RECIPE FOR FOREX & INDICES INVESTING R.B NTHULANE RECIPE FOR FOREX & INDICES INVESTING Contents Introduction PART 1 Indices and Forex ..........................................3 PART 2 Old and new way of doing things ...................8 Principles .......................................................14 PART 3 Fundamentals ................................................20 Analysis for Forex ..........................................27 Analysis for Indices .......................................43 PART 4 Market Sentiment ..........................................62 Let’s Trade .....................................................69 Frequently Asked Questions ..........................77 INTRODUCTION I believe all traders, new or old who apply the principles of this book will save themselves a lot of money and time. I have had the privilege to finally find something that works after going up and down. I finally managed to crack the code and turn from being a speculative trader to being a trader who is at least 80% sure that his trades will yield good profits. With the advancement of technology and internet information that is all over the place, it makes it really difficult to come back with one single strategy that will sort you out for life. What I will be breaking down in this book might not be entirely new to some of you but I am going to combine everything and give you one single system that works, saving you time and money at the same time helping you to be profitable. The system I present in this book came from careful observations that I underwent with my brothers as we were busy with a trial-and-error method of learning, blowing account after account. Blowing accounts is part of the journey but it doesn’t end there. To those that haven’t been part of the 90% of traders who don’t make profit good for you. On the other hand you might not be part of the stats at all, given that you follow the principles of this book and to those who are part of the stat it is time to switch. PART 1 Copy rights © 2017 r.b. Nthulane 1 Recommendations Before making your first deposit into your forex account if you are a new trader you need to spend some time learning about the real forex market, I won’t be covering the basics of trading in this book but I recommend that you go and learn the basics of forex from online sources, I strongly recommend babypips.com which is free. Youtube also has a lot of information just do your best to avoid learning about INDICATORS as you are not going to need them if you really want to be profitable. Here are some of the topics you should learn: 1. What is forex trading and how it works 2. How you can participate in the forex market 3. Choosing the right broker, check reviews about a broker before going with them 4. Online trading platforms, apps, software and how to use them 5. Trading fundamentals Once you have gotten that off the way and believe that you are ready to face the real world of trading, take some time and open a practice account and just apply yourself for at least two weeks then you can decide from there if you are ready to face the real world. Copy rights © 2017 r.b. Nthulane 2 CHAPTER 1 Indices and Forex Trading is more of a patience and discipline thing, in actual fact it is about 90% psychological. We can take the same trade at the same time but only the person who is psychologically strong or disciplined will get the most out of the trade. With the right discipline we don’t necessarily have to get all the trades right to be successful but we surely need to apply the right discipline and patience. Discipline involves taking proper risks and being well behaved in your trading. There is a strong relationship between forex trading and indices trading, in fact the two are connected, if you are going to be successful in one you will also be successful in the other. But again you can choose to focus on indices only and still be successful or focus on forex only and still be succesful, there is a strong relationship between the two but the volatility is different. Indices will make you what forex can make you in two weeks in a day or two but the opposite can happen but we are not going to focus on the opposite but I don’t want you to be ignorant of the fact that as much as you can make a lot in a day the opposite can happen in a day if you are not going to apply the principles outlined in this book. In forex we are looking at currency pairs and their performances as a whole but in indices we are Copy rights © 2017 r.b. Nthulane 3 looking at companies performances. A currency’s strenght is directly influenced by all the fundamentals that surround it, people often neglect some fundamentals but I have realised that when all the fundamentals surrounding a currency are combined they make up a driving force of the currency as a whole. The fact that a country’s currency is losing value does not mean that the companies in that country also lose value or rather also don’t perform. With some companies it is actually an advantage for them when the currency of the country loses value based on their operations. In indices we actually dealing with stocks/share prices of many companies that have been combined to make that index. One popular index is the Dax also known as German 30, it has top 30 companies in Germany such as BMW, Siemens, Adidas and Deutsche Bank. The price of the Dax index fluctuates every time depending on how its companies are doing. Different companies weigh differently within a particular index, they are capitalization weighted which means that they are weighed based on their market value. That tells us that the companies do not weigh the same, the more a company weighs within the index the more it will have an effect on the index’s price movement. Let me break that down. Let’s say we have XY 10 index, the 10 companies do not all weigh 10%, we can have X company weighing 30% meaning that the other 9 companies will have to share the remaining 70% in that index but still within that 70% they are not going to weigh the same, so this means that company Copy rights © 2017 r.b. Nthulane 4 X has more influence on the overall performance of XY 10 index. So are we going to sit down and look at how each company in ABC 100 index is doing? No we are not going to do that, we are going to tackle it technically, in price action but we are not going to be ignorant of the fact that fundamentals (news) play a role in price action. It is very wise to not neglect fundamentals and events happening across the globe when trading indices, the reason being indices are strictly companies’ share prices and the share prices rise and fall on a daily basis depending on the events and fundamentals happening around the world. Companies have one goal daily and that is to grow but there are events which affect them which they don’t have full control over and it is these events that lead to companies having to watch their share prices crumble but for us it an opportunity to make money for example we simply can’t ignore the fact that oil prices are falling or rising because this has a direct influence on energy companies’ performance and shares daily. Another driving force for indices is a country’s economic performance, when we know how a country is expected to perform based on news or economic events that have occurred it becomes easier to decide how long we are going to hold our trades for. The reason being that we understand why stocks/ shares are behaving in this manner and we expect them to continue for a certain period of time. One example of this is what happened to the markets when Donald Trump became the president of the USA, stocks were just sky rocketing for months because of the promises he had made and investors were trusting him to boost the economy the markets were Copy rights © 2017 r.b. Nthulane 5 just performing extremely well. The U.S. dollar was bullish for weeks and as a result stocks kept rising. Copy rights © 2017 r.b. Nthulane 6 PART 2 7 CHAPTER 2 THE OLD AND THE NEW WAY OF DOING THINGS Besides not having a solid winning system/strategy that just works, there’s a lot that is common among the 90% of people who don’t make it in the markets and again there’s a lot that is among the 10% that make it in the markets. If you are part of the 90%, you simply have to let go of the old way of doing things and start doing it the new way. In the markets there are principles that lead to success, and only those that go by these priniples, they are the ones that are successful. I have blown too many accounts in my learning, so I have learnt how to do things right. You might have not blown an account or accounts and you don’t have to first blow accounts to make it, all you have to do is follow what I am going to outline in this chapter. In a world of social media many of us came to know about trading from people who claim to be living a good life from trading, and those people would often post a lot of good profits on Facebook, Instagram or twitter. We might have not given in immediately but because those good profits were popping up infront of our faces every time we log on to social networks, we finally gave in and that’s why we are here today. But little did we know that what we have been consistently seeing on social networks was building up a path to failing in the markets in our minds. Why am I saying this? When we finally got our hands on trading platforms we already wanted to make as much as what we had being seeing on social networks, and the reason behind that is nothing more than the path that was Copy rights © 2017 r.b. Nthulane 8 being built over time. We also wanted to post those big profits on social media, we also wanted to make as much money as what others are making on social networks. The lot sizes we were seeing on their posts gave us a clue of how to make those huge profits but little did we know that it was a road to blowing our accounts. We learnt the wrong way of doing things by just scrolling past and perhaps pausing for 3 seconds on that post with good profits. 