best forex plan ebook
TRANSCRIPT
-
8/14/2019 Best Forex Plan Ebook
1/48
Welcome!
-
8/14/2019 Best Forex Plan Ebook
2/48
Best Forex Plan
Right now there is not another financial market in the world
more active than Forex. On average it trades more than
$1.5 trillion US dollars per day. Traders on the Forex
market are afforded the opportunity to trade on a market
thats open 24 hours a day and to leverage up to 200 times
your money.
Each day, inexperienced and veteran stock traders come to
the Forex market to capitalize on its many opportunities.
In Best Forex Plan youll discover how you can trade Forex
to supplement your income or to turn it into full-time
career.
The trading strategies in this manual will teach how to
create your own trading strategy and begin using Forex to
your benefit.
Enjoy the journey.
Table Of Contents
2
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
3/48
Best Forex Plan
i.Welcome 2
ii.Table Of Contents 3
I. A Little About The Forex Market 4
II. How To Trade Forex Successfully 6
II.1 Day Trading Vs Swing Trading 7
II.2 Choose Your Time Zone 8
II.3 Choosing Your Currency Pair 9
III. Types Of Orders 10
IV. Indicators You Need To Use 12
IV.1 MACD 12
IV.2 Moving Average 19
V. Day Trading System 22
V.1 Trading Examples 24
VI. Swing Trading System 30
VI.1 Trading Examples 31
VII. How To Avoid Excessive Risks And To Protect
Yourself
34
VII.1 Money Management 34
VII.2 Brokers 35
VII.3 Having A Trading Diary 36
VII.4 Have A Solid System 39
VIII. Economic Indicators 41
IX. How To Keep Track Of The Most Important
Indicators
44
3
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
4/48
Best Forex Plan
VII. Disclaimer 47
VIII. Copyrights 48
A Little About The Forex Market
No other trading market affords you the opportunity to
make money like the Forex market.
There are several feature of Forex that make it superior to
other markets, such as:
Leverage There are great leverage possibilities with
Forex as you can trade up to 200 times the available
funds in your account.
24 hours market From Monday through Friday the
Forex market is open all day every to give you the
opportunity to make trades.
Worldwide market Forex allows you to trade from
any place in the world. All you need is an Internet
connection.
Advanced Technology The technology available toforex traders is extremely sophisticated and in many
4
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
5/48
Best Forex Plan
cases, its available free of charge. Professional trading
platforms and demo accounts are offered free by
many brokers. Demo accounts are especially helpful
because they allow you to learn about what its like to
trade on Forex without risking any of your money.
Profit in Bull and Bear Markets You can make
money whether the market is trending up or down.
Cost There are no commission charges from brokers
on the Forex market. Your broker only charges you
the spread, which is the difference between the bidand the ask.
Many newcomers to Forex find all these things to be
advantageous as they get started as a trader. Many of
them have found success trading in their free time or as a
new career.
5
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
6/48
Best Forex Plan
How To Trade Forex Successfully
In order to trade Forex successfully, you need to:
1. Decide whether youll be a day trader or swing trader.
2. Decide which time zone you need to trade in.
3. Decide which currency pairs youll trade.
6
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
7/48
Best Forex Plan
1. Day Trading Vs. Swing Trading
The difference between day trading and swing trading is
pretty simple. A day trader is a trader who trades
throughout the day, while a swing trader is a trader who
only commits a short period of time per day to trading on
Forex.
As you might expect, day trading requires more of a
commitment than swing trading. Day traders need to be attheir computers for three to four hours a day so they can
seize on opportunities to make money.
On the other hand swing traders prefer to use charts which
they check on once per day and make their trading
decisions based off of that. Good swing traders can earn a
decent income.
Typically, day traders make a small profit on each trade but
they make a lot of them throughout the course of the day.
Swing traders make trades less frequently, but theirs tend
to be more profitable.
The best times to trade on Forex are during the overlap
between the European session and the US session which is
between 800 GMT and 1700 GMT
If youre not in GMT you can visit:
7
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
8/48
Best Forex Plan
http://www.timezoneconverter.com/cgi-bin/tzc.tzc
and just convert to the time zone youre in.
If youre interested in swing trading, you might want to try
the 4 hours chart or the daily chart. With those charts, all
you have to do is review your charts to determine if there
any possibilities for you to make trades.
