STAGE 1

INTRODUCTION TO FOREX TRADING

Foreign exchange or Forex trading is the simultaneous buying and selling of currencies. It has been existing for hundreds of years from the time of trade and barter between traders in different countries and has evolved with the advent of technology to the point where we can trade the forex market with our computers and phones.

Before the advent of the internet, the forex market was left for big banks, hedge funds and other big players, but because of the existence of leverage, retail traders now have access to trade in the forex market.

Forex trading is the largest financial market in the world with over six trillion ($6,000,000,000,000) daily turnover as of 2022 and because of this, so many people have flocked to this arena to make their dreams of financial freedom come true.

Currencies are traded in pairs and the act of trading is the simultaneous buying of one currency and selling of the other. For example, if we were to trade the EURO VS UNITED STATES DOLLAR (EURUSD) which is the most traded pair, we can decide to Buy(Go Long) or Sell (Go Short). When we buy the EURUSD we believe that the EURO is going to gain value against the USD so, we are automatically buying the EURO and selling the DOLLAR. The EURO is the base currency and the USD is the counter currency. This means that if the price of the EURUSD is 1.2000, it means 1 EURO will exchange for 1.2000 DOLLARS.

Currencies are segmented in 3 parts:

Major pairs – EURUSD, GBUSD, USDCHF, USDJPY, USDCAD, AUDUSD,

Cross pairs – EURGBP, GBPJPY, EURCHF

Exotic pairs – USDMXN, USDSGD

The forex market is traded 24 hours , 5 days a week, Monday to Friday. The market opens in New Zealand, then to Australia, Singapore, Hong Kong in Asia, then to Frankfurt, London in Europe and finally ends up in New York in the USA, the world financial capital. These various time zones make it possible for the market to be open at all times. Therefore, there is always liquidity which means that every time you buy there is always someone(counterpart) on the other side of the trade to sell.

There are different players involved in the FOREX market, these include the Central banks of different currencies, the major banks in the world, institutions like hedge funds that manage funds, retail traders or ordinary individuals.

Most retail participants are speculators who tend to analyze the charts to determine minor changes in the market and make decisions to gain from these price movements. Retails traders like us depend on Forex brokers as a vehicle to access the liquidity and make our trades via their trading platforms.

HOW DO WE TRADE FOREX

Like we mentioned earlier, we retail traders depend on forex brokers like HOTFOREX, OCTAFX, XM, FOREXTIME,INSTAFOREX, etc. These brokers allow us to access the market via their trading platforms like Meta trader 4 and 5 or Trade stations. The Metatrader platforms are the most common and widely used platforms in the forex trading industry and we would be using it for most of the illustrations in this book. Below is a picture of the MT4, the flagship version known to many traders.

UNDERSTANDING THE MT4 TRADING PLATFORM

The meta trader is really a wonderful piece of software and it has undergone few changes for more than 15 years since I first set my eyes on it. The company that created this platform is called metaquotes and they have a website Mql5.com where you can go and access a multitude of information and community of traders that would enhance your trading knowledge.

Once the trading platform is connected to the internet, the price feeds are updated in real time so we have access to the current quotes for different currencies, commodities and crypto assets.

To use the MT4, you need to open a demo or live account with the broker, after which details will be sent to your email  which you can use to login and start trading. The Demo is like a practice account that you need to get around the functions available to you while using the trading platform, some of these functions are the charts, price tools (candlesticks, lines and bars), time tabs for toggling between timeframes, indicator tab for access to indicators, drawing tools for doing some technical analysis, the buy and sell  buttons for initiating trades, windows to view prices, terminal button where you see your balance, equity and trade information and some other important functions.

Now you have a demo account and know how the platform works and have started placing some trades, you would probably be asking yourself a question;

How do I know when to buy or sell?

Welcome to the world of Financial Analysis. You have now volunteered for the most difficult financial training  known to man. You may have come from a different professional field, in spite of  your expertise, you may not successfully negotiate this program, if you do will experience a tempo that far exceeds anything you have faced in your life. Truly nothing has prepared you for the type of emotions you will experience in this exciting and challenging forex trading world.

Trading forex can be easy or hard and it depends on your approach and personality, this journey could take  40 days or 40 years as the case of the Israelites.

