About Forex ………………………………………………………………………………………………………………………………………..

2
Currency pairs…………………………………………………………………………………………………………………………………..3
What moves the Forex market? ……………………………………………………………………………………………………….6
Pip…………………………………………………………………………………………………………………………………………………….8
Bid and Ask price ………………………………………………………………………………………………………………………………. 9
Margin Trading and Lot ……………………………………………………………………………………………………………………10
Leverage ………………………………………………………………………………………………………………………………………….. 11
How to calculate? ……………………………………………………………………………………………………………………………... 13
How can I start Forex trading? ………………………………………………………………………………………………………….…….. 14
Fundamental vs technical analysis……………………………………………………………………………………………………. 18
How many pairs should you trade?………………………………………………………………………………………………… 19
How much money do I need to start Forex trading? …………………………………………………………………………. 19
Trading plan ……………………………………………………………………………………………………………………………………… 20
How to Place Profit Targets?.................................................................................................................21
Charts and candlesticks …………………………………………………………………………………………………………………….….. 22
Understanding technical analysis................................................................................................................ 27
Support and Resistance.......................................................................................................................... 28
Chart patterns ………………………………………………………………………………………………………………………………….. 31
34
Technical indicators.................................................................................................................................
Trading psychology ………………………………………………………………………………………………………………………………. 42

• Even if you already know all these things, I recommend you to read this. It doesn’t take a long time
and you can find some very useful information about trading.

1
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 About Forex

Forex is global market that allows the exchange of one currency for another.
Let’s make it simple. You travel from to Germany to USA. Main currency in USA is
dollar (USD - $). Main currency in Germany is euro (EUR - €). You have 1000 € in your
wallet. The moment you arrived in USA you need to exchange euros for dollars
because main currency in USA is dollar. How can you do that? Well, you can go to
exchange office and buy dollar. Exchange rate is for example 1.1250, so you will see
something like this: EUR/USD = 1.1250. That means for 1000 € you will get $1125.
It’s simple math: 1000 € * $1.1250 = $1125. Imagine you didn’t spend any money and
now it is time to go back in Germany, but now exchange rate is lower! For example
exchange rate now is 1.1020 or EUR/USD = 1.1020. This time you need euros, so let’s
do simple math again: $1125 / 1.1020 = 1021 €. Now you have 1021 €, but on the
beginning of the journey you had 1000 €. That means you earned 21 €. It’s these
changes in the exchanges rates that allow you to make money in the foreign
exchange market or Forex. This is much harder than it sounds, because you never
know when exchange rate will go up or down.

The foreign exchange market, which is usually known as Forex or FX, is the largest
financial market in the world, with its $5 TRILLION a day trade volume. For people
like you and me this doesn’t mean much. We can’t even imagine how big that is. For
us is important how we can take advantage of that. Here, I will try to explain that and
help you become successful trader.

The Forex market is run by a global network of banks, spread across four major forex
trading centers in different time zones: London, New York, Sydney and Tokyo.
Because there is no central location, you can trade Forex 24 hours a day 5 days a
week. Most traders speculating on forex prices will not plan to take delivery of the
currency itself; instead they make exchange rate predictions to take advantage of
price movements in the market. Simple rule: buy when price is low and sell when
price is high.

2
 Currency pairs

I mentioned currency pair in the example above, but what is a base and quote
currency? A base currency is the first currency listed in a forex pair, while the second
currency is called the quote currency. Forex trading always involves selling one
currency in order to buy another, which is why it is quoted in pairs – the price of a
forex pair is how much one unit of the base currency is worth in the quote currency.

Each currency in the pair is listed as a three-letter code, which tends to be formed of
two letters that stand for the region, and one standing for the currency itself. For
example take GBP. GB stands for Great Britain, and P stands for pound.

GBP/USD is a currency pair that involves buying the Great British pound and selling
the US dollar. GBP is the base currency and USD is the quote currency. If GBP/USD is
trading at 1.3550, then one pound is worth 1.3550 dollars. If the pound rises against
the dollar, then a single pound will be worth more dollars and the pair’s price will
increase. If it drops, the pair’s price will decrease. So if you think that the base
currency in a pair is likely to strengthen against the quote currency, you can buy the
pair (going long). If you think it will weaken, you can sell the pair (going short).

In this table you can see most traded currencies.

Table 1: popular currencies

3
Pairs are split into the following categories:
• Major pairs - seven currencies that make up 80% of global forex trading. Major pairs
include USD, so every pair that includes USD is major pair.

Picture 1: major pairs

• Minor pairs - less frequently traded, these often feature major currencies against
each other instead of the US dollar. Includes: EUR/GBP, EUR/CHF, GBP/JPY.

• Exotics - a major currency against one from a small or emerging economy. Includes:
USD/PLN (US dollar vs Polish zloty), GBP/MXN (Sterling vs Mexican peso).
• Regional pairs - pairs classified by region – such as Scandinavia or Australasia.
Includes: EUR/NOK (Euro vs Norwegian krona), AUD/NZD (Australian dollar vs New
Zealand dollar).
The dollar is the most traded currency, taking up about 85% of all transactions. The
euro’s share is second while that of the yen is third. Significant reasons why the U.S.
dollar plays a central role in the forex market:
- The United States economy is the LARGEST economy in the world,
- The US dollar is the reserve currency of the world,
- The United States has the largest and most liquid financial markets in the world,
- The United States has a stable political system,
- The United States is the world’s sole military superpower.

4
EUR/USD is the most traded currency pair in the world. That is exactly why I don’t
trade this pair. Big Banks and market makers can easily manipulate with price of
this currency. Be aware of this!
One important thing to note about the forex market is that while commercial and
financial transactions are part of the trading volume, most currency trading is based
on speculation. In other words, most of the trading volume comes from traders that
buy and sell based on intraday price movements. The scale of the forex market means
that liquidity – the amount of buying and selling volume happening at any given time
– is extremely high.

5
 What moves the Forex market?

The Forex market is made up of currencies from all over the world, which can
make exchange rate predictions difficult as there are many factors that could
contribute to price movements. Forex is primarily driven by the forces of supply and
demand, and it is important to gain an understanding of the influences that drives
price fluctuations here.

Central banks

Supply is controlled by central banks, who can announce measures that will have a
significant effect on their currency’s price. Quantitative easing, for instance, involves
injecting more money into an economy, and can cause its currency’s price to drop.

News reports

Commercial banks and other investors tend to want to put their capital into
economies that have a strong outlook. So, if a positive piece of news hits the markets
about a certain region, it will encourage investment and increase demand for that
region’s currency. Unless there is a parallel increase in supply for the currency, the
disparity between supply and demand will cause its price to increase. Similarly, a
piece of negative news can cause investment to decrease and lower a currency’s price.

Market sentiment

Market sentiment, which is often in reaction to the news, can also play a major role in
driving currency prices. If traders believe that a currency is headed in a certain
direction, they will trade accordingly and may convince others to follow suit,
increasing or decreasing demand.

Economic data

Economic data is integral to the price movements of currencies for two reasons – it
gives an indication of how an economy is performing, and it offers insight into what
its central bank might do next.

