Forex Cheat Sheet! pdf

Forex Cheat Sheet!How to Tap Into a Global Torrent of Cash without Risking the Family Farm By Marc Charles Table of Contents Introduction My Exposure to the Forex Market Forex is a legit

Forex Cheat Sheet!

How to Tap Into a Global Torrent of Cash without Risking the Family Farm

By Marc Charles

Table of Contents

Introduction

My Exposure to the Forex Market

Forex is a legitimate multi-trillion dollar global market

“I Don’t Want to Lose Money!”

Cut the losers short and let the winners run

The Forex Majors

The $3.90 trillion break-down is as follows:

The New “Mini” FX Accounts are a Perfect Fit for Most Traders

Forex Basics — Easier Than You Think!

2 How Base Currencies Are Quoted

3 The Rollover Transaction

4 Forex Margin

How to Accelerate Your Forex Learning Curve

Strategy for Limiting Losses

The 80-20 Strategy

Don’t Listen to Losing Traders

The Price Action Strategy

The Odds Strategy

Markets Discount Fundamentals

Why Trends Persist

The Importance of Human Nature

Closing thoughts

About the Author

Marc Charles Testimonials

Valuable Resources

Recommended Books on Trading Forex MarketsOpening a Forex Account

Disclaimer

It is easy to tap into a global torrent of cash known as the Forex market

But more importantly, you don’t have to take unnecessary risks or lose the family farm doing it

This book is a “how to guide” for making money in the Forex market

This book is also focused on reducing or eliminating risk, and learning how to approach the market like a savvyprofessional

Ironically, the biggest losses and ridiculous risk exposure typically occurs after a long period of winning trades

For example, Jon Corzine learned this first hand with MF Global He was the CEO of MF Global, a largetrading firm with massive exposure to the currency markets, Forex and derivatives The firm lost more than $650million in various markets recently

Granted, the losses were not isolated to the currency or FOREX markets But you can bet a significant portion

of the portfolio was at risk in this market

The point is MF Global had a long winning streak of profitable trades

At some point, without a great respect for downside risk (at all times), you become invincible Traders (andgamblers) often believe they are invincible No one is invincible

Although this book is a short “cheat sheet” for making money in the Forex market, I will also spend some time

on reducing and/or eliminating risk

My Exposure to the Forex Market

My exposure to the currency markets took place in 1994

My good friend Thomas K was managing a small trading room on the fourth floor of a bank building in

downtown Wausau Wisconsin

Thomas and his staff of three traders were using the currency and foreign exchange markets to help theirclients’ hedge risk in an export market

But Thomas quickly learned you could make a lot of money “on the side” in addition to managing a client’s

portfolio And so Thomas devoted time every day to their in-house portfolio Thomas and his traders made a lot ofmoney.

In fact, one day when I stopped in Thomas’ office they had “cleared” more than $22,000 in net profit This wasaccomplished in about three hours of trading

I learned quickly the Forex market offered some “over the top” opportunities for profit

I started trading currency futures full time in 1995, in addition to running several other business ventures

I traded currencies about 8 hours a week….sometimes more

1998 was a turning point for me

I met a trader who specialized in the Forex market, and traded on a large scale

The trader taught me “loopholes” in the market which occur a couple of times a month He only traded theseopportunities! The trader was never “hypnotized” by market action His only objective was to limit risk and makehuge profits

This edition is not a full-fledged training course!

In other words, I’ve condensed years of research and experience into a few simple pages

I’m writing a new book on high frequency Forex opportunities too, it will be published soon I run excerpts in

my blog AskMarcCharles and in other publications

In this edition you’ll have everything you need to get started in making money in the Forex market withoutrisking the family farm

I’ve made as little as $200 or as much as $1,500 in a single day with the strategies I teach in this book

What’s more, it takes very little effort or research to put these strategies to work

But don’t kid yourself….it will take a little research and patience on your part to consistently pull cash from theForex market

The most important thing to keep in mind is Forex is the largest electronic marketplace in the world.

I realize most people make claims such as: “This market is worth “trillions”

But this time it’s true

Forex is a legitimate multi-trillion dollar

global market

When research the Forex market you will see for yourself the enormity of the market

The Forex market is used by banks, governments, drug cartels, ex-patriots and international corporations

On top of that, farmers, sheiks, kings, and even small traders like you and I are making money in it.

