12

10
 Syllabus

In this self-study trading course, we will

reveal to you some of the basic tactics on
how to conquer and trade the markets and
become a Trading Matador.

While trading might seem to be a

complicated thing, today many of our
traders are beating the markets with the
help of our comprehensive guides.

Our trading course breaks each topic

down presenting them in the simplest
way possible. In an essence, each chapter
consists of a module of knowledge, while
the whole trading course will take you on
a unique learning curve, improving your
trading skills.

eToro Trading Academy - Lessons you can earn from

Syllabus

The Forex Market- What is Forex?

Introduces the Forex Market and gives
you an idea of its size and scope.
Basics of Forex Benefits- Why Forex trading has become
Lesson so popular over the last couple of years.
1 Basic Terminology- Learn the lingo.
Trading Hours.

A quick guide to In this lesson we will walk you through

the various tools and order types pro-
eToro’s revolutionized vided on the trading platform. We will
trading platform elaborate on how to establish a Forex
Lesson position, how to manage the trade while
2 the position is open, how to close the po-
sition and most important how to review
your trades.

Fundamental This lesson will cover the forces that

move the prices: The fundamentals.
Analysis Lesson These include interest rates, economic
3 growth, inflation, among others.

Technical Analysis
Basics - Charts, Chart The purpose of this chapter is to explain
types, Timeframes Lesson
the first steps in conducting technical
analysis. These steps involve learning the
4 different types of charts and how to flip
between the various time frames. Finally
it will explain which time frames are
suited for various types of traders.

The Lines - Trends, Find out why there are certain prices on
the charts that act as a magnet.
Trend lines, Support & Understanding the location of the
Resistance lines Lesson currency pair is the basics of technical
5 analysis and can often reveal future price
movement.

eToro Trading Academy - Lessons you can earn from

Syllabus

Fibonacci and Have you ever asked yourself why the

Pullbacks price pattern doesn’t move in a straight
Lesson line? In this lesson we will cover price
6 movements and pullbacks, using one of
the most popular trading tools on the
market. With the help of the Fibonacci
tool you will be able to measure the
extent of each pull back, helping you time
your next entry and exit points.

Popular Indicators After completing the basics lessons of

technical analysis, this lesson will dive
Lesson into more advanced tools, used by
7 technical traders.Indicators are normally
plotted on the charts to confirm the
trader’s assumptions. For example, some
indicators will show a trader whether
there are signs of weakness in the trend
or whether the support and resistance
levels are going to be broken.

Knowing the rules of technical trading

doesn’t always help improve your suc-
cess rate. Strategies and determination
Breakouts and are key factors when technical trading. If
Swing trading Lesson you are not using proven strategies along

8
with correct portfolio management, you
will find yourself knowing the theory but
unable to trade the trade. In this les-
son, previous material will.Be exercised
through trading strategies that suite all
market conditions.

One picture is worth a thousand words. In

this lesson we will cover a few trading
examples using all the material that
Trading Examples Lesson has been taught.Examine entry points
9 and exit points while using different
strategies. This lesson is designed to
help you compare your current trades
by comparing them with successful ones
done by our dealing room.

eToro Trading Academy - Lessons you can earn from

 Syllabus

A key part of trading is diversifying your

portfolio. Gold and Silver trading are two
Adapting technical of the best ways of taking part in the
rapid commodity market, prospering from
analysis to commodity Lesson the different trends. With the help of this

10
trading lesson and our unique trading tools you
will be able to adapt your trading strate-
gies to benefit from the stimulating world
of commodity trading. This lesson among,
other things, will show you why and how
Forex traders quickly become accustomed
to commodity trading benefiting from the
various trends.

Oil is the most traded commodity in the

Crude Oil Lesson world and the center of the multi-trillion
Trading Strategies
11 dollar international energy business.
Find out how you can take part in this
volatile market

Trading stock indices lets you take

Indices Lesson advantage of big movements in the
Trading the World
12 market through one simple trade .
Learn how you can start trading the
world.

While this course is designed to give you the proper foundation in becoming a
Forex matador, practice is required and recommended after each lesson. One
must remember that successful traders are not born over night and with the right
motivation and determination, you too can be profiting from the markets in no time
at all.
Should you require any information
during this course, feel free to
contact your account manager
with any questions you might need
answering.

