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Best Forex Trading Plan

Best Forex Trading Journal



What Is The Best Forex Trading Plan?

It’s all about being able to record your results in the most time-efficient and accurate manner that also allows you to learn and adapt from your mistakes.

Having the best forex trading plan allows you to quickly identify any mistakes and rapidly stop them from happening again.

The difference between a plan and a journal is that a trading plan is used to get you out of bad habits and perform better each time you record data. Whereas a journal you are just keeping track of your trading habits.

As traders, it is important that you understand exactly what you did right or wrong so you can reinforce your trading habits and rules. Thus making you unconsciously competent.

By reviewing each trade at the end of a trading session, or when you have time within the same day – take notes on what went right, why you entered and why you exited/added positions/move stop loss.

Some reasons may sound repetitive to you, which means you are on the right track to becoming consistently profitable.

You will be able to use these trade reviews to also analyze what went wrong and identify potentially troublesome patterns that you will be able to eradicate with ease.

As part of the best forex trading plan by Alphaex Capital we have included two checklists, a weekly and daily checklist to prepare you for your trading sessions.

Weekly Forex Checklist

You must go through this checklist until you are unconsciously competent and automatically do this by habit. Below is a checklist that must be completed weekly so you can gain a bigger picture view of your traded assets.

Step 1: Reviewed COT Report?

  • Which currencies are gaining momentum
  • Have they changed net positions? (i.e – net short to net long)
  • Are the net positions getting stronger or weaker?

Step 2: Reviewed Assets Weekly High & Low?

  • Plot the highs and lows of the previous trading week to set a trading range.

Step 3: Updated Trend Analysis?

  • Is the market trending?
  • Has it reversed since last week?

Step 4: Reviewed Any Chart Formations?

  • In the bigger picture is there any chart formations forming/formed to look out for?
  • If so plot them and take note of the neckline levels to watch out for.

Step 5: Reviewed Upcoming High Impact News?

  • What high impact news is being released this week?
  • Is the general consensus expecting better or worst results?

Answer these questions and input them in your trading plan for reference – this will keep your bigger picture view in check whilst you look for trading opportunities.

Daily Forex Checklist

Step 1: Reviewed Upcoming High Impact News?

  • What high impact news is being released today?
  • Is the general consensus expecting better or worst results?
  • Note the release times and avoid trading around these times.

Step 2: Performed Kelly’s Criterion?

  • If you didn’t do this at the end of the last trading session, do this now.
  • Adjust risk/position size accordingly

Step 3: Reviewed Yesterday’s High and Low

  • Plot the highs and lows of the previous trading day to set a trading range.

Step 4: Updated Trend Analysis?

  • Is the market trending?
  • Any areas that are significant to trade?

Step 5: Reviewed Any Chart Formations?

  • In the bigger picture is there any chart formations forming/formed to look out for?
  • If so plot them and take note of the neckline levels to watch out for.

Answer these questions and input them in your forex trading plan for reference – this will keep your bigger picture view in check whilst you look for trading opportunities.

How To Use The Best Forex Trading Plan?

Each month, you will review and compile a table of all of our trades for your trading plan.

You will then rank each asset based on performance and PnL. This allows you to reflect on which assets you performed in and underperformed in.

When you review each trade at the end of the month, treat it like a self-assessment.

Best Forex Trading Plan PnL Table | Free Forex Course

You can capture the above information from your MT4 platform’s own data.

For each trade you spot, you will update the trading pages individually. This is done by entering the data in the boxes and placing a print screen of your trading analysis prior to or at the execution of the trade.

You then list the trade confirmations.

Best Forex Trading Plan Confirmation | Free Forex Trading Course

After you have exited your position, we review it by pasting the post-trade screenshot in our journal.

This is then followed by management and reflection questions to help unlock and deepen your understanding of every trade you have executed.

Best Forex Trading Plan Review | Free Forex Trading Course

Download The Best Forex Trading Plan PDF & Word

Download Template (Word)

Download Best Forex Trading Plan – Word – Template

Download Example (PDF)

Download Best Forex Trading Plan PDF – Example

Having a trading plan is significant if you want to progress as a trader/investor. It is important to reflect and deepen your knowledge by being able to elaborate on each trade you do. This will certainly help you transition into the unconsciously competent levels of your understanding.

Remember the key benefits here:

  • Keeps a record of each trade with analysis to reflect on;
  • Spot patterns / trading decisions that lead to losses easily and earlier;
  • The more you keep a record and enter the details, the better it will become at learning the trading strategies.
  • Takes you to the unconsciously competent level – being able to spot trading patterns quickly and able to take on more opportunities.



How To Set Up The Metatrader 4 Platform

How To Set Up The Metatrader 4 Platform - Alphaex Capital



Setting up your MT4

In order for you to maximise this free forex trading course, we believe you must have at least a demo account opened and for you to follow the examples on your account as you go along.

This helps you recognise patterns, usages of our topics in the course, and step by step, day by day, build confidence.

The demo account is the EXACT same as the live account but with virtual money. So let’s build your demo environment first before we get started.

Step 1: Download MetaTrader 4 – you can download from any broker of your choice or directly from the website.

Important note: Make sure it is MetaTrader 4 and not MetaTrader 5.

Step 2: Install MetaTrader 4 on your PC or Mac.

Step 3: login using your account details

Step 4: Close all windows when opened

Step 5: Open up the EURUSD chart.

Step 6: Go to preferences and make the chart clearer and cleaner.

Step 7: Once you have the chart set up to the way you want you can save it as a template – this will allow you to easily load up your preferences on every chart.




What Is A Forex Broker

What Is A Forex Broker 2019



What Is A Forex Broker

A Forex broker is a company that acts as the middleman between you and the market (hence broker part).

The Forex broker’s obligation is to provide a secure and regulated environment, combined with the best execution policy, to provide regulatory approved standards of providing a service.

