Open Eye Forex, a division of Open

eye consultants, a company

started by Tumelo Mngomezulu
late 2015 and finally got
registered in July 2017. Open Eye
Forex aims to educate any
ordinary person and teach them
how to be consistently profitable
in trading the foreign exchange
markets.
Before we dive in, I would like to thank the Open
Eye Forex team for their assistance and
contribution towards the company and the input
on this book to be completed. A special thanks to
Bonga Madlala, Kido Msiza, Nqobile Tembane,
Nompumelelo Shezi, my parents and a big thanks
to those that have been a part of Open Eye Forex
thus far.
I started out forex trading back in 2013 before there was
this huge hype around it. At the time I was a sound
engineering student (I still love it though). My journey
started one day when I was browsing the internet on
how to make money online, I came across forex.

I was so in love with trading that I would even skip out on

lectures just to trade. The only training I had was from a
fundamental trader and I knew nothing. I actually blew
R50 000 the first time I had attempted forex trading. I
didn’t give up there. I kept trading, I would save up and
blow accounts, I would trade demo when I didn’t have a
live account. I kept learning and researching, coming
across different types of trading styles and finally I got it
right.

Before we go any further, I need to tell you something

important, the biggest key to successful trading is
understanding that trading is: 60% Psychology, 30%
Money Management and 10% Strategy.
Forex trading is a serious deal, with high risks
and high rewards. The trick is finding what
suits you best. No two successful traders are
alike, but there are similarities with their
approach and behavior towards the market.
To be a successful trader you need to have
those qualities. As you go through this
course you will learn how to go from knowing
nothing to knowing how to turn yourself into
a consistently profitable trader.

One should understand that profitable trading

is like running a business. You need
discipline, patience and dedication. As you
trade you will find there are two emotions
that will hit you are fear and greed.
Those two emotions are the down fall of
many traders. Find a balance and you will
find yourself having a steady increase on
your returns on
investment.

This entire course has been built around the

tools I used to become consistently
profitable trader.

Enjoy!!!
This is the most important section of trading and we
have provided you with many resources and books
(On the memory stick) to help you get your head
around the concept.

Many people make hype around strategies but that

should be the least of your worries. Studies show
(and from personal experience as a trader and a
mentor) that the strategy is never to blame for the
downfall of traders. It is their attitudes and beliefs
towards trading and the market that leads to their
down fall. Another downfall is their management of
their investment.

Because there is this millionaire #LifeOfATrader idea to

trading, many newbies often fall into the trap of
risking too much (over-leveraging) on a single trade,
especially if they have had a series of winning trades.
Winning trades are great but become a problem once
one get too confident xstarts risking too much.

You must understand that nothing is guaranteed in

forex trading or any trading to be exact. Thus we
must always be prepared to account for the losses
we WILL get when trading. Losses in the markets are
unavoidable because trading is all based on
probabilities.
In the memory stick there are two books that are important
to read and UNDERSTAND before committing real money
into trading. These books are “Trading in the zone” by
Mark Douglas and “The NEW Market Wizards” by Jack D

Trading is a marathon not a sprint! It is all about long term

thinking, not 1 week, not 1 month but years. Although
you can make high percentage returns from trading you
should also understand that that is an unsustainable
way from trading. So if you think you’re going to quit
your job in the next 3 months, think again!!! It is
possible to make 500% growth in a week but it is highly
unlikely and not the way to go about it. Even a 10%
growth in a month is good, and most professional
traders probably will not make 100% growth in a month.
If you ran a large hedge fund, making 100% in a year
would actually make your firms one of the best.

To become a successful trader you need to build a traders

mindset, have a long term outlook on this and making
money should not be your number 1 priority. Yes,
making money should not be your first priority. Your
first job is to protect your equity (investment). Your next
job should be following your trading plan with
discipline. Money is the byproduct of all these tiny
concepts discussed here.

So if you’re planning on becoming a millionaire by the end

of 12 months, you are setting up for disaster.

There’s a mouthful to say about psychology and trader

mindset and that’s why you need to read those books.
I highly recommend that you trade a demo account
until you can answer yes to the following
questions.

• Have I grown my demo account equity smoothly

over the past 3 months? Using the correct risk,
not by just one big risky trade that made you lots
of money
• Do I have a trading plan?
• Do I follow the trading plan with discipline?
• How will I handle a series of draw downs?
• Will I be trading money I can afford to lose?
• Will I be trading money that I will be able to leave for
an extended period of time? i.e. can I go 6 months
without having to interfere with my account.

I understand that you’re probably into trading for

money but you must understand that it is a steady
process and that thinking you will put in money
today to pay rent for next month is unrealistic (for a
newbie).

