set up with his trading platform installed and to start with it
worked well. But the problem started when, as a dad who was now full time
at home, the needs of the children and his wife kept creeping in so it
wasn't long before trader Tony found that he had little time to trade
because he was driving his kids to and from school.

To overcome this problem Trader Tony went out and bought a smart phone so
that he could now access his trades while he was on the move. This gave
Trader Tony a lot more flexibility and the ability to access his account
and trade while still fulfilling all of his fatherly duties. What was even
better was that the mobile platform gave Trader Tony the ability to set up
alarms to notify him when preset trading entry and exit signals presented
themselves.

These signals and alarms were meant to make life easier for Trader Tony but
unfortunately this was not the case. Trader Tony’s frustrating and anxious
feelings only increased when these signals and alarms were ringing while he
was stuck in traffic. The trade he had placed was going the wrong way. Just
when Trader Tony thought that things couldn't get worse he drove into a
tunnel and lost the signal completely. When Trader Tony finally came out of
the tunnel he couldn't log on to see what was happening with his trade. And
then things took yet another turn for the worse, Trader Tony in his
frustration and with the anxious feelings increasing, went in the wrong
direction and got lost. To add to all of this, Trader Tony’s GPS system
wasn't working either now and he couldn't work out how to get where he
should be going. Trader Tony was much like his trade - not going the
direction he should be.

Eventually Trader Tony was able to stop, take a deep breath, and he logged
on just in time to see his terrific trade tumble down into the abyss and
disappear forever.

All of the signals, alarms and portability was supposed to make Tony’s
life so much easier. Unfortunately the opposite was the reality because
Tony could not take off the trade when he needed to. He could only watch
his trade go the wrong way.

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This day is not where the story of Trader Tony finishes. He had decided a
long, long time ago, he would for a few weeks every year take part in the
Variety Club Bush Bash. This was an annual event where a group of drivers
hit the road to raise funds for charity. With his trusty PDA in hand Trader
Tony completed the bush bash and then went four-wheel-driving up in the top
end of East Australia. Trader Tony was confident that he would be able to
access is trades on his trusty smart phone.

So with the vehicle filled up with petrol Trader Tony went off on his 4-
wheel-drive adventure. When Trader Tony eventually gets to his destination
he discovered that his trusty smart phone was not so smart - there is no
signal at the top of Australia. Now it would not been such a problem except
that Trader Tony in his infinite wisdom decided to put on a trade before he
started driving. So Trader Tony had to deal with the stress and anxiety of
not knowing how his trade was going for two weeks until he finally got back
home. The story does not end here, however. When Trader Tony got home on
Saturday one of the first things he did was to sit down in front of his
trusty trading platform to see how the trade had gone and more importantly
complete the trade. He looked at it and then went away, came back an hour
or two later and looked again. It didn't appear to Trader Tony that the
market moved at all in that two-hour time frame so he rang the broking
house to find out what was happening because obviously his connection was
broken in some way. Trader Tony finally woke up - nobody trades on
Saturday!

Things did get better. Before Tony went off on his adventure, he sat down
and carefully constructed a detailed plan for his trading business.
Recently Tony set up his multi-terminal trading platform so that he can now
manage several trading accounts simultaneously. His business as a Forex
trading professional is now going the way he had planned.

Tony believes that if trading is not fun then you shouldn't do it.
Commitment and passion are integral to being a successful trader regardless
of the obstacles and challenges that you may face.

Trader story

The Rapid Realisation of Trader Ross

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Trader Ross decided to set himself up with the latest technology so that he
could have reliable mobile access to his trading platform. Trader Ross went
away to a telecommunications company to tell them exactly what it was he
needed and why. Trader Ross went to the extent of having the
telecommunications company representative confirm with him on several
occasions before he signed the paperwork that the highly advanced PDA would
meet all the requirements and allow him to trade.

Unfortunately, no one told the PDA what it was supposed to do. The
technology was completely incapable of downloading, connecting and running
the trading platform. To add insult to injury the telecommunications
company refused to refund or change the device as he had signed a two-year
contract. As far as they were concerned it wasn't their problem that the
trading platform software could not be run with the device they had sold
him. The result was Trader Ross now has a very expensive paperweight that
he is still paying for (under the two-year contract) every month. Trader
Ross now uses that expensive technologically advanced PDA as a paper weight
to hold the receipts for all the successful trades he does using other
devices and platforms.

A Lesson from These Stories: Both Trader Tony and Trader Ross were
emotionally attached to their trades and their technology. More importantly
both traders were allowing the technology dictate how their lives should
work. Remember, it is not the technology that makes a good trader.

Trading Platforms in Australia and New Zealand

We are now going to give you a brief description of each of the trading
platforms that are available for you to use. These platforms are merely in
alphabetical order so you shouldn't take the order as any indication of our
preference or as a recommendation in any way. Each platform has particular
characteristics and features that may be of interest depending on the type
of trading you will be doing. It is essential that you do the necessary
research and ask the questions to make sure that the trading platform
you're looking at is going to meet all of your requirements. The fantastic
thing about these trading platforms is that you have the ability to sign up

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for a demonstration (‘demo’) account so that you can familiarise yourself

with that platform and, if required, allow you to perform the necessary
testing of other applications (expert advisers, for example). The brilliant
thing about these demonstration accounts is that you can trade on the live
feed platform without risking any of your hard earned dollars. It is these
demonstration platforms that give you an opportunity to learn how to trade
without risking any of your capital.

FXCM

As of January 2009, there was in excess of $600 million in customer funds,

over 125,000 live accounts from nearly 200 countries, and an average of
7,000,000 trades executed each month trading on platforms offered by FXCM
Holdings LLC. Customer support is provided in over a dozen languages. FXCM
Australia Limited (“FXCM”) is the holder of an Australian Financial
Services Licence (number 309763) which was issued by the Australian
Securities and Investments Commission. Forex Capital Markets LLC (“FXCM
LLC”), an affiliate of FXCM Australia, has received numerous awards from
the investment community, including Best Currency Broker from Shares, Best
Retail Foreign Exchange Platform from FX Week and Best Foreign Exchange
Specialist from Technical Analysis of Stocks and Commodities. In addition
to currency trading, FXCH Holdings LLC offers educational courses on Forex
trading, and provides research through DailyFX.com.

www.forextrading.com.au

GFT

As a worldwide leader in online trading, GFT has received numerous awards

for growth, technology and entrepreneurship. They have built a loyal base
of customers in Australia and more than 120 other countries by drawing upon
their expertise to provide exceptional software and services for financial
traders.

They deliver powerful new trading solutions that are simple to use, yet
provide the sophistication and value you might require. They demonstrate
their commitment to their customers by having a presence in all major

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worldwide financial centres, being regulated on four continents, and

employing an international workforce of experts, all of whom are thoroughly
trained in the latest in trading services.

www.GFT.com.au

Go Markets

Go Markets Pty Ltd is an Australian registered company offering a wide

range of financial products to an extensive client base both here in
Australia and overseas. Go Markets is an ASIC registered company (AFSL
licence number 254963) that is regulated to offer financial services
including Securities, Derivatives (including CFDs) and Margin Forex.

To be able to offer a high level of service as standard to all of their

clients they have entered into partnerships with various financial
institutions that specialise in the global securities and derivatives
industry.

http://www.gomarketsaus.com/go_trader

(We copied the information about FXCM, GFT and Go Markets directly from
their website. We did this because we did not want to influence you in your
choice of preferred trader. If you're interested in any of these brokers we
would suggest that you contact them directly to get the latest products and
services they provide.)

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Chapter 3
ENTRY and EXIT Points

Now this is not the end.

It is not even the beginning of the end.
But it is, perhaps, the end of the beginning.
Winston Churchill

In this chapter we will be detailing some of the indicators we use and how
we use them. The indicators that we will look at in some detail are the
DiNapoli 3x3 and DiNapoli Preferred Stochastic. Of all the indicators, the
DiNapoli indicators are the most robust and simple indicators available for
any trader to use, whether you are professional or just starting out. Other
indicators that we will look at include the Guppy Multiple Moving Averages,
the Exponential Moving Average (EMA 60) and the HeikiAshi candles in
particular.

For the purposes of clarity in this discussion we will only focus on one
currency, that being the GBP/JPY. As a currency for trading, it needs to
be noted that the GBP/JPY is not for everyone. You will need to determine
what currency suits your trading style and learn the characteristics for
that currency. These tools and principles can be applied equally across any
currency pairs, of course.

Trading Announcements

There are announcements made every day that impact the Forex trading
market. One of the best sources of the information is Forex Factory. Forex
Factory is the premium Forex trading hub featuring the world's most active
trading forum for Forex traders. Its calendar is the most advanced and
reliable Forex calendar in the world with features and information that can

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help Forex traders make better trading decisions. This website provides
information and resources that are written by experts with some of the
information and resources being invaluable for people trading the Forex
market. The Forex Factory can be found at the following web address:
http://www.forexfactory.com/.

Platform

The main trading platforms that we use are MetaTrader 4. Both platforms
can have DiNapoli as the selected layout that is pre-installed on these
platforms to make it easier for traders to use. If you are using programs
other than MetaTrader, you may need to construct a layout that will suit
your particular platform.

The trading platform we will be using in this discussion will be the Meta
trader 4, which at this stage is the most popular platform in use. Meta
trader 4 is not just the most popular trading platform, it is also an
award-winning platform used by most professional traders. The trading
layout that we will use for the purposes of discussion, comprising five
work spaces, is as follows:

1) Main – Open position, Working orders, Order history, Quote

board Short-term – 1 hour , and 4 hour charts

2) Mid-term – 4 hour

3) Long-term – Daily, Weekly & Monthly charts

4) Guppy – 4 hour chart

5) Testing ground

The Chart

When David started trading Forex he started with trading the GBP/JPY on a 2
minute chart. Trading this chart can be a bit of an adrenaline rush as the
chart is very fast paced and unpredictable. As David gained more experience
trading GBP/JPY he soon shifted up to the one hour time frame, as this time

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frame provided greater profitability by reducing the unpredictability. That

is a practical example of what we mean by “learn the currency”. As a
result of what David learned, he does not go down to smaller time frames
when trading GBP/JPY. Put simply, trading a volatile currency on a small
time frame will usually be very stressful and not very profitable.

We are great advocates of reducing the emotion and stress of trading so one
of the other steps we take is to focus only on the pip level. Thus on the
“Open Positions” window we display only the pip counter, currency
abbreviation and whether the trade is a buy or sell. We remove all other
information such as the number of lots being traded, the dollar value, the
entry points and so on. If you just focus on getting the pips each time you
will become consistent and successful and - as an added bonus - it will
reduce the stress of watching trades.

The HeikinAshi Candle

There are many different ways of displaying price information and for the
purposes of discussion in this chapter we will be using HeikinAshi candles.
HeikinAshi candles are an easy-to-understand system originally developed by
the Japanese and have become popular in trading over the last 10 to 15
years. Even though many people still use bar charts and other candle forms,
HeikinAshi candles are generally considered to be the easiest candle
pattern to understand.

The HeikinAshi candle is a representation of the smoothed average of the

previous four candle closes and, like an ordinary candle, has a body and a
wick. The way the HeikinAshi (and indeed any) candle appears - with
different length bodies and different length wicks - is an indication of
the various entry and exit points in any trade. By looking at the candles
you can determine whether the currency is likely to continue in the
established direction or the reverse direction (retracement).

As with anything mysterious, there are wonderful technical terms that are
used to describe lines, boxes and shapes on the chart. Here are some
examples of reversal patterns – when the market is about to turn around the
other way - found in candles:

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 “The Hammer” - is a candlestick that has a short body and a long

wick. If it is a reversal it is likely that the wick on the Hammer
will extend below all prior lows.

 “The Hanging Man” - is a top reversal pattern that signals the end
of an uptrend. This candlestick is the same shape as the Hammer but
occurs at the top of a rising trend and signals the end of the
uptrend. The Hanging Man will be at or near the top of the highest
point of the uptrend.

 “The Doji” - is a top and bottom reversal pattern, which signals

the end of the current trend. Doji patterns appear many times but
they only become significant when found at the top or bottom of a
trend. The Doji pattern is formed when the opening and closing prices
in a given time frame are the same. The placement of the wick on a
Doji candle will determine whether it is a “Doji Cross” (horizontal
line and vertical lines intersect), “Doji” (with a horizontal line
at the top of the wick) or a “Gravestone Doji” (with a horizontal
line at the bottom of the wick).

Now that we have explained some of the terminology, you will understand
what we are referring to when we talk about Dojis and candles. It is these
candle types that give us clear entry and exit signals in our trading.

Entry Signals

We are looking for a change in direction to enter a trade using HeikinAshi

candles. Indications for a change in direction include one or more of the
following:

 A smaller candle body than the previous one;

 A shorter wick than the previous candle;

 A Doji candle with tiny body and long wicks;

 A candle that begins to cross the DiNapoli 3x3;

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 A cross on the Slow Stochastic indicator or the DiNapoli Preferred

Stochastic;

 Approaching a level of resistance or support OR a whole number

currency value; or,

 A new candle opening on the other side of the DiNapoli 3x3

indicating a change in direction.

Entry signal trade

A flat top RED candle opening under the DiNapoli 3x3 gives you an entry
signal to go SELL SHORT.

OR

A flat bottom GREEN candle opening above the DiNapoli 3x3 gives you an entry
to BUY LONG.

Exit Signals

We are looking for a change in direction to exit a trade using HeikinAshi

candles. Indications for a change in direction include one or more of the
following:

 A smaller candle body than the previous one;

 A shorter wick than the previous candle;

 A Doji candle with tiny body and long wicks;

 A candle that begins to cross the DiNapoli 3x3;

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 A cross on the Slow Stochastic indicator or the DiNapoli Preferred

Stochastic;

 Approaching a level of resistance or support OR a whole number

currency value; or,

 A new candle opening on the other side of the DiNapoli 3x3

indicating a change in direction. NB A new candle opening on the other

side of the DiNapoli 3x3 shows the change in direction is in place and, if
you are still in the trade, then your trade is wrong!

Interesting Background Information on Joe DiNapoli

Joe DiNapoli is a veteran trader with over twenty-five years of solid

market trading experience. He is also a detailed and passionate researcher,
as well as an internationally recognised lecturer and a widely acclaimed
author.

Although his formal education was in electrical engineering and economics,

he became immersed in trading and this is where Joe’s early research
began.

Today Joe is one of the most sought-after experts for his exhaustive
investigations into trading principles. Joe has written many technical
analysis books as well as developed several practical and unique methods of
trading. Several of the techniques, including Fibonacci ratios and the
DiNapoli 3 x 3, are used in major financial capitals around the world.

His articles have appeared in a wide variety of technical publications

around the world. Some of the books he has written include Fibonacci Money
Management and Trend Analysis In-Home Trading Course.

Joe DiNapoli has developed indicators and methodologies that are installed
on trading platforms worldwide and in daily use. Further information about
Joe DiNapoli and his techniques are detailed in his many books.

Now you know little bit about the man who was responsible for developing
some the indicators that we will be talking about.

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The common DiNapoli indicators consist of the following:

1) DiNapoli Detrend

2) DiNapoli MA 25x5

3) DiNapoli MA 3x3

4) DiNapoli MACD

5) DiNapoli MACD Predictor

6) DiNapoli Oscillator

7) DiNapoli Preferred Stochastic

8) DiNapoli Retracement Fibonacci

9) DiNapoli Expansion Fibonacci

10) Fib Node software

(Several of these indicators are free while others are only accessed by
subscription through the broker. From the above list, indicators 5 through
to 10 are usually only available by subscription. It is possible, however,
for a trader to construct these indicators manually.

DiNapoli Layouts

We set charts up with the following indicators: the DiNapoli MA 3x3,

DiNapoli Preferred Stochastic, 60 EMA, with the HeikinAshi candles.
David’s favourite layout is the DiNapoli 3x3 with HeikinAshi candles only.
As you can see by looking at this chart there are no other lines except for
the DiNapoli 3x3 line. We do this in order to reduce confusion with a lot
of information on the chart. We advocate a simpler, cleaner approach to
setting up charts.

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Figure 1 D 3 x 3,60 EMA, HeikiAshi Candles

Guppy Multiple Moving Average Layouts

The Guppy Multiple Moving Average (GMMA) can be installed onto a chart.
First, it can be installed below the main chart; and second, it can be
installed on the chart itself. It is a matter of personal preference which
way you prefer to work but again we are looking at a minimum amount of
information on the chart to give a clearer picture of how the currency is
moving.

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Figure 2 GMMA Guppy Multi Moving Average

Entry signals are as follows: a flat top or a flat bottom HeikinAshi candle
above or below the DiNapoli 3x3 with a cross on the Stochastic. Once you
have a cross then wait for a flat top or flat bottom candle before going
into the trade.

If the cross is above the DiNapoli, then go long (buy), if it is below

then go short (sell). If it is above the 60 EMA go long and if it is below
the 60 EMA go short.

Stay in the trade for a goal of 75 pips or more.

Types of orders

Market - Such order will be executed, but price is not guaranteed.

Stop - Execution is guaranteed if ask (buy stop) OR bid (sell stop) quote
reaches order price, depending on the direction of your stop order.

Limit - Execution occurs if ask (limit buy) OR bid (limit sell) quote
reaches order price, depending on the direction of your limit order.

Stops and Limits

No discussion about entry and exits would be complete without covering

stops and limits. Stops and limits are extremely useful tools when looking

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at placing trades in the Forex market. Stops and Limits are used to protect
your profits and minimise your losses when you place a ‘Parent and
Contingent’ order into the Forex market.

Stop Loss Order: A point in the trade where a maximum loss value is
specified. In other words, you put a stop order on your trade at the point
where you no longer want to lose money, should your trade go the wrong way.
In the event of a trade going against the trader, when the price goes down
to that point the trade will automatically close out the trade for the
specified loss. (Unless, as sometimes happens in extremely fast-moving
markets, the currency is moving too fast and jumps the stoploss point).

Limit: A point in the trade where a maximum or minimum amount of profit is

specified. This is the point where you would be happy to take a profit. In
the event of a trade going in the correct direction for the trader, when
the price gets to that point the trade will automatically close out for the
specified profit.

Trailing Stop Loss: This is a complex stop-loss order in which the stop-
loss price is set at a specified point when the trade starts. When the
price moves in the direction of the trade, the stop-loss point moves
proportionately. If the price falls, the stop-loss point doesn't change.
This technique allows the trader to set a limit on the maximum possible
loss and as the price rises reduces the maximum possible loss (just in case
the market retraces or turns around).

Stop Limit Order: A stop-limit order is essentially a combination of the

stop-order and the limit-order described above. The advantage with stop-
limit orders is that a trader can place an order into the market in advance
and wait for the market to move to the trade entry. It also will
automatically lock in profits when the limit point is reached.

Cancelling orders is essential. Using tools like stop-loss and limits give
a distinct advantage in that, when these points are reached, the trade
automatically closes the trade out and cancels the orders. Traders need to
take great care that when they close the trade out manually, they take the
extra step of cancelling the remaining working orders as well. Traders
cannot at any time assume that because they have closed the order that
that position has been cancelled. The effect of not closing the working
orders can be devastating to a trader's account because the trade can be
re-initiated if it has not been completely cancelled.

Trader story

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Tardy Trader Joe

Trader Joe had had an excellent day trading using parent and contingent
orders. So much so that Trader Joe had managed to double the trading
account in one night from $2300 up to $4723. Trader Joe was feeling very
pleased with himself as the money had been locked away in the bank. So
Trader Joe went off to bed confident in the knowledge that the trading plan
worked and his style of trading was profitable.

The next day trader Joe went into the trading platform only to find that
the account had dropped from $4723 all the way down to $37. Trader Joe was
very puzzled by this as he had taken great care to close the orders and
lock away the profit. Little did Joe know at that time that he still had
two orders in the system that had not been cancelled. What had happened
while Joe slept was the currency moved to the point where Joe had entered
the trade the night before and picked up those two trades as completely
unprotected trades.

By the time he had woke up the next morning the loss had become so great
with those trades that it had automatically closed and cancelled the trades
and with it taken virtually all of the money that was in the account.

This was an expensive lesson for Trader Joe about making sure that he
cancelled orders and not just closed the trade to lock away profit. Trader
Joe learnt that day that when you put a parent and contingent order on you
actually place two orders into the market - a stop order and a limit order
that must be cancelled when you have closed the trade.

Trader Joe now uses stops and limits as a matter of course and more
importantly ensures that all trades are cancelled before he closes his
trades down for the night.

Do not plan for ventures before finishing what's at hand.

Euripides

Trading the trading announcements

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Some traders trade on announcements. We do not recommend that you trade on

announcements until you have a great deal of experience and understand not
only the currencies but the markets and the impact announcements have on
the markets. Trading announcements is very risky. Trading on announcements
is much like playing Russian roulette. When you start you have no idea
which way things are going but you can be very sure that sooner or later
you will get the direction of the trade wrong.

To understand how announcements affect the market we suggest you follow the
procedure detailed below on a demonstration account so that you can observe
the impact of announcements on the currencies you trade.

 Go down to a five minute time frame.

 Initially use a range-bound currency (AUD/USD) and then look at a

more volatile currency (GBP/JPY)

 Place the support and resistance lines at the edges of the HeikinAshi
candles.

 Observe the volatility of the currency as they are impacted by

different types of announcements.

If you use the Forex factory you will notice that the red announcements
have the greatest impact. The announcement that has the largest impact on
every currency every month is Non-Farm Payroll (the first Friday of every
month).

Caution

When we look at entry and exit signals, our internal dialogue or self-talk
can dominate logic and trading plans. Through the internal dialogue we can
be convinced to enter trades that do not exist. The range of things we
convince ourselves about with self-talk include:

 The trade is not wrong - I know I have it right;

 Creation of entry and exit signals that are not there;

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 Reassure ourselves that the “next candle“ will go in “my

direction”;

 The move it is just “small retracement”.

We can convince ourselves of many other things while we are trading. The
simple result is that by convincing ourselves these things we can stay in
the trade too long, compound our losses, or minimise our profits, and
increase the emotional rollercoaster and stress that we put ourselves
under.

The simple truth is we don't like admitting that our trading decision is
wrong. Because of this, we try to maintain control on the platform and the
reality is you can't. To demonstrate, at the time of writing this paragraph
there are 3.13 million traders online using the one data feed on the live
trading system. There are 3130 people logged into the Forex Factory website
seeking information about coming announcements. Quite frankly, we are
deluding ourselves if we think we can have any sort of influence on the
market going our way. We are just one of a mob of traders following exactly
the same market signals.

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Chapter 4

DIFFERENT TYPES of TRADER

In this chapter we explore a couple of ways of looking at Trader Types;
that is, how your personality and style affects your approach to trading.
First we will look at three trader types in terms of the method you may use
to trade, as well as discuss the importance of timing. Then we will explore
the 15 different trader personalities that may also affect your approach.
Combining these different pieces of information can give a more complete
picture of your attitude to trading and can indicate what methodologies and
strategies would work best for you.

Technical Trading Types

1) Range Bound Trader. The Range Bound Trader is someone who goes for
small profits usually in the range of three to 10 pips. In addition the
Range Bound Trader would be working on smaller time frames (usually five to
30 minutes) and would tend to place multiple trades in this shorter time
frame. (This type of trader is occasionally referred to as a Scalper,
however, the term “ scalper“ in this context is usually a share trading
term not a Forex term.)