2. Decide which time zone you need to trade in
After youve determined whether youll be a trader or a
swing trader the next thing you need to do is to determine
the time zone you want to trade in.
The best times to trade Forex are:
8 GMT 11:30 GMT
13 GMT 17 GMT
1 GMT 6 GMT (For Japanese Yen pairs)
If youve made the decision to be a swing trader, then you
need to review your charts at 22GMT because this is the
close of the day for most Forex brokers.
8
Copyrights 2009 BestForexPlan.com. All rights reserved.
http://www.timezoneconverter.com/cgi-bin/tzc.tzchttp://www.timezoneconverter.com/cgi-bin/tzc.tzc -
8/14/2019 Best Forex Plan Ebook
9/48
Best Forex Plan
1. Decide which currency pairs youll trade
Every currency pair has strengths and weaknesses. Some
traders prefer the euro (EUR) and the US dollar (USD) pair.
Others like the British pound (GBP) and the USD pair. Still
others choose the USD and the Japanese Yen (JPY) pair.
There are many pairs available so you will have to decide
on which pairs you will do most of your business.
Its important to remember that each currency has its owncharacteristics and when its paired with another currency
their relationship can seem unpredictable. Youll learn
quickly that systems you develop for one pair wont
necessarily work for another pair.
9
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
10/48
Best Forex Plan
Types Of Orders
There are several different types of orders to choose fromin the Forex Market. You should choose your order typebased on your trading habits and the system that you planon trading in.
Here are the four most important types of orders:
Market Order Is an order to buy or sell at the
current market price. You can perform a market
order whether you are buying or selling a currency
pair.
Market orders should be used with care because in
fast-moving markets its important to remember that
in a fast-paced market it is common for slippage to
occur during a Slippage is the amount the market
moves from the time an order is made and the actual
price of a transaction. The price can be difference fromthe one you placed even if only a few seconds elapse
between the actual price and the price you chose to
buy or sell at. Slippage works both ways. It could
make you money or it could cost you money. Market
Orders almost always guarantee that you can
buy or sell a currency pair, but they dont
guarantee the price that you execute your order.
10
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
11/48
Best Forex Plan
Limit Order Its an order to buy or sell at acertain limit price. Limit orders are preferred whenyou wish to buy a currency below the market price orsell a currency above the market price.
You set the price at which you would like to make theorder and its executed when the currency hits thatprice, whether the price is trending upward ordownward. While there is no slippage with limitorders, theres also no guarantee that your orderwill be filled as soon its made.
Stop Order A stop order is an order to buy abovethe market or to sell below the market. It is mostfrequently used when a trader is trying to limit lossesthat were unexpected. It is also used when a trader istrying to buy a currency at a price lower than thecurrent market price. A stop order can be used toeither cut your losses or to increase your gains. It isgood type of order to guard against predictability.
One Cancels the Other (OCO) This order is usedwhen you are placing a limit order and a stop-loss order at the same time. The One Cancels theOther order is very helpful in times of a volatilemarket. Its fairly simple. When you place one type oforder, say, a Stop Order at the same time as sway, aLimit Order, one order is cancelled as soon as theother one is executed. This is a good method to helpprevent you from losing a large amount on one trade,but it can limit your profits on some trades as well.
11
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
12/48
Best Forex Plan
Indicators You Need To Use
There are two types of indicators you can use to help yourtrading, MACD and Moving Average. First, lets talk about
the MACD.
MACD:
The MACD can tell you not only what the current trend is
but whether or not it is strong.
The MACD lets you know if the currency pair youre
interested in is trending up or down and if that trend is
strong or weak. In other words its very useful.
If you decide to use the MACD heres what the chart will
look like:
12
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
13/48
Best Forex Plan
The area where the chart is above the zero line is
when the MACD is trending upwards. When MACD is
giving this reading for a currency pair its a good
indicator of a strong buying period.
Conversely, when the chart is below the zero line, as it
is in the first part of the graph above, this is an
indicator of a strong selling period.
The bigger the MACD-Histogram bars, the stronger the
trend. When the MACD-Histogram bars are rising, this
means the trend is gaining strength. If the MACD-Histogram bars are decreasing, this means the trend is
losing strength.
Lets look at some examples:
Example #1:
This first chart is a great example of what Bull Trend and
Bear Trends look like in an MACD. When the bars are
gathered above the zero line as they are here its an
indicator that a currency pair is trending upward and is
being bought. When the bars are gathered below the zero
line as they are on the left hand side of the above graph
13
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
14/48
Best Forex Plan
that means a currency pair is trending downward and is
being sold.
