FOREX INTRODUCTION

Welcome to this, your first lesson in our RICH fx Course. We hope you find the content interesting, informative and helpful to your trading future. In this first lesson you will learn about all the basic information regarding the Forex market. While these following lessons will cover a large number of concepts and ideas in great depth, more detail and advanced trading ideas are available in the RICH fx Advanced Training available at www.richfx.blogspot.com
In any kind of business, from selling used cars to trading the Forex market, it is important to understand every aspect of the market, from the very essentials to the most complex issues that affect it.
Picture this scenario, if you were to adventure into the used cars business, would you just buy a car lot and try to sell them without any planning? I don’t think so, if you do this you will probably end up with a different car to use each day of the week. What would you do then? You will probably want to do some research on the market in which you are about to venture: Who are my possible clients? Check out strategies and prices of competitors, do some analysis of advantages and disadvantages of the used car market, and much more…
The same goes for trading. I’ve seen many traders getting a margin call (MC) without being aware what kind of leverage was being used when the MC happened and some other traders without even knowing what a margin call was!! (If you are not familiar with these terms, don’t worry about it, we will go through them in the following lesson).
In this lesson, we will analyze every aspect of Forex trading, from how it was formed, the main participants, advantages and disadvantages of trading the Forex market, how the Forex market compares to futures and equity markets and all concepts related to Forex trading.

THE FOREX MARKET

What is The Forex Market?
The Forex market is an acronym of The Foreign Exchange Market also called The Currency Market.

What is traded in the Forex Market?
Money, as simple as that!
Currencies are bought and sold freely. This is the simultaneous buying of one currency and the selling of another.
For instance, you have some inside information that leads you to think that the Euro will go up, you want to buy the Euro pair (or EUR/USD). When you buy the EUR/USD pair you are actually buying the EUR and selling the US dollar. When you buy the EUR it is also said that you are “long” the EUR. When you sell the EUR it is also said that you are “short” the EUR.
More than 80% of the volume is generated by what we call the seven major currencies:

• The US dollar (USD)
• The Euro (EUR)
• The British Pound (GBP)
• The Swiss Franc (CHF)
• The Canadian dollar (CAD)
• The Australian dollar (AUD)
• The Japanese Yen (JPY)
•  

When did it at all start?

You could not say it all started after a sole event. A series of events happened and in the end it resulted in the Forex market, as we know it today.
It all started when the Bretton Woods agreement was finally abandoned around 1971.
In this agreement, participating countries had their currency pegged to either the gold or the US dollar. By 1973 the most powerful countries around the globe introduced a free exchange rate regime where they let their currencies fluctuate driven by the market or more precisely by the forces of supply and demand. It was then when the Forex market was available to speculate, hedge as well as other reasons.
It was not until 1997 when the Forex market became available to individual investors and traders through online trading capabilities and leverage (margin trading), offering traders around the world great opportunities to profit from the Forex market.
The Forex market is now the most liquid financial market of the world, with a generated volume of nearly 4 trillion US dollars (source: BIS) on a daily basis (more than all other US financial markets combined).

Benefits of Trading Forex

Trading the Forex market has several advantages over other financial markets. Amongst the most important are: liquidity, it’s a 24hr market, leverage trading (margin), low transaction costs, low minimum investment, specialized trading, you can trade from anywhere and others.
Accessibility – It’s no wonder that the Forex market has the trading volume of 3 trillion a day ‐ all anyone needs to take part in the action is a computer with an internet connection.

Liquidity - The foreign exchange market is the largest financial market in the world with a daily turnover of just over $3 trillion! Now apart from being a really cool statistic, the sheer massive scope of the Forex market is also one of its biggest advantages. The enormous volume of daily trades makes it the most liquid market in the world, which basically means that under normal market conditions you can buy and sell currency as you please. You can never be in a jam for currency to buy or stuck with currency that you can’t unload

24hr Market - The Forex market is open 24 hours a day, so that you can be right there trading whenever you hear a financial scoop. No need to bite your fingernails waiting for the opening bell.