2) Day Trader. The Day Trader will hold a trading position for most of,
if not all of a day. The Day Trader would be working on larger time frames
(usually 30 minute, one, two or four hours). The Day Trader will tend to
have profit targets of 10 to 50 pips per trade.

3) Position Trader. The Position Trader will place a trade for long-term
gains. A position trader can work on time frames from one hour through to
one month and will have profit targets that will tend to be over 50 pips
and even in the hundreds of pips depending on the currency.

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Determining what type of Forex trading style would work best for you is
fairly important. It is also not a step that people normally look at when
they start trading. Choosing a style of trading will allow you to see
trading opportunities more easily. To start with, we recommend that you try
each of the trading styles using a demonstration account so that you can
find a tried and tested method of trading that works for you before you
start on your live account.

Choosing a particular trading style is also very important when you look at
currency pairs. As you explore and understand the characteristics of the
currencies you will find that particular trading styles are more suited to
certain currencies. For instance, you may find that a currency that moves
very fast would be more suited to Range Bound trading and a slow moving
currency may be more suited to Position trading.

Another aspect to consider is the spread of the currency. If you're looking

at doing a lot of smaller trades and taking small amounts of profit each
time it is worthwhile looking at a currency that has a small spread (a
small spread means that it costs less to go into the trade). Conversely, if
you're looking at longer term time frames with larger profits it may give
greater flexibility to use currencies that have a larger spread (a large
spreads means it costs you more to go into the trade).

No matter what style we are talking about, the key is that when you finish
trading for the day you are profitable.
Timing

What else separates a good trader from a great trader? There are a number
of factors that separate the good from the great: instinct, intelligence,
knowledge, leverage and timing all come into play. Probably the most
important area is timing.

When we talk about timing we are talking about a number of factors that go
into timing such as:

 the amount of time that you’re in the market for each trade
 the time frame you're looking at on the chart (eg 30 minutes, one
hour, etc)
 the timing to enter a trade
 the timing to exit a trade
 the timing of announcements that can affect the market (eg non-farm
payroll)

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To bring your skills as a trader to the next level it is important to

understand the different types of timing and how they work with currencies
you want to trade. All aspects of timing combined with the trading style
are extremely important to any trader.

If you take into account everything we talk about in this book when we
discuss entry signals, exit signals, currency characteristics and
timeframes, it is the time frames combined with a trading style that become
the critical considerations to an individual trader’s strategy. We could
write several books just dealing with timing but by the time we finished
writing the books and you finish reading them, I don't believe either of us
would be any wiser. The greatest education that we have had with regards to
learning timing has been using the demonstration accounts and having “on-
the-job training” - which is using live data on a real trading platform
using play money. You will learn far more with hands-on experience using a
live demonstration account than you will by reading about the intricacies
of timing from an academic point of view.

Trader Personality Types

We mentioned earlier in the chapter about trader personalities.

Understanding your trader personality will give you an indication as to
what are your strengths and your trading challenges. Once you know these
you will be able to use your strengths and work on reducing your challenges
to maximise your profits.

Dr Van K Tharp is a professional coach for traders and investors. Part of

the work he has done over the years has been to develop an understanding of
trader personalities. In the Dr Van K Tharp model there are 15 personality
types. As you read through the personality types detailed here you may get
an idea of what type of trader personality you are. As you identify what
type of trader you may be, consider what it is that you can do to become a
better trader by working with your strengths. How can you use this
information to your advantage?

We suggest you complete the Tharp Trader Test produced by the Van Tharp
Institute to find out your own profile in greater detail. If you wish to do
the complete and free trader personality profile test, the web address is
http://tharptradertest.com.

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Accurate Trader

If you are an accurate trader, then you tend to be quiet and very
responsible in meeting your obligations, even beyond the call of duty. You
are also thorough, practical and very accurate. You are the type of person
that I'd want keeping track of my trades and that is your strong point.
Your world probably tends to be very concrete and you value harmony and co-
operation. However, trading/investing ideas tend to be very abstract. In
addition, for you, the trading world tends to be very solitary.

One of your Trading Strengths

If someone hands you a system that works – you can follow through with it.
You like things that are proven.

One of your Trading Challenges

Thinking too much could lead to ‘analysis paralysis’ which could be a
constant threat.

Administrative Trader

People who fit into this category have several of the qualities that make a
good trader. You tend to be practical, realistic and decisive. You move
quickly to implement decisions and these are all good for trading. You love
facts and what you think is concrete. You are very good at making sure that
things run smoothly. As a result, you tend to be good at organising
projects and people to get things done the most efficient way possible.

One of your Trading Strengths

You should have no problems staying with and executing a simple trading
system that someone gives you and you feel confident about.

One of your Trading Challenges

You love the details of trading system analysis and development so much but
you can often be working on the wrong things. Your efforts can be misguided
if you are following the wrong guidelines or advice.

Adventurous Trader

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Generally you are a quiet and flexible observer until a problem appears and
then you act quickly to find a solution. You are good at determining what
makes things work and going through a large amount of information to find
out what is important. This quality will help you immensely as a trader.
You are not easily persuaded by anything that is not based on fact.
However, if your orientation tends to be external, then you are probably a
big risk taker.

One of your Trading Strengths

You are great at analysing details to determine what makes things work.

One of your Trading Challenges

You might have problems with self-analysis which is critical to eliminating
mistakes in trading.

Artistic Trader

Being an Artistic Trader suggests that you enjoy what's going on around you
and being in the "now." You like to have your own space and work within
your own time frame. In this sense you enjoy the independence of trading,
although not the fixed hours of the markets. One of your strengths is your
ability to be open-minded, adaptable and flexible, so if you can figure out
how to apply that to trading, it will improve your chances of success.

One of your Trading Strengths

You have an ability to be open-minded, adaptable and flexible within your
trading.

One of your Trading Challenges

Finding and fixing mistakes are not preferred behaviours.

Detailed Trader

The Detailed Trader type suggests that you are very quiet and serious. You
tend to earn your success by being thorough, methodical, systematic,
organised and dependable. You are also realistic and responsible as long as
things make sense for you. You have two of the three qualities that are
necessary for trading success (ie: you make decisions based on logic and
analysis and you are decisive, orderly and do things sequentially). Thus,

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if you are willing to commit yourself, you'll probably be quite successful

as a trader. However, you might need some help seeing the big picture that
is necessary for trading success.

One of your Trading Strengths

You should have no problems staying with and executing a simple trading
system that someone gives you and you feel confident about.

One of your Trading Challenges

You love the details of trading system analysis and development so much but
you can often be working on the wrong things. Your efforts can be misguided
if you are following the wrong guidelines or advice.

Facilitative Trader

The Facilitative Trader type suggests that you are essentially quiet and
serious, although you tend to be very sociable and good at facilitating
others as a group leader. You can provide inspiring leadership as you find
potential in everyone and you want them to fulfil their potential. As a
result, you might be a good leader of traders; however, be aware that it
could be a stretch for you to become an individual or solitary trader. You
probably like to be well organised which is a useful trait for a
trader/investor. You also have two of the three core qualities that are
essential for being a great trader - the ability to see the big picture and
the connections between things. You are also decisive, orderly and able to
do things sequentially. You'll work at maintaining structure but you
probably don’t like to deal with logic and ideas, so the development of a
trading system could be somewhat of a problem for you.

One of your Trading Strengths

You bring energy, creativity and a willingness to explore new ideas to
system development and trading.

One of your Trading Challenges

May have a need for external confirmation of your ideas, systems and
beliefs to the detriment of developing your own system.

Fun-Loving Trader

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You tend to be optimistic, outgoing, playful, loving life, the people

around you and your material comforts. You probably enjoy working with
others to make things happen and are more gregarious than the other trader
types, finding security in your connection with others. You also bring a
logical, common sense approach to your work. And you like to things to be
fun. You are highly productive and have an infectious zest for life.

One of your Trading Strengths

If you choose to trade, you would be optimistic about your chances in the
markets.

One of your Trading Challenges

You will have a tendency to throw good money after bad to try to jumpstart
a losing trade and turn it around.

Independent Trader

If the markets interest you, you'll probably work to develop a logical

explanation for how they work. This is because you love theoretical ideas
and abstract concepts (in fact, much more so than interacting with people).
This can be great for trading success, if you don't get too theoretical.
This type of trader profile suggests that you value knowledge above all
else. As a result, you'll be constantly generating new ideas about the
market or trying to disprove the ideas that you learn from others.

One of your Trading Strengths

You can quickly determine if a new style of trading or system will fit well
with your personality.

One of your Trading Challenges

Your trading could dominate your time and you could become socially
isolated, which in turn could upset others, particularly if you have a
spouse.

Innovative Trader

Your goal is probably to understand the world, constantly absorbing new

information that comes your way. You then process all of this through your
intuition to quickly size up what is going on around you. This can be an

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excellent quality for traders and investors if you get the right
information. Otherwise your decisions and conclusions may tend to be
flawed. And this could be costly for you as a trader.

One of your Trading Strengths

You can quickly determine if a new style of trading or system will fit well
with your personality and you get very excited about it.

One of your Trading Challenges

You want external confirmation for everything and have a strong need for a
mentor.

Planning Trader

You tend to be decisive and to the point. You'll quickly assume leadership
when it is called for by the circumstances around you. You have the ability
to quickly develop and implement trading systems to meet your needs. You
have the three core qualities that are essential to being a great trader -
the ability to see the big picture, new possibilities and the connections
between things. You make decisions based on logic and analysis and you are
decisive, orderly and do things sequentially. You can easily spot logical
inefficiencies in the market and take advantage of them, especially if you
are pointed in the right direction. You enjoy long-term planning and goal
setting and seem to enjoy learning, expanding your knowledge and staying
well-informed.

One of your Trading Strengths

Originality and drive and a willingness to follow your ideas through to
completion.

One of your Trading Challenges

Probably so logical that you don't recognise when emotions are causing you
to self-destruct.

Socially Responsible Trader

Socially Responsible traders tend to be very loyal, especially to your

values and to people who are important to you. In addition, you want an
external life (and a market) that is congruent with your values. However,
the market is going to do what it is going to do. You tend to be quick at

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seeing the possibilities, meaning that you can easily find opportunities in
the market. You probably deal with the market according to your personal
values and how you feel at the time.

One of your Trading Strengths

Totally motivated by your values and what "feels right" to you.

One of your Trading Challenges

Without an understanding of how to evaluate systems, you may persist in
your market and trading beliefs despite the weight of objective evidence to
the contrary.

Spontaneous Trader

You are probably enthusiastic, warm and quite imaginative. You see life as
being full of possibilities. In addition, you are able to quickly make
connections between events and the information to which you are exposed and
then make quick decisions. This quality can be good as a trader, but you
also need to be very careful because you have only one of the three
qualities that we find in the best traders.

One of your Trading Strengths

Enthusiasm and a willingness to take action; you probably don't have a
problem with pulling the trigger or trying new trading systems.

One of your Trading Challenges

Discipline, follow through and attention to detail will always be
challenges, and you need to find ways to achieve these that are automatic,
scheduled and regular.

Strategic Trader

You probably live in a world of ideas and strategic planning. This is

because you value intelligence, knowledge and being competent. These are
great qualities for a trader/investor. In fact, you have the three core
qualities that are essential to being a great trader - the ability to see
the big picture, new possibilities and connections between things. You make
decisions based on logic and analysis and you are decisive, orderly and do
things sequentially. You have an original mind and a great drive to

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implement your ideas and achieve your goals. Thus, if trading success is
important to you, you'll probably find a way to achieve it.

One of your Trading Strengths

Originality and drive and willingness to follow your ideas through to
completion.

One of your Trading Challenges

You are probably so logic driven that you don't recognise when emotions are
causing you to self-destruct.

Supportive Trader

You tend to focus on the details of life, seeing what needs to be done and
doing it in a conscientious manner. You take your responsibilities very
seriously and you are very dependable, practical and realistic. At the same
time, you strongly value security and stability. You tend not to be a risk
taker, but you could see yourself as an investor as long as you had a
structure to work under.

One of your Trading Strengths

Your creativity often comes from flashes of insight into the nature of
things or the needs of people.

One of your Trading Challenges

You have trouble taking socially adverse trades, which if you dig deep
would eliminate a lot of options for you in trading.

Values Driven Trader

Value Driven Traders typically need to do their own thing and trade
something they deeply believe in that is self-generated. If you've listened
to, say, the media about what's important to success, then you could find
yourself trading with some version of this idea but with disastrous
results. You tend to get your sense of meaning out of relationships, ideas
and material possessions, which suggests that you would tend to be
motivated to make money. You have two out of the three characteristics that
make a great trader you have the three core qualities that are essential to
being a great trader - you have the ability to see the big picture, new

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possibilities and connections between things. You are also decisive,

orderly and do things sequentially.

One of your Trading Strengths

You can readily grasp how the markets work and develop new low-risk ideas.

One of your Trading Challenges

If you accept the status quo of society and how trading “should be done”
as your understanding of the markets, then you’ll probably jump right in
and make a mess of things.

In summary when you explore your trader profile you will gain insights and
clarity on how you as a trader will view, assess, understand and act on the
information you collect as you look at the markets. A combining of the
three aspects discussed in this chapter will assist you in determining your
own trading strategy and methods.

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Chapter 5
Currency Characteristics
When I was looking at writing this chapter I recalled the conversation I
had with a friend who was trying to understand what I was doing with Forex
trading and writing this book. The question he asked me was “Are there
really differences in the way different currencies work and can you really
make money by understanding the way it works?” My answer to this question
was:

The more you understand the currencies you trade the more you will be able
to determine how and when to trade those currencies profitably. In some
ways what you need to do is develop a relationship with the currency. Just
as with any other relationship you have there will be high points, lower
points, unexpected movements and challenges along the way. In fact you
start to notice that there is a rhythm and flow in the relationship. My
wife will agree that our relationship fulfils all those criteria
(particularly the ‘unexpected’ and ‘challenging’ bits). As you study
and understand the currencies you trade the more you understand that there
is a rhythm and a flow to the way the currency moves. Each currency has its
own personality and the more you get to understand it the better able you
are to work with it. Getting to know how the currency moves in a market
will better prepare you to take advantage and profit from the short, medium
and long-term trends.

To give you an idea and some other things that need to be taken into
consideration I will cover several areas that can, and do, influence

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currencies. As you may imagine, some events impact particular currencies

more than others. For example, several currencies are heavily influenced by
changes to interest rates and trade relationships, other currencies may not
be impacted as much. Understanding these relationships can help you figure
out how the currency will move when announcements are made. Some currencies
are extremely sensitive to changes in commodity prices or to political
stability in the area, for example. For you to be successful it is
essential that you understand how these events and the general rhythm and
flow of the market influence the currencies you trade. The more you
understand this, the better trader you will be.

Currencies we are talking about in this section and the abbreviations we

will be using:
Australia, Dollars AUD
Canada, Dollars CAD
United Kingdom, Pounds GBP (Sterling)
Euro EUR
Japan, Yen JPY
Switzerland, Francs CHF
New Zealand, Dollars NZD
United States of America, Dollars USD

Currency Cycles

As mentioned before, currencies have a rhythm and flow. One aspect of this
rhythm and flow is that currencies make patterns whereby this ebb and flow
works in cycles so that over time a currency will frequently end up where
it started. In fact, if we look carefully, this ebb and flow is not unlike
the rhythms of our own daily lives, which also run in cycles. These include
the seasons, the rising and setting of the sun, the ebb and flow of tides,
day and night, the earth revolving around the sun, and so on. We tend to
take all of these cycles for granted because they are happening every day.
As a result we rarely think of them in terms of cycles.

And unless we are meteorologists or farmers or have a great interest in the

weather, we seldom associate cycles with forecasting. With the science of
weather forecasting we have accurate instruments to predict tomorrow's
sunshine or rain, which could also be said for things like earthquake
prediction, tsunami alerts and many other cyclical areas of life. What has
us able to predict or forecast tomorrow's weather, or the next earthquake,

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are the underlying factors that go into looking at repeated cycles. It is

on the basis of these cycles and rhythms that we form our hypotheses to
predict future events. With the patterns in currency charts, we can make
predictions in the patterns of currencies.

Essentially, the same methods can be applied to trading the Forex market.
Just as with predicting the weather, we have a choice of sticking our head
out the door and on the basis of this information predict what tomorrow is
likely to bring; OR we could wind up a supercomputer to start a technical
analysis of market cycle theory and, as a result, develop an hypothesis
based on the evolution of the market over the last 12 months (plus maybe
include the impact of the beef and salad sandwich with orange juice the
Reserve Bank governor ate for lunch) and we will then be able to predict
the low and high of a trading cycle.

I know I may have exaggerated my description of analysis. However, I know

we can sometimes over analyse the market cycle and this sort of over
analysis can lead to paralysis when it comes to trading. However, what
follows will enable you to appreciate what is meant by the market cycle
from a technical analysis point of view. As I keep repeating, I think we
can go too far when analysis is concerned.

The basic concept of a market cycle. Imagine the price of a currency

moving up and down, shown graphically on a chart in the form of a wave. The
bottom of the wave is the low point and the top of the wave is the high
point. Each low point (the ebb of the wave) is connected to a high point
(the crest of the wave) and over time there is a series of waves mapped
out. The movement between two low points or two high points of any two
waves can be regarded as a cycle. To explain this another way: imagine the
longest day of summer (the equinox) last year and the same time this year,
we can make a pattern from the two which we can think of as a cycle of the
length of days (ie the time factor). Overlay this with the temperature,
rainfall, wind patterns (ie the conditions factor) on to this cycle and you
have a weather prediction for the following year, or a trend in weather
patterns. When looking at the Forex market, the conditions component for
markets would be based on volume, the prevailing economy, production costs,
employment statistics and many other indicators. By combining the two main
factors – time and conditions - for frequently repeating cycles over a
period of time, such as the weather or markets, we can define a trend, and
trends are used as the basis for forecasting. Thus such trends can be used
as a tool for forecasting the Forex.

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Trading market cycles and rhythms

The length of market cycles can be viewed as the short-term, the medium-
term and the long-term cycles. It is generally accepted in Forex analysis
terms that short-term Forex analysis involves a period of 100 - 400 hours,
medium cycles are between 20 - 40 days and the long-term cycle covers 30 -
50 weeks.

However, with much of the trading I do, I don’t use these time frames.
Guess you could say I am a MICRO time frame trader. I go into the market
for as little as half an hour up to a few hours a day. The simple reason is
that I look to make the pips I want and get out of the market quickly,
hence preserving my capital. I’m sure you can tell by now that I don’t
do Market Cycle Analysis. I do look at the market cycles to get the rhythm
and flow but I do not sit and analyse it.

As with many things we have the option of including all the information we
can find to help predict the cycle, the flow and the rhythm of the market
but the truth is that we don't really need all the information. It actually
works better if you get just the information you need to do the trades you
want. Now, having said that, if your trading style is to place a trade on
and leave it for 12 months then by all means it can be important that you
do a full analysis of the market cycle. However, if you're a day trader
there is really absolutely no point in doing an analysis of where the
currency will be in 12 months time.

After discussing the nature of the cycle, let us now look at the rhythms of
some specific currencies. Please note: we will only be looking at a few
currencies but EVERY currency can be looked at in this way - just pick your
favourite currency and see what you can find out about its rhythms and
flows.

USD - US Dollar

The USD is the world's reserve currency. Central banks hold the USD for
financial international dealings and through the acquisition of assets.
This makes the USD very sensitive to changes in interest rates.

The US is a debtor nation. This means that US reserve needs to borrow

capital to operate, which also means that the USD is very sensitive to

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interest rates. So any announcements related to interest rates will impact

the USD.

The US imports much more than it exports, so the US consistently runs a

large trade deficit. The single most important import is energy,
specifically crude oil, thus rising oil prices typically result in a weaker
USD.

The US is a politically susceptible country which can expose the USD to

political risks such as changes in government and taxes. Additionally, when
the US becomes engaged in overseas military activity, these
activities/conflicts can, and often do, cause fluctuations (rise and fall)
for the USD.

EUR - Euro

The EUR is extremely sensitive to changes in interest rates. This is

because the EUR is emerging as a leading reserve currency, replacing the
USD in some cases.

The EUR is as equally sensitive to economic growth as interest rates. This

region typically lags the rest of the world in GDP growth, which can
sometimes weaken the EUR. The EUR is shared by a collection of countries
that can have conflicting monetary and political views and consequently it
can be affected by political changes. These differences often show up as a
weakness in the EUR. The European Union is frequently growing as more and
more countries join. This has both advantages and disadvantages in the
context of currency trading.

GBP - British Pound - Sterling

The GBP is one of the most highly valued currencies in the world because of
the United Kingdom's stable and reliable monetary policy. The GBP typically
carries a relatively high interest rate. The UK economy relies heavily on
consumer spending, which means the labour situation, retail sales and
housing data are all important statistics and announcements to take into
consideration when trading.

JPY - Japanese Yen

The JPY is sensitive to changes in exchange rates because Japan is a huge

exporter of manufactured goods. The Bank of Japan can “manage” the JPY
because the country relies so heavily on exports to drive growth.

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The country is quite small and short on natural resources. It therefore

follows that Japan imports a great deal of commodities including energy and
metals. That being the case, the stability and strength of countries that
Japan deals with are also an important consideration as well as commodity
pricing when analysing the currency.

The Japanese economy has been known for yielding a very low interest rate
due to the sluggish domestic growth.

AUD – Australian Dollar

The Australian dollar is currently the sixth most-traded currency in the

world, (behind the US dollar, the Euro, the Yen, the Pound Sterling, and
the Swiss Franc), accounting for over 6% of worldwide foreign-exchange
transactions. The Australian dollar is popular with currency traders due to
high interest rates in Australia; the relative freedom of the foreign
exchange market from government intervention; and the general stability of
Australia's economy and political system. The prevailing view is that the
Australian dollar offers diversification benefits in a portfolio containing
the major world currencies, particularly because of its greater exposure to
Asian economies and the commodities cycle.

Currency characteristics summary

In a brief journey on currency characteristics we have only looked at a few

of the currencies. Each currency has a particular flow and rhythm and is
influenced by different factors. There are numerous instances when
understanding a currency’s characteristics can help a trader identify
opportunities in the Forex market. The more you know about the currencies
you trade, the economics of the country, or region - when combined with
daily announcements - the better prepared you will be to spot opportunities
in the Forex market. It is to your benefit to take the time to study the
currencies you want to trade as it will pay you handsomely further down the
road and make trading more enjoyable.

More characteristics to look at when trading currencies

Having discussed the individual currencies, we will now look briefly at

cross currencies and how they can work together. GBP/JPY and the AUD/JPY
are examples of cross currencies (no, that doesnt mean the currency is
angry). Here’s a tip: currencies do not have emotions and are not
influenced by your emotions.

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A cross currency is a pair of currencies, traded on the Forex, which do not

include the USD as part of the pair. That is, one foreign currency is
traded for another without having to first exchange the currency into
American dollars, (e.g. the AUS/JPY). Historically, if an individual
wished to exchange a sum of money into a different currency they would
first be required to exchange their currency into the USD. Then the USD
would be used to purchase the second currency. The use of cross currencies
eliminates the additional transactions and more importantly the additional
costs incurred when these exchanges happened. For example the GBP/JPY cross
was invented to help people from the United Kingdom and Japan transact
directly without the use of the USD. The interesting thing is that the
cross currencies can have more volatility and thus provide a higher return
to Forex trader than a currency that has a USD component.

