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Types of Orders
Market Orders
An order to buy or sell a currency at the current market price. When placing a market
order, the currency trader specifies the currency pair he wants to buy or sell. (EUR/USD,
USD/JPY, etc) and the number of lots he is interested in buying or selling.
Limit Orders
An order to buy or sell currency at a specified price or better. Trader specifies currency
and price.
Stop Orders
Order that is activated when a specified price is reached. A stop order becomes a regular
market order when the exchange rate reaches a specified level. Stop orders can be used to
enter the market on momentum or to limit the potential loss of a position.
Protect a Position
A trader buys 100,000 (1 lot) of EUR/USD at 1.1305 in anticipation of an expected 80
pip rally in the Euro. In order to protect himself from an unmanageable loss, the trader
places a stop loss order at 1.1285 (20 pips below the current price). This way, if the Euro
drops instead of rises against the dollar, the trader's loss is limited to 20 pips or $200 in
this example.
Buy on Momentum
Trader expects the USD to rally vs the Japanese Yen, but is hesitant to enter a buy order
because the USD/JPY is getting close to short term resistance at 118. The trader instead
places a buy stop order 10 pips above the resistance level. His stop is thus placed at
118.10. Unless the USD/JPY goes to 118.10, the order won't be activated. By doing this,
the trader is waiting for the USD/JPY resistance level to be broken before entering the
position.
Trailing Stop Orders
Trailing stop orders can be placed below the current market value to allow profits to run.
This is a great technique to use so that a trader does not sell too early into a rally, but at
the same time protects himself from losing profits already gained.
EX: A trader buys the USD/JPY at 118.10 and it rises to 119. The trader does not want
to sell too early, but also does not want to lose the profit he has already gained. So, a
trailing stop loss an be set at say 118.70. If the market continues to move up, the order ill
not be activated and the trader participates in the future gain. Trailing stop orders would
then move up to lock in more gains. For example, if the market moved to 119.20, the
trader can now move the stop to 119, protecting more gains and still not selling in case
the position continues to climb. If the market moves down through the stop, the trade
will be activated and the trader will keep the gain and exit the position.
OCO (once cancels other)
An OCO order is the simultaneous placement of two linked orders above and below the
current market price. If either one of the orders is executed in the specified time period,
the remaining order will automatically be canceled.
EX: Price of the EUR/USD is at 1.1340. A trader wants to buy 200,000 (2 lots) if the
rate breaks the resistance at 1.1395 or wants to sell short if the price breaks the support at
1.1300. The trader can then enter an OCO order made up of a buy stop order at 1.1405
(10 pips above the resistance) and a sell stop order at 1.1290 (10 pips below the support)
if the EUR/USD breaks support and gets to 1.1290, the sell stop order will be executed
and the buy stop order at 1.1405 will be canceled. If instead, the EUR/USD breaks
resistance and reaches 1.1405, the opposite will take place.
Example of a currency trade
The current bid/ask for EUR/USD is 1.0120/1.0126, meaning you can buy the 1 EURO
for 1.0126. Suppose you feel that the EUR will appreciate in value against the dollar. To
execute this strategy, you would buy Euros with dollars and then wait for the exchange
rate to rise. So, you make the trade: Purchasing 100,000 EUR (1 lot) at 1.0126 (101,260)
At 1% margin, your initial deposit would be $1,102.60 (100,000 contract size x 1.0126
exchange rate x 1% margin rate). Now, you must sell Euros for dollars to realize any
profit. Let's say you were right and the exchange rate rises to 1.0236. You can now sell
1 Euro for 1.0236. When you sell the 100,000 Euros at the current EUR/USD rate of
1.0236, you will receive $102,360 USD. Since you originally sold (paid) $101,260 USD,
your profit is $1,100 USD. You can really see the power of leverage with this example,
profiting $1,100 on $101,260 worth of currency by only depositing $1,102.60.

Psychology of Trading
Trade with a DISCIPLINED Plan:
The problem with many traders is that they take shopping more seriously than trading.
The average shopper would not spend $400 without serious research and examination of
the product he is about to purchase, yet the average trader would make a trade that could
easily cost him $400 based on little more than a “feeling” or “hunch.” Be sure that you
have a plan in place BEFORE you start to trade. The plan must include stop and limit
levels for the trade, as your analysis should encompass the expected downside as well as
the expected upside.
Cut your losses early and Let your Profits Run:
This simple concept is one of the most difficult to implement and is the cause of most
traders demise. Most traders violate their predetermined plan and take their profits before
reaching their profit target because they feel uncomfortable sitting on a profitable
position. These same people will easily sit on losing positions, allowing the market to
move against them for hundreds of points in hopes that the market will come back. In
addition, traders who have had their stops hit a few times only to see the market go back
in their favor once they are out, are quick to remove stops from their trading on the belief
that this will always be the case. Stops are there to be hit, and to stop you from losing
more then a predetermined amount! The mistaken belief is that every trade should be
profitable. If you can get 3 out of 6 trades to be profitable then you are doing well. How
then do you make money with only half of your trades being winners? You simply allow
your profits on the winners to run and make sure that your losses are minimal.
Do not marry your trades:
The reason trading with a plan is the #1 tip is because most objective analysis is done
before the trade is executed. Once a trader is in a position he/she tends to analyze the
market differently in the “hopes” that the market will move in a favorable direction rather
than objectively looking at the changing factors that may have turned against your
original analysis. This is especially true of losses. Traders with a losing position tend to
marry their position, which causes them to disregard the fact that all signs point towards
continued losses.
Do not bet the farm:
Do not over trade. One of the most common mistakes that traders make is leveraging their
account too high by trading much larger sizes than their account should prudently trade.
Leverage is a double-edged sword. Just because one lot (100,000 units) of currency only
requires $1000 as a minimum margin deposit, it does not mean that a trader with $5000 in
his account should be able to trade 5 lots. One lot is $100,000 and should be treated as a
$100,000 investment and not the $1000 put up as margin. Most traders analyze the charts
correctly and place sensible trades, yet they tend