FOREX TRAINING

Facilitator: Reabetsoe Nkopane (Rea)

Basics
• Forex stands for Foreign Exchange, which is exchanging
one currency for another.

• You sell one currency and buy another currency

simultaneously and once you do so you have essentially
involved yourself in the forex market
Basics
• The market is open 24-hours a day, 5 days a week and
has different sessions depending on what time it is.

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New York

Sydney

Tokyo/Asian
Basics Cont.
• Forex is the largest financial market with a daily turnover
of more than $5 trillion.
Basics Cont.
• Currencies are always quoted in pairs, such as USD/ZAR,
where you exchange USD for ZAR.

e.g.
• USD/ZAR = 13.3971

USD: Base Currency

ZAR: Quote Currency
Terminology
• Base Currency: The base currency is the “basis” for the buy or the
sell.

• Quote Currency: The quote currency is the second currency in any

currency pair

• Long/Bullish: In trader's talk going long/Bullish means BUY

• Short/Bearish: In trader's talk going Short/Bearish means SELL

Terminology Cont.
• Pip: Percentage In point – A pip is the smallest price movement
available in a currency.

The 4th decimal number e.g. USD/ZAR = 13.39710

If USD/ZAR moves from 13.39710 to 13.39720 = 1 pip

Instances where you have USD/JPY = 100.509 use 3rd decimal

number as your pip

• Lot Size: Value used to determine profit or loss.

Micro Lot Size : 0.01 = 10 cent per pip
Mini Lot size : 0.10 = $1 per pip
Standard Lot size : 1.00 = $10 per pip
Types of Orders
• Market Order: A market order is an order to buy or sell at the current
market price.

• BUY: USD/ZAR Current Market price = 13.3971

• Pending Order: Is an order to buy or sell at a price above or below

the current price.

• BUY: USD/ZAR at price = 13.4001

• Take Profit: A level where you decide to exit a trade with profit

• Stop Loss: A level where you decide to exit a trade with a loss
Types of Trading
• Fundamental analysis: Fundamental analysis is a way of
looking at the market through economic, social and
political forces that affect supply and demand.
Types of Trading Cont.
• Technical Analysis: Technical analysis is the study of
price movement. In one word, technical analysis = charts
PRICE ACTION
What is Price Action?
• Price action is a trading technique that allows the trader to
analyse the market and make subjective trading decisions
based on past and present price movements.

• Price action trading uses tools like chart patterns,

candlestick patterns, trendlines, support & resistance and
many more.
PRICE AND CHARTS
Bar Chart
• Shows opening price, while simultaneously showing the
closing price, as well as the highs and lows.
Candlestick Chart
• Also shows opening price, while simultaneously showing
the closing price, as well as the highs and lows.
Line Chart
• A simple chart that draws a line from one closing price to
the next closing price.
CANDLESTICKS
Bullish Candlestick (BUY)
• A Bullish candlestick simply means the price opened
lower and closed up higher after a certain time period.
Bullish Candlestick (BUY)
Bearish Candlestick (SELL)
• A bearish candlestick simply means that the candlestick
opened up at a high price and closed lower after a
certain time period.
Bearish Candlestick (SELL)
SUPPORT &
RESISTANCE
Support & Resistance
• Support: Lowest point the price reaches before reversing.
• Resistance: Highest point the price reaches before
reversing.

e.g.
• Look at support as the floor.
• Look at resistance as the ceiling.
 Support & Resistance
Types of Support and Resistance:

Major Resistance

Minor
Support/Resistance

Major Support
Support & Resistance
• Broken support turns into resistance and broken
resistance turns into support.
Resistance

Support
Support & Resistance
• We call these support and resistance area’s by one
word— zones.