All the yen (JPY) currencies will move together in the same direction: for
example, the USD/JPY, the EUR/JPY, and the GBP/JPY will all travel in the
same way. The same with the US Dollar: all currencies that have the USD as
the second in the pair will travel in the same direction – ie the AUD/USD,
NZD/USD and EUR/USD will all follow the same direction. As with the JPYs,
all the EURs will move in the same direction for the same reason. I am sure
you get the idea now and can apply the principle to any group of currencies
with a common currency as the second in the pair.

Now, having established the principle of the USD as the second currency, if
you then have a currency with the US component as the first in the pair (as
the USD/JPY) it will pre-dominantly go in the opposite direction to any
currency with the USD as the second in the pair.

Studying the AUD/JPY cross currency, it is interesting to note that if you

look at the charts associated with these currencies then you will see that
the Australian component (AUD/USD) will go in one direction and the
Japanese component (USD/JPY) will usually go in the opposite direction.
This is useful because if you are looking at the AUD/JPY cross and the
currencies have the same strength, then the cross will be fairly static.
What is useful to learn from this is that if the AUD component has strength
and the JPY component has weakness, the AUD/JPY will move faster than the
individual components (AUD/USD, USD/JPY).

A great exercise as a beginner is to set up three charts: the first with

the AUD/USD, the second with USD/JPY, and the third with AUD/JPY. While
you learn about the characteristics of the currency you want to trade,
watching these three charts is a great way of seeing how these currencies

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work together in the market and will give you insights into how your
preferred currency will work with other currencies.

Don’t just dismiss this - it can be a very powerful tool. For example, if
you are trading the AUD/JPY and you can see the AUD has presented a buy
opportunity, it would follow that the JPY component may present a sell
opportunity at the same time. And, depending on the relative strengths of
the AUD and JPY components, you might even see an opportunity for the
AUD/JPY cross. You can use this method to understand and trade any currency
you want to work with whether it is the GBP/JPY, EUR/GBP, EUR/CHF or
AUD/CHF.

To help explain the relative movements of a cross more clearly we have

included a movement diagram showing how the crosses are likely to react.

AUD / USD USD / JPY

+ / - + / -

The USD + and the USD - cancel out each other.

AUD / USD USD / JPY AUD / JPY

+ / - + / - + / -
↑ ↓ No movement Don’t trade
↑ ↑ Going LONG +++ PERFECT TRADE! BUY!
↑ → Long buy Will go up a bit
Static
↑↑ ↓ Long buy If AUD/USD goes up quicker
than
USD/JPY goes down then AUD/JPY
goes up a bit.
↓ ↑ No movement Don’t trade
↓ ↓ Going SHORT PERFECT TRADE ! SELL!
+++
↓ → Short sell Will go down a bit
Static
↓↓ ↑ Short sell If AUD/USD goes down quicker
than USD/JPY goes up, then
AUD/JPY goes down a bit.

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This is true for all the cross currency pairs. A rule of thumb is that you
don’t trade a cross without knowing what the other side of the cross is
doing.

Another interesting thing to look at is the relationship between the EUR

and CHF. The EUR and the CHF are relatively easy currencies to trade if you
trade the relationship. Just looking at the two currencies you will see
they are diametrically opposite to each other. That is to say if the CHF is
going up the EUR will be going down. The interesting thing here is that if
a trade presents for a sell on the EUR then you can go to a chart of the
EUR/JPY and it is likely that you will see a trade is presenting itself in
the same direction.

Speedy Gonzales trading

The whole objective is to get in and out of the market quickly - finish
your trade, put the money in your pocket as soon as possible, and get out
of the market. If you want to win this game, consistency is the way. Most
books on trading will tell you to let profits run when frequently it is
difficult to do that emotionally. From an equity management view, it is
better to decide how many pips (how much money/profit) you want from each
trade, get it and get out of the market. In effect lock your profit away
and retire from the field. The key to winning the game is consistency and
profitability. If you condition yourself to get 50 or 100 pips each day,
then you start to condition your brain to see the trades where you can
collect the amount of pips you want each day whether that is from one trade
or a series of trades.

Specific characteristics

Some other interesting currency characteristics: if you look at the JPYs

you may notice that they tend to go back to where they started, that is,
they trade in a predictable range. The EURs have their own characteristic
insofar as they will all go together in one direction. This makes trading
the EUR currencies easy because you understand the relationship that each
of them has to each other. Again, I need to reiterate you need to check
each currency that you are trading by learning its cycles to determine the
characteristics for that currency.

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If Sterling is going up and Yen is going down then and Sterling Yen will go
sideways because they are fighting each other and neither is winning. If
Sterling is going down and Yen is going down, then Sterling/Yen will go
down faster. These are some of the things that you can look at when viewing
the nature and relationship of the currencies.

Another pair of currencies to look at is the EUR/JPY and EUR/GBP. Basically

they will usually move in opposite directions; they can on occasions,
however, run together. These currencies are both sluggish but stable
because of the EUR component, which is due to the fact that the EUR is the
biggest high-liquidity currency in the market. The EUR/JPY is classified as
a mixed major and, because of its size, it has even been classed as the
fifth major. An important thing to consider when you look at EUR/GBP is
that it is a big moving currency. Large moving currencies can provide
opportunities for large profits (and large losses if you get it wrong!).

Times of Day

Another thing that you need to look at when understanding a currency is the
times of the day when the major movements occur. For example, the EUR/JPY
can start to move from 10am briefly but it is not until 2pm that it starts
to really move. The EUR/GBP is most likely to start moving around 4pm.
(Important NB: the times stated here are indicative for Australia, so YOU
need to look at the market open and closing times in YOUR area.)

A further tip is to look at matching currencies with the markets. For

example the AUD currencies have the most movement when the Australian and
Asian markets are open. Similarly, the EUR, GBP and CHF currencies are
likely to have the largest movements when the European markets are open.
There are exceptions: a currency such as the EUR/JPY works all the time
and can be considered a very good 24 hour currency.

Equity management

Your equity management will also need to be adjusted depending on the

currencies you’re trading, particularly if you are trading larger
currencies like GBP/JPY and the EUR/GBP. For example, if you normally
trade 10 lots of EUR/JPY then you will need to look at trading only five
lots of EUR/GBP because of the larger spread. The EUR/GBP is a slow moving
currency but it has a 2:1 ratio. To understand what we mean by 2 to 1 ratio

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just look at the exchange rate for the Australian dollar to the Euro.
Effectively you will get close to two Australian dollars for every one
Euro. Whenever you are trading currencies like the EUR/GBP, you are
increasing your exposure (doubling your risk) and increasing potential
losses.

An easy formula for a good equity management plan is one that allows you to
have one lot to trade for every $1000 of equity in the trading account. If
you have $2000 then you have two lots to trade. On this basis you can
either trade one currency with two lots or two currencies with one lot.
When it comes to trading with a bit of discipline and good equity
management, you can be very successful. Go in, get your pips and get out,
locking your profit away by trading according to your plan. If you want to
go in again, wait two hours and start again. Do not be tempted to continue
to trade as the chances are you may well give back the profit you made.

To sum up, you have a complete smorgasbord of currencies to choose from to

trade. Just learn the characteristics and follow your trading plan. You
need to taste and feel and see the results that you want.

The Currency Menu (List of World Currencies) is included in Appendix 2

Trader Story

Hong Kong Harry

Trader Harry was a local driver who wanted to visit Hong Kong. Harry took
the time to learn the characteristics of his favourite currency, the
AUD/USD. In fact, Harry spent two years learning the characteristics of
the Australian dollar so thoroughly when he started trading a live account
he was collecting between 45 pips and 75 pips each night. He knew when the
Aussie would run; he knew what it would do when it was under pressure; he
knew the entry and exit points; and he knew exactly the limits and stop
losses that needed to be applied. Every night he would sit down put on his
30 pip stop loss and set his limit and lock away profit. Harry knew how to
trade the currency so well he had a 94% success rate in trading the
Australian dollar.

Harry watched his live trading account steadily increase so much so that he
was making enough money to be able to take his wife on a long overdue
overseas holiday. Both he and his wife had decided they wanted to visit

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Hong Kong and all the money for the trip was going to be come out of the
profits from Harry's trading account.

Since Harry was heading off to Hong Kong, he decided that he'd start
trading the AUS/HKD cross (Australian dollar/Hong Kong dollar).

Each night he would sit down to trade as he had done for the past two
years. What Harry noticed was that as he entered a trade on the AUS/HKD he
was being stopped out with a loss of 30 pips within a few minutes of
entering the trade. This process happened again and again and Harry was
consistently losing 30 pips every trade. To add to Harry's dilemma, his
equity management plan did not allow him to reduce the number of lots he
was putting on each trade as his bank balance started to reduce. This
compound effect - repetitive losses and high exposure - saw an ever
increasing percentage of his equity disappear with every transaction. In
fact Harry's account fell from $10,000 down to $1500 in less than three
weeks. This was by losing just 30 pips per trade.

Harry was a very proud man, a real down-to-earth character. It was very
difficult for him to ask for help but eventually he did. As Harry put it
“he had to eat humble pie”. Harry sought out the best trader he knew to
get advice so he could understand what had been going wrong with his
trading. When Harry went to sit down with the other trader he took his own
humble pie (the biggest apple pie and cream he could find) for them to eat
while they worked out what was going wrong.

The problem was Harry understood the AUD/USD extremely well. Harry assumed
that if the AUD was at the beginning of a currency pair it would react in
exactly the same way as other AUD pairs. This was not true. To start with
the AUD/HKD has a 25 pip spread instead of four pips. To add to this the
flow of the currency was completely different. Yes, it would essentially
run in the same direction but it was more volatile and the way it reacted
in the market was very different. Harry soon realised that his approach,
which was safe when trading the AUD/USD, was like committing hari kari on
his trading account when using the AUD/HKD.

Harry then sat down and, with assistance, developed a trading plan to trade
the AUD/HKD. The plan included putting a more realistic stop in of 60 pips
and increasing the limit to 75 pips. Harry then traded his new plan so

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effectively that he was soon back with a 95% success rate on his trades.
Even then it took Harry over three months to be able to bring his trading
account back to where it was before it was devastated. Another reason it
took so long was that the return on investment for the AUD/HKD is very low
in comparison to other currencies.

Because of Harry's experience, once he had all of his money back he closed
his trading account never to trade again. Harry was working on the
principle of once burnt twice shy. Harry never did take his wife to Hong
Kong.

It is experiences like this that can kill a trader's confidence. This is

why it is so important before you start trading a currency that you are
completely aware of the characteristics of the currency including the
spread, return on investment, and the way it moves in the market.

The weird and wonderful world of professional Forex trading

Like any industry, professional Forex traders have some interesting quirks,
sayings, superstitions and just downright bizarre things that they do and
say. As with a lot of behaviours there is occasionally some basis of fact
and sometimes useful information that you can glean. So come with me now on
a very brief journey of some of the really strange things that have been
said and have happened on the Forex trading floor.

GBP/JPY has the ability to turn the most advanced traders into walking
zombies. This is due to the highly unpredictable nature of the currency and
the inherently higher risk profile. It is not suited to all traders and, in
fact, any cross currency in the JPY series can be difficult to trade and
confuse a trader’s mental state.

For entertainment purposes you could always observe (please pay close
attention to the word ‘observe’) currencies such as the GBP/JPY and
other like-minded volatile currencies during a monthly event called the
“Non-Farm Payroll”. This can be a very dangerous time to trade. You will
need a rare set of skills to handle this event. The Non-Farm Payroll can
be an exciting time of the month, coming as it does mostly on the first
Friday of each month. The excitement is tripled when the triple-witching
hour happens, something that occurs when three types of derivatives’
contracts expire at the same time. This occurs coincidentally in another
triple as triple witching happens every three months.

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Simply put, non-farm payroll would be one of the scariest times to trade in
any month. It is totally unpredictable, uncontrollable, extremely risky
and can completely demolish a trading account in a couple of minutes. This
is not an exaggeration - I have observed the GBP/JPY move 223 pips in less
than two minutes. The most exciting movement I've seen is the TTY/JPY,
which moved 16,300 pips in the same amount of time. Once this sort of
movement starts it is often just not possible to close out a position soon
enough. Due to its high unpredictability, the GBP/JPY can be extremely
risky and not suitable for all trading styles. An appetite for high risk
is absolutely necessary if you’re going to trade this currency pair.

So what is ‘Non-Farm Payroll’? It is a collection of statistics

researched, recorded and reported by the US Bureau of Labor. These
statistics are intended to represent the total number of paid US workers of
any business, excluding general government employees, private household
employees, employees of non-profit organisations and farm employees. This
monthly report also includes estimates on every individual who works each
week and the average weekly earnings of all non-farm employees.

The reason non-farm payroll is so important is that every currency is

impacted by the US component so any shifts up or down in payroll or
consumer sentiment in the US economy will impact currency movements
worldwide. The reason every currency is impacted is because every major
trading economy has US component on the Forex market. The cross currencies
mathematically cancel the USD component. (E.g. AUD/USD plus USD/JPY equals
AUD/JPY hence the US component impacts both currencies.)

Trader Story

Cathy's Calamity

Trader Cathy had been watching non-farm payroll for several months and had
worked out what she thought was a foolproof strategy to be able to trade on
that night. Cathy set up her account with $70,000 in it, got a packet of
potato chips, beer and settled in to trade for the night. About an hour
before the Non-Farm Payroll announcement Cathy had placed several trades
that were all going the way that she wanted them to. In fact things were
going so well that Cathy was about $34,000 in profit.

Then the non-farm payroll announcement happened and the currency carnage
catapulted Cathy's account over the fence. As soon as things started to go

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in the wrong direction Cathy tried to close out the positions but was
unable to because of the speed of the currency movements. The currency
moved so fast that it jumped the stops and kept going. In less than two
minutes the account, which was worth $104,000 prior to the announcement,
ended up closing out with $900 in it.

The emotional rollercoaster of non-farm payroll can have a devastating

effect and not just financially. When the trade finally closed out Cathy
collapsed with chest pains and was rushed to hospital. Fortunately Cathy
recovered fully but her bank account didn't.

The Irish Elves and other creatures

In the professional Forex trading world the GBP/JPY is sometimes referred

to as the leprechaun currency. The currency is a market maker or market
leader and like an Irish elf the GBP/JPY can be mischievous, elusive and
possess buried treasures for traders to find. If you manage to catch the
GBP/JPY on a run there is a chance you can reveal and collect some of the
hidden treasure. All jokes aside, although the GBP/JPY is a very good
currency to trade most of the time, extreme caution needs to be taken as it
is just as easy to make losses as it is to make profits from this currency.

The term ‘Elves' originated in conjunction with the GBP/JPY by financial

commentators during 1970 to 2005. It was used as a slang term to describe
the technical analysts who appeared on the PBS television show Wall Street
Week. On the show, the Elves– or so-called analysts - attempted to predict
the direction of the market in the coming months. The show gained immense
popularity due to the analysts’ complete inability to make accurate
predictions. They had a 100% failure rate when it came to the GBP/JPY, so
traders listened carefully and traded in exactly the opposite direction.
Unfortunately this useful and accurate technical trading tool is no longer
available to us.

The ‘Boston Snow Indicator’ is another amazingly accurate indicator of

trading. (Just in case you missed it we are being a little sarcastic) Some
time ago a trader with clearly too much time on his hands sat down and
developed a theory that stated that if it snowed at Christmas in Boston
then the market would rise the following year. This indicator produced
marginally better results than the PBS elves. This indicator known as the
Boston Snow indicator is also called the BS indicator for short. I guess if
you throw enough darts at a dartboard eventually you get a bull's-eye.

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Japanese housewives play a major part in the movement that takes place on
the GBP/JPY. The Japanese housewives’ indicator has a direct correlation
with the football soccer moms’ indicator. Common to all these indicators
is the stay-at-home mums anywhere in the world who can be driving the
market. The way this works is if a Japanese housewife or a soccer mum is
trading currencies and they start chatting to each other when picking up
the kids or doing some other activity together. The combined impact of
everybody talking about the same thing can actually influence the market.
It is almost certain that the Japanese housewives/ soccer mum phenomenon
has helped drive the recent credit crisis. Believe it or not this theory
has legs. In short, there is a general belief that rumours move the market.

‘Wooden Duck’ trading refers to the phenomenon of when you get a head of
government, a treasurer of a country, any member of the G20, G8, or any
high-ranking member of a world financial body and put them in a room in
front of a group of people anywhere in the world and have them speak on the
world stage. At some point in that speech you could watch world currencies
move whether what is being said was important or relevant or not. Another
name for this was the George Bush indicator. In short you need to be
prepared for anything when a world leader gets up and speaks.

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Chapter 6
Different Trading Methods
Confidence is the feeling that you have before you understand what you
have done.
Anonymous

TRADING IS A HANDS-ON GAME

Here we will briefly touch on different trading methods. There is a

considerable amount of literature on all sorts of methods, which we choose
not to duplicate here. Some of the methods we will go into in more detail
precisely because they do have more detail. If any of these methods appeal
to you I'm sure that you can find other sources of information to expand
your knowledge.

Abstract trading

This may sound a bit flippant but, very simply, get a dartboard and throw a
dart at it. If the dart lands in the top half, set your trade to buy. If
the dart lands in the bottom half, sell. Now to put it in the equivalent
trading terms: looking at your chart, if the candles are green buy and if
the candles are red sell. Another method of abstract trading is to trade
only long-wick candles. (Not long bodies, only long wicks.) The key to
success with this method is that when your trade is in profit take the
profit off quickly and when it looks like the trade is going bad get out
before it gets too bad.

Fundamental analysis

Fundamentally, you are trading on the news. You must look at any reports or
news that is released and this information dictates how you trade.
Essential resources for this type of trading are websites such as
www.forexfactory.com, which give out all the trade and government
announcements for the day. An excellent feature of this particular site is
that it uses a white, yellow, orange or red sign against each announcement
to indicate the severity of the impact an announcement will have on the

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currencies. If you are doing a fundamental analysis, it is essential to

review these announcements every day before you start trading.

Anniversary trading

No, anniversary trading does not mean you trade only on your wedding
anniversary or your birthday: in essence, you trade only annual
announcements. For example, the annual Producer Price Index (PPI) from
England and the annual inflation rate out of the US.

Position trading (long-term trading)

With this type of trading you put on a trade and leave it on for a week, a
month, two months, a quarter. The length of time is purely dictated by the
type of position trading that you do as a trader.

Range bound trading (Scalping)

Forex range bound trading can also be called “scalping” or quick trading.
It is a method whereby traders allow their positions to last for only a
matter of seconds to a few minutes, rarely longer. With this trading
method, a trader starts a trade and takes merely a few pips, maybe as many
as 10 pips but usually only two or three, but takes them frequently. This
means, of course, that the trader is continually taking positions and
peeling profit.

Swing trading

Swing trading is a trading practice commonly defined as when a currency is

bought at, or near, opposite cycle swings caused by daily or weekly price
volatility. A swing trade is open longer than a day, but shorter than
position (longer term) trades.

Breakout trading

Breakout trading is used to take a position in the early stage of a trend.

A breakout occurs when the currency moves - with increased volume - outside
the defined support or resistance levels. A breakout trader enters a long
position after the currency breaks above the resistance or below the
support line. Once the trade goes beyond the price barrier of support or
resistance, the volatility usually increases and prices usually trend in

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the breakout's direction. The reason breakouts are an important trading

strategy is because these setups are the starting point for future
volatility and large swings. In many instances, breakouts are the starting
point for major price trends.

Technical analysis

Technical analysis is the study of prices and volume. It uses charts and
mathematics to analyse forces that impact on supply and demand.

Technical analysts will use support lines, resist lines, trend lines, chart
patterns, Fibonacci lines plus other indicators including the RSI, MAC D,
CCI, Bollinger bands, Exponential Moving Averages plus many others. We will
cover a few of them here but I’m sure there are technical analyst traders
who could list many other indicators we do not cover in this book. In
several ways technical analysis trading is like shooting fish in a barrel.

Following the traditional way of trading Forex, new traders are usually
directed to courses and instructors who can teach them technical analysis.
I can understand why they do this. For some people it is intrinsically
interesting to understand all the technicalities that can go into trading.
In addition, there are traders who see that technical analysis has some
merit for their trading. And sometimes it is comforting to have a
structure and methodology that takes the emotion out of the process. The
down side that I see is that too many lines, bars and arrows can lead to a
messy chart with complications and confusion.

Figure 3Technial Anylsise

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There are some people who love technical analysis and wouldn’t trade
without it. Learning about all the details of technical analysis is a huge
task in itself. Nevertheless, from what I’ve been told by other traders
I’ve spoken to, there appears to be only a very small percentage of traders
who use technical analysis in a way that actually beats the market over the
long run.

Chart patterns

There are various patterns in the charts that can indicate where the market
is going. You can look at reversal patterns, continuation patterns, double
tops, double bottoms, ascending triangles, descending triangles, head and
shoulder patterns, and inverse head and shoulder patterns. Each of these
chart patterns are believed to indicate when to get in or out of a trade.

Fibonacci

Leonardo Pisano, better known by his nickname, Fibonacci, was an Italian

mathematician born in Pisa in the 12th century. He introduced the Fibonacci
numbers to Western Europe, said to be based upon observations of the Great
Pyramid of Giza in Egypt. Fibonacci numbers are a sequence of numbers where
each successive number is the sum of the two previous numbers.

e.g. 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.

It is the ratio of the Fibonacci sequence that is significant, rather than

the actual numbers in the sequence. The quotient of the adjacent terms in
the series possesses an amazing proportion, roughly 1.618, or its inverse
0.618. This proportion is known by many names: the golden ratio, the golden
mean, PHI, and the divine proportion. The dimensional properties that
adhere to the ratio of 1.618 occur repeatedly in nature. Examples are as
varied as mollusc shells (nautilus shells are one specific example) and the
shapes of galaxies containing billions of stars.

When used in technical analysis, the golden ratio is most often translated
into three percentages: – 38.2%, 50%, and 61.8%. However, other multiples
can be used, such as 23.6%, 161.8%, 423%, and so on. The Fibonacci sequence
is applied to indicate support or resistance for currency movements. Some
platforms can automatically apply the Fibonacci sequence to charts.

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Figure 4 fibonaaci Ratio Examples

Place fig diagram here

Simple Moving Averages / Exponential Moving Averages (EMA)

You can overlay averages over your candles/chart to indicate general trend.

Simple moving averages are one of the most popular and easy-to-use tools
available to the technical analyst. They smooth a data series and make it
easier to spot trends, something that is especially helpful in volatile
markets. They also form the building blocks for many other technical
indicators and overlays.

Exponential Moving Average. EMA is a type of moving average that is

similar to a simple moving average, except that more weight is given to the
latest data. The exponential moving average is also known as "exponentially
weighted moving average".

EMAs reduce the lag by applying more weight to recent prices relative to
the older prices. The weighting applied to the most recent price depends on
the specified period of the moving average. The shorter the EMA period, the
more weight will be applied to the most recent price.

It may appear that the difference between an exponential moving average and
a simple moving average is minimal. However, in the instance of Forex
trading, the exponential moving average is consistently closer to the
actual price.

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Bringing it all together

Having spoken about a number of different indicators used in technical

analysis, I have asked a technical trader to provide a chart so that you
can see what it is they look at when they trade. Even then, this particular
trader does not use some of the tools that we have described.

