1. ANTICIPATING:  how to handle risk?

It’s important to realize that even the best forex traders have losing trades. While you may make some successful forex trades, you will also make some losing trades. Fortunately, there are a number of things you can do to anticipate risk.

A. Protect your position with STOPS, LIMITS and other order types

There are a number of order types, such as the trailing stop, if/then, and order cancels the order (OCO), designed to help traders manage risk and protect potential profits.

B. Set proper levels

You need to make sure that your stop is set so that your trade can handle smaller jumps and drops in price while protecting you from losing your shirt if the market doesn’t go your way. A stop that’s too narrow may lead you to reenter the market, causing you to get stopped out again. That can cause more damage to your account balance than if you entered a stop that was too wide or if you had no stop at all.

C. Check your emotions

Sometimes, the factor that determines how successful your trade will be isn’t the amount of research you did, but your mindset at the time. As you trade, try to stay objective and calm. Even if you have a losing trade, resist the urge to enter another trade outside of your trading plan in an attempt to win your earnings back

D. Create a trading plan and stick to it

A good trading plan is crucial to your trading success. Not only will it help you meet some of your goals, but it will also define the way you trade, what you’re willing to risk and how you will protect yourself when a trade doesn’t go your way.

2. PLANNING: How to create a Trading Plan?

A trading plan serves as a steady anchor in chaotic markets, helping you forecast when to enter and exit the market. Best of all, it’s fairly easy to create. The following steps may help you get started.

A. When constructing a trading plan, ask yourself:

• Will I trade only one specific currency pair or many?
• Will I trade on a daily basis or hold my positions for days or longer?
• How much do I want to make?
• How much am I willing to lose per trade?
• If I trade on a daily basis, how many consecutive losses will I tolerate before I stop for the day?
• How will I use stops to control my risk?
• Will I have one profit target or multiple targets?
• What kind of profit can I reasonably expect to gain?

B. Using your answer, write out a short but detailed plan of action

C. Stick to your plan. Keeping a log of your trades. It will force you to follow your rules and help to avoid impulsive trading

3. ANALYZING: How to analyze the markets?

A. What are the price charts?

Price charts plot the recent prices of a currency pair on a graph and provide a snapshot of market movements over a particular period of time.

B. Line Charts

One of the common chart types that most of the trader will use is the Line Charts. It provides a quick way to view the changes in price movements over a period of time.

C. Bar & Candlestick Charts

Bar and candlestick charts provide an easy-to-analyze appearance that displays detailed information about the price movements of a currency pair.
In the chart will be defined by four price points (high, low, open and close)

• The length is to represent the level of trading activity for a specified period.
• When the price of a currency pair rises, the bar or candle usually will show green color.
• When the price of a currency pair drops, the bar or candle usually will show red color.
• Most traders will compare the market movements and verity trend by switching between different time frames.

BAR CHARTS

CANDLESTICKS CHARTS

D. What is technical analysis?

1. To study the repeating patterns and movements in the market caused by the pattern-like behavior of traders.
2. To monitor the current and historical price movements of a currency pair,
3. To determine market trends and forecast potential entry and exit points for their trades.

E. The most common technical analysis tools and methods:

a. Support and Resistance Levels

Support: Points that the price drops to but never breaks through before rising again.

Resistance: Points that the price rises to but never breaks through before dropping again.

b. Indicators

Indicators display trend lines either over the recent market movements on a chart or in a separate area below the chart. Bollinger Bands, Average Directional Index (ADX) and Moving Averages are all examples of indicators. Indicators can be either lagging (these analyze past market price movements) or leading (these forecast future price movements).

c. Patterns

A chart pattern is a series of price points that move in a particular arrangement and, once completed, forecast market movements. Some common patterns are flags, channels，and triangles. You can also plot more complex patterns, such as ABCD patterns or Fibonacci levels.

F. What if Fundamental Analysis?

• Track the political, social and economic forces and forecasting how they will affect the value of the currencies
• The value of a currency pair changes in response to the news, interest rate changes, government decisions, and other events.
• Below the chart will show you events and news on the state of a particular country’s or region’s economy can cause currency markets to shoot up or down dramatically.

Many new traders will develop their fundamental analysis skills by following news events and scheduled economic announcements. It’s important to incorporate technical analysis into your strategy as well.

Example of Market moving events: