Power For Ex Profit Principles 2011

SPECIAL
NOTE: This is a limited edition update to what I think is one of the most powerful reports I have ever published, and its in direct response to the requests my students have been sending me for years. Theyve essentially been pleading with me to show them how they can potentially profit in the Forex markets. Heres the deal: Just like any other market, most traders are losing their shirt when they trade Forex. Thats mainly because theyre going about it all wrong, and many have been mislead by unscrupulous individuals or questionable brokers promising seemingly overnight riches. Forex is still a little like the wild west, so theres naturally a lot of confusion and misinformation out there. In this special report, Power Forex Profit Principles, Im going to cover many tactics and strategies used by successful Forex traders all over the world. But unfortunately, only about 5 to 10 percent of all Forex traders are actually aware of this information. I would strongly suggest you print out this report and read it more than once. What you are about to read is more valuable to you than what you will find in many trading courses that youd have to pay for. This is a HUGE report. Take your time to read it all. Good Trading,
Power Forex Profit Principles
Bill Poulos
Copyright Profits Run, Inc.
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Please take a few seconds and print this entire report right now. Heres why: When you print this report out, the chances that youll actually read it and learn something new about trading the Forex markets will increase dramatically. I have a collection of digital reports on my computer, and the only ones Ive read all the way through are the ones Ive printed out. When you print this report out, you can read it anywhere in your house (or on the road, for that matter). I love my family, but my office is smack dab in the middle of the house, so its a high traffic area. Sometimes the only way I can get a solid chunk of time to read something I find online is if I print it out and take it somewhere else in the house. There is an activity in this report that requires you to answer some questions. The impact of this activity will be much greater if you actually get out a pencil or pen and actually write on this report. I highly recommend you spend some quality time completing this activity. Your future could depend on it.
PLEASE PRINT THIS REPORT NOW!
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DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. The use of leverage can lead to large losses as well as gains. Under certain conditions you may fins it impossible to liquidate a position. This can occur, for example, when a market becomes illiquid. The placement of contingent orders by you, such as stop-loss or stop-limit orders will not necessarily limit or prevent losses because market conditions may make it impossible to execute such orders. In no event should the content of this correspondence be construed as an express or implied promise or guarantee that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Revision 05-20110516.
Free Distribution Rights: As long as this report remains unchanged and in Adobe Reader (PDF) format, you have my permission to give away copies of it for free. How do the Forex markets operate on a 24 hour basis? ......................................... 8 Can you take me through a typical trade scenario? ................................................ 9 What types of orders do I use with Forex trading? ............................................... 10 How much can I expect to make with Forex trading? ........................................... 10 Forex seems to be quite different from trading stocks? ....................................... 11 How do I find a reliable Forex broker? .................................................................. 11 What are the best Forex pairs to trade? ............................................................... 13 What is the best trading platform and charting software? ................................... 14 Is it better to use fundamental or technical analysis with Forex trading? ............ 15 What are the attributes of a good Forex trading method? ................................... 16
In This Report
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What are the best technical indicators to use? ..................................................... 17 What simple strategy can I use to find good entry points? ................................... 23 How can I determine the initial stop loss, trailing stops, and exit points? ............ 25 How can I find a Forex method that works almost all of the time? ...................... 28 How can I minimize downside risk while still capturing quality gains? ................. 29 What account size do I need to trade the Forex markets? ................................... 30
Dear Trader, The information you hold in your hands (or are viewing on your computer) has the potential to dramatically increase the pips you pull out of the Forex markets, and it does have the potential to change your life. Thats not hype, because the potential is real. Its up to you to make it happen, and my goal with this report is to help you discover in hours and days what took me decades to realize about success in the markets. Ive been trading the markets since 1974, and Ive been teaching thousands of students around the world what it takes to succeed in the markets since 2001. So some people think of me as a grizzled trading veteran because Ive seen so much over the past 3 decades. Sure, Ive scraped my knees and have been through
50,000 Traders & Their Forex Frustrations