Good Luck
eToro Trading Academy - Lessons you can earn from
 Table of Contents

1.Basics of Forex
The Forex Market
What is Forex?

Page
Benefits
2
Page

Basic Terminology 5
Page

7 Trading Hours

Page

9
 What is Forex?

Over the last couple of years Forex trading, foreign currency for their own purpose,
also known as currency trading, has for example a large U.S corporation
become one of the most popular forms requiring Euros to import goods from
of investment. As currencies are traded Europe, a large part of the market is made
all over the world and there is no specific up of currency traders, who speculate on
central exchange or meeting place for movements of exchange rates, similar to
this market, participants from across the stock prices. Due to the market’s leverage
globe have made Forex the largest traded (a term that will be explained later on
market. Due to the amount of buyers and during this lesson), currency traders can
sellers at any given moment, traders can take advantage of even small fluctuations
easily liquidate their positions with the click and not necessarily wait for months on
of a mouse, while benefiting from further end to see profits.
advantages that this market has to offer.
For example, an investment of only $200
While some of the participants in this can yield on certain days over $480, in
market are simply seeking to exchange a less than 1 hour.

Basics of Forex 2
The Forex Market - What is Forex?

The Forex market as we know it today

evolved during the 70’s when countries
adopted a floating exchange rate. This
basically means that the power of supply
and demand began to affect the market’s
price. Think about it, once upon a time
most exchange rates were fixed, meaning
they never changed, nowadays if you Illustration
go and buy Euros; you are affecting the
demand and pushing the price higher. If
there is a seller willing to sell you his/her
Euros, then your demand is met by the
supplier and the transaction takes place
– In other words you are receiving your
Dollars worth in Euros.

As the Forex market is so vast and there This is called liquidity and basically what
are buyers and sellers taking part in it it means is that traders are always able
24 hours a day, 5 days a week, a buyer to open and close positions - buy and sell
will always be able to purchase a foreign currencies.
currency, while a seller will always be able
to find a buyer for his currencies
(selling a currency).

Today participants range from small investors to large ones, all benefiting
from this active market.

So, Who are the Major Players?

Government and Central Banks

Even though governments and central rates to help the U.S economy. This had
banks try to keep a free market, they can a direct affect on the Dollar affecting its
often have a major influence on currency price. Another example is China, which
exchange rates due to various methods has been keeping its Yuan low against the
they use to stimulate the economy or U.S Dollar for years.
restrain the economy from overheating.
For example, towards the end of 2007 the
Federal Reserve began to lower interest

Basics of Forex 3
The Forex Market - What is Forex?

Banks

In addition to central banks, commercial banks buys and sells currencies between one
take a major part in the Forex market. These another. Retail traders, don’t normally
banks transact with each other, exchanging have access to the Interbank market.
currencies on a day to day basis. The larger
the bank, the more volume it trades. Individual Investors

Hedge Funds Individual market investors make up a

fair portion of the daily volume traded on
A hedge fund is a fund that can take both the Forex market. As on stocks, various
long and short positions in all the tradable currency pairs are traded throughout
markets, including Forex, to reduce future the day by individuals through retail
losses. Hedge funds will often use the Forex Brokers. While most of the trading
Forex market to preserve future profits. For is speculative trading for individual
example, if a hedge fund located in the U.S, portfolios, some have taken this form
is trading securities in Europe, the last thing of income to the next level, becoming
the hedge fund manager wants is to see is all money managers of numerous accounts.
of his profits vanish into thin air, due to the
devaluation of the EURO. In other words he
doesn’t want to see his profits being offset
by losses when converting back his money
into Dollars. A hedge fund will often trade
the currency market to prevent devaluation
of its portfolio.

Retail Forex Brokers

Unfortunately most individual investors

can’t gain access to the interbank market,
due to low volume. Over the last couple of
years and especially with the development
of the internet smaller brokers now allow
individual traders to take part in the world
of Forex trading. Brokers like eToro, who are
regulated by various authorities such as the
NFA, provide direct access for retail traders
(individuals), allowing them to trade low
volume lots.
Interbank market- A group of large banks, that

Basics of Forex 4
 Benefits

Forex trading has become so popular over the last couple of years, that many portfolio
managers are now diversifying their money into the various pairs, to prosper from the
daily trends. In addition to conventional trading, hedging strategies are often used on
currency pairs to offset other open positions on other tradable assets. Once thought
as only a ‘rich man’s game’, Forex trading is slowly catching the attention of smaller
investors, taking part in this dynamic world due to its enormous benefits and potential
profits.