Narrow Focus – Unlike the stock market, a smaller market with tens of thousands of stocks to choose from, the Forex market revolves around more or less eight major currencies. A narrow choice means no rooms for confusion, so even though the market is huge, it’s quite easy to get a clear picture of what’s happening.

The Market Can’t Be Cornered ‐ The colossal size of the Forex market also makes sure that no one can corner the market. Even banks don’t have enough pull to really control the market for a long period of time, which makes it a great place for the little guy to make a move.

Leveraged Trading - Forex trading gives much more buying/selling power than many other financial markets. This allows us to control greater transactions with a small margin deposit. Some brokers offer up to 400:1 leverage, meaning that you can control for instance a 100,000 US dollar transaction with just .25% or US$250. This also allows us to keep our risk capital at the minimum.
However, beware as this is a double-edged sword. If the leverage is not properly used, this could also be a disadvantage. The more leverage you use, the more of your account is at risk.
Imagine this scenario: Two traders with the same capital using different leverage:
Trader A: using 400:1 with a US$2,000 trading account
Trader B: using 100:1 with a US$2,000 trading account
If both of them open a standard trade (100,000 units) trader A will have at risk US$1,750 (2,000 – 250 = 1750) while trader B will only have at risk US$1,000 (2000 – 1000 = 1000)*.
*Of course there are risk management techniques that allow traders to reduce that amount of risk such as stop loss orders. We will go deeper in to this in the following lesson...
For this reason, using leverage greater than 100:1 is not advised.
Remember: the margin is used as a deposit; everything else is also at risk.

Low Transaction costs - The Forex market is considered one of the markets with the lowest costs of trading. Most brokers collect their fees based on two schemes:
Spread – Brokers collect their fees by charging a different price for long and short positions. The difference is what is collected by the broker.
Spread and Commissions – Most brokers under this scheme charge a commission but usually the spread is tighter and transaction costs can even fall below brokers under the spread “only” scheme.

Low minimum investment - The Forex market requires less capital to start trading than any other markets. Some brokers allow traders to open trading accounts with an investment that could go as low as US$1 (yes, you read that right, that is one US dollar.) On average however, brokers allow traders to open accounts with around US$250.
Of course, you can’t expect to make a fortune with that investment but it will get your feet wet before you start risking a larger amount of capital or you can try to slowly start growing your account from there.

Specialized trading - The liquidity of the market allows us to focus on just a few instruments (or currency pairs) as our main investments (85% of all trading transactions are made on the previously mentioned seven major currencies). This allows us to keep track of, monitor and get to know each instrument better.

Trading from anywhere - Not having a physical location where all transactions take place (OTC), allows us to trade from anywhere in the world. We only need either a phone line (where you can have direct access to the brokers dealing desk) or an internet connection (through an online platform).
Below, comparative tables between the Forex market and other financial markets.

Leveraged Trading - Forex trading gives much more buying/selling power than many other financial markets. This allows us to control greater transactions with a small margin deposit. Some brokers offer up to 400:1 leverage, meaning that you can control for instance a 100,000 US dollar transaction with just .25% or US$250. This also allows us to keep our risk capital at the minimum.
However, beware as this is a double-edged sword. If the leverage is not properly used, this could also be a disadvantage. The more leverage you use, the more of your account is at risk.
Imagine this scenario: Two traders with the same capital using different leverage:
Trader A: using 400:1 with a US$2,000 trading account
Trader B: using 100:1 with a US$2,000 trading account
If both of them open a standard trade (100,000 units) trader A will have at risk US$1,750 (2,000 – 250 = 1750) while trader B will only have at risk US$1,000 (2000 – 1000 = 1000)*.
*Of course there are risk management techniques that allow traders to reduce that amount of risk such as stop loss orders. We will go deeper in to this in the following lesson...
For this reason, using leverage greater than 100:1 is not advised.
Remember: the margin is used as a deposit; everything else is also at risk.