Example #2:
The chart above is a good depiction of how to interpret the
data on MACD chart.
At point A, the size of the histogram bars are getting
bigger, meaning that the downtrend is picking up
momentum. But then it bottoms out. Then, as illustrated by
point B, the histogram bars start getting smaller and closer
to the zero line, meaning that the downtrend is losing
momentum.
Example #3:
14
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
15/48
Best Forex Plan
Example number three is an example of how a trend can
gain and lose momentum above the zero line. At point A,
the histogram bars are getting larger, indicating an
uptrend. Once they reach their peak they begin a descent
as the histogram bars get smaller, indicating the uptrend is
coming to a close.
As you can see, the MACD is very helpful in making tends
easy to follow and understand, making them easier for you
to make a good decision. And the key to Forex trading is
making good decisions.
Another key feature of MACD is its ability to compare the
present trend of a currency pair with its previous
movements. In doing this the MACD confirms the strength
(or weakness) of trend. MACD allows you to see how strong
a trend is whether its upward or downward.
In a strong trend, whether its upward or downward, the
MACD goes in the same direction as the currency pair price.
The graph below depicts this.
15
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
16/48
Best Forex Plan
The MACD chart shows you that at points A, B and C, the
EUR/USD currency pair was hitting new lows, as was the
histogram for MACD. This is a clear indicator that the trend
is a strong one and you should react accordingly.
But the MACD can give you a clue to when a trend is
coming to an end. It does this when it reveals a divergence
between a currency pair price and the MACD histogram.
The chart below is great example of this.
16
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
17/48
Best Forex Plan
Where the EUR/USD hit a new low price at 9:10 on 29
September the MACD histogram had actually hit a low
around 6:30 and was actually losing strength as a trend.
When theres a divergence like this, its a good indicator
that the trend is about to reverse its course.
We can find out whether this was correct or not by looking
at the next chart.
17
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
18/48
Best Forex Plan
In the previous chart, the EUR/USD was trending downward
while the MACD was not. This type of divergence is known
as Bullish Divergence (which is defined below). The
divergence by the MACD was an indicator that the EUR/USD
downward trend was about to reverse itself. As you can see
thats exactly what happened, as the MACD gave us a hint
that the EUR/USD would begin an upward trend.
If you want to be profitable at Forex its important
for you to identify divergences between the price andthe MACD:
The chart above depicts a Bullish divergence which
is when a price reaches a new low, while the MACD
does not. Forex traders can use the MACD to see that
this downward trend is fading and could possibly
reverse to an upward trend.
18
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
19/48
Best Forex Plan
Alternately, a Bearish divergence occurs when a
currency pair price reaches a new high but the MACD
does not. This is an indicator the upward trend is
losing strength and theres a good possibility for it to
become a downward trend.
Now lets talk about the Moving Average indicator.
Moving Average:
The Moving Average is exactly what it says it is; its the
average price of a currency pair over a set period of time.
It allows you to see how much the price has been moving
over that time. As an example, a Simple Moving Average
20 is total of the last 20 closing prices of a particular
currency pair, divided by 20.
While its possible to calculate the average high or averagelow price for a currency pair, the Moving Average is most
often measured by the closing price.
The Moving Average gives traders an idea of whether the
price of currency pair has been on an upward trend or a
downward trend, or no strong trend in either direction.
19
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
20/48
Best Forex Plan
The chart above shows when EUE/USD price was having an
uptrend, a downtrend and no trend at all.
In addition to depicting price trends the Moving Average is
also extremely important to identify what are known as
resistance and support points. The Moving Average can act
as a strong support (when the price is above the current
line), or a strong resistance (when the price is below the
current line).
This chart shows how the Moving Average supports a price.
On three different occasions the EUR/USD touched the
Moving Average, but it never fell below it. This information
is very helpful when considering a stop loss order.
So, to summarize on Moving Averages, it can be used to:
Spot the trend When the price of currency pair is
above the Moving Average, even though the Moving
Average is increasing, thats a sign of an upward
trend. When the price of a currency pair is below the
Moving Average, even though the Moving Average isdecreasing, thats a sign of a downward trend. When
20
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
21/48
Best Forex Plan
the Moving Average is nearly horizontal, that a sign
that there is no significant trend at all.
