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RockSolidFx CourseTM

Presented by RSFX Trading Courses.

Free Manual

EDITION 1.0

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Contents• Preparation.• Introduction To Forex .• Basic Trading Principles.• Fundamental Analysis.• Technical Analysis.• Trading Strategy.• Risk Management.• Master Trader Psychology.• The Trading Journey.

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Preparation

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Getting Focused• Before we begin we

need a shift in mind set.• We need to believe we

will win.• Belief that we will

succeed is paramount. • It’s the difference

between success and failure.

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The Belief Cycle• If you believe you will

be successful you will put more effort into trading.

• More effort you get better results.

• Better results will consolidate your belief.

• The cycle of positivity continues.

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Communities and Peer Groups

• Another important aspect of being successful at trading is to surround yourself with like minded people.

• Join trading communities, peer groups, blogs get a mentor etc.

• We are on hand to support you through various bootcamps and events.

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Now were in the right frame of mind lets move onto discussing the tools we use to make our understanding how to make profits.

Now We Are Ready

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Introduction to Forex

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• The financial tool we use is every day to exchange currency.

• Simple way to take advantage of short-term market movements.

• By correctly predicting if the price of an asset will rise or fall

What is Forex?

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• Placing a trade using forex consists of four steps:– Step 1 – Select a currency.– Step 2 – Make a prediction – UP or DOWN.– Step 3 – Input the amount you want to invest.– Step 4 – Select a stop loss for protection.

• With that done lets move onto some basic trading principles.

How Forex Work

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Basic Trading Principles

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• There are four main assets groups that we can trade using binary options:– Stocks/Companies– Indices.– Commodities.– Currency Pairs.

Asset Groups

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• Companies divide their capital into shares which are offered for sale.

• Companies express their share price in the domestic currency to whatever exchange they are listed on. For example Tesco PLC listed on the U.K. FTSE100 is expressed in Great British Pounds (GBP).

• Dependant on how well a company performs its share price will go UP or DOWN.

• We can take advantage of these changes in a companies share price.

Stocks/Companies

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• An index represents the performance of the stock market of a given country.

• The major world indices are:– Dow Jones Industrial Average (United States U.S.)– S&P 500 (United States U.S.)– FTSE 100 – United Kingdom (U.K.)– DAX 30 – Germany.– CAC 40 – France.– NIKKEI 225 – Japan.

• Depending on how well a countries economy is performing its index will go UP or DOWN.

Indices

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• A commodity is the term given to describe a item of which there is demand.

• Major commodities traded on the financial markets are:– Gold – price expressed in U.S. Dollars ($) per ounce.– Silver – price expressed in U.S. Dollars ($) per ounce.– West Texas Intermediate (WTI) Oil – price expressed in U.S.

dollars ($) per barrel.• Depending on world events and economic data

commodity prices will go UP or DOWN.

Commodities

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• Currency Pairs are essentially exchange rates.• In each pair we have a base and a terms currency.• Base currency (left listed) is equal to 1.• Terms currency (right listed) is variable.• For example GBP/USD. Great British Pound (GBP) is the

base. U.S. Dollar (USD) is the terms.• If we see GBP/USD is 1.5639 it means £1 is equal to

$1.5639• Depending on world events and economic data currency

pairs will go UP or DOWN.

Currency Pairs

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Understanding Currency Pairs

• Currency pairs move like a see-saw.

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People

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But instead of people we have currency

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Understanding Currency Pairs

• Currency pairs move like a see-saw.• Take the currency pair GBP/USD.• If the currency pair for example is going UP:– Great British Pound (GBP) is strengthening.– U.S. Dollar is simultaneously weakening.

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Understanding Currency Pairs

• If the currency pair for is going DOWN:– Great British Pound (GBP) is weakening.– U.S. Dollar is simultaneously strengthening.

• Make Sense?

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• Now we have established the asset groups lets talk about the link between them.

• Assets groups can be separated into ‘risk on’ or ‘risk off’.

• Let’s elaborate...

Asset Groups

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• When things are looking good in a countries economy or the global economy as a whole we are ‘risk on’. Investors will move money from safe haven assets into assets that offer a higher rate of return. These assets generally tend to be:– Stocks.– Indices .– Growth related currencies – The Euro (EUR) and

Great British Pound (GBP).

Risk On Sentiment

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• When things are not looking good in a countries economy or the global economy as a whole we are ‘risk off’. Investors will move money from riskier assets into safe haven assets that protect their money. These assets generally tend to be:– Commodities – specifically Gold and Silver.– Safe haven currencies – Japanese Yen (JPY), Swiss

Franc (CHF) and the U.S. Dollar (USD).

Risk Off Sentiment

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• We live in a 24 hour global economy with exchanges all over the world.

• The main trading sessions are:• Asian markets 22:00 (GMT) to 05:00 (GMT).• U.K. and European markets 08:00 (GMT) to 16:30 (GMT).• U.S. Markets 14:30 (GMT) to 21:00 (GMT).

Market Opening Times

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• During periods of overlapping market times there is significant trading volume in particular 14:30 (GMT) to 16:30 (GMT) when the U.K, European and U.S. Markets are open.

• At market opening times we may also see increased volume.

Market Opening Times Cont...

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• There are two different approaches to when it comes to trading binary options. Fundamental Analysis and Technical Analysis.

• Traditionally the two approaches are exclusive however with our programme we combine both to achieve improved trading results through higher probability setups.

• Lets move on to understanding fundamental analysis first...

Approaches to Trading

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Fundamental Analysis

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Fundamental Analysis• Fundamental analysis is the examination of

the underlying forces that affect the well being of an economy, industry group or company.

• Generally these underlying forces can be separated into two groups news and economic data.

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• Events that generally happen unexpectedly but can cause some of the biggest moves on an asset.

• This can be:– Natural Disasters.– War.– Terrorism.– Company earnings reports – released quarterly.

News

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• BP Gulf of Mexico oil spill in 2010. An explosion aboard the Deepwater Horizon rig on 20 April killed 11 workers and began a devastating spill which leaked over four million barrels of oil into the Gulf of Mexico – the largest spill in American history.

• Good news or bad news?• What do you think happened to BP share price?• On this bad news we could have traded BP share

price to go DOWN.

Trading News – Example 1

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• Google release quarterly earnings that top estimates. Revenue and earnings per share (EPS) figures better than expected.

• Good news or bad news?• What do you think would happen to Google

share price?• On this positive news we could have traded

Google to go UP.

Trading News – Example 2

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• Good sources to keep up to date of what is happening on a daily basis are:– Bloomberg (www.bloomberg.com)– Dailyfx (www.Dailyfx.com) – Forecrunch (www.Forexcrunch.com)– Reuters (www.reuters.com)

• Lets now move onto understanding economic data...

News Sources

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• Key data that is released weekly, monthly, quarterly or yearly.

• Can cause significant volatility in the markets.• Luckily for us we have vision of when these

events occur through the use of an economic calendar.

• Forex Factory (www.forexfactory.com) is a good one to use

Economic Data

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• When logging onto forexfactory.com you will be presented with a screen similar to the image below.

• You can see the date and time of release, the type of economic data being released, what economies it will affect, impact level, actual, forecasted and previous figures.

Economic Calendar

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• We will be focusing on red events as these present the highest volatility and thus the greatest opportunity for us to profit.

• These events tend to be:– Gross Domestic Product (GDP) figures.– Employment data (in particular U.S Non-Farm Payroll).– Retails Sales.– Manufacturing and Services PMI figures.– Central bank interest rate decisions.

‘Red’ Events

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• Defined as the market value of all officially recognised final goods and services produced within a country in a given period of time.

• Its is the primary indicator to tell us if an economy is growing or contracting.

• A figure above 0 indicates growth.• A figure below 0 indicates contraction.• Two consecutive quarters of contraction indicate

a recession.

Gross Domestic Product (GBP)

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• Actual figure better than forecasted. Generally we see a rally in the countries indices and strengthening of the domestic currency. We are ‘risk on’.

• Actual figure worse than forecasted. Generally we see a fall in countries indices and weakening of the domestic currency. We are ‘risk off’.

Trading GDP Figures

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• As the name would suggest this particular piece of data tells us the number of people who are currently employed within an economy.

• A special case of employment data is U.S. Non- Farm payroll which is generally released on the first Friday of every month.

• Make a note of this event as we generally see big movements on the Dow Jones, S&P500 and USD/JPY on the back of this data release.

Employment Data

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• Actual figure better than forecasted means more people employed in an economy. Generally we see a rally in relevant indices and strengthening of the domestic currency. We are ‘risk on’.

• Actual figure worse than forecasted means less people employed in an economy. Generally we see a fall in relevant indices and weakening of the domestic currency. We are ‘risk off’.

Trading Employment Data

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• Retail sales are the primary gauge of consumer spending; which accounts for the majority of overall economic activity.

• Released monthly.• Expressed as a % change from previous

month.

Retail Sales

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• Actual figure better than forecasted means more people spending in an economy. Generally we see a rally in relevant indices and strengthening of the domestic currency. We are ‘risk on’.

• Actual figure worse than forecasted means less people spending in an economy. Generally we see a fall in relevant indices and weakening of the domestic currency. We are ‘risk off’.

Trading Retails Sales

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• Survey of purchasing managers within the manufacturing and services sectors which asks respondents to rate the relative level of business conditions.

• A figure higher than 50.0 indicates expansion.• A figure lower than 50.0 indicates contraction.

Manufacturing & Services PMI

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• Actual figure better than forecasted. Generally we see a rally in relevant indices and strengthening of the domestic currency. We are ‘risk on’

• Actual figure worse than forecasted. Generally we see a fall in relevant indices and strengthening of the domestic currency. We are ‘risk off’.

Trading PMI Data

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• Interest rates are used by central banks to shape monetary policy in an economy.

• There are four central banks that we need to primarily focus on:– U.S. Federal Reserve – Bank of England (BoE)– European Central Bank (ECB)– Bank of Japan (BoJ)

• Interest rate decisions are generally followed by a speech from the head of the central bank.

• Speeches covers in detail the factors that affected the most recent interest rate and other policy decisions such as the overall economic outlook and inflation. Most importantly speeches provide clues regarding future monetary policy.

Central Bank Interest Rates

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• Actual figure higher than forecasted or comments from the central bank governor that are more hawkish/optimistic. Generally we see a strengthening of the domestic currency. We are ‘risk on’.

• Actual figure lower than forecasted or comments from the central bank governor that are more dovish/pessimistic. Generally we see a weakening of the domestic currency. We are ‘risk off’.

Trading Interest Rates

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• U.S. Non-Farm Payroll has come out better than expected 156,000 new jobs created vs. a forecasted figure of 123,000.

• What do you think would happen to the following assets:– S&P500.– Gold. – USD/JPY.

Trading Economic Data – Example 1

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• Better than expected data so we are ‘risk on’.• S&P500 would rally as investors pile in.• Gold would fall as investors move money into

riskier assets.• USD/JPY would rally as investors move out

from Yen into riskier assets.• Make sense? • Lets go onto another example...

Answers

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• UK GDP figures have come out at -0.1% vs. a forecasted figure of 0.2%.

• Better or worse than expected?• What do you think will happen to the

following assets:– FTSE100.– GBP/USD.

Trading Economic Data – Example 2

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• Worse than expected data so we are ‘risk off.’• FTSE100 would fall as investors move out of

equities.• GBP/USD would fall due to the Great British

Pound becoming weaker.• Now we have a grasp of trading news and

economic data lets move onto understanding technical analysis.

Answers

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Technical Analysis

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• Technical analysis is the study of asset prices using charts and indicators in the attempt to determine the future direction of a market.

• The primary way of studying an assets price on a chart is through price action.

What Is Technical Analysis

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• We can view the price of an asset on numerous timeframes. • Typical time frames used in trading:– 5 minute.– 15 minute– 1 hour– 4 hour– Daily

• The higher the timeframe the more significant. For example viewing price action on a 4 hour timeframe would be more significant than a 5 minute.

• Using multiple timeframes will allow us to asses market direction and pin point our trade entries.