6
Credit ratings

Investors will try to maximize the return they can get from a market, while
minimizing their risk. So alongside interest rates and economic data, they might also
look at credit ratings when deciding where to invest. A country’s credit rating is an
independent assessment of its likelihood of repaying its debts. A country with a high
credit rating is seen as a safer area for investment than one with a low credit rating.
This often comes into particular focus when credit ratings are upgraded and
downgraded. A country with an upgraded credit rating can see its currency increase
in price, and vice versa.
Now when we learned about Forex and how it works we need to learn basic terms
like: pip, bid and ask price, spread, lot, leverage and margin.

7
 Pip

A pip, short for point in percentage, is a very small measure of change in a

currency pair in the forex market. It can be measured in terms of the quote or in terms
of the underlying currency. A pip is a standardized unit and is the smallest
amount by which a currency quote can change. It is usually $0.0001 for US.

Assume that we have a EUR/USD direct quote of 1.1370. What this quote means is
that for 1 €, you can buy about 1.1370 dollars. If there was a one-pip increase in this
quote (to 1.1371), the value of the euro would rise relative to the US dollar, as 1 €
would allow you to buy slightly more dollars.

The effect that a one-pip change has on the dollar amount, or pip value, depends on
the amount of euros purchased. If an investor buys 10,000 euros with dollar, the price
paid will be $ 11370 (1.1370 x 10,000). If the exchange rate for this pair experiences
a one-pip increase, the price paid would be $ 11371 (1.1371 x 10,000). In that case,
the pip value on a lot of 10,000 euros will be $ 1 ($ 11371 - $ 11370 ).

Here’s another example using a currency pair with the Japanese Yen as the counter
currency. Notice that this currency pair only goes to two decimal places to measure a
1 pip change in value (most of the other currencies have four decimal places). In this
case, a one pip move would be .01 JPY. So, in all pairs that include JPY, a pip is second
decimal number.
Take GBP/JPY as example: [(.01 JPY) / (145.80 JPY)] x 1 GBP = 0.0000685 GBP.
So, when trading 10,000 units of GBP/JPY, each pip change in value is worth
approximately 0.685 GBP.

8
 Bid and Ask price

All forex quotes are quoted with two prices: the bid and ask. In general, the bid
is lower than the ask price. The bid is the price at which your broker is willing to buy
the base currency in exchange for the quote currency. This means the bid is the best
available price at which you (the trader) will sell to the market. If you want to sell
something, the broker will buy it from you at the bid price. Ask price is the price at
which your broker will sell the base currency in exchange for the quote currency. This
means the ask price is the best available price at which you will buy from the market.
Another word for ask is the offer price. If you want to buy something, the broker will
sell (or offer) it to you at the ask price. The difference between the bid and the ask
price is known as the SPREAD.
On the EUR/USD quote below, the bid price is 1.1005 and the ask price is 1.1006. If
you want to sell EUR, you click “Sell” and you will sell euros at 1.1005.
If you want to buy EUR, you click “Buy” and you will buy euros at 1.1006.

Picture 2: currency pair

9
 Margin Trading and Lot

When you go to the grocery store and want to buy an egg, you can’t just buy a
single egg, they come in dozens or “lots” of 12, so what is a lot in Forex?

Currencies are traded in lots – batches of currency used to standardize Forex trades.
As Forex tends to move in small amounts, lots tend to be very large: a standard lot is
100,000 units of the base currency. So, because individual traders won’t necessarily
have 100,000 pounds (or whichever currency they’re trading) to place on every trade,
almost all Forex trading is leveraged.

In Forex, it would be just as foolish to buy or sell 1 euro, so they usually come in “lots”
of 1,000 units of currency (micro), 10,000 units (mini), or 100,000 units (standard)
depending on your broker and the type of account you have. You probably don’t have
enough money to buy 10,000 euros. That is no problem, and yes, you still can trade.
The answer is margin trading.

Margin trading is simply the term used for trading with borrowed capital. This is how
you’re able to open $1,250 or $50,000 positions with as little as $25 or $1,000. You
can conduct relatively large transactions, very quickly and cheaply, with a small
amount of initial capital. It is very important to understand this.

Example: You believe that signals in the market are indicating that the British pound
will go up against the US dollar. You open one standard lot (100,000 units GBP/USD),
buying with the British pound at 3% margin and wait for the exchange rate to climb.
When you buy one lot (100,000 units) of GBP/USD at a price of 1.20000, you are
buying 100,000 pounds, which is worth $120,000 (100,000 units of GBP * 1.20000).
If the margin requirement was 3%, then $3,600 would be set aside in your account to
open up the trade ($120,000 * 3%). You now control 100,000 pounds with just
$3,600. Your predictions come true and you decide to sell. You close the position at
1.20200. You earn about $200.

10
 Leverage

Leverage is the ability to use something small to control something big. Specific
to Forex trading, it means you can have a small amount of capital in your account
controlling a larger amount in the market.
This is trading on margin mentioned above. In forex trading, there is no interest
charged on the margin used, and it doesn't matter what kind of trader you are or what
kind of credit you have. If you have an account and the broker offers margin, you can
trade on it.

The apparent advantage of using leverage is that you can make a considerable amount
of money with only a limited amount of capital. The problem is that you can also
lose a considerable amount of money trading with leverage. It all depends on how
wisely you use it and how conservative your risk management is. Money and risk
management are extremely important in trading. Without proper risk and money
management, you will fail as a trader!

Leverage makes a rather boring market incredibly exciting. Unfortunately, when your
money is on the line exciting is not always good, but that is what leverage has brought
to Forex. Without leverage, traders would be surprised to see a 10% move in their
account in one year. However, a trader using too much leverage can easily see a 10%
move in their accounts in one day. While typical amounts of leverage tend to be too
high, some trade with five times leverage; it is important for you to know that much
of the volatility you experience when trading is due more to the leverage on your
trade than the move in the underlying asset.

Leverage Amounts

Leverage is usually given in a fixed amount that can vary with different brokers. Each
broker gives out leverage based on their rules and regulations. The amounts are
typically 50:1, 100:1, 200:1 and 400:1.

50:1 → Fifty to one leverage means that for every $1 you have in your account you
can place a trade worth $50. As an example, if you deposited $500, you would be able
to trade amounts up to $25,000 (50*500$) on the market using 50:1 leverage. It's not
that you should be trading the full $25,000, but you would have the ability to trade up
to that amount.

11
100:1 → One hundred to one leverage means that for every $1 you have in your
account, you can place a trade worth $100. This is a typical amount of leverage offered
on a standard lot account. The typical $1000 deposit for a standard account would
give you the ability to control $100,000 (100*1000$).

200:1 → Two hundred to one leverage means that for every $1 you have in your
account, you can place a trade worth $200. This is a typical amount of leverage offered
on a mini lot account. The typical deposit on such an account is around $300. With
$300 you would be able to open up trades up to the amount of $60,000 (200*300$).

There's no need to be afraid of leverage once you have learned how to manage it. The
only time leverage should never be used is if you take hands-off approach to your
trades. Otherwise, leverage can be used successfully and profitably with proper
management. Leverage must be handled carefully – once you learn to do this, you
have no reason to worry.