Features of a top forex broker:

Regulated in your country.

It doesn’t matter where they are based generally. As long as they are regulated in your country, either fully or approved via a regulatory passport, then this means you are protected.

Companies in other countries that offer services to foreign countries must have an approved status in each country they do business with, otherwise, as a client, you will not be protected.

For example, in the UK every company that offers these services MUST be regulated by the Financial Conduct Authority (FCA). If the broker is trying to get you on board and you are from the UK – you must avoid this company if they are not regulated by the FCA.

Pay structure

It is better to pay a commission per trade than it is a spread. The commission allows brokerages to offer reduced spreads which will save you a fortune in trading fees/mistakes.

With 0 spreads, you will enter and close at the price you request.

With a 2-pip spread, you will enter and close at the price you request +/- 2 pips. This can be a case of being stopped out too early.

No forms of aggressive marketing

Marketing is essential for any business but those brokers that offer you bonuses that are adding to your account based on your initial deposit or even no-deposit promotions. These may look good on paper, but these marketing tactics are not good. The major brokers won’t offer these promotions as they normally have a negative effect on the user’s experience with the company and forex trading in general.

Bonuses and promotions are only okay if they are a reduction in commission or fees.

Swift Anti-money Laundering procedures

One of the main things you must do, which is by law, is to provide documents to the brokerage to comply with the law. The brokerage has a legal obligation to run checks on you to ensure that the service is fit and proper for you. This is completely normal. Just like opening a standard bank account.

You want a broker that can process anything involving admin as swiftly and efficiently as possible.

Offers Direct Access / Electronic Communications Network (ECN)

A few years back brokers would have dealers who would receive your requested order then fill it to the market themselves. This caused a delay in execution and allowed brokers to take advantage of market movements. This dealing desk would be able to generate extra profit based on the order execution from your terminal and from actually executing the trade in the market.

Now, thanks again to technology dealing desks have been eradicated by the bigger brokerages by offering direct access to the market. This is important because it means you will get the best-executed price possible at Market Order.

Dealing desks still exist in all brokerages, but they are mainly used for calling into a dealer to place a trade over the phone.

An ECN broker is preferable because it reduces the number of interactions between the client and the direct Forex market. Giving you the best possible trading conditions that favour both you and the broker.

Biggest broker myths

The broker makes it hard for me to withdraw/ blocks me from withdrawing.

We’ve seen this written on so many reviews of brokers and it’s simply not always fair on the broker. As discussed, the brokers require documentation to process and complete your accounts – some customers do not like doing this and get frustrated with the extra level of admin (although this is a legal requirement from both the customer and the broker).

Most brokers will process a fully verified account and send payment within 24 hours.

My broker hunts for my stops.

Absolutely not. No broker hunts for your stops – market makers and institutions do that.

Yes, it is true, if you place your stop loss or take profits at areas of high amounts of liquidity – this is because they have huge orders that need to be filled.

Don’t worry though, you will not be a victim to this common error.

We will show you how to avoid this and also take advantage of it.

How to open a broker account

Forex brokers will generally have the same step by step process of registering you as a client. Below we will us Admiral Markets, who are our recommended broker – plenty of benefits.

Not got a broker yet? You can read our Admiral Markets Review because we rated them highly, and believe they are one of the best forex brokers around!

Let’s begin:

Step 1: Go to the website and find the Create Account button

You can complete this process at the same time by clicking here: https://www.alphaexcapital.com/recommends/admiralmarketslive/
Screenshot 2019 08 09 at 13.28.03 1 | Alphaex Capital

Step 2: Enter your details

Screenshot 2019 08 09 at 13.28.14 1 | Alphaex Capital

Step 3: Verify your account and complete the rest of the details. It’s as easy as that!

Completing A Broker Account

Tip on demo account money

Please only input the amount of money you can afford to invest down to £1,000 or $1,000.

For example, if you want to invest with £100 – please only add £1,000 on your demo account. Or if you want to invest £50,000 then please add £50,000 on the demo account.

This is important because the whole point of this free forex course and a demo account is to be able to easily and seamlessly transfer your abilities from the demo to the live account in the best way possible.

This will help you get used to the market moving against you and with you for a profit with the amount of trading size you would be using in the live environment.

By adding huge amounts of money that are 2x, 5x, 10x the value of your initial deposit – your mindset will not be adjusted to the lower value and could make poor, avoidable, mistakes.





What Is A Forex Broker Quiz

It’s good to get an overview of a forex broker and their role in your trading career. Take out “What Is A Forex Broker” quiz to lock in the information gained today.

0%

What Is The Key Feature Of An ECN Broker?

Correct! Wrong!

Do Respectable Brokers Prevent You From Withdrawing Money?

Please select 2 correct answers

Correct! Wrong!

How Does A Forex Broker Make Money?

Correct! Wrong!

When Opening A Demo Account, It Is Advised That You Should?

Correct! Wrong!

What Does ECN Stand For?

Correct! Wrong!

What Is Important For A Forex Broker To Complete When You Open An Account?

Correct! Wrong!

Do Brokers Hunt Your Stops?

Correct! Wrong!

Should A Forex Broker Be Regulated?

Correct! Wrong!

What Is A Forex Broker In Trading?

Correct! Wrong!

What Is A Forex Broker: The Quiz!
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Congratulations, you have passed the quiz! Please, continue to our next section to continue your learning!
FAILED
Oh no! Don't worry though, you can retake the test as many times as you want. The answers are in the lesson above and it is important you get a good understanding by completing these quizzes.

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What is a pip in Forex?

What is a pip


What is a pip?

From time to time as you are learning the lingo of trading the forex markets you may have come across a small word, called pip.

A pip is the lowest value quoted in a currency pair.

It is how much a currency pair goes up and down by.