Understanding Timeframes

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• The price of an asset is shown graphically on a chart generally in one of three ways.– Line charts.– Open High Low Close (OHLC) bars.– Candlesticks.

• It is the purest representation of what is occurring on an asset.

• A saying we have at Special Ops Trading is ‘Price is king.’

Price Action

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• Line charts represent price action by showing a series of data points connected by straight line segments.

• Data points typically tend to be the closing price.

• We tend not to use line charts as we miss the real movement of an assets price. We do not see the highest point and lowest points during the time period.

Line Charts

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• OHLC bars are used to illustrate movements in the price of an asset a period of time.

• Each vertical line shows the price range (highest price – lowest price) over a period of time such as 1 hour or a day.

• Tick marks project from each side of the line.• Opening price on the left• Closing price on the right.• If the closing price is higher than the opening price – buyer

bar – usually coloured green.• If the closing price is lower than the opening price – seller bar

– usually coloured red.

Open High Low Close (OHLC) Bars

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OHLC Bar Analogy

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OHLC Bar AnalogyIncreasing:

Bullish OHLC BarDecreasing:

Bearish OHLC Bar

Open

OpenHigh

Close

Close

Low

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• Candlesticks are used to illustrate movements in the price of an asset a period of time.

• Created and used by the Japanese as early as the 15th century when trading rice futures.

• If the candle is coloured green - closing price is higher than the opening price.

• If the candle is coloured red - closing price is lower than the opening price.

• Great for seeing reversal or patterns in price action.• Preferred way of viewing price action.

Candlesticks

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Candlestick Analogy

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Candlestick Analogy

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Candlestick Reversal Patterns

• Reversal patterns give us a clue into the shift or change of market psychology. – From buying to selling.– From selling to buying.

• Key reversal patterns are:– The hammer, and– Inverted hammer.

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Hammer• A hammer is a key reversal pattern and must

come after a decline in an assets price.• The real body should be near the top of the

candlestick.• The lower shadow should at least be twice the

height of the real body.• Ideally the real body should green (bullish)

with little or no upper shadow.

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Hammer Example

•Sharp declines in AUD/USD.•Bullish hammer formed.•Price goes UP.

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Inverted Hammer• An inverted hammer is a key reversal pattern

and must come after a rally in an assets price.• The real body should be near the bottom of

the candlestick.• The upper shadow should at least be twice the

height of the real body.• Ideally the real body should red (bearish) with

little or no lower shadow.

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Inverted Hammer Example

•Strong rallies in EUR/GBP.•Bearish inverted hammer formed.•Price goes DOWN.

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Candlesticks Summary• Use candlestick patterns in conjunction with

support and resistance levels and chart indicators which will be covered later in the manual.

• For more candlestick patterns a great book to read is: Japanese Candlestick Charting Techniques by Steve Nison.

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• The markets are like a ‘tug of war’ between buyers and sellers.

• Depending who is winning the markets can move in one of three ways:– Upwards trend or bullish trend.– Downwards trend or bearish trend.– Ranging market.

• We will elaborate on each...

Understanding Market Trends

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• An up-trending market or bullish market is a general rise in the assets price over a period of time.

• Defined as seeing ‘higher highs’ and ‘higher lows’ in an assets price movement.

• Looking at a chart the asset price generally moves from the bottom left to top right.

• More buyers than sellers.• Buyers winning the war.

Uptrending Markets

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•Higher Highs•Higher Lows•Established uptrend

• See how the FTSE100 is moving from bottom left to top right.

Uptrending Markets

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• A down-trending market or bearish market is a general fall in the assets price over a period of time.

• Defined as seeing ‘lower highs’ and ‘lower lows’ in an assets price movement.

• Looking at a chart the asset price generally moves from the top left to bottom right.

• More sellers than buyers.

Down trending Markets

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•Lower Highs•Lower Lows•Established down trend

• See how Gold is moving from top left to bottom right

Down trending Markets

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• Ranging or oscillating market is a general sideways movement in the assets price over a period of time.

• Shows in-decision in the market.• Looking at a chart the asset price moves from

left to right.• Even number of buyers and sellers.

Ranging Markets

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•No clear trend

Ranging Markets

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• Moving averages are used in trading to highlight market trends also.