Spot resistance and support areas -When youre
debating to make a stop loss order its a good idea to
try to find any resistance or supports areas, regardless
of whether youre in a long trade or trying to sell
short. Resistance areas can serve as buy points in the
case of an uptrend or sell points in the case of a
downtrend.
A final reminder. You can use both the MACD and Moving
Average in the event you are a day trader or a swing
trader.
21
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
22/48
Best Forex Plan
Day Trading System
Many day traders use five minute MACD charts (like theone below) or a Moving Average 20. Each histogram bar
represents a five minute increment. So, in an MACD for an
entire day there will be 288 bars or 12 bars for every hour
of the day.
22
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
23/48
Best Forex Plan
Here are some rules that many day successful traders
follow:
When the MACD is rising and above the Moving
Average 20 while it is rising, this is a strong indicator
of a bullish market or a buy signal.
When the MACD is falling and below the Moving
Average 20 while it is falling, this is a strong indicator
of a bearish market or a short sell signal.
As a general rule you should set your buy target at
40-50 pips, and your stop loss at 30 pips below the
price.
Lets take a look at some examples and how you can
respond to them.
23
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
24/48
Best Forex Plan
Trading Examples:
Example #1:
The chart, specifically in the spot where the arrow points
to, shows the EUR/USD above the Moving Average. This is
a great buy point as MACD is above zero and is moving up
at the same time as the price.
These are things to look for when youre trying to identify a
good buy point. But we can get even more detailed. Heres
how.
Find the most recent high point for a currency and draw a
red horizontal line across the top. When a currencys price
rises above that red line, thats a great time to buy it.
24
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
25/48
Best Forex Plan
In this chart youll see an example of when the currency
pair price did notrise above the previous high price.
This means that a buy point wasnt put into effect. The
currency pair price (EUR/USD) fell back to the Moving
Average before it began climbing up again. But, we still
need to pay attention to the chart in case the EUR/USD
currency pair makes a surge.
Looking at the chart above youll see that all the conditions
for a buy are in place. The Moving Average 20, the Moving
Average and the MACD all are moving up. We just need to
see if the price gets past its previous high point (as noted
by the horizontal red line).
25
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
26/48
-
8/14/2019 Best Forex Plan Ebook
27/48
Best Forex Plan
Example #2:
Lets have a look at this chart. We can see the EUR/USD
price is rising, and the MACD is above 0 and rising. But the
price hasnt hit its previous high yet, as indicated by the
solid horizontal line between 1.4245 and 1.4270.
27
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
28/48
Best Forex Plan
This next chart is heavily detailed, with lots of helpful
information. In the middle of the day the buy point was
triggered, but then the price soared past the previous high
price, thanks to a surge of nearly 200 pips (from 1.4255 to
over 1.4425. The fact that the MACD stayed strong
throughout the surge tells you that this was a currency pair
you should probably keep for a while. The dotted blue lines
indicate this trend.
If you look at the MACD youll see there was as a bearish
divergence, an indicator that the trend could potentially
change. This shows the value of MACD, where it is
predicting a reversal of the current price.
28
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
29/48
Best Forex Plan
Example #3:
Our third and final example depicts an instance of a Short
Sell Signal. The GBP/USD was under the Moving Average
20. The Moving Average 20 was trending down while the
MACD was below 0 and trending down as well. Much as you
did when noting the previous high price with a horizontal
red line, you can note the previous low price in the sameway. When the price drops below that horizontal red line
this means its time to sell.
Once the short sell signal was triggered, GBP/USD began a
trend that dropped started a 300 pips slide from the 1.4740
range to the 1.4425 range. Just think of how much you
would have lost had you not sold at the sell signal. And you
never would have known about this trend without using theMACD chart to identify a sell signal.
29
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
30/48
Best Forex Plan
Swing Trading System
The only difference between the swing trading system andthe day trading system is the swing trading system
functions on 4 hour, daily and weekly charts. Day trading
uses 5 minute and 15 minute charts.
Here are some basic rules of swing trading:
When the MACD is gaining strength, and the currency
pair price is rising (while staying above the MA 20)
this should be interpreted as a buy signal.
A short sell signal occurs when the MACD is losing
strength and the currency pair price is also losing
strength, particularly if its falling below the MA 20.
You should target your buy signal at 200-250 pips
and your short sell signal at 100 pips.