Although it takes time, it will get to a point where you

can start living from trading. Patience Is Key!
Have you ever looked at the news and saw how
much 1 American Dollar would cost you in
Rands? Or travelled to an international country
and had to exchange your rands for their
currency? Well that is forex, also known as
foreign exchange and that simply means
changing one currency into the value of
another. Take for instance you’re a South
African travelling to England, you will need to
have pounds to purchase stuff there, so you
will go to any forex bank and sell you South
African Rands (ZAR) in exchange for Great
British Pounds (GBP) and thus you have
participate in the forex market.
The foreign exchange market also know as
forex (fx) and is the world’s largest market
which has a massive volume of US$5 trillion a
day, that far surpasses the New York Stock
Exchange which follows at $170 billion. A big
difference.

Unlike other stock exchanges such as the New

York Stock Exchange (NYSE) or the
Johannesburg Stock Exchange (JSE) the forex
market is not centralised and is in operation
24 hours a day and 5 days a week. (Technically
7 days but retail traders [being us] only get
access to it during week days)
You may have noticed that the price does not stay the
same through out the weeks, days or even hours,
either having dropped or risen and that’s where you
can make (or lose [we do not rule out the possibility
of a loss]) money trading forex. Thus forex trading
is the process in which we buy or sell a currency. But
here’s the catch, you’re not buying or selling the
physical currency, you’re buying and selling the value
of the currency.
One important thing to understand about the
forex market, you don’t need to own a currency in
order to sell it. (As we continue you will see why)
This is a list of the 8 most popular currencies that we
will generally trade. Yes there are tons more
available including the South African Rand also
known as ZAR but here is where most traders focus
USD-United States Dollar
EUR-European Euro
GBP-Great British Pound
JPY- Japanese Yen
CHF- Swizz Franc
CAD- Canadien Dollar
AUD- Australian Dollar
NZD- New Zealand Dollar

You can see the dollar name is very popular

amongst currencies so it is very important to be
specific when talking about a certain dollar

In the list above you can see that the currency

symbols come in three letters and generally the
first two letters are for the country’s identification
and the last one is referring to the currency being
used
Now that you understand what forex means and you
know what currencies we generally like to look at,
you must know that our trading is done around what
we refer to as currency pairs. So we don’t just buy
the united states dollar alone or sell the great british
pound alone. We put them in pairs so that we can
buy or sell relative to another currency, i.e. we will
have USD/ZAR as a pair, so we pair up the United
States dollar with the South African Rand. So once
we trade, we trade either the strengthening of the
dollar against the rand or the strengthening of the
rand against the dollar.

The pairs stay as they are and USD/ZAR will remain

USD/ZAR until the end of time(Well at least that’s
what we all expect). The currency on the left (in this
case USD) is known as the base currency and the one
on the right (in this case ZAR) is known as the quote
currency, this will be important for understanding
how to read a forex quote.
Now that we understand that we use currency pairs
to trade in forex we must understand that when
we perform a trade in forex we are
simultaneously buying one currency and selling
another currency.

When performing a buy transaction, the exchange rate

which we see on the screen tells us how much you
have to pay, in units of the quote currency to buy a
single unit of the base currency
e.g. you buying USD/ZAR (base/quote) and you see
the price written 13.75243, this simply means that
you have to pay R13.75243 to acquire US$1

When performing a sell transaction, the exchange rate

which we see on the screen tells us how much of the
quote currency you will get for selling the base
currency e.g. you selling USD/ZAR (base/quote) and
you see price written 13.75243, this simply means
that you will receive R13.75243 for selling US$1

Now that we see how we are quoted in forex we can

then see how the buying and selling comes into
place. We use the base currency as the basis for the
buy or sell. Hence we will buy USD/ZAR (which
means we are buying the USD and selling the ZAR)
or we will sell USD/ZAR (which means we are selling
the USD and buying the ZAR). In actuality we are
constantly buying one’s
currency’s value over another currency, but
because we place them in pairs we will buy
USD/ZAR or sell USD/ZAR, keeping in mind that
the base currency is the basis for the trade.
Every forex is quoted with two prices, this being the
bid price and the ask price. The ask price is always
higher than the bid price (please note that when I say
always, that anything is possible and in theory this
shouldn’t happen, in my years of trading I haven’t
seen it happen but I have read an article in which it
did).
The bid price is the price at which your broker will buy
the base currency in exchange for the quote
currency, so this means that this is the price that you
will get offered to sell at.
The ask price is the price at which your broker will sell
the base currency in exchange for the quote
currency, so this means that this is the price that you
will get offered to buy at.
Now the difference between the bid and the ask price
is what we call spread (spread will then make every
trade you open begin in a negative, this is where
brokers make money, apart from commission
depending on your broker which we will later
discuss)
Back to the bid and the ask price. Looking back at our
quote example of USD/ZAR typically the bid price is
the price you will see at default (At open eye forex
we will show you how to switch on your ask price so
you can see what is really going on). e.g. On
USD/ZAR the bid can be at 13.75243 whilst the ask
price can be at 13.75263 giving us a spread of
0.00020
So now if we buy USD/ZAR we will buy at
13.75263 and if we sell USD/ZAR we sell at
13.75243.By now I am sure you see that the
broker is not in your favour and neither is the
market, but we still at lesson one, don’t run away
just yet, more will be revealed as we get into the
advanced part of the course, you all get to see and
understand why things are done in such a manner.
So now we’re getting closer to understanding the
money process in forex, don’t rush, we’re getting
there! Please make sure you fully understand this
section (and the next) before trying to open a live
account. This section (and the next) will help you
understand how money is made in forex trading,
it’s the whole math behind the profits made.

