Building the Forex Traders

Foundation

Greg Michalowski Email: greg@fxdd.com www.livestream.com/FXDD Twitter: gregmikefx

High Risk Warning: All news, opinions, research, data, or other information contained within this presentation are provided as general market commentary and do not constitute investment advice. FXDD expressly disclaims any liability for any lost principal or profits without limitation which may arise directly or indirectly from the use of or reliance on such information.

ADVISORY WARNING: FXDD provides sources of economic and market information during this broadcast as an educational service to its clients and prospects. The opinions or recommendations expressed during the broadcast are not intended as investment advice and are based on data reasonably believed to be accurate at the time of publication. Clients and prospects are advised to carefully consider the opinions and analysis offered in the context of your individual analysis and decision making. None of the statements of opinions or recommendations are to be considered as constituting a track record. Past performance is no guarantee of futures results and FXDD specifically advises clients and prospects to carefully review all claims and representations made during the broadcast in light of your particular analysis, trading style and objectives. All news, opinions, research, data, or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. FXDD expressly disclaims any liability for any lost principal or profits without limitation which may arise directly or indirectly from the use of or reliance on such information. As with all such advisory services, past results are never a guarantee of future results.

Disclaimer Di

scla

imer

Greg Michalowski • 28 years of market experience • 10 years with Citibank NY/London

as an interest rate derivatives trader

• 5 years with Credit Suisse First Boston as a trader

• Been with FXDD since Day 1 (2001) • Author: “Attacking Currency

Trends” (4.7 stars on Amazon.com) • Regular contributor on FXStreet • Quoted in the WSJ, Bloomberg,

Reuters, etc. • > 14,000 followers on Twitter.

www.twitter.com/gregmikefx

Who am I

EMAIL: greg@fxdd.com Commentary at

www.livestream.com/fxdd

Building the FOUNDATION for Trade Entry

VS.

More Important? REWARD or RISK

“I sold the EURUSD at 1.3525.

I am TARGETING 1.3475”

“I sold the EURUSD at 1.3525.

my STOP is at 1.3550”

Focusing on RISK is more important

“I sold the EURUSD at 1.3525.

I am targeting 1.3575”

“I sold the EURUSD at 1.3525.

my stop is at 1.3550”

Traders who focus on TARGETING

REWARD are saying RISK is potentially

UNLIMITED.

Targeting Reward = Risk Unlimited

UNLIMITED

LIMITED

Traders who focus on DEFINING and

LIMITING RISK are saying REWARDS

are UNLIMITED.

Targeting Risk = Rewards Unlimited

UNLIMITED

UNLIMITED

LIMITED

RISK Focusing on

> REWARD

RISK How is

Defined and Limited?

QUESTION

By trading near key technical levels called

BORDERLINES

ANSWER

• Define Risk • Tend to have Energy near the level • Bullish above and Bearish below • Seen and used by many • Help define trends • Reduce FEAR

REQUIREMENTS OF BORDERLINES

Bullish Bearish

FEAR

TECHNICAL TOOLS for DEFINING BORDERLINES

MY TECHNICAL TOOLS FOR BORDERLINES • Defines Risk • Tends to have Energy near the level • Bullish above and Bearish below • Seen and used by many • Helps define trends • Reduces FEAR

1. Moving Averages a. 100 bar SMA b. 200 bar SMA

100 BAR MA (BLUE)

200 BAR MA (GREEN)

SELL RISK -20

+71 REWARD

+114 REWARD

SELL

-23 RISK

+138 REWARD

BUY

-28 RISK

+78 REWARD

BUY

-20 RISK

+111 REWARD

LOSING TRADE

SELL -24 RISK

+101 REWARD

+197 REWARD

SELL -24 RISK

This is the same trade but just a little later. Define risk. Limit Risk. Reward is the unknown, but that is OK.

+75 REWARD

+172 REWARD

+72 REWARD

+52

BUY -21 RISK

+144 REWARD

BUY -25 RISK

STOPPED OUT Trading Account Loses

(25) Pips

What Happened?

UK Inflation Report came out which sent the price down on initial headlines. STOPPED OUT. EVENT RISK INCREASED.

100 hour MA (STOP LOSS LEVEL -24 pips)

200 hour MA

BUY here

What if you waited and BOUGHT here AFTER THE EVENT RISK and Failed BREAK?

Same STOP LOSS

Failed BREAK

What if BOUGHT here on the BREAK OF THE 200 bar MA on the 5 min. chart?