99% of the time we didn’t even get to see how big that person’s account was or if it is a real account or not and how many losses he encountered before finally getting something to show us on social media. But all we saw was that with 10 lots we can make $500 profits, it is doable, we have seen it too many times from XYZ on social networks. We would often get to see some people’s analysis and guess what, oh yes I see how they do it, its the indicators I read about on Google or any other site. Yes I remember that one, I watched a Youtube video explaining how it works. We then went on to do it by ourselves and it worked once, worked again and again oh wow it works my account is double then the next moment the account is blown. That’s just how it would often go with indicators, they sometimes worked and the moment they didn’t work it was a bad day, credit cards must come out because we have to deposit funds again. And all this happened because we trusted on indicators, and indicators simply don’t work in the markets if they worked we would have at least 60% success in the markets, the 40% would have to fail because they perhaps don’t have the right indicators or they are getting it wrong psychologically. There’s a lot of other things we have encountered in the forex and indices trading journey. Copy rights © 2017 r.b. Nthulane 9 The old and ways of doing things: • Indicators don’t work, they are always lagging and will always correct themselves and adjust to sudden changes in the market. Indicators do not know real life events and will always fall short, they are not human beings and can’t make human decisions. So do your best to avoid using indicators. If you have been using them, by now you should’ve realised that they simply don’t work. If you have never used them don’t even start. If indicators worked big financial institutions would work around restricting them from being used by you and me. • It is not about always having trades running or having to wake up and trade every day. I like to say I invest in the markets because when I open trades I am not looking forward to closing my trades after an hour or 2, but rather expecting a yield after a few days if not weeks. Our introduction to forex was the wrong one, we were used to seeing people posting every 3 hours and then made to believe that it ought to be like that. Treat trading as an investment. When you invest in property or whatever it is that you choose to invest in you do not expect returns on the same day. You should have the same mind set about trading, this will enable you to be consistently profitable. When you want to make an investment you don’t just go to the bank and make transactions, but first you study and plan about what you want to invest in. You take time to think about your next investment, if you can apply the same in your trading nothing will stop you. It’s even much better because at the end of the day investing in the Copy rights © 2017 r.b. Nthulane 10 markets will yield results much faster than any other investment. • Don’t sit in front of the charts every day, you will see what you are looking for but not everything you see will be what you were really looking for, false setups. This is what leads to people blowing an account in a day because they had plenty of time to open all false setups. • Patience and discipline is what you will need, I like to make this example to people: if you want to ride a train you know that the safest way to do so is to go to the train station and wait for the train to arrive and even when it arrives you still wait for it to stop before you can get on the train, to safely get on the train you have to apply patience and discipline. You have to patiently wait for it to arrive then apply some discipline to wait for it to stop and for other people to leave the train then enter. We have safe entry points in trading, if you didn’t know, you should not worry, you will know after finishing this book. We don’t enter trades everywhere and exit trades everywhere. Once in the trade we need to patiently wait for the trade to get to where we had planned to exit then we can exit. Yes if emergency arises in between we have to exit but if not then we don’t. Just like when you go to the bank and choose to invest your money with them you patiently wait for that term you guys agreed upon to end then you can go and get your money with that tiny little interest gained. If we can do it anywhere else then we can and we’ll do it in trading too. Be patient enough to wait for the price to get to your entry and exit points, it will eventually get there it has done it before and it will do it again, that’s just how the market is. Be disciplined enough to only enter trades at their entry points and to exit trades at their Copy rights © 2017 r.b. Nthulane 11 exit points. • Never aim to double an account in a day or a week, sometimes it can happen as you are doing things right but that should never be your aim because the opposite will happen. All other investments will give you less than 40% in a month and yet you go for them, but with trading you want a 100% return in 2 weeks. You need to have realistic goals to make it in trading, yes what you heard when they said there’s money in trading is true but it is not an overnight thing. Maybe you want quick money for something urgent, I will be honest with you this is not the right place to get it, the opposite will happen. Having realistic goals will benefit you in your decision making before opening a trade. • Use correct lot/contract sizes at all times. As much as it will be exciting to double an account by consistently using wrong lot sizes, you are building a bad habit which is not sustainable, this will blow your account with time, the very same account that you have grown will be easily blown in a trade or two simply because you risked more than you were supposed to. Always remember that if you are risking more because of a certain target you can also lose as much. Always risk less even if you are 100% sure that it will yield to profit. • Do not over trade. 70% of the 90% of people who don’t make it in trading are simply doing it wrong by over trading because today they made good profit. Instead of stopping for the week or for the day, they then decide to go and look for other opportunities. From there all the profits they had made are wiped away plus a certain % of the account balance. • Don’t have a lot of trades running all at once. Copy rights © 2017 r.b. Nthulane 12 Take 2 or 3 trades a weeks and just apply patience and see your profits increase. Also just focus on a few pairs this will enable you to trade less. • Always use a stop loss. Even when you are 100% sure of your trade, anything can happen at any time and you will read about the cause later after your account is gone. • You can use a take profit or trailing stop for taking profits. • Avoid trading to show off your results, if possible try trading by yourself if you are easily influenced. • Avoid following the crowd but stick to what has been working for you. Copy rights © 2017 r.b. Nthulane 13 CHAPTER 3 Principles The principle is one and simple, price action mixed with fundamentals, the two applied in the right way will leave you with nothing besides being profitable. Fundamentals are key driving forces to a country’s economic growth and we cannot avoid this reality else we will find ourselves wanting to invest in a country whose economy is about to crumble and the output of that will be a loss. It is a good thing to stay fundamentally fit in trading. Fundamentals create a sentiment and this