FOREX

TRADING
BEGINNERS ADVENTURE
WITH KEMMATRADES
BASICS OF THE FOREX MARKET EXPLAINED
FOREX?
IS AN ABBREVIATION FOR
FOREIGN EXCHANGE
Foreign Exchange Market
(FX) is the World’s biggest
financial trading market where
transactions (buying & selling)
of currencies take place with
the help of banks, individual
traders and other institutions.
This Photo by Unknown Author is licensed under CC BY-SA-NC
LET US COMPARE!!
Forex is more profitable and $6.6 TRILLION
advantageous than all other financial ▪ LIQUIDITY / TRADING VOLUME
securities markets (Stocks, shares, ▪ POSITION TAKING
bonds, options, futures, commodity) ▪ EASIER TO MONITER
▪ LOWER TRANSACTION COST
▪ HIGH LEVERAGE
▪ BUSINESS CLOSURE

STOCK MARKETS
$22.4 BILLION
$18.9 BILLION
$7.2 BILLION

LONDON STOCK TOKYO STOCK NEW YORK STOCK FOREX MARKET

EXCHANGE EXCHANGE EXCHANGE
8 MOST TRADED CURRENCIES

SYMBOL | COUNTRY | CURRENCY

USD UNITED STATES DOLLAR

GBP GREAT BRITAIN POUND
EUR EUROZONE EURO
CAD CANADA DOLLAR
JPY JAPAN YEN
CHF SWITZERLAND FRANC
AUD AUSTRALIA DOLLAR
NZD NEW ZEALAND DOLLAR
DECENTRALIZED NATURE OF THE MARKET

EBS & REAUTERS (REFINITIV)

ONLINE MARKET MAKERS

(hedge funds, corporations, retail
market makers, and retail ECNs.)
“flow monsters”
(super banks)
HOW TO MAKE MONEY TRADING FOREX
The objective of trading forex is to make money.

We speculate value increase or decrease in currencies and

make exchanges expecting to make profit off the transaction
if we are right on our speculations.

Specifically, in the forex market you BUY or SELL currencies.

Once you buy, you are speculating that the currency you
bought will increase in value compared to the one you sold
and vice versa.
HOW TO MAKE MONEY TRADING FOREX
A TRADER’S CALL GBP USD

YOU PURCHASE 10,000

POUNDS
AT THE CURRENT
GBP/USD EXCHANGE
+10,000 -11,200*
RATE
1.1200

A WEEK LATER, YOU

EXCHANGE YOUR
10,000 POUNDS BACK
INTO U.S. DOLLARS AT -10,000 +11,300*
THE
EXCHANGE RATE
1.1300

YOU EARN A PROFIT

OF $100
0 +100
FOREX QUOTES
Currencies are always quoted GBP / USD
in pairs. 1.35 85 2 1.35 87 9
sell 10.00 buy

In every foreign exchange

transaction you are
simultaneously buying one BASE QUOTE
currency and selling another. CURRENCY CURRENCY

(ALWAYS HAS A VALUE OF 1)

The first listed currency is the

base currency, while the second
is the quote currency.
READING FOREX QUOTES
The BASE CURRENCY is the basis for every transaction.
If you make a decision to buy, you are buying the base and
simultaneously selling the quote. Vice versa*

A trader would buy a pair if there is the believe that the base
currency will appreciate(gain value) relative to the quote
currency.
A trader would sell a pair if there is the believe that the base
currency will depreciate(lose value) relative to the quote
currency.
FOREX TRADING SESSIONS ASIAN | LONDON | NEWYORK
It is true that the forex market is open 24 hours a day, but that doesn’t mean it’s always active the entire day.
Profit making in forex relents on price movement so it will be difficult to achieve that if market is still.
Believe me, there are times when an open market can be stagnant and frustrating.