STOP LOSS

ORIGINAL TRADE

+156/+197

Other Borderline MA levels in the GBPUSD into September

MY TECHNICAL TOOLS FOR BORDERLINES • Defines Risk • Tends to have Energy near the level • Bullish above and Bearish below • Seen and used by many (Simple) • Helps define trends • Reduces FEAR

1. Moving Averages a. 100 bar SMA b. 200 bar SMA

2. Trend Lines

MY TECHNICAL TOOLS FOR BORDERLINES • Defines Risk • Tends to have Energy near the level • Bullish above and Bearish below • Seen and used by many (Simple) • Helps define trends • Reduces FEAR

1. Moving Averages a. 100 bar SMA b. 200 bar SMA

2. Trend Lines a. Up Trends b. Down Trends c. Channels d. Ceilings/Floors

1

2

3 BUY

-20 RISK

BUY #2 /RISK #2

FOMC DAY Event Risk is HIGH Liquidity Risk is High Market Risk is High BUT…..

BUY RISK

+30 Profit

Trend Line AND 100 hour MA AND Low define and limit risk BEFORE the release.

MY TECHNICAL TOOLS FOR BORDERLINES • Defines Risk • Tends to have Energy near the level • Bullish above and Bearish below • Seen and used by many (Simple) • Helps define trends • Reduces FEAR

1. Moving Averages a. 100 bar SMA b. 200 bar SMA

2. Trend Lines 3. Fibonacci Retracements

KEY FIBONACCI RETRACEMENT LEVELS

There are three main retracement levels

1. 38.2% 2. 50%

The 38.2% and 50% = Correction Zone 3. 61.8%

Trend move

Correction

Borderlines

Stay below the Correction Zone, keeps the sellers in charge

Trend move

Trend move

Borderlines

Price stays below the Correction Zone (Borderlines), and sellers reenter.

FOUNDATION SUMMARY 1. Focus on Risk. Reward may follow. 2. Trade near key technical levels

(Borderlines). 3. Three technical tools,

• Moving Averages (100 and 200 SMA) • Trend lines • Fibonacci Retracements

Increasing the Odds of Success

in your Forex Trading

Greg Michalowski Email: greg@fxdd.com www.livestream.com/FXDD Twitter: gregmikefx

High Risk Warning: All news, opinions, research, data, or other information contained within this presentation are provided as general market commentary and do not constitute investment advice. FXDD expressly disclaims any liability for any lost principal or profits without limitation which may arise directly or indirectly from the use of or reliance on such information.

ADVISORY WARNING: FXDD provides sources of economic and market information during this broadcast as an educational service to its clients and prospects. The opinions or recommendations expressed during the broadcast are not intended as investment advice and are based on data reasonably believed to be accurate at the time of publication. Clients and prospects are advised to carefully consider the opinions and analysis offered in the context of your individual analysis and decision making. None of the statements of opinions or recommendations are to be considered as constituting a track record. Past performance is no guarantee of futures results and FXDD specifically advises clients and prospects to carefully review all claims and representations made during the broadcast in light of your particular analysis, trading style and objectives. All news, opinions, research, data, or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. FXDD expressly disclaims any liability for any lost principal or profits without limitation which may arise directly or indirectly from the use of or reliance on such information. As with all such advisory services, past results are never a guarantee of future results.

Disclaimer Di

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INCREASING THE ODDS OF SUCCESS

INCREASING THE ODDS OF SUCCESS Odds of success in your trading are

more in your favor simply by trading near BORDERLINES, DEFINING RISK, LIMITING RISK and hoping the market agrees with the TOOLS YOU USE and WHAT YOU SEE

INCREASING THE ODDS OF SUCCESS If the market is active (i.e., not sitting in a

narrow range), and you define your risk, you have the potential to:

RISK A LITTLE (LOSE)

MAKE MORE THAN A LITTLE (WIN) OR

Timing your Trade Entries

specifically

(E)NERGY in trading is created by having (M)ultiple reasons to trade which moves the market away from the point of the trade….sometimes fast (like a JET PLANE).

(E)nergy = (M)ass x C2 C = Speed of Light

More M = More E U L T I P L E

R E A S O N S

N E R G Y

t o T R A D E

= More Energy

Risk a Little Make More than a Little

= Odds of Success in our Favor

You just need to get the DIRECTION RIGHT

Some of the Times (40%-50%)

USDJPY

147 Pips

1 2 3 4 Days

100 HOUR MA

200 HOUR MA

CHART FACTS USDJPY

1 Hour Chart Current Price: 99.67

100 Simple MA: 99.90 200 Simple MA: 99.85

4+ Days 147 Pip Range

PRIMARY TOOL TRADING FACTS 1. Current Price < 100 SMA 2. Current Price < 200 SMA 3. Topside Trend line held 4. Price < Bottom Trend line

SECONDARY TRADING FACTS 1. 4 Day Range Narrow (147 Pips) 2. Current Day Range Narrow

(89 pips) 3. 100 and 200 Hour MA flat * 4. Two Moving Averages

Converging w/ the Price *

SECONDARY TRADING FACTS 1. 4 Day Range Narrow (147 Pips) 2. Current Day Range Narrow (89 pips) 3. 100 and 200 Hour MA flat * 4. Two Moving Averages Converging w/ the

Price *

Key Concept: Non Trending transitions to

Trending MAs are going sideways or

two MAs and Price are converged = Non Trending

Non TRENDING

TRENDING

TRANSITIONS

147 Pips

1 2 3 4 Days

100 HOUR MA

200 HOUR MA

SELL

BUY or SELL? STOP -25 RISK?