• The two most common types of moving averages are simple and exponential.

• Simple moving averages calculate the average of closing prices with all the periods given the same weighting.

• Exponential moving averages apply a weighting to more recent price data and therefore offer a better idea of what is happening.

• We use exponential moving averages.• Charting software automatically plots moving averages for you.

Moving Averages

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• The mot common moving averages we use to assess market direction are:– 50 EMA (default colour red)– 200 EMA (default colour green)

• When price is above both the 50 EMA and 200 EMA we are looking for long (upward) positions.

• When the price is below both the 50 EMA and 200 EMA we are looking for short (downward) positions.

Moving Averages

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Moving Averages – Up trending Markets

•See how the 50 EMA is above the 200 EMA.

•Looking for long positions.

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Moving Averages – Downtrending Markets

•See how the 50 EMA is below the 200 EMA.

•Looking for short positions.

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Market Trend Rules• Always trade with the direction of the trend.• ‘The Trend Is Your Friend’• Ride the wave of momentum don’t try to

swim against it.

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• Over time the price of an asset may find that it is unable to penetrate a particular price level.

• If this inability to penetrate a particular price level occurs after an upwards move it is called resistance or a ceiling.

• If this inability to penetrate a particular price level occurs after a downwards move it is called support or a floor.

• The most common forms of support and resistance are:– Trend line. – Horizontal levels.– Moving Averages.

Support and Resistance

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• Off levels of support we are looking for buying or long positions.• Off resistance levels we are looking for selling or short positions.• The higher the timeframe the support or resistance level is found

on the more significant that support or resistance level is. For example a support or resistance level found on a daily timeframe would be more significant and stronger than one found on a 15 minute timeframe.

• Support or resistance levels can take as little as hours or as long as several years to form. The longer the period of time which they are formed over the stronger that support or resistance level is.

Support and Resistance Rules

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• In upward trending markets we can connect the ‘higher lows’ or ‘troughs’ of an assets price movement to form trend line support.

• We are looking for the asset price to bounce and retest the trend line on two occasions before we consider it valid.

• On the third test we can place a long trade.

Trend Line Support

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•Support confirmed•Place trade to go UP on retest

Trend Line Support

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• In downward trending markets we can connect the ‘lower highs’ or ‘peaks’ of an assets price movement to form trend line resistance.

• We are looking for the asset price to bounce and retest the trend line on two occasions before we consider it valid.

• On the third test we can place a short trade.

Trend Line Resistance

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•Resistance confirmed•Place trade to go DOWN on retest

Trend Line Resistance

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• Horizontal support levels coincide directly with an assets price and tend to form around round numbers.

• We are looking for the asset price to bounce and retest the horizontal support level on two occasions before we consider it valid.

• On the third test we can place a long trade.

Horizontal Support

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•Price unable to break 0.9625•Support confirmed•Place trade to go UP on retest

Horizontal Support

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• Horizontal resistance levels coincide directly with an assets price and again tend to form around round numbers.

• We are looking for the asset price to bounce and retest the horizontal resistance level on two occasions before we consider it valid.

• On the third test we can place a short trade.

Horizontal Resistance

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•Price unable to break 1.6330•Resistance confirmed•Place trade to go DOWN on retest

Horizontal Resistance

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Moving Averages Support• Moving averages as support work a little bit

differently.• We are looking for the asset price to test the

moving average just once• On the test of the moving average we can

place a long trade.

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• Along with the support and resistance principles we have just learnt to provide confirmation of taking a trade we use specific chart indicators.

• The chart indicators we use are:– Relative Strength Index (RSI).– Stochastic oscillators.

Chart Indicators

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• RSI looks at recent pricing data and moving averages to assess who is dominating the market. Buyers or sellers.

• Settings we use at Special Ops Trading is:– Period 7.– Overbought 80.– Oversold 20.

• When the indicator is above 80 are looking for short trades.

• When the indicator is below 20 we are looking for long trades.

Relative Strength Index (RSI)

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Relative Strength Index (RSI)

•Above 80 Looking for short trades

•Below 20 looking for long trades

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• The theory behind stochastics is that in an upward trending market prices tend to close near their high and in a downward-trending market prices tend to close near their low.