MY ADVICE ABOUT: MAIN TRADING SESSION WITHIN OUR TIME ZONE

▪ LONDON NEWYORK OVERLAP

▪ SUNDAY MARKET OPENING
▪ FRIDAYS AFTER 4PM
▪ BANK HOLIDAYS
AVERAGE PIP MOVEMENT OF MY MAJOR PAIRS
PAIR TOKYO LONDON NEW YORK

EUR/USD 50 - 70 80 - 100 100 - 120

GBPUSD 55 -80 80 – 120 100 – 130

GBPJPY 70 – 100 100 – 140 120 – 150

XAUUSD 50 – 70 TENTATIVE TENTATIVE

WHEN DO YOU BUY OR SELL?
TECHNICAL ANALYSIS
FUNDAMENTAL ANALYSIS STUDY OF PRICE MOVEMENT
TRADERS STUDY PAST TREND
EVENTS WITH RESPECT
TO PRICE MOVEMENTS TO
EACH CURRENCY BELONGS TO A DETERMINE THE CURRENT
COUNTRY, A REGION OR A STATE. TRADING CONDITIONS
FUNDAMENTALS FOCUSES ON THE
OVERALL STATE OF THE ECONOMY CANDLE STICKS CHART PATTERNS
WITH RESPECT TO PRODUCTIVITY, SUPPORT RESISTANCE
DEMAND SUPPLY
EMPLOYMENT, MANUFACTURING, TREND TRENDLINES
INTERNATIONAL TRADE & INTEREST INDICATORS
RATE
FOUR MAIN STYLES OF TRADING
• SCALPING
• DAY TRADING
• SWING TRADING
• POSITION TRADING
The difference between the
styles is based on the length
of time that trades are held.
Choosing a trading style requires the flexibility to know when a trading
style is not working for you, but also requires the consistency to stick with
the right trading style even when it is not performing optimally.
SCALPING
A very rapid trading style involving an attempt to
make profits from small price changes in the market.
DAY TRADING
This means that scalpers tend to constantly monitor
the price levels of pairs to make lots of small bets
throughout the day.

Scalping is best suited to active traders that can make

immediate decisions and act on those decisions
without hesitation.
Impatient people often make the best scalpers.
Being a successful scalper requires focus and
concentration.

It is not a suitable trading style for people who are

easily distracted or who often find themselves
daydreaming
DAY TRADING
Day trading is more suitable for traders that
prefer opening and closing a trade on the
same day.

Many day traders would not consider

holding trades overnight because they
would not be able to sleep knowing that
they have an active trade that could be
affected by price movements during the
other sessions outside their trading hours.

Many day traders would not consider

scalping because they would not have the
time to enter and monitor trades
consistently during the day.
SWING TRADING
SWING TRADING ALMOST ALWAYS
INVOLVES HOLDING TRADES OVERNIGHT.

It is compatible with people that have the patience to

wait for a trade to materialize to their speculated
price level before closure. This kinds of trades could
take more than a day to materialize because profit
targets are wider.

Swing trading generally requires a longer period so

the ability to keep calm when a trade is not hitting a
target too quick is a necessity.
POSITION TRADING
Position trading is the longest term trading of all and often
has trades that last for months or several years. Therefore,
position trading is only suitable for the most patient and
least excitable traders.

Position trading targets are often several thousand pips, so if

your heart starts beating fast when a trade hits 25 pips in
profit, position trading is probably not suitable for you.

If other people’s opinions easily sways you, then position

trading is going to be difficult for you.
FOREX
TERMS
FOREX TERMS

LONG/SHORT/BULL/BEAR SPREAD
LEVERAGE MARGIN
BALANCE EQUITY
FREE MARGIN STOP LOSS
TAKE PROFITS LOT SIZE
PIP / PIPETTE SLIPPAGE
BID/ASK
LONG & SHORT / BULL & BEAR MARKET
THE BASIC TERMINOLOGY OF OPTION
You can have two opinions about a security, the price will go up or come
down.