enables us to decide on whether we are going to hold our positions for long or not. If the fundamentals are in our favour and we can see that our position is still going to yield much more profit then we have no reason to close the trade. Patiently let the trade run, again if it is against us then we will know that it is time to leave the trade and not hope for the impossible. Trading using price action is simply using Support and Resistance lines or Support and Resistance zones including trend lines. The trend is our friend at all times, Support and Resistance help us determine the new trend and once we are in it we simply stick to our friend the trend. Support is like the floor and Resistance is like the ceiling, if you throw a tennis ball to the ceiling when it hits the ceiling the next direction that it will take is towards floor and when it gets to the floor it will bounce and head towards the ceiling. And that’s just how the forex environment is like and it has always been like that, we can easily trace it all the way back from the 70s & 80s till today and we will find that there is simply this one Copy rights © 2017 r.b. Nthulane 14 behaviour of bouncing off the ceiling and the floor. A tennis ball will not just break past the ceiling unless it has a stronger force, in this case the stronger force will be fundamentals. Fundamentals and sentiment are the only driving forces that will cause our ceiling/resistance to be broken else besides that we know that the next direction is towards the floor. The same applies to floor/support, only fundamentals and sentiment will cause the break out. What I mean by sentiment is how the majority of traders around the world view a certain currency, which can be that they expect the currency to keep on gaining strength or losing value. As long as the sentiment is biased in one direction that currency will go in that direction simply because the majority of traders are pulling or pushing it to that side. This means that our only entry points will have to be at the resistance/ceiling or support/floor, we will be looking to sell at the resistance and to buy at the support and nowhere else. 80 to 90% of the time everything will go right simply because even big financial institutions simply wait for those points to make money, yes financial institutions trade forex as well, that’s how they are able to give you that 5% they promised you at the end of the year in your savings account, by that time they would have grown your money by a 1000%. Where did you think all these insurance companies get the guts to cover you knowing that you will come back and claim 100% more than what you pay them? They take some of the funds into trading. So when you see a support and resistance just know that you are not the only one going in that trade. Does this mean that every place where the price turns is a support or resistance? The answer is most probably yes, but we get major support and resistance and minor support and resistance. In between the major ones, and we are only going to work with major ones, you get the minor support and resistance. Everything in between the majors is a huge risk. You have to be disciplined and Copy rights © 2017 r.b. Nthulane 15 patient enough to wait for the price to reach our major entry points before you can decide to enter. When the resistance/ceiling is broken it turns into the support/floor this is the same with the support/floor, if the price goes past the support it will turn into the resistance. ENTERING A TRADE Draw in your support/floor and resistance/ceiling points or zones on H4 (4 HOURS) AND D1 (DAILY) time frames, nothing less. Every time you open your charts you will see how far the price is from the entry points. Before entering a trade decide on how much you are willing to lose and consider that money deducted from your balance, this will help you with discipline. This means you must only risk what you are willing to lose. Then after you have decided on how much you are willing to lose then you will know what lot size you must use. Always risk less than 4-5% of your account size this will allow you to come back and recover from the trades that didn’t go your way. Lot Size Never use more than 0.015 lots per $100 This means if you have a: $200 account use between 0.02 and 0.03 $400 account use between 0.04 and 0.06 $1000 account use between 0.10 and 0.15 $2000 account use between 0.20 and 0.30 $10000 account use between 1.00 and 1.50 Copy rights © 2017 r.b. Nthulane 16 Remember not all trades will go right, 80-90% of the trades will go right but that 10-20% that goes wrong will not harm your account if you stick to the right lot size. Never try to double your account quickly by risking more, it will result in a bad habit and you will not make it. The total number of trades running should never exceed the lot sizes above. This means that if you want to have more than 1 trade running on your $400, when you add all the lot sizes running at risk, they should never exceed 0.06 else you will be risking more than you have to and this is one of the downfalls of many traders. Stop loss Be very disciplined with stop losses. Always make sure that where you put your stop loss you will not be risking more than 4-5% of your account balance. And this can be well done by patiently waiting for the trade to reach the entry point, else you will be forced to place the stop loss at a place where you will be risking twice as much as you were supposed to or you will put your stop loss at a place where it will surely be hit. But don’t worry I will show you how to do it right. Never have a single trade running without a stop loss no matter how sure you think you are about your trade. Take Profit Set your take profits at major support or resistance zones or rather just use a trailing stop loss. Always shift your stop loss to your entry point once the price has moved by a few points away from your entry point, this will leave you with no trades running at a risk. in addition it allows you to open a new position if there is any opportunity available. Copy rights © 2017 r.b. Nthulane 17 Before entering Observe whether the price has completely reached the entry point, if not give it time it will eventually get there, just be patient enough. Look at the trend on a daily time frame, a trend line will assist you with this or the market sentiment. If the market sentiment is very strong don’t go against it. How to determine this? Look at it in this way, if a country gets a new president whom the world believes is good for the economy of that country, then selling that county’s currency will be going against the market sentiment and will lead to losses. Another good example is Brexit, we saw the pound lose value over a period of more than two weeks, trying to buy the pound in that period was just like trying to jump into a lions’ den. You see sentiment holds for more than a day and gives us a trend which we should not ignore while deciding on our trades/investments. Look at the economic calendar to see if there’s anything on the economic calendar that can affect your trade. If there is then don’t enter the trade, but if there is nothing then you can enter the trade. Here you are looking for major fundamentals that can come to a complete change in the market sentiment. When to enter With price action there is no perfect formula for when to enter but we enter at our support and resistance, there is Copy rights © 2017 r.b. Nthulane 18 no perfect signal that will tell us that indeed the change in direction is about to occur. One thing we surely know is that the price will eventually turn there, sometimes it is immediate and sometimes we get a consolidation at the entry point but with patience the change in direction eventually occurs. Investing involves taking risks but we take calculated risks when we enter at our major supports and resistances because 90% of the time the price will turn there as long as there is no solid sentiment around that pair or currency. Yes not all trades will go right but trading this way will leave you with an 80-90% accuracy. Some may say candle sticks patterns, I am not against them but I have come to realize that they are not always there and you can miss out on your entry point while waiting for them, so the best is to risk that 4-5% of your balance knowing that you stand up to 90% chance of coming back with a smile after a few days. Price may consolidate at the support or resistance and your trade just alternates between profit and loss, this is where you put your feet down and patiently wait, it happens a lot, I have seen it a lot but it yields good profit at the end of the week. Copy rights © 2017 r.b. Nthulane 19 CHAPTER 4 Fundamentals Some of the fundamentals to keep our eyes on are • Interest Rate Decisions Every country’s central