SELL

-25 STOP

SELL STOP -25

+82

+173 +208

Non Trend Transitions to Trend + Multiple Reasons to Trade = Odds in the Traders Favor (risk low)

GBPUSD

CHART FACTS GBPUSD

1 Hour Chart Current Price: 1.5357

100 Simple MA: 1.5354 200 Simple MA: Not in Play

In Correction Zone between 38.2% and 50%

of a Trend move higher

1.5354

CORRECTION ZONE

TREND MOVE

RISK? BUY or SELL?

-15 Risk is DEFINED RISK is LIMITED

MULTIPLE REASONS ACCEPT RISK?

-15

+42 +52 WHERE’S

THE ENERGY?

-39

38 H

60 Pips

1.5415 1.5412

100 H MA 1.5355

C-ZONE

1 2 3 4 5 6

170 Pips

1 2

WHERE’S THE ENERGY?

IT’S COMING Markets are Non Trending

LOOK AT OTHER TIME FRAMES By looking at key

technical level on other time period

charts, traders can often get additional clues for trade bias

and trade entries

I look at the : • 5 Minute • Hourly • Daily

LOOK AT OTHER TIME FRAMES 5 minute chart is a proxy for Intraday

Traders 1 hour chart is a proxy for Swing

Traders Daily chart is a proxy

for LT Traders

By looking at key technical level on other time period

charts, traders can often get additional clues for trade bias

and trade entries

What are the Longer Term

Traders focused on?

KEY BORDERLINE Time to Move

CHART FACTS GBPUSD

DAILY Chart Price is between the 100 and 200 day MAs but the

38.2% of year range is slowing the move. Also

area of ENERGY from past.

What are the Intraday Traders

focused on?

FAILED BREAK TWICE

SELL HERE?

CHART FACTS GBPUSD

5 Minute Chart Price above and below 100 and 200

bar MA (sideways/converged) Price failed on BREAK higher.

Need to BREAK below low. Range Narrow.

RISK HERE Price is going above and below MAs

What are the 3 types of Trader’s

Trading Bias? BULLISH or BEARISH?

Hourly: Non-Trending below ceiling

at 1.5415. Above 100 hour MA at

1.5360

1.5360

1.5415

BIAS: NEUTRAL, but LOOKING FOR A BREAK

Daily: Key

resistance against 38.2% retracement at 1.54124 is

holding.

1.54124

BIAS: BEARISH. Holding ceiling at 1.54124

5 Minute: Falls below

the converged

100 and 200 bar MA at

1.5387.

BIAS: BEARISH below 100 and 200 bar MA and Correction ZONE

If different TYPES OF TRADERS (i.e., Short Term, Swing and Long Term) are in agreement to bias

If risk can be DEFINED and LIMITED

If there are MULTIPLE REASONS to trade

TRADE

BREAK HOLD BREAK

BREAK

SELL 1.5360

RISK 1.5383

+131

+235

TRADE FACTS GBPUSD 1 HOUR Chart

• Price moved below 100 MA and stayed below • Price tested 200 MA,100 MA (between Goal Posts)

• Broke 100 MA • Price moves to channel trend line and stalls (+131) • Accelerates trend through trend line (liquidation)

• Stops at 1.5125 before consolidating (+235)

SUMMARY: PUTTING THE ODDS IN YOUR FAVOR

1. Trade near BORDERLINES 2. FIND Multiple Reasons to TRADE 3. RISK a LITTLE to MAKE MORE than a LITTLE

(DEFINE and LIMIT RISK) 4. NON TRENDING TRENDING 5. AGREEMENT from MULTIPLE TIME PERIODS

TRADE FACTS GBPUSD DAILY Chart

• Price holds below 38.2%. Borderline to lean against • Price BREAKS trend line at 1.5364 • Price BREAKS below 100 day MA

NOW WHAT? PUT in FIBONACCI FOR TARGETS.

BREAK BREAK

BREAK

KEY TARGET REACHED AT 50% FIBO.

TRADE FACTS GBPUSD DAILY Chart

• Price BREAKS 38.2% retracement. Trend continues.