Keep It Simple Trader (KIST)

Although I have looked at many aspects of technical analysis; overall, I do

not use the processes. Personally, I find a full technical analysis very
much overkill. However, having said that, I do use some of the tools
available when I look to trade.

I tend to adopt strategies that keep the chart relatively clear and simple.
For example, the chart below is a chart I would look at and use to trade.
Here is the technical lowdown on this chart. The red line is the Di Napoli
3x3, and the red and green candles are HeikinAshi candles.

The basic strategy goes like this: look at the candles – if they are above
the RED line with GREEN candles place a BUY order and if they are below the
RED line with RED Candles place a SELL order. You then look at other
indicators to show your entry and exit points. (Some of these aspects are
covered in the chapter looking specifically at entry and exit signals when
trading.)

Obviously there is a bit more to my style of trading than that, but that is
the bare bones of the entire strategy. There are other indicators you can
use to confirm the trade or show entry points clearer - but essentially
that’s it.

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Chapter 7
Trading Strategies That You Can
Use

"It's not whether you're right or wrong that's important,

but how much money you make when you're right
and how much you lose when you're wrong."
- Warren Buffett

Trading Strategy 1 – The 4x3x3 Trade

Requirements

This strategy uses three simple indicators. An Exponential Moving Average

(EMA), a Di Napoli 3x3 and Slow Stochastics. The EMA should be configured
with Price = Close, Period of 4 and Displacement of zero. The Di Napoli 3x3
should simply use default settings. The Slow Stochastics should be
configured with Price = Close, Period of 15, %K Slow Period of 5, %D Slow
Period of 5, Hi Baseline of 80 and Lo Baseline of 20.

Technique

This strategy is based upon entries when the 4 EMA crosses the Di Napoli
3x3 and the Slow Stochastics %K crossed the Slow Stochastics %D in the same
direction as the 4 EMA. The closer the Stochastics cross is to the Hi or Lo
Baseline the stronger the trade so long as the %K is moving back towards
the other baseline. Your stop should be 20 above or below your entry
depending on whether it is a long or short trade. Your Limit should be 30.
This technique can be used on any charts but works best on 15 minute
upwards.

Example

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Figure 5 Trading Strategy 4x3x3

Trading Strategy 2 - The Monkey Trade

Requirements

This strategy utilises only two simple indicators: an Exponential Moving

Average (EMA) of 8 and HeikinAshi Candles.

Technique

This strategy is the simplest of all strategies and is called The Monkey
Trade, as any half- smart monkey could trade this way. It is based upon
entries and exits when the colour of the HeikinAshi candles change unless
the candle is still above the 8 EMA in a long trade or below it in a short
trade. Your stop should be 10 pips above or below the previous candle and
your target pips can be fixed at 1.5 times risk as a minimum but can be
higher depending on the chart you are trading. (ie bigger targets can be
achieved on 4 hour charts and higher.) This technique can be used on any
chart but works best on 15 minute upwards. At any time you can place a
trade in the prevailing direction of the HeikinAshi candles. You take
profit with half your lots at your set limit and move your stop to break
even. Then you let the trade run until the colour of the candle changes and
closes below the 8 EMA for a long trade and above the 8 EMA for a short
trade.

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Example

Figure 6 Trading Statergy 2- The monkey Trade

Trading Strategy 3 - The High 5 Trade

Requirements

This strategy utilises three Exponential Moving Averages (EMAs) and

HeikinAshi Candles. The three EMAs used are set to 5, 15 and 50.

Technique

This strategy is called The High 5 Trade as the three EMAs used all contain
"5". It is based upon entries and exits when the 5 EMA crosses the 15 EMA
and the next HeikinAshi candle is a decisive candle (ie the bottom of a
bullish candle has no wick or the top of a bearish candle has no wick).
Your stop should be 10 pips above or below the previous candle and your
target pips can be fixed at 1.5 times risk as a minimum but can be higher
depending on the chart you are trading (ie bigger targets can be achieved
on four hour charts and higher). This technique can be used on any charts.
When the 5 EMA crosses the 15 EMA, you are looking for an entry but you
wait for the first decisive candle before actually entering the trade. You
take profit with half your lots at your set limit and move your stop to

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break even. Then you let the trade run until the 5 EMA again crosses the 15
EMA. An entry is also available when the 5 EMA bounces off the 15 and/or
the 50 EMA as this is when it retraces and continues in the same direction
as the trend.

Example

Figure 7 High five 5,15, 50 EMS Trading Statergy

Trading Strategy 4 - The Stochastics Cross Trade

Requirements

This strategy uses only one simple indicator, The Slow Stochastics.

Technique

This strategy is a very simple strategy and is called The Stochastics Cross
Trade as it is based on any cross of the Stochastics. You enter the trade
when it crosses and exit when it crosses it again. It's that simple! The
Slow Stochastics %K cross of the Slow Stochastics %D ideally is in the same
direction as the 4 EMA. The closer the Stochastics cross is to the Hi or Lo
baseline the stronger the trade so long as the %K is moving back towards
the other baseline. Your stop should be 20 above or below your entry
depending on whether it is a long or short trade. Your limit should be 30.

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This technique can be used on any charts but works best on 15 minute
upwards.

Example

Figure 8 The stochastic Cross

Trading Strategy 6 – THE RAGHEE WAVE

Set up your chart with the following:

3 EMAs 34 period /HeikinAshi Candle

34 CLOSES, 34LOW, 34HIGH

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Figure 9 Trading Statergy 6 The Wave

Entry signals

Up Trade Entry: When the Flat bottom GREEN candle is above the upper band,
stay in the trade until you see an exit signal on the HeikenAshi candles.
As soon as you see an exit signal close the trade.

Figure 10 Entry signal HeikiAshi Candles

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Down Trade Entry: When the Flat bottom RED candle is below the lower band,
stay in the trade until you see an exit signal on the HeikenAshi candles.
As soon as
you

Figure 11 Entry signals HeikiAshi Down Trade

see an exit signal close the trade.

It is important to have a balanced approach your trading portfolio using

this strategy. However, this strategy can be applied to any currency pair.
Again, a good trading plan and good equity management will make a
difference. It is essential to place realistic stops for the currency you
are trading and it is recommended that you lock away profits as they become
available.

Stop Placement When using the HeikiAshi candle a stop can be place on the
high or the low of teo candles back Protect your equity at all costs

Up behing the low of 2 candles back in the case of a Down Trade behind the
high of 2 candle back

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Figure 12 Stop Placement heikiAshi Candles

If candles are in the middle or crossing the band stay out of the trade,
wait until you have a clearly defined candle above or below the wave.

This strategy is more suited to larger time frames. That is the two, four,
hour daily and weekly timeframes . It is best to avoid the smaller time
frames due to the fact that the movements become too fast and unreliable on
the smaller time frame.

Just in case you missed it before: a good planning strategy and equity
management are essential to making this or any other trading strategy work
effectively. Always look to minimising losses and locking profits away
whenever possible.

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Chapter 8
Expert Advisors (Robots)
“Never become so much of an expert that you stop gaining expertise.
View life as a continuous learning experience.”
Denis Waitley

An Expert Advisor in Forex is also known as a Forex Trading Robot, EA,

MT-4 EA, or Automated Forex Trading Software. Essentially, they are
software that is supposed to take the emotion out of trading.

The trading process becomes very mechanical and methodical. They are
designed to work on the Meta Trader platform and can be set up to alert
you of trading opportunities as well as being able to automatically take
you into a trade as well as manage all other aspects of trading. This
may include sending orders to the broker, adjusting stop losses,
adjusting trailing stops, or taking profits. The degree of automation is
dependent on the type of expert advisor that you are using.

Expert advisors can be set up to take profit. There are a great many
varieties of Expert Advisor available. They can cost from $100 through
to $60,000 or more. How much you pay for an Expert Advisor does not
necessarily reflect how much it can potentially make from the market.
Some of the expert advisors that cost around $500-$1000 can produce more
consistent results than an expert advisor costing tens of thousands of
dollars. Expert advisors of every flavour and price range do not always
get it right. As a result an Expert Advisor can lead to significant
losses if the trader is not carefully monitoring results. Looking at it
very simply, if they worked reliably all the time everyone would be
using them and that just doesn't happen.

If you want a guarantee, buy a toaster.

Clint Eastwood

There are various different types of Expert Advisors for the MetaTrader
4 platform. Here we will discuss some of the more common types. This is
by no means a comprehensive list. There can be other types of Expert

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Advisors created based on the imagination and passion of the programmers

who make them.

News Expert Advisor - This is a type of hedging advisor. The News Expert
Advisor is designed to take advantage of news events and the large price
shifts that can occur during financial news releases.

Breakout Expert Advisor - Is designed to open a trade when the price

breaks through predefined support and resistance levels.

Hedge Expert Advisor - This is any Expert Advisor that takes two
separate and opposing positions and minimises the loss on one while
facilitating maximum profit on the good trade.

Range bound (a.k.a. Scalping) Expert Advisor - the objective of this

expert advisor is to secure small profits as soon as they become
available.

Adaptive Expert Advisor - this is a new type of expert advisor that has
taken some prominence. As a second generation advisor it is much more
adaptive to its environment than its predecessors and as a result can be
more profitable.

Expert advisors explained

Traditional expert advisors are static. You input operational parameters

(they usually come set up with default parameters) and the expert
advisor goes to work with those parameters and makes no adjustments. The
downside to this is that if there are significant unexpected changes in
the market it may not be possible for the expert advisor to keep up with
the changes and as a result it will impact the win-loss ratio. In
English it means you can lose money. It is difficult to find settings in
expert advisors that can work for all market conditions. The first step
to finding this type of expert advisor has come about with the second
generation. As this new generation emerges they appear to be more
capable of adapting to the changing market.

Adaptive expert advisors are systems that are capable of perceiving

their environment, categorising it and using the resulting information
to make adjustments to their own operations with the purpose of
achieving higher profitability with minimum draw down.

Each expert advisor is unique and has its own unique set of operational

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parameters or rules. As the expert advisor follows those rules it enters

and exits the market locking away profit as they go. Everything must be
set in the parameters from the type of currency and the time frame down
to what sort of entry and exit signals the expert advisor will react to.

Expert advisors for MetaTrader 4 are all unique and different in the
rules they follow to enter and exit the market. Expert advisors
eliminate emotional trading decisions that can cripple novice trading
accounts. Forex expert advisors allow investors to exercise a very
strict trading system without falling outside pre-programmed parameters.
It is this rock solid consistency that is one of the features that make
these programs so attractive to serious traders. Forex expert advisors
exercise unmatched discipline when trading and can be designed to
evaluate more parameters at the same time than any human could keep an
eye on at once.

All of the technical indicators that are available in the MT-4 platform
can be brought into the calculation by an expert advisor. The expert
advisors have such great stability that you can even create your own
custom indicator and call upon it from an expert advisor.

Expert advisors make use of technical indicators in order to assess

market conditions and make trading decisions. In order for an expert
advisor to work, it must be attached to an individual chart on the
trading platform. The expert advisor can then take into consideration
dozens of different factors in an instant in order to decide what to do
next. This ability to consider such a broad range of price influencing
factors coupled with the discipline of a mechanical trading system
devoid of emotion can lead to a successful trading combination.

Additional information about expert advisors is available in the

resource section and on our website.

Robot emotion

Having said that expert advisors do not have emotions and that they take
emotion out of trading it must be noted that the traders who use them
still allow their emotions to get in the way.

As the expert advisor works it will open up positions on the trading

platform that will just sit there and frequently they will move into
negative territory. The size of the negative territory will depend on

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the funds available in the account and the drawdown associated with the
currency being used.

If the trader is going to watch the fluctuations in the currency being

traded by the expert advisor then the trader is likely to go through
more of an emotional rollercoaster then if they were doing manual
trading. Seeing large drawdowns can affect the trader significantly.
Generally the first reaction is to close the position and take a loss.
Generally, this is not good idea as the expert advisor most likely would
have taken into account the fluctuation into negative territory. The
result of the trader panicking and manually intervening has been to
incur an unnecessary loss.

That is not to say there are not times when it is necessary for the
trader to intercede and close out trades. Once you understand how the
expert advisor works you can establish your own trading rules for the
expert advisor. One such rule may include closing out all trades at the
end of the month or closing all trades before major announcements (like
non-farm payroll). Decisions like this will need to be made by the
trader after consideration of how the expert advisor deals with events
like that. Not all expert advisors are suited for all conditions and
events so it is best to avoid those conditions and events rather than
incur loss.

Many expert advisors promise the world and subsequently give you a block
of land just beyond the black stump (out in the middle of nowhere). Like
with a lot of things in Forex trading a reliable and consistent expert
advisor that will provide profits each and every day is more of an idea
than a reality.

When we started to investigate expert advisors we set up a number of

them with test accounts. The first one took the account to $0 within 12
hours. The second expert advisor took eight hours to zero the account.
We looked at what we were doing, changed the settings, and changed the
currency pairs we were using and started again. In this case we started
to make a profit at the rate of about 5% per day.

With another robot we took great care to use slow moving currencies and
a small time frame. With that particular account were able to double in
the account within three weeks but then did serious damage to the
account as we left it open during non-farm payroll.

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The bottom line is before you set up a live account to trade with your
expert advisor you need to test and back test the expert advisor with
specific currencies and conditions. Even then the human factor can still
interfere with the success of the expert advisor.

Expert advisor stories

Paul’s Perilous Parable

(Any resemblance of this trader to one of the authors is purely

coincidental – like we are really going to believe that.). Trader Paul is a
computer consultant of many years experience. In fact trader Paul had
worked with a number of advanced computer technologies over the years and
implemented some very complex computer solutions in various industries.
Trader Paul had decided to install a robot on a live account with specified
parameters to give a better return on each trade investment.

After the initial installation things went fairly well and trader Paul was
beginning to see 10% to 15 % return on the investment per day. But then
inexplicably the expert advisor was failing to give any returns. To add to
this turn of events the two trades that the expert advisor had put on were
going in the wrong direction with no sign of turning around.

The first day was not too much of a concern. The second day things were
starting to look bad as the drawdown* now covered 30% of the capital. The
third day saw the drawdown at 50% of the capital. Trader Paul was now
starting to get very concerned that one of the parameters that had been set
was completely incorrect.

As the market moved up and down so did the drawdown. But it showed no sign
of closing the trade out. Trader Paul then closed the trade out manually
with a loss of about 15% of the total account. Trader Paul then continued
to monitor the expert advisor.

Several more days went by and the expert advisor had not placed another
trade. After discussions with another trader it was determined that Paul’s
expert advisor had suffered from a computer ID 10 T error. You see trader
Paul forgotten to turn the expert advisor on and that was the reason why it
was not taking any trades. Even the cleverest trader can be a bit of an
idiot sometimes.

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Moral the story is that sometimes you are just too smart to your own good.
If you're going to invest in an expert advisor make sure you turn it on.

* Drawdowns are open positions on the trading platform that are negative.
It is possible for expert advisors to have drawdowns present for weeks or
months at a time before the trade is finally closed out. Seeing a large
drawdown on an expert advisor can affect a trader. Psychologically it can
have the trader “ panic” and close out trades unnecessarily. Drawdowns on
expert advisors are part of the game. However, this does not main that the
trader shouldn't look at the expert advisor at all. Consideration and
intelligent evaluation needs to be undertaken in relation with
announcements and the expert advisors. For example if the expert advisor
prior to an announcement places a buy order and the announcement is
unfavourable and sends the currency into a sell position then the outcome
is large drawdowns and likelihood of the trade closing out with a loss.

“Give me a smart idiot over a stupid genius any day.”

Samuel Goldwyn

Trials and tribulations of Trader June

Trader June bought an expert advisor and set it up as per the instructions.
Trader June was pleased to see her expert advisor increase the trading
account a little bit each day. Then one dark and stormy night the power
went off in the area. As a result, with no power for the computer, the
expert advisor was no longer working. When the power came on again the
expert advisor opened new positions for every currency that it was
monitoring. This meant that it now had 20 trades open. Fortunately in this
case the trades went the right way and closed out in a profit position
taking the account from $68,000 up to $77,000.

Things were looking good. The following week there was an interruption to
the Internet service and the expert advisor was not able to access the
trades for two days. This inability to access the expert advisor placed
extreme stress not only on Trader June but also other traders around her
who were trying to help. The broker was very helpful and kept informing
Trader June on the opening balance of the account each day.

Even then, the drawdown on the account was in excess of $20,000 taking the
account down to a value of about $58,000. It was at this point it was

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decided that the expert advisor would be put onto a Virtual Personal Server
(VPS).

The server was set up and the expert advisor was transferred onto the VPS.
Things were looking very good as on the Friday the account increased by
$2800 in just under two hours.

The market was closed Saturday and Sunday but five seconds after the market
opened on Monday morning the expert advisor hit an equity drawdown on the
account. It wiped off all the $20,000 drawdown from the account, and then
began taking new trades! Trader June was a little jaded.

As a result of this experience, the other jolly traders who were helping
Trader June changed the strategy for this account by reducing the number of
currencies being used so that the equity drawdown could be kept under
control. In addition to this everyone learnt about different aspects of
parameter settings with that expert advisor.

Another aspect of running an expert advisor on a VPS is that the VPS

provider will schedule upgrades and other maintenance functions
periodically. This can be one of the great unknowns. A lot of the time we
do not know how system upgrades such as this can impact an expert advisor.
Most of the time there will be no impact, in fact you probably won't even
notice that anything is being done. However, there is always a chance that
something will change sufficiently during an upgrade that it will affect
the way the expert advisor works. As has been shown in our two stories, it
is possible for just about anything to happen from putting on additional
trades to closing out positions.

To add to this, it's important that when you are running an expert advisor,
that you have only one platform on your computer. It is possible that the
expert advisor will take a trade from a data feed from a second platform –
that is, it will get confused as to which data to follow. This too can lead
to unintended trades that can lead to significant drawdowns.

Trader June’s expert advisor account steadily builds after each

loss/equity drawdown but continues to have some equity challenges along the
way.

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Failure is simply the opportunity to begin again more intelligently

Henry Ford

Trader Nicks Nifty Solution

Trader Nick knew nothing about trading the Forex market when he started.
Nick was a successful businessman whose company was producing one and a
half million dollar profits regularly. One day while Nick was on the
Internet he came across a website advertising a Robot Trading System
(Expert Advisor) that promised enormous returns in a very short time frame.
Nick did not want to waste any time. He believed the advertising so much
that he decided to give that particular ”robot” a try. Nick spent just
over $100 on his “robot”, registered immediately for a live trading
account with one of the trading houses and deposited $100,000 into the
account.

Day one and Nick saw $800 go into the account. Day two saw $750 going to
the account. Day three saw a drawdown start to happen. The drawdowns
continued to happen over the next few days and became such a concern to
Nick that he closed out the positions. Did Nick panic? Yes Nick panicked
and as a result when he closed positions he had lost $15,000 in the first
week.

The second week saw the robot take positions and continue with drawdowns.
As the account rapidly approached a loss of $50,000, Nick sought out
assistance from professional trader who understood expert advisors. After
considerable investigation it was determined that that particular expert
advisor was not suited for what Nick wanted.

Fortunately, the trader Nick went to was able to show him how expert
advisors can work properly. As a result Nick had a new expert advisor set
up with settings that would be appropriate for what Nick was trying to
achieve. In addition to this Nick had the expert advisor put on a Virtual
Personal Server. It did take many weeks before the trading account was back
to the original $100,000 starting point.

Expert advisors can be fully automatic trading systems, but every trader
needs to be aware that not every expert advisor works the way they say.

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More importantly there will be times when the trader will need to intervene
to reduce the drawdowns against the account.

Caveat emptor - buyer beware.

Failure teaches success.

Japanese Saying

The dangers of expert advisers include but are not limited to power
failures, failures in Internet service, high equity drawdowns and computer
or server upgrades. To add to this ID 10 T errors, more commonly known as
user errors, add up to an interesting combination that can affect the
outcome of expert advisors. It is important that you to test, back test and
be sure of what you are doing before you put an expert advisor on a live
account.

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Chapter 9
Trading Plans
Plan your Trades, Trade Your Plan
The GOLDEN Trading Rule

Before going into details about trading plans we will start with a basic
discussion about the Power of Compounding. To be a successful trader, one
does not have to make large profits immediately. It is likely that when you
start trading you will have at least as many losses as you do profits.
Minimising your losses and being persistent is what will have you become
successful.

Power of compounding

Compounding can be a very powerful tool when building a Forex trading

account. However you look at your trading plan, a sound conservative
approach combined with a compounding strategy can see your trading account
grow fairly rapidly.

A new trader could start with a very low initial investment. In a good
management plan the trader would risk between 3% and 10% of their capital.
For any trader going beyond a conservative risk profile makes trading
become more like gambling.

We will look at how a trading plan combined with leverage facilities

available will increase a trader's account from $1000 to a million dollars
in a very short space of time.

To achieve this you need to look at having:

 An initial deposit of $1000
 No more than 3% - 10% of capital being used at any time.
 1 to 3 trades per day
 4 or 5 days trading per week.
 A Trading leverage of 100:1 (base 10 mini account).
 A Trading goal of 75 pips per day with a 75 pip stop.

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There are four stages to this trading plan. They are:

 Stage 1 $1000 to $10,000 - 100:1
 Stage 2 $10,001 to $25,000 - 100:1
 Stage 3 $25,001 to $100,000 - 100:1
 Stage 4 $100,001 to $1,000,000 – 100:1

To see the plan in action we have a case study based on 100 pips per day.
The end result will be the same. However, using a 75 pips a day goal
instead of 100 pips per day will simply extend the number of days taken to
achieve the goal.

Case study - Trader Alice

Alice was a nurse who loved to help people. Whenever she could she would go
overseas and help at different clinics in developing countries. Alice had a
desire to work for Médecins Sans Frontières (an international, independent,
medical humanitarian organisation that delivers emergency aid) but was
unable to be financially independent enough to take even the first step to
work with them. Alice was earning about $65,000 per year and due to the
long hours involved with shiftwork was very tired. In fact the hours and
the stress were starting to take their toll on Alice's health.

Alice wanted a way out of intensive shiftwork nursing and a friend asked
her if she would like to trade a Forex account for charity. Alice took the
opportunity and embraced it with all her heart. Part of Alice’s trading
plan involved the power of compounding.

We will now look at the power of compounding an account that was opened
with $1000.

Below are the equity management parameters that Alice followed during her
journey from $1000 to $1 million. Alice used an equity management tool to
manage her trading and the account. The equity management parameters that
were followed are shown below.

Due to limit broker lots sizes restrictions the maxina lots size for the
select broker is 200 full lots Trading target is 100 pips per day with a
100 pips stop

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Zero to 20 days

Alice started on 10/1/2011 with a balance of $1000.

 Daily goal is 100 pips per day with a stop of 75

 Initial risk of 10% of the account

 When the account reaches $155,000 the risk is reduced to 2.5%.

 Number of lots per trade to be increased in proportion to the total

value of the account

The first trading month (10/1/11 to 4/2/11), the balance of the account
went from $1000 to $4075. This is a result of compounding the 100 pips per
day.

20 days to 40 days

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Alice started with one lot and by the 07/2/2011 Alice was trading .55 lots.
This equated to an increase in the account of $550 per day. Alice followed
her rules and became driven to get the pips each day. Some days she was
able to reach her goal easily while other days it was more difficult. There
were many losing trades as well as winning trades but the goal was to be
positive 100 pips each day.