• Important characteristics of zones are as follows:

• Zones are an area, not a price point.
• Zones are spots on the chart where price reverses, repeatedly.
• Zones may be extreme highs or lows on the chart.
• Zones are where naked traders find trading opportunities.
• Support and resistance zones rarely need to be modified.
• Line charts help naked traders find zones.
Support & Resistance
• Zones are an area, not a price point.
Support & Resistance
• Zones are an area, not a price point.
Support & Resistance
• Zones are spots on the chart where price reverses,
repeatedly.
Support & Resistance
• Support and resistance zones rarely need to be modified

December 2016

June 2016
Support & Resistance
• Line charts help naked traders find zones.
Support & Resistance
• How to find zones:
• Start with a higher timeframe chart (Daily).
• Use a line chart to find the zones.
• Plot your zone where prices keeps reversing repeatedly.
• Check if zone was once a support or resistance before.
BUYING & SELLING
PRESSURE
Buying & Selling Pressure
• Understanding buying and selling pressure on
candlesticks.

• Every candlestick that forms tells you a story about the battle
between the Buyers (Bulls) and Sellers (Bears), who dominated the
battle, who is weakening and who finally won.
Buying & Selling Pressure
• The first green candlestick on the left tells you that
sellers(bears) were dominant.

• The second green candlestick tells you the buyers(bulls)

were dominant.
Buying & Selling Pressure
• The first red candlestick on the left tells you that
sellers(bears) were dominant.

• The second red candlestick tells you the buyers(bulls)

were dominant.
Buying & Selling Pressure
• The longer the body of the candlestick the stronger the
buying or the selling pressure.
Buying & Selling Pressure
• So far we have been looking at individual candlesticks,
what if we combine more than one candlestick? What
does that show us?

• A group of candlesticks can show you how strong or weak a bullish

or bearish move is.

• They can also show us if a bullish or bearish move is weakening.

• The word used to describe such a situation is momentum.

Buying & Selling Pressure
• 3 Bearish candlesticks in a downtrend, each with a
decreasing body length.

• This is a signal that the

downtrend is weakening

• Around support level be

on the lookout for a bullish
reversal candlestick.
Buying & Selling Pressure
Buying & Selling Pressure
• 3 Bullish candlesticks in an uptrend, each with a decreasing
body length.

• This is a signal that the

uptrend is weakening

• Around resistance level be

on the lookout for a bearish
reversal candlestick.
Buying & Selling Pressure
TRENDS
Trends
• A Trend is when price is either moving up, down or
sideways.

• So when price is moving up, it’s called an uptrend.

• When price is moving down, it’s called a downtrend.

• When price is moving sideways, it’s called a sideway

trend/Consolidation
Trends
• With an uptrend market, prices will be making increasing
higher highs(HH) and higher lows(HL).
Trends
• With a downtrend market, prices will be making decreasing
lower highs(LH) and lower lows(LL).
Trends
Trends
• With a Sideways/Consolidation market, price moves
between the support and resistance.
Trends
TRENDLINES/CHANNEL
S
Trendslines/Channels
• The path price follows and the area enclosed within it is
called the price channel.
• The fundamental principle of how a channel forms is
based on support and resistance.

There are 3 major types of channels:

• The uptrend channel,
• The downtrend channel
• The sideways/consolidation channel
Trendlines/Channels
• This is what a downtrend channel looks like and how to
trade it:
Trendlines/Channels
• This is what a uptrend channel looks like and how to trade
it:
Trendlines/Channels
• This is what a sideways/consolidation channel looks like
and how to trade it:
CHART PATTERNS
Continuation Chart Patterns
• Symmetrical Triangle
• 3 types of triangles:
Chart Patterns
• A Symmetrical triangle is a continuation pattern.
• In an uptrend, expect a breakout to the upside.
• In a downtrend, expect a breakout to the downside.

Symmetrical Triangle

Uptrend
Ascending Triangle
• An ascending triangle is a bullish continuation pattern.
• So when you see this pattern forming in an uptrend, then expect a
breakout to the upside
Ascending Triangle
Ascending Triangle
However, it can also be a strong reversal signal (bullish) when
you see it form in a downtrend.
Descending Triangle
• A descending triangle is a bearish continuation pattern.
• So when you see this pattern forming in a downtrend, then expect a
breakout to the downside.
Descending Triangle
REVERSAL CHART
PATTERNS
Head & Shoulders
• A head & shoulders is a bearish reversal chart pattern that
forms at the resistance.
Head

Left Shoulder Right Shoulder

Neckline
Inverse Head & Shoulders
• An inverse head & shoulders is a bullish reversal chart
pattern that forms at your support.