12
 How to calculate?

So now that you know how to calculate pip value and leverage, let’s look at how you
calculate your profit or loss. Let’s buy US dollars and sell Swiss francs.

The rate you are quoted is 1.4525 / 1.4530. Because you are buying US dollars you
will be working on the “ASK” price of 1.4530, the rate at which traders are prepared
to sell. So you buy 1 standard lot (100,000 units) at 1.4530. A few hours later, the
price moves to 1.4550 and you decide to close your trade. The new quote for
USD/CHF is 1.4550 / 1.4555. Since you initially bought to open the trade, to close the
trade, you now must sell in order to close the trade so you must take the “BID” price
of 1.4550. The price which traders are prepared to buy at. The difference between
1.4530 and 1.4550 is .0020 or 20 pips. Using our formula from before, we now have
(.0001/1.4550) x 100,000 = $6.87 per pip x 20 pips = $137.40.

I guess you are probably little confused and that is totally normal. No reason to be
worried. When you start practicing all this will be simple.

13
 How can I start Forex trading?

You’ve read about pips, leverage, margin, bid and ask price and all other basic
stuff. It is time to start practice. Today it is very easy to start Forex trading. First thing
you need to do is select a Forex Broker. There are many brokers and for new trader
it may be hard to choose the best one. Remember, most of them offer a demo account,
where you can test their trading platform. Usually, registration is quick.
If you look at Forex broker offer, make sure that he allows to trade with lower sizes
such as nano or at least micro.
One of the most important criteria for traders when choosing a Forex Broker is the
regulatory status of the broker and under which regulatory body it is governed.
Brokers who conduct business without regulation do so at their own discretion and
pose a direct risk to the security of their clients’ money.

Here is a list of Forex brokerage regulators for a few select countries:

- Australia - Australian Securities and Investments Commission (ASIC)

- Cyprus - Cyprus Securities and Exchange Commission (CySEC)
- Russia - Federal Financial Markets Service (FFMS)
- South Africa - Financial Services Board (FSB)
- Switzerland - Swiss Federal Banking Commission (SFBC)
- United Kingdom - Financial Services Authority (FSA)

This is most important thing when choosing a broker, so before you choose yours,
check their regulation status. It is easy to do that. Just find their license number and
check on the Internet. If you can’t find license number or they don’t want to give it to
you, simply avoid that broker and find new.

Install trading software

With selected broker you need to install trading software. This will be Meta Trader 4
platform or other custom platform from broker. Some brokers use their own trading
platform. The big advantage of Meta Trader 4 is that you have many custom
indicators, expert advisors. It is a good platform overall and I recommend brokers
who offer MT4.

14
When you have registered an account, you can add funds. It is very easy. You can start
with few hundred dollars on mini account. Minimum amount is different for each
broker.

Test platform on demo

This is the most important thing for new traders. Opening a demo account is the best
thing that you can do at the beginning of your trading career. Before you decide to
open real account, test a platform on demo.

You will have some virtual 10k or 100k to play with on demo. Test how order placing
works, how to place stop loss, take profit etc. You do not want to learn these things
with your real cash.

The main advantages of Forex demo trading:

- You do not put at risk real money – yours loses and gains are virtual, so there is
no risk that you will lose all you trading capital;
- You can test your trading system and different trading strategies;
- You can see how to use leverage;
- If you are using mechanical system, you can test it in practice.

The main disadvantages of demo trading:

- You do not put at risk real money – you react different when it is real money
you are losing;
- You make trades that you normally wouldn’t make with real money.

When you are on demo and you switch to real money trading, you will notice
difference. Now you care. When you are losing money, you feel fear. You hesitate to
close losing position because it may turn around. When your trade is in profit, you are
greedy. You hesitate to close position, because it may go even higher. This kind of
emotions occurs only when you are trading with real money. You will learn over time
that most of yours loses come from not following trading plan and allowing emotions
to play too big role in your decision making process. You are not able to switch off
your emotions. On the other hand, you must be aware of them and not allow to take
control. That is why you need to have your trading plan on paper. Write down as
many things you can in your trading plan – that way you will minimize impact of
emotions in your trading.

15
Demo trading in trader learning process:

1. Open demo account;

2. Build strategy and trading plan;
3. Test different position sizes – add to trading plan size of positions. Test different
currency pairs, different time frames;
4. Test your trading plan – set goals such as do not lose money in next few months.

Find a Mentor

It is not an easy task to find mentor, especially these days. Most trading pages on
Instagram and social media platforms are scam. They will tell how you can get rich
quick, how they have best strategy that works around 90% of the time and will show
you pictures like this:

Picture 3: scam I Picture 4: scam II

16
That is NONSENSE. Don’t believe them! First of all, good trader will never open more
than 3 (max 4) positions. Opening too many positions is the worst thing that you can
do. You need to focus, and you cannot do that when you open more than 3 positions.
Not just that, if you are wrong, you will blow your account very fast. But why
scammers do this? Answer is simple. They have two demo accounts. On one account
they buy and on another one they sell.

They will open as many positions as they can so they can win more. And guess what.
When positions are closed they will show pictures of winning account.

Finding an honest mentor is the fastest way to learn to trade Forex. With mentor, you
will avoid many mistakes and sometimes save many years of trial and errors.

17
 Fundamental vs technical analysis

Technical analysis relies on past price movement data to predict currencies’

future value. Traders focus on charts of price movement and various analytical tools
to evaluate a security's strength or weakness. In technical analysis, a trader examines
the prices of specified currencies over time. In most cases, they will recognize
repeated patterns, which they then use to predict the movement of the market. With
automated technical analysis, computer software analyzes the history of the
currencies’ price movement. Currency values tend to fluctuate in fairly predictable
patterns, which give this style of analysis a value. Technical analysis is the most
popular type of forex analysis.

Fundamental analysis relies on current factors affecting countries’ economies. These

traders look at related economic, financial, and other qualitative and quantitative
factors. In fundamental analysis, traders examine factors such as a country’s inflation
rate, interest rates, GDP and other economic indicators. Traders consider interest
rates particularly important when making decisions. A higher interest rate will attract
more investors, which, over time, will increase the value of that country’s currency.

What you will focus more is personal choice, but do not ignore the other side. If
someone says that he is technical trader and do not look at fundamentals and news,
then he is not someone you want to follow. There are so many evidences that news
can move the market. Many big players simply close all trades before important news,
because market can be unpredictable.

Technical and Fundamental analysis are base of Forex trading.

18
 How many pairs should you trade?

As a new trader, you should start with one or two pairs. Why? Three or more
pairs are hard to follow. Remember that you should check situation on few time
frames to take a trade. With two or more pairs you will struggle to follow price
actions. Select two pairs. It is enough. Every pair has its own characteristic. If you
jump between pairs, you won’t notice this. Also, it is important to check situation on
higher time frames. When you do that on many trading pairs, it is hard to follow price
action for new traders.

How much money do I need to start Forex trading?