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a few bumps and bruises over the years, but I see myself as a filter for you, or someone who has the ability to sift through all the junk and noise thats out there and tell it to you like it is. So, I may come across a little harsh in this report, but I dont believe in sugar- coating anything or giving you false hopes of success. There are enough swindlers doing that already. I want to give you the facts, like em or not, so youre empowered to take action and make positive decisions on how to succeed in the Forex markets. For years now, my students and readers have been pleading with me to show them how to trade the Forex markets. And many of them actually took my stock trading courses and started telling me about all the money they were making by applying those courses to the Forex markets. They essentially proved to me what I knew to be true markets are markets. Theres nothing magical about the Forex markets, because all markets are ultimately driven by human psychology fear and greed and supply and demand. Sure, every market has its own peculiarities, but if you understand how the basic drivers of human emotions work, you can potentially succeed big in any market. As I researched the answers to my students questions about Forex, the more I realized that too many traders were getting suckered and taken by less-than- honest Forex brokers, as well as the holy grail peddlers who were preying upon the wide-eyed desperation of traders who think they can get rich quick trading the popular Forex markets. Excuse me, but what I found was disgusting. I found more misinformation, lies, and hype about Forex that I had seen in some time. And thats when I decided to put all my energy into dispelling this junk so I could give my students and readers a source of factual, actual, solid, realistic Forex Profit Principles that they could use to potentially profit in the Forex markets again and again. So to make sure I didnt miss any big questions or concerns, I surveyed over 50,000 active traders recently and asked them one question: If you could sit down and have lunch with me, what is the top question you would ask me about Forex trading?
They Nearly Begged Me to Help Them
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Thats it. Plain and simple. Almost immediately, the questions began to pour in. You know what its like Monday morning when you check your email and theres a ton of it from over the weekend? Well, it was like that multiplied by a hundred, or a thousand. People were confused more than I realized about Forex. Quite honestly, this response overwhelmed me. At first I thought to myself, How can I possibly address all these questions? Theres just not enough time to do it! But then I noticed something amazing I started seeing the same questions over and over. So I began to put them into categories, and after a long 12 hour day, I was shocked and excited. Why? Well, I was shocked to find that, indeed, most of the questions fell neatly into a handful of broad categories. But I was excited because I had personally experienced what all these questions were asking. And I knew without a shadow of a doubt that I could help these traders. But it gets better, because I realized that if a survey of 50,000 traders resulted in a core, common set of questions, then millions of traders all around the world probably had the same concerns. So this report, the Power Forex Profit Principles, is my answer to the top questions I received from my readers and students about Forex trading. Now lets get right into the nitty gritty and clear up these questions once and for all. Are you ready? Lets begin.
I Was Shocked and Excited
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I hear a lot about Forex trading and am very interested in learning more about it. Can you give me a brief overview of the basics of Forex?
Unlike stocks and futures that trade through exchanges or the NASDAQ, Forex trading is done through market makers that include major banks as well as small to large brokerage firms located around the world who collectively make a market on a 24/7 basis. The Forex market is always open and is the largest financial network in the world (daily average turnover of trillions of dollars). Forex trading involves trading currency pairs such as the EUR/USD pair (Euro/US dollar pair) where a buyer of this pair would actually be buying the Euro and simultaneously selling short the US dollar. The format of a Forex pair is YYY/ZZZ, where the first currency is called the base currency and the second currency is called the counter currency. The price for a Forex pair is expressed in terms of the counter currency. For example, the price of the EUR/USD pair is expressed in US dollars (the counter currency) as 1.3667. This means that the base currency, the Euro in this case, equals US$ 1.3667. The price of the USD/JPY pair is expressed in Japanese Yen as 108.02, because for this pair the Japanese Yen is the counter currency. This means that the base currency, the US dollar in this case, equals 108.02 Japanese Yen. Prices are expressed in pips, which are nothing more than the minimum increment that a currency pair price can change. For example, if the EUR/USD price changes from 1.3790 to 1.3791, the price is said to have gone up by 1 pip. Most major pairs are priced to 4 decimals which is the equivalent of 1/100th of one percent. The exception would be the Japanese Yen pair that only trades to 2 decimals. This is because there are usually over 100 yen to the dollar. Forex pair quotes are on a bid-ask basis. The bid is the price that the market is willing to pay a seller at a point in time for a specific currency pair. The ask is the price that the market is willing to sell to a buyer at a point in time for a specific currency pair. The difference between the bid and the ask is called the bid/ask spread. For example, a typical EUR/USD quote could be 1.3784 bid 1.3787 ask which is a spread of 3 pips. Since the spread is how the market makers are compensated, there is no commission when placing a trade.
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Also, it is important to note that the spread will vary depending on market conditions. So the quote itself for any given Forex pair is the bid-ask combination at a point in time based on the market driven floating exchange rate. The quotation lists the bid price first, then the ask price. For the EUR/USD example above, the quote would be expressed simply as 1.3784/1.3787 or 1.3784/87. Trading is done in lots, either 100,000 unit standard or 10,000 unit mini lots. For example, for a standard lot purchase, if the EUR/USD quote was 1.3784/1.3787, then buying an EUR/USD pair means buying 100,000 Euro dollars and selling short $137,870 US dollars. Therefore, for a standard lot in which the USD is the counter currency, 1 pip will equal $10 ($1 for a mini lot). For other major counter currency pairs 1 pip will range from $8 to $10. Forex dealers offer leverage as high as 100:1 and sometimes higher. At 100:1 leverage, 1 standard lot pair in which the USD in the base currency would require $1,000 in margin ($100,000/100). On the other hand, a 1 mini lot pair would require only $100 in margin ($10,000/100). If the account value falls below the margin requirement, the dealer will close out the trade automatically.
How do the Forex markets operate on a 24 hour basis?