Traders refer to a pip when they talk about profits and losses when trading as it standardises their results with others.

The true meaning of pip is that it stands for percentage in price.

The value of a pip is the 4th digit after the decimal.

This is because the forex rates are measured in ten-thousandths of a unit. For example, if the Euro costs $ 1.1324, that means it costs one dollar and 13.24 cents.

Making a profit on forex trading means watching the fluctuations of pips.

Continuing the example from above, if the price of the Euro were to change to 1.1330, it would have risen by 6 pips.

1.1324

+6 pips

1.1330

Conversely, if it had dropped to 1.1320, it would have dropped by 4 pips.

1.1324

-4 pips

1.1320

Quite easy, isn’t it?

How to Calculate the Value of a Pip

I rule of thumb is to base how much value of a pip is based on the EUR/USD conversion – roughly $10 per pip per lot.

However, each pair have their own true value and it is important to understand what they are roughly so you can manage your risk more accurately.

For example, the GBP/USD is 1.4000; which translates to for every £1 GBP to $1.40 USD.

To calculate this we use the expression below:

Value Increment In The Currency Pair (1 pip) / Exchange Rate * 1 Base Rate = Pip value in base currency.

So put this into our example:

Value Increment In Currency (1 pip/0.0001) / Exchange Rate (1.4000) * 1 Base Rate = Pip value in base currency.

=

(0.0001/1.4000)*1 = 0.00007143 per unit traded.

(Now, we discuss what units are later on in our “What Is A Lot” lesson)

So, if we traded 1 lot the value per pip would be:

0.00007143 * 100,000 = £7.14 change per pip. So every time the GBP/USD moves, the value is roughly £7.14 per pip.

So if it goes up 10 pips that is an increase of £71.40.

If it goes down 10 pips that is a decrease of £71.40.

Another example we should use is with the Japanese Yen as the pip is only two decimal points in.

USD/JPY – in this example, a one pip move is only 0.01 move.

For example, the USD/JPY is 114.30; which translates to for every £1 USD to $114.30 JPY.

To calculate this we use the expression below:

Value Increment In Currency (1 pip) / Exchange Rate * 1 Base Rate = Pip value in base currency.

So put this into our example:

Value Increment In Currency (1 pip/0.01) / Exchange Rate (114.30) * 1 Base Rate = Pip value in base currency.

=

(0.01/114.30)*1 = 0.0000875 per unit traded.

So, if we traded 1 lot the value per pip would be:

0.0000875 * 100,000 = $8.75 change per pip. So every time the USD/JPY moves, the value is roughly $8.75 per pip.

So if it goes up 10 pips that is an increase of $87.50.

If it goes down 10 pips that is a decrease of $87.50.

It’s as easy as that!

Fortunately, thanks to technology and services offered by brokers nowadays, you don’t have to formulate these any more. They are already done within your account and already done in your account currency too!





What Is A Pip Quiz

Take our “What Is A Pip” quiz below to ensure that this lesson is well and truly taken in.

Before you progress onto the next page, you must get over 50% of the quiz correct. That way, you have retained the information and can continue building your knowledge on trading the forex markets.

0%

What Does PIP Stand For?

Correct! Wrong!

As A Golden Rule, What Is The Value Per Pip For EUR/USD Based On 100,000 units?

Correct! Wrong!

Where Is The Value Of A Pip Commonly Placed?

0.0001
Show hint
Correct! Wrong!

What Is The Formula To Work Out The Value Per Pip?

Correct! Wrong!

How Many Pips Has This Example Gone Up By? 1.3000 -> 1.3232

Correct! Wrong!

What Is A Pip?

Correct! Wrong!

How Many Pips Has This Example Gone Down By? 1.3000 -> 1.1500

Correct! Wrong!

How Many Pips Has This Example Gone Up By? 1.3000 -> 1.3015

Correct! Wrong!

Calculate The Value Per Pip For The GBP/USD @ 1.3500 Per 100,000 Units Traded

Correct! Wrong!

How Many Pips Has This Example Gone Down By? 1.3000 -> 1.2990

Correct! Wrong!

What Is A Pip: The Quiz!
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Congratulations, you have passed the quiz! Please, continue to our next section to continue your learning!
FAILED
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How To Trade The Commitment Of Traders Report

How To Trade The Commitment Of Traders Report For Beginners



Due to the timeframes most commonly used by retail traders, we best not focus on longer-term macroeconomic analysis right now.

Instead, you are going to gain your Global View by piggybacking on Hedge Funds. For you, this will be a simple case of “is the industry net long or net short”. Remember, these guys do all their own research, so if the common theme is that the EUR/USD is “net short” that means they are bullish on the US economy whilst reserved about the Eurozone.

This is because they are buying dollars and selling euros. Therefore, shorting the EUR/USD.

Simple, right?

As we quickly discussed on Section 7 about US economic data, this is our key focus because the majority of currencies are pegged to the USD. Therefore, what goes on in the US will have an impact on the majority of the Major currencies.

So we can capture this data by looking at one simple report and record it every week.

This is called the Commitment of Traders report – AKA – COT Report.

This is reported every Friday and we can use our Framework to track it.

How To Quickly Build A Reliable Market Sentiment View

This is a very quick way of building an image on what the smart money (institutions, hedge funds, banks etc.) is doing.

We simply read the free to view Commitment of Traders report every Friday.

The Commitment of Traders report prints the net long & short positions by speculative and commercial traders.

Simply put it, if we see a net short (negative figure) you are looking for sell/short ideas in that asset.

If we see a net long (positive integer) then you are looking for buying/long ideas in that asset.

As you record the figures down each week, if the figures are reducing/increasing then that is a sign of weakening/growing confidence in the positions.

For example, it would be rare if in 1 week large net long positions would become net shorts. It normally takes 3-4 weeks for the shift to happen.

This gives you an accurate picture of where smart money (institutions) are placing their trades.