Low Transaction costs - The Forex market is considered one of the markets with the lowest costs of trading. Most brokers collect their fees based on two schemes:
Spread – Brokers collect their fees by charging a different price for long and short positions. The difference is what is collected by the broker.
Spread and Commissions – Most brokers under this scheme charge a commission but usually the spread is tighter and transaction costs can even fall below brokers under the spread “only” scheme.

Low minimum investment - The Forex market requires less capital to start trading than any other markets. Some brokers allow traders to open trading accounts with an investment that could go as low as US$1 (yes, you read that right, that is one US dollar.) On average however, brokers allow traders to open accounts with around US$250.
Of course, you can’t expect to make a fortune with that investment but it will get your feet wet before you start risking a larger amount of capital or you can try to slowly start growing your account from there.

Specialized trading - The liquidity of the market allows us to focus on just a few instruments (or currency pairs) as our main investments (85% of all trading transactions are made on the previously mentioned seven major currencies). This allows us to keep track of, monitor and get to know each instrument better.

Trading from anywhere - Not having a physical location where all transactions take place (OTC), allows us to trade from anywhere in the world. We only need either a phone line (where you can have direct access to the brokers dealing desk) or an internet connection (through an online platform).
Below, comparative tables between the Forex market and other financial markets.

Forex vs. Equities

Currency Trading Basic Concepts

How to Read a Forex Quote

Currencies are always quoted in pairs, such as GBP/USD or USD/JPY. The reason they are quoted in pairs is because in every foreign exchange transaction, you are simultaneously buying one currency and selling another. Here is an example of a foreign exchange rate for the British pound versus the U.S. dollar:

The first listed currency to the left of the slash ("/") is known as the base currency (in this example, the British pound), while the second one on the right is called the counter or quote currency (in this example, the U.S. dollar).
When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency. In the example above, you have to pay 1.51258 U.S. dollars to buy 1 British pound.
When selling, the exchange rate tells you how many units of the quote currency you get for selling one unit of the base currency. In the example above, you will receive 1.51258 U.S. dollars when you sell 1 British pound.
The base currency is the "basis" for the buy or the sell. If you buy EUR/USD this simply means that you are buying the base currency and simultaneously selling the quote currency. In caveman talk, "buy EUR, sell USD."
You would buy the pair if you believe the base currency will appreciate (gain value) relative to the quote currency. You would sell the pair if you think the base currency will depreciate (lose value) relative to the quote currency.

Long/Short

First, you should determine whether you want to buy or sell.
If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader's talk, this is called "going long" or taking a "long position." Just remember: long = buy.
If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called "going short" or taking a "short position". Just remember: short = sell.

Bid/Ask

"How come I keep getting quoted with two prices?"

All forex quotes are quoted with two prices: the bid and ask. For the most part, the bid is lower than the ask price.
The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency. This means the bid is the best available price at which you (the trader) will sell to the market.
The ask is the price at which your broker will sell the base currency in exchange for the quote currency. This means the ask price is the best available price at which you will buy from the market. Another word for ask is the offer price.

The difference between the bid and the ask price is popularly known as the spread.
On the EUR/USD quote above, the bid price is 1.34568 and the ask price is 1.34588. Look at how this broker makes it so easy for you to trade away your money.
If you want to sell EUR, you click "Sell" and you will sell euros at 1.34568. If you want to buy EUR, you click "Buy" and you will buy euros at 1.34588.

Pips and Pipettes

Here is where we're going to do a little math. You've probably heard of the terms "pips", "pipettes", and "lots" thrown around, and here we're going to explain what they are and show you how they are calculated.
Take your time with this information, as it is required knowledge for all forex traders. Don't even think about trading until you are comfortable with pip values and calculating profit and loss.

What the heck is a Pip? What about a Pipette?

The unit of measurement to express the change in value between two currencies is called a "Pip". If EUR/USD moves from 1.2250 to 1.2251, that is ONE PIP. A pip is the last decimal place of a quotation, given that four decimal places are used for pairs without the Japanese yen. If a pair does include the Japanese yen, then the currency quote goes out two decimal places.
Very Important: There are brokers that quote currency pairs beyond the standard "4 and 2" decimal places to "5 and 3" decimal places. They are quoting FRACTIONAL PIPS, also called pipettes. For instance, if GBP/USD moves from 1.51542 to 1.51543, it moved ONE PIPETTE.
As each currency has its own value, it is necessary to calculate the value of a pip for that particular currency. In the following examples, we will use quotes with 4 decimal places.