Pips explained:

We use pips to measure the change in value of a

currency pair. Now in the pervious example youmay
have noticed that we had five (5) digits after the
decimal place. When working with pips we use four
(4) digits after the decimal place. Eg 13.7526 to
13.7529 would then be a THREE pip move (notice
now we have only 4 digits after the decimal place).
The exception being the JPY pairs (Japanese Yen)
they have, three (3) digits after thedecimal place
and just two (2) when it comes to counting pips,
typically a USD/JPY quote will be
115.275 but in pips 115.27.
 Points explained:
Well, it’s straight forward now that you
understand pips. Points are when the quote has 5
digits after the decimal place. e.g. USD/ZAR
13.75264 to 13.75266 is a two (2) point move.
 This is important to understand when it comes to
pips and points. When measuring market
movement we measure in pips, but when we get
paid on MetaTrader we use points to calculate
how much we will make, meaning we get paid by
the point. This next section will bring more clarity
on that.
Lot size and volume mean one and the same thing.
This is figure you choose before you open a trade,
this figure (amount) will determine how much money
you will make (or lose) relative to the amount of pips
you acquire during your trade.
People will often ask “what is a pip worth?” and this
answers it all. A pip’s worth (technically a point,
since we get paid in points on the trading platform)
is how much you set your lot size to be. The
smallest lot size you may use is 0.01 and the largest
is technically infinite but most brokers will limit you
to 100.00. Another popular lot size is
1.00 which is commonly referred to as a standard
lot and boy oh boy, once you’re trading a standard
lot, you’re making a significant amount of money in
the market.

This now gets you closer to the calculation of you

profit. Lets break it down to a money perspective so
you can understand, a lot size of 0.01 basically
means for every point that the market moves, that
becomes either 1cent added or subtracted on your
trade depending on the type of order you put in
(buy/sell) as compared to the current direction of
the market, therefore a 1.00 lot will mean that
$1 is added or subtracted to your trade.
Now that we have an understanding of pips and
lots we may now proceed to the understanding of
how is our profit calculated. This is the formula
we use: Profit = lot size x pips (technically
points[remember we get paid by the point])

So lets say we took a buy trade that acquired 50

pips (meaning 500 points) at a lot size of 1.00the
calculation becomes:
Profit = lot size x points
Profit = 1.00 x 500
Profit = $500

Lets assume we took the same trade at a lot size

of 0.10the calculation becomes :
Profit = lot size x points
Profit = 0.10 x 500
Profit = $50

You don’t have to stress yourself on always

calculating this because your trading platform
does all of this for you, but like we were taught in
school, you can’t just punch in figures into a
calculator without understanding how the
calculator thinks.
This is one of the most important sections of this
lesson, reason being if you don’t understand the
concepts here, you can find yourself funding your
account numerous times or quitting all together.

Leverage: Is the bonus you receive from the broker

to become able to trade large amounts with
having a small amount of money in your account.
When the leverage is 100:1, it means you can
trade 100 times more than the money you have
in your account.

Margin: Is the money that will be placed and

engaged in the positions that you take. For
example, to buy $1000 with the leverage of
100:1, $10 from your account will be engaged in
the position ($1000 / 100 = $10). You cannot use
this $10 to take any other positions, as long as
the position is still open. If you close the position,
the $10 margin will be released.
Balance: Is the total amount of the money you have
in your account before taking any position. When
you have an open position and its profit/loss
goes up and down as the market moves, your
account balance is still the same as it was before
taking the position. If you close the position, the
profit/loss of the position will be
added/subtracted to your account balance and
the new account balance will be displayed.