Why is this important?

It is important because you are becoming a trader that understands the flow of money. Like a car in a traffic jam, it is much easier to go with the flow of the traffic than drive against it.

If the smart, well-researched, institutional money is betting on growth in EURUSD – we would rather be looking to go long on EURUSD as well.

This can simultaneously filter out poor, reactionary trades.

Remember, our job isn’t to beat the market – but to enter it at the right time and take a profit from it.

Equally, if you saw that the COT report showed EURUSD was net short, you would not be looking for buying opportunities.

So when you see a reversal in the market, such as a head and shoulders pattern and the general market sentiment is net short – then this would be a high-quality trade.

Makes sense?

Essentially, the smart money is the flow of traffic and we want to join it.

What do I do?

This is a reason why we just focus on several pairs to learn with.

Every Friday/Weekend, you update your report with the currency’s figures. This will give us the previous trading week’s bias going into the following trading week.

The more you do this, the more data you will have which allows us to analyse the markets as a whole over time. Each month there are 4 reports and we will be able to deduce market shifts if we monitor this report weekly.

This is not a LONG TERM VIEW

This is just to see which side the smart money is on, therefore to have/ or “borrow” a very limited and short-term view on the Forex pair.

This is a quick view of where money is being placed and should not form your opinion.

If you are looking for a long-term view, we will go through that process in an advanced class where we talk about endogenous and exogenous research and mirror exactly what Hedge Funds do.

EUR/USD Example

Step 1: Go to http://www.cftc.gov/marketreports/commitmentsoftraders/index.htm

Step 2: Find “Current Legacy Report” further down the page and then click on “Short Format” under “Futures Only” heading on the “Chicago Mercantile Exchange”.

How To Trade The Commitment Of Traders Report - Step 1 - Example

EUR/USD Example

Step 3: Look for EuroFX (EUR/USD Future name)

Quick Tip: Use Ctrl + F / Cmd + F & type in the currency to find it quicker e.g) “Aus” / “Eur” etc.

How To Trade The Commitment Of Traders Report - Step 2 - Example

Step 4: Note down the long and short positions + changes from the previous week.

Step 5: Note down momentum (Change in contracts, are we seeing faster growing/contracting figures – which side is the momentum on? Short or Long)

Explainer

So in this example, we can see that the majority of contracts are net long (179,515 vs 149,875) – therefore, the momentum is behind the buy side.

We can see that in the second row (changes from…) that there has been an increase of 2,125 new long contracts since the previous COT whilst a -6,108 short contracts changed since the previous report.

What does this tell us? Momentum is being taken away from the short sellers and added to the buyers.

This gives us a snippet, and a very temporary view that we’d expect strength and an increase in the EUR/USD – should nothing drastic happen in the near future.





How To Trade The Commitment Of Traders Report Quiz

Take the “How To Trade The Commitment Of Traders Report” quiz below to ensure that this simple lesson gets engraved to the back of your memory. This part of the course is crucial to understand.

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If A Net Change Is Positive, What Does This Mean For The Asset?

Correct! Wrong!

Finish The Sentence: The COT Report Shows Us The...

Correct! Wrong!

The COT Report Should Be Considered As A...?

Correct! Wrong!

What Is The Key Advantage Of Using The COT Report?

Correct! Wrong!

Which Columns Should We Pay Most Attention To?

Correct! Wrong!

If A Figure Is Showing A Negative Figure In Net Change - This Means?

Correct! Wrong!

If A Net Change Is Negative, What Does This Mean For The Asset?

Correct! Wrong!

If A Figure Is Showing A Positive Figure In Net Change - This Means?

Correct! Wrong!

When Is The Commitment Of Traders Report Released?

Correct! Wrong!

What Is The Commitment Of Traders Report?

Correct! Wrong!

How To Trade The Commitment Of Traders Report: The Quiz!
PASSED
Congratulations, you have passed the quiz! Please, continue to our next section to continue your learning!
FAILED
Oh no! Don't worry though, you can retake the test as many times as you want. The answers are in the lesson above and it is important you get a good understanding by completing these quizzes.

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Important Economic Trading Data

Important Economic Trading Data For Beginners



US Data Releases

We have included two segments that you must understand whilst you trade. These are highly important data flow and important data flow. The data highlighted below can move the markets in any direction, so understanding what they mean for the economy will give you an edge on how to react.

  1. Highly Important Data Flow

These data points are expected to move the market on an intraday level and edge the bias over a longer period of time.

Non-Farm Payrolls

You would have heard of this if you have read about Forex elsewhere. It is one of the most volatile times in the marketplace, primarily thanks to the hype it gets around the data point from brokers and people telling you how to trade it.

DO NOT TRADE THIS DATA POINT.

They encourage you to trade it because it creates a very volatile period, in just a space of 5 minutes it could do 50-300+ pip up and down round trade.

It makes it exciting for new traders seeing the price rise or fall rapidly…

It is a poor trading decision if you want to trade on this news.

We use the data provided by the Non-Farm Payrolls as an indicator of job growth in the US and accounts for 80% of the works who contribute towards the GDP. An increase shows a growing economy and a decrease shows a contracting economy. That is of course at it’s most simplistic form.

The report is published once a month on the first Friday of the month.

Gross Domestic Product

Gross Domestic Product (GDP) is a value of all the goods and services produced by a country.

It is a strong measure of economic health. So a positive growth in GDP = better economy. Negative growth in GDP = contracting economy.

The formulae for it is GDP = C+G+I+NX

Or:

GDP = Public Consumption + Government Spending + All of a country’s businesses spending on capital + the country’s Net Exports

Federal Open Market Committee Meeting (FOMC)

The FOMC happens 8 times a year to discuss monetary policy changes. Any changes that have been decided on are announced immediately. The Federal Reserve determines the interest rate policy, so any announcement after the meeting is very important. It allows us, as serious traders, to get an understanding of what the members of the Fed who are in charge of the direction of the US’s economy.