Active trading sessions in each countrys financial centers around the world take place from Sunday 5:00PM EST to Friday 5:00PM EST. For the major financial centers, trading starts in Sydney, then moves to each financial center in this order: Tokyo, London (and Europe), New York. The daily session for daily charting purposes ends at 5:00PM EST (coincident with the New York close), but the market does not actually close. Here are the time intervals for each of the major financial centers expressed as EST. Sydney session starts at 5:00 pm and ends around 2:00 am. Tokyo session begins at 7:00 pm and ends around 4:00 am. London opens at 3:00 am and ends around 12:00 am. New York session opens at 8:00 am and ends around 5:00 pm.
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To give you a visual representation of this, heres a figure showing the same business hours for the various regions. In this figure you can see the overlap between the London (and Europe) session and the New York session, between 8 am and 11 am EST. The currency markets experience the highest volatility and volume during that overlap, which also coincides with the releases of important US economic releases.
Figure 1 - Forex Markets Timeline
Can you take me through a typical trade scenario?

Lets say the current bid/ask quote for EUR/USD is 1.3802/05 and you want to buy the pair because you think the Euro is going to gain on the US dollar. So you buy 1 standard lot. When you do that you are actually buying 100,000 Euros (1 standard lot) for $138,050 US dollars (100,000 x 1.3805). At 100:1 leverage, your initial margin deposit would be $1,381 for this trade. So in our example, lets say the Euro pair goes up and is now trading at 1.3865/68 and you decide to sell and take profits. You would then sell your 1 standard lot. When you do that you are actually selling 100,000 Euros (1 standard lot) for $138,650 US dollars (100,000 x 1.3865). Since you bought 100,000 Euros for $138,050 and sold them for $138,650, you made a profit of $600 or 60 pips. If on the other hand the Euro pair went down to 1.3775/78 and you sold at 1.3775, you would have a loss of $300 ($138,050 - $137,750). And again, if the account equity fell below the margin requirement, the trade would be automatically liquidated. However, this should never happen to you if you follow sound risk management rules.
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What types of orders do I use with Forex trading?