In currencies where the U.S. dollar is quoted first, the calculation would be as follows:

USD/CHF at 1.5250

.0001 divided by exchange rate = pip value
.0001 / 1.5250 = 0.0000655

USD/CAD at 1.4890

.0001 divided by exchange rate = pip value
.0001 / 1.4890 = 0.00006715

USD/JPY at 119.80

Notice this currency pair only goes to two decimal places (most of the other currencies have four decimal places). In this case, 1 pip would be .01.
.01 divided by exchange rate = pip value
.01 / 119.80 = 0.0000834

In the case where the U.S. dollar is not quoted first and we want to get the U.S. dollar value, we have to add one more step.

EUR/USD at 1.2200

.0001 divided by exchange rate = pip value
So .0001 / 1.2200 = EUR 0.00008196
BUT we need to get back to U.S. dollars so we add another calculation which is
EUR x Exchange rate
So 0.00008196 x 1.2200 = 0.00009999
When rounded up it would be 0.0001

GBP/USD at 1.7975

.0001 divided by exchange rate = pip value
So .0001 / 1.7975 = GBP 0.0000556
BUT we need to get back to U.S. dollars so we add another calculation which is
GBP x Exchange rate
So 0.0000556 x 1.7975 = 0.0000998
When rounded up it would be 0.0001
You're probably rolling your eyes back and thinking "Do I really need to work all this out?" Well, the answer is a big fat NO. Nearly all forex brokers will work all this out for you automatically, but it's always good for you to know how they work it out.


Margin (Leverage)

Ok, if you are feeling tired by now, too much material, etc. take a rest; you are going to need it in this lesson.

Margin Trading
In contrast to other financial markets where you require the full deposit of the amount traded, in the Forex market you only require a margin deposit. The rest of the amount will be granted by your broker (you will borrow it from your broker).
The leverage could go as high as 400:1 depending on your risk profile and the broker chosen. 400:1 means that you will only need 1/400 in balance to open one position (plus the floating losses). Under this scheme, you only need .25% of the total amount traded.
For example, if you were to trade one standard lot using 400:1 (which equals 100,000 units of the base currency) you would only need $250 ($100,000/400 = $250) for indirect currency pairs [USD quoted as the base currency].
But be careful, HIGH LEVERAGE CAN LEAD TO SUBSTANTIAL LOSSES AS WELL AS SUBSTANTIAL PROFITS. We will get in to detail later on.

There are two things to be considered about margin trading:
1 - Margin trading allows us to keep our risk capital at the minimum since a small amount of money is used to conduct a bigger transaction.
2 - The greater the leverage used, the more risk capital you have at risk, and this takes us to the next concept…
Type of Orders

Orders
There are several ways in which a trader can get in and out the market. Different approaches (or trading strategies) require different ways to get in and out the market.
Entry Orders
Market order - Is an order to buy or sell a currency pair at the current market price. For instance, if the EUR/USD quote is 1.2538/41, using a market order will get you long at 1.2541 or short at 1.2538.
Limit order - This order allows us to get in the market below the current price (if we intend to go long), or above the market price (if we intend to go short.) This kind of market order is commonly used for a range bound strategy or by retracement traders.
Range-bound strategies: Buy at the bottom and sell at the top of a given price channel.
Retracement strategy: Waiting for a pull back (when trying to get long) or for a rally (when trying to get short) before entering the market.
Stop entry order - A stop entry order gets you in the market above the current price if you are trying to buy, or below the current price if you intent to sell. This kind of order is commonly used by breakout traders.
Breakout strategy: Waiting for the market to reach new highs/lows or break an important level before entering a trade.
Exit Orders
Limit order - A limit order (or take profit order) specifies at what rate you will exit the market to take profits. If a trader is long, the limit order must be above the entry price. If the trader is short, the limit order must be below his/her entry level.
Stop order - A stop order (or stop loss order) specifies the maximum loss you are willing to take on any given trade in terms of pips. If you are long, the stop loss order must be below the entry level; on the other hand, if you are short, the stop loss order must be above the current price.
Three Types of Market Analysis
To begin, let's look at three ways on how you would analyze and develop ideas to trade the market. There are three basic types of market analysis:

1. Technical Analysis
2. Fundamental Analysis
3. Sentiment Analysis

There has always been a constant debate as to which analysis is better, but to tell you the truth, you need to know all three.

It's kind of like standing on a three-legged stool - if one of the legs is weak, the stool will break under your weight and you'll fall flat on your face. The same holds true in trading. If your analysis on any of the three types of trading is weak and you ignore it, there's a good chance that it will cause you to lose out on your trade!

Technical Analysis

Technical analysis is the framework in which traders study price movement.
The theory is that a person can look at historical price movements and determine the current trading conditions and potential price movement.
The main evidence for using technical analysis is that, theoretically, all current market information is reflected in price. If price reflects all the information that is out there, then price action is all one would really need to make a trade.
Now, have you ever heard the old adage, "History tends to repeat itself"?
Well, that's basically what technical analysis is all about! If a price level held as a key support or resistance in the past, traders will keep an eye out for it and base their trades around that historical price level.

someone says technical analysis, the first thing that comes to mind is a chart. Technical analysts use charts because they are the easiest way to visualize historical data!
You can look at past data to help you spot trends and patterns which could help you find some great trading opportunities.
What's more is that with all the traders who rely on technical analysis out there, these price patterns and indicator signals tend to become self-fulfilling.
As more and more traders look for certain price levels and chart patterns, the more likely that these patterns will manifest themselves in the markets.

You should know though that technical analysis is VERY subjective.
Just because Ralph and Joseph are looking at the exact same chart setup or indicators doesn't mean that they will come up with the same idea of where price may be headed.
The important thing is that you understand the concepts under technical analysis so you won't get nosebleeds whenever somebody starts talking about Fibonacci, Bollinger bands, or pivot points.
Fibonacci ? Bollinger bands ? Pivot points ? !

Now we know you're thinking to yourself, "Geez, these guys are smart. They use crazy words like 'Fibonacci' and 'Bollinger'. I can never learn this stuff!"
Don't worry yourself too much. After you're done with the School of Pipsology, you too will be just as... uhmmm... "smart" as us.

Candlesticks Patterns

Fundamental Analysis

Fundamental analysis is a way of looking at the market by analyzing economic, social, and political forces that affects the supply and demand of an asset. If you think about it, this makes a whole lot of sense! Just like in your Economics 101 class, it is supply and demand that determines price.
Using supply and demand as an indicator of where price could be headed is easy. The hard part is analyzing all the factors that affect supply and demand.
In other words, you have to look at different factors to determine whose economy is rockin' like a Taylor Swift song, and whose economy sucks. You have to understand the reasons of why and how certain events like an increase in unemployment affect a country's economy, and ultimately, the level of demand for its currency.
The idea behind this type of analysis is that if a country's current or future economic outlook is good, their currency should strengthen. The better shape a country's economy is, the more foreign businesses and investors will invest in that country. This results in the need to purchase that country's currency to obtain those assets.
In a nutshell, this is what fundamental analysis is:

Later on in the course, you will learn which economic data drives currency prices, and why they do so. You will know who the Fed Chairman is and how retail sales data reflects the economy. You'll be spitting out interest rates like baseball statistics.
But that's for another lesson for another time. For now, just know that the fundamental analysis is a way of analyzing a currency through the strength or weakness of that country's economy. It's going to be awesome, we promise!