Equity: Equity is your account balance plus the

floating profit/loss of your open positions. For
example, when you have an open position which
is $500 in profit while your account balance is
$5000, then your account equity is $5,500. If you
close this position, the $500 profit will be added
to your account balance and so your account
balance will become $5,500. If it was a losing
position with -$500 loss, then while it was
opened, your account equity would be $4,500 and
if you close it, $500 will be deducted from your
account balance and so your account balance will
be $4,500. When you have no open positions,
your account equity will be the same as your
account balance.
Free Margin: Free margin is the money that is not
engaged in any trade and you can use it to take
more positions. You remember what the margin
was, right? Free margin is the difference of the
equity and margin. At the above example, your
position margin is $10. Lets say the equity is
$1000. Therefore, your free margin will be $990
($1000 – $10). If your open positions make
money, the more they go into profit, the greater
equity you will have and so you will also gain
more free margin.
Margin Level: Margin level is the ratio (%) of equity
to margin. For example, when the equity is $1000
and the margin is also $1000, margin level will be
$1000 / $1000 = 1 or in fact 100%. If the equity
was $2000, then the margin level would be 200%.
Market Order : This is when you open a trade at the
exact price you see on your terminal, remember
that a buy is opened at the ask price and a sell is
open at the bid price.-This is the type of order we
will always use at Open Eye Forex

Stop loss order :This is more of a function than an

order, although your broker will recognise it as an
order. The stop loss order is like it’s name. It’s a
function that prevents you from losing more
money in the market in case the market doesn’t
go in the direction you had hoped it to go. It is a
level in which you say which you say I am only
prepared to lose “x” amount of money and not a
cent more, if markets go to that level the trade
will automatically close itself, preventing you from
losing more

Take Profit order : This is the opposite of a stop

loss order, this order (function) will automatically
close your trade for you once your trade has
reached your desired profits.
Long- means to Buy

Short- means to sell

Bull/bullish- means that the

price is going up

Bear/bearish- means that the

price is going down
Technical analysis : This is the type of analysis we
prefer to trade at Open Eye Forex. This is a study of
a chart and price. There are various ways in which
people perform technical analysis, like
using patterns, trends, price action, indicators and
many more. We collect historical data to try reach a
conclusion for the future. Looking at places where
the market had supply and demand (also known as
support and resistance) and various other technical
aspects. This in the opinion of Open Eye Forex is
the best sort of analysis, as the chart is a visual
representation of buyers and sellers in the market,
therefore we see what all the major market players
are doing and we simply follow what they are
doing, rather than what they are saying.

Fundamental analysis : This type of analysis is

performed by looking at economic news, economic
data, geopolitical events and things in that line of
financial information. If news is good we buy the
currency and if it’s bad we sell it. Now in theory it
sounds all good and well, but the biggest issue with
it is that sometimes the movement is seen later or
they will push markets elsewhere before in the
fundamental direction.
We will discuss the flaws once we get intothe
advanced concepts.
 Line chart : A line chart draws a line from one
closing price to the next closing price, relative to
the timeframe (later discussed in this lesson)
When you view a line chart you can see the
currency pair direction. This line chart is useful
when looking at them on a larger timeframe.
 Bar chart : A bar chart has tons information and
you can interpret a lot of information on that
chart. It give you information as to where price
opened and where price closed and it tells us the
high and low of that particular timeframe (later
discussed in this lesson).
 Candlestick chart : The candlestick chart is very
similar to the bar chart but it has a better look to
it. It still shows us the same information such as
the open and close price and the high and low of
the candlestick. This is a personal favourite of
Open Eye Forex (Okay it used to be, but later on
in the course you will see our alternative and why
we prefer those, but we will still go over it). Why
the candlestick? Well like said before, it looks
better, very easy to read at just a glance.
There are many sort of reversal
candlesticks and we advise that
you check them out on the
internet. Although there are
many, at Open Eye Forex we
prefer to use the concept of one
candlestick reversals.
We use “Engulfings”. There are
bullish engulfings and bearish
engulfings
There are various time frames we use in trading,
ranging from a 1 minute time frame to a 1 month
time frame. What a timeframe means, is that for
every candlestick you see in that chart represents
the duration of the time frame you are on. e.g.
You are on a 15 min chart, that means every
candlestick you see there represents 15 minutes.
Same goes for every single time frame availableto
you.

Another thing to note, is that when you open a trade,

you don’t open it specifically to one time frame, it
is open across all time frame. A time frame is
another medium of analysis. It is usually tied to the
duration of the trade you are taking.

Trading time frames available to use through the MT4

trading platform are the following: 1Min 5Min 15Min
30Min 1Hr 4Hr 1Day 1 Week 1 Month.
 Chart patterns
Trend lines
Trend lines are probably the most common form of technical
analysis in forex trading. They are probably one of the most
underutilized ones as well.