There are different order types for different trading needs. Market Order: This order type is used to enter or exit the market immediately at the current quoted price. If you want to buy you will be filled at the asking price. If you want to sell you will be filled at the bid price. Limit Order: This order type is used to buy or sell a pair at a predetermined price. A buy limit order will only be filled if the market trades (ask) at or below the limit price. A sell limit order will only be filled if the market trades (bid) at or above the limit price. Stop Order: This order type is used to buy or sell a pair at a predetermined price. A buy stop order will only be filled if the market trades (ask) at or above the stop price. A sell stop order will only be filled if the market trades (bid) at or below the stop price.
How much can I expect to make with Forex trading?

It is very important to have realistic expectations. The truth is that Forex trading is not a get rich quick proposition, despite all of the hype to the contrary. That does not mean though that there isnt money to be made. One of the appeals of Forex trading is the great leverage that is offered. However, leverage can work for or against you and therefore it is critical that you follow good trading methods along with sound risk management principles to have the opportunity to unlock the profit potential that the Forex markets have to offer.
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Forex seems to be quite different from trading stocks. What are the benefits and risks in comparison and would a much bigger account be needed?
In addition to the Forex attributes explained in the basics of Forex question above, the Forex markets are indeed different from the stock markets in that their price behavior is different with usually more abrupt price swings. This requires different trading methods than those typically used for stocks in order to take full advantage of the profit potential that Forex has to offer while at the same time designing the right strategy to minimize risk. On the other hand, they are alike in that both Forex and stocks are markets that develop repeatable price behavior that present profit opportunities for those traders with good trading methods, sound money management principles and disciplined trading. Because of the high leverage that Forex offers, Forex positions require a much smaller account size than do stocks trading similar sized positions as Forex margin requirements are much smaller than stock margin requirements. And so the reward can be much greater with Forex, but at the same time, the risk is much greater. But this can be dealt with effectively with good trading tactics and good money management rules that allow for maximizing profit potential and minimizing risk.
How do I find a reliable Forex broker?

Unlike stock and futures brokers, not all Forex brokers are regulated. It is very important to open an account with a regulated broker or bank that is a registered member of a regulating body. Since there is no central market, there is no global regulatory agency responsible for monitoring the activity of the currency markets. Therefore, regulation is left to each country. In the United States the Federal Reserve Bank monitors the banking system and the Commodity Futures Trading Commission (CFTC) has jurisdiction over all Futures and Forex activity. When trading in the foreign exchange markets, individuals should only trade with a CFTC registered entity that is also a member
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of the National Futures Association (NFA) and is regulated by the CFTC. For non- US broker/ bank entities, be sure that the broker or bank is registered with that countrys appropriate regulatory bodies. In addition to working with a regulated broker, you want a broker that has low spreads. These spreads are calculated in pips, which is the difference between the price at which a currency can be bought and the price at which it can be sold at any given point in time. This is how the forex brokers or banks make their money since they dont charge commissions. So, obviously, lower spreads will save you more money. Trading tools are also very important when choosing a Forex broker. Specifically, you want a broker that will give you good charting and trading software that has the ability to plot the indicators that your trading method uses. This brings up an important point. You should never go looking for charting software first and then try to use or develop a trading method. Instead, you should first get educated on a good trading method (or develop your own) and then find charting software that will let you implement this method. Ive seen too many traders stubbornly use inadequate charting software just because their broker gave it to them. Dont make this mistake. Thankfully, unlike stock brokers, many forex brokers do provide you with very adequate charting and trading software, all bundled together. Other aspects to watch for when selecting a broker are the leverage levels and account types (standard and mini accounts) offered. Most brokers offer at least 100:1 leverage which is more than adequate for most traders. Some brokers also offer greater leverage, up to 400:1. This type of leverage is completely unnecessary as the risk reward ratio can quickly go against you if you use
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excessive leverage. (Ill cover this in more detail later in the report in the question about risk management.) Depending on your account size, you will want to be sure the broker you choose offers the appropriate account types. Standard and mini accounts are typical. The standard account typically requires minimum initial capital of $2,000 or more, while the mini account typically requires $300 or more. Leverage of 100:1 should be available for either a standard or a mini account.
What are the best Forex pairs to trade?

I believe that not all Forex pairs are suitable for trading. What we should be looking for as traders are liquid markets that have sufficient price movement to make a trade worthwhile. With that in mind, the following pairs are the most widely traded, most liquid pairs and the only ones that I would consider trading: EUR/USD Euro / US dollar GBP/USD - British Pound / US dollar (often referred to as the Cable) USD/JPY - US dollar / Japanese Yen USD/CHF US dollar / Swiss Franc USD/CAD US dollar / Canadian dollar AUD/USD Australian dollar / US dollar And to further simplify Forex trading, you could easily limit your trading to the two most liquid and widely traded pairs, the EUR/USD and the GBP/USD. This really starts to reduce demands on your time for trading activities without giving up good profit potential.
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What is the best trading platform and charting software for both beginners and more experienced traders alike and where should I obtain the most reliable data?
The answer to this question starts with your broker. First, I highly recommend that you only open an account with a registered broker. Having said that, most Forex brokers provide, free of charge, an online trading platform that is integral with decent charting software. So that you have your charting software, your data feed and your trading platform (the ability to place trades online) all in one. I believe you can consider the data reliable and the order execution proper as long as you are dealing with a registered broker. However, some trading platforms and charting software are more intuitive and easier to use than others, so in selecting a broker, you want to open a demo account first and get the feel for that brokers platform to see if it is comfortable for you. You will be able to determine this with a little paper trading over a few days and weeks. Also, you want to be sure that your brokers charting software is able to plot the indicators that your trading methods call for. Most will be able to do this, but not all. In addition, some traders prefer to also use additional upscale charting software independent from the dealer, such as offered by MetaTrader. MetaTrader and others offer additional charting capability as well as trade alert capability that some traders find useful.
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Is it better to use fundamental or technical analysis with Forex trading?