This is one of most popular questions about Forex trading. You can open trading
account with as little as 100$ (or even less in some cases). Is it enough to trade?
Technically, yes. With that money, you can place trades if broker has nano or micro
lots in his offer. If you want to trade for living, you will need much more. But you need
to start from somewhere like everyone else.

When you learn how to trade, use money you can afford to lose. That is very
important. Never trade with money you can’t lose. This is brutal game. Save some
money for your trading account. People see all that adverts, read about leverage and
think that they do not need much capital. That is a huge mistake.

19
 Trading plan

You must have a trading plan. Of course, there is a whole learning process and
you will be testing different Forex trading strategies. Eventually you should decide
what works best for you and explore that part. Your goal is to create trading plan.
You should write down things like:

- Which currency pair you trade;

- Which time frames you trade;
- When you enter a trade (based on what strategy/signals);
- When you exit a trade (based on what strategy / signals);
- Stop losses – what is your risk per trade;
- Taking profits and money management.

If you do not have things like this written down, then you will be changing lot of things
at once. That way you will never find out what you are doing wrong. When you start
to learn how to trade Forex, it is normal that you will be testing different systems and
strategies. In the end, you should choose one and take your time to master it.

I have my own strategy that I developed after years of learning on demo account. You
will find more about my strategy in my lessons. I wait for the setup and I go in. No
emotions, no pressure. Is it perfect? NO. You will never find perfect strategy. Even
80% or more win rate is impossible. When you find strategy with win rate over 50%
you are on the right path. In Forex even with 50% win rate you can be profitable at
the end of the month. How? Answer is good trading plan. Imagine that every time you
are wrong, you lose $ 2, and every time you are right, you win $5. This month you
traded 10 times. Simple math again: 5 (trades you won) * $5 =$25; 5 (trades you lost)
* $2 = $10. Balance: $25 - $10 = +$15.

This is why Forex is not gambling and why Forex is much better than gambling. It’s
not about luck, it’s about your decisions!

20
 How to Place Profit Targets?

Frankly speaking, the most feasible approach of how to use stop-loss and take-
profit in Forex is perhaps the most emotionally and technically complicated aspect of
Forex trading. The trick is to exit a trade when you have a respectable profit, rather
than waiting for the market to come crashing back against you, and then exiting out
of fear. The difficulty here is that you will not to want to exit a trade when it is in profit
and moving in your favor, as it feels like the trade will continue in that direction.

The irony is that not exiting the moment the trade is significantly in your favor usually
means that you will make an emotional exit, as the trade comes crashing back against
your current position. Therefore, your focus when using the stop-loss and the take-
profit in Forex should be to take respectable profits, or a 1:2 risk/reward ratio or
greater when they are available - unless you have predefined prior to entering, that
you will try to let the trade run further.

What is a Take-Profit order?

A take-profit order (T/P) is a type of limit order that specifies the exact price at which
to close out an open position for a profit.

What is a Stop-Loss order?

A stop-loss order is an order placed with a broker to sell a security when it reaches a
certain price. Stop-loss orders are designed to limit an investor’s loss on a position in
a security. Although most investors associate a stop-loss order with a long position, it
can also protect a short position, in which case the security gets bought if it trades
above a defined price. Some traders don’t use stop loss order. It takes a lot of guts and
knowledge. For new traders it is recommended to use stop loss. You can put it little
above previous high or little below previous low.

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 Charts and candlesticks

Let’s take a look at the three most popular types of forex charts:
1 - Line chart
2 - Bar chart
3 - Candlestick chart

Line Charts

A simple line chart draws a line from one closing price to the next closing price. When
strung together with a line, we can see the general price movement of a currency pair
over a period of time.
Here is an example of a line chart for EUR/USD:

Picture 5: line chart

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Bar Charts

A bar chart is a little more complex. It shows the opening and closing prices, as well
as the highs and lows. The bottom of the vertical bar indicates the lowest traded price
for that time period, while the top of the bar indicates the highest price paid. The
vertical bar itself indicates the currency pair’s trading range as a whole. The
horizontal hash on the left side of the bar is the opening price, and the right-side
horizontal hash is the closing price.

Here is an example of a bar chart for USD/CAD:

Picture 6: bar chart

You will see the word “bar” in reference to a single piece of data on a chart. A bar is
simply one segment of time, whether it is one day, one week, or one hour. When you
see the word ‘bar’, be sure to understand what time frame it is referencing.

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Here’s an example of a price bar:

Picture 7: price bar

Candlesticks Charts
Candlestick bars still indicate the high-to-low range with a vertical line. In candlestick
charting, the larger block (or body) in the middle indicates the range between the
opening and closing prices.

Traditionally, if the block in the middle is filled or colored in, then the currency pair
closed lower than it opened. In the following example, the ‘filled color’ is black. For
our ‘filled’ blocks, the top of the block is the opening price, and the bottom of the block
is the closing price. If the closing price is higher than the opening price, then the block
in the middle will be “white” or hollow or unfilled. You can change the colors.

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Picture 8: candlesticks
The advantages of candlestick charting

Candlesticks are easy to interpret, and are a good place for beginners to start figuring
out Forex chart analysis. Candlesticks are easy to use. Your eyes adapt almost
immediately to the information in the bar notation. Candlesticks and candlestick
patterns have cool names, which helps you to remember what the pattern means.
Candlesticks are good at identifying market turning points – reversals from an
uptrend to a downtrend or a downtrend to an uptrend.
Here is an example of a candlestick chart for EUR/USD

Picture 9: candlestick chart

As you can see I like to use red clolor for bearish candle and blue for bullish candle.

25
Here you can find some useful information about candles, but remember – trading
just candles is bad idea, but combining them with your trading strategy can be
very useful, and try to trade only when candle closes.

Picture 10: candlestick patterns

26
 Understanding technical analysis

Technical analysis is the study of historical price action in order to identify

patterns and determine probabilities of future movements in the market through the
use of technical studies, indicators, and other analysis tools. Technical analysis boils
down to two things:
1- identifying trend
2- identifying support/resistance through the use of price charts and/or timeframes

Markets can only do three things: move up, down, or sideways.

Prices typically move in a zigzag fashion, and as a result, price action has only two
states:

1. Range – when prices zigzag sideways;

2. Trend – prices either zigzag higher (up trend, or bull trend), or prices zigzag lower
(down trend, or bear trend).

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Picture 11: trend

 Support and Resistance

Support and resistance is one of the most widely used concepts in Forex
trading. Let’s take a look at the basics first.

Picture 12: support and resistance I

As you can see, this zigzag pattern is making its way up (bull market). When the Forex
market moves up and then pulls back, the highest point reached before it pulled back
is now resistance. As the market continues up again, the lowest point reached before
it started back is now support. In this way, resistance and support are continually
formed as the Forex market oscillates over time. The reverse is true for the
downtrend.

Support and resistance are one of the most important and fundamental parts of
technical analysis.

Support: Typically expected that prices should rise after touching support.
Resistance: Generally expected that prices should fall after hitting resistance.

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An example of price respecting support and resistance lines is given at the chart
below.

Picture 13: support and resistance II

Potential Buy Signal → It is a general expectation that when prices touch a historical
level of support, prices will cease the negative momentum downward and reverse
course; hence a potential buy signal could be triggered when price touches the
support line.

