What is FOREX?

FOREX stands for Foreign Exchange. It’s the exchanging of one currency for another. Traders take advantage of price fluctuations in exchange rates to make a profit.

I won’t pretend to be better than this guy at explaining it all…

How I Got Into it

I saw one of my high school friends posting screenshots on facebook of all the money he was making in the FOREX market. I knew this guy was honest and upfront about all of his business ventures, so I knew he was telling the truth. I saw him making $10,000+ each week (sometimes each day) that he traded. He said that the guys he was learning from earn much more.

I was skeptical, but intrigued. I’ve never written something off as too good to be true until I’ve given it my best shot. So I googled around, looking for the best FOREX books for beginners.

I started by reading all of Anna Coulling’s books. They were a thrill to read. I couldn’t put them down.

I felt like an expert after reading those books, so much that I started playing around in the market with a few dollars. I was only using volume as an indicator for market movements, so of course I didn’t win consistently. I realized that there must be more to trading, so I reached out to my Facebook friend to see how he was learning. It turns out that he is part of a trading group that offers online training and a community to get advice from. I joined for $400.

Forever In Profit

Great decision. I wish I would have joined sooner. The teachers at Forever In Profit introduced a whole new side that I didn’t know about. Support and resistance levels, fibonacci reversal levels, trend lines, supply and demand zones, and other types of indicators and market patterns. Together with volume/price analysis, I felt like I knew everything I needed to know.

I should have waited till I was consistent in a demo account before going live, but as most traders do, I jumped into live trading without establishing my own trading system. I lost about half of my starting balance, but I soon won it back. Nevertheless, I had to “start over” and get things right so it didn’t happen again.

Starting Over

I am a big proponent of failure. I know that failure is an essential part of learning any skill.

I started over at the drawing board and mapped out my new trading plan — a more conservative and long-term plan.

I shopped for some more FOREX books and stumbled upon two fantastic reads: Naked Forex and Trading in the Zone. Trading in the Zone completely changed my mindset about trading and I attribute my current success entirely to that book. I underestimated the importance of risk management and trading psychology before I read that book, but when I finished, things just “clicked”. I didn’t start making millions, but I did learn how to manage my thinking so that I wouldn’t over-trade or get frustrated with my losses.

Along the way, as I read all these books, I slowly gathered bits and pieces of MY trading system — one that works with my schedule and my way of thinking.

Most of the people in Forever In Profit seem to focus on long-term trading (4H and daily charts). That’s what I started with, but I found that I just couldn’t sit and wait for the market to hit my targets over that long time period. I found a book series called “Scalping is Fun” and combined that strategy with long-term chart markups. After I added scalping (trading short-term) to my long-term analysis of the market, I started hitting my goal of $100 a day EVERY day! It was so exciting!

My Strategy

I think everyone should design their own personal strategy for trading. Here’s mine…

I trade only from 6am – 10am or after 11pm.

I trade USDJPY, EURUSD, GBPUSD, and sometimes AUDUSD. I only enter an order when the market is trending — the moves the market makes when trending are very predictable compared to periods of consolidation.

Before entering the market, I pull up the daily charts for each pair and mark quarter points (google quarter theory). Then I mark any other obvious support and resistance lines.

I then move to the 4 hour chart and mark supply and demand zones for each pair. If there is a clear trend up or down, I draw a trend line.

I look at the most recent move, up or down, and measure it with the fibonacci retracement tool. It’s scary how perfectly the market bounces off of the key levels of this tool.

I only make trades in the direction of the overall trend. In very few cases I will catch a small 5 pip retracement when I know that some big resistance is coming up, but that’s pretty rare.

Usually I will wait for the market to hit a major support / resistance line, trendline, or fibonacci retracement level, I wait for a reliable candle reversal pattern, check my TDI, RSI, and volume indicators to see if they agree, and then gauge my risk. I use the babypips risk calculator to determine the size of my position. I like to risk no more than 2% of my account.

Once I have done all of this — and checked the news to make sure I’m not trading during a major news event — I look at the 1 and 5 minute charts to find a good entry. On these charts I use the Heiken Ashi candles, as they do a great job of showing bear vs. bull power. I wait for the candles to change colors, confirm with the volume, and enter in the direction of the trend. Then I use color change and decreasing volume to identify my exit. I’ve found that I don’t really need to catch more than 20 pips a day to reach my goal. But once I reach my daily goal, I exit everything. Greed can really ruin your account.

I’ve oversimplified my explanation here, but I wanted to show that trading is not hard. It just takes time to master it. It’s an awesome way to supplement your income. I plan on replacing my current income with weekly withdrawals from my trading account. I love it when you can work less and earn more.

 

Where to Start

If you’re hearing about FOREX for the first time, or you are wondering how to get started, here’s what I would recommend.

– Go to BabyPips.com and go through their “School of Pipsology” twice. Make sure you understand all the concepts.

– Open a demo account and start to experiment with a trading system. I use Trader’s Way as my broker.

– Join a trading group. I recommend Forever In Profit. Watch all their videos and be active in the community.

– Read, read, read — especially Trading in the Zone

– Decide on a system and stick with it. (You’ll learn about that in Trading in the Zone)

– Don’t go live until you have been profitable in your demo account for a month straight and you are confident with your trading style.

– Keep reading, keep studying charts, and learn more about the FOREX market.

 

Let me know how I can help!

Happy trading!