TYPES OF ANALYSIS

There are two ways to analyze the forex or financial markets; one is the fundamental analysis and the other technical analysis.

Fundamental Analysis

This type of analysis focuses on economic news (inflation, unemployment, interest rate), political events (elections) or even natural disasters (earthquake, hurricane), all these events may affect the price of a currency. So, if we are interested in taking trades, any of the above events could affect a country’s economy and currency.

So for instance the war between Russia and Ukraine has affected the value of the Russian ruble because of the multitude of sanctions leveled against the country and indirectly affected economies that depend on either Ukraine or Russian for different commodities like wheat for bread, oil and gas for running factories. There are forex calendar that track most of the news events in the forex industry and we can access these news from websites like forexfactory.com which is the most common sites to get news, so many others are available from fxbook.com, mql5.com etc. Below is the snap shots of the forex factory calendar. It shows the days, time and currency with the news for the day, with the previous, forecast and actual figures.

Technical Analysis

This is a form of analysis that uses a myriad of tools like candlesticks, chart patterns, indicators, fibonacci, elliott wave theory and concepts to forecast the future price of currencies. The basic idea of technical analysis is that past events and patterns often would repeat itself. So traders that use technical analysis study a lot of chart analysis using some or all the tools mentioned above to determine price movement.

In the world of technical analysis there are different groups, the price action based  traders (smart money traders and ICT ) and indicator based traders who use a combination of mainly indicators and price action analysis tto make their trading decisions

Technical indicators

These are mathematical tools that are based on price that help traders study price behavior and thereby can be used for forecasts of future price movement. Technical indicators can be leading or lagging in nature, the leading indicators (stochastics, CCI) tend to show us what price will do in future and offer us a hindsight below a move happens, whereas the lagging indicators (parabolic SAR, ADX) are confirming indication of a move that has started.

Candlesticks

The Japanese created the candlestick used to identify the open, high, low and close price of the day and help traders to interpret the market behaviors. The candlestick is still used till date. Below is anatomy of candlestick and types of candlesticks patterns.

Common Candlestick patterns

Chart patterns

Chart patterns form on the chart that also helps to predict price behaviors and are very effective. Some common chart patterns are the head and shoulders, triangles.

From the image above, we see different patterns that could be identified when we view the charts, using them we can predict a reversal or continuation of price. Each can individually interpret the behavior of traders in the market. Its key to note that price is determined by human behaviors which are seen on the charts. Advanced  programs like AUTOCHARTIST are used now by some traders to automatically detect these patterns and send trade alerts.

COMMON TRADING TERMINOLOGIES:

• QUOTE PRICE – The rate of the currency pairs
• BID – The price at which we can sell a currency pair
• ASK – The price at which we can buy a currency pair
• SPREAD – The difference between the BID and the ASK
• LONG – Buying a currency pair
• SHORT – Selling a currency pair
• BULLISH – Price is in a UPTREND
• BEARISH – Price is in a DOWNTREND
• EQUITY – The amount of capital plus or minus the profits or loss
• BALANCE – The capital in the trading account
• LOT SIZE – Amount of contract traded
• PIP – PRICE IN POINTS – lowest unit of price
• CANDLESTICKS – Used to depict price on the chart
• TIMEFRAMES – Periods that it takes a price/candlesticks to form
• INDICATORS – Technical tools used to analyze market
• STOP LOSS – value set to close trade in loss
• TAKE PROFIT – value set to close trade in profit
• DRAWDOWN – this is the partial loss  incurred either as balance or equity while trading

TYPES OF TRADERS

 SCALPERS / DAY TRADERS

Scalpers are traders that tend to hold trades between seconds to few minutes in the market, they take advantage of very short term movement in the market and go for few pips. There preferred time frame is 1m-5m

Day traders are the type of traders that open and close their trades within the day, they don’t hold trades overnight. Their preferred time frame is mostly within the minute time frame and the 1H.

SWING TRADERS

Swing trading is a medium form of trading which involves holding trades from hours to days and weeks as the case may be, they mostly base their entry off the 4H time frame based on the higher time frame bais.

 POSITION TRADERS

A position trader is one that bases their trading decisions on fundamentals of the currency, they have a broader view of the long term impact of interest rate, unemployment, and even political news on the currency they trade. They tend to hold trades for very long periods of time ranging from weeks, months and even years.