Potential Sell Signal → If prices reach a historical price ceiling (resistance), typically
it is expected that prices will stop at that level, unless some other external impetus
like great earnings can send prices past historical resistance; therefore, a potential
sell signal is triggered when price touches the historical resistance line.

Breaking Support and Resistance → Another fundamental concept of support and

resistance is listed next and is shown in the chart below. If price breaks below
support, then that support level can become the new resistance level. If price breaks
above support, then that resistance level can become the new support level.

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 Picture 14: support and resistance III

Support and resistance are basic yet vitally important technical analysis tools. On
every time frame, intra-day, daily, weekly, and monthly, Support and resistance levels
are focused in by traders. Knowledge of these levels could keep a trader on the correct
side of the market.

30
 Chart patterns

If you have been around the Forex market for any length of time, then you
definitely have heard about chart patterns and their importance in technical analysis.
I will go through the most important chart figures in.

What are Forex chart patterns?

Forex chart patterns are on-chart price action patterns that have a higher than
average probability of follow-through in a particular direction. These trading patterns
offer significant clues to price action traders that use technical chart analysis in their
Forex trading decision process. Each chart pattern has the potential to push the price
toward a new move. Thus, Forex traders tend to identify chart patterns in order to
take advantage of upcoming price swings.

Type of chart patterns

Forex trading patterns are divided in groups based on the potential price direction of
the pattern. There are three main types of chart patterns classified in Forex technical
charting.

Continuation chart patterns

The trend continuation chart pattern appears when the price is trending. If you spot
a continuation chart pattern during a trend, this means the price is correcting. In this
manner, continuation patterns indicate that a new move in the same direction is likely
to occur. Some of the most popular continuation chart formations are: pennants, flags
and corrective wedges.

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 Picture 15: continuation chart patterns

Reversal chart patterns

The trend reversal chart patterns appear at the end of a trend. If you see a reversal
chart formation when the price is trending, in most of the cases the price move will
reverse with the confirmation of the formation. In other words, reversal chart
patterns indicate that the current trend is about to end and a new contrary move is
on its way! The most popular reversal chart patterns are: double (or triple)
top/bottom, head and shoulders, reversal wedges, ascending/ descending triangle.

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Picture 16: reversal chart patterns

Neutral Chart Patterns

These are the chart formations which are likely to push the price toward a new move,
but the direction is unknown. Neutral chart patterns may appear during trends or
non-trending periods. You may wonder what value there may be in neutral chart
formations, since we are unable to know the likely direction. But actually, spotting a
neutral chart pattern is still quite valuable as you can still trade an upcoming move.
When the price confirms a neutral chart pattern, you can open a position in the
direction of the breakout.

Picture 17: neutral chart patterns

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 Technical indicators

Success comes from knowledge – this is true for most things in life and especially
Forex trading. To become successful, a trader needs to learn technical analysis.
Technical indicators are a big part of technical analysis. I will provide you with a fair
and simple explanation of the most popular technical indicators. There are many
indicators that you can use. It is impossible to know and master every single one of
them. Here you can find few popular indicators that you can combine with other
things to create trading strategy.

Do technical indicators actually work?

We trade to get a positive result or, in other words, profit. Many beginner traders are
eager to know whether technical indicators are able to give them good trading signals.

The truth is that technical indicators won’t automatically lead you to profit, but they
will do a lot of work for you. There are no doubts that a skillful and experienced trader
can achieve profit without indicators, but they can still help a lot.

In fact, technical indicators can do a few wonderful things:

1 - Show something that is not obvious;

2 - Help to find a trade idea;
3 - Save time for market analysis.

Every technical indicator is based on a mathematical formula. These formulas make

fast calculations of various price parameters and then visualize the result on the chart.
You don’t need to calculate anything yourself. Just go to Meta Trader menu, click on
“Insert” and then choose an indicator you would like to add to the chart.

At the same time, technical indicators make their calculations only on the basis of a
price – the currency quotes, which are reordered in the trading software. As a result,
indicators do have weak spots. They can give signals which lag behind the price (for
example, the price has already fallen when the indicator finally gives a signal to sell).

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Popular technical indicators for Forex traders

Technical indicators are divided into several groups depending on their purpose. As
purposes of the indicators are different, a trader needs not one, but a combination of
several indicators to open a trade.

• Moving Average – an indicator to identify the trend

Moving Average (MA) is a trend indicator. It helps to identify and follow the trend.
MA shows an average value of a price over a chosen time period. In simple terms:
Moving Average follows the price. This line helps to smooth the price volatility and
get rid of the unwanted price “noise”, so that you focus on the main trend and not on
corrections. It is necessary to understand that this indicator does not predict the
future price, but outlines the current direction of the market.

Advantages of Moving Average

1 - Identifies a direction of a trend;

2 - Finds trend reversals;
3 - Shows potential support and resistance levels.

Disadvantages of Moving Average

1 - Lags behind the current price (will change more slowly than the price chart
because the indicator is based on the past prices).

There are 4 types of the Moving Averages – simple, exponential, linear weighted and
smoothed. The difference between them is merely technical (how much weight is
assigned to the latest data). Most traders use Simple Moving Average.

The most popular time periods for MA are 200, 100, 50 and 20. 200-period MA may
help to analyze a long-term “historical” trend, while the 20-period MA – to follow a
short-term trend.

Moving Average shows whether to buy or sell a currency pair (buy in an uptrend, sell
in a downtrend). MA won’t tell you at what level to open your trade (for that you’ll
need other indicators). As a result, applying a trend indicator should be among the
first steps of your technical analysis.
On the picture below you can see 2 MAs on one chart. You can add multiple MAs, but
it doesn’t have much sense to go with more than 3.

35
 Picture 18: moving average

• Bollinger Bands – an indicator to measure volatility

Bollinger Bands helps to measure market volatility (the degree of variation of a
trading price). Bollinger Bands consist of 3 lines. Each line (band) is an MA. The
middle band is usually a 20-period SMA. It identifies trend direction – just like the
MAs described above do. Upper and lower bands (or “volatility” bands) are shifted by
two standard deviations above and below the middle band. In simple terms: Bollinger
Bands indicator puts the price in a kind of box between the two outside lines. The
price is constantly revolving around the middle line. It can go and test levels beyond
the outside lines, but only for a short period of time and it won’t be able to get far
away. After such deviation from the center, the price will have to return back to the
middle. You can also notice that during some periods of time Bollinger lines come
closer together, while during other periods of time they spread and the range
becomes wider. The narrower the range, the lower is market volatility and, vice versa,

36
the bands widen when the market becomes more volatile. I like to use BB as they can
tell what to expect in the near future.

Advantage of Bollinger Bands

1 - The indicator is actually great in a sideways market (when a currency pair is

trading in a range). In this case, the lines of the indicator can be used as support and
resistance levels, where traders can open their positions.

Disadvantage of Bollinger Bands

1 - During a strong trend, the price can spend a long time at one Bollinger line and not
go to the opposite one.

The outer bands automatically widen when volatility increases and narrow when
volatility decreases. High and low volatility periods usually follow each other, so the
narrowing of the bands often means that the volatility is about to increase sharply.