30
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
31/48
Best Forex Plan
Trading Examples:
Example #1:
This chart reflects a buying opportunity. The GBP/USD is
above the Moving Average 20 and the MACD is above 0 and
trending upward. Once the price goes above the most
recent top, as indicated by the red horizontal line, there isan excellent buying opportunity.
31
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
32/48
Best Forex Plan
It turned out that this turned out to be a huge rally (1000
pips) that only faded when the MACD began losing
momentum.
Example #2:
32
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
33/48
Best Forex Plan
Here we see a good example of a short sell signal. The
Australian Dollar/US Dollar 4 hour chart and the MACD
(which is already below 0) are trending downward, as the
arrows indicate. So, the point where the price falls below
the recent high (as indicated by the red horizontal line) iswhen this becomes a short sell signal.
33
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
34/48
Best Forex Plan
This turned out to be a strong downtrend. At the .7080
price there was another short sell signal as the conditions
for it were replicated.
Once again, as it had when the price was rising, the trend
lasted until it began to diverge from the MACD.
How To Avoid Excessive Risks And To Protect
Yourself
Money Management:
Protecting your account is the first priority of any money
management system so you should always follow their
rules closely.
Generally speaking you should never risk more than 5%
of the total value your trading account on a single
trade. So, if theres an unexpected down trend you wont
suffer much because you didnt expose yourself
unnecessarily.
34
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
35/48
Best Forex Plan
Lets say you have $1000 in your account. That would
mean you would never risk more than $50 in any one
trade. You should think in terms of small trades. This is the
key to managing your account. If you only risk a small
amount of your account, such as 5%, you would have to
take losses on 20 consecutive trades before you finally lost
your account. This is the kind of statistic you need to be
thinking about when youre developing a money
management system. You should always protect yourself
from unpredictable events.
Brokers:
One of the hardest things for new Forex traders to do is to
find a good broker. The reason why its so hard to find a
good broker is because they are unregulated. In other
markets, when brokers do well their clients often do well
too. Thats not the case with the Forex market as brokers
can chase stop loss orders or end their relationship with
you if theyre not making enough money from you.
Youll have to do some research to find a good broker. One
thing that is absolutely required is a broker who can
guarantee the safety of your funds.
Two good websites for you to begin your research for a
broker are:
www.forextopten.com and www.forexpeacearmy.com.
35
Copyrights 2009 BestForexPlan.com. All rights reserved.
http://www.forextopten.com/http://www.forexpeacearmy.com/http://www.forextopten.com/http://www.forexpeacearmy.com/ -
8/14/2019 Best Forex Plan Ebook
36/48
Best Forex Plan
They contain ratings and you can read what customers say
about their brokers. Youre sure to find helpful information
at each site.
Having a Trading Diary:
Although it is important to have a good broker, it might not
be as important as keeping a trading diary. A trading diary
is what you use to manually keep track of all the trades you
make, what statistical factors went into making the trade
and what your emotions were in the moments before you
executed a trade.
The more elaborate your trading diary is the more helpful it
will be for you. It will help you avoid making the same
mistakes twice.
Lets give a scenario where keeping a trading diary would
help you if you were a day trader.
Imagine youre waiting for a currency pair to surpass its
previous high and youre following along in your charts soyou know when to make your next move. That time while
36
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
37/48
Best Forex Plan
your waiting is when you should make an entry into your
trading diary. What currency pair are you trading? What are
the statistics that led you to this decision? How do you feel
now that youve made the trade is about to happen? Once
you enter the trade you should write down what youre
feeling in the moments after it happens. Occasionally, youll
need to close a trade earlier than you expected. Sometimes
youll hold onto a trade longer than you thought you would
because you just have a sneaking suspicion that something
will change. When you finally do exit the trade you should
do exactly what you did in your diary when you entered the
trade. Write down all the factors, statistics and emotionsthat went into your decision.
This may seem silly at first but it will definitely help you
become a better trader in both the short term and long
term.
Keeping a trading diary is also a good way for you to re-evaluate the systems that you use. Imagine a scenario
where you left a trade before the price reached the buy
signal or it reached the sell short signal. This would be an
example of you going against your system rules. You can
then see if going against your rules actually worked to your
benefit. You can ask yourself what prompted you to go
against your rules. This may also make you reconsider your
rules. If you write all these factors down in your trading
diary you wont need to wonder what to do when such a
situation comes up again.
But the trading diary isnt only helpful when it comes to
individual trades or individual situations.