If drawn correctly, they can be as accurate as any other method.

Unfortunately, most forex traders don’t draw them correctly or
try to make the line fit the market instead of the other way
around.

in their most basic form, an uptrend line is drawn along the

bottom of easily identifiable support areas (valleys). In a
downtrend, the trend line is drawn along the top of easily
identifiable resistance areas (peaks).
Types of Trends

There are three types of trends:

1. Uptrend (higher lows)

2. Downtrend (lower highs)

3. Sideways trends(ranging)

Trend Line Rules

• It takes atleast two highs or two lows to draw a valid trend
line but it takes three to confirm a trend line

• The steeper the trend line you draw, the less reliable it is
going to be and the more likely it will break.

• And most importantly, DO NOT EVER draw trend lines by

forcing them to fit the market. If they do not fit right, then
that trend line isn’t a valid one!
 Channels

If we take this trend line theory one step further and draw a parallel
line at the same angle of the uptrend or downtrend, we will have
created a channel.

Channels are just another tool in technical analysis which can be

used to determine good places to buy or sell. Both the tops and
bottoms of channels represent potential areas of support or
resistance
When prices hit the bottom trend line, this may be used as a buying area. When
prices hit the upper trend line, this may be used as a selling area.

Types of channels

There are three types of channels:

1. Ascending channel (higher highs and higher lows)

2. Descending channel (lower highs and lower lows)

3. Horizontal channel (ranging)

Channel Rules:

 Generally, the bottom of channel is considered a buy zone while the top of
channel is considered a sell zone.

 Like in drawing trend lines, DO NOT EVER force the price to the channels that
you draw! A channel boundary that is sloping at one angle while the
corresponding channel boundary is sloping at another is not correct and could
lead to bad trades.
Ascending Triangle Descending Triangle
A Bearish chart pattern used A bullish chart pattern used in
in technical Analysis that is technical analysis that is created
easily recognizable by the by drawing one trend line that
distinct shape created by connects a series of lower highs
two trend lines. In an and a second trend line that has
ascending triangle one trend historically proven to be a strong
line is drawn horizontally at a level of support. Once the
level that has historically pattern has been formed and
prevented the price from spotted. Traders using Technical
reaching higher highs, while analysis will enter long once
the second trend line price has touched the support
connects a series of higher level and wait for the breakout
lows. Once the pattern has to the upside. As the image
formed and spotted. Traders below suggests, price will rise an
using technical analysis will estimate the range of the
enter short once price has Descending triangle.
touched the resistance level
and wait for the breakout to
the downside. As the image
below suggests, price will
drop an estimate the range
of the ascending triangle
Symmetrical Triangle Bearish Pennant
A chart pattern which is used in A bearish pennant is formed during a steep,
technical analysis that is easily almost vertical, downtrend, it is similar to a
recognized by its shape created by two symmetrical triangle with the difference being, it is
converging trend lines. The pattern is formed after a steep drop in price, and thereafter
recognized by drawing two trend lines price will consolidate briefly and thereafter
which connect a sequence of lower continue its downward movement. As the image
highs and higher lows. This chart below suggest price will drop an estimate range
pattern is generally regarded as a from the most recent high it came from.
period of consolidation before price
breaks out beyond one of the
identified trend lines. A breakout
below the lower trend line indicates a
signal to the trader that price will
move lower, while a breakout above
the upper trend line indicates a signal
to the trader that price will move
lower.
Bullish Pennant Rising Wedge
Bullish Pennant, just as the name suggests, A rising wedge is formed when price makes
signals price will resume its upward movement higher highs and higher lows in-between upward
after the brief period consolidation. A bullish sloping support and resistance trend lines. In the
pennant will occur after price made sharp, almost image below notice how the support trend line is
vertical movement upward. As the image below steeper than that of the resistance. This indicates
suggests price will rise an estimated range from higher lows are being formed quicker than higher
the previous low it came from. highs which forms a wedge – like formation. As the
image below suggests price will breakout to an
estimate range between the first high and first low
from which the wedge started its formation.
Falling Wedge Bearish Rectangle
A rising wedge is formed when price
makes lower highs and lower lows in- A bearish rectangle is a chart pattern
between downward sloping support formed during a downtrend once price
and resistance trend lines. In the consolidates between parallel support and
image below notice how the resistance levels. A rectangle indicates a period of
resistance trend line is steeper than indecision between the bulls and the bears, as they
the support trend line. This indicates take turns taking over. Price will test the support
lower highs are being formed quicker and resistance levels several times before
than the lower lows, which forms this eventually breaking out to the downside.
wedge like formation. As the image
below suggests price rise an estimated
distance equal from the first high and
low of the falling wedge formation.
Bullish Rectangle
A bullish rectangle is a chart pattern formed during an uptrend once
price consolidates between parallel support and resistance levels. A
rectangle indicates a period of indecision between the bulls and the
bears, as they take turns taking over. Price will test the support and
resistance levels several times before eventually breaking out to the
upside.
We are technical analysts, but we like to use
indicators for proper timed and confirmed
entries. That still makes us technical traders
though. We trade based off of structure that
was taught before , like support and
resistance just with indicators. Naked chart
trading is still good and well but we want
confirmed moves, that’s why we use the
indicators below