Sentimental Analysis

Earlier, we said that price should theoretically accurately reflect all available market information. Unfortunately for us traders, it isn't that simple. The markets do not simply reflect all the information out there because traders will all just act the same way. Of course, that isn't how things work.
Each trader has his own opinion or explanation of why the market is acting the way they do. The market is just like Facebook - it's a complex network made up of individuals who want to spam our news feeds.
Kidding aside, the market basically represents what all traders - you, Pipcrawler, Celine from the donut shop - feel about the market. Each trader's thoughts and opinions, which are expressed through whatever position they take, helps form the overall sentiment of the market.
The problem is that as traders, no matter how strongly you feel about a certain trade, you can't move the markets in your favor (unless you're one of the GSs - George Soros or Goldman Sachs!). Even if you truly believe that the dollar is going to go up, but everyone else is bearish on it, there's nothing much you can do about it.

As a trader, you have to take all this into consideration. It's up to you to gauge how the market is feeling, whether it is bullish or bearish. Ultimately, it's also up to you to find out how you want to incorporate market sentiment into your trading strategy. If you choose to simply ignore market sentiment, that's your choice. But hey, we're telling you now, it's your loss!
Being able to gauge market sentiment can be an important tool in your toolbox. Later on in school, we'll teach you how to analyze market sentiment and use it to your advantage like Jedi mind tricks.

Types of Charts

Let's take a look at the three most popular types of charts:

1. Line chart
2. Bar chart
3. Candlestick chart

Now, we'll explain each of the charts, and let you know what you should know about each of them.

Line Charts

A simple line chart draws a line from one closing price to the next closing price. When strung together with a line, we can see the general price movement of a currency pair over a period of time.
Here is an example of a line chart for EUR/USD:

Bar Charts

A bar chart is a little more complex. It shows the opening and closing prices, as well as the highs and lows. The bottom of the vertical bar indicates the lowest traded price for that time period, while the top of the bar indicates the highest price paid.
The vertical bar itself indicates the currency pair's trading range as a whole.
The horizontal hash on the left side of the bar is the opening price, and the right-side horizontal hash is the closing price.
Here is an example of a bar chart for EUR/USD:

Take note, throughout our lessons, you will see the word "bar" in reference to a single piece of data on a chart.

A bar is simply one segment of time, whether it is one day, one week, or one hour. When you see the word
'bar' going forward, be sure to understand what time frame it is referencing.
Bar charts are also called "OHLC" charts, because they indicate the Open, the High, the Low, and the Close for that particular currency. Here's an example of a price bar:

Open: The little horizontal line on the left is the opening price
High: The top of the vertical line defines the highest price of the time period
Low: The bottom of the vertical line defines the lowest price of the time period
Close: The little horizontal line on the right is the closing price

Support and Resistance

Support and resistance is one of the most widely used concepts in trading. Strangely enough, everyone seems to have their own idea on how you should measure support and resistance.
Let's take a look at the basics first.

Look at the diagram above. As you can see, this zigzag pattern is making its way up (bull market). When the market moves up and then pulls back, the highest point reached before it pulled back is now resistance.
As the market continues up again, the lowest point reached before it started back is now support. In this way resistance and support are continually formed as the market oscillates over time. The reverse is true for the downtrend.

Plotting Support and Resistance

One thing to remember is that support and resistance levels are not exact numbers.
Often times you will see a support or resistance level that appears broken, but soon after find out that the market was just testing it. With candlestick charts, these "tests" of support and resistance are usually represented by the candlestick shadows.

Notice how the shadows of the candles tested the 1.4700 support level. At those times it seemed like the market was "breaking" support. In hindsight we can see that the market was merely testing that level.

So how do we truly know if support and resistance was broken?

There is no definite answer to this question. Some argue that a support or resistance level is broken if the market can actually close past that level. However, you will find that this is not always the case.
Let's take our same example from above and see what happened when the price actually closed past the 1.4700 support level.