The answer to this question depends on your trading method. The markets are indeed moved by fundamentals (balance of trade data, money supply, interest rates, economic and financial reports, etc.) but only through the prism of human psychology. It is not the fundamental data or information that is so important as much as it is the markets reactions to that information. Many advocate trading on the fundamentals; however, a case can be made that trading on the fundamentals is extremely difficult due to the fact that the markets always immediately and continuously are digesting any and all fundamental data and to do this successfully, you need to be available on a real time basis at whatever hour of the day or night that the news is likely to impact the market. Then, you need to act on that news before or at least in the same instant that the rest of the world does or else the opportunity could be lost. While some do trade the fundamentals successfully, I believe using good trading methods based on technical analysis is an easier, less demanding way to trade with far greater odds of success. This is because I believe, as do technical traders in general, that any and all fundamentals are already always reflected in the price of the market at any instant and so I would rather apply technical analysis to the markets and trade them on my terms, when I want to trade them and how I want to trade them, with as little time spent in the process as possible.
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What are the attributes of a good Forex trading method?

A good trading method should be as simple as possible to provide a powerful edge to the disciplined trader that is based upon specific setup conditions, entry rules, initial stops, and exit strategy. In addition the management of position size and number of positions must be according to strict money management rules. A good trading method also must be relatively easy to follow. Setup conditions These are the specific requirements that must be met to consider a pair for a trade. These requirements are expressed in terms of technical analysis indicators, patterns and price action. The aim here is to only consider a trade when the market meets these pre-set conditions and to stand aside otherwise. This is one of the ways required to put the odds in your favor. Entry Rules Once the setup conditions are in place, entry rules define the trigger necessary to actually enter into the trade. This usually means that price must behave in a certain way in order to trigger into a trade using either a market, stop, or limit order. Initial Stop Rules These are the rules that govern how a new position should be protected from an adverse move in the market. Since there is always risk when trading the Forex markets, it is very important to know the appropriate place to place the initial stop order. Placed too close to the market risks being stopped out prematurely. Placed too far from the market takes on too much risk. This is one of the most critical aspects of trade management. Effective Initial Stops should be place where you dont expect the market to go and if it does, the premise of the trade is over and you should exit the trade with a small loss. Exit Strategy Rules These rules govern how to manage a trade to exit the trade profitably, if the Initial Stop Rules have not been applied to the trade. These rules
should strike a balance between protecting open profits as much as possible and exiting a market too soon and missing favorable market moves.
Why dont all setup conditions trigger into positions?

There is a common misunderstanding among many beginners that if a trading method is good then any time the setup conditions as defined by that method occur, then that means its OK to go ahead and enter the market. As seasoned traders know, this is not always the case. In order to have an edge when trading the markets, a successful trader waits for conditions to develop that may signal a good trade opportunity. But when these conditions develop, which are usually called setup conditions, that oftentimes only means that the trader should be on alert to a trading opportunity. An actual trade does not occur unless after the setup conditions are in place a trigger also occurs. The trigger is necessary to confirm that the market will move in the intended direction before entering the market. This is a very important concept, as it is common to have several setup condition alerts that do not trigger. So the moral of this story is that it is perfectly OK (and expected) for setup conditions to NOT trigger. That means conditions are no longer good for the trade, and you are being protected because you didnt enter that trade. Amateurs and beginners will sometimes assume a trading method is not working because setup conditions have not been triggered into a position. Nothing could be further from the truth.
What are the best technical indicators to use?

At last count there are over 100 technical indicators available in most charting software packages. There is no magic in the indicators themselves as they all strive to tell you something about how the market is behaving at a point in time. And it is not that some are better than others, rather the key to using indicators successfully is to select only a few that complement each other and to use them in an uncommon manner together with powerful trading tactics.
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The tendency of amateur traders is to over-complicate things. They want to use (or misuse, really) too many indicators and patterns, and think that to be successful, there must be a bunch of complexity that is required in a good trading method. Nothing could be further from the truth. Simple is better, by far, for several reasons. 1. Using too many or the wrong indicators is counterproductive, as the information that those indicators provide is counterintuitive and just plain misleading. 2. Using a few simple indicators in a uniquely powerful way can provide the right information necessary to make good trading decisions. 3. With the right indicators and patterns, you will be far more likely to trade with discipline because you will be able to understand an objective set of rules that the right indicators and patterns can provide. Let me comment on a phenomenon that I see time and time again. Hopefully, you will not fall victim to this. Here it is: You research a new trading method and ultimately buy it. Then you quickly flip ahead to what you consider to be the meat of the method, and totally ignore the more-important aspects of risk management, discipline, and psychology. Then you examine the method, looking for a big, mysterious, jaw-dropping secret that will let you predict each and every market move like a modern-day Nostradamus. You look for a complicated formula, or you look for some cryptic combination of indicators that must be good, because theyre just so complicated looking! Wow! Then what happens is youll typically burn yourself out trying to apply it. Youll become frustrated when the method doesnt work. Or, youll blame yourself for not being smart enough to understand or apply the method. Then youll put the method on the shelf, only to occasionally glance at it in wonder from time to time. Wondering why you couldnt get what you still assume to be a great method to work.
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But heres what can also happen. In the example above, after you discover that the meat of the method is very simple, easy to understand, and only uses a few common indicators, you become perplexed. You may even become disappointed. After all, in your mind, you expected some labyrinthine skeleton key that would unlock the mysteries of the forex markets once and for all. You may even be tempted to throw in the towel, instantly give up the method and send it back just because its not complicated enough. What?! Thats just crazy. But I have to admit, I went through a period in my younger (and poorer) days when I thought a bit like that. Time and experience have finally taught me, and much to my relief, that complicated is usually not good, and simple is almost always better. If those traders that are still cursed with that complexity mindset would just try a simple trading method, they would be doing themselves a HUGE favor (not to mention, potentially, their trading accounts). This goes for both true beginners as well as traders who think of themselves as experts. Again, the key here is simple, but powerful. Use just a few indicators, applied in a manner that is not the usual textbook approach. That is what can give you an edge trading the markets. Incidentally, the unfortunate truth of the matter is that that the old 80/20 rule will come into play here (except in trading, its more like 90/10, or 95/5), and 80 to 95% of the traders that just read this section and nodded their heads in agreement will completely ignore this advice and fall right back into the trap described above. Its a near certainty, and thats too bad. So I really urge you to go back and read this section again, and hopefully you can escape the self- sabotaging patterns that are separating most traders from failure and success in the markets.
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Lets take a look now at some examples of a few indicators that can be used to form the basis of very powerful trading methods.
Figure 2 - USD/CHF Daily Chart
Figure 2 shows some typical and not so typical indicators applied to the USD/CHF pair using VT Trader. First, notice that two simple moving averages have been plotted on the chart (in blue and red). These are commonly used indicators. I have also plotted moving average envelopes which are a fixed percentage above and below the blue moving average. These are not so commonly used and can be very helpful supporting various quick hit, in and out trading strategies that only need attention once a day at the 5:00PM EST daily close.
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Figure 3 - USD/JPY Daily Chart
Figure 3 shows some additional indicators applied to the USD/JPY pair using VT Trader. On this chart, I am applying a longer term moving average in purple together with two very short term moving averages in brown. The long term moving average is based on the closing price while the short term moving averages are based on the high and close respectively. Also, included is the ADX at the bottom of the chart. This is what I mean when I say the key to developing an edge when trading the markets is to combine a few indicators in an uncommon way. Each of these configurations is designed to exploit a certain behavior in the market. But the indicators alone are insufficient; only when combined with powerful trading tactics does the power of a good trading method emerge.
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Figure 4 - USD/CAD Daily Chart
Figure 4 shows a configuration we reviewed in an earlier question applied this time to the USD/CAD pair using VT Trader. On this chart I am applying two simple moving averages plotted in blue and red and the ADX indicator plotted at the bottom in brown. This set of indicators when combined with different trading tactics is designed to capture longer term moves in the Forex markets such as occurred on this USD/CAD pair beginning at the left hand side of the chart and continuing for over 5 months. These mega trends can only be captured by trading the daily bar charts.
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Figure 5 - AUD/USD Daily Chart
Figure 5 shows another combination of indicators applied to the AUD/USD pair using VT Trader. On this chart, I am applying an intermediate term moving average in red together with slow stochastics and ADX in the two panels below the price chart. The intermediate term moving average is based on the closing price. This set of indicators when combined with different trading tactics is designed to capture sudden trend reversal waves such as occurred on this AUD/USD pair just to the right of the center of the chart and continuing for almost 3 months.
What simple strategy can I use to find good entry points?