Disclaimer: it’s really not that serious, but I

feel one should put it out there. These are
technical indicators, in no way are they
saying that the trade is going that way, they
are simply mathematically calculated
functions that will try give us a direction of
the market. Now here’s why I say disclaimer,
nobody and no indicator can tell you exactly
where the market is going. We may build up
certain averages (which is the purpose of the
indicators) to conclude where the market
MIGHT go but at the end of the day, the
markets decide, although generally with the
right use of the tools, you can win a majority
of you trades.
 Relative Strength Index
 Heiken Ashi candlesticks

 Ichimoku Kinko Hyo

The relative strength index (RSI) is a very simple
tool, it is found in the oscillator indicator section
in the MetaTrader 4 platform and serves a very
basic but useful function.

Classified as a momentum oscillator, the RSI

measures the speed and magnitude of directional
price movement.

What does that mean? It tells us whether the market

is over bought or over sold. It is scaled from 0-
100 but if a market goes below 30, the market is
identifiable as over sold and if a market goes
above 70 it can be identified as over bought.

Although many people like to trade a bullish or

bearish divergence of the indicator, generally at
Open Eye Forex we will like to know if a currency
pair is over bought or over sold, before
divergence. From there, after finding out the
status of the pair, we will look for reversal
patterns or other indicator entry, in line with what
the RSI says.
We don’t always use the RSI but when we do, we make
it a 21-period RSI, the default is a 14 period but 21
is suitable for a more steady stretched out period,
like finding the overbought or oversold point in a
week.

The idea there after is to use our next two indicators

to see if/when we should enter the trade, e.g. If
GBPUSD is over bought we would expect it to start
selling, so we will wait for the a reversal pattern,
Ichimoku and heiken ashi to show a sell signal
Remember in the Japanese candlestick section of
the course we highlighted that we use new
candlesticks? Well those are the Heiken Ashi
candlesticks. We prefer these because they take
the average movement of the candles and smooth
out the market movement. Whilst Japanese
candlesticks will show bull and bear candles in a
bull market (buy market) Heiken Ashi candlesticks
will show you smoothed out candlesticks,
meaning they will remain the same colour
throughout that trend, not showing multiple
colours during that trend.

Bullish Heiken Ashi’s are white whilst bearish are

red.
 Here’s the example below of Japanese
candlesticks vs Heiken Ashi candlesticks
We use the Heiken Ashi candlesticks when
executing trades as they show us the price action
trend a little bit easier than Japanese candlesticks

The most powerful Heiken Ashi sticks have flat

bottoms during a bull trend and flat tops during a
bear trend like the example below:

This helps us by showing us that price didn’t go

beyond the average, although candles will stay the
same colour it’s better when they have flat tops or
flat bottoms
If ever theres a powerful indicator, it is this one.
This is our trend indicator. It is like 5 indicators in
one, although we only use four of the elements at
Open Eye Forex. It is made up of the following
components:
1. Tenken Sen (This one is useful but at Open Eye Forex we don’t use it)
2. Kijun Sen
3. Chikou Span
4. Senkou Span A
5. Senkou Span B
The Kijun Sen, this is a very powerful function of
the ichimoku, this is the first indicator that tells
us that there is a trend change. At Open Eye Forex
we indicate it using a blue line (which is normally
the colour). What the Kijun Sen does, it take the
average of the highs and lows for the past 26
candles and indicates itself with that. It stays in
line with the current candlestick and it may be
used for a shorter term trading if traded alone.

The rule with the Kijun Sen is that we place buy

orders when we’re above the Kijun Sen and we
place sell orders when we’re below the Kijun Sen.
At first when one looks at the Chikou Span, they
will ask themselves why would you wanna use an
indicator that stays behind the chart by 26
candles? How would that be useful in trading to
be lagging? Well that’s a very unique feature.
What the Chikou Span works with are closing
prices. Therefore immediately looking at it we can
learn a lot about the current market. If the Chikou
Span is above the chart, we can see that we are
trading higher than we were 26 periods ago, thus
we can immediately see that we’re on a buy trend
and if it is below the chart we can see that it is a
sell trend, as we would be trading lower than we
were 26 periods ago.