Think of a day where you had trouble focusing. Maybe
there was something on your mind from another part ofyour life that was clouding your decision. When you write
37
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
38/48
Best Forex Plan
down whats going on, you allow yourself to be more
thoughtful and force yourself to slow down the decision-
making process. Even if youre not writing down whats
happening with your trading day, your trading diary is a
great tool to help you clear your mind and ultimately make
more effective trader. Its amazing how many traders have
learned this once they started keeping a trading diary.
One other thing that you should write in your trading diary
is the time youre willing to invest in Forex trading. If you
write down the hours you plan on trading, say, between 14
and 16 GMT, youll begin to think of this time as a
commitment. Its almost like an appointment you made
with yourself, which is an appointment that you probably
wont be eager to break.
There are many traders who are very precise when it
comes to their diaries. They write down every detail they
can think of. From the time they wake up, to the first trade
of the day, to the time they shot off their computer, theres
no such thing as a detail thats too small. These types of
traders tend to be very successful. But there are also many
successful traders who only write down the details around
their trades and ignore everything else. Once you start
using your trading diary, youll see for yourself which
technique works best for you.
Weve spent a lot of time discussing in this section
discussing what to write in your trading diary. The most
important thing to do with your trading diary is to read it.
What good are all the notes and reminders and details if
you never read them? This is, after all, how you learn.
38
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
39/48
Best Forex Plan
Have A Solid System:
What does it mean to have a solid system? It sounds easier
than it is. A solid system is one that has, time and again,
helped you make money.
You may not realize this, but not all Forex traders have the
same data. Furthermore, when they are looking at the
same data they may see different things. What one broker
sees a buy signal might be a Bullish divergence. The reasonfor this is that they have different systems.
One of the first things to do when planning a system for
yourself is check the time frames you want to do your
trading. Its very important to find a trading time that you
can stick with day after day. Consistency is one of the keys
to developing a system and you want to create a system
that you can repeat, day after day.
39
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
40/48
Best Forex Plan
Once youve selected the trading time you should open a
demo account. A demo account will be provided to you free
of charge by most brokers. You can use the demo account
to test your systems and your ideas without fear of losing
any money. This allows you the benefit of being able to
adapt or change your system stress-free.
It may take some time for you to find a system youre truly
comfortable with. But you should not open an account with
a broker until youve found such a system. Once you do
have a system and a broker you begin trading in a
confident, informed manner.
Economic Indicators
One of the keys to developing a system is to know how to
interpret the many economic indicators. To start with, you
need to know when the important indicators relating to
Forex will be released. You need to be able to plan your
trading accordingly. If you are unprepared for the release
of an important indicator, its possible that you could get
caught off guard. Getting surprised by information is one of
the main reasons traders lose money.
Another thing youll realize is that there is a lot of trading
activity near the announcement of an economic indicator.
All the other traders are basing their trades off the
economic indicators, too. If you are using a market order
(see the chapter on Types of Orders) youll learn quickly
that a lot of slippage happens on the day economic
40
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
41/48
Best Forex Plan
indicators are released. The price can change very quickly
which could end up costing you money.
Should you be the type of trader that uses limit orders its
possible that there a broker might actually make the orderdifferent from your limit price during very busy times.
Therefore, you should avoid setting up limit orders around
the time of announcements of economic indicators.
The most important Economic releases are:
GDP (Gross Domestic Product)
CPI (Consumer price index)
PPI (Producer Price Index)
Nonfarm Payrolls
Interest Rate Decision Retail Sales Index Durable Goods orders Consumer Confidence
PMI (Purchasing Managers Index)
Housing StartsTheir definitions follow.
Gross Domestic Product (GDP)
The Gross Domestic Product indicator is the total value ofgoods and services that have been produced within theborders of a country by either local or foreignmanufacturers. The GDP is considered the best indicator of
a country's economic state because it reflects the pace theeconomy of a particular country is growing.
41
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
42/48
Best Forex Plan
Consumer Price Index (CPI)The Consumer Price Index is the change in price of a
defined set of consumer goods and services. The CPI is theway to measure the level of inflation in a country from onemonth to the next. This is an important indicator for Forextraders when considering the currency rate of the countryreleasing its CPI.
Producer Price Index (PPI)Where the CPI reflects the costs of the goods to consumers,the Producer Price Index shows the price thatmanufacturers are getting for their goods. The agriculture,manufacturing, utility and mining industries are the keysectors that contribute to the PPI. In conjunction with theCPI, the PPI is a good measurement of inflation.