The general approach that I use is to develop specific setup conditions that, when present in the market, indicate that I should consider entering into a new position. So the first thing is to identify the conditions that occur relatively
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infrequently in the market, but that when they do, a high probability opportunity may await. This is a very important concept, because one of the keys to successful Forex trading is to wait patiently for the prime opportunity to enter the market. Amateurs too often become impatient and want to trade just for the sake of trading and consequently enter the market under other than ideal conditions. This greatly reduces the chance of a successful trade.
Figure 6 - GBP/USD Daily Chart Entry Point Examples
Amateur traders that do this are, in effect, trying to force the market to come to them on their terms. Guess what? The market doesnt care! Its going to do what its going to do and there is nothing you can do about it except for one thing. And that is to wait for the market to develop according to predefined setup conditions and only when that happens is it appropriate to consider a trade. In that way, youre not forcing, but rather waiting for the market to come to you, which makes a world of difference. Another key concept to find entry points that is common to most types of trend trading is to attempt to buy into support levels and sell into resistance levels. The
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success or failure of this attempt lies in the robustness of the setup conditions defined in the trading method. Once the setup conditions are in place, specific entry rules need to be followed to trigger the actual trade. For example, one of the pairs that you are following may meet the setup conditions for a long trade. Now, depending on the trading method, the entry order could be a Stop order that says, Only buy if the market trades above a certain level which confirms the resumption of the uptrend. Or, it could be a Limit order which says, Buy only if the market trades down to a support level, defined by a moving average or Fibonacci level or old highs, etc. There is no one right way to do this. However, the precise entry trigger point has to be integral to the other features of the overall trading method, including planned risk in the trade. The entry point rules of the method, by necessity, will determine the stop loss point and consequently planned risk in the trade. The two go hand in hand.
How can I determine the initial stop loss, trailing stops, and exit points?
Besides money/risk management, I believe this is one of the most important questions regarding a good trading method. It should go without saying that as soon as you enter the market with a new position, an initial stop order should be entered to protect the position against an adverse move in the market or an exit strategy should be employed to cover the trade if the market closes adversely. If such a move occurs, as is often the case, you want your position liquidated and out of the market with a minimal loss. The consequences of failing to do this are that you will not be successful at trading - period. In fact, every trade you put on, you should plan to lose, so that you are sure to place your stop loss order or cover the trade on an adverse close. Otherwise, what would have been a small loss turns into a big loss, throwing the entire risk/reward ratio out of kilter against you. That being said, where should the stop be placed? The short answer is, Where you dont expect the market to go; or, more specifically, where the assumption in putting on the trade is no longer valid. For example, if a long position was entered into after an uptrend or breakout market traded back down to support, an initial stop could be entered below the recent low because if the market does
go there, support (as defined by that low) would have failed, and there is no longer any reason to be long the market so get out! Dont wait around for it to come back in your favor because the odds are against it. If the market goes in your favor once the initial stop is in place, then you need a set of rules that will allow you to exit the market profitably. This poses a real dilemma. If you exit too soon, you may secure a small profit, but miss out on all those big moves that occur (and the big profits that go with them). On the other hand, if you wait too long to exit, the market may reverse and take away all of your open profits and even put you into a loss position.
Figure 7 - GBP/USD Daily Chart Initial Stop, Trailing Stops, & Profit Target Examples
So what do you do? Well, the first thing is to realize that there is no method that can forecast whether or not a particular move will: Go against you immediately Go up only a little before going back down Go up a lot in your favor
For example, after you enter a long trade in an uptrend, theres absolutely no way to predict what will happen next (contrary to what the so-called gurus tell you). Because of this, you absolutely need an exit strategy, because the risk of loss is significant no matter how carefully you plan your entries and exits. The following is the very best exit strategy that I believe possible when trading the Forex markets. I call it the Optimal Profit Exit Strategy. Its a strategy that scales out of a trade in two steps. This strategy is first and foremost about taking an initial profit as soon as appropriate, thereby taking some money off the table and reducing the risk in the trade at the same time. 1. Step one is to cover 1/2 of your position at a pre-determined profit target. The profit target is modest, but enough to make the trade worthwhile and the specific level is also dependent on the overall method being used. Once that initial profit target is hit, you should move the initial stop up for the remaining 1/2 of the position to the lowest low of the past 3 days for an uptrend trade or the highest high of the past 3 days for a downtrend trade. Youre now out of 1/2 of the trade with a very nice profit and at the same time you are prepared to ride the market as far as it wants to go in your favor for the remaining 1/2 of your position. 2. The remaining 1/2 position should remain protected by a trailing stop always based on the lowest low of the past 3 days (for an uptrend trade). And so as the market continues to move up, you should continuously move the stop up with it. This locks in a significant portion of the remaining open profit but also gives the market enough room to trade down a bit without shaking you out of the trade if it moves higher. With this strategy you should be prepared to take advantage of the market after entering a trade no matter what it does. And thats a big deal.
The Optimal Profit Exit Strategy
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How can I find a Forex method that works almost all of the time with minimal or no losses?
I call this the Holy Grail Syndrome and, of course, the Holy Grail of trading simply does not exist. Ive talked about this concept many times since I started training individuals to trade the markets back in 2001, but it bears repeating here. For years, I refused to believe in this concept and was forever looking for or trying to develop a method that would always win with no losses, or certainly never experience two losing trades in a row. I wasted years of my life with this false impression about what it would take to trade successfully. Dont fall into the same trap. While the holy grail of trading does not exist, nor will it ever; thankfully, it is not necessary in order to be successful. What is necessary as I have emphasized repeatedly in this report is a trading method that gives you an edge in the market, the discipline to trade it and of course sound money management. That sounds simple, and in some respects it is, until you factor us humans into the equation. Consider these questions. 1. Do you have an edge in trading the markets? What is it? If you dont know, then you do not have an edge. 2. How about discipline - can you really follow your trading method without fail, especially after two successive losing trades? What about three? Or will you drop the method and search for something else? When that happens the Holy Grail Syndrome is at work. 3. Then there is money management. Are you allocating the appropriate level of funds and controlling the degree of risk on each trade?
The reason most traders lose is that they cannot answer Yes to all three questions listed above. And I believe that the key to mustering the discipline needed to be a winner is to have a method that does indeed provide a winning edge, that is relatively simple to apply, and that uses sound money management practices. Only then, in my opinion, can one muster the required discipline to trade effectively. So do yourself a favor and abandon the search for the Holy Grail. Instead, find a good trading method that fits with your personality, apply sound money management practices, and trade it with discipline.
How can I minimize downside risk while still capturing quality gains in the Forex markets?
First, you must have a good trading method. But even more importantly, you must have strict money management rules; without them, even a good trading method will eventually fail. I have found that in order to be effective with risk management, you must have rules that are simple or else you simply wont follow them. For example, one risk management method is called Optimal-f. While Optimal-f has a lot going it for it, I believe it is too complicated to be of practical use. Instead I believe the better approach is as follows: Simply risk no more than 2% of your account size on any one position and no more than 8% of your account size on all open positions at a point in time. Risk in this case means the amount you plan to lose if the trade(s) goes against you. So, as your account size grows, you would be able to place larger and larger positions. When you have a losing trade or two, you would be reducing the amount risked and therefore the position size on the next trade. So this is a very simple self regulating concept that keeps your positions in proper alignment with your account size at all times. This is particularly important in Forex trading, given the tremendous leverage offered by the brokers. The last thing you want to do is to over commit to a trade just because of the brokers low margin requirements. By the way, I believe that most Forex traders that end up on the losing end do so because of poor risk management more than any other factor. Lets look at an example. Suppose you open an account and dont understand the importance of risk management. You elect to risk 30% of the initial account
size on each trade (because the brokers margin requirements allow it) and then promptly lose three trades in a row. Your account would be almost completely wiped out after only three trades. On the other hand, lets say you understand the importance of risk management and risk only 2% of the account size on each trade. Now lets say once again you lose three trades in a row. This time you would have lost less than 6% of your initial account size and still have plenty of capital left for additional trades where one good trade could more than offset the three losers. You might say that this is an extreme example, but I think it makes the case; when you trade with proper risk management rules, you stay in the game.
What account size do I need to trade the Forex markets?