The best part is you don’t need to risk the family farm, nest egg or your kid’s college money (or should I sayPARTY money) to trade Forex

If you are already a seasoned trader or investor, this book is probably not a good fit This book is a “cheatsheet”, a basic primer on the Forex market

You can get started in Forex with less than $2,500

But there are Forex brokerages that can be opened with less than $1000

Granted…you CAN lose money in this market

I always make this important point very plain and clear

Forex is speculative – which means you can LOSE money.

However, I’ll show you how professional Forex traders and hedge funds limit their losses in this market Youcan copy these strategies

“I Don’t Want to Lose Money!”

A professional currency trader told me, “Managing losses is more important than making money in this (Forex)business” He made millions in the market But he also managed to avoid losing tens of millions!

He added, “Making money is the easy part”

For this trader managing losing trades became the focal point of his strategy

There’s an old adage in the Forex markets which states:

Cut the losers short and let the winners runThis means we need to learn how and when to cut losing trades.

I know this sounds simplistic, and traders use this adage all the time

But cutting losers short should be the foundation of any great strategy

In addition, we need to learn HOW and when to let the “winning” trades run wild It is easier said than done.I’ve enclosed a strategy for limiting losses which has worked well for me over the years

Forex – or “FX” – stands for Foreign Exchange

Forex is the largest and most liquid financial market in the world It is 30 times larger than all of the U.S equitymarkets combined

The foreign exchange is the simultaneous buying of one currency and selling of another

About 5 percent of the daily volume in this market is from companies and governments which buy or sellproducts and services in a foreign country or must convert profits made in foreign currencies into their domesticcurrency

The remaining 95 percent is produced by individual speculators and traders who participate in the market forprofit.

For most entrepreneurs, the best trading opportunities are with the most commonly traded (and therefore mostliquid) currencies, called “the Majors.”

Today, 90% of the daily Forex volume involves trading “the Majors”

The Forex Majors

The U.S Dollar

The Japanese Yen

The Euro

The British Pound

The Swiss Franc

The Canadian Dollar

The Australian Dollar

Forex is a true 24-hour global market

Forex begins trading each day in Sydney and moves around the globe as the business day unfolds in eachfinancial center – first to Tokyo, then to London, and then on to New York

Unlike other financial markets, investors can respond to currency fluctuations caused by economic, social, andpolitical events at the time they occur – day or night

According to the Bank for International Settlements, as of October December 2012, the average daily turnover

in global foreign exchange markets is more than $3.92 trillion!

This constitutes growth of about 20% over the $3.21 trillion daily volume as of October 2011

The $3.90 trillion break-down is as follows:

$1.490 trillion in spot (cash) transactions

$475 billion in outright forwards

$1.765 trillion in foreign exchange swaps

$43 billion currency swaps

$207 billion in options and other products

The “FX” market is considered an Over the Counter (OTC) or “interbank” market, because transactions areconducted between two counterparts over the telephone or via an electronic network

And it’s important to note… FX trading is not centralized on an exchange, as it is with the stock and futuresmarkets

The most significant difference between the FX market and the currency futures market is participants in the FXmarket deal on a principal-to-principal basis

In the currency futures market, participants deal, instead, through brokers in an “open outcry” exchange

Here’s the good news…

Internet brokerages now enable individuals and small traders with easy access to this market

The low entry costs (sometimes as low as $500) have drawn tens of thousands of small investors, traders, andspeculators into the market

On top of that, today there are new “mini” FX accounts These were not available when I started trading

The New “Mini” FX Accounts are a Perfect Fit for Most Traders

The new “mini” FX accounts are a great way for small traders, investors, and speculators to make money.The new “mini” FX accounts can be opened with less than $1000

The contracts are about a third of the size of a standard Forex contract

Brokerages offering both regular and “mini” FX accounts:

HotSpotFX

Forex

FXCM

These brokerages can help you open an account and get started trading

Most Forex brokerages offer step-by-step tutorials and instruction too

The sheer number of currencies traded in the Forex market serves to ensure extreme volatility on a day-to-daybasis

There will always be currencies which are moving up or down, offering opportunities for profit (and

commensurate risk) to traders

Believe it or not, extreme volatility is actually a good thing!

It simply means a market has tremendous activity If you’re on the winning side of a trade you’ll make moneymuch faster!

Forex offers a ton of ways to lower risk and enable traders to profit in both rising and falling markets

Forex also makes it possible leverage positions (the most attractive aspect of currency futures), with low marginrequirements

Best of all, Forex charges zero dealing commissions

Forex Basics — Easier Than You Think!