Neckline

Left Shoulder
Right Shoulder

Head
Double Bottom
• A double bottom is a bullish reversal chart pattern that
forms around support.

Neckline

Bottom 1 Bottom 2
Double Top
• A double top is a bearish reversal chart pattern that forms
at your resistance.
Top 1 Top 2

Neckline
Triple Bottom
• A triple bottom is also a bullish reversal chart pattern.
Triple Top
• A triple top is also a bearish reversal chart pattern.
CANDLESTICK
PATTERNS
Candlestick Patterns
• 11 important candlestick patterns:

• Doji
• Engulfing
• Harami
• Dark Cloud Cover
• Piercing
• Shooting Star
• Inverted Hammer
• Hammer
• Hanging Man
• Railway track
• Spinning Top

• These candles are great entry signals when they form

around Support or Resistance levels.
Doji
• A doji candlestick occurs when the open and closing price
are equal.

• 4 Types of Doji candlesticks:

a) Bullish or Bearish signal
b) Bearish reversal
c) Bullish reversal
d) Bullish or Bearish depending on
where it forms (Support/Resistance)
Engulfing
• Engulfing happens when the 2nd candle covers the entire
body of the 1st candle.

a) Bullish Engulfing: When formed on a

support level it can signal
potential downtrend ending.

b) Bearish Engulfing: When formed on

a resistance level, it can signal
potential uptrend ending.
Engulfing
Harami
• Harami happens when the 1st candle covers the entire
body of the 2nd candle.

a) Bullish Harami: When formed on a

support level it can signal
potential downtrend ending.

b) Bearish Harami: When formed on a

resistance level, it can signal
potential uptrend ending.
Harami
Dark Cloud Cover
• A Dark Cloud is a bearish reversal candlestick pattern
consisting of 2 candlesticks.

• The 1st candle is bullish showing

strong uptrend momentum

• 2nd candle is bearish and closes

at about midway of the 1st
candle.

• When formed around resistance

it’s a signal to SELL.
Piercing
• A Piercing is a bullish reversal candlestick pattern
consisting of 2 candlesticks.

• The 1st candle is bearish

showing strong downtrend
momentum

• 2nd candle is bullish and closes

up the midway of the 1st
candle.

• When formed around support

it’s a signal to BUY.
Shooting Star
• Shooting star is a single candlestick and is a bearish
reversal when formed around resistance level.
Shooting Star
Inverted Hammer
• An Inverted Hammer is a single candlestick and is a
bullish reversal when formed around support level.
Inverted Hammer
Hammer
• A Hammer is a single candlestick and is a bullish reversal
when formed around support level.
Hammer
Hanging Man
• A Hanging Man is a single candlestick and is a bearish
reversal when formed around resistance level.
Hanging Man
Railway Track
• A Railway Track is a candlestick pattern consisting of 2
parallel candlesticks.

• Bearish Railway Track:

The 1st candlestick
is bullish followed by a
bearish candlestick of the
same length & body.

• When formed around

resistance it’s a signal to SELL.
Railway Track
• A Railway Track is a candlestick pattern consisting of 2
parallel candlesticks.

• Bullish Railway Track: The 1st candlestick

is bearish followed by a
bullish candlestick of the
same length & body.

• When formed around support

it’s a signal to BUY.
Railway Track
Spinning Top
• A Spinning Top is a single candlestick and can be a
continuation or reversal pattern.

• A spinning top has a small body

and long shadows on both
sides that exceed the length
of the body.
Spinning Top
• When formed around a resistance in an uptrend
it’s a signal to SELL.