bank releases their interest rate decision every 2nd month throughout the year. 1 out of 3 things can happen, it is either they choose to keep their interest rate unchanged, increase it or decrease it. If they decrease the interest rate, it is negative for their currency and you should look into selling that currency. If they increase their interest rate, is positive for their currency and you should look into buying that currency. Often times when they don’t change anything, it is seen as negative for the currency but does not hold a strong sentiment like when they change. Interest rate decision today is one of the biggest market movers, do your best to make sure that you trade interest rate decision. There’s always hints all over the media concerning what the next decision will be, the media gets the hints given by the chair or central banks members. Economic calendars often get this forecast right. If you didn’t get the time to go through your fundamentals you can rely on economic calendars 90% of the time, but it is always wise to do your home work and make informed decisions. Copy rights © 2017 r.b. Nthulane 20 You will always know before hand if the interest rate is going to be increased, decreased or remain unchanged if you follow fundamentals. Always look for hints from the media after speeches by the chair. There are many market analyst who do the job for us and all we have to do is read a few sources and we will know where we are headed next. Interest rate decisions create a strong market sentiment in one direction or another. If you didn’t trade it before the decision was released you can always trade it after the release in the direction in which the market is going following the release. The market continues in that one direction for a good 3 days, don’t rush to close your positions but rather hold and trail with a stop loss. • GDP (Gross Domestic Product) Every country releases its GDP every 3 months, and if the GDP increases it is positive for that currency and you should consider buying that currency but if it decreases then it has a negative effect on that currency and you should consider selling that currency. GDP indicates a country’s economic health/performance and can contribute towards market sentiment, so this is one thing to consider when looking into the sentiment. • CPI (Consumer Price Index) The CPI gives a good indication of inflation and purchasing trends by consumers and is released every month based on the previous month’s performance. An increase in the CPI is positive for the country’s currency Copy rights © 2017 r.b. Nthulane 21 and a decrease is negative for the country’s currency. Buy when positive and sell when negative. It does play a role towards market sentiment. • Employment Changes Change in employment rate gives a good indication of whether more money is going to be available in the hands of consumers. If more people are unemployed it means that less money is available for spending in businesses and this becomes negative for the economy. Announcements concerning employment change comes in many forms on the economic calendar but they are all about employment. This data is always rated highly important. For e.g. it can be represented in the form of number of jobs created, non-farm payroll (NFP) If unemployment increases, it is negative for the currency and you should sell. If unemployment decreases it is positive for the currency and you should buy that currency. Employment change has a high impact on market sentiment. • Crude Oil Inventory Oil prices have an impact on the Canadian Dollar (CAD) and on indices too. Crude Oil Inventory tells us how much oil was stored in the US from the previous week and it is released every Wednesday sometimes Thursdays. If more oil was stored it means there’s too much oil to sell and it decreases the Copy rights © 2017 r.b. Nthulane 22 price of oil but if less oil was stored then it is positive for the oil and the price will increase. This affects the Canadian dollar because Canada’s greatest export is oil, so if they are exporting a lot of oil at a cheaper price it weighs on their economy and therefore becomes negative for the CAD. Some Indices have several energy companies in them, S&P 500, NASDAQ and FTSE are some of those indices. When oil prices are seriously under pressure it weighs on those companies stock prices and in turn on the index. And the same happens when the oil prices are doing very well, their stock prices perform well. • Political Events There is no country whose economy is not linked to its politics. Political events help investors decide on whether they should invest or pull of a country. Decisions and policies put in place by a government have a direct influence on the economy. When a new president wins in elections in most cases it is positive for that country’s currency and we should look into buying. You should not neglect political events in your decision making because they contribute to the sentiment of that country’s economy. • Speeches by central bank’s chair/members Often times when a certain country’s central bank’s chair is going to speak you will find it on the economic calendar with very high impact. They often give hints on what their plans are concerning interest rates and the economy and the market often reacts to the speech. It often creates a very strong market sentiment in one direction and we often find the market moving in one Copy rights © 2017 r.b. Nthulane 23 direction for a week or more. • Other Events Indices react to world events such as natural disasters, wars, political unrest and economic news. It is important to follow economic data such as unemployment rates, interest rates and GDP figures. US indices including NIKKEI often rise with the strength in the U.S. dollar this is because most of the companies there report their profits in U.S. dollar. NIKKEI often has the same moves as USDJPY. So positive market sentiment for the U.S. dollar gives us a positive market sentiment for the US indices and because of this we should be buying and not selling those indices. Those indices are S&P500, Dow Jones and NASDAQ. The AUS200 moves just like US indices, positive sentiment in the Australian dollar brings a positive sentiment to the AU200, at such times the economy is healthy and businesses are doing well. The opposite does not always mean that the indices will perform bad too, businesses can still operate and make profit in a country which is under a bit of shaking. Always perform careful analysis of the relevant factors before trading. With the Dax/Germany 30 we often find that the index does the opposite of the EUR and this is because many companies in the Dax trade outside of Germany. A weak economy can often be good for them since they can remain untouched from the outside countries in which they operate. This index also responds to economic data released in Germany. You often find that on a quiet day for the EUR, the Dax had great moves and this being a result of economic data released in Germany. In addition when the data was positive it is also positive for the index and when the data was negative it is also Copy rights © 2017 r.b. Nthulane 24 negative for the index. Thus we are noting the DAX may act independently of the EUR. Most of the companies in the Dax trade in the US, when the U.S. dollar is strong the index also performs well. So in cases where the EUR is weak and the U.S. dollar is strong you will often find the Dax to be strong, those are good times to buy the Dax. With FTSE/UK100, even though the 100 companies here are UK based, the index is affected by news from Europe and the US too. Many of the companies here have much of their revenue coming from outside the UK with many of the companies reporting their profits in U.S. dollars. As a result, the index often does the opposite of the GBP. When the pound loses value, companies in this index have more money when it has to be converted back into pounds and again due to the weakness of the GBP. Goods and services from companies in the UK become more attractive to outside countries because those counties pay less. All this becomes positive for the FTSE. It has about 13 mining companies and will therefore be influenced by news surrounding commodities. It also has 5 oil companies and because of this it is also affected by strong market sentiment on oil prices. NEVER NEGLECT FUNDAMENTALS IN YOUR TRADING, THEY ARE THE FORCES BEHIND MOST OF THE BIG MOVES THAT WE SEE IN THE MARKETS. IF WE CAN OPEN OUR CHARTS AND LOOK AT ALL THE HUGE MOVES AND GO BACK TO TRY AND SEE WHAT HAPPENED THEN WE WILL OFTEN FIND THAT THERE WAS SOMETHING THAT HAPPENED FUNDAMENTALLY. ALWAYS CHECK YOUR FUNDAMENTALS BEFORE MAKING ANY TRADING DECISIONS, THIS WILL GIVE YOU THE EDGE. Copy rights © 2017 r.b. Nthulane 25 PART 3 CHAPTER 5 Analysis for forex Let’s look at the charts. I will be showing you how most of the people that make-up the 10% of successful traders trade. One thing you must know is that there is no indicators being used but simple support and resistance combined with patience and discipline. The market simply behaves in this one way: the market repeats what it did last when it was at that certain price. Let’s start by looking Gold/XAUUSD Copy rights © 2017 r.b. Nthulane 27 The first thing I want to bring to your attention is that the distance between two vertical dotted lines on a DAILY time frame represent a month. It is useful in looking at how long a trend took before it changed. As much as the candlesticks may look small, it is due to the time frame being used, however , on a smaller time frame you would see a huge move. Now from the DAILY chart above look at number 1, look at how the price turned at that point and the 3 days later the price came back to the same point and turned again. The 2nd turning was simply because it had already occurred 3 days before at that point which is our resistance. 