Forex Market Characteristics

1 Daily trade of over $3 trillion, 10 times larger than any stock market.
You can always buy or sell a position.

24 hour market- Reduces the after hour surprises like on Stocks.

Leveraged market- Allowing investors to start off small but trade large amounts.

Globalization- Allowing traders to participate from across the globe.

Advantages over Stocks

1 Enormous liquidity - Often stock ABC suddenly resigns during the market’s
traders find that they can’t liquidate their closed hours, can you image what will
positions as there are no buyers in the happen to your stock?
market. You must remember that unlike In Foreign exchange, the markets are open
stocks, currencies are traded on a global 24/5, meaning that you have complete
scale and not just on one exchange. This control of your positions at all times.
means that you can always open and sell The Market closes on Friday after the U.S
a position. stock session at 21:00GMT and re-opens
on Sunday at 22:00GMT.
2 Complete control - Stock sessions It is important to note that even though
are only normally open for about 7 hours the market closes you still have the option
a day. Just imagine if the CEO of stock to hold the position open.

Basics of Forex 5
Benefits

3 Long and Short Positions - Why only profit from something going up?
Forex traders can profit from the market, irrespective of the trends direction.
For example; by taking a glance at the following chart you can see that the EUR/USD
currency pair begins by increasing, but slowly forms a down trend shortly thereafter.

Basically what it means is that at first the Euro is evaluating against the Dollar, but
thereafter the Dollar gains back its strength as the price decreases.

Advantages over Stocks

What this means is that when the pair is Leveraged Market- In order to purchase a
going up you can profit from the Euro’s stock that costs $25, a trader will normally
strength by buying the pair Long. When require a sum of $25, unless his broker is
the pair is going down you can profit willing to give a small leverage.
from the Dollar’s strength by selling the
pair Short.

Basics of Forex 6
Benefits

To purchase 10 shares at a price of $25 4 Commission Free- Unlike stocks

per share requires $250. whereas brokers charge their traders a flat
fee for opening a position, Forex brokers
Thanks to leverage, Forex traders can only charge the spread (the difference
purchase various currencies with a much between the bid and ask price)
lower investment. On the eToro Platform
you can customize your leverage from 5 Thousands of stocks vs. 6 major
5:1 and up to 500:1, allowing you to currency pairs- Often new stock traders
trade larger positions than the amount lose their confidence due to the vast
in your balance. This allows a trader to amount tradable assets.
determine his/her own leverage. If you What to buy? When to buy it? Which
are more of a risk taker, then you can sector to choose from?
increase you leverage level. If you are Even though the Forex market has dozens
more of a conservative person, you can of pairs to choose from, most of the daily
set your risk level (leverage) to a much volume is circulated around 6 major
lower level currencies. These 6 currencies provide the
bulk of the Forex trading transactions.
Please note that leverage will
be explained in more depth
later on in this tutorial

Major Currencies Currency Code Symbol

United States Dollar USD $

Euro-zone Euro EUR €

Japanese Yen JPY ¥

British Pound Sterling GBP £

Swiss franc CHF -

Australian Dollar AUD $

6 No manipulation- Due to the vast amount of traders that take part in the Forex
market from across the globe, it is virtually impossible for one person or investment
firm to influence the price movement.

Basics of Forex 7
 Forex Terminology

Similar to every new field one must learn

the field’s basic terminology or in other “Can you please change me
words the market lingo. over these Euro’s to Dollars”.
In this section we are going to explain
the common terms used by Forex traders
so that in the following lessons, you will
understand the concepts when explained
along with charts.
In the Forex market, a currency is always
traded in a pair.
Remember that if someone living in
Europe wants to buy Dollars, he or she
has to sell (convert) his/her Euro’s to
receive the same equivalence in Dollars.
Normally that same person will go to an
exchange and say:

When requesting to change Euros, the

dealer at the exchange immediately
does a transaction that involves two
currencies; the EURO and the Dollar, or
in other words the EUR/USD pair.
He/she buys Euros with your Dollars, at
the current market rate.
According to the previous example we
saw that in order to take part in the Forex
market two different currencies are
required. These two currencies together
are known as a pair.
For example the USD/JPY pair (U.S Dollar
against the Japanese Yen).