The important point to take away here is that these meetings can either raise or cut interest rates, which are used to stimulate the economy but it also reduces the value of the currency. So you should be watching majors like a hawk.

US ISM Manufacturing

ISM stands for Institute of Supply Managers which is a strong indicator of the economic health of the manufacturing sector.

It is based on five indicators of economic health:

  • new orders
  • inventory levels
  • production,
  • supplier deliveries
  • the employment environment.

To gauge the health of the economy, if an ISM Manufacturing reported 50 or higher indicates that the manufacturing sector is expanding compared with the previous month. Anything lower than 50 suggests that the manufacturing sector is contracting compared to the previous month.

US ISM Non-Manufacturing

Like ISM previously, this is an indicator of economic health across all sectors except manufacturing.

It is based on five indicators:

  • new orders
  • business activity
  • prices
  • the employment environment.

Similar to the other ISM reported for manufacturing, to gauge the health of the economy if an ISM non-manufacturing reported 50 or higher indicates that the non-manufacturing sectors are expanding compared with the previous month.

Anything lower than 50 suggests that the non-manufacturing sectors are contracting compared to the previous month.

University of Michigan Confidence Index (MSCI)

The MSCI is a survey of consumer confidence to gather information on consumer expectations for the overall economy.

The preliminary MSCI report, which equates to roughly 60% of total survey results, is released around the 10th of each month. A completed report for the previous month is published on the first of every month.

We use the MSCI as an indicator as it allows us to view how real-consumers feel about spending their money.

Consumer Confidence Index

This index measures how optimistic or pessimistic consumers are with the economy in the short-term. The theory behind this index is that if consumers are optimistic then they will spend more money on goods and services, which will, in turn, stimulate the economy.

Initial Jobless Claims

This is a report of the number of jobless claims filed by individuals who are applying to receive state jobless benefits. This is a subtle insight into the direction of the economy because this is a weekly report.

The more initial claims positively correlate with a weakening economy and vice versa for lower initial claims.

Continuing Claims

This is a data release that shows the number of individuals who are already filing for and are continuing to file for state jobless benefits.

Existing Home Sales

Existing home sales is a powerful data release as it shows the number of home sales from the previous month. It measures demand in the real-estate sector.

New Home Sales

A data release that measures sales of newly built homes, which again shows demand in the real-estate sector. However, this time it shows demand for the new builds only.

There is an awful lot of information here, but serious traders can deduce information from these data points and make a long-term bias to predict future movements 18 months in advanced. For now, keep an eye out on what the reports say.





Important Economic Trading Data Quiz

Can you pass the “Important Economic Trading Data” quiz below? Sync this lesson to memory and ensure you remember all the important data.

0%

If An ISM Is Reported At 51 Points Or Above, This Represents That Manufacturing Is

Correct! Wrong!

If Existing Home Sales Is Increasing, This Means What For The Economy?

Correct! Wrong!

What Does The NFP Data Show?

Correct! Wrong!

Which Economic Data Is Released Every Week?

Correct! Wrong!

Which Economic Data Usually Creates The Most Volatility Every First Friday Of The Month?

Correct! Wrong!

If An ISM Is Reported At 49 Points Or Below, This Represents That Manufacturing Is

Correct! Wrong!

How Many High-Impact Data Releases Are There?

Correct! Wrong!

Which Country Has The Highest-Impact News?

Correct! Wrong!

What Do Economic Data Releases Effect?

Correct! Wrong!

Which Of These Represents An Indication Of Health In Manufacturing?

Correct! Wrong!

Important Economic Trading Data: The Quiz!
PASSED
Congratulations, you have passed the quiz! Please, continue to our next section to continue your learning!
FAILED
Oh no! Don't worry though, you can retake the test as many times as you want. The answers are in the lesson above and it is important you get a good understanding by completing these quizzes.

Share your Results:




Fundamental Analysis

Fundamental Analysis For Beginners



What Is Fundamental Analysis

Technical Analysis is the art of predicting market movements using visual representation and to time your trades accurately.

Whereas fundamental analysis is the understanding of macro and global economic events and data released by countries to issue to the markets which highlight whether there is growth in the country or not.

These data points are crucial to understand and look out for as they can move the market significantly.

For example, the non-farm payroll can move the market 30-100 pips within seconds depending on the data released.

If you have trades open during these times, you can be taken out of a trade and what could have been a winning trade, could quickly change based on the data output.

So, one of our rules to trading is to not trade near or during high-impact news events.

Why Use Fundamental Analysis

It is important to learn how the economies are doing as these play huge roles in whether a currency price is rising or falling.

Economic Data drives the prices of the currencies, so by understanding how different economies are doing in a general direction can easily highlight where the markets could go over a course of several months or greater.

How To Use Fundamental Analysis

In this section, we will go through the key data points released each month, what they mean and how the effect the markets.

In this course, you only need to understand the basics as you will not be holding onto your trades for months/years etc.

You will be using the data points to gauge and build an idea on the direction of the overall market sentiment and enabling you, by understanding the economies, a greater advantage of trading in the right direction with the smart money.

A lot of courses will shy away from this section because it is more “academic” and they don’t fully understand the impact of these events on a larger level. We will be going into great detail with trading economic data in the future.

The most overlooked part of fundamental analysis for many traders (especially beginners) is the very short-term impact they have on the market.

By highlighting these high-impact data points, this will help reduce poor trades and should always be taken into consideration when entering a trade. The whole point of this free forex trading course is to share the true golden nuggets with you and to reduce the element of luck involved in trading!

By the time you have finished this course fully (including all the quizzes), your brain will have retained an awful lot of information. With fundamental analysis, it is important to consider the impact of each data across each asset – this is the kind of analysis that will take the longest to learn, but when you do – everything will be part of a bigger picture and making trading so much easier to profit from.