9 days later the price managed to break past the resistance, but because a broken resistance becomes a support, we see the price at number 2 coming back and bouncing off the new support. Look at the same point at number 3, the price came back and spent 3 days on that support before turning back to the resistance. This turning is as a result of what has already occurred previously. If we go 10 years back and look at the same point we will find it to be a major support or major resistance still. Now look at number 5, why did the price turn there? The answer is simple, it is simply because it also turned at number 4 and if you look it spent 2-3 days at number 4 before fully dropping. When drawing your support and resistance you simply look at where the price turned previously and if it occurred more than once. Look at number 6, price played there for a good 7 days and if you don’t treat forex like an investment you will close your trade in a day or 2 but then when you come back days later you will find regret waiting for you. Here one simply had to apply patience. Copy rights © 2017 r.b. Nthulane 28 From the H4 chart above, look at number 5. This was number 4 on the previous chart we looked at, look at that 3 days of consolidation at resistance before fully dropping. Many times in forex at our entry points, consolidation will test our patience a lot and once we pass the test we will have nothing but profits. Now look at how long it take to drop to the next major support, we still need to patiently wait for the price to finish its movement before we can exit. It always eventually get there, all we do is wait and watch our investments grow while we busy with our lives. Now look at 2,3 and 4, we can see that price broke the resistance and became the support and had you missed the entry at number 3 you could have gotten it at number 4. You would enter because you would have seen a lot of evidence on your left of that point being a solid entry point for buying gold. From number 1 we see a double bottom on the support. That’s where we would have entered. When the price came down to form the double bottom. By then we Copy rights © 2017 r.b. Nthulane 29 already have proof that it will turn there since it had just happened. Remember we start by drawing our support and resistance lines, so when the price is approaching these lines we already know that our train is arriving. So when we see that double bottom occurring we know that it is occurring because we are at support and we should buy the gold for a good week at least. The same things are occurring on the H4 chart above. That’s just the behaviour of the markets. The distance between the vertical lines here represent a week because we are on an H4 time frame. Copy rights © 2017 r.b. Nthulane 30 EURUSD From the EURUSD on the DAILY chart above we see a very long consolidation at number 1, the train literally gave enough time for everyone to get in before taking off, 6 months later we are seeing the price at number 6. Only those who invest in forex can get the most out of this trade. Look at number 3 and 5, we are not shocked to see the price turning there, why? Simply because we would have drawn in our resistance already based on what the price did previously when it was at that point. You can go to your charting software today, it doesn’t matter how long it took you to get your hands on this book, look at that point going backwards and see that it is indeed a resistance and you would have drawn it in too. Looking at number 2, we get a good example of the fact that we are working on a resistance or support zone and Copy rights © 2017 r.b. Nthulane 31 not just a single point. We see the price consolidating at the support for a few days before picking up. And again only those who treat this as an investment will get the best out of it. The H4 chart above is another good example of how the price respects the resistance and support, we also see that we have to be ready to see the trades switching between profit and loss for some time before fully yielding good profit. Look at the next two charts and see how price action is simply the way to go. Copy rights © 2017 r.b. Nthulane 32 Copy rights © 2017 r.b. Nthulane 33 GBPJPY Above is good looking chart of GBPJPY on a DAILY time frame, number 1 and 3 are at our major resistance and number 2 and 4 are at our major support. Number 4 is a great example of a support zone, the price seemingly went past the support at number 2 but it was still withing the zone. See the market just has its own nature which makes it respect support and resistance zones. The reason behind this nature has all to do with us traders. Many successful traders who have seen the light are simply going to wait for the price to get to these zones then open their trades and hold until the exit points. The more the volume that is pushing the market in one direction the market has no other option but to go in that direction. Copy rights © 2017 r.b. Nthulane 34 Number 1, 2 and 3 are nothing but a great example of a major support. Look at how the price struggled at number 3 before if finally broke the support. And again for the breaking to occur on such major points we need some strong pushing force and in this case it was the speculation around Brexit that happened earlier in 2017. If there is no major fundamental around the pair then there is 90% chance that the price will turn. Here the price was pushed down because traders were simply trading fundamentals. FUNDAMENTALS OVER RIDE PRICE ACTION. From number 4 we see a very good bullish sentiment which went and stopped at the major resistance at number 5, if you check on the far left you will see that indeed this point is indeed a major key point. Copy rights © 2017 r.b. Nthulane 35 Here on the far left we are able to see the far left we spoke about previously. The price had turned from the support and was headed up until some major fundamentals hit the market and in this case it was the Brexit in 2016, look at how it just broke past that major support. This is proof that fundamentals over ride price action. The price had consolidated at the major support when it failed to break it for a good 20 hours but fundamentals did it in a minute. Number 2 is showing us that you might enter the trade as soon as it get to the support but that doesn’t mean that the price will reverse immediately but eventually it as to, this is where people who are in it to invest stand back and patiently wait for the expected outcome. Number 3 has a consolidation and this can simply be explained by looking at number 1, the price consolidated there before and is now repeating what it did last. Copy rights © 2017 r.b. Nthulane 36 CADJPY Number 1 has an “M“ formation or double top, by just seeing the 2nd top coming up one has to be ready to sell simply because we are at a resistance and the price was rejected at the same zone the previous month. Look at how great of an entry that was. We have a triple bottom at the major support, if one had missed the first entry point on the 3 days of consolidation, another opportunity came at number 3, and again at number 4. From there the market went all the way to the top. Let’s look at one more chart on DAILY before breaking it down. Copy rights © 2017 r.b. Nthulane 37 Number 1 and 2 might not look as clear as what we’ve been seeing, yes we do get things like that at a support level where the price left long wigs and didn’t just turn. Remember we work with zones, so the price does go deeper into the zone before turning back. We will use those wigs to determine where to place our stop losses. Number 3 was a good entry for a selling trade, and look at how it spent days there before dropping. Copy rights © 2017 r.b. Nthulane 