• When formed around a support in a downtrend it’s a

signal to BUY.
Spinning Top
FUNDAMENTALS
Download these Apps from your App Store:

Fundamentals App: Investing.com

Trading App: Meta Trader 4
PC/Laptop : JP Markets MT4
https://www.jpmarkets.co.za/mt4/
Types of Trading
• Fundamental analysis: Fundamental analysis is a way of
looking at the market through economic, social and
political forces that affect supply and demand.
Fundamentals (USD)
• Fundamentals that affect US Dollar:

• Non-Farm Payroll (NFP) - Number of paid part-time or full time

jobs in the public sector, excluding the farming sector.
• 1st Friday of each month.

• High Employment figure = Positive for USD Buy/Bullish.

• Low Employment Figure = Negative for USD Sell/Bearish.
Fundamentals (USD)
• Fundamentals that affect US Dollar:

• Unemployment Rate –The percentage of the total work force

that is unemployed and actively seeking employment.
• 1st Friday of each month.

• Low Unemployment Figure = Positive for USD Buy/Bullish.

• High Unemployment figure = Negative for USD Sell/Bearish.
Fundamentals (USD)
• Fundamentals that affect US Dollar:

• Interest Rate – When the Federal Open Market Committee

(FOMC) members vote on where to set the rate.
• Every 2 months.

• High Interest Rate = Positive for USD Buy/Bullish.

• Low/Unchanged Interest Rate = Negative for USD Sell/Bearish
(Only trade gold) = BUY/Bullish
Fundamentals (GBP)
• Fundamentals that affect GB Pound:

• Interest Rate – Bank of England (BOE) monetary policy

committee members vote on where to set the rate.
• Every 2 months.

• High Interest Rate = Positive for GBP Buy/Bullish.

• Low/Unchanged Interest Rate = Negative for GBP
Sell/Bearish.
Fundamentals (GBP)
• Fundamentals that affect GB Pound:

• Construction Purchasing Management Index (PMI) –

Measures the activity level of purchasing managers in the
construction industry.
• Every month.

• Positive PMI (Above 50%) = Positive for GBP Buy/Bullish

• Negative PMI (Below 50%) = Negative for GBP Sell/Bearish
Fundamentals (GBP)
• Fundamentals that affect GB Pound:

• Gross Domestic Product (GDP) – Measure the value of all

finished goods and services produced by the economy.
• Every 3 months.

• Positive GDP = Positive for GBP Buy/Bullish.

• Negative GDP = Negative for GBP Sell/Bearish.
Fundamentals (GBP)
• Fundamentals that affect GB Pound:

• Manufacturing Purchasing Manager’s Index (PMI) –

Measures the activity level of purchasing managers in the
manufacturing industry.
• Every 3 months.

• Positive PMI (Above 50%) = Positive for GBP Buy/Bullish.

• Negative PMI (Below 50%) = Negative for GBP Sell/Bearish.
Fundamentals (GBP)
• Fundamentals that affect GB Pound:

• Queens Speech
• Every year in May.

• Positive for GBP Buy/Bullish.

Fundamentals (EUR)
• Fundamentals that affect EUR:

• Interest Rate – European Central Bank (ECB) Announcement.

• Every 2 months.

• High Interest Rate = Positive for EUR Buy/Bullish.

• Low Interest Rate = Negative for EUR Sell/Bearish.
TRADING PLAN
Trading Plan
• Choose currency pairs to trade:
• GBP/JPY EUR/USD
• USD/JPY GBPUSD
• XAU/USD (GOLD)

• When to trade:
• Draw your zones on D1 (Daily)
• When price approaches your zones, look for reversal patterns
(Double Top/Head & Shoulders and vice versa).
• Once you identify the reversal pattern, you then look for reversal
candles on H1 and you enter your trade.
Trading Plan

• Risk Management:
• $150 - $300 use maximum 0.01 x 7 at a time.
• $300 - $700 use maximum 0.02 x 7 at a time.
• $700 - $1000 use maximum 0.03 x 10 at a time.

• When to exit trade:

• At the next zone (Support/Resistance).
• When you are satisfied.
THANKS