Nonfarm PayrollsThe most important indicator for Forex traders is theNonfarm payrolls. They are released in the first Friday ofevery month, and their announcement almost alwaysresults in the most volatility to the Forex markets. This istrue whether news is good or bad.
Interest Rate DecisionIf the Nonfarm payrolls announcement is the mostimportant indicator for then the Interest Rate decisionmight be the second most important. The Interest Rate isan announcement from the central bank of a country. Sincethe Forex market is tied directly to currency pairs theannouncement of interest rates has a direct bearing onwhether a currency pair while increase or decrease onvalue. The interest rate does not change according to a set
calendar, so when there is a change it results in an extrajolt of volatility in the Forex market.
42
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
43/48
Best Forex Plan
Retail Sales IndexThe Retail Sales Index measures the goods sold within theretail industry, regardless of the size or type of business.
Durable Goods OrdersThe Durable Goods Orders reflects the amount thatconsumers are spending on long-term purchases. Durablegoods are considered items that are expected to last forthree years or more. The Durable Goods Ordersannouncement is a strong indicator of the performance of
the manufacturing sector.
Consumer Confidence IndexConsumer confidence measures the confidence consumershave in the stability of the economy and their spendingpower. This indicator is useful to measure the health of theeconomy.
Purchasing Managers Index (PMI)The National Association of Purchasing Managers (NAPM)releases a monthly index that gauges the predicted growthin the manufacturing sector. Since its a report from agroup as well-respected as the NAPM, the release of thePurchasing Mangers Index is always met with interest.
Housing Starts
The Housing Starts monthly report provides three
important statistics: housing starts, building permits and
housing completions. There are many experts who relate
these statistics to consumer-based indicators to get a clear
picture of the economy. Forex traders are no different in
coupling this data with other indicators to get a meaningful
prediction.
43
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
44/48
Best Forex Plan
How To Keep Track Of The Most Important
Indicators
All you really need to keep track of the most important
indicators is a good economic calendar. Many traders prefer
this one: http://www.dailyfx.com/calendar/.
The Daily FX Calendar is great tool because it lets you pick
the currency youre most interested in and then adjust the
economic indicators by their level of importance to you.
Assuming youre only interested in the most important
economic indicators that will be released in US and Europe,
you can then adjust your calendar as follows:
All you have to do is uncheck, the low and medium boxes
and all the non-European and non-American boxes as in the
chart below.
44
Copyrights 2009 BestForexPlan.com. All rights reserved.
http://www.dailyfx.com/calendar/http://www.dailyfx.com/calendar/ -
8/14/2019 Best Forex Plan Ebook
45/48
Best Forex Plan
Then you just click the Apply Filter button, youll be set to
receive the most important economic indicators relating to
the EUR, USD and NZD. Your reports will look something
like this:
45
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
46/48
Best Forex Plan
Then you can just click on the link to read more about the
economic release in question. Reading these is almostalways helpful in anticipating any volatility that may result
in the Forex market from their releases.
46
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
47/48
Best Forex Plan
Disclaimer
There is a very high degree of risk involved in trading. Inany market where a potential for profit exists, there exists
also a risk of loss.
Forex trading is a risky business. You should never tradewith money you cannot afford to lose. None of theinformation on our website nor any information oreducation provided to the client by any means assures thatthe client will make money in the Forex market.
Although every effort has been made to assure accuracy,
the authors and publishers can assume no responsibility forerrors or omissions. Neither the author nor the publisherwill be responsible for the use or misuse of the informationcontained herein.
Examples are provided for illustrative purposes only andshould not be construed as investment advice or strategy.It is not intended as professional advice or arecommendation to act. Before engaging in any activitymentioned in this ebook, seek the advice and consultationof a competent professional.
Past performance is not indicative of future results.
Copyrights
47
Copyrights 2009 BestForexPlan.com. All rights reserved.
-
8/14/2019 Best Forex Plan Ebook
48/48
Best Forex Plan
The material in this manual is property of BestForexPlan.com. This material cannot be copied in partor in whole without the express written permission ofBestForexPlan.com.
Anyone who attempts to alter this material without thepermission of BestForexPlan.com will be prosecuted to thefullest extent of the laws and will be liable for reimbursingBestForexPlan.com for all lawyers and court fees.