We can see that our position in the market is based on the interest and personality we have as traders, most retail traders like you and I have shorter term views and fall into the first category of day trading, moreover our funds are too small to handle the big swings that accompany long term trading.

In all cases we still need to look at different time frames to make proper judgment of our trading decision applying proper risk management according to the portfolio we are managing.

Stage 2

FOREX PRICE STRUCTURES

It’s important to understand how price moves generally. Normally, by looking at the chart it could look random, but within this randomness there are structures. The market moves in a trending(up or down) and ranging(sideways) manner.

When we look at the charts, it’s easy to tell when price is on an uptrend or downtrend. When we zoom out alternatively we see that the price is ranging or consolidating as it moves widen in two parallel lines.

In an uptrend, when traders are buying a currency say EUR/USD (simultaneously buying euro and selling dollar), as the price continues to move up, more traders are joining the trend, and at point when we see a pullback/retracement, what is actually happening is that traders are closing some profits, they are actually doing the opposite(selling the euro and buying the dollar) but because there are more buyers than sellers, when the volume of the close or sell orders are surpassed by the buyers in the market we notice that the price continues in the uptrend.

An in depth look into the market structure talks about the anatomy of price and cycles that forms as price develops. A microscopic look into the chart will show that there are trends and patterns within the very trends we are looking at, and inside those ones we still find more of the same structures. This is evident when we view the chart from the higher time frames like the monthly to the weekly, then daily, down to 4 hourly(H4), hourly (1H,2H) and finally to the minute time frames such as the 30m, 15m, 5m and 1m. To know more on this topic you can study the Elliott Wave theory, which delves into these waves in a comprehensive manner. For the scope of this book, we are going to look at “ multiple time frame analysis “.

MULTIPLE TIMEFRAME ANALYSIS

This concept is a form of analysis that takes the trader through different time frames so they  get a broader view of the market, this helps us to make a more informed decision on our trades. The market could be in an uptrend on the daily time frame but when you check the 1 hour time frame we can see that it’s in a downtrend, this downtrend is just a retracement of the bigger trend on the daily, so one could make a mistake to enter a sell trade based on the 1H, whereas the major move is bullish.

The chart below shows the EURJPY on the Daily time frame, we can see clearly that as the market moves in a down trend there are times when it shifts in a bullish fashion, these are call retracements or pullbacks, the same thing is identified when it’s moving in a bullish or uptrend, we also see that there are downwards retracements that occur before it continues in the original direction. These retracements when viewed on the lower time frame can be seen as a normal trend if one just views only that time frame.

This is the reason why a trader cannot be fixated on a timeframe. Instead , by identifying the major trend on a high time frame we go lower to execute trades. Different kinds of traders have different views on the market, but whether you decide to be a long term trader(position trader) or a medium term trader( swing trader) or a short term trader ( day trader or scalper), having a multiple time frame or top down approach filters your trades and gives you the right bias when taking trades.

SUPPORT AND RESISTANCE LEVELS

This is a critical component in trading analysis and market structure because as technical analysts we believe that past occurrences repeat themselves.

A support level is a point where price has reversed and continues in a bullish or upwards way. It  is seen to be vital because in most cases price reacts when it approaches this level. When this happens within a price range it is called a Demand zone. We can draw support levels by connecting the lows on the chart and wait for price to attempt these levels.

Regular support happens after a down trend, as we see in the chart above price gets rejected severally at a support level. A triple bottom is formed and the price rockets up.

A resistance level is a point where price has reversed and continues in a bearish or downwards manner. Whenever the price reaches this level again we tend to get a reaction or rejection of that level. When this happens in a price range we call it a Supply zone.

From the chart above the price goes up and forms a resistance where price strongly rejects when it happens the 3rd time.

SUPPLY AND DEMAND ZONES

The supply and demand ones are similar to the support and resistance but in this case instead of a line of rejection, we are looking for a zone or price range.

Identifying and trading the Demand and supply zone is more complex, but the simplest way is to identify a bullish or bearish candlestick pattern and mark out the high and low of the smaller candle. This idea behind the demand and supply zones is that the big money traders often use these zones as a primary reentry level because this is where the smart money have entered their trades initially.