Basics of Forex 8
Forex Terminology

Symbols - as Forex is traded all across the globe, an international dialect must be used
among the participants to help them understand and communicate with each other.

To recognize the different pairs each currency is abbreviated by a minimum of 3 letters,

and is classed as a symbol. For example;

Great British Pound- GBP

New-Zealand Dollar- NZD

Bid: a price at which a broker/dealer is willing to buy.

Ask: a price at which a broker/dealer is willing to sell.

If you recall in the Forex benefits section we mentioned the word ‘spread’.
Basically Forex brokers like eToro don’t charge commission, either they charge a
spread.

The spread is the difference between the BID and the ASK price.

Basics of Forex 9
Forex Terminology

Pip or Points: Price Increase Point (PIP) is For example if the rate of the EUR/USD is
the term used in the currency market to now trading at 1.3332 and then it increases
represent the smallest incremental move to 1.3333, it means that the EUR/USD has
an exchange rate can make. increased by 1 PIP.

Leverage (or in other words your risk For example, if you have $300 and want
level): The amount of “credit” you can get to take advantage of a 50 pip move then
from your investment, i.e. 100:1 leverage your profit will be as follows;
is a 1% margin requirement. EUR/USD rate = 1.3332
According to the EUR/USD rate above,
Traders in the Forex market normally take your $300 are worth $300/1.3332= €225
advantage of the day to day movement If the price of the EUR/USD now jumps up
using leverage. by 50 pips to 1.3382 then your Euros will
be now worth in Dollars the following:
225*1.3382=$301.10
You made a $1.01 profit. Not really worth
all the hassle is it?

To make the Forex market more attractive For example; $300 x (200 leverage)
brokers allow you to use leverage, = $60,000 of buying power,
meaning that they allow you to trade on This means that your trading capital is
their money. now $60,000 and not $300.
Instead of trading on just $300 you can
now trade on a leveraged account.

Now let’s see now how much can profit from that same 50 pip move:

Step 1 $60,000/1.3332= €45004.5

Step 2 €45,004.5*1.3372= $60,225

Your Profit: $60,225-$60,000= $225

Your small $1 profit has now turned into a $225 profit
Important note: All
! brokers have special
protection orders that

! ! ! ! ! !!!!! ! prevent you from losing

ever a g e more than your initial

t i s l investment.
T ha

Basics of Forex 10
Forex Terminology

Positions

Long Position: Is a position where profits are made from an increase in the price. For
example, if you buy the Euro and Sell the Dollar.

Short Position: Is a Position where profits are made from a decrease in price. For example,
profiting from the declining Euro and the rising Dollar.

Lot: Is the standard size of a transaction; one standard lot is equal to 100,000 units of
the base currency or 10,000 units if it is in a mini account.

Daily High: The highest price the currency pair traded that particular day. This is also
known as an intraday high.

Daily Low: The lowest price the currency pair traded that particular day. This is also
known as an intraday low.

Tick: The minimum change of a price.

Volatility: Refers to the tendency of prices/variables to fluctuate over time. It is most

commonly measured using the coefficient of variation (the standard deviation divided
by the mean). The higher the volatility, the higher the risk involved.

Basics of Forex 11
 Market Hours

Even though we mentioned before that the market is open 24/5, new traders tend to
think that they can trade whenever they choose. Even though that is true, it is best to
open and close trades when volume is high. By taking a look at the diagram below you
can see when the Forex market is most active, therefore, having the largest outcome of
trades and presenting the most movement.

City Market Hours

Tokyo 7:00 pm to 4:00 am EST

New York 8:00 am to 5:00 pm EST

London 3:00 am to 12:00 noon EST

Sydney 5:00 pm to 2:00 am EST

Conclusion
In this lesson we covered the basics of the Forex Market, the terminology and the major
participants. In our next Lesson “A quick guide to eToro’s revolutionized trading platform”
we will cover our unique eToro trading platform. Before opening positions it is important
to understand thoroughly all the features we provide and the different market orders.

Should you have any questions regarding this lesson, feel free to contact your personal
account manager.

Congratulations!
You have now finished
the first lesson.

Basics of Forex 12