I don’t recommend you to use Bollinger Bands without confirmation from other
indicators/technical tools. Bollinger bands go well with candlestick patterns,
trendlines, and other price actions signals. Bollinger Bands work best when the
market is not trending. This indicator can be a great basis for a trading system, but it
takes a lot of time to become good with it.

Picture 19: Bollinger Bands 37

• MACD – an indicator that shows the phase of the market

MACD (Moving Average Convergence/Divergence) measures the driving force behind

the market. It shows when the market gets tired of moving in one direction and needs
a rest (correction). MACD histogram is the difference between a 26-period and 12-
period exponential moving averages (EMA). It also includes a signal line (9-period
moving average). In simple terms: MACD is based on moving averages, but it involves
some other formulas as well, so it belongs to a type of technical indicators known
oscillators. Oscillators are shown in separate boxes below the price chart. After an
oscillator rises to high levels, it has to turn back down. Usually so does the price chart.
The difference is that while MACD needs to return close to 0 or lower, the price’s
decline will likely be smaller. This is how MACD “predicts” the turns in price.

Sell when histogram bars start declining after a big advance. Buy when histogram
bars start growing after a big decline. Crossovers between the histogram and the
signal line can make market entries more precise. Buy when the MACD-histogram
rises above the signal line. Sell when the MACD-histogram falls below the signal line.
Zero line as additional confirmation. When MACD crosses the zero line, it also shows
the strength of bulls or bears. Buy when the MACD-histogram rises above 0. Sell when
the MACD-histogram falls below 0. Note though, that such signals are weaker than the
previous ones.
Divergence → If a price rises and a MACD falls, it means that the advance of the price
is not confirmed by the indicator and the rally is about to end. On the contrary, if a
price falls and MACD rises, a bullish turn in the near-term.

Advantages of MACD

1 - MACD can be used both trending or ranging markets;

2 - If you understood MACD, it will be easy for you to learn how other oscillators
work: the principle is quite similar.

Disadvantage of MACD

1 - The indicator lags behind the price chart, so some signals come late and are not
followed by the strong move of the market.

It’s good to have MACD on your chart as it measures both trend and momentum. It
can be a strong part of a trading system, although I don’t recommend to make trading
decisions based only on this indicator.

38
Picture 20: MACD

39
• RSI – an indicator to measure momentum

The Relative Strength Index (RSI) is a momentum oscillator that measures the speed
and change of price movements. The RSI oscillates between zero and 100.
Traditionally the RSI is considered overbought when above 70 and oversold when
below 30. Signals can be generated by looking for divergences and failure swings. RSI
can also be used to identify the general trend.

RSI is considered overbought when above 70 and oversold when below 30. These
traditional levels can also be adjusted if necessary to better fit the security. For
example, if a security is repeatedly reaching the overbought level of 70 you may want
to adjust this level to 80. During strong trends, the RSI may remain in overbought or
oversold for extended periods.

In an uptrend or bull market, the RSI tends to remain in the 40 to 90 range with the
40-50 zone acting as support. During a downtrend or bear market the RSI tends to
stay between the 10 to 60 range with the 50-60 zone acting as resistance. These
ranges will vary depending on the RSI settings and the strength of the security’s or
market’s underlying trend. If underlying prices make a new high or low that isn't
confirmed by the RSI, this divergence can signal a price reversal.

40
Picture 21: RSI
Advantages of RSI

1 - Effective way to predict potential trends;

2 – RSI can give very good signal when to enter and when to close position.

Disadvantages of RSI
1 - True reversal signals are rare and can be difficult to separate from false alarms;
2 - RSI can stay long time in overbought or oversold zone;
3 - When a market features a strong trend, the RSI loses its usefulness.

There is no magic indicator than can predict with certainty when to enter or when
to exit a trade. If there was, everyone would use it, and there would be no dynamic
market as everyone would buy, and everyone would sell at the same time.

41
 Trading psychology

As you progress as a trader you will become involved in thinking and probably
reading about trading psychology. Trading psychology is a broad term that
encompasses the study of traders and their emotional issues about trading. Trading-
psychology literature takes its cues from scientific study of psychology, common
sense, and the experience of traders and trading gurus. If you are interested in trading
psychology, it probably means that you are further along in your trading education. If
you are one of the traders with an interest in trading psychology, you have moved
beyond looking for the perfect trading system. You now understand the important
role emotions play in trading results. One thing that many traders fail to recognize is
the intricate relationship between what you risk and the emotions you experience
during trading. In fact, risk and trading psychology are two sides of the same coin.

Markets change, new opportunities will always come. Don’t rush, be patient and
always have a trading plan. Good traders are successful but humble people. Being a
trader is a lifelong challenge.

I hope this helps you to grow as a trader. Continue to learn and be smarter tomorrow
than you are today.
Now, when we went through basics, we can start with more advanced knowledge. In
the upcoming lessons you will find out more about technical and fundamental
analysis.

42
 LESSONS

- I recommend you to read 1 to maximum 3 lessons a day, so you can process the
information you find there. You will learn basic and advanced things about Forex trading,
so take your time and don’t try to learn everything in short amount of time. Trading is not
easy and it takes time to become good, confident and even more time to become profitable
trader. But the good thing is – it is possible!

Lesson 1 - About Forex

In first lesson, I want you to realize how huge Forex market is and if you want to outsmart
everybody else who trade on this market, you will have to learn and practice a lot!

Lesson 2 - Technical and Fundamental analysis

There are two types of analysis. Technical and Fundamental. The point of this lesson is to
realize that you need to use them both. You will focus on one for sure, but never neglect
other one.

Lesson 3 - Support and resistance

It is very important to understand this topic. If you have any questions, feel free to ask me. I
recommend you to look at support and resistance as zones, not just lines.

Lesson 4 - Trendlines
Trendlines are very important when it comes to technical analysis. They give you valuable
information about current trend and we use them to spot chart patterns.

Lesson 5 - Trading trendlines

This lesson is very important so make sure to ask anything you need.

Lesson 6 - Forex Patterns

Try to remember as much patterns as you can. It might seem hard to remember, but trust
me it's not. You will see these patterns many times, especially in my free Telegram group.

Lesson 7 - Continuation Chart Patterns

After these patterns are formed, continuation of the price is expected. Here you will learn
some of the most traded continuation chart patterns.

Lesson 8 - Reversal Chart Patterns

After these patterns are formed, declining of the price is expected. Here you will learn some
of the most traded reversal chart patterns.
Lesson 9 - Neutral Chart Patterns
These patterns are interesting because price can go either way, but they can be very useful
if you have proper strategy trade them. Here you will read how I recommend you to trade
them and how I like to trade them.

Lesson 10 - Market Behavior

After we have learned about chart patterns, it’s time to read about market behavior.

Lesson 11 - Relative Strength Index

RSI is the most used indicator. Many traders have this indicator plotted into their charts
and you should try it too. Many traders also trade overbought and oversold RSI conditions
but you should be very careful if you try this strategy and the reasons why, you will find in
this lesson.

Lesson 12 - MACD
This is little more complex indicator, but if you understand this indicator, you will not have
any difficulties with others.

Lesson 13 - Bollinger Bands

I trade this indicator and its part of my strategy. Here you will see how I trade Bollinger
Bands. With a proper strategy this indicator is very useful!

Lesson 14 - Moving Average

Moving Average is indicator that you simply have to use. It is very useful and there are
many ways to trade them. It is the easiest way to determine the trend with MAs.

Lesson 15 - Stochastic Oscillator and CCI

These two indicators are popular and that is why I want to cover them too. I tried CCI
indicator but it didn't give good results so I simply stopped using it. Stochastics are very
good, but many times they give false signals. If used properly, they can be very good.

Lesson 16 - Fundamental analysis

After we have learned about technical analysis, it is time to learn about fundamental
analysis too. Here you will find the most important news that usually move the price.

Lesson 17 - Backtesting
Backtesting is very important. It is crucial to test your strategy before you actually start to
trade it. This something that you just have to do!

Examples
Here you will find some ideas and examples of how to make a trading strategy.
Lesson 18 - Problems with trading
There are many problems that you will face when trading. One of the biggest problems is
controlling your emotions. You have to be completely objective, because if you are not, you
are just fooling yourself.

Lesson 19 - Trading psychology

I want you to read the most important lesson and it’s about trading psychology. You have to
know about this if you want to become good trader.

Lesson 20 - How much money do I need to start trading?

Here you will find the answer to most frequently asked question. The only right answer is
to start with amount you can afford to lose!

Lesson 21 - When not to trade?

When not to trade is very important to know. By not trading we protect our capital and
sometimes it’s just the best thing we can do. In this lesson you will find out when you
shouldn’t trade.

Lesson 22 - Risk Reward Ratio

This lesson and the next one are very important. You have to read them!

Lesson 23 - Money Management

If you don’t have proper money management you will fail. That is just harsh truth.

Lesson 24 - Fibonacci tools

Fibonacci tools are very helpful and interesting. Here you will find out how I like to use
them.

Lesson 25 - Trading Fibonacci

In this lesson you will see how to trade Fibonacci tools with few examples.

Lesson 26 - Advanced (Harmonic) patterns

Advanced patterns can be very useful, but to trade them on a professional level, you will
have to master them. You will need much more then you can find here, but I want you to
know about them and to be aware of their significance.

Lesson 27 - Elliott Wave

Elliot Wave is very interesting strategy but it is definitely not recommended for beginners.
This is trading on a much higher level, but just like with advanced patterns, I want you to
know about this strategy too.
Lesson 28 - Taking the trades
You should look at the missed opportunities as a part of the game. Just try to learn from
them, but don't focus on missed trades, because they can affect your trading in a negative
way.

Lesson 29 - Types of traders

Here you will find out all types of traders. If you don't really know which one to choose, this
lesson will help you determine your trading style. Once you find that out, stick to it.

Lesson 30 - Focus on learning

Never focus on money. Money should be the end result of your hard work and willingness
to learn and improve every day. In this lesson you will find out why you should focus on
learning instead of money.

Lesson 31 - Trading journal

Trading journal is very important part of every good trader. It is additional work, but it
definitely helps you to see what you can improve, what are you doing right and what are
you doing wrong.

Lesson 32 - Importance of having a proper strategy and money management

You will find some shocking charts here that will hopefully show you the importance of
having a proper strategy and money management once and for all!

TECHNICAL ANALYSIS
Here you will find many real chart examples.

Lesson 33 - Key takeaways pt.1

Lesson 34 - Key takeaways pt.2

Lesson 35 - Never give up

 Lesson I

About Forex

Welcome to the world of forex trading. Forex is a portmanteau of foreign currency and exchange. Foreign
exchange is the process of changing one currency into another currency for a variety of reasons. The foreign
exchange market is where currencies are traded. For example, a German tourist in Egypt can't pay in euros
to see the pyramids because it's not the locally accepted currency. Because of that, the tourist has to
exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate.
The market is open 24 hours a day, five days a week, and currencies are traded worldwide in the major
financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney
- across almost every time zone. This means that when the trading day in the U.S. ends, the forex market
begins anew in Tokyo and Hong Kong. As such, the forex market can be extremely active any time of the
day, with price quotes changing constantly.
Forex is the largest market in the world. Forex traders exchange $5 (and more) trillion each day. Forex
market never sleeps, you have the opportunity to trade at any time of the day and make money any time.
But you need to be careful, because you can easily lose everything!
Traders with very little money can begin trading forex. In forex, you may take relatively large trades with
small amounts of money because of the favorable leverage requirements. There are many reasons to
become a forex trader, but if your only reason is to get rich quick, then you are at the wrong place. It takes
time, effort, a lot of practice and patience. Once you gain necessary knowledge and learn how to control
your emotions, trading forex will become easy.
You often hear people claim that because the forex market is so large, it is relatively easy for forex traders
to jump in and ride the trends in this gigantic market. To be exact, the world’s largest market. However,
most forex traders trade what is called the retail forex market; this is a different market to the “real” forex
market in which $5 trillion is exchanged each day. Basically, we can say there are two markets in forex.
There is the interbank market, where big banks, governments, hedge funds, and corporations exchange
currencies, and there is the retail market. Most forex traders trade in the retail forex market, an entirely
different market to the “real” interbank market. Basically, you trade against big banks, governments and
corporations that have enormous amounts of money and because of that, they can manipulate the market.
Everything you know, they know too and they will use that against you. Make no mistake about it, when
you step into any market, including the forex market, and decide that you want to make money, you have
decided you will outwit and outperform some of the most determined, intelligent, and well-resourced
people in the world! All these people have one goal. They want to take your money. How can you make
money in the markets, knowing whom you are up against? You must practice. Practice your trading. This
is the simple way to become an expert. Simple does not mean easy, because many traders expect to become
experts without practice, and sadly they never achieve expertise. Consistently profitable trading is yours if
you practice trading and become an expert!

1
So how can you win? The answer is mathematics. Here is what I mean by that. You need to find trading
strategy that works 50% of time. A forex trading strategy is a technique used by a forex trader to determine
whether to buy or sell a currency pair at any given time (we will talk about this more later). All the stories
that you hear about 90+% win ratio {forex robots} are simply not true.
So out of 100 trades, you win 50. That is good. Now, every time you win, you win $4 and every time you
lose, you lose $2. That is why I love forex market. I choose how much I win, and I choose how much I lose.
So, 50(won trades)·$4 = $200; 50(lost trades)·$2=$100. Now; $200(that you won) - $100(that you lost) =
$100 (in profit).
The biggest problem with this is that is not easy to stick to your strategy every time. Sometimes you will
have (for example) 7 consistent losses. After that, you will start to question your strategy and you will try
to find new one again. Again, and again and again... That is very big mistake that leads to nowhere! So your
biggest enemies are your emotions and lack of self-discipline. You need to realize that consistency is the
key, and the only way to be consistent is to control your emotions. After 7 losses you will get 7 or 8 or 9
wins, but you never got to see that because you changed your strategy. The cycle of winning and losing is
endless. That is just how life works!
The question is how to form trading strategy?
To do that, you need to know everything about technical and fundamental analysis and that it takes time
to form one. Right from the start you should know that market is never wrong in what it does! Therefore,
you as an individual trader interacting with the market (first as an observer to perceive opportunity, then
as a participant executing a trade, contributing to the overall market behavior) have to confront an
environment where only you can be wrong, and it's never the other way around. I want you to read this
carefully more than once. It is very important to understand this! Everything we learn after this can be for
nothing, if you don’t understand this part.