• Price STOPS at 50% retracement target. Take profit at limit of Consolidation ZONE.

BREAK

Exiting your Forex Trades

with a purpose

Greg Michalowski Email: greg@fxdd.com www.livestream.com/FXDD Twitter: gregmikefx

High Risk Warning: All news, opinions, research, data, or other information contained within this presentation are provided as general market commentary and do not constitute investment advice. FXDD expressly disclaims any liability for any lost principal or profits without limitation which may arise directly or indirectly from the use of or reliance on such information.

ADVISORY WARNING: FXDD provides sources of economic and market information during this broadcast as an educational service to its clients and prospects. The opinions or recommendations expressed during the broadcast are not intended as investment advice and are based on data reasonably believed to be accurate at the time of publication. Clients and prospects are advised to carefully consider the opinions and analysis offered in the context of your individual analysis and decision making. None of the statements of opinions or recommendations are to be considered as constituting a track record. Past performance is no guarantee of futures results and FXDD specifically advises clients and prospects to carefully review all claims and representations made during the broadcast in light of your particular analysis, trading style and objectives. All news, opinions, research, data, or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. FXDD expressly disclaims any liability for any lost principal or profits without limitation which may arise directly or indirectly from the use of or reliance on such information. As with all such advisory services, past results are never a guarantee of future results.

Disclaimer Di

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imer

VS.

More Important? ENTRY or EXIT

VS.

Most Traders focus on….

What bothers me is….

How little

• “I made 20 pips.” • “I have a profit.” • “No one ever went broke taking a profit” • “Bulls and bears make money. Pigs get slaughtered” • “I am afraid the market will correct and my profit will disappear”

What are YOUR Reasons to Exit?

FEARING SUCCESS

Traders can look to ride winners – especially in a

trending market – to get ahead in your

trading.

After all, if we are going to work so hard in trying to increase the odds of success, why not take advantage of that work..,

…WITH CONFIDENCE

Mindset on a Trade Taken 1. Risk is Defined at the beginning of the trade. Either you lose or you win. DO NOT FEAR. LOSING IS PART OF TRADING

Mindset on a Trade Taken 1. Risk is Defined at the beginning of the trade. Either you

lose or you win. DO NOT FEAR. LOSING IS PART OF TRADING.

2. If you win - and want take profit - look to take partial profit where Pips Gained = Risk Pips on Trade Entry. Optional: Move stop closer to Breakeven

Mindset on a Trade Taken 1. Risk is Defined at the beginning of the trade. Either you

lose or you win. DO NOT FEAR. LOSING IS PART OF TRADING.

2. If you win - and want take profit - look to take partial profit where Pips Gained = Risk Pips on Trade Entry. Optional: Move stop closer to Breakeven 3. Define “targets” in the direction of the trade. When a target is reached, move stop.

Target = Defined Technical Borderline in the direction of the trade/trend

What is a Target?

Targets can be entry levels for traders looking to get in on the trade

What is a Target?

Targets get harder and harder to pass as a trend move continues. This leads to corrections.

What is a Target?

Mindset on a Exiting 1. Risk is Defined at the beginning of the trade. Either you

lose or you win. DO NOT FEAR. LOSING IS PART OF TRADING.

2. If you win - and want take profit - look to take partial profit where Pips Gained = Risk Pips on Trade Entry. Optional: Move stop closer to Breakeven 3. Look for “targets” in the direction of the trade. When a target is reached, move stop. 4. Trades will often have “corrections”. Traders invest profit

during corrections. If a correction is too deep, look to exit (> 50% of the last trend leg).

5. If a Target level/area has a cluster of technical borderlines (multiple reasons to trade), consider exiting the trade or taking more profit.

Mindset on a Exiting 1. Risk is Defined at the beginning of the trade. Either you

lose or you win. DO NOT FEAR. LOSING IS PART OF TRADING.

2. If you win - and want take profit - look to take partial profit where Pips Gained = Risk Pips on Trade Entry. Optional: Move stop closer to Breakeven 3. Look for “targets” in the direction of the trade. When a target is reached, move stop. 4. Trades will often have “corrections”. Traders invest profit

during corrections. If a correction is too deep, look to exit (> 50% of the last trend leg).

5. If a Target level/area has a cluster of technical borderlines (multiple reasons to trade), consider exiting the trade or taking more profit.

EURUSD

More Important? Entry or Exit

TRADE FACTS .

ANOTHER EXAMPLE

ANOTHER EXAMPLE

All information on this site is provided for informational and educational purposes only, not

intended for trading purposes or advice. As with all such advisory services, past results are not indicative

of future results. In addition trading in foreign exchange markets on margin carries a high level of

risk, and may not be suitable for all individuals.