In this case, price had closed below the 1.4700 support level but ended up rising back up above it.
If you had believed that this was a real breakout and sold this pair, you would've been seriously hurtin'!
Looking at the chart now, you can visually see and come to the conclusion that the support was not actually broken; it is still very much intact and now even stronger.
To help you filter out these false breakouts, you should think of support and resistance more of as "zones" rather than concrete numbers.
One way to help you find these zones is to plot support and resistance on a line chart rather than a candlestick chart. The reason is that line charts only show you the closing price while candlesticks add the extreme highs and lows to the picture.
These highs and lows can be misleading because often times they are just the "knee-jerk" reactions of the market. It's like when someone is doing something really strange, but when asked about it, he or she simply replies, "Sorry, it's just a reflex."
When plotting support and resistance, you don't want the reflexes of the market. You only want to plot its intentional movements.
Looking at the line chart, you want to plot your support and resistance lines around areas where you can see the price forming several peaks or valleys.

Other interesting tidbits about support and resistance:

• When the price passes through resistance, that resistance could potentially become support.
• The more often price tests a level of resistance or support without breaking it, the stronger the area of resistance or support is.
• When a support or resistance level breaks, the strength of the follow-through move depends on how strongly the broken support or resistance had been holding.

With a little practice, you'll be able to spot potential support and resistance areas easily. In the next lesson, we'll teach you how to trade diagonal support and resistance lines, otherwise known as trend lines.

Trend Lines

Trend lines are probably the most common form of technical analysis. 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 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).

How do you draw trend lines?

To draw trend lines properly, all you have to do is locate two major tops or bottoms and connect them.
What's next?
Nothing.
Uhh, is that it?
Yep, it's that simple.
Here are trend lines in action! Look at those waves!

Types of Trends

There are three types of trends:

1. Uptrend (higher lows)
2. Downtrend (lower highs)
3. Sideways trends (ranging)

Here are some important things to remember about trend lines:

• It takes at least two tops or bottoms 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.
• Like horizontal support and resistance levels, trend lines become stronger the more times they are tested.
• 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!

How to Choose a Forex Broker ?

Sometimes it’s hard to make a decision with which Forex broker to open our trading account, there are just too many of them, and as the market becomes more popular there will we be more. Most of them have different features, capabilities, weaknesses and advantages, for this reason I have created a checklist that can help you decide the broker to use for your Forex adventure.

1. Is it Regulated?
The first question you have to ask to yourself is: is the broker I want to use Regulated? There must be no doubt about this first point. All regulated brokers must submit financial reports to regulatory authorities, and when they fail to do it, authorities have the right to charge them or terminate their membership. This forces Forex brokers to keep transparent financial reports.
The brokers must be regulated by their local regulatory authorities, for instance, for brokers based in the US, they must be regulated by the NFA (National Futures Association) and CFTC (Commodity Futures Trading Commission), Swiss based brokers must be regulated by the FDF (Swiss Federal Department of Finance), brokers in UK must be regulated by the FSA and so on.
Also when a Forex broker is regulated it allows investors to dispute any resolution, increasing the investor protection.

2. Trading Conditions
This point refers to the features of the trading platform and the trading conditions with the chosen broker. Amongst the most important factors are:
Spread - Obviously the smaller the spread on currency pairs the better the conditions are for investors and traders.
Platform execution - Trading execution refers to how fast and consistent are the execution of trades. Some brokers guarantee fast and transparent executions during normal market conditions.
Fractional trading – Some brokers allow investors and traders to trade on a fractional basis, instead of trading full lots “100,000 units” or “300,000 units”, they allow you to trade “163,345 units” or “325,911 units”. This is very helpful for trades risking a certain percentage of their balance on each trade.
Safety of funds – We need to make sure our trading funds are kept in a segregated account or at least insured.
Trading platform – Easy to use and understand platform, is it reliable during fast moving markets? And what extra features it offers.
Minimum investment – What is the minimum amount of money required to open a trading account? This aspect is very useful because before trading your full account, you need to test the waters and see how well you perform with an account containing limited funds (after trading a demo account).
Margin (leverage) – What kind of leverage can be used with the chosen broker? Just to make sure our leverage requirements by our Forex strategy and methodology (leverage above 100:1 is not advisable).
Commissions – Some brokers charge commission, it is ok if they do if the spread is smaller than other brokers.
One click dealing – If your trading style is for the very short term and you need to get in the market as fast as possible once you get your signal this might be a good feature for you.
Advanced type of orders – Your strategy might need to be to use two orders and once the first once gets triggered you want your platform to cancel the other (OCO orders), etc.
Support for mobile devices – excellent when you have a day job and need to be connected to monitor your trades at all times.
Trade directly from the chart – Some traders like to trade directly from the chart, sometimes it can take a few seconds to switch from the chart to your quote panel where you enter your trades.
Trailing Stop – Nice feature for trend traders and traders who like to lock in some profits as soon as the market moves in their favor.