1 Buying and Selling Currencies

Currencies are always priced in pairs

All trades result in the simultaneous purchase of one currency and sale of another

While trading on Forex, you would execute a trade only at a time when you expect the currencies you are

buying to increase in value relative to the one you are selling

If the currency you are buying does increase in value, you must sell the other currency in order to lock in aprofit

An open trade (or open position), therefore, is a trade in which a trader has bought or sold a particular

currency pair and has not yet sold or bought back the equivalent amount to close the position

How Base Currencies Are Quoted

The first currency in the pair is considered the base currency; the second is the counter or quote currency

Most of the time, the U.S Dollar is the base currency, and quotes are expressed in units of 1 USD per countercurrency (for example, USD/JPY or USD/CAD)

The only exceptions to this convention are with the Euro, the Pound Sterling, and the Australian Dollar, whichare quoted as dollars per foreign currency

Forex quotes always include a bid and an ask price The “bid” is the price at which the market maker is willing

to buy the base currency in exchange for the counter currency

The “ask” is the price at which the market maker is willing to sell the base currency in exchange for the countercurrency

The difference between the bid and the ask prices is referred to as the “spread.”

The cost of establishing a position is determined by the spread, and prices are always quoted using five

numbers (for example, 134.85), the final digit of which is referred to as a point or a “pip.”

For example, if USD/CAD is quoted with a bid of 134.85 and ask of 134.90, the five-pip spread is the cost oftrading this position

From the start, therefore, the trader must recover the five-pip cost from his profits, necessitating a favorablemove in his position in order to simply break even

The Rollover Transaction

In the spot Forex market, trades must be settled within two business days

For example, if a trader sells a certain number of currency units on Wednesday, he must deliver an equivalentnumber of units on Friday

Some currency-trading systems may allow for a “rollover,” with which open positions can be swapped forward

to the next settlement date (giving an extension of two additional business days)

The interest rate for such a swap is predetermined – and, in fact, these swaps are actually financial instrumentsthat can be traded on the currency market

In any spot-rollover transaction, the difference between the interest rates of the base and counter currencies isreflected as an overnight loan.

If the trader holds a long position in the currency with the higher interest rate, he would gain on the spot

rollover

The amount of such a gain would fluctuate day to day according to the precise interest-rate differential betweenthe base and the counter currencies

Rollover rates are quoted in dollars and are shown in the interest column of the Forex trading system

Rollovers do not affect traders who never hold a position overnight, since the rollover is exclusively a day phenomenon

day-to-Forex Margin

Trading in the currency markets requires a trader to think in a slightly different way about margin

Margin on the Forex is not a down payment on a future purchase of equity It’s a deposit to the trader’saccount which will cover any currency-trading losses in the future

A typical currency-trading system will allow for a very high degree of leverage in its margin requirements, up to100:1

The system will automatically calculate the funds necessary for current positions and will check for marginavailability before executing any trade

How to Accelerate Your Forex Learning

Curve

The Forex learning curve can be overwhelming, it was for me

This is especially true if you’ve never traded currency futures, options, or the equity markets

Therefore, in order to accelerate your understanding of the market, you’ll need to read as much about it as youcan, paper trade and watch tutorials

Google and YouTube are excellent resources too You’ll find hundreds of “how to” videos for beginners toexpert

I’ve listed several books which helped me and I’m confident they will help you too

There are dozens of Forex trading seminars available too

But when it comes to Forex trading seminars – let the buyer beware

The best Forex trading seminars should be conducted by someone who is a successful trader and a skillfulteacher

Not everyone can teach!

Most people like to talk about how smart they are and how much money they claim to have made

Online trading forums will give you a great sense of legitimate and bogus trading seminars

Strategy for Limiting Losses

One of the greatest aspects of the Forex market is the ability to place “stop loss orders”

A “stop loss order” is an order to buy or sell when the price of a Forex contract drops or rises to a designatedlevel

For example, let’s say you buy the Japanese Yen and sell the US Dollar at a certain price point

But the market moves against you….in this example the Yen falls in value in relation to the US Dollar

You can place a “stop loss order” BEFORE you enter this trade to protect yourself and limit downside losses

When the “stop loss order” is triggered (automatically and electronically) you would be removed from thetrade, and your position would be liquidated

I always trade using “stop loss orders”….even when seasoned traders tell me I don’t need them!

If you trade the Forex markets you’ll need to familiarize yourself with the various methods of risk management,