Towards the end of February Alice went to a travel agent and booked
herself an around the world cruise. The law of attraction played a major
part in the way Alice saw things. In her mind Alice had already achieved
the million dollars. Throughout the entire process she would be
consistently thinking how it would be for her as a $1,000,000 a year
currency trader.

40 to 60 days

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During the period 07/03/11 to 1/04/2011 the account went from $36 615 to
$245,925.00. The following section is a projection of the growth of the
account with Alice following the plan. At this stage a total 44 trading
days has elapsed.

During the period 4-04-2011 to 6-11-09 the account went from $245,500 to
$1,503,165. The following projection clearly shows the power of compounding
with increasing number of lots being traded. At this stage we are using
over 136.58 lots per trade. A total of 78 trading days have elapsed.

60 days to 80 days

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In this trading plan projection the account went from $1000 to $1,000,000
by 29 April 2011. In this projection the goal was reached in 79 trading
days. The projection on this account was based on a leverage of 100:1 for
the entire period. If Alice was to use a leverage plan starting with 400:1
for the first $10,000 and reducing leverage as the account increase in
value would see the goal of $1,000,000 be reached 15 days earlier.

We recommend a conservative approach to trading particularly when using

high levels of leverage. Combined with the power of compounding the lot
sizes in relation to the value of the account, the account growth
accelerates even though the trading goal for number of pips per day remains
the same.

The power of compounding does work. If you choose to join us in a workshop

the equity sheet will be yours free.

He who has the gold makes the rules.

The Wizard of Id

21 Tips for developing a trading plan.

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A trading plan is the most important document a trader can prepare.

Unfortunately many traders do not take the time to detail their thoughts so
the action plan can be brought together. To understand what we mean, if
you're sailing a boat without any navigational aids or a rudder, eventually
you will crash on the rocks. Without a detailed plan for trading it will
mean that your trading will crash onto the rocks as well. The result is you
will lose your money.

1. The most important rule in trading is KEEP IT SIMPLE - complex

trading methods can cause you pain, grief and frustration. Complex
trading methods and complex trading plans may confuse. If you're a
beginner trader take baby steps and learn the basic methods for
developing your trading plan. BELIEVE IN YOURSELF.

One way to end up with $1 million

is to start with $2 million and use technical analysis.

Ralph Seger

2. Know your WHY. Why do you really want to trade? If your why does not
make you cry then create a bigger reason WHY. Write it down and list
your reasons for trading in great detail.

3. Now you have your reasons why, create a vision board. On your vision
board add pictures and any other relevant displays to illustrate your
dream or your vision. For example, if you want a car display a
picture of your dream car. If you want to pay your mortgage take a
photo of your house and write down how much money you need to clear
your mortgage as part of the display. Be imaginative, be passionate
and be adventurous.

4. Detail where you are now. This helps because if you know where you
are then it is easier for you to understand where you need to go.
Much like driving a car. You need to have a starting point.

5. Clearly state your goals of where you want to be. Put as much detail
into this is you can. Again, going back to the car analogy, having a

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destination of Unit 1, 88 Moneybags Street in the suburb of Success

is much better than somewhere south of the river. Unfortunately, most
people set up their goals as ‘I want to be rich’, without actually
knowing what that would mean or look like for them or more
importantly have a specific date to achieve the goal.

6. List all your strengths and weaknesses. You can even find out what
type of trader you would be and this could help. There are
questionnaires you can fill out that will assist in determining the
type of trader you are. One of those sites is the
www.tharptradertest.com by the Van Tharp Institute (www.iitm.com).
This can provide a detailed report that may help you in defining your
strengths and weaknesses as a trader. This report will also indicate
what some of your limitations may be. It is a good idea to complete
these profiles before you start trading.

7. Every successful trader has a well thought out trading plan! Sit down
and detail your trading plan. Your trading plan should include as a
minimum what type of currencies, what stops you will set, what limits
you will set and when you will trade.

8. Think about what you want to achieve and by when (set a date). Things
that need to be considered when you're putting together an equity
management plan are as follows:

a. Lot size. It is best to have a ratio of one lot of trading per

$1000 of equity in the account. Example $1000 = 1 lot, $5000 =
5 lots etc

b. Lot versus currency details. As an example trading the

Australian dollar with two lots can be considered the same as
trading one lot of the Euro/Sterling. This is based on the risk
profile of the currency.

9. It works better if you develop your trading plan after the equity
management plan has been completed. When you look at the trading plan
you need to take into account some of the points detailed above (8b).

10. Choose what currency pairs you are going to trade. If you're
using the Forex Trading Tool enter the details in user definitions.

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11. Choose when you are going to trade. For example two hours after
the opening of the Sydney exchange for four hours and then two hours
after New York opens.

12. Define your trading strategies. You can enter the details of
your trading strategy into the strategy section of the Forex Trading
Tool.

13. Clearly define your trade entry rules and trade exit rules.

14. Before you place a trade check to see what announcements are
going to be made on that trading day. Announcements will affect the
way currencies move. One site to use as reference for announcements
is: http://www.forexfactory.com/. This site is extremely useful as
each announcement has an indicator of the importance that particular
announcements will have on the market. Be very cautious trading when
high impact announcements are made.

15. Regularly review the analysis of your trades, stops and the
pips that you make/lose. It is easy to review and analyse your trades
using the Forex Trading Tool. Using this analysis you can fine tune
your risk profile and easily determine the currencies that work best
with your particular trading style.

16. At the completion of your trading session and analysis look at

where you can improve. On the basis of this information you can learn
and modify your trading strategy. Learn from your mistakes and
benefit from your successes.

17. Print your trading plan. Have it in a file or have it easily

accessible so that you can read and review your trading plan every
day.

18. Find a mentor or coach who can help review your trading in an
impartial and unemotional way. It is best to find someone who is
doing what you want to do. When you think about it, there really is
no point in having a coach or mentor who has not been successful in
the journey you are about to take. A successful coach or mentor can
provide valuable trading methods and strategies that you can adapt to
your own trading style. When you think about it, would you entrust

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the servicing of your brand-new Rolls-Royce to Little Johnny Smith

who once built a scale model of a Rolls-Royce?

19. Clearly state in detail how you are going to give back to
society as a result of your trading success. We both give back in
different ways. Paul is involved with several charities including
Heartkids, and The Heart and Lung Transplant Foundation, as well as
being involved in supporting medical centres in remote areas of
Australia. David is involved with SIDS, Lions Eye Institute and
Medical Research Foundation. The more that you give money away the
more money flows back to you in the long term.

20. Plan your trade and trade your plan - leave emotion out of the
game. Markets go up, markets go down. Riding the emotional roller
coaster is only going to do your head in – frustration, anger, joy,
sadness and any other emotion you can think of are part of life but
have no place in the trading room. You need to check your emotions at
the door and maintain a focused state. If you cannot maintain a
focused state you will be adversely affected by the rhythms of the
market. If you consistently find yourself emotionally attached to the
ups and downs of the market then it could be that trading is not you.
Emotional trading will not only hurt you psychologically but also
drain your bank account quicker than blinking.

21. If the signs for the trade are not clear then stay out. Always
work to preserving your working capital. If you are not sure about
the trade it is much easier to keep what you have than to try and get
it back if you make the wrong choice. Forcing a trade is like pushing
a wet noodle up a hill. (If you want hours of pointless entertainment
watch someone try to push a wet noodle up a hill with a chopstick.)
IF IN DOUBT STAY OUT.

Trader Story

Kylie's trading plan – David’s Magic Story

For 22 years Kylie worked as a hairdresser in a local saloon in a suburb of

Newcastle, Australia. One day when Kylie was leaving work she was hit by a
car. Having spent months in hospital meant that Kylie's career was over.
Kylie was 50 and by the time she had recovered there was little prospect of

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further ever finding full-time employment again. Kylie was devastated that
she could no longer rely on the career she loved to pay the bills. A close
friend of mine invited me along to a party. This is where I first met
Kylie. We talked for several hours and in the course of that discussion I
learnt that Kylie was facing foreclosure from the bank, she had lost her
job and was living on what was left of her superannuation and savings. As a
result of continuing medical costs and increasing living costs these funds
were being rapidly depleted. I started to discuss with Kylie the
possibility of her learning about Forex trading. I agreed to help her and
to set on the path of being a Forex trader if that is what she chose to do.

Kylie knew she needed to develop a plan to get herself out of the mess that
she was in. We sat down together and constructed a detailed trading plan.
It was a plan that would see Kylie being able to retire debt and support
herself financially for the rest of her life. In the plan we clearly stated
where she was now and where she wanted to be. The most important part of
the plan was where we stated the time frame for each detailed goal. Kylie
then went to the bank to get an extension on her loan. Fortunately the bank
agreed to a small extension.

We set up a 12 week trading plan. Day after day Kylie sat down and traded
her plan. Kylie had a daily target of 75 pips. The prospect of losing the
family home and the general adversity associated with the escalating
medical and living costs became Kylie's driving force.

Some days Kylie would hit the target while other days she did not. The days
when Kylie did not hit the target were frustrating but those days spurred
her on and increased her determination to beat the emotional rollercoaster
and become a successful trader. Kylie persisted and picked off the pips -
75 pips at a time. I was working as a fund manager for a large
superannuation fund at the time and there were days that Kylie would come
into the office and trade with me.

There was an 18 week period when I didn’t see Kylie. At the time I thought
Kylie had become another victim of the emotional rollercoaster that is the
Forex market and that she had lost her money and given up on trading.

Fortunately, I was wrong. I received an e-mail from Kylie in which she said
she had moved house and she was inviting me to her house warming party. I

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was a little anxious about going to her housewarming party the following
Saturday night. When I got there I noticed that this was a brand-new home.
I knocked on the door and Kylie opened the door with the largest smile that
I’ve ever seen

Kylie had traded her way out of trouble. In 18 weeks Kylie had managed to
generate sufficient profit to retire all of her debts and put together
enough money to buy a new home. Kylie is no longer a hairdresser. She now
lives on the Gold Coast and manages a hedge fund for an overseas investment
house.

The point of this story is to illustrate that a sound trading plan can
provide direction and methods that can change your destiny. Kylie found the
courage to embrace it.

Keep your fears to yourself but share your courage with others.
Robert Louis Stevenson

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Chapter 10
Mindset
If you want to be successful,
find someone who has achieved the results you want
and copy what they do and you'll achieve the same results.
Tony Robbins

The information contained in this chapter could be the most important

information you require to be a successful Forex trader. What we talk about
here can also be used in other aspects of your life, whether it is your
personal life or your business life. You have the power to have your life
go from the ordinary to the completely extraordinary. Your way of being,
your mindset, your attitude and the way you look at life are signposts to
the outcomes or goals that one may want in life. How you set yourself up
and how you view the end result will play a very large part in your
success.

Being in life or being in business comes with its complications and

challenges. You will find there are many challenging situations that you
will need to be able to take care of as you take the trading journey. It is
critical to your success how you view your trading experiences and, having
a mindset that is functional, efficient and focused on the necessary parts
of your life or your trading at all times.

There are five important things to consider about your mindset:

1. Be creative and innovative. Having things work in your life relies on

your ability to see solutions in a different light and think outside
the box. Being creative will see your life thrive and grow in
unexpected directions. When we started on the journey to write this
book, little did we know what an impact that little idea would have
on our lives. With our creative idea and clever innovation in putting
on paper this simple Forex trading system, we have seen our lives
grow in profitable directions that we could not even have imagined
when we started. The biggest thing about being creative and
innovative is that ultimately you are only limited by your
imagination.

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2. Think focused. You need to focus on everything you do. When you are
trading, focus on the trade, focus on what your objective is, focus
on your bigger goal. As we are often led to say when trading - Focus,
Focus, Focus. You cannot be successful if your mind is all over the
place, taking care of 10 different things at once. So simply put –
when you are trading focus on your trading, when you're having fun
focus on having fun, when you are with your family focus on being
with your family and so on.

3. Be willing to take risks. If you are not a risk taker, you may never
see many of the opportunities or rewards that are possible. In order
to be successful with Forex trading you need to be prepared to take
some risk. This will help you grow and succeed.

4. Think big. Don't just settle for what you know you can achieve.
Instead, think of the big picture, the big idea, of everything that
you want your life to be. The bigger you dream the more you can
achieve.

5. Be passionate. It is important that you find your passion. Passion is

like the fuel in the car. Without passion you won't get very far. If
you are committed and driven to succeed then it is your passion that
will fuel your journey to success.

Knowing that these are important things to consider about your mindset the
question arises: What can we do to make it work?

To start this discussion we need to look at the part of your brain known as
the Reticular Activating System (RAS). Your RAS plays a vital part in your
ability to achieve goals.

So what is the RAS and how do we use it? The best way I can explain it is
to give you examples. First example: you've decided that you're going to
buy a new car. You have been driving around in a Toyota Corolla for years
and decided to get something new and different. You're going to treat
yourself and buy a brand-new Saab convertible. You go to the car dealer and
you test drive a brand-new Saab. You sit in the car and feel the leather
seats. You smell the new car smell and then you see all controls light up
as you hear the engine roar into life. You start to feel excited about the
prospect of getting a new blue Saab convertible.

As you leave the car dealer you start to notice something you've never
noticed before. You begin to notice all of the Saabs on the road. In fact
you are surprised at the number of Saab convertibles that are being driven
around!

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Second example: you're in a busy airport waiting to catch the plane to go

home. Just imagine all of the noise from hundreds of people talking,
background music, machines beeping, whirring and wheezing, Jet engines
starting up and PA announcements about everything from the next flight
taking off through to a lost child. How much of this noise is actually
bought to your attention? Not a lot. As soon as you hear your name or
flight number, suddenly your attention is full on.

Your RAS is the automatic mechanism inside your brain that brings relevant
information to your attention. In the first example you hadn't noticed the
car that you wanted until you could touch, feel and hear it and then you
start to see what you wanted everywhere. In the second example you
effectively ignored everything except what you needed to hear.

Your reticular activating system is like a filter between your conscious

mind and your subconscious mind. It takes instructions from your conscious
mind and passes them on to your subconscious. For example, the instruction
might be, “I wonder if anyone else is driving a blue Saab convertible” or
“I wonder if anyone is saying my name”.

There are some interesting points about your reticular activating system
that make it an essential tool for achieving goals.

First, you can deliberately program the reticular activating system by

choosing the exact messages you send from your conscious mind. For example,
you can set goals, or say affirmations, or visualise your goals.

Napoleon Hill said, “we can achieve any realistic goal if we keep on
thinking of that goal, and stop thinking any negative thoughts about it”.
Of course the converse is also true. If we continue to think about what we
cannot do or what we cannot achieve our subconscious will help us – to
achieve that which we do not want.

Another interesting thing is that your reticular activating system cannot

distinguish between 'real events' and ' imagined ' reality. In other words
the reticular activating system will believe whatever message you give it.
In that way what we feed our mind, what images we create and what things we
tell ourselves will impact the results that we get.

So what you need to do is to create very specific pictures of your goals in

your conscious mind. When you create these very specific pictures it works
better if you use all of your senses and your thoughts. In other words
describe your goal so that you can taste it, you can feel it, you can hear

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it, you can see it and you can think about what you will do with it when
you have it. The RAS will then pass this on to your subconscious - which
will then help you achieve the goal. Your unconscious does this by bringing
to your attention all the relevant information which otherwise might have
remained as 'background noise'.

"Imagination is more important than knowledge.

Knowledge is limited. Imagination encircles the world."
Albert Einstein

So what can you do with this and how can you make it all work for you?
There are a number of things you can do that will actually help you. When
we talk about each of these examples consider what it is you can do to
incorporate as many senses as possible. The more senses combined with
thought that you have activated around your goal, the easier it is for the
reticular activating system to operate.

Prosperity box/dream board

The first thing we are going to look at is a prosperity box or dream board.
This can actually take on a number of different forms.

David uses a prosperity box which is a small red leather box in which he
puts anything that will lead to his prosperity. For example David has
fallen in love with the new Lexus ISF in blue. Apart from going for a test
drive to get the feel and smell of the new car, David also has a picture of
the exact car he wants which he keeps in his prosperity box. David also has
copies of his bank statements that have been changed so that on a specified
future date the account will have $1 million in it. David’s prosperity box
also includes a completed form for his broker requesting a withdrawal of $1
million from his trading account. Again, it is dated in the future.

Paul uses a dream board. Similar items are on the dream board as are
contained in the prosperity box. New cars (a new car for every member of
the family), a holiday in Canada, future dated bank statements,
architectural drawings showing a new carport plus other house modifications
and a donation plan to clearly specified charities.

This is a tool that we use to help us focus on the end game. You see its
not making money for the sake of making money. We have a clear focus on
what we want and how we can give back.

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Infuse your being with prosperity

As we sit down to trade or for that fact as we are writing this book, there
are one kilogram gold and silver bars on the table. In that sense we are
surrounding ourselves with wealth and having our way of being as that of
someone who is wealthy. Besides they make pretty good paperweights. This is
another aspect of touching and feeling our goal.

Giving

There is a flow to money. We believe the more that you give, the more you
get in return. Trading on the Forex can give you a fantastic lifestyle. One
of our favourite books is The Richest Man in Babylon (George Samuel
Clason). This book dispenses financial advice through a collection of
parables set in ancient Babylon. Through their experiences in business and
managing household finances, the characters in the parables learn simple
lessons that contain financial wisdom. The way the parables are written
give these lessons a timeless wisdom that makes them as relevant today as
they were back in the days of Babylon. In one of the parables, the rich man
gives away or tithes 10% of the money he earns.

On the face of it, it may seem strange but giving away 10% makes you a
better trader. Just this simple act changes the whole game. If your
relationship with money is one where there is enough for everybody, then
there will always be enough to go around for you and everyone else.

Find a charity and give away some of your profit. This can be a way for you
to give back to the community. In addition to this, giving away to a
charity may also have tax deduction benefits. You will need to check with
your accountant for your own individual circumstances.

Spiritual vibrations

Emotion and thinking are symbiotic, one will never exist without the other.
Whenever you have positive emotions (happy, excited, etc) your thinking is
upbeat and positive. Conversely, if you have negative emotions (sad, angry,
etc) then your thinking is downbeat and depressed. Whether you are
consciously aware of this or not does not matter because subconsciously
this is what is occurring. Your thinking affects your emotion and your
emotion affects your thinking. In addition to this your thinking affects
your physiology, which in turn also affects your emotion.

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If your energy and vibrations are negative then your trading will be
negative. It is essential for you to be in a positive mindset for you to be
able to make clear, rational and good decisions when it comes to Forex
trading.

The degree to which you believe emotions and vibrations affect you with
your trading, or in your everyday life, is really for an individual to
determine. However, there are several teachers that we have come across
that cover the areas of spiritual vibrations, emotions and your thinking in
relation to outcomes in your life. The teachers who have had an impact on
us include Anthony Robinson, Esther and Jerry Hicks (Abraham), Chris
Howard, Peter Daniels, Pat Mesiti.

Trading is a game of increasing your energy vibration so abundance flows to

you. The Law of Attraction talks about drawing energies together. This law
attracts thoughts, ideas, people, situations and circumstances together. In
this way thoughts of similar kind are drawn together. When it comes to
trading the Forex market, having thoughts and ideas of abundance, wealth
and prosperity attracts these things to you.

Simply put “like attracts like”. If you wish to attract these things then
you need to set up positive vibrations and energies to attract them towards
you. You could consider the following:

 You get what you think about.

 You attract into your life whatever you focus on.
 Positive thoughts attract positive events.
 If you keep thinking and expecting success you will achieve success.
 Similar energy attracts similar energy.

How does this help?

A question you can ask now is: “Why do I want to trade Forex?”

Whatever the answer is, how you set up your mindset will make a difference.
When you ask that question usually you will start to think about what you
will do with the money that you make from Forex trading. While you are
going through that process it's helpful if you think about how you would
feel if you could achieve everything that you want to. How would you feel
if you made enough money to be financially independent or pay your mortgage
completely? Whatever it is you want, how would you feel if you could see,
touch, feel, and hear the sounds associated with you getting everything
that you want.

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You will get the end results if you believe and change your vibration and
energy.
You will get the end results if your attention is fully on where you want
to be.

The control needed in Forex is unlike any other control. Once you control
the emotional rollercoaster that can happen when you are trading, then you
can truly start to control your trading destiny.

One way of getting the emotional rollercoaster under control is to clearly

define all your outcomes in your trading plan. This includes your overall
trading plan as well as your daily trading plan and all you do when you
achieve your outcomes.

The key to this is to C.R.E.A.T.E. your outcomes:

C - Concise and Clear outcomes.
R – Realistic goals.
E - Ecological outcomes (good for you, good for those around you, and good
for the planet).
A - As if it has already happened. Write your goals in the present tense.
T - Time frame - That is when did (and does) it happen.
E - Evidence that you have achieved this result.

The power of the mind is often taken for granted and there are a number of
courses and organisations that can assist you with a building that muscle.
What we have included here is sufficient to you to get started with the
primary keys to have you begin the journey and be successful.

You may find that you develop rituals or patterns that help you get into a
state of mind to trade successfully. Whether they are consciously aware of
it or not, successful traders go through a process in preparation for
trading. Some traders will develop highly complex trading charts whereas
other traders listen to calm music or motivational talks aimed at Forex
trading (e.g. Dr Van Tharp’s Peak Performance Home Study Kit).

Ask yourself: What is it that I do to prepare myself to do different tasks

in the day? I am sure you will find that there are set rituals that you
perform. When you come to do your Forex trading you will develop your own
rituals or processes that can have you be successful. Having said that the
most important thing you can do each day is:

 Focus on what you want to do

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 Focus on how you will go about it

 Focus on the outcome

Famous funny man Jim Carey wrote himself a cheque to the value of $10
million dollars. He then carried that cheque with him every day until he
was able to cash it and pay himself the $10 million dollars. This where
you can C.R.E.A.T.E your future. There is power in dreaming big.

Shoot for the moon.

Even if you miss, you’ll land among the stars....
Unknown

Daily review

Just as there are rituals and processes to go through to set up your

trading mindset at the beginning of the day, there are processes that you
can develop for the completion of the day’s trading.

It doesn't matter if your trading is a winning trade or a losing trade.

They are all equal. It is essential that you review your trading as it
provides an indication of the process that you went through in the day.
This can lead to providing additional information that will help you
improve your trading in the long term. Doing the review of your trades
helps build a reference file in your mind about what it takes to have a
successful trader and in the future recognise the pathway to an
unsuccessful trade.

Harry Hindsight is the best trader in the world. The simple truth is that
hindsight is the best teacher after you have completed the day’s trading.
How you go about it is the key. If you look back on the trade you can
determine what you could have done to have the trade go better. This review
will help build your trading muscle. Hindsight is the best way to condition
the mind to look for the best possible trading situation in the future.
Analysing unsuccessful trades will show you where you could have had it be
a successful trade or minimised your loss. Analysing successful trades will
confirm the entry and exit points and build and reinforce the successful

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trading muscle you develop as you gain experience. Analysing the trades
that you have completed also gives you a good indication of what currencies
work best for you and what currencies you should leave alone.

Building confidence

Building your confidence as a Forex trader involves:

 Having a trading system that works.

 Effectively reviewing all of your trades.

 Having a positive mindset.