Example of demand and supply zones

Below we see another area and how prices react when they approach genuine zones of supply and demand.

These areas are used to determine when to exit when traders are in a trade, because we assume that when the price gets there it will reverse.

DIVERGENCE TRADING IN FOREX

Divergence simply means a contrary move of the oscillator in relation to the price on the chart. It  is one of the best concepts in trading. It is often overlooked but when perfected could help change the prospect of a trader and give more wins over time.

It’s a leading indication that price is about to change direction and reverse a trend to a new direction or continue in the original trend. Some indicators used to identify divergence are the MACD, OSMA, RSI, CCI, STOCHASTIC.

There are two types of divergence, the Regular and the Hidden divergence.

The Regular divergence is seen when a trend is about to end. In an uptrend, when the price is making higher highs and lower highs, most traders would want to know when the trend is getting weak, one easy way to know this is with the use of the regular divergence.

The Hidden divergence however is different in the sense that it is a signal of a trend continuation, and is identified when the reversal of a trend is ending and the trend wants to continue. Below is a bullish hidden divergence.

As we can see on the above chart, as the price was going high, there is a time when we witness a slight retracement (some buyers are taking profit, and price weakens), but because there is still buying or bullish strength the price continues going higher. The indicator shows a contrary move at this time telling us that the market is ready to continue on its original trend. See chart below, bullish hidden divergence using stochastics indicator

Here is a bearish hidden divergence on the chart below using  both the stochastic and Osma.

False divergence

Sometimes divergences fail, especially the regular divergences.  The chart below we see a regular divergence, notice that it’s just a minor retracement and price then continues in the original trend.

TRADE MANAGEMENT STRATEGIES

There are different ways to manage trades in forex and all are good depending on the trading strategies we employ. The traditional way is to enter a buy or sell trade and place your stop loss and take profit at your desired level. Let me tell you right now that this is one of the reasons you are not making money from your trades. Have you ever had a situation where you have entered a trade and you are sure of the direction but price quickly hits your SL and then goes back to your direction. You curse the broker and swear that evil spirits must be after you.in trading. Most of our trades would have turned to winners if only you knew how to manage them. Here are three commonly used trade management systems that elite traders use to manage their trades, each is used based on the trading strategy.

GRID systems

The grid system adds up to trades as they proceed in our favor or against us. Basically we don’t just open all our trades at once, instead we split them into bits,  so if the price goes against us we add the same lot size at different price gaps with the intention that the price will go in our original direction. This gives us more profits when trades initially move against us before moving in our favor.

Alternatively, we add to existing trades when the price starts moving in our favor and we have determined the trend.

On the chart below, we get a sell entry signal on the EURJPY, I marked different points of trade, TRADE1, TRADE2 AND TRADE3

At these points signified we would have entered 0.1 lots at the entry level, instead of going in full with a 0.5 lot, what we saw was that the price returned to our original sell direction and we would be in profit earlier instead of waiting for the price to fall  immediately  after the first entry.

The characteristics of a grid system is the division of trades, it should have  uniform STOP LOSS(SL) and the TAKEPROFIT(TP) is defined by the trader which will be either  in pips or the dollar value.  Grid trading could be a risky strategy in the hands of amateur traders, but trading this system along the trend of the market reduces the risk significantly.

MARTINGALE system

The martingale is quite similar to the grid system, but the major difference is that we double the lot size of the trade when price moves against us a certain level of pips (gap). In each case we adjust the take profit to the size of the original trade and use a multiplier of 2. The math here is that when our latest trade goes our direction and closes in take profits, our aggregate trades end in profit. Lets look at an example:

Using the same chart, if we started with 0.1 and used a take-profit of 20 pips, at TRADE 2 we would open with 0.2, doubling our initial lot size, and at TRADE 3, we would open with 0.4 lot size, and adjust all take profit to the take-profit of the latest trade, so when the TRADE 3 eventually moves in the direction of our trade by 20 pips: all the trades will be closed and we would be left with something like this (0.4 x 20) + (0.2 x 0) + (0.1 x -20) = +60. The price could move more and give more profits when we manually monitor trades

The characteristics of the martingale is that we double our bet, when we lose with the hope that the next one will go in our favor and wipe off the initial loss, we also use a common gap between trades and set the trades at the same take profit. The trader is at the discretion to choose the initial lot size based on the equity, as this system could quickly increase our floating loss or drawdown. But when calculated we can quickly raise our capital with this system if we are on the right side of the trend and our entries are well thought out.