38 Copy rights © 2017 r.b. Nthulane 39 More examples: Copy rights © 2017 r.b. Nthulane 40 Copy rights © 2017 r.b. Nthulane 41 Copy rights © 2017 r.b. Nthulane 42 CHAPTER 6 Analysis for Indices Let’s now look at indices. There are certain behaviours associated with indices. I used to have an app called Netdania and the app would often tell me when there was a huge move that occurred in a certain pair, index or oil. I would often get a notification saying that crude oil has fallen or risen by 2.01% and within 20 minutes I would get another notification saying the same crude oil has fallen or risen by 3.01% sometimes by 4%. The app would often tell me that Dax, FTSE, S&P 500 or any other index has fallen or risen by 1.03%, I would always wait for another notification that says it has further fallen or risen to 2/3% but I would never get that second notification with respect to indices. Then I decided to start visiting the charts everytime I got such a notification, and then I discovered that there was no second notification because the index has retraced. Then I decided to always wait for the notification everyday and only trade the retracement and only to find that indeed that was their behaviour, 90% of those trades always yielded good profits. From that day I knew that I’d only trade retracements on indices. In addition I also realized that the app was often times late so I had to find the best way to wait for my 1.03%. I then came across INVESTING.COM. They always wrote the percentage of the daily move for everything in the market, from of all that I had made a discovery, INDICES OFTEN RETRACE, that’s when I fell in love with indices. Copy rights © 2017 r.b. Nthulane 43 As I started trading them, I discovered that they always closed at certain times and trading them was not allowed since they were closed and were not moving. Then I realized that everytime when they opened for trading, there was always a gap. Sometimes the gap would be up and sometimes it would be down. Now I had to try and see how the market reacts to the gap. And I discovered that fundamental gaps didn’t close but the market would just continue in that direction. But again I realized that if it is just normal price action the gap often closed but there would often be an initial move in the direction of the gap. These gaps are often more visible on H1 time frame. Now I had to try and see where the price often turns, and knowing that indices often retrace, I just had to see where the retracement occurred and I found it. By now I was introduced to price action and to how the market often repeats what it did previously and I realized that those retracements were occurring where they occurred previously. But that was not all as we were increasing in our understanding of indices a brother of mine made a very huge discovery, there are distinct points which are respected by the price. Yes there are distinct entry points, and these are the points that will also indicate to you where the price will potentially turn if it is at a record high. There won’t be any need to worry about if your support or resistance is at the right place. I also realized that at times some indices have the same movements with currency pairs and others have an inverse relationship with currency pairs at times. A good example of such would be NIKKEI/JP225, it often has the same movement as USDJPY. FTSE sometimes has an opposite relationship to the pound and the reason for this is because many companies in the index have their money in foreign currency, so when the pound loses value it is good for them. Also because some companies export their goods, so when the pound is weak, their products Copy rights © 2017 r.b. Nthulane 44 become attractive for outside countries and hence their business performs well. Let’s start with FTSE/UK100 Copy rights © 2017 r.b. Nthulane 45 Let’s start on weekly so that we can clearly see where long term trends turn, remember we are in this to invest and not to scalp. Look at the support and resistance lines, there is something common 7600.1, 7400.8, 7101.9, 6900.4, 6601.5, 6299.3, 5899.6 and 5502.6. The numbers are not as exact as they should be because of the software used to draw the lines. But if you check the relationship is that they run in 100s. It was supposed to be 7600, 7400, 7100, 6900. So in short our lines should be at 7600, 7500, 7400, 7300, 7200 etc. Copy rights © 2017 r.b. Nthulane 46 Let’s look at the 2 previous charts of UK100 on a Daily timeframe, look at those same points we had on the Weekly timeframe. The price does one of two things when it gets there, it either turns immediately or first spend time there before turning. Also look at the all time high, we see it turning at around 7600 also look at how the price was bouncing off at 7400 for many days. Copy rights © 2017 r.b. Nthulane 47 Copy rights © 2017 r.b. Nthulane 48 By now you must be getting the picture, look at how the price turns at around those supports and resistances. This is the best time frame to use for entering into your trades, H4. The H4 timeframe is the best timeframe to use for our trading style, it eliminates scalping. Copy rights © 2017 r.b. Nthulane 49 From the H1 timeframe we can now discuss the retracement that I mentioned earlier. Look at where the rectangle has been drawn again look at the price level. The price got to that level then spent around 2 hours playing around there before fully retracing. I am saying around 2 hours because there is a small bearish candlestick between the two bigger candlesticks and remember each candlestick represents an hour. Sometimes the price spends more time at the turning point before fully turning. Let’s look at one more H1 timeframe, and just look further into the retracements that I said often occur. Copy rights © 2017 r.b. Nthulane 50 On an H1 timeframe, from one vertical dotted line to the next is 1 day. Look at all the v-shapes that I have drawn in on almost all the days, those just show us that there is a constant behaviour that occurs and that is retracement. Also look at our all time high, it also occurred in a form of the v-shape/retracement. It can be tempting to try and catch those daily retracements but remember we are in it to invest and not to keep our eyes fixed on charts everyday catching wrong retracements. Now let’s move on to DAX/Germany 30 Look at where the trend changes, look at where the all time high turned. Let’s break it down. Copy rights © 2017 r.b. Nthulane 51 Support to resistance? Yes it does apply on indices too,, we also have support and resistance zones, we are more advantaged because we know which points are much more respected and because we know the behaviour of indices and what moves them. We do get consolidations too and those are best for indicating a retracement or change in direction especially when they are occurring at our trusted zones. Although some consolidations are not visible on bigger time frames we can best see them on smaller time frames. At number 2 the all time high is clearly visible, we can also see that the price played there before dropping, if it didn’t play there we would only see a wig and the other candlestick would have opened below and never crossed the resistance line again. Copy rights © 2017 r.b. Nthulane 52 From the DAILY chart above, let’s focus on the changing of the trend. We have 5 places where the trend was changing at, look at the price level where these changes were occurring. They all agree with our magical numbers. Another thing I want you to note is what the price mostly does before it fully changes direction. Is there anything that tells us that the price is about to turn here? Yes there is, we see a consolidation at most points where price turned. Price normally bounced off at that zone before fully turning. Sometimes it took 2-4 days of bouncing off at one point before fully turning. Now knowing what to expect at those zones we can gladly open our positions knowing that we stand 80-90% chance to succeed. Copy rights © 2017 r.b. Nthulane 53 Number 1 represents nothing else but a pure retracement, look at where the retracement happened, that’s just how indices work. They will not fall by more than 2% on a single day unless the fall is based on fundamentals, so what will occur after a fall or rise is a retracement. Now look at number 2, the market opened with a gap up and continued in that direction until it reached our magical zone then turned. This happens a lot with indices but not always. The market will open with a gap and then move in that direction but a retracement will occur 80% of the time when the price hits our magical numbers unless there are fundamentals behind the move. Number 4 is one of those moments where we have to be disciplined and not be moved by the price testing the support, we already know that we are