When building confidence in your trading, review past trading patterns and
learn the currency you want to trade. The more you learn about the
currency, the more you understand, the more you will be able to profit from
the way it moves in the market.

Another confidence builder is to start small and gradually increase the

number of pips you collect from every transaction. For example you could
start trading a range bound currency like the Australian dollar and build
the muscle of locking away five to 10 pips each trade. Eventually you will
become so good at this that you will start to recognise when there are 30,
40, 50 and even more pips in a single trade. It's all part of building the
muscle that has you recognise a good trade. The market doesn't care if you
take five pips or 105 pips. All that you need to focus on is the different
opportunities in the trade and recognise whether you have a five pip trade
or 105 pip trade and lock away the profit as soon as you can.

As you develop your mindset and style of trading, you will improve your
results. Use all the tools available to have you be a better trader.
OWN your style.
OWN your success

Your mindset and attitude is with you all day every day. Personally, we
start our days from a place of gratitude. We do this for a lot of reasons
and we find that it is hard to be fearful when you are grateful. An
attitude of gratitude is a good place from which to build your trading
mindset.

Many newcomers to Forex trading go through the cycle of entering the market
and only taking a few pips. You can take this approach to start to build
the mindset muscle that it is the only way and the safest way to be

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trading. Occasionally you may even lash out and lock away five or 10 pips.
The risk that you run in building your trading strategy this way is that
you fail to recognise the greater opportunities available with some trades.
In that way this method is more of two steps forward and one step back.
What I mean by this is that you are holding yourself back from the full
potential available in the trade. In effect as the new trader you could be
losing 15, 20, 30 or more pips that could be locked away as profit.

Invariably it is fear that holds traders back from taking more off the
table in each trade.

The external environment with which you are faced on a daily basis can also
play a major part in your trading mindset. What is going on in your
business life or your home life can and will impact how you approach your
trading. Concerns, worries or stress will creep into how you think about
your trading.

One of the biggest mindset challenges that traders have to deal with is
“the fear of loss”. If you are in a state of financial chaos, home
stresses or business challenges will carry over to your trading. That fear
of loss will lead to you losing. Simply put what you focus on is what you
achieve. So if your fear of loss has you focused on the down side of each
trade it is likely that you will see more losses than wins.

What you focus on and how you deal with loss will play a great part in
determining how your account balance and your long-term lifestyle will
look.

Trader Story

Traders Karen and Alan

Karen and Alan were looking at the way they could make a little bit of
money so that they could afford to do the extra things like overseas
holidays and a new car. Karen and Alan paid thousands of dollars to attend
a Forex trading seminar. It was not until much later that they realised the
person who was teaching them how to trade Forex didn’t actually trade in
the Forex market. In fact they paid someone else to do the trading. The
principles he was teaching was just the theory that he thought would work.

The way they were taught had Karen and Alan setting up trades with a stop
at 30 pips and a limit of 45 pips. This sounds good in theory and on the
face of it, if they play the numbers then they should make money.

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Enthusiastically Karen and Alan went about setting up two live trading
accounts. Filled with the anticipation of being able to trade their way to
financial independence they started to trade.

Alan thought he was on a winner. To start with Alan was taking 10 or 12

pips at a time and banking them. The problem was that Karen would go back
into the market and give back what Alan had made. Alan's trading standards
suffered as a result of Karen losing what was being made.

The balance of the account started to reduce and even though he didn’t
realise it, Alan started to reduce the number of pips he was banking
because he was getting desperate to build the account. He was now banking
five or 10 pips each trade. To compound this, the losing trades were
starting to hit the stoploss level of 30 pips. In effect Karen and Alan
were losing much more money than they were making.

Karen and Alan's mindsets had been seriously compromised. Karen had become
fearful and she was always focused on the stoploss level. Alan had become
frustrated and disillusioned as it did not appear he was able to increase
the account in the way he and Karen had dreamed. Their poor mindset had led
to small profits and an ever-decreasing account balance.

Karen and Alan sought help from their financial adviser who also traded the
Forex market. After doing a careful analysis and looking into what Karen
and Alan were doing they came to the conclusion that their mindset was not
suited to trading at that time. It also became apparent that going for a
small amount of pips with the stops that were set was going to see the
market beat them more often than they could lock away profit.

Their financial adviser had them work with Calvin a professional Forex
trader who coached them to change their mindset. Calvin guided them to
change their trading rules and helped them develop a trading plan that was
more likely to succeed.

Sitting down with Trading Coach Calvin, Karen and Alan started see real
potential and were again becoming enthusiastic about the possibilities of
trading Forex. Trading Coach Calvin had them focus on a single currency to
start with and, based on the particular currency pair they were using, took
the stops and limits out to 50 pips. Their use of small stops was the main
culprit of killing their trading because they were not giving the market
room to move. The fear of loss was restricting how they were trading.

Once the market was given the room to move (allowing for fluctuations in
any trade) Karen and Alan started to see their trading account increase.
Not just in overall value but they noticed immediately that instead of

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locking away eight to 12 pips per trade in a matter of days they were
locking away 50 pips most trades, every day.

It has been nearly two years since Karen and Alan were given their trading
mental tune-up and the trading plan to go with it. They are both still
trading and are still achieving their trading results.

This trading experience has several lessons that we can all learn from.

1) Never trade from a place of fear.

2) What you focus on is what you will get.

3) If you are going to learn how to trade find someone who does trade.

4) If your trading plan is not working - don't use it. Evaluate and
start again.

5) If you are going in the wrong direction, stop and seek help before
it's too late.

6) If you're going to get a trading coach, find a trading coach who

consistently does what they will be coaching you on.

7) If you are going to get a trading mentor, find one you want to
emulate. It is easier to learn from someone who is successful and you
admire.

8) There is no need to reinvent the wheel when you're right.

Mentor and training

Finding a mentor is a great idea. A mentor can not only teach you their
system, but also share experiences, insights and most importantly be able
to discuss trading psychology. There are many ways to find a mentor. The
easiest and the cheapest way is to use Internet forums where experienced
traders share their knowledge.

Within many of these forums you will encounter several types of traders
from the really green novice trader through to veteran traders who could
have twenty years or more of market experience.

When you're looking for a mentor seek out someone who not only has the
experience but has the track record with a system or methods that work
consistently. Veteran traders will have many ways of trading different

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currencies and as a result working with them will help you find a system
and method of trading that works for you. When you are developing your own
trading style give your methods at least six months trial before you try to
develop a second or third method of trading. This way you consolidate your
trading knowledge as you go.

While you are learning a system or method of trading show your mentor that
you are serious. Put in the work that is necessary to be successful. The
more you can show your mentor how serious you are the more they will be
prepared to work with you and give you more. A principle that Paul works on
is that if a mentor is going to give so much time effort and knowledge to
have him be successful then he is going to do everything that is necessary
so that his mentor looks very good. The more successful Paul is more
successful his mentor looks.

The more detailed planning and review work that you can provide your mentor
the easier it will be for them to advise you and improve you as a trader.
Build a relationship with a mentor then build relationship with the
currency that they are usually trading. This way it is easier if you to
learn the movements and characteristics of the currency and your mentor can
then provide a greater understanding about the particular idiosyncrasies of
the currency.

One last thing that we will cover is the 80/20 rule. You can look at this
in a number of different ways, e.g. 20% of your effort will give you 80%
of your profit. But in trading I am going to suggest it is more like
10/10/80.

 10% is your practical skill.

 10% is your external environment.

 80% is your mindset.

I believe that if you get the 80% mindset right then you will exert 20%
effort to gain 80% of your profit.

A mentor will work with you to develop the 80% mindset and assist you in
development of the 10% practical skills. A good mentor will assist you with
your mindset, developing states of trading, putting together the structures
and routines that work, provide modelling of successful traders, show you
patterns in trading and work with you in relation to the emotional
rollercoaster that happens in the trading environment.

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"If you treat a person as she appears to be, you make her worse than she
is.
But if you treat a person as if she already were what she potentially
could be,
you make her what she should be."
Goethe

Interview with Trader Paul

How do you prepare your mind for trading?

I sit quietly, almost in a meditative state. The object is to quieten my
thoughts so it becomes easier to focus. I usually play calming or classical
music and I may do a mind numbing task, something that is simple to do like
a puzzle or to play cards (Patience). The whole idea by doing this is that
when I sit to start to trade I remove all unnecessary distractions from my
immediate vicinity. This can take five or 10 minutes.

How do you go about your trading?

Once I have my mind calm and focused, I then opened the charts, check the
announcements for the day and select a currency that would suit trading in
that time frame. For instance first thing in the morning I would look for a
trade with the Australian dollar. What I do is I check my trading plan,
which outlines which currency I trade at what time of the day. Again
according to my trading plan I look at the type of trading I will be doing
for that currency and that time of day.

If it is a more long-term trade I will look for an entry signal and when I
place the trade I will also place the appropriate trailing stops and
limits. Once I've done that I will then go about my business and doing
other tasks. For me, sitting and watching those trades is a big waste of
time because I expect the currency to go up and down and if I have it right
it will go in the direction to reach my limit. If I have it wrong I have
minimised my loss. I will check back on the trade and reassess stops and
limits periodically. If the trade looks like it is going to be stronger
than I anticipated I may move my limit. Conversely, if the trade is bad I
will close out immediately.

If my trading plan says that I'm trading a volatile currency then I will
sit and watch the trades carefully. This way I ensure that I lock away
profit regularly and minimise losses. I only ever trade volatile currencies

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for no more than one hour. It can be mentally challenging sometimes and
beyond one hour I have found that I start to make mistakes.

What have been your biggest failures?

Consistently, the biggest mistakes I make are when I go back into another
trade too soon. I have learned from several painful trades that once I have
successfully locked away profit I need to stay out of the market for a
minimum of two hours. This has become part of my trading plan. I guess in
effect that makes my biggest failure not following my trading plan. When I
haven’t followed my trading plan and started to trade too soon invariably I
reverse the gains previously made. The worst case of this was I had locked
away 107 pips and continued to watch the chart and saw what I thought was
another entry point. I went back into the market and by the time I closed
the additional trade I had lost a total of 130 pips. Then I started an
emotional trade and made another bad trade and lost another 60 pips. If
that wasn't bad enough I went back in third time and lost another 40 pips.
I broke every rule in my trading plan and it cost me. Emotional trading
really sucks and it certainly cost me.

What beliefs do you have when you trade?

I hadn't really thought about it until you asked that question. With
regards to my trading I believe that there is money to make in the market
all the time. It doesn't matter whether it's an uptrend or a downtrend you
can always find an entry point and lock away some profit. Thinking about
what I do I would say that I have another belief around currencies. I will
not allow any currency to beat me. This can be dangerous. If I am on an
emotional rollercoaster, I will turn a bad trade into a complete disaster
and lose everything. But, if I follow my trading rules carefully I will be
able to go back in to trade the currency I had just lost on to get my money
back. It is all very well for a currency to beat me in the short-term but
long-term I am determined that I will come out in front.

What drives you to be a better currency trader?

I approach every trade with a set plan. A plan that is flexible in nature
with clear objectives in my mind before I enter the trade. There are
several things that drive me to be a better currency trader. Firstly, I
trade so that I can generate enough money each month so that I can have
everyday financial security for myself and my family. Secondly, I will be
generating enough income so that I can give my wife a choice as to whether
she continues in her employment.

Giving her the freedom to choose. Thirdly, so I can support the different
charity work I do as I have a desire and passion to make a difference in
the world. I look for projects that will make a difference in communities

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and then provide the funding or raise the funds for specific projects so
others dreams become reality

Trading Story

Linda’s Trading Rollercoaster

Linda believed that she would be able to just sit down and trade whenever
she felt like it. So Linda got up in the morning and started looking at
charts at 6am. Linda then cooked breakfast got the kids ready for school,
made a couple of lunches and in between all these little jobs kept checking
the charts. After about an hour and a half Linda had managed to pack the
kids off to school and sat herself in front of the computer to look for a
trade.

Linda thought she would look at different currencies to see what looked
good. So Linda looked at the AUD/USD, NZD/USD, GBP/JPY, EUR/USD, EUR/JPY,
GBP/CHF, EUR/JPY, CAD/JPY, and the NZD/JPY. Not being sure, Linda started
to look at different time frames for each these currencies starting with a
30 minute, one hour, 15 minute, four hour, eight hour and five minute
charts.

Eventually Linda decided that she could see a trade with GBP/JPY. Linda
then checked a couple of other GBP and JPY currencies to see if they were
doing the same sort of thing and placed the trade. Linda continued to check
between time frames and different currencies to see if there was something
else that she could find.

Ten minutes passed and Linda noticed that her trade was going rapidly in
the minus direction. Linda went back and checked the GBP/JPY chart again
and then checked the 15 minute, 30 minute, one hour time frames and decided
that it was a bad trade so she closed out with a 36 pip loss.

Linda went back to looking for another trade and eventually placed another
trade on the GBP/CHF. After 15 minutes this trade appeared to be going the
wrong direction as well and closed the trade out with a 17 pip loss.

This went on for five other trades before Linda decided that she'd had
enough. By the time Linda head finished she managed to lock away a 237 pip
loss. All in all not a good start to the day.

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It was at this point the Linda went back to have another look at the
GBP/JPY currency that she started on and found that if she had stayed just
with that trade for the two hours that she was trading then she would be up
64 pips.

The point of this story is very simple. Linda started her trading without
the correct mindset, without a trading plan, without focus, with too many
currencies, with too many time frames and no exit strategies for the
trades. The result is self-explanatory - Linda lost consistently. The only
thing Linda learnt that day was how to lose money quickly.

Linda came to us and we sat down with her and set out a trading plan and a
method of focusing when she is trading. Linda went down to one time frame
and one currency and as a result became consistently profitable being able
to bank 50 to 130 pips each day.

By failing to prepare, you are preparing to fail.

Benjamin Franklin

Trader Story

Trader Carole (Nurse)

After a series of long late-night shifts walking around the hospital Trader
Carole goes home and falls into bed exhausted. She asks herself the
question again, “How can I stop this job and have some sort of life
outside work?”

The following day Trader Carole continues to ponder what may be possible.
Fortunately for Carole she came face to face with David Shepherd who sat
down and started to develop a trading model with her that would change her
life.

David started to build the foundations with Carole. The foundation that
David created with Carole included the following steps:

 Create an account with a broker.

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 Set up a test account to develop your trading skills.

 Start a prosperity box and place the following items inside:

o Complete a dated request for funds from the broker

o A picture of the car Carole wanted

o A picture of the house Carole wanted

o A picture of a clinic in Bali that Carole would like to assist

financially

o Create a mock bank statement with a balance goal

o A written letter of resignation from her nursing job

 Specify a date to start live trading.

 Start mindset work in preparation for trading.

Creating this started to develop a mindset for Carole to work with. In

addition to this it created a future for Carole to live into.

I'm afraid we'll have to keep you guessing as to how successful Carole is
as Carole is currently working with another trader to write a trading book
for women. The best I can tell you is so far so good. Carole seems to be on
track to be able to hand in her resignation when she chooses to.

The best way to predict your future is to create it.

Stephen Covey

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Chapter 11
HeikinAshi Explanation

Balance is beautiful.
Miyoko Ohno

The first question one may ask is why do we have a chapter on HeikinAshi?
The reason we have this chapter is simple. Some of the most successful
traders in the world developed HeikinAshi candles to assist them when
trading. For many years the use of HeikinAshi candles was confined only to
the Japanese traders who had developed them. On that basis the discussion
of HeikinAshi candles is important as we prefer to learn and use the
techniques of traders who are successful.

What Is HeikinAshi

Heikin means “average” or “balance” in Japanese, while Ashi means

“foot” or “bar”, in other words “to stand on one foot”. HeikinAshi
is a visual technique that eliminates irregularities from a normal chart,
offering a clearer picture of trends and consolidations.

In Forex, we can trade currencies when the price trends are moving up or
moving down. Traders are continually seeking and using different methods to
assist them to indicate the direction of the market. Different traders will
use different methods but for most traders some form of technical analysis
will usually be performed. As such they tend to spend a lot of time
learning the technical analysis methodologies.

Technical analysis was introduced by Japanese traders. This was started

with the invention of the candlesticks. Those who are familiar with the
candlestick charts know that is usually the fastest way to understand the
condition of the market and the psychological bias of the buyers and
sellers in the market.

The Japanese traders who developed technical analysis never stopped

improving their techniques. They were focused on having technical analysis
tools available that would make market movement and price prediction easier

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and faster. The development of the HeikinAshi chart came after the
candlestick chart and is one of several different achievements of the
Japanese traders. The HeikinAshi candles have been a relatively unknown
tool that has recently seen a rise in popularity. Even though it has been
accessible for almost two decades many traders are still reluctant to look
at this trading tool

The use of HeikinAshi candles enables traders gain an edge on other tools
in determining the strength in direction of a trend. It can be helpful to
use the HeikinAshi tool in conjunction with other tools to provide
confirmation of direction and strength.

What are HeikinAshi charts and what do they look like?

The HeikinAshi chart looks like a standard candlestick chart but the method
of calculation and plotting of the candles on the HeikinAshi chart is very
different from a candlestick chart.
When you view a candlestick chart, each candlestick shows four different
numbers. These numbers being the open, the close, the high and the low
prices. Each candlestick is independent and has no relationship with the
previous candlestick.

HeikinAshi candles tend to be smoother because instead of using a simple

low and high of the session to calculate individual candles, the HeikinAshi
takes the prices per bar and averages them to create a "smoother" session.
This is an important key when looking at the volatility of currencies.

HeikinAshi candles are different in that each candle is calculated and

plotted using information from the previous candle. The information used to
derive a HeikinAshi candle is as follows:
 Open price: the open price in a HeikinAshi candle is the average of
the open and close of the previous candle.
o Open = (Open Price of the previous bar + Close Price of the
previous bar) / 2
 Close price: the close price in a HeikinAshi candle is the average of
open, close, high and low price.
o Close = (Open Price + High + Low +Close) / 4
 High price: the high price in a HeikinAshi candle is the highest
value of either the high, the open or the close price.
o High = [Maximum value of the (High, Open, Close)]
 Low price: the low price in a HeikinAshi candle is the lowest value
of either the high, the open or the close price.

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o Low = [Minimum value of the (Low, Open, Close)]

By applying the formulas to the new session (time frame) to construct

consecutive candles, the chart continues to reflect the underlying trend.
In this way the candles of a HeikinAshi chart are related to each other. It
also allows for the isolation of price and smooths out the market
volatility that can be associated with currency movement.

One of the advantages is that the resulting picture allows the trader to
view a visually easier to understand chart that allows them to more readily
identify the overall trend.

Figure 13 Heiki Ashi Candles

Advantages of HeikinAshi candle charts

 The delay in HeikinAshi candles is very useful when dealing with

volatile currency pairs. (For example GBP/JPY). The delay provides a
clear indication of the continuing trend of the market. In doing so
it reduces the chance of a trader rushing and making mistakes by
trading against the trend.
 Using the smaller time frames can provide clean entry points for a
trade after news announcements. This can be most useful when doing 30
minute or intraday trading.
 The HeikinAshi candle chart provides fewer false signals again
reducing the chance of a trader moving against the trend of the
market.
 HeikinAshi candles are easier to read because they do not have a lot
of different shapes and formations.

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Disadvantages of HeikinAshi candle charts

 HeikinAshi candle charts can be difficult to read and inherently more

dangerous to use on larger timeframes like daily charts or eight
hourly. Using HeikinAshi candles on these time frames may mean that
you are unable to notice the change to allow you to close the trade.

Different candles in a HeikinAshi chart:

 Green, Blue Candles - Bullish

o When the market is Bullish, HeikinAshi candles have large
bodies and long upper shadows and no lower shadow. Looking at
the uptrend in the chart below, you will notice that almost all
of the candles have large bodies, long upper shadows and no
lower shadow.
 Red Candles - Bearish
o When the market is Bearish, HeikinAshi candles have large
bodies and long lower shadows but no upper shadow. Look at the
down trend on the chart below, you will notice that almost all
of the candles have large bodies, long lower shadows and no
upper shadow.
 Reversal Candles
o Reversal candles in the HeikinAshi charts look like Doji
Candlesticks. They have no or very small bodies but long upper
and lower shadows. Look at the reversal candles in the chart
below:

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Figure 14 Dojo switching candles

Figure 15 dojo switching candle up trade

Dojo’s change of direction candles or switching candles

How can you use the HeikinAshi chart in your trades?

There are traders who only use HeikinAshi candle charts to trade. We would
suggest that a trader just starting may wish to use some additional
indicators to verify entry and exit points of a trade.

After the explanation about HeikinAshi candles the simple way to trade
using HeikinAshi candles is if it is green – “Buy” and if it is red -
“Sell”. The other indicators that you can be very useful with determining
the exit and entry points are the DiNapoli 3 x 3 and the 8, 3, 3 DiNapoli
Preferred Slow Stochastic Indicator.

Using the DiNapoli 3 x 3 you can see an indication of the continuing trend.
With green candles (or a buy trend) the candle construction will be above
the DiNapoli 3 x 3 line. With red candles (or a sell trend) the candle
construction will be below the DiNapoli 3 x 3 line. If the candles cross
the DiNapoli 3 x 3 this is a very strong indication that the market is
about to change direction.

Using the 8, 3, 3 DiNapoli Preferred Slow Stochastic Indicator you can

again see where the market is changing direction when the lines cross.

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Both of these additional indicators can assist with determining the most
appropriate point to enter and exit the market. Please take particular
note: learn how to trade these indicators successfully on a demonstration
account before you use them on a live account.

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Chapter 12
The Little Gold Trader
Collecting is my passion, Collecting is my joy; it gives me great
satisfaction.
Ursula Andress

As we were putting this book together we collected stories from traders in

Asia-Pacific. A number of those stories have been included in different
chapters to give you an idea of what other people’s experiences have been
in trading the Forex market.

There was one story that came to us which wasn't directly related to Forex
trading. It did, however, have a good message about trading, mindset and
passion. This story is different to everything else we had done because it
was written by Lisa, a 14-year-old gold trader and coin collector who has a
passion and desire that has made her successful.

Throughout the book we have spoken about:

 Developing a good reason why

 Education and understanding

 Developing your mindset

 Having passion

Lisa’s story has all of these things. I interviewed Lisa's uncle Steve to
get some additional background. I have included this at the beginning with
Lisa’s story in Lisa's words following.

Trader story

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Lisa sees herself as a coin collector. The only real difference is that the
coins that she loves to collect just happen to be gold. It’s that passion
for gold coins that has developed her education and understanding of the
gold market, different ways of trading gold and different ways of owning
gold.

One of the more interesting aspects of Lisa's mindset is that her passion
for gold has led her to educate herself in all aspects of gold. As a
result, what she knows and the stories that she can tell about gold are
somewhat encyclopaedic.

As a coin collector, Lisa has a general coin collection that sits in a

little leather album on her bookshelf with a page dedicated to a different
country. She currently has 34 pages in this album. Lisa also has a few
unique items as part of her general coin collection such as a roll of US
quarters and the US Treasury bag complete with a seal full of US pennies.
Lisa buys a proof set of Australian coins every year. Her favourite coin is
a gold coin from the Cook Islands, which is the same shape as an Australian
50 cent piece. And her favourite banknote is a note designed by the
Australian Mint for the Cook Islands, which is a $3 banknote. It is legal
tender although it is not in general circulation. The coins that Lisa has
as a coin collection is what she calls the slumber party coin collection.
These are the coins she brings out at slumber parties or shows other
people. Every other part of her collection is off limits and no one ever
sees it.