• If you believe that prices of your asset are likely to increase, you are bullish. If the
price of a market instrument is going up during a time period, it is referred to as
bull market.
• If you believe that prices of your asset are likely to go down, you are bearish. If the
price of a market instrument is declining during a time period, it is called a
bear market.
• The general direction that the market is moving in is called a trend. Trends can be
in bullish, bearish & sideways.
• If you buy an asset, your position is long. When long an asset, you benefit if the
price of the asset increases
• If you sell an asset, your position is short. When you short an asset, you benefit if
the price of the asset decreases
BUY WHEN YOU EXPECT PRICE TO GO UP

1.1350

1.1200
LONG
BUY
BULL MARKET
SELL WHEN YOU EXPECT PRICE TO COME DOWN

1.1350

1.1200
SHORT
SELL
BEAR MARKET
PIP & PIPETTE
The unit measure of the change in value or
price of a trading asset is termed PIP
It is represented from the fourth decimal 1.3840 1.38408
place of a currency quote. There are
exceptions when it comes to Japanese Yen
(JPY) and Swiss Franc (CHF) which
usually has two decimal places.
There are brokers that quote beyond the PIP PIPETTE
usual four decimals. When that happens,
the fifth decimal place is a mere fraction of
a pip. This fraction is called PIPETTE.
LOT SIZE
Forex is commonly traded in THERE ARE 4 TYPES OF LOT SIZE.
specific amounts called a
LOT SIZE.

A “LOT” is a unit measuring a

transaction amount.
It basically represents the
amount of currency you will
either buy or sell.
When you place orders on your
trading platform, orders are
placed in sizes quoted in lots
and not in currency.
LEVERAGE & LOT SIZE
FACTORS TO CONSIDER
LEVERAGE in forex directs me to ratio and
1. THE MARKETS BEING TRADED
proportions. The initial margin a trader has is
multiplied by the leverage the trader chooses to 2. ACCOUNT SIZE
operate with on a particular account.
3. GENERAL EXPERIENCE IN FOREX
When a trader uses 1:100 ratio, it means the Initial TRADING
Margin is one hundred times less than it’s POWER
Transactions Size.
CAPITAL LEVERAGE
g
Brokers offer this feature to help retail traders gain
the purchasing power even if their accounts are
not huge enough to indulge in some transactions
on the forex market.
ILLUSTRATION ON LEVEREAGE AND LOT SIZING

$100 $100

1:100 1:1000

0.1 LOT $10,000 1 LOT $100,000

KEY:

CAPITAL

LEVERAGE

PURCHASING POWER

LOT SIZE
BALANCE
BALANCE is the amount of capital
a trader has in their trading
account devoid of open positions.

The balance of the illustrative

account is 9,297.31 USD
EQUITY
EQUITY refers to your account
balance plus the floating profit or
loss of your open positions.

EQUITY = BALANCE + FLOATING PROFIT/LOSS

IF THERE ARE NO OPEN POSITIONS,

THERE WILL BE NO RUNNING
PROFIT/LOSS THEREFORE,

EQUITY = BALANCE
MARGIN
Margin is the amount of money
a trader needs to put forward in
order to open or maintain a
position.

Basically a security deposit that

the broker holds while
a forex trade is open.
FREE MARGIN
FREE MARGIN is the difference
of your account equity and the open
position’s required margin.

Free margin = Equity - Floating Margin

When you have no running

positions, you have no used margin.

Your Equity = Free Margin

SETTING UP META TRADER 4
EXPLAINED
OPENING TRADES CHART CUSTOMIZATION
CLOSING TRADES MARKET WATCH
SETTING STOPS (TP/SL) DOWNLOADING MT4
TRAILING STOPS TAKING SIGNALS
TAKING PARTIAL PROFITS
 CHART CUSTOMIZATION
MARKET WTCH
SELECTING PAIRS
TRADING BEGINS
TWO MAIN PHASES OF CHART CUSTUMIZATION
CHART CUSTOMIZED
SELECTING PAIRS
READY TO TRADE
CURRENCY PAIR INSTANT EXECUTION

LOT SIZING PENDING ORDERS

PENDING ORDERS
The concept of generating pending orders can be very
complicated to new traders. From what they are, to how or why
they are used isn’t a concept that is obvious as simple market
executions.

Pending orders are simply trades yet to be triggered. Once a

pending order is finally executed, it becomes a running trade.
In a pending order the trader directs the broker to open a trade
at a later time when certain conditions by the trader are met.

FOUR MAIN TYPES OF PENDING ORDERS

▪ BUY LIMIT
▪ SELL LIMIT
▪ BUY STOP
▪ SELL STOP
ADVANCE TO INTERMEDIARY