Fundamental Analysis Quiz

A brief introduction to the Fundamental Analysis section, key here is to understand when to avoid trading and how you can utilise this data to predict future market movements. Take our “Fundamental Analysis” to make sure this information has sunk in!

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What Do Economic Data Release Effect?

Correct! Wrong!

What Does Fundamental Analysis Help Us Understand?

Correct! Wrong!

If You Were Watching The GBP/USD & Positive News Came Out From The UK, Which Direction Would You Expect The Price To Go?

Correct! Wrong!

If You Were Watching The USD/JPY & Positive News Came Out From The US, Which Direction Would You Expect The Price To Go?

Correct! Wrong!

What Is Fundamental Analysis?

Correct! Wrong!

If You Were Watching The EUR/USD & Positive News Came Out From The US, Which Direction Would You Expect The Price To Go?

Correct! Wrong!

What Is One Of The Main Rules When Trading On A Smaller Timeframe?

Correct! Wrong!

Fundamental Analysis: The Quiz!
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FAILED
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How To Trade Flag Patterns

How To Trade Flag Patterns Like An Expert



What is a flag pattern?

Flag patterns are quite rare, yet powerful.

They form in the shape of a flag… surprised?

They appear after a large move (just like pennants) but consolidate in a range sideways.

Unlike pennants which consolidate higher, or lower.

These are really easy to spot and just as powerful to trade.

How To Trade Flag Patterns

We have highlighted the flag pattern in yellow. As you can see the market has violently moved upwards before consolidating really quickly and shortly after the move. We want to see equal highs at the top as well as equal lows, this helps establish the range clearly.

The idea of the pattern is to trade in between this range and then breakout higher.

How to trade flag patterns

Step 1: Identify the flag pattern

We can do this really easily by finding a sharp movement upwards followed by a swift consolidation period.

How To Trade Flag Patterns - Identify - Example

Step 2: Identify the support and resistance levels

This is where our rules on support and resistance levels vary a touch in the flag pattern. The aim here is to ensure the resistance is on the best-closed price (most recent) and near/or on other closes.

Secondly, with the support we want that to be on the lowest close, going forward with touch as many other closes as possible.

How To Trade Flag Patterns - Mark - Line - Example

In this example above we switch to the Line graph to ensure we capture the best possible levels during the flag pattern.

How To Trade Flag Patterns - Mark - Candlestick - Example

Switching back to the candlestick view validates the accuracy for the flag pattern.

Step 3: Wait for breakout candle to reveal itself.

Once we have identified a potential flag pattern, you must wait for it to be validated. This is achieved by a breakout candlestick.

How To Trade Flag Patterns - Breakout Confirmation - Example

In the image above you can see the selected candlestick has marginally, but successfully broken out of the flag pattern range.

Step 4: Open the trade based on execution rules.

You want to put your entry level slightly higher than the breakout candlestick’s high (1-3 pips) and the stop loss at the breakout candlestick’s low.

How To Trade Flag Patterns - Enter Trade - Example

As you can see the entry candle triggered the entry level as expected.

Step 5: Enter the Take Profit level

Now, to do this you must look at the volatility candle, the candlestick that pushed the market higher quickly and before the consolidation period. We can use this as a reference to produce an accurate minimum trading breakout range. This is the exact same process as the wedge and pennant Take Profit levels.

How To Trade Flag Patterns - Set Take Profit - Example

As you can see in this example, the expected move was at least 227 pips, which worked out. Over the last few pages, we hope you can understand that these pattern breakout ranges and actual breakouts are not luck.





How To Trade Flag Patterns Quiz

Can you get full marks in “How To Trade Flag Patterns” quiz? Complete this quiz and progress.

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As The Formation Is Emerging, What Do We Ideally Want To See?

Correct! Wrong!

What Type Of Indicator Are These Patterns?

Correct! Wrong!

Where Would You Find A Flag Pattern Emerge?

Correct! Wrong!

What Is A Flag Pattern?

Correct! Wrong!

How To Trade Flag Patterns: The Quiz!
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How To Trade Pennant Patterns

How To Trade Pennant Patterns Like An Expert



Moving swiftly on from wedges, we must talk about trading pennant formations.

They are virtually the same pattern; except they form after either a sharp move up or down.

Ideally, pennants form with smaller/exhausted body candlesticks that are narrowing as the session goes on.

Plus, unlike wedges, they are continuation patterns only.

So, when you identify a pennant after a sharp move, it provides a fruitful opportunity to take advantage of the market move.

A quick note: if you think you have identified a pennant but the market reverses after – it is not a pennant.

How to identify a pennant chart pattern

The first key indicator is to look for a sharp move in either direction. This will give us the first clue of the chart formation, plus the direction to expect the breakout to occur in.

Secondly, we need to see the market stalling and narrowing.

Ideally, we want to see the market trade lower highs and higher lows between the initial sharp move

How To Trade Pennant Patterns

In the example above as you can see we had a sharp move upwards, in an upward trend, which consolidated over a few sessions to create the pennant formation.

What you must remember is that with all chart formations, nothing is going to 100% the exact same or there are no cookie-cutter patterns that must look exactly what is illustrated for the trade to work out.

There are hundreds, if not thousands, of slight variations of each chart pattern.

It is up to you and your ability to identify them and draw them accurately.

How to trade pennant chart patterns

Now you know how to identify the pattern, it’s time to make some money off of it.

Bullish Pennant

Step 1: Find a strong move upwards, followed by consolidation.

Ideally, we want the consolidation period to be between the previous largest buy candlestick.

How To Trade Pennant Patterns - Identify - Example

Highlighted in this step we’ve demonstrated a large, volatile, move upwards as the initial kick start to the pattern. Now, this can be a series of candles (like pictured) or it can be 1 large candlestick.