HEDGING system.

Unlike the grid and martingale, the hedge tends to open the opposite side of the initial trade, when price goes against us. There are two basic ways to run a hedging system, the first closes out the first trade in loss and opens an opposite trade while doubling the initial lot size, if this second trade closes in profit we have an aggregate win. Alternatively when this second trade also fails, we open the opposite of the first trade, while increasing the lot size of the third trade. When the 3rd trade closes in profit the entire 3 trades will aggregate a win. This is called the switch hedge.

The traditional hedge however runs all trades concurrently until all trades are in profit and the whole system closes when the last trade hits take profit.. With this type of hedging our lot sizes are in this format e.g 1,3,5,8 and same take profit, so when the latest trade reaches the take profit , the aggregate ends profitable. This system requires heavier equity or capital. And should be avoided when trading  a range market. Traders use this for news trading, when there are quick moves in one or more directions. Let’s see a sample trade below:

In the chart above, let’s say there is a signal to trade, we take the first trade SELL1 with 1 lot at Stop loss of 30 pips and take profit of 30 pips, when price moves against the trade and gets to our stop loss, we have a BUY2 of 2 lots with stop of 30 pips and tp of 30 pips, but as news came out and the price again goes down to the stop loss of BUY2 and  we open a SELL3 trade with 4 lots which eventually hits the target , when we check the aggregate of all trades (4×30)+(2x-30)+(1x-30)=$30. The trader can of course adjust lot sizes, take profits and stop-loss to manage risk and outcome of the hedge.

RISK / MONEY MANAGEMENT IN FOREX

This topic is the most overlooked in forex. It is the reason why most retail trades lose at their quest to be profitable. Because forex is seen as a get rich quick scheme, we come in with our $100 and want to turn it to $1,000 in a short time, which is a 1000% increase. Nothing could be far from the truth and this is a gambling mentality.A seasoned professional trader targets just 20% in annual Return on investment yearly. They risk a maximum of 2% of their capital on each trade, with the mindset that they can’t be right all the time. They know that trading is a game of probability, so they are not chasing the market or telling it what to do. They have a defined trading plan and follow it religiously and repeat the same thing every day. They know that in the end if they are disciplined enough, statistics will be in their favor.

This will inform our agenda when we create a trading strategy, because we want something that gives us at least a risk to reward of 1:2 and with a win rate of 50% minimum. The lower the risk:reward the win rate should be higher, but we know from experience that the win rate should not be lower than 40%, so even if we lose 6 trades x1 risk and gain 4 trades x 2 rewards , we still have an aggregate of +2 gain. When this is sorted out, all we need to do is stick to a risk % per trade cycle.

BUILDING A TRADING STRATEGY

Putting it together, you should know that a strategic plan is needed to approach this trading game, we don’t want to gamble our money away  But where do you start;

First, we need to identify what kind of trader we want to be; a scalper, day trader, swing trader or position trader. By virtue of the amount of capital we have as retail traders we naturally fall into the day trading or swing trader class. Now if you are the busy type you can consider a strategy that is swing in nature, here you won’t be watching the charts all the time, looking at 1H,4H and D1. but if you have all the time in the world, you could be a scalper or day trader, watching the 5m to 60 m time frames for trade signals and entries.

Secondly, I recommend trading with the trend as they say “ the trend is your friend”, it’s better to go with the flow of the river and move along with the big money. When you do this you place yourself in a higher probability for success.

Thirdly , we need to know the indicators to use for determining the trend, and also where to join the trend to determine the minimal drawdown or risk on equity, before the market continues with the trend. If we look at past charts and identify a trend, we can manually decide where we would have liked to join the trend, our aim is to find a methodology to trade in this area or time. What we need are leading indications, which tell us that price will make a move before it does. Leading indicators can be oscillators and divergence on the chart.

Fourth, after identifying the impending trend or change of trend on a high time frame, we need to go to a lower time frame and fine tune our entry. This is vital to reduce our overall risk.