Lisa's passion for gold and her gold coin collection grows a little each
month. Lisa does have one Platinum coin. However, she doesn't like Platinum
because it's too hard to keep shiny.

Lisa has a very adult and precise approach to trading gold and increasing
her holdings. Lisa gets paid an allowance and puts aside a set amount
towards buying gold. If the value of her gold goes up then she goes to her
dad and borrows money based on the increased value of her current holding
to purchase more gold. Dad then draws up a contract where Lisa has to pay
interest on the credit line that he is giving her.

Before signing it, Lisa takes the contract to her grandmother who is a
lawyer to have the contract reviewed. After the contract is reviewed

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suggestions are made to change the contract and to improve the interest
rate being charged. Lisa's grandmother usually tells her that her father
has written the contract in his favour and that these changes need to be
made to bring it back to being more in her favour. So the negotiation
process continues until Lisa and her father have come to an agreement and
the contract is signed.

Once Lisa has the loan from her father she then goes and negotiates the
purchase of more gold.

Lisa has developed a very strong relationship with Des the owner of the
local coin shop. He has given Lisa a VIP card and she ensures she uses all
the benefits. Lisa's passion for coins and gold is such that Lisa will
intentionally miss the bus so that she can spend half an hour at the coin
shop of an afternoon. While other kids are busy at fast food places or
playing arcade games, Lisa is busy learning about different types of coins,
currencies and gold. Des will show Lisa all the coins he has bought in and
they will discuss each coin in great detail. Des will give Lisa advice
about what coins she should be looking for and what special things to look
at.

Once Lisa eventually gets home, (this is a daily ritual as Lisa manages to
miss the bus every day), she then goes about any sport or homework she has
to do. At eight o'clock at night once everything else has been finished,
Lisa then starts researching what she has learned from Des that afternoon.
If Lisa then agrees with what Des told her that afternoon, she will then
start to look at how she can go about obtaining the new coins.

Lisa has managed to combine her passion for gold with another love of her
life, horse riding. As part of her plan to obtain the coins and gold that
she wants, Lisa has a couple of jobs. One of her jobs is to ride horses and
any money that she makes goes straight into a high interest investment
account.

As part of a strategy she looks carefully at her savings plan and develops
a written plan for how she can purchase the golden coins that she wants. As
Lisa looks at the different strategies she also tries to look for new ways
of increasing her holdings. Frequently, Lisa will sit down with her
grandmother and discuss her plan for purchasing gold. It is during this

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time that Lisa spends with her grandmother that she also learns about other
trading options that are available. Lisa is currently researching options
and how to use them but she will not enter the options market until she is
clear that she knows enough to be able to trade properly.

When Lisa’s grandfather took her to Western Australia she was shown a gold
pour at the mine site as well as another gold pour at the Perth Mint. It
was seeing these gold pours that really fired Lisa's imagination and
passion for gold.

With everything that Lisa has been learning she has worked out that she can
buy more gold using gold certificates than she can if she bought the
physical bullion. So after her own research and discussing it in detail
with various people she trusts, Lisa has now embarked on buying gold
certificates.

Lisa is responsible for the entire process and all aspects of the loans,
right through to storage and insurance of her gold. Lisa has a safety
deposit box for her gold bullion, which is also insured. Lisa has another
safety deposit box for the gold certificates and has that insured as well.
One of the things that Lisa found out was that it is cheaper to insure gold
certificates than it is to insure gold bullion. That is why she is now
collecting more gold certificates as she can end up with more gold at a
cheaper rate. Lisa is 100% responsible for all insurances and costs
associated with the purchase and storage of her gold.

Lisa is always asking questions about how she can protect her gold. So she
has researched trusts and various other instruments that will help keep her
gold safe. Her gold collection includes gold coins from Canada, Singapore,
UK, New Zealand and Australian. It is with these collections that Lisa is
very pedantic in particular. Lisa will never show anyone her gold except
for the immediate family. Even then, if any gold is handled it must be done
with gloves so as not to tarnish the gold in any way.

Lisa's favourite website is NASA. As I mentioned Lisa has a passion for

gold and knows things about gold that most people don't. The reason Lisa
likes NASA is because of what NASA does with gold. Lisa would tell you gold
is resistant to corrosion, has excellent electrical conductivity, is
ductile (which means it can be drawn out to a thin wire) and malleable

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(able to be flattened out extremely thin), reflects infra red and has
excellent thermal conductivity properties. NASA uses the gold in satellites
and spacecrafts where it is used for protection against solar radiation. If
you sat down with her, Lisa could tell you a lot more about the uses that
NASA has for gold.

Lisa’s interest in NASA is so strong that when she and her family went to
Florida they saw a space shuttle take off. As the rockets burst into life
Lisa started to cry and kept crying for the entire launch. When her dad
finally got her to tell him what was wrong she said that she wanted to know
how they recover all the gold that NASA uses. She was crying because the
gold was going into space and the booster rockets were going into the ocean
never to be seen again.

Lisa wants to become a teacher in mathematics and economics. Her favourite

sport is hockey. So in those ways she is just like any typical teenager.
The biggest difference is that over the past couple of years Lisa has
developed an ability to know the gold market in a way that her father and
her uncle do not. Lisa has an amazing ability to buy and sell gold. She
knows how and when the market will move. Lisa uses other commodities as
indicators for gold. For example, she listens to the price of oil and uses
that as one of the indicators to determine how much her gold will be worth.
Her father and uncle have no idea how she does it but she has developed an
uncanny ability to accurately determine the movement of gold.

Here is Lisa’s story.

Hello my name is Lisa I have just turned14. I would be the luckiest girl in
the world I have a dad and an Uncle Steven who have both taught me how to
trade. I am a numismatist

Dictionary Definition: Numismatics (Latin: numisma, nomisma, "coin"; from

the Greek: νομίζειν nomízein, "to use according to law") is the
study or collection of currency, including coins, tokens, paper money, and
related objects. While numismatists are often characterized as students or
collectors of coins, the discipline also includes the broader study of
money and other payment media used to resolve debts and the exchange of
goods.

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Like many girls my age I collected gold coins, many of my friends have jars
of coins from all over the world. Most of these coins are not worth a lot
of money. My gold coin collection is worth money and increases in value
every day.

My love of gold started back when I was eight years old. It was a very sad
time. My Poppy Fu (grand father) had just passed way. A man in a suit came
knocking at the door. He was from a legal firm. Both dad and I were needed
to be at a reading of a will. Poppy left me a little gold coin and the
instruction was that I could do anything I liked with this coin.

The coin was a 1966 solid gold Krugerrand coin. In 1967 the Krugerrand went
from a solid gold coin to an alloy of gold. There was only 1000 of 1966
pure gold coins ever made. These coins were minted because a visiting king
was coming to South Africa.

One day after school I decided to go to the local coin shop and ask the man
behind the counter just how much this coin was worth.

The shop keeper got a magnifying glass and looked at my coin very closely.
The shop keeper name is Des. I would buy a lot of gold off Des in the next
few years.

Des told me to go and get my parents and he took my coin off me and placed
it into the store safe. I was so upset. This man had taken my coin off me
that my poppy had given me. I ran home crying all the way.

Uncle Steven was at my place and I told him what the shopkeeper had done.
Uncle Steven and I went back to the shop. Uncle Steve is a giant and Des is
tiny compared to my uncle Steve. The shopkeeper is going to get it now.

Uncle Steven was not nice, sometimes I think Uncle Steve can breathe fire
out of his ears if he wants to, and he looks mean. The store owner agreed
to give Uncle Steven the coin, before he did he took a book of rare coins
and showed me my coin and told both uncle Steven and I how much this coin
was worth. Uncle Steven went very pale. I recalled he looked like he was
going to faint.

What Des showed us in the book was that the 1966 Krugerrand was a very rare
coin and today this coin is valued at US$190,000. Guess what; I own one.

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For months it sat in a little wooden case that Poppy had made. Nobody not
even dad or Uncle Steve knew how much this coin was worth.

Uncle Steven and I went from the coin store straight to the big bank
building on the corner and Uncle Steven asked to see the manager. I was not
sure of what he was doing but uncle Steve signed some forms and the bank
manager took uncle Steve and me into this big vault.

This big vault was filled with lots of tiny silver boxes. A small box was
open and the rare coin that had spent months in my bedside drawer was now
going into the safe deposit box. Uncle Steven bought a throw away camera
on the way to the bank and he took pictures of my coin . Uncle Steve said
these pictures would be needed for insurance. The coin was then placed into
a deposit box.

The bank manger was very nice and he asked me if I knew what the value of
my coin was. I told him. The bank manger then took Uncle Steven and me into
a second vault and he then showed me a stack of money. The bank manager
showed me a stack of money that was how much my coin was worth.

I agreed with Uncle Steve that my coin had to be

put away in a safe place. I was so excited going
home. When I got home dad was there I told him
everything and gave him the papers that bank
manger gave us. I was talking very fast.

Dad did not say much, he just keep reading over

the paper.

A few months later Uncle Steven got me a rare

coin book and I started to get interested in gold coins.

My other Poppy, Poppy John was going to Western Australia to talk to a man
in gold mines at the super pit. It was during the school holidays. I did
not get to see Poppy John a lot. He is a very busy man. Poppy John turned
up one day and asked my dad if I could go with him to WA to see the gold
mine. Dad agreed and the next day my brother and I were off to see a gold
mine in WA.

We got to Perth and got into a helicopter and went to the biggest gold mine
in Australia. It is massive.

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There were 34 of these big trucks. While we were at the super pit I watched
gold being poured. I think it was then that I fell in love with gold.

I save my money and every time I have enough I go back to Des and buy more
gold coins. I spend many hours in Des’s shop. I love looking at the coins.
I think that paper and plastic notes are boring.

About two years later, dad and Uncle Steve showed me how I could trade
gold. Daddy made me wait until I was 12 before he would let me trade, yet
Uncle Steven was showing me how to do it from the age of nine.

My first trade was a gold certificate for one ounce. It was just a piece of
paper. I made US $100 on that deal. I did this many times. When I had
enough money I then went out and brought real gold. This gold still goes
into my safe deposit box.

Dad takes me every month to the bank and I spend hours looking at the
gold. Every birthday I ask for gold. I buy a lot of my gold from the Perth
Mint and still shop at Des’s.

My gold collection went into overdrive went daddy showed me how to buy and
trade gold using margins. I would sit for hours with Uncle Steven going
over the process. I can go to sleep in Australia. The next day when I wake
up I am a little richer.

Most of the time I buy gold certificates as they are cheaper. I don’t
understand compounding but I know I need to find out about it. After all I
am just a kid and still learning. Dad and Uncle Steve talked about
compounding for ages and I learnt a bit. I will keep listening and asking
questions and one day I will understand compounding.

I have been trading for two years now, though I don’t understand
compounding yet I know my gold values are increasing.

Nanny went to Hong Kong and brought me a gold bar in the shape of a
Chinese junk. It doesn’t float. It sinks like a rock.

Dad and Uncle Steve both buy and sell money I just collect gold. Sometimes
I sell it for a profit then buy more gold coins.

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I love trading. If I want something I just go out and buy it. My portfolio
is now worth US $487,000. Dad is very strict with my gold. I am not allowed
to leave it around the house. My gold is insured and I pay this every year.

My portfolio is very diverse. There are physical gold, gold coins, gold
certificates and now some gold shares. If I keep going at this rate I could
go to the bank and lend them some money.

The last school holiday Nanny, who also trades, started to show me how to
trade options on gold stock. I sold a little bit of gold made $5000 now I
have some gold shares. I can’t get them until I am 18 so they better keep
going up. I must admit trading shares from where I stand looks hard. I
think I will stay with gold because I understand that.

I have learned a lot about gold and find out new stories all the time. One
story I like is about the Ansett Airline door stop.

Rumour has it in the early 1970s gold was being moved from one capital city
to another. These flights were top secret. A gold shipment left Melbourne
bound for Canberra with a gold bar on board. The gold was heading for the
Royal Australian Mint. The gold was wrapped in newspaper and was then
transported to the cargo terminal but the gold never made it to Canberra.

The police were called in to investigate the missing gold bar. It was very
important because the gold bar was 10 kilograms and it had just
disappeared. The WA Police, who have one of the best gold squads in the
world, investigated yet there were no signs of the gold.

The search for the missing gold bar went on for years with no success and
finally the insurance company paid the compensation for the missing gold
bar.

At about the time the gold bar went missing, a parcel wrapped in newspaper
turned up at the Ansett cargo terminal in Sydney. There were no details or
address information. The parcel became a door stop in a cargo depot.

Nobody thought it was the missing 10 kilo gold bar from Melbourne because
it did not look like a shiny gold bar. Years went by and everyone thought
the gold door stop was just a lead weight. Nobody working at the cargo
terminal knew what to look for.

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A man who was a cleaner at the cargo depot worked out what it was. After
35 years at the airline he was forced to retire when the Airline closed its
doors and everything was sold off at auction. The cleaner went to the
auction and bought the door stop for $5.

The cleaner now owned the 10 kilo gold bar. The cleaner tried to sell the
gold bar and was immediately under arrest. They charged him with grand
theft. Everyone went to court and after a long time the case was thrown out
and all charges dropped.

The gold bar was given back to the cleaner. He then promptly left the
country with his gold bar under his arm. The cleaner and his gold bar flew
first class to another country.

When I heard this story I wondered if I would always know what gold looked
or felt like. I have learned what gold looks like at all stages of
production so I think I could. Next time you kick a door stop look to see
if it is in fact gold.

Learn to do common things uncommonly well.

George Washington Carver

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APPENDIX 1
Sample Trading Plan

David Shepherd Forex Trading Plan

10 January 2011 to 1-May 2011

$1000 to $1million in 80 days

www.1millionin80days.com

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My mental approach

What is the downside of you getting what you want?

The only downside is to stay where I presently am in life. This causes me

great grief and heartache. I am scared to be stuck where I am and have
life pass me by. When I have nothing, life is hard and all I want to do is
close the door and hide away from the world.

What is the upside of getting what you want?

The upside of this trading plan is that I will transform my life and in
doing so help others take control of their lives. I will be able to make a
difference in other communities in ways that will become a lasting
contribution.

How is it servicing or helping to stay where you are?

It’s not helping me in any way. The best I can say is, “it's comfortable
as it is what I am familiar with”. The saddest thing for me is that my
true potential is decaying with each and every passing day. All the
potential in the world and $3.50 will get me a cup of coffee and right now
that is the best there is if I stay about where I am.

How would I feel if I had just increased my live trading account by 2750%
over the past calendar month?

I would feel very calm and focused on my goals. I would be confident that
all of my goals are within my reach. I would be fit and happy. I would be
easy to get along with and I know with every fibre in my body that I can do
anything and be anything that I set my mind to.

How would I feel if I was a million dollar a year currency trader?

There is a deep sense of security knowing I have a million in my trading

account. I get a buzz every time I look at the account balance. I get a lot
of joy when I pay the tax man what I should pay him. Most importantly I
reflect back on where I have come from and see the changes I have made in
my life so I am where I am today.

A detailed trading plan can have many aspects of trading. Make sure you
list your goals and dreams. Go out and get pictures of what you want then

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include these in your trading plan as well. Remember to include your

donations or gifting in the plan.

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Write a letter or email to a person who would be pleased to hear you have
reached your desired state. Write this letter in the positive and as if it
has already happened. State it in the present and feel it.

Dear Mum,

You will never guess what I have done. My first book -$1000-$1 million in
80 days - is now very close to being an international bestseller. What's
even more exciting is that in the last 10 weeks I have been focused on
trading the AUS/USD.

Yes Mum, I know you have said that I only trade the GBP/JPY BUT I thought
it was about time that as an Australian I mastered and traded the
Australian dollar.

So I put my pride aside and just did what was needed to successfully trade
the Australian dollar. All I needed was 75 pips a day to achieve my goal.
After I looked carefully at the characteristics of the AUD/USD I realised
that I could trade it easily. What’s more I saw that I would be able to
reach my goal trading the Australian dollar and that is just what I did.

Mum it has been amazing because in trading the Australian dollar for the
past ten weeks I have noticed that my trading style has improved. The
really exciting thing for me is that my bank account has doubled 11 times.

While in Melbourne, Carole and I will be staying at the Crown Towers. I

have to tell you that it's a really great feeling to be able to sit proudly
and look at my live trading account with over a million dollars in it.

I am no longer held back and I want to share my success with people

important in my life. So Mum I have enclosed a plane ticket for you to join
me in Melbourne. There is accommodation at the Crown Tower already booked.
The penthouse suite has room for all of us. Raymond, Paul, Thea, Elisa and
Adrian will be there as well. After the book launch it’s off to Singapore
for a few weeks.

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I am very excited about the upcoming book

launch. Already, we have sold nearly 5000
copies and it looks like the book sales
are continuing to accelerate. Very soon
your number three son will be a
bestselling author. How are you going to
feel with a bestselling author in the
family? I know that I will be feeling
pretty spectacular. I expect that hitting My next car- The ISF Lexus.
the international bestseller list will
Mine as of January 2010
happen just before Christmas.

It's a real buzz because the statement of

my account and being able to achieve my financial goals is a testament of
the methods that I use when I am trading. It feels great to be able to
share what I do and how I do it with other people.

Now I have a statement of a live account that I can use during my seminars.
I may have had trouble in the past trading the Australian dollar but
successfully trading the Aussie this year has taught me patience. It has
been that patience and persistence that has helped me put my life together
in other ways as well. I'm now enjoying all of the benefits that come with
the success I am experiencing in all areas of my life.

I am looking forward to the book launch and hope to see you there.

Love David.

I want to be a Forex trader because?

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Forex trading will transform my life and give me the lifestyle I have
dreamed of for years. It will bring financial freedom and give me a means
to retire the outstanding debts that I currently have. It will give me a
means to give back to the community and help other people to get more out
of life for themselves. Forex trading is fun and I do enjoy it. Being a
great Forex trader will help me transform the limiting beliefs that I've
had in the past and allow me to create an extraordinary positive future.

My attributes that make me a good Forex trader are?

 Ability to look at things it differently

 Always moving forward and expanding as a professional trader

 Belief in myself and my ability to get ahead

 Dreaming BIG

 Picking myself up after a setback

 Being able to cut a loss when the trade is wrong

 Having the skills to let a profit run when the opportunity presents

 Being able to make my own trading decisions without being influenced

by anything that may be happening around me

My optimum mindset for trading is?

After exercising at the gym I am calm and focused. My mind is still able to
get the results I want. I believe in myself every day. I will build the
energy of abundance. Keeping fit with exercise, writing and reading
inspirational and educational material are daily event for my optimum
physical and mental health. Having this in place will allow this plan to
work.

I will stop trading temporarily if?

I have more than two losses in a row. After a winning trade I will stay out
of the market for a two hour period. If it looks like I’m chasing the
market then I will come out of the market for at least two hours.

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I will review winning trades by?

After a trade has been completed a detailed report will be constructed with
the trades recorded in a video format and put into U-Tube and into a DVD so
they can be added to the trading video library at a later date.

I will continually upgrade my skills by!

As part of my development I will search and read the format for all types
of information to assist my trading style. I will also attend the next
DiNapoli live event in Australia. I will continue developing my mindset so
that I remain clear and focused whenever I am trading.

I will follow this trading plan explicitly.

I commit to planning my trades and trading my plan and adhering to this

trading plan 100%.

If I don’t follow this plan explicitly then I will remain where I am

dealing with what I currently have. Staying where I am is just too painful
and I am not prepared to allow that to continue.

My financial goals.

My financial plan is calculated as per the Forex Trading Equity Management

Tool.

My starting date for this trading goal is 31/8/09

Completion date for these goals is 28 October 2009 before the book launch.

My starting balance for trading is $1000

My daily profit target is 75 pips per day

My trade stop loss is 75 pips

My profit target for the first week is $1500

My target profit for the first month is $7200

My target profit for the quarter first quarter is $475,800

I reach my goal of $1 million on the following date 29/4/2011

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I will have $3,741,100 dollars in my live account by the 23/10/2009. To

achieve this I will need to trade 75 pips two times a day. To reach this
goal I will go from one lot to 133000 lots in this period of time.

My risk management strategy

My equity risk per trade is 10%

My risk per trade will be modified when

My account exceeds $155 000

My new risk per trade will be 2.5%

My regular withdrawal plan from equity management is $10000

My withdrawal frequency is Monthly

My withdrawal will start from 28/2/2011

My risk reward strategy is

My average stop loss is 60 pips

My risk reward ratio is 1.25:17

My take profit is 150 pips > or greater

In the event of a trailing stop of 60 pips
behind the market,
Allow profit to run as long as possible

My stop loss will be moved to breakeven when the trade is in profits by

60 pips.

My number of lots to trade is as per the lot calculator in The

Forex Trading Equity Management
Tool

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I will trade maximum number lots per trade yes

My maximum number of lots is 3000

My multiple limit strategy is 75, 100

and 150 pips
In the event of multiple lots the profit will be taken off the table at the
specified levels

My Forex market parameters

1. I will trade any of the following

From 31-8-09 to 17-12-09 the only pair I will trade is the AUS/USD,
if I am to move past this inner conflict then it’s up to me to trade
the AUS/USD. I don’t know any other currency pair. Therefore this is
the pair to trade.

2. I will only trade spreads up to four pips. The AUS/USD only up to

$10,000 and once the account is above $10,000 then the EUR/GBP will
be included into the mix. For this exercise GBP/JPY will not be
included in the trading schedule. This will be reviewed once the
account reaches one million dollars or greater.

3. I will only trade these times

6am entry will be on a hourly chart
Second entry will be at 0:00 GMT on a daily chart this will be a set
and forget
Two entries a day I will close the computer down and will not be
influenced by anything else during this time.

4. I will not trade when there are Public Holidays in the major trading
hubs of the world e.g. Australia, Japan, London, New York. I will not
trade non-farm payroll announcements.

5. For my trading I will use this trading I will use Meta trader 4 with
GoMarkets Australia

6. I will use this trade type Stop entry on pending

Entry and exit signals

Up

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Flat bottom green candle above the DiNapoli 3 x 3

If the short term is above the long term then entry into the trade long

Down
Flat top red candle below the DiNapoli 3 x 3
If the short term is below the long term and wide apart indicates entry
into the trade in a short direction

Enter the trade with a parent and contingent order for 60/76 set and forget
walk away when the trade is on.
When the trade is approaching 60 pips, the stop will be changed from a
fixed to a trailing stop, which will be 60 pips behind the market. The
limit will then be moved to a goal of 150 pips or 75 pips traded twice. I
will ensure that the stop is moved to ensure that I achieve my daily target
of 150 pips.

My trading strategy
I will trade using the following strategies

Daily chart 75 pip limit 60 pips stop

Entry will be on the four hour chart during active trading session on a
daily chart
Daily chart entries at 8am local time.

I will not trade when

 The account balance is less than 500
 I am in a bad mood
 Other people are trying to tell me what to trade

Preparation for trading

My regular actions before I trade:

1) Go to the gym daily
2) While at the gym I will listen to Daily Magic.
3) Listen to Van Tharp Disk 2 every day before trading.
4) Each morning I will write out what it would feel like to achieve the
desired state.

I will review today's Economic Calendar before going into a trade and make
a note of times that announcements will affect the currency I am trading.
I will note yesterday’s high and low for the currency I am trading.