Step 2: Highlight the chart pattern’s support and resistance levels to draw the pennant.

Simply switch to the line chart view and draw support and resistance levels as normal.

How To Trade Pennant Patterns - Confirm - Line - Example

By drawing the lines as close to all the candlestick closes to generate accurate Resistance and Support levels.

How To Trade Pennant Patterns - Confirm - Candlestick - Example

When you switch back to the candlestick chart you can see that price has tried to go higher several times but failed.

Step 3: Confirm pattern by waiting for the breakout to occur to the upside, add order level as per the perfect execution rules.

How To Trade Pennant Patterns - Execute - Example

Step 4: Identify the Take Profit level (this can be done prior, but the pattern must be validated before we actually add a take profit level).

We use the optimised consolidation range to gauge how much the market can potentially breakout out.

How To Trade Pennant Patterns - Take Profit - Example

In the example above, we have highlighted the optimised range in a yellow box. This covers a potential breakout of 42 pips. We then replicate the range to define our TP level, setting it 42 pips higher than our entry level.

As you can see, the market traded upwards as expected, we would have hit our take profit too.

Bearish Pennants

Step 1: Find a strong move downwards, followed by consolidation.

Ideally, we want the consolidation period to be between the previous largest sell candlestick.

How To Trade Pennant Patterns - Bearish - Identify - Example

Here we see in step 1 the large move downwards indicated a potential for a stall in the mark, which usually leads to a pennant formation. The large sell wick (last one) was swiftly followed by a small series of candlesticks and created a consolidation period

Step 2: Highlight the chart pattern’s support and resistance levels to draw the pennant.

Simply switch to the line chart view and draw support and resistance levels as normal.

How To Trade Pennant Patterns - Bearish - Confirm - Line - Example

By drawing the lines as close to all the closes, this will generate Resistance and Support levels with greater accuracy.

Note, for optimal chart drawing – we want to match the Open & Close of the last large sell candle – this gives us the range that the price must trade between and trade lower until we confirm a breakout.

How To Trade Pennant Patterns - Bearish - Identify - Candlesticks - Example

When you switch back to the candlestick chart you can notice that price has attempted to move higher several times but failed.

Step 3: Confirm pattern by waiting for the breakout to occur to the downside, add order level as per the perfect execution rules.

How To Trade Pennant Patterns - Bearish - Execute - Example

Step 4: Identify the Take Profit level (this can be done prior, but the formation must be validated before we actually add a take profit level).

We use the optimised consolidation range to gauge how much the market can potentially breakout out.

How To Trade Pennant Patterns - Bearish - Take Profit - Example

In the example above, we have highlighted the optimised range in a yellow box. This covers a potential breakout of 39 pips. We then replicate the range to define our TP level, setting it 39 pips lower than our entry level.

As you can see, the market traded downwards as expected, we would have hit our take profit too.

We want to make sure we have this as the market has ALREADY informed us where it wants to go to and by how much. The market did go lower and we could have made more pips, but this is what separates the best from the best.

The best traders would ensure they lock in the maximum-minimum profit from the defined range (39 pips) and let the market move further down.

As discussed in our risk management section about trailing stop losses, we may have been able to predict with high accuracy the MINIMUM move expected from a breakout thanks to our analysis, but we do NOT know how far the markets could go. That is why active money management by trailing stop losses are important.

By going through this free forex trading course online, you will be ahead of many – if not the majority – of the paid to learn packages available online.





How To Trade Pennant Patterns Quiz

Move on to the next section by completing the “How To Trade Pennant Patterns” quiz.

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What Is A Key Characteristic Of A Pennant?

Correct! Wrong!

What Is A Pennant Pattern?

Correct! Wrong!

What Type Of Indicator Are These Patterns?

Correct! Wrong!

If The Market Is Moving Upwards & Then Stalls, Then Moves Downwards, Is This A Pennant?

Correct! Wrong!

How Can You Quickly Identify A Pennant Pattern?

Correct! Wrong!

How Do You Find The Potential Breakout Range?

Correct! Wrong!

How Many Types Of Pennant Patterns Are There?

Correct! Wrong!

If The Market Is Moving Downwards & Then Stalls, Then Continues Downwards, Is This A Pennant?

Correct! Wrong!

How To Trade Pennant Patterns: The Quiz!
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How To Trade Wedge Patterns

How To Trade Wedge Patterns Like An Expert



In this part of the course, we will introduce the concept of trading wedge patterns.

Wedges are slightly different because they appear mid-trend and can be either a continuation or reversal pattern.

What is a wedge pattern

Wedges occur when the market has pushed in a general direction and then stalls by trading in a range channel that is narrowing over time.

The bars of each session are slowing getting smaller and smaller until the market breakouts out.

Wedges can be identified quite easily by their shape.

The highs are getting lower and the lows are getting higherHow To Trade Wedge Patterns - Wedge

These are powerful patterns to spot and can be quite rare on higher timeframes. Spotting one of these patterns can allow you to get a solid breakout trade and we have a couple of tips on ensuring you can achieve maximum results over time.

How To Trade Wedge Patterns In Forex

Let’s have a look at the different types:

Rising Wedge

When the assets price consolidates between an upward sloping support and resistance lines this forms a rising wedge.

A rising wedge forms after the assets price starts to consolidate and trade between a resistance and support level in an upward direction, narrowing as the price goes along – hence forming a rising wedge.

The longer the consolidation period, the more extreme a breakout may occur.

How To Trade Wedge Patterns - Rising Wedge

As you can see the pattern creates a similar level of highs and higher lows as the pattern continues.

Hence the terminology – rising wedge.

How To Trade A Rising Wedge

With all wedge patterns note this, the price can breakout on either side of the pattern – it is the breakout direction that we trade.

Bearish Breakout

In this example, you can see after a period of consolidation and the formation of the rising wedge.