Finally, we initiate the trade, using one of our trade management systems and then determine the exit of our trade using valid support or resistance levels or demand and supply zones.

This is  how the mindset of a trader should be when creating a strategy. All boxes must be checked, because when a trader opens a trade there is a psychological change  that occurs in the mind, that only a predetermined plan can control. We must know what to do from the beginning to the end of a trade cycle, having total control of the process.

In any case, know that you are part of the strategy, and as they say, a strategy is as good as the traders who execute it.

One piece of advice here is to avoid the big news when we trade. This is because these are the times of unpredictable volatility, increased spreads that lead to high cost of trades, slippages which often execute your trade at a price that isn’t your desired entry and so on. So, unless the strategy is for news trading, it’s best to avoid the high impact news totally.

PSYCHOLOGY OF TRADING

Believe me, as someone that has been in forex trading for more than 10 years, off and on, we need shrinks to check us from time to time. Never think that as a beginner you can navigate this waters alone. In this sea there are more whales and sharks, and you can be eaten up easily if you don’t have the right guide.

You may have heard that 90% of traders lose their money and statistics have it that 95% lose at their first try. This industry cares less about your grade in school and be sure to be well baptized when you start. I am not saying this to scare you, but when you approach this with the right mindset, you can become a consistently profitable trader in a short time. There are 3 areas of human psychological areas to cover here;

DISCIPLINE

Simply put, without discipline  you can never make it in trading. A disciplined trader follows his or her trading rules to the letter and never deviates from the trading plan. It’s the ability to follow a routine religiously. Traders often practice some daily ritual to keep their mind in shape, just the way you are expected to make your bed every morning when you wake. I can bet most don’t do that. It helps the subconscious to be informed when it’s time to trade.

PATIENCE

Did you know that 90-95% of the time we spend trading is a waiting game, looking out for potential signals that will lead to trades, sometimes these signals are not valid and we have to skip and continue waiting. For an impatient mind, you can open a trade when all the boxes are not checked, this happens to traders everyday, especially the overconfident traders who fall into this trap. One way to practice patience is to watch your meal when you are served for a minimum of 3 minutes before eating. When you do this you are gradually building your ability to be patient, for me I code my signal and launch it on a VPS which sends me an alert to check my chart for potential trades. This way I am absorbed from frequent glances on my platform looking for what is not there.

GREED

This is another demon in trading when you approach forex like a gambling. You can be overtaken by greed or over confidence while trading and believe that the market is obedient to our strategy, so we want to increase our lot size and hit it big.. My dear, it’s the devil in your head, cast and bind that thought immediately it arises, else you will surely regret it. Always following your risk management rules will help you mind long term, remember you are a pro or hope to be one. So see this from a long term and little drops eventually will fill the bucket. Psychology determines 80% of a trader’s fortune and success.

Stage 3

TYPES OF FOREX BROKERS

As mentioned earlier in this book, forex brokers are the intermediary between the trader and  the market. They are like our normal commercial banks and through them we get live feeds of the price of different currencies and assets.

There are different kinds of brokers in the forex industry. Some are regulated while others are loosely regulated. Most brokers operate from tax havens countries like Dominican Republic, Seychelles, Cyprus and so on, while the serious ones have their head office in the US, Australia and UK where the regulatory agencies are more serious. I don’t need to tell you that the ones in task havens are not as strong as the latter. However, there are reliable ones that are honest. Because of the nature of the forex industry, some unscrupulous element can buy a license with the MT4 platform, pay  for liquidity feed and start offering services to customers without full compliance to the rules guiding the industry.

A good broker should be able to versatile and insure traders funds in case of mishap. They don’t trade against their traders or hunt your stops, and will provide best services like tight spreads, quick funding and payouts and of course have a robust internal control mechanism.

What you need to know is that we have the A books brokers and the B book broker.  A book brokers channel your trades directly to the liquidity and depend only on the spreads on each trade you place while the B book brokers don’t pass your trades to the liquidity with the hope that you lose your money and they keep the physical cash you paid in their banks. These brokers go to the length of trading against you and often don’t like keeping very good traders on their books. In reality, most of them operate both books and separate the good traders from the bad ones.