• Settings we use at Special Ops Trading is:– K% period 5– D% period 3.– Slowing 3.– Overbought 80.– Oversold 20.• When the K% line crosses up D% signal line and the reading is below 20

we are looking for long trades.• When the K% line crosses up D% signal line and the reading is below 20

we are looking for short trades.

Stochastics Oscillators

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Stochastic Oscillators

•Above 80 Looking for short trades

•Below 20 looking for long trades

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Chart Indicator Rules• Remember...• We use chart indicators as a means of confirming

our trade off support or resistance levels.• Indicators are not used as our primary means of

entering a trade.• That concludes your introduction to technical

analysis.• Now we will move onto putting it all together as

trading strategy.

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Risk Management

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• Trading the financial markets does carry a degree of risk and we will occur loosing trades.

• What we do not know is when those loosing trades will come.

• That is why we have to be disciplined and stick to a constant trade size.

• The key to making profits through trading is by only risking small amounts of your account balance.

Why Do We Need To Manage Risk?

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• By only risking a small amount of your trading account on any one trade you can be assured you will be trading for a very long time and prevent yourself from wiping out your account early on.

• We will only be risking 5% of account balance on any one trade.

What Amount?

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TRADE SIZE = ACCOUNT BALANCE ÷ 20

• Example If you have an account balance of £20,000 and you want to place a trade.

• £20,000 ÷ 20 = £1,000.• Trade size = £1,000.

Trade Size Calculation

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• Now we have established our trade size we need to set a plan to control our trading.

• Maximum daily risk 10% of account balance.• We will only be placing a maximum of three

trades per day.• Lets discuss the plan…

Number of Trades

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Trade 1• On the first trade of the day at 5% of your

account balance place a trade.• If you are successful – Stop for the day. You

are done.• If you are unsuccessful – Have another go.

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Trade 2• On the second trade of the day again at 5% of

your account balance place a trade.• If you are successful – Have another go.• If you are unsuccessful – Stop for the day. You

are done.

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Trade 3• On the third trade of the day again at 5% of

your account balance place a trade.• If you are successful – Stop for the day. You

are done.• If you are unsuccessful – Stop for the day. You

are done.• Make sense?

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Master Trader Psychology

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• Take the emotions out of trading.• Pick your trades like you pick your fruit at the

supermarket. Only the best quality.• Be patient. Do not rush.• Allow the trades to come to you rather than

telling the market what to do.• Prepare a trading plan and stick to it.

Trading Psychology

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• Preparing a trading plan is vitally important to you success as a trader.

‘Fail to plan...plan to fail.’

Preparing A Trading Plan

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Preparing A Trading Plan• Items you can add in your trading plan:– What assets will I trade?– What are my times of trading?– What strategies will I be using?– What is my trade size? – Maximum number of trades per day?

• Make it personal to your goals.• Refer to your trading plan daily.

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• Another attribute of being a successful trader is keeping a journal or log of all the trades you have taken.

• This is very useful to review with our support team where you have gone wrong on an unsuccessful trade so we can put things right for the next one.

Preparing A Trade Journal

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Preparing A Trade Journal• Items you can add in your trade journal.– Asset.– Date and time of trade.– Strategy used.– Comments on your reasons for entering the trade.

• Update your trade journal daily.

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The Trading Journey

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• We have devised a host of further training programmes to assist our traders in developing their understanding of the financial markets and acquiring advanced strategies and techniques to make increased monthly profits.

Further courses are: • Bronze Packages• Sliver Packages• Gold Packages– Chart Patterns.– Advanced Technical Analysis.– Fibonacci Master Class (Including harmonic patterns).

Further Courses

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Further Courses

Chart Patterns

Advanced Technical Analysis

Fibonacci Masterclass

Profits From Binary

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Boot camps & 1-2-1 Coaching

• We run regular ‘live trading’ boot camps and 1-2-1 coaching sessions with one of our professional .

• Great opportunity to meet other traders and like minded people.

• Contact us @ http://rocksolidfx.co.uk/contact-us-2/

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