There is no one right answer to that question. First, you should only trade with funds that you can afford to lose. However, Forex brokers allow you to trade standard lots and mini lots. The margin (depending on the pair you are trading) for a standard lot is around $1,000 and for a mini lot around $100. So technically, you could open an account with, say, $500 and trade 5 mini lots. Of course, you would be violating your risk management rules and would probably end up losing your stake. The key, once again, is to risk no more than 2% of your account size on any one trade and so if you were to put on 1 mini lot and risk 50 pips, that would be about $50 of risk in the trade (for a US dollar counter currency pair). That means you would have to have an account size of at least $2,500 ($2,500 x 2% = $50) to put that trade on without violating the risk management rules.
How are orders placed with Forex brokers?

Placing Forex orders is most commonly done online through your brokers order platform that is often integrated with your brokers charting software. This is very easy to do once you understand the order mechanics. Following are examples of typical order placements using VT Trader charting software and order platform. This information is readily transferable to most any brokers charting software and order platform as they are all very similar in the way they operate. Im providing this information here simply to demonstrate how easy it is to place Forex orders because I get a lot of questions from newcomers about this. If youre a more experienced trader, then this information will be old hat to you.
Figure 8 AUD/USD Daily Bar Chart 11/07
Here is a typical daily bar chart; in this case it is for the AUD/USD pair. I will use this chart to demonstrate how to place a market order to buy this pair and then how to place a stop order protecting the position.
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Figure 9 Initiate an order to buy at the market
In order to place an order to buy at the market, we right-click on the chart above the current market price and then a window pops up as shown on this chart. Next, select Buy in the pop up menu.
Figure 10 Open Positions Window
Another window will pop up called Open Positions.
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Here you want to enter the number of lots you will be buying. In this example, we will place a market order to buy 1 standard lot. (The procedure for a mini lot account would be the same, except you would be buying 1 mini lot instead.) So you just type in 1 in the amount per account row and click OK.
Figure 12 Request for Confirmation Window
This window is requesting confirmation that you want to go ahead and place the order. Just click OK and your market order will be immediately placed and
because it is a market order, it will be filled immediately at the current ask price.
Figure 13 AUD/USD Daily Bar Chart
Once you click OK above, you are now long 1 AUD/USD pair and you are returned to the daily bar chart.
If you then click on the Open Positions tab, a window will open that shows your current position; in this case, that you bought 1 AUD/USD pair at 0.8844 (under the open column), the close column shows the current price. Other columns
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include stop, limit, and open profit/loss. To enter a stop order, to protect the long position, you just right click on the stop box and a new menu opens.
Figure 15 Open Positions Window with Right-Click Menu
From this menu you then left-click on the word stop.
Figure 16 Open Positions Window with Stop Order Window
Within this window you then enter your stop price; in this case, we entered 0.8744, meaning we want to sell the position if the market drops to that price. And then left-click the submit button.
Figure 17 Open Positions Window with Request for Confirmation Window
Then another window will pop up called Request for Confirmation. After reviewing your order to confirm that it is correct, go ahead and left-click on the OK button and the order will be entered.
This will return you to the Open Positions window, showing again that you bought 1 AUD/USD pair at 0.8844, but now it also shows under the stop column that you have an open stop order to sell at 0.8744. If you wanted to also enter a limit order above the market at a profit target level, you would just click
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on the limit column and follow the same procedure as above to also enter a limit order. Thats all there is to it. And once you have practiced this procedure several times, it will become second nature to you.
How important is it to have a trading mentor?

Mastering good trading methods can be done without a mentor, but I highly recommend having access to a mentor because a mentor can do several things for you as a Forex student. With a mentor, you have the opportunity to dramatically shortcut your learning curve by checking in with your mentor from time to time as you study the course material and practice applying the new trading methods taught in the course by paper trading. This alone will save you a great deal of study time as well as costly mistakes. While you must take responsibility to study and master the trading methods, your mentor can answer any clarifying questions on the course material that you may have. (Caution: many so-called Forex mentors merely offer canned material and sketchy, if any, support. Be sure your mentor offers a dedicated support team to answer your questions.) Another key role for the mentor is to verify that your interpretation of various trade opportunities in real time markets is correct. I cant tell you the number of beginning traders or even traders with some experience that give up on a great trading method because it didnt work for me. And the reason it didnt work for them is that they were not applying the trading methods correctly in the first place. Without a mentor, these traders never even knew why others were somehow successful with the method but they werent. But worse yet, those that had access to a mentor never asked for help from their mentor. Either way they end up missing mastering the great method that they have before them, only to go on to some other method that may or may not be good and just keep repeating the process with success never having been achieved.
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A mentor also provides encouragement and perspective on the real world of trading. This helps you overcome any learning challenges along the way. Realistic expectations are another thing a mentor can help with. So many beginners fall prone to the get rich quick hype and therefore expect to achieve double digit returns month in and month out. That is not the real world. There will be profits and losses and good months and bad months. As a diligent student, you need to understand this and stay disciplined as you await your next great profit opportunity. In summary, having access to a mentor while mastering a good trading method can greatly enhance your probability of success.
Forex freedom in just minutes a day?