To know a good broker, one can do a simple search on the internet, goto websites like the FOREXPEACEARMY to find out about complaints generally about forex businesses. Personally I use HF Markets and XM. US based brokers are well regulated if you don’t mind reduced leverage of 1:50.

PROP FIRMS

Lately, there has been a rave of companies that have come out to fund traders who need more capital to enhance their profits. In 2015, a firm called FTMO became very popular by offering this service to traders, with different account sizes ranging from $5,000- $200,000 to manage when you pay a refundable fee. A set of trading rules which the traders will achieve before you are funded as a trader. Some of these rules are; 5% daily drawdown, 10% overall drawdown in 30 days, and a target of 10% to be achieved in the next 30 days, other rules are no news trading, no holding of trades over weekend and no robot trading. New firms have since opened with lesser strict rules like MFF, FundedNEXT, True Forex Funds, Surge Trader to mention a few, they all come with different conditions attached to their challenge and evaluation phase This offers sounds mouth watering to the average Joe, but when we look closely, we see that it’s a difficult hurdle to cross.

Imagine offering you a $100k account and asking you not to lose $10k and still make $10k in 30 days. This simply means that you have only $10k to work with and  have to make $10k(100%) to pass the first stage. Ask yourself a simple question, do you make 100% in your personal trading monthly, or even in 2 months? No wonder the failure rate is quite high. Prop firms are not meant for newbies or intermediate traders, but for those that have cut their teeth in this business. Before considering  Prop firms we are meant to have consistency in our normal trading accounts, else you would be throwing your entry fees to the sharks.

SIGNAL SERVICE VS COPYTRADE / PAMM ACCOUNTS

The forex industry has developed a lot over the years. There has been bad news of people losing their funds to get rich quick schemes that have sold us the idea of passive returns on investment and most have gone down the gutter.

However, there still exist genuine individuals that are consistent and honest. They offer Signal services to traders, who trade them directly on their own, so in this way at least you as a trader can be in control of your funds.

Some brokers have gone a step further to create software where Master traders can allow clients to follow their trades automatically by linking their accounts together, so when the master account has a trade it is automatically sent to their clients account. This is called COPY trading. A PAMM account is similar to the copy trading but in this case all the monies being managed by the master trader is merged together in a pool and he trades them as one account. In either case there is a defined sharing formula which is split on every cycle period.

One advantage a trader gets with signal services and copy trades is that you can  take trades along with the incoming trades, but this cannot happen with a PAMM account. However the lag that could occur with signal services, sometimes the time it takes from when we get the signal and then actually taking the trades could mean missing out on moves. Ultimately, I always advise checking out the traders statistics on his or her profile  with the broker and linking account.

FOREX ROBOTS/EXPERT ADVISER

If you have ever imagined sitting back and watching your account grow while some agents or subjects are doing the entire work, you are not alone. Many have had dreams of making the stressful work of trading less complicated. This is  the world of FOREX ROBOTS or EXPERT ADVISOR.

Forex experts advisors or robots are softwares coded using the trading strategy to create a partial or fully automated trading robot that manages the account of a trader. The programming language used for this is called the Meta quotes language 5 for the MT4 and MT5, if you visit the webpage mql5.com, you would get a lot of robots and indicators, some are free and others come with a fee. There are thousands of robots and custom indicators you can use to enhance your trading.

If you have a good idea for a trading strategy and feel it can be automated, you can hire a programmer for a fee and get it done on https://www.mql5.com.

Personally, I believe you can make your trades earlier by using robots or custom indicators to reduce the stress of trading, but not in a fully automated way. I have indicators that are hooked up to MT4 and launched on virtual private servers, they send me alerts of an impending trade and this is when I go to my chart to run final analysis and take trades manually. This helps to reduce screen time and eliminates guess works and anxiety of excessive chart monitoring.

I am sure some of you will not want to share your idea with a programmer who doesn’t know the stress you have gone through to get this secret strategy. Welcome to the world of forex robot builders. Some smart guys have made it possible to create your custom indicator and robots by applying the rules and algorithms in their software and in less than an hour you can create a software. There are many such softwares online, but I use eabuilders.com. Note that you need to pay to access some services with these companies. It’s a small price to pay and saves a lot of money paid to programmers, plus you have the ability to continue editing your strategy until you have created your ATM machine.