Step 1: Identify the rising wedge

You will be able to spot these patterns in candlestick charts easily, but we like to set up our resistance and rising support levels through our line graphs to give us a better representation.

How To Trade Wedge Patterns - Rising Wedge Step 1

As you can see these lines give us high-quality indications of the price rejection. We must make sure that when we draw these lines that they cover the majority of the close prices. This further validates the lines.

How To Trade Wedge Patterns - Rising Wedge

When you switch back to candlestick mode, you will notice how accurate they are to trade from.

Step 2: Breakout Confirmation and Trade Execution.

Standard entry and stop loss execution rules apply. (Should go without saying by now!).

How To Trade Wedge Patterns - Rising Wedge - Execute - Example

As you can see the wedge respected the resistance level (top of the wedge) and broke out to the downside.

Step 3: Calculate Take Profit Level

To do this we take the range from the widest part of the wedge – this gives us an expected breakout range for the market to fall. In this case, it was 22 pips.

How To Trade Wedge Patterns - Rising Wedge - Take Profit - Example

In this example, the green bars represent the wedge’s range which was 22 pips.

By using this information we will be able to place a take profit order at 22 pips with a high chance of profiting 22 pips.

Bullish Breakout

We use the same rules as the previous example but apply it to when the price breaks out of the wedge formation to the upside.

How To Trade Wedge Patterns - Rising Wedge - Bullish Breakout Example

In the brief example above, you should already understand how to generate the pattern and process from the previous example.

In the example above, we can deduce a 10 pip move to the upside as a minimum target level.

Falling Wedge

Next on the agenda is the fall wedge formation.

When the assets price consolidates between a downward sloping support and resistance lines this forms a falling wedge.

A falling wedge forms after the assets price starts to consolidate and trade between a resistance and support level in a downward direction, narrowing as the price goes along – hence forming a downward wedge.

We can easily spot a falling wedge by the formation of the market structure producing lower highs and lower lows whilst narrowing over time.

How To Trade Wedge Patterns - Falling Wedge

The longer the consolidation period, the more extreme a breakout may occur.

How to trade a falling wedge pattern

Bullish Breakout

Step 1: Identify the falling wedge

You will be able to spot these formations easily, but we like to set up our falling resistance and support levels through our line graphs to give us a better representation.

How To Trade Wedge Patterns - Falling Wedge - Identify - Line

In the example above, it shows that these lines give us strong indications of the price rejection. We must make sure that when we draw these lines that they cover the majority of the close prices. This further validates the lines.

How To Trade Wedge Patterns - Falling Wedge

When you switch back to candlestick mode, you will notice how accurate they are to trade from.

Step 2: Breakout Confirmation and Trade Execution.

Standard entry and stop loss execution rules apply. (Should go without saying by now!).

How To Trade Wedge Patterns - Falling Wedge - Execute - Example

As you can see the wedge respected the support level (bottom of the wedge) and broke out to the upside.

Step 3: Calculate Take Profit Level

To do this we take the range from the widest part of the wedge – this gives us an expected breakout range for the market to rise. In this case, it was 24 pips.

How To Trade Wedge Patterns - Falling Wedge - Take Profit - Example

In this example, the yellow bars represent the wedge’s range which was 24 pips.

By using this information we will be able to place a take profit order at 24 pips with a high chance of profiting 24 pips.

Bearish Breakout

Step 1: Identify the falling wedge

You will be able to identify these chart patterns easily, but we like to set up our falling resistance and support levels through our line graphs to give us a better representation.

How To Trade Wedge Patterns - Falling Wedge - Bearish - Line - Example

The more you get used to switching between the chart and line chart, the better. The methodologies outlined in our free forex course demonstrates the accuracy of using these processes, thus higher quality technical analysis You must draw these lines so that they cover the majority of the close prices.

How To Trade Wedge Patterns - Falling Wedge - Bearish - Candlestick Example

When you switch back to the candlestick chart, you will notice how accurate they are to trade from.

Step 2: Breakout Confirmation and Trade Execution.

Standard entry and stop loss execution rules apply. (Should go without saying by now!).

How To Trade Wedge Patterns - Falling Wedge - Bearish - Execute - Example

As you can see the wedge respected the support level (bottom of the wedge) and broke out to the downside.

Step 3: Calculate Take Profit Level

Just like the other examples, we want to take the widest range of the wedge to give us the best possible indication of how much the market will break out to. In this case, it was 24 pips.

How To Trade Wedge Patterns - Falling Wedge - Bearish - Take Profit - Example

In this example, the yellow bars represent the wedge’s range which was 24 pips.

By using this information, we will be able to place a take profit order at 24 pips with a high chance of profiting 24 pips.

By now, wedges should be fairly straight forward to you and that you should be able to open the MT4 platform and find plenty of examples across different assets.





How To Trade Wedge Patterns Quiz

Think you can get 8/8 on the”How To Trade Wedge Patterns” quiz below?

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How Do You Find The Potential Breakout Range?

Correct! Wrong!

How Can You Quickly Identify A Wedge Pattern?

Correct! Wrong!

A Falling Wedge Can Be Identified By...

Correct! Wrong!

Most Commonly, Where Are Wedge Patterns Formed?

Correct! Wrong!

What Type Of Indicator Are These Patterns?

Correct! Wrong!

A Rising Wedge Can Be Identified By...

Correct! Wrong!

What Is A Wedge Pattern?

Correct! Wrong!

How Many Types Of Wedge Patterns Are There?

Correct! Wrong!

How To Trade Wedge Patterns: The Quiz!
PASSED
Congratulations, you have passed the quiz! Please, continue to our next section to continue your learning!
FAILED
Oh no! Don't worry though, you can retake the test as many times as you want. The answers are in the lesson above and it is important you get a good understanding by completing these quizzes.

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