at support and we also know how the market behaves at support. Copy rights © 2017 r.b. Nthulane 54 From the H1 chart above we can see that we do experience retracements everyday, the beauty of indices is that as much as those moves might be pretty small, the profits associated with those moves are enough to put a smile on ones face. It is also evident that the best place to entertain those retracements is at our entry points. We can see that it took more than a week but eventually the price did get to the entry point and turned. That’s just the beauty of patience in trading, it yields profits 80-90% of the time. We also see that the price went back to the entry point again to form an “M“ or double top, this is not the time to exit the trade if you were already in the trade, you hold onto the trade and patiently wait. Do not temper with the trade unless there is something fundamental involved. Pure price action will always repeat what it did last so price will turn to complete the “M” formation. Copy rights © 2017 r.b. Nthulane 55 Let’s look at NIKKEI/JP225. This index has the same movement as USDJPY, we know that USD and JPY are rivals so NIKKEI gains with the USD. There is nothing new here, the entry points are still at our magical numbers. The beautiful entry point at number 1 just proves to us that after we are in the trade we should patiently wait and only from that will we reap from our investment. The price played at that entry point for a good two weeks, waiting on that trade for two weeks is way better than opening 50 more trades in two weeks but with the account only coming back to where it was or below. Number 2 is a case of a resistance that has turned into a support, this had presented a buying opportunity. And there was also a great consolidation that occurred before the price rose up to the new resistance. By now you should understand the importance of patience and treating this like an investment. Look at all the consolidations that happen at the entry points. Copy rights © 2017 r.b. Nthulane 56 Look at more examples below Copy rights © 2017 r.b. Nthulane 57 From the H1 chart above we see those daily retracements that leave a v-shape occurring here too. Here I want to discuss the gap and what follows. This is a behaviour of indices, the market will open with a gap and the price will continue in the direction of the gap but remember we know that indices retrace and the retracement occurs at our magical numbers and that is what we are seeing above. Again we see that the market is just repeating what it did previously. 80-90% of the time when we have a consolidation at our magical numbers which seem like they are ending the trend we should go with them, there is often a consolidation before the change of direction. We have seen this happening many times. Go to your charts and see if it is not so. Copy rights © 2017 r.b. Nthulane 58 Let’s look at one more example. S&P 500 Copy rights © 2017 r.b. Nthulane 59 From the H1 time frame above we see the same behaviour that occurs with all other indices. V-shapes indicating retracements, retracement occurring at our entry points and lastly we are seeing a consolidation happening at our entry point. The H4 and D1 charts are just proof of what we have been looking at with other indices, there’s just a certain behaviour which indices follow, it is simply their nature. Understanding their nature puts us in an advantageous position. Copy rights © 2017 r.b. Nthulane 60 PART 4 61 CHAPTER 7 Market Sentiment Simply put market sentiment is how the market is feeling. There is no market without traders, so it is basically the view that majority of traders have. It is the pulling or pushing force that is pushing or pulling the market in one direction. I find market sentiment to be very useful simply because what the market is feeling is what the market will do. If the market feels like pulling in one direction, that’s exactly what will happen. If you come with your pushing force it won’t be enough to stop the pulling force and because of that you will be consumed. You only make money when you side in with the market, anything opposite that is a loss. A trend is a result of market sentiment. If the market feels like pushing in one direction, that’s what will happen, only those who are pushing or are looking for pushing opportunities will profit from their effort. Some traders like to put it this way “the trend is your friend”, I fully agree with them and that’s what this chapter is about. If the price is at a major support but the market sentiment is bearish and strong then expect the major support to be broken. Major support and resistance zones are the number 1 drivers of the market sentiment. The reason why price respects major support and resistance zones is simply because the market sentiment at those zones is always biased in the opposite direction. There are many traders and financial institutions who patiently wait for the price Copy rights © 2017 r.b. Nthulane 62 to get there and then they jump in. A lot of traders have awaken to support and resistance trading and this puts much more force in one direction, this changes the trend. The second driver of the market sentiment is fundamentals. Fundamentals also set the market sentiment,you can see this by observing the market’s reaction after fundamentals were released. When a country’s fundamentals are conservatively coming out negatively you will often see that its currency is bearish for a number of days if not weeks. There’s just no reason for investors to invest in a currency whose country is under performing. Concerning market sentiment you have to keep in mind that investors always want to have their money where it will mature and will pull out if they see a risk of losing their money. As a result of this, no investor will put money into a country whose businesses or economy is under performing and again not everyone will pull out at the same time so in a series of days you should expect that currency to be losing value because a lot of people are pulling out from it. The sentiment here is bearish and we shouldn’t look into buying but selling. The trend line in this case will be a bearish one. Supports will be broken and new resistances will be formed. You should look for selling opportunities in such cases. Again we get times where a currency’s market sentiment is bullish, this could be because of new policies passed, new president or even interest rate being increased. This will surely create a bullish market sentiment that will continue for days or weeks. Keep in mind that there will be retracements but the overall trend will be bullish, here we should look into buying opportunities. This is why we have to hold our trades for long. THE SAME THING APPLIES TO INDICES, OVER THE YEARS THE PRICE OF INDICES HAVE BEEN INCREASING AND Copy rights © 2017 r.b. Nthulane 63 THAT WILL ALWAYS BE THE CASE, THE REASON FOR THIS IS SIMPLY BECAUSE BUSINESSES ARE OUT THERE TO BE PROFITABLE AND TO CONTINUE GROWING. INDICES ONLY HAVE TOP PERFORMING COMPANIES IN A COUNTRY AND IF A COMPANY STOPS PERFORMING IT IS REMOVED FROM THE INDEX AND REPLACED WITH A BETTER PERFORMING ONE. From the CADJPY chart above you can see the bullish trend running within the trend line. The market sentiment here was made to continue because the Bank of Canada had signaled that they are going to raise the interest rate, by just this we saw the CAD being bullish for days until they actually raised the interest rate. After raising the interest rate, the bullish market sentiment was just made stronger and we saw CADJPY going all the way to the major resistance. If you look above you will see that price is currently consolidating within that resistance. The point I want you to take here is that fundamentals make market sentiment and if you don’t follow the sentiment you stand a higher chance of not making it. Copy rights © 2017 r.b. Nthulane 64 The same effect was seen on USDCAD above. There are many other examples that I can show you, in fact if we go to 70% of the trends and see the reason behind them, we will find that there was something behind the market sentiment. The examples for this are infinity. Do not ignore this fact while trading. Copy rights © 2017 r.b. Nthulane 65 From the Dax Daily chart we can see a bearish market sentiment. Open any EUR pairs and compare the charts on the same dates, you will see that the reason for the bearish trend was because the EUR was gaining strength. The reason behind the EUR gaining strength at that time was because of the comments made by the Central bank of the EU. The chair at the time was Draghi. His comments saw the EUR sky rocketing for a good 2 weeks if not 3. From the US3O chart above you can see that indeed the overall trend of indices is bullish because companies aim to improve daily. Although