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@ENTITYTRADING
All rights reserved. May not be reproduced or transmitted in any form or by any
means, electronically or mechanical, including photocopying, recording or by any
information storage and retrieval system, in part or in whole, without explicit
written permission; except where permitted by law.

All information provided is for purely educational purposes and we do not take
responsibility for loss of investments. Past performance is no guarantee of future
performance and you may not get back the amount you invest so you have to be
prepared to lose. Please make sure you understand the risks involved with trading
before creating an account and entering a trade as we will not be liable for any
losses incurred. This information is to be used as guidance to help understand
the market better and adhere to the language used in forex.
 WHY FOREX?
If you are reading this guide, you have most
likely taken some sort of interest in the Forex market.
But what does the Forex market have to offer you?

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
24 Hour 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 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.

ENTITY TRADING
WHY FOREX CONTINUED
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 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.

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.

ENTITY TRADING
WHY FOREX CONTINUED
Profitability - It doesn’t take a financial genius to figure
out that the biggest attraction of any market, or any
financial venture for that matter, is the opportunity of
profit. In the Forex market, profitability is expressed
in several ways. First, just to set the record
straight, you don’t have to be a millionaire to trade
Forex. Unlike most financial markets, the Forex
market allows you to start trading with relatively low
initial capital. The Forex market doesn’t require large
initial investments because it allows you to
use leveraged trading.

Having said all that, it is important to remember that

as profitable as the Forex market is, it still carries all the
risks involved with financial trading. You should always
be aware of the risk, and never risk
money that you can’t afford to lose.