2
 Lesson II

Technical and fundamental analysis

There are basically two schools of traders, and you must decide which school fits your trading
personality. You will most likely focus on one, but be sure to never completely forget about other one. The
first school is the school of fundamental analysis. Fundamental traders use economic reports and news
reports as the basis for their trading decisions. Forex traders who have a fundamental approach will closely
examine world events, interest-rate decisions, and political news. Fundamental traders are concerned with
properly interpreting news. The focus for the technical forex trader is different. The technical forex trader
uses technical indicators, candlesticks and patterns to properly interpret price movement on a chart. The
forex trader who adopts a technical approach will examine the price charts. So, while the fundamental forex
trader is concerned with interpreting news and world events, the technical trader is concerned with
interpreting price on a chart.
Technical analysts believe that history tends to repeat itself! The repetitive nature of price movements is
often attributed to market psychology, which tends to be very predictable based on emotions like fear or
excitement. Technical analysis uses chart patterns to analyze these emotions and subsequent market
movements to understand trends. While many form of technical analysis have been used for more than
100 years, they are still believed to be relevant because they illustrate patterns in price movements that
often repeat themselves. The problem with technical analysis is that ignores fundamental factors. So
combining fundamental and technical analysis is much better than focusing on just one. For example, every
morning I check news that will be released that day (economic calendar). If very important information for
Euro zone (that can move price) will be released in 4PM, I simply won’t open any trade around 4PM that
includes EUR.
Everything about technical analysis is relative. By that I mean there is no perfect indicator or pattern! This
is very important to know. Don’t ever think that you will find indicator or pattern that works every time.
Now when we know that, let’s start with candlesticks.
The candlestick chart is a popular chart that displays the opening price, the closing price, the high price
and the low price for a market during a given time period. Each candlestick clearly represents the
important market activity for the given time period. You can choose specific time period and it is called
time frame. If you choose one hour time frame (H1), every candle will represent price movement in one
hour. Look at the picture 9 (previous chapter) to see how candlestick looks.
- Open price: The open price depicts the first traded price during the formation of a new candle;
- High price: The top of the upper wick. If there is no upper wick, then the high price is the open price of a
bearish candle or the closing price of a bullish candle;
- Low price: The bottom of the lower wick. If there is no lower wick, then the low price is the open price of
a bullish candle or the closing price of a bearish candle;
- Close price: The close price is the last price traded during the formation of the candle.

3
On the picture 10 (previous chapter - page 26) you can see most popular candlestick patterns. Bearish
patterns indicate that after pattern is formed, lowering of price is expected. Bullish patterns indicate that
after pattern is formed, rising of price is expected. Neutral patterns indicate that after pattern is formed,
price can go either way, up or down. This will not work every time. Candlestick charts are the most popular
charts among forex traders because they are more visual. Candlestick charts highlight the open and the
close of different time periods more distinctly than other charts, like the bar chart or line chart.
Candlestick charts have certain advantages:
- Forex price movements are perceived more easily on candlestick charts compared to others;
- It is easier to recognize price patterns and price action on candlestick charts;
- Candlestick charts offer more information in terms of price (open, close, high and low) than line charts.
However, there are some disadvantages of candlestick charts:
- Candles that close green or red may mislead amateur forex traders into thinking that the market will keep
moving in the direction of the previous closing candle;
- Candlestick charts may clutter a page because they are not a simple as line charts or bar charts.
One thing I recommend is to open the trade only when candle closes (when candle is formed).
The reason why is that candle like on picture 1 can easily transform into candle that looks like candle on
picture 2.

Picture 1 Picture 2

When people see massive bearish candle like in the first picture they will sell. They believe that price will
go down, so they sell and place stop loss just above the wick (or somewhere around). Market makers
(people that trade for big banks with enormous amounts of money) know that. Remember the previous
lesson. They buy and because they operate with large amounts of money price will strengthen, go up and
trigger all the stop loses. And just because you were not patience enough to wait for candle to fully form,
you lost money!

The reasons for price movement like this can be different, not just one I described. Of course this will not
happen every time, but by being patience and waiting for the candle to close you drastically lower the
chances to lose money!
4
Be sure to always combine candlestick patterns with other things like trend, chart patterns and indicators
(we will talk about that in this course). Never open the trade just because you see bullish or bearish candle!
Example that I explained above happens often. Look at picture 3:

Picture 3
See that large wick. People who didn’t wait for candle to close and sold, lost their money. This is typical
price manipulation at the support zone.

Picture 3.1

Make sure to always go back at previous chapter where I shared more pictures of different candlestick
patterns that can be useful. And AGAIN: don’t just enter the trade based on candlestick pattern signal!
Combine them with support/resistance zones, trendlines, indicators and other tools.
5
 Lesson III

Support and resistance

Support and resistance levels are significant reference points because many traders recognize support
and resistance on charts and believe in their significance. The concepts of support and resistance are
undoubtedly two of the most highly discussed attributes of technical analysis. Part of analyzing chart
patterns, these terms are used by traders to refer to price levels on charts that tend to act as barriers,
preventing the price from getting pushed in a certain direction. The explanation and idea behind
identifying these levels seem easy, but as you'll find out, support and resistance can come in various forms.
Somehow, everyone seems to have their own idea on how you should draw and measure forex support and
resistance.
First, let’s see how support looks like in theory (picture 4):

Support occurs when falling prices stop, change direction,

and begin to rise. Support is often viewed as a “floor”
which is supporting, or holding up prices.

Picture 4
This is how resistance looks like in theory (picture 5):

Resistance is a price level where raising prices stop,

change direction, and begin to fall. Resistance is often
viewed as a “ceiling” keeping prices from rising higher.

Picture 5

If price breaks support or resistance, the price often continues to the next level of support or resistance.
Support and resistance levels are not always exact. They are usually a zone covering a small range of prices
so levels can be breached, or pierced, without necessarily being broken. As a result, support/resistance
levels help identify possible points where price may change directions.
It sounds logic but the only right way to spot support and resistance is by looking at the chart!
6
Can you spot a resistance on picture 6? Just look at the chart, don’t scroll down.

Picture 6

Here it is:

Picture 7

You can see at the cahrt that price failed to break 0.89750 level 4 times. This level represented resistance
zone, because price failed to break it.

7
The way I like to draw support and resistance levels is like this:

Picture 8

I use zones, not lines. As you can see here, price touched resistance zone 4 times, and after 4th time price
went down. The zones can be bigger, but I prefer thinner zones, as price is more likely to reject or penetrate
thinner zones. When we have big zones, price also can move up and down inside that zone.
On picture 9 you can see support level.

Picture 9

8
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