let’s focus on the last month, you can see that the market sentiment here was extremely bullish. Everyday the index was closing at a new high. The reason behind this was the hype behind technological stocks, everyone was going for technological stocks. It was all over the news and the internet. You see again the hype created a bullish market sentiment, all you do in this case is hold your trades and just trail with a stop loss. Copy rights © 2017 r.b. Nthulane 66 Yes it is not all the time where we have a strong market sentiment, sometimes the price will just be playing within our magic numbers and bouncing back but that’s nothing to worry about. There’s still a lot of money to be made in such cases especially in indices and simply because the payout in indices is very good. One thing to avoid is scalping, we still hold trades but trail with a stop loss. Let’s look at 2 more charts of this case: Copy rights © 2017 r.b. Nthulane 67 Copy rights © 2017 r.b. Nthulane 68 CHAPTER 8 Let’s Trade It’s been a journey, maybe you got lost somewhere in the journey. No problem, time to put everything into one basket. How do we actually trade? When do we trade? Only trade indices when you have a good account balance. If you don’t have a good balance, it will be wise to grow the account in forex then you can start trading indices. If you attempt to trade indices with a very small account you will be stuck in between not wanting to blow your account and trying to trade properly and therefore not do the right thing. With indices our supports and resistance lines run in 100s, these are our magical points/numbers. For example 1100, 1200, 1300, 1400, 1500...65100, 65200, 65300, 65400, 65600 etc. We know that not everything will go our way, but these points will always give us the edge. With the right discipline and patience we are going to achieve what we are in the markets for. From 1100 to 1200, with a lot size of 0.01, your profit will be around $110 depending on what currency your account is in. I have realized that with many brokers the minimum lot size for trading indices is 1.00, but that is actually equivalent to the 0.01 that is allowed in other brokers. The profits will always be more or less the same for the same movement. I always enter indices trades as a form of retracements from the magical numbers. If I’m trading them fundamentally, only then will I enter from where the price Copy rights © 2017 r.b. Nthulane 69 was at the time. Although, I first check if there’s nothing fundamental that is causing the current moves on the indices. I am then 80% guaranteed that I am in the right trade. The price will not always bounce exactly at intervals of 100s. If the price went past the level by about 1-30 (not exact) points, I still take the trade simply because I expect it to retrace as it usually does. One thing that will help you is to look back at what the price did at around that level, if it had previously turned then you can expect the same to happen. I will then put my stop loss at about 40 (not exact) points away from my entry point. From there I sit back, relax and just trail with a stop loss. Above is the first way of how/when to enter the trade, notice how I made it a zone and the level where the zone is around 7500 “500”. You can also see that it was actually a retracement. Copy rights © 2017 r.b. Nthulane 70 Copy rights © 2017 r.b. Nthulane 71 The 2 charts above show the first way of entering a trade. when you see that the price is coming to the magical point and you know that it should retrace from there, when it gets there you enter the trade and place you stop loss, the beauty of this is that you will be smiling within 5 minutes throughout your holding. Let’s look at the 2nd way of entering a trade. The 1st and 2nd way of entering a trade has nothing to do with the time frame. When you look at the entry point you can see that the price consolidated at that point for some time before fully turning. The 2nd involves entering after seeing that the price is struggling to break past that level, many times when this happens the price will turn. It is like the price was trying to breakthrough but failed to break past that point. Look at 2 more examples below. Copy rights © 2017 r.b. Nthulane 72 This way of entering applies to forex too. Copy rights © 2017 r.b. Nthulane 73 Now let’s look at the stop loss, where to place it and how to trail using a stop loss manually. Copy rights © 2017 r.b. Nthulane 74 Always place your stop loss beyond the greatest point that the price managed to reach at that zone. Remember the market repeats what it did previously. If your stop loss is below the greatest point then it has more of a chance of being hit because the market managed to surpass that point before. If your lot size is correct and you entered at the right time you will find it easier to place the stop loss at the right place but if your lot size or entry point is wrong then you are going to be psychologically challenged to place it at the right place. Above is an example of how to use trailing stop manually. I use this instead of take profit simply because I don’t want to exit a trade which can still give me much more profit. And this is how it works: When the price has moved to New Current Price 1 move your stop loss to break even which is at New Stop Loss 1, just around the entry point but in profit. Once you have done this your trade will never go negative again so your Copy rights © 2017 r.b. Nthulane 75 account is safe, let the trade run for some days. Once the price has moved to New Current Price 2, move your stop loss to New Stop Loss 2. When the price moves to New Current Price 3, you must move your stop loss to New Stop Loss 3. In addition, when you see that you are happy with the current profit and want to close the trade, don’t do it yet rather move the stop loss to Final Stop Loss, if the market continues going in your direction you will simply continue trailing else the market will hit your final stop loss. It is that simple. Remember to treat this as an investment and nothing else, that’s the only sustainable way that I know. A wise investor always studies the market he wants to invest in before he makes his investment. Don’t neglect fundamentals because they are the driving force of the market, they set the market sentiment. Remember the trend is your friend. Always use your stop loss. Copy rights © 2017 r.b. Nthulane 76 CHAPTER 9 Frequently Asked Questions As a teacher and mentor in forex trading, I have realized that students often asked me the same questions. I will put some of the questions here with their answers. How do I know the difference between major and minor support or resistance? They are found on bigger time frames, H4 upwards. You should be able to trace them all the way back. They are far from each other, you often have to patiently wait for the price to get there. Show me your supports and resistance lines, I think mine are wrong: Students often asked me this because they thought all our points have to be the exact same numbers but no we treat it as a zone and not just a single line, sometimes the price will go below the line but yet still be in the zone. How long should I hold my winning trades? Until the price gets to the next major support or resistance, until the trade hits your stop loss. I entered a trade, it is not moving should I close? I always received this question and it was mostly because the students were not patient enough, they wanted to enter trades and see big profits within an hour. Don’t close the trade if you got in at the right Copy rights © 2017 r.b. Nthulane 77 point. It’s Friday should I close my trades or hold over the weekend? If there are no fundamentals you are aware of that will be released during the weekend then do not close the trades, always make sure you have your stop loss in place. Do you use candlestick patterns? Personally I don’t use them, they don’t always occur and when they do they always give an entry point which is far from the stop loss. There is simply no best indicator than the knowledge of what the market does at support or resistance. Do indices follow fundamentals? Yes they do but mostly the high impact ones. Go back to chapter 5. The trade is currently going against me, should I move my stop loss? Never adjust your stop loss for any reason. This is very important with indices, the market will get to your stop loss if your direction was wrong. Copy rights © 2017 r.b. Nthulane 78 From all that I have gone through, I have seen that this way of trading works. You have to be strict with how you do things and stick to that alone. Have good discipline then apply patience on top of that, from that you will be headed for success. I trust that your trading journey will be filled with profits and success, I wish you all the best.