Generally people will want the Chikou Span to be

above the chart or below the chart in order to
make a trading decision at Open Eye Forex we like
for it to be above the Kijun Sen or below the Kijun
Sen in order to reach a conclusion as to where
market trend is looking.
The reason the Senkou Span A and Senkou Span B
are mentioned together is because these two
combined together give us the most noticeable
part of the Ichimoku indicator, they make up the
Kumo, in English, they make up the cloud. This is
the most powerful function of them all and
although there is a strategy used at Open Eye
Forex that just uses the Kijun Sen, the Kumo gives
us a strong foundation of many of our trades.

Apart from its huge cloud covering, which is hard

not to notice, one special thing about the Kumo is
that it shifted 26 periods ahead of us, that means
the Kumo stays 26 candles ahead of us. This is a
wonderful function because then we can make
trading decisions based off what the future kumo
tells us.

One can set any colours they want to set for the
bull Kumo and bear Kumo but using the Open Eye
Forex template, Pink will show a bull trend and
Yellow will show a bear trend.
 So now with that in mind you can expect to sell
when you see the future yellow and expect to buy
when the future is pink. But keep in mind the
support and resistance.

 Beware of when exiting of a Kumo at flat bottom

or top. Flat bottoms and tops tend to have a
gravitational pull to them, sometimes we will look
at entering the market on a retracement.

 The rules of engagement for the kumo are simple

and are like the rules for the Kijun Sen. We buy
when the chart is above the kumo and sell below
the kumo.
Tenkan Sen: (Highest high + Lowest low)/2 for the
past 9 periods
Kijun Sen: (Highest high + Lowest low)/2 for the
past 26 periods
Chikou Span: Current closing price, time shifted
backwards by 26 periods
Senkou Span A: (Tenkan Sen + Kijun Sen)/2 time
shifted forwards by 26 periods
Senkou Span B: (Highest high + Lowest Low)/2 for
the past 52 periods shifted forwards by 26
periods.
There is one more indicator which is not
mentioned above here as it is not necessary for
the trading but is very useful and has recently
been introduced in to our trading system. It is a
support and resistance indicator. Remember we
buy at support and sell at resistance.
Unfortunately for how it is set up there is no
example for how it can be traded besides trading
it in a live market, don’t worry though. You’re still
safe with all the other indicators.

You may also add a session indicator if your

trading is session specific.
In this lesson, you will finally understand how to view
the market and take a trade, although nothing else
but practice and dedication will make you a great
trader, these next methodologies will give you a
clear view of the markets. You will now learn the
way we trade at Open Eye Forex. In this section of
the course I have set the strategies in such a way
where there’s less subjectivity, but yes, you’re
going to have times where you’re going to have to
rely on what your eyes tell you and you’ll forget
what rules we use but, at most times we will follow
all the trading rules that will be set out here.

As looked at in the last lesson, you may have noticed

that lots of trading is done at support levels and
resistance levels. The trading done at Open Eye
Forex is simple, look at a higher time frame pattern
or area in the market and come down to a smaller
time frame for execution. Generally we will try stay
in the higher time frame trend and come down on a
smaller one to execute the trade. e.g. we will look
at the 4H and execute on a 30M
There are three sort of
Strategies/Trade Setups we use
at Open Eye Forex:
Reversal Patterns
Asian Averages
Outta Control (Trend Trading)

Very few strategies taught in this

day and age (by any mentor, guru
or coach) are original, yet
everyone has their own
adaptation, the following setup
execution are through the Open
Eye Forex adaptation.
Remember the patterns discussed in
lesson 2?

The reversal patterns that happen over two days

or more are stronger (even a long period like
two weeks apply)

The reversal patterns allow us to enter via the

Kijun-Sen regardless of where we’re positioned
with the Kumo.

These can be executed using normal candlesticks

although we prefer Heiken Ashi’s to match the
trend.

We look at all time frames for a reversal, the

higher the time frame the better.
 Double tops and Double bottom. (M&W
formations)
 Head & Shoulders
 Oh no I am turning

Although you have seen the text book patterns, you

must remember that markets aren’t perfect and
would like to confuse you a bit so these patterns
aren’t as pretty as the drawings.

All examples are on a M30 timeframe

This trading is very much based off of the use of
the whole ichimoku indicator unlike just the
Kijun-Sen only.

We will use two methods of identifying trend

changes, the first being support and resistance
on the 4Hr Chart. The second will be an oversold
or overbought RSI value using a 21-Period RSI.

The Kumo break is the trade confirmation.

These can be executed using normal candlesticks

although we prefer Heiken Ashi’s to match the
trend.
This is where we will use the support and
resistance indicator to help us identify where
to buy and where to sell. Remember we buy
at support and sell at resistance.