I will note any pending trades or pending triggers.

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I will check my lot calculator to determine the number of lots to trade –

this will be done at the end of each trading day with the lot preset to the
amount as per the equity sheet.

I will decide whether my mindset is suitable for trading each day. If my

mindset is not in the place to trade then I will stop trading. Most
importantly I will not chase the market or kid myself I am in a good space.

My post trade housekeeping

I will record all my trades every day. Trades will be recorded in a digital
file as well video format.

I will check any open trades in relation to pending economic announcements.

I have strictly adhered to these trading plans and review monthly.

Give away Plan

Heart Kids WA $250,000

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Appendix 3

FOREX Glossary

Aggressor:
A trader dealing on an existing price in the market.

Appreciation:
A currency is said to 'appreciate ' when it strengthens in price in
response to market demand.

Arbitrage:
Profiting from differences in the price of a single currency pair that is
traded on more than one market.

Around:
Dealer jargon used in quoting when the forward premium/discount is near
parity. For example, "two-two around" would translate into two points to
either side of the present spot

Ask (Ask Price / Ask Rate):

The price at which a currency pair or security is offered for sale; the
quoted price at which an investor can buy a currency pair. This is also
known as the 'offer', 'ask price', and 'ask rate'.

Back Office:
The office location, or department, where the processing of financial
transactions takes place.

Balance of Trade:
The value of a country's exports minus its imports.

Base Currency:
In terms of foreign exchange trading, currencies are quoted in terms of a
currency pair. The first currency in the pair is the base currency. The
base currency is the currency against which exchange rates are generally
quoted in a given country. Examples: USD/JPY, the US Dollar is the base
currency; EUR/USD, the EURO is the base currency. In the FX markets, the US

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Dollar is normally considered the 'base' currency for quotes, meaning that
quotes are expressed as a unit of US$1 per the other currency quoted in the
pair. The primary exceptions to this rule are the British Pound, the Euro
and the Australian Dollar.

Bear Market:
A market distinguished by declining prices.

Bid:
The price at which an investor can place an order to buy a currency pair;
the quoted price where an investor can sell a currency pair. This is also
known as the 'bid price' and 'bid rate'.

Bid/Ask Spread:
The difference between the bid and offer price, and the most widely used
measure of market liquidity.

Big Figure:
Dealer expression referring to the first few digits of an exchange rate.
These digits rarely change in normal market fluctuations, and therefore are
omitted in dealer quotes, especially in times of high market activity. For
example, a USD/Yen rate might be 107.30/107.35, but would be quoted
verbally without the first three digits i.e. "30/35".rate of 108.05/10 the
big figure is 108. EUR/USD price of .8325/28 the big figure is .83

Bollinger Bands
A quantitative method that combines a moving average with the instruments
volatility. The bands were designed to gauge whether the prices are high or
low on relative basis. They are plotted two standard deviations above and
below a simple moving average. The bands look like an expanding and
contracting envelope model.

Book:
In a professional trading environment, a 'book' is the summary of a
trader's or desk's total positions.

Boris
Slang for Russian trading.

Broker:
An individual or firm that acts as an intermediary, putting together buyers

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and sellers for a fee or commission. In contrast, a 'dealer' commits

capital and takes one side of a position, hoping to earn a spread (profit)
by closing out the position in a subsequent trade with another party. In
the foreign exchange market brokers tend to act as intermediaries between
banks bringing buyers and sellers together for a commission paid by the
initiator or by both parties. There are four or five major global brokers
operating through subsidiaries affiliates and partners in many countries.

Bretton Woods Agreement of 1944:

An agreement that established fixed foreign exchange rates for major
currencies, provided for central bank intervention in the currency markets,
and pegged the price of gold at US $35 per ounce. The agreement lasted
until 1971 when President Nixon overturned the Bretton Woods agreement and
established a floating exchange rate for the major currencies.

Bull Market:
A market distinguished by rising prices

Bundesbank:
Germany's Central Bank.

Buy Limit Order:

An order to execute a transaction at a specified price (the limit) or
lower.

Cable:
Trader jargon referring to the Sterling/US Dollar exchange rate. So called
because the rate was originally transmitted via a transatlantic cable
beginning in the mid 1800s.

Candlestick Chart:
A chart that displays the daily trading price range (open, high, low and
close).

Carry (Interest-Rate Carry):

The income or cost associated with keeping a foreign exchange position
overnight. This is derived when the currency pairs in the position have
different interest rates for the same period of time.

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Central Bank:
A bank, administered by a national government, which regulates the
behaviour of financial institutions within its borders and carries out
monetary policy. For example, the US central bank is the Federal Reserve,
and the German central bank is the Bundesbank and in Australia it is the
Reserve Bank.

Chartist:
An individual who studies graphs and charts of historic data to find trends
and predict trend reversals which include the observance of certain
patterns and characteristics of the charts to derive resistance levels,
head and shoulders patterns, and double bottom or double top patterns which
are thought to indicate trend reversals.

CHUFF:
Slang for the Swiss Franc (CHF).

Clearing:
The process of settling a trade.

Closing a Position:
The process of selling or buying a foreign exchange position resulting in
the liquidation (squaring up) of the position.

Closing Market Rate:

The rate at which a position can be closed based on the market price at end
of the day.

Commission:
A transaction fee charged by a broker.

Contract:
The standard unit of trading.

Cross-Rate:
The exchange rate between any two currencies that are considered non-
standard in the country where the currency pair is quoted. For example, in
the US, a GBP/JPY quote would be considered a cross-rate, whereas in UK or
Japan it would be one of the primary currency pairs traded.

Currency:
Any form of money issued by a government or central bank and used as legal

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tender and a basis for trade. It can be traded for other currencies on the
foreign exchange market, so each currency has a value relative to another.
If one US dollar can buy 1.20 Australian Dollars, then one Australian
Dollar can buy 0.80 US dollars.

Currency Pair:
The two currencies that make up a foreign exchange rate. IE: USD/YEN.

Currency Risk:
The possibility of an unfavourable change in exchange rates.

Day Order:
A buy or sell order that will expire automatically at the end of the
trading day on which it is entered.

Day Trade:
A trade opened and closed on the same trading day.

Day Trader:
A trader who buys and sells on the basis of small short-term price
movements.

Day Trading:
Refers to a style or type of trading where trade positions are opened and
closed during the same day.

Dealer:
An individual or firm that buys and sells assets from their portfolio,
acting as a principal or counterpart to a transaction. In contrast, a
broker is an individual or firm that acts as an intermediary, putting
together buyers and sellers for a fee or commission.

Deficit:
A negative balance of trade or payments.

Depreciation:
A fall in the value of a currency due to market forces.

Derivative:
A contract that changes in value in relation to the price movements of a

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related or underlying security, future or other physical instrument. An

Option is the most common derivative instrument.

Devaluation:
The deliberate downward adjustment of a currency's price, normally by
official announcement.

Dragon Lady:
Slang for the Sterling Yen (GBP/JPY).

Discretionary Account:
An account in which the customer permits a trading institution to act on
the customer's behalf in buying and selling currency pairs. The institution
has discretion as to the choice of currency pairs, prices, and timing-
subject to any limitations specified in the agreement.

Euro:
The common currency adopted by eleven European nations (Germany, France,
Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy,
Spain and Portugal) on 1 January 1999.

Economic Indicator:
A government issued statistic that indicates current economic growth and
stability. Common indicators include employment rates, Gross Domestic
Product (GDP), inflation, retail sales, etc.

European Central Bank (ECB):

The Central Bank for the new European Monetary Union.

European Monetary Union (EMU):

The principal goal of the EMU is to establish a single European currency
called the Euro, which will officially replace the national currencies of
the member EU countries in 2002. On January 1st, 1999 the transitional
phase to introduce the Euro began. The Euro now exists as a banking
currency and paper financial transactions and foreign exchange are made in
Euros. This transition period will last for three years, at which time Euro
notes an coins will enter circulation. On July 1,2002, only Euros will be
legal tender for EMU participants, the national currencies of the member
countries will cease to exist. The current members of the EMU are Germany,
France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands,

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Italy, Spain and Portugal. This needs to be rewritten as 2002 is in the

past so it doesn’t read right.

Federal Reserve (Fed):

The Central Bank of the United States.

Fill:
The process of completing a customer's order to buy or sell a currency
pair.

Fill Price:
The price at which a buy or sell order was executed.

Financial Risk:
The risk that a firm will be unable to meet its financial obligations.

Flat:
Term describing a trading book with no market exposure - Dealer jargon used
to describe a position that has been completely reversed, e.g. you bought
$500,000 then sold $500,000, thereby creating a neutral (flat) position.

Foreign Exchange Market - (Forex, FX):

Market where currencies are traded internationally. About three trillion
(million million) dollars-worth of foreign exchange is traded globally
every day, making Forex larger than all bond markets put together. Currency
markets exist in the form of spot, forward, futures and options markets.
Foreign exchange transactions are made up of: Trade flows Only 5% to 10% of
total Forex transactions. Imports usually need to be paid for in the
currency of the country from which they originate. Exports are usually paid
for in one's own currency. A trade deficit therefore causes a currency to
depreciate. Flow-ons reated when a large trade is split up into several
smaller trades. Capital flows Cross-border investment. Speculation Short-
term investment based on expected currency movements. This accounts for the
lion's share of Forex market volume. The punctuation in the previous para
makes it unclear. As I am not sure exactly what you are saying in sections
I haven’t corrected it for you. Please correct.

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Fundamental analysis:
Analysis of economic and political information with the objective of
determining future movements in a financial market.

Good Till Cancelled Order (GTC):

A buy or sell order which remains open until it is filled or cancelled.

Interbank rates:
The Foreign Exchange rates at which large international banks quote other
large international banks.

Intraday
Another way of saying "within the day". Intraday price movements are
particularly important to short-term traders looking to make many trades
over the course of a single trading session. The term intraday is
occasionally used to describe securities that trade on the markets during
regular business hours, such as stocks and ETFs, as opposed to mutual
funds, which must be bought from a dealer.

Jawbone
Announcements and statements by politicians or monetary authorities to
influence decisions by business, consumer, or trade union sectors, often
associated with forecasts and policy implications.

Jobber:
A trader who trades for small, short-term profits during the course of a
trading session, rarely carrying a position overnight.

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Kiwi
Slang for the New Zealand dollar.

Leading Indicators:
Statistics that are considered to predict future economic activity.

Leverage:
In options terminology, this expresses the disproportionately large change
in the premium in terms of the relative price movement of the underlying
instrument.

LIBOR:
The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from
another bank. "The rate at which an individual Contributor Panel bank could
borrow funds, were it to do so by asking for and then accepting inter-bank
offers in reasonable market size, just prior to 11.00am London time."

Limit Order:
An order with restrictions on the maximum price to be paid or the minimum
price to be received. As an example, if the current price of AUD/YEN is
77.44, then a BUY limit order to buy AUD/YEN would be at a price below 80.
(i.e., 79.50).

Liquidity:
The ability of a market to accept large transactions with minimal to no
impact on price stability.

Liquidation:
The closing of an existing position through the execution of an offsetting
transaction.

Long: See long position.

Looney:
Slang for the Canadian Dollar.

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Long Position:
In foreign exchange, when a currency pair is bought, it is understood that
the primary currency in the pair is 'long', and the secondary currency is
'short'.

Maintenance:
A set minimum margin that a customer must maintain in his margin account.

Margin:
The amount of money needed to maintain a position.

Margin Account:
An account that allows leverage buying on credit and borrowing on
currencies already in the account. Buying on credit and borrowing are
subject to standards established by the firm carrying the account. Interest
is charged on any borrowed funds and only for the period of time that the
loan is outstanding.

Margin Call:
A request from a broker or dealer for additional funds or other collateral
to guarantee performance on a position that has moved against the customer.

Market Close:
This refers to the time of day that a market closes. In the 24 hour-a-day
foreign exchange market, there is no official market close. 5pm EST is
often referred to and understood as the market close because value dates
for spot transactions change to the next new value date at that time.

Market-Maker:
A dealer who regularly quotes both bid and ask prices and is ready to make
a two-sided market for any financial instrument.

Market Order:
A customer order for immediate execution at the best price available when
the order reaches the marketplace.

Market Rate:
The current quote of a currency pair.

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Market Risk:
The risks that occur when general market pressures cause the value of an
investment to fluctuate.

Momentum:
The tendency of a currency pair to continue movement in a single direction.

Momentum investor:
A market participant who increases market exposure when the market is
rising and decreases exposure or goes short when the market is declining.

OCO-One Cancels the Other Order:

A combination of two orders in which the execution of either one
automatically cancels the other.

Offer:
The price at which a currency pair or security is for sale; the quoted
price at which an investor can buy a currency pair. This is also known as
the 'ask', 'ask price', and 'ask rate'.

Offsetting transaction:
A trade that serves to cancel or offset some or all of the market risk of
an open position.

Old Lady:
Old lady of Threadneedle Street, a term for the Bank of England

Open Order:
Buy or sell order that remains in force until executed or cancelled by the
customer.

Open Position:
Any position (long or short) that is subject to market fluctuations and has
not been closed out by a corresponding opposite transaction.

Order:
A customer's instructions to buy or sell currencies.

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Overnight Position:
A trade that remains open until the next business day.

Paris
A term for USD/FRF Spot Rate.

Pip / Point:
The smallest increment of change in a foreign currency price, either up or
down.
(1) 100th part of a per cent, normally 10,000 of any spot rate. Movement of
exchange rates are usually in terms of points.
(2) One percent on an interest rate e.g. from 8% -9%.
(3) Minimum fluctuation or smallest increment of price movement.

Profit Taking
The unwinding of a position to realise profits.

Price:
The price at which the underlying currency can be bought or sold.

Price Transparency:
Describes quotes to which every market participant has equal access.

Principal Value:
The original amount invested by the client.

Quote:
A simultaneous bid and offer in a currency pair.

Rate:
Price at which a currency can be purchased or sold against another
currency.

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Range:
The difference between the highest and lowest price of a future recorded
during a given trading session.

Resistance:
A term used in technical analysis indicating a specific price level at
which analysis concludes people will sell.

Reversal:
Reversal patterns that occur at the end of the trend, signalling the trend
change.

Risk (Foreign Exchange Risk):

The risk that the exchange rate on a foreign currency will move against the
position held by an investor such that the value of the investment is
reduced.

Risk Management:
The employment of financial analysis and use of trading techniques to
reduce and/or control exposure to financial risk.

Roll-Over:
Process whereby the settlement of a deal is rolled forward to another value
date. The cost of this process is based on the interest rate differential
of the two currencies.

Running a Position:
Keeping open positions in the hope of a speculative gain.

Sell Limit Order:

An order to execute a transaction only at a specified price (the limit) or
higher.

Selling Short:
A situation where a currency has been sold with the intent of buying back
the position at a lower price to make a profit.

Settlement:
The process by which a trade is entered into the books and records of the

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counterparts to a transaction. The settlement of currency trades may or may

not involve the actual physical exchange of one currency for another.

Scalping:
A strategy of buying at the bid and selling at the offer as soon as
possible.

Short:
An investment position that benefits from a decline in market price.

Short Squeeze:
The pressure on short sellers to cover their positions as a result of sharp
price increases.

Spread:
The difference between the bid and offer prices.

Spot Price:
Market where people buy and sell actual financial instruments (currencies)
for two-day delivery.

Spot/Next or S/N roll:

The process of moving the spot settlement value date on an open position
forward to the next valid value date. This process will affect the profit
or loss on the overnight position. The forward points reflect the
difference in interest rates between the currencies being rolled over.

Spot Price:
The current market price. Settlement of spot transactions usually occurs
within two business days.

Spread:
This point or pip difference between the bid and ask price of a currency
pair.

Sterling:
Another term for the British currency, 'The Pound'.

Stop (loss) Order:

Order to buy or sell when a given price is reached or passed to liquidate
part or all of an existing position.

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Stop-Loss Order
An order placed with a broker to sell a security when it reaches a certain
price. A stop-loss order is designed to limit an investor's loss on a
security position.

Stop Order (or stop):

An order to buy or to sell a currency when the currency's price reaches or
passes a specified level.

Support Levels:
A technique used in technical analysis that indicates a specific price
ceiling and floor at which a given exchange rate will automatically correct
itself. Opposite of resistance.

Swing Trading:
To find situations in which a currency has potential to move in such a
short time frame, the trader must act quickly. This is mainly used by at-
home and day traders. Large institutions trade in sizes too big to move in
and out of stocks quickly. The individual trader is better able to exploit
the short-term movements.

Swissy:
Slang for Swiss Franc.

Take Profit Order:

A customer's instructions to buy or sell a currency pair which, when
executed, will result in the reduction in the size of the existing position
and show a profit on said position.

Technical Analysis:
An effort to forecast prices by analysing market data, i.e. historical
price trends and averages, volumes, open interest, etc.

Technical Correction:
An adjustment to price not based on market sentiment but technical factors
such as volume and charting.

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Tick:
The smallest possible change in a price, either up or down.

Thin Market:
A market in which trading volume is low and in which consequently bid and
ask quotes are wide and the liquidity of the instrument traded is low.

Tomorrow Next (Tom/Next), (T/N), T/N Roll:

The process of moving the settlement value date on an open position forward
from one business day after the trade date (tomorrow), to the next valid
value date (next), the spot value date.

Triangle:
A technical analysis pattern created by drawing trendlines along a price
range that gets narrower over time because of lower tops and higher
bottoms. Variations of a triangle include ascending and descending
triangles. Triangles are very similar to wedges and pennants.

Transaction Cost:
The cost of buying or selling a financial instrument.

Transaction Date:
The date on which a trade occurs.

Turnover:
The total volume of all executed transactions in a given time period.

Two-Way Price:
When both a bid and offer rate is quoted for a FX transaction.

US Prime Rate:
The interest rate at which US banks will lend to their prime corporate
customers.

Volatility (VOL):
Statistical measure of the change in price of a financial currency pair
over a given time period.

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Whipsaw:
Slang for a condition of a highly volatile market where a sharp price
movement is quickly followed by a sharp reversal.

World Bank:
A bank made up of members of the IMF whose aim is to assist in the
development of member states by making loans where private capital is not
available.

Yard:
Slang for a billion.

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 $1000 to $1 million in 80 days E-book V1-2011

Final thoughts

We imagine that right now your mind is spinning with a multitude of

thoughts and different emotions. We can well imagine the biggest question
on your mind is, “Can I really do this?”

You are the only one who can answer that question. Hopefully, what you
found in these pages will start you on a journey of exploration.

The title of the book is real. There are many traders who have and will
continue to achieve the results of $1000 to $1 million dollars in 80 days.
Each and every trader who has these results has had to develop the skills
and mindset over time, so this is not an overnight success.

The real driver of success with foreign exchange trading is implementation,

practice, education and having a healthy mental approach. Simply reading
this book will not have you become a good foreign exchange trader. It is
your ability to assimilate information and put into practice techniques and
methods that will have you become profitable.

As we have said from the very beginning, we strongly recommend that should
you wish to explore the Forex market, get a free account from one of the
brokers so that you can develop your skills and your understanding using
demonstration dollars before you commit real money. It is much easier to
fund a demonstration account than it is to be replacing a live account with
real dollars while you learn.

The keys to becoming a successful foreign exchange trader are education

about your chosen currency, developing mindset and practice, practice,
practice, practice. When you have it right using a demonstration account
then go live and start the journey of $1000 to $1 million dollars in 80
days.

We trust that you've enjoyed this book. It has been a real honour for us to
work with some amazing professional traders and to bring to you the
information that has had people become financially independent through
trading the Forex market.

Remember, the more you give the more you get, so dream big.

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 $1000 to $1 million in 80 days E-book V1-2011

The ball is in your court. Do you want to play?

David Shepherd and Paul Barratt

www.1millionin80days.com

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 $1000 to $1 million in 80 days E-book V1-2011

About the Authors

Paul Barratt

Paul Barratt was born in Perth in September 1959. Growing up, Paul faced a
number of challenges as he was diagnosed with a heart condition at the age
of five and was faced with many other medical problems that potentially
could have shortened his life. Paul however is not the kind of person to
lie down and accept limitations that may have been imposed.

Paul was in the very first intake of students in the first digital systems
and computers course at the Western Australian Institute of Technology (now
known as Curtin University in WA). As a result of his passion with
computers at 17 he was employed as a computer engineer. Paul's knowledge in
computers expanded as he took on operations, programming, graphics design
and new technologies as they were emerging. As a result of his breadth of
knowledge, he fulfilled several management positions with large
international computer companies before starting his own information
technology business.

Paul is married to Joanne with one son Chris. As a family Paul, Joanne and
Chris work well together and support each other in many different aspects
of their lives. This support was most evident when Paul's medical
challenges finally caught up with him and he went into heart failure and
eventually became WA's first heart and lung transplant recipient.

As a result of these life changing moments Paul's passion has seen him
raise funds for many charitable groups. His passion for making a difference
in different communities has seen him sit on the board of the Heart Lung
Transplant Foundation and Heart Kids WA. As well as being a part of
Transplant Australia as an advocate for organ donation, Paul supports
patient groups and is working towards supporting communities in remote and
country areas of Australia.

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Paul values life greatly and is always looks to give back to communities
that have supported him. Paul’s giving back has seen him as a finalist in
the Local Hero category in the Australia Day awards in 2008.

Paul had been trading various markets over the years including shares,
options and the futures market. The foreign-exchange market had always
fascinated him but he wasn't sure how to approach trading that market. When
he met David he saw how easy it could be to trade the foreign exchange
market. A mentor - student relationship developed.

Paul realised the value of the information David was teaching and
encouraged David to put his ideas on paper. As every good mentor would say
“If you think it's such a good idea you do it.” Never afraid of taking on
the challenge, Paul chose to not only take on the game of turning $1000 and
$1 million but with David, write the book. Currency trading is not for
everyone but it has seen Paul's life change significantly.

Paul continues to live in Perth with his beautiful and supportive wife
Joanne and is looking to continue to make a difference in communities
around Australia through education, public speaking and fundraising.
Operation Golden Dragon is one of those vehicles that will make a
difference in communities not just in Australia but around the world.

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David Shepherd

David was born in Penrith New South Wales in 1965. David has a broad range
of qualifications from mechanical engineering, maths, property investment
and development with a Bachelor of Economics and Law. David is an expert
student of life and believes that no matter what he's achieved over the
years there always will be more.

In fact David’s diversity and preparation to take on challenges has seen

him achieve the highest Toastmasters award, second dan black belt martial
artist as well as being a master practitioner of Neurolinguistic
Programming. David is currently completing his PhD of Trading.

David has been trading since he was 19 (starting with options). He has been
a professional trader for over 15 years on the foreign-exchange market.
Part of that trading experience has seen him as a fund manager for a large
superannuation fund. As a trader David is well credentialled and qualified
to teach people how to trade in a way that actually works. Part of David's
PhD studies looks at the psychology of trading and it is some of this work
that has people he teaches become successful.

Strange as it may seem, it was not trading that initially bought David and
Paul together.

Large in stature and even larger in heart, David Shepherd is an impressive

and inspiring human being. It is that inspiration and passion for trading
that saw the partnership develop with Paul.

It is that same passion that has David be a mentor and coach to many
traders that are committed to trading simply and profitably.

David currently lives in Perth but travels Australia-wide educating and

inspiring foreign-exchange traders one-on-one, as well as working with many
traders internationally online.1

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