As I said before, Ive been teaching thousands of folks just like you how to trade the markets since 2001. Back then, there was a TON of trading information online (and offline, for that matter). And today, this information seems to have multiplied exponentially. So where do you begin? Well, trading is very personal business and Ive always maintained that you need to trade with a method that fits your emotions, trading style, and personal lifestyle. But what are we all really trying to achieve? Honestly. Its not a digital trading account padded with a bunch of zeros is it? Sure, we all want to make a profit (a BIG profit, right?), but what we ultimately want is what that money can do for us. Theres something to be said about lifestyle, and you need to ask yourself a very personal question. Whats the right mix of trading and non-trading activity for you? When it comes to balancing this, I think Ive been through it all. In my early days, when I was killing myself to capture profits day trading, my life outside trading suffered and took some big bruises. I remember at least a few times where I would be in a very critical meeting at my day job, where my focus was needed 100% to truly be effective, but my mind would wander to that open trade I had just placed an hour earlier. So not only did my effectiveness at work suffer, but my trade did, too. And there was also a stretch of time when Id get home from a long day of work, see my wife and kids at dinner and then disappear into my trading lair with a pot of black coffee, as my wife put the kids to bed and fell asleep without me.
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These are some the events that drove me to discover trading methods that only required a few minutes here and there to apply. And when I began sharing them with the world in 2001, I found out I was not alone. There were thousands of traders out there who felt just like me. However, thats just my experience, and my story. You need to look at your story and decide whats right for you. You may love staring at charts for hours on end all day long. If thats you, I really hope it works out for you. All I know is thats not for me. But however you decide to trade the Forex markets (or any markets), you need to do one of two things to be successful based on my experience: 1. Dedicate years of your life to test, experiment, tweak, try, invent, etc. a good trading method on your own. 2. Invest in a good trading method developed by someone whos already gone through everything described in item 1 above. Way back in the 1970s, I didnt understand this, so I chose option one. It took me years to finally come up with the core trading concepts that I know to be true and effective. The funny thing is, I ran into a handful of great trading methods that, had I had the right mindset and understood the concepts I talk about in this report, I probably would have avoided years of losses and frustration. All I know is that if I had a time machine, Id go back in time to 1974 and slap my younger self in the face and say, Dont even think about it. Good methods already exist. Find them, and trade them. Id also give myself a copy of this report!
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So, some traders whine and complain about spending money to learn how to trade. Or they moan about having to subscribe to a monthly data feed service for good trading data. I just dont get it! Trading is a serious business. In the broader picture, I believe spending money on trading education or on charting software is an absolute necessity for quickly reaching your trading goals (and thankfully, with Forex trading, most brokers will give you great software for free). Sure, you can go to the library or read every free article you can find online. I look at it this way. Youre going to spend the money one way or another learning how to trade; either in losing trades over time, or upfront in good trading education. Let me be clear. This report is not a trading method. Its merely a collection of questions and answers. Yes, I believe it contains some very good information that can be used with any trading method on the market, whether its your own or someone elses. But this information is only one piece of the larger trading puzzle. Personally, if I can learn just one new insight or one new nugget of information when Im evaluating a new trading method, then whatever time or money I invested in it was totally worth it to me. And as you become a more experienced Forex trader, youll see some of the same concepts covered again and again in various trading methods and courses. But thats OK! Remember what I said about simplicity. You dont need an overly complex method to be successful. If you learn just one new technique, or if you see a familiar concept rephrased in a way that creates new clarity for you, then your time and investment in that method should have been well worth it. This is making gradual improvements to your trading success over time, and its something I believe all of us as traders should strive for. As youre digesting and assimilating all the information in this report, I want you to think about the underlying, core reasons why youre actually interested in trading the Forex markets. For most traders, its because you want to improve or change something thats not working for you. So, to help you out, please take a few minutes and complete this short activity that I learned a few years ago. I think youll find that it will help you clarify where you are, where you want to go, and what its going to take to get there. If you havent already done so, I highly recommend you print this entire report out so
Why Are You Interested In Forex?
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you can actually write on it and fill in your answers to these questions. Ive found by doing it that way, this exercise will be much more effective for you. (By the way, if youre an analytical person like I am, you might find this activity a little weird or uncomfortable I know I did! But trust me, it forces you to think about what you really want in life, and the first time I did this activity, it was very profound for me. So if youre feeling a little resistance, go ahead and smash through it and commit to taking the first step to creating the future you want RIGHT NOW.)
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1. What is your ultimate dream? This can be anything you want (for example, retiring early, traveling the world, sending your kids to college, starting your own charity, etc). Describe as if you already have and are currently experiencing it right now (for example, I retired at age 40 and am currently on a world travel tour with my wife. So far, weve visited Italy, Spain, and Portugal, and have 8 more cities to visit this year.) _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ 2. What does your dream look like? Describe it in as much detail as possible. (Continuing with the example above, My wife and I are healthy and happy as we effortlessly travel first class from country to country. A private limousine picks us up at each airport we land at whisks us off to the next 5-star hotel.) _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ 3. What does your dream feel like? Again, use as much detail as you can. (For example, It feels so good to be free and to be close to my family. The stress and strain I used to wake up with when I struggled to make ends meet is now gone. I feel totally relaxed and in control for the first time in my life.) _____________________________________________________________ _____________________________________________________________ _____________________________________________________________
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_____________________________________________________________ 4. Write down 5 compelling reasons why you MUST transform this dream into reality. (For example, My kids are getting older, and I MUST spend more free time with them before they grow up and move away.) 1) ___________________________________________________________ 2) ___________________________________________________________ 3) ___________________________________________________________ 4) ___________________________________________________________ 5) ___________________________________________________________ 5. Finally, write down 5 things that MUST CHANGE in order for you to achieve your dream. (For example, I MUST dedicate at least 20 minutes every day to studying successful Forex mentors, or I MUST find a good trading method I can rely on so I can have confidence in placing trades.) 1) ___________________________________________________________ 2) ___________________________________________________________ 3) ___________________________________________________________ 4) ___________________________________________________________ 5) ___________________________________________________________
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Now, save these pages and keep them somewhere where they can be reviewed every day. Even though I did this a few years ago, I still keep my answers next to my trading computer. It inspires me to stay focused and on target, and I hope this helps you do the same.

Forex Survey Summary

It was a lot of fun going through all the questions I got from conducting this survey on Forex trading. We all think we have unique problems and questions, but every time I do a survey Im reminded that were not so different after all. Remember to go back and re-read these questions and answers at least a few times. Something that you missed the first time through will undoubtedly jump out at you in subsequent readings. Also remember that the Forex markets are not magical or mysterious. Theyre just markets. Period. And you can potentially pull profits out of the Forex markets just like with any other market. So with a good Forex trading method in hand, you should be well positioned to add Forex trading to your own personal trading toolkit. Id like to thank everyone who took the time to send me their top questions. In doing so, you helped a lot of traders who will read this report. And I hope you got at least one useful nugget of information about Forex trading. Remember, you are not alone in your quest to successfully trade the markets as always, I am here to help you. Good Trading,
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Bill Poulos

Power For Ex Profit Principles 2011

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PLEASE PRINT THIS REPORT NOW!

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50,000 Traders & Their Forex Frustrations

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They Nearly Begged Me to Help Them

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I Was Shocked and Excited

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How do the Forex markets operate on a 24 hour basis?

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Figure 1 - Forex Markets Timeline

Can you take me through a typical trade scenario?

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What types of orders do I use with Forex trading?

How much can I expect to make with Forex trading?

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How do I find a reliable Forex broker?

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What are the best Forex pairs to trade?

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Is it better to use fundamental or technical analysis with Forex trading?

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What are the attributes of a good Forex trading method?

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Why dont all setup conditions trigger into positions?

What are the best technical indicators to use?

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Figure 2 - USD/CHF Daily Chart

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Figure 3 - USD/JPY Daily Chart

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Figure 4 - USD/CAD Daily Chart

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Figure 5 - AUD/USD Daily Chart

What simple strategy can I use to find good entry points?

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Figure 6 - GBP/USD Daily Chart Entry Point Examples

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Power Forex Profit Principles