ENTITY TRADING
 TIME ZONES
Session Time Open Time Close These are the times that each market opens and
closes throughout the week and each market has
LONDON 08:00 15:00 its benefits. For UK residents, the most optimal
trading period would be the London session as it
NEW YORK 13:00 21:00
has the most volatility, meaning bigger profits can
be made from trades as candles are moving in
directions a lot more drastically. New York session
ASIAN 20:00 08:00
also provides some good trades and may be safer
for some as the candles aren't as volatile.
 LOTS
Units Volume £/Pip Forex lots are units of measurement. They
determine how many units of a currency you're
Standard 100,000 1.00 £10.00 buying. You can buy four types of lots in forex:
Lot
standard, mini, micro and nano. Your position size
Mini Lot 10,000 0.10 £1.00 is determined by the lot size, and the number or
lots you buy or sell. This is why leverage is needed
Micro Lot 1,000 0.01 £0.10 to give you enough buying power to purchase this
lot.
PIPS
Market PIPS (Percentage in Points)
‘PIPS’ are one of the most common terms in forex and
is because it's the smallest whole price move a
currency can make. Most currency pairs are priced out
to four decimal places and a SINGLE pip is the fourth
decimal number. For example, GBPUSD price is
at 1.13637 the Pip is the 4th decimal along. When
placing a trade, you can judge the size of the move by
how many pips it moved. The profits/losses made from
the trade will be judged by the amount of lots you put
on and how many pips it has moved also. For
example, if you placed a buy on the market with a 0.1
lot size ($1 a pip) and the candle rose by 10 pips, you
would have made $10.
PLACING A TRADE
When you analyse the market and find a potential
buy, you will place what is called a long/short
position on the chart to help you determine where
you expect the trade to go to. If it reaches that price
then you will be taken out of the trade at the point
you marked with profit. This is called your take profit
(green section). This works in reverse with the stop
loss (red section) as it will take you out of the trade if
the market moves in the direction you don’t want
it to, this way you won't stay in the trade as
price goes the wrong way for you and you
will only lose a small amount of your account.
RISK MANAGEMENT
Risk management is arguably the most important
thing to building a good forex account. If
you don't take the time to work out how much of
your account you are risking each trade, it makes
it very easy to blow your account and lose
everything. A general rule of thumb is to always
risk 1% of your account
every trade, therefore you would have to lose
100 trade IN A ROW to blow your whole
account. Let’s work this out on an
average account. Say the account in question
contains £500. 1% of £500 is £5 so we don't want
to lose more than £5 a trade.
HOW TO CALCULATE RISK
Continuing from the previous slide, we now know
we only want to risk £5 a trade. Once you have set
up your take profit and stop loss, you will be able
to see on your stop loss how many
pips it is. Let's use 10 pips as a stop loss as
an example. If we use the chart on
the previous slide about pips, we can see that 0.01
lots is equal to 10p a pip. If we times this by our 10
pips that equals £1 and we need it to equal £5 so
we times by 5. Therefore you also times the lots by
5 meaning with 0.05 lots (50p per pip) on the trade,
if you risk 10 pips you will lose £5 (50p x 10). This is
the correct risk management for a £500
account to risk 1% per trade.
LEVERAGE
In forex, money is borrowed from a broker. This is
because the amount you put into your account will
not be big enough to place trades on the open
market. The broker gives you a leverage of 1:x
depending on how much you choose for example:
On a 1:30 leverage account, with £2,000 you can trade
with up to 60,000
On a 1:100 leverage account, with £2,000 can trade up
to 200,000
This works in relation to lots to help you figure out how
much of your account you're willing to risk with each
trade that you place. The bigger the leverage and lot
size, the more money you can gain or lose each trade.
TRADE THE TREND
Trend analysis is based on the idea that what has
happened in the past gives traders an idea of what will
happen in the future. Although this may seem basic,
being able to identify when a pair is in a trend and
when it isn't will help you to increase your chances to
profit consistently in the Forex market. When you can
identify a trend, you can estimate what direction the
rate of a currency pair is going to go in. You should
exploit the direction of the trend you identify by placing
a trade in that direction. If it’s an uptrend, meaning that
the rate is increasing, buying the currency pair will give
you a better probability for profit. If it’s a downtrend,
meaning that the rate is decreasing, selling the
currency pair will give you a better chance of making
money.
IDENTIFIYING A TREND
When a trend is taking place in a Forex pair,
the price movements start to form peaks
and valleys in the chart of that pair, which
are easily identified. In an uptrend, the
price movements form a series of higher
peaks and higher valleys. Since a picture’s
worth a thousand words, let’s look at the
following chart: This chart suggests that
the trader should buy the currency
pair (and close the trade by selling at profit
after the rate rises).
TREND LINES
Trend lines are a simple tool to help you determine a point
of entry. When a line is broken, therefore changing the
trend, this shows the market could enter a movement in
the opposite direction as the market has broken its
pattern. To understand where in the market you can place
a trend line you have to first identify the movement of the
market. When looking at an uptrend, find the higher lows
(a minimum of three) and connect a line across the
bottom ends. Take the line further to identify when the
trend will be broken later in the market. Wait until this
line is broken by a LARGER candle and not a smaller set of
candles as this will indicate more volume in the
movement. With a downtrend, the only difference is to
place the line across the lower highs of the market (still a
minimum of three) as this will show when an uptrend
forms.
CANDLESTICKS
Each candle that opens and closes will
either be red or green. The image
shown describes how the candles show
where price has travelled in the time that
the candle represents. Using the upper
wick as an example, the 'high' is the
maximum price that the candle
has reached in that time period and vice
versa with the low. The wicks help to
represent a potential move in
the market depending on the size of them.
CASHING IN ON PRICE MOVEMENTS
Trading Forex is an exciting business. The market is always
on the move, and every tiny shift in currency rates can
mean profits and losses of hundreds and even thousands
of dollars! Let’s demonstrate how that can happen:
In general, the eight most traded currencies on the Forex
market are:
USD- US dollars
EUR- euro
GBP- British pounds
JPY- Japanese yen
CAD- Canadian dollar CHF- Swiss franc
NZD- New Zealand dollar AUD- Australian dollar
CASHING IN ON PRICE MOVEMENTS
Forex trading is always done in pairs, since any
trade involves the simultaneous buying of a
currency and selling of another currency.
The trading revolves around 18 main currency
pairs. These pairs are:
USD/CAD EUR/USD AUD/JPY AUD/NZD
USD/CHF GBP/USD EUR/AUD CHF/JPY
NZD/USD AUD/USD USD/JPY EUR/CAD
EUR/JPY EUR/CHF GBP/CHF GBP/JPY
EUR/GBP AUD/CAD
TIME FRAMES
A time frame correlates to each candle, for
example, if you chose the 15
minute timeframe then each candle would
represent and last 15 minutes in the market.
This is highly useful because you can set
higher timeframes like 1D (1 day) or 4H (4
hour) to help you get a better perspective of
how the market is performing in
general before you move down to
lower timeframes to see the
smaller movements in the markets and pick
the best possible entry point for your trade.
General Tips(Do’s & Don'ts):
Don’t doubt your trade after you have analysed the market. When you have identified a
potential incoming trend, don’t wait to be sure before beginning the trade, invest before
you miss the major potential to earn money in the trade or you will miss the trend by the
time you come to invest.
Even though you could have larger sums of money saved to use trading, use smaller capital
when first starting and expect to lose money as well as gain it. Using real money in
comparison to demo money or testing strategies will help you to become aware of the
psychological aspect of trading as you will be able to feel and process the feeling of losing
or gaining money and the percentage made on the trade will become more important to
you than the money made.
Track your trades and journal them. If a trade goes wrong, identify the reason to be able to
prevent it happening the next trade. Note the percentage gain/loss and any key factors
about the trade that you can learn from when using the strategy in future. Use a demo
account for a month and every day and note each trade to help you work out the win/loss
ratio on the strategy and use it with real money later with more confidence. If you have
above a 50% win rate on a strategy and you have good risk management then you will
become a profitable trader but try a strategy multiple times before getting rid of it.