We will wait for the indicator to show a

verified support or resistance.

R.O.E we enter the market when we break the

kumo in the perceived direction. (Buy above,
Sell Below)

Rules for Kijun-Sen and Chikou Span should

be met too.

Trade execution on M30 chart.

In this case we will wait for an oversold or
overbought market condition on a 21-Period
RSI

When we get to a scale of 30 or below we get

ready to buy

When we get to a scale of 70 or above we get

ready to sell
Divergence is another strong factor

Wait for all entry rules to be met, like the Kumo,

Kijun-Sen and Chikou Span to align as well as
the Heiken Ashi’s to match the trend
This is a personally developed system and also the
most simple.

The outta control system is a simple system of

trend trading. There are two variations to the
system and are both powerful.

A day trader and a swing trader can benefit from

this system.

The only indicator in use here isthe Heiken Ashi

and this is only for the day trader. Swing traders
can use naked charts for the analysis and Heiken
Ashi candles for the execution.
The medium of analysis here is based off the
previous day’s Daily Heiken Ashi candle. If it is
red we sell in the current day and if it is white we
buy on the current day.

We can use either the 30min heiken ashi chart or

the 1 hour naked chart to execute the trade.

Execution on the 30 min is done when the 30min

heiken ashi closes the same colour as the
previous.

Execution on the 1 hour is done when there is an

engulfing candle in the previous day’s direction.
The medium of analysis here is done by looking at
the previous weekly candle. If they bought last
week we buy in the current week and if they
sold last week we sell in the current week

Just like the day trade we can use either the

heiken ashi candles or naked engulfings both
using the 4 Hour timeframe

Using Heiken Ashi’s we take the trade when the 4

hour heiken ashi closes in the previous week’s
trend

Using naked charts we trade the engulfings in

the previous week trend
Reversal Patters-Medium
probabilities but high pay out

Asian Averages- High

probabilities with the same sort
of pay out

Outta Control- Highest

probabilities with a variation on
the pay out depending on the set
up but generally good, especially
on a swing trade
There are various ways one can
derive as to where they want to
place stop losses. Some people
use market structure, some use
indicators and some use the
average true range (ATR). So
combining the three you can put
really good stops.
Stop loss techniques:
1. Kijun-Sen Stop loss
2. Average True Range
3. Market Structre
Average True Range(ATR):
The average true range doesn’t look at the trend of
price but simply shows us the average volatility
we have seen over the past 14 periods. A day
trader should make their stop loss 30% of the
daily ATR. E.g. if the ATR for GBPUSD was 100
pips then your stop loss would be 30 pips.
For a swing trader their stop loss should be 30%
of the weekly ATR. E.g. if the ATR for GBPUSD was
200 pips then your stop loss would be 60 pips

Market Structure:
Place the stop loss just beyond the previous new
structure high or low in the time frame you used
to execute your trade.
Taking profit is not so difficult once you have
established a stop loss. What ever your stop loss
value is, your minimum reward should be equal to
the risk you have. For example, if your SL is 50
pips then your minimum take profit must be with
50.
For really attainable profits and still getting a better
risk to reward ratio is to simply multiply whatever
value your stop loss is by 2.3. That way it will help
you to ensure consistent profits.
No matter what sort of trade you take, whether a
scalp trade or a position trade, position size
calculation is vital.

The risk rule may vary from mentor to mentor but

we recommend never risking more than 5% of
your account per trade.

Your position sizing should be set in a way that you

may take many losses in a row and still have an
account.

Because people don’t work their risk well, they fall

into the 90/90/90 trap which basically means 90%
of traders lose 90% of their capital within the first
90 days of trading. Thus position sizing is
important when it comes to trading.
-Account balance * risk percentage = risk amount

-Risk amount/ SL point value = lot size

Example:

-$5000 * 3% = $150
-$150/300 = 0.5 lots

Therefore your lot size will be 0.5

Please watch the videos if you are lost on this
section.
An alternative to doing calculations is by having a
set lot size that you use. The general rule would
be every $100 = 0.01 to trade. Meaning if you
had $500 in your account you would use a lot size
of 0.05.

Please always do the necessary conversions if you

are trading a ZAR account.

It is vital to decrease your risk during losing periods,

because when you’re losing your judgment
becomes worse. So if you’re risking 3% per trade,
during losing times reduce that down to 1%. As
you start winning again go back to the normal 3%
Truth be told, risk management is
not difficult, it is merely pre-
calculated numbers before
entering a trade. The two key
tools are stops and position
sizing. In trading we cannot
control our profits but we can
certainly control our losses,
that’s why we use proper risk
management