And there are might be other features that could facilitate your trading experience.
Try to have a list of those features so you can test them on many platforms. Take in consideration that probably you won’t find a single broker with all the features you are looking for, so you will need to stick to the ones that have the features you feel are most important to you

3. Diligence
Hopefully you have shortlisted some brokers at this point. You should have 3 or 4 finalists. In this step do some research on forums, ask other traders about their experiences using their brokers, and so forth.
Some forums where you can ask for broker information are: ForexFactory, BabyPips, ForexNews. There are also some review sites where you can post your reviews and read what others are saying about specific brokers: ForexBastards, TheForexReviewer and Forex Anonymous. Be careful though, some of these reviews might be generated by the same person who really got pissed at the broker for something irrelevant: like an order not filled during an important announcement (we all know it is difficult to get one filled due to the volatility), etc. Please focus on those reviews that really say something relevant and give some kind of “proof” of what they are saying.

Amongst the aspects you should ask and get informed are:
Customer service – This aspect is the most important of them all, are they rude to customers? Are they willing to help customers? These are the questions you should ask in forums and fellow traders.
Slippage – Slippage is the difference between the price where the trade was executed and actual value of it. Do they honor stop loss and take profit levels? Do they guarantee it? If any one had any discrepancies, did their broker reverse the result?
Manual execution – Some brokers don't like scalpers, if they catch someone doing it, they will put this trader into manual execution, so a dealer (human) must accept all transactions made by this trader. Do they do this?
Re-quotes – a re-quote happens when you click the buy/sell button and the platform doesn't accept our price, so it will give us another quote for that particular trade.
If brokers are registered by their local regulatory authorities, you can visit the regulator website and you will find plenty of information about Forex brokers. Some of them publish resolutions regarding Forex brokers.

4. Testing
In this phase we should test your final list, first on a demo account to see how it works, if it fits your trading style and your system. If you are satisfied with the results, then try the same platform with limited funds to see how it performs on real trades. If you are satisfied again then open your full trading account with the chosen broker.
I hope this checklist help you all take the right decision when choosing brokers.

Congratulations! You Made It!

Are you scared now?
Good!
We just did that to make sure you understand that even though you've got to have fun in everything you do, forex trading is serious business and you have to approach it that way.
With all that said, anyone with the passion and commitment to learn this business has the chance to get their piece of the pie and then some.
Yes, you can make it, but before beginning your Forex trading adventure, here are a few lessons we've learned that we'd like to share to help you get started on the right path.

 You, The Successful Trader

These things are what you do to ensure your long- term success

You plan every trade on paper – before entering it
Set clear goals: Yearly , Monthly , Weekly
You journal every trade
You master the basics, and practice key skills to build competence
You stick with what you know
You keep a journal, to build on success and learn from mistakes
You monitor yourself, and develop yourself
You study and learn continually – with focus on full comprehension
You manage your money and your risk –constantly
You keep your pride and ego in check – they won’t make your money.
You keep a clear head and listen to, but don’t get caught up in, your feelings and emotions
You keep your awareness high – especially regarding time. You’re here for the long haul.
You keep respect for the markets, for yourself, your money.
You thing every trade all the way through , including all possibilities, and put decision guides and actions to take in for all of them.
You review your trades, your journal and your goals and milestones on a scheduled basis. Take action to build on success and block mistakes.
You do your trading in an organized place and keep your policies, this success –reminder sheet , that mistakes traders  make in full view during the planning of every trade.
You run your trading the same as you would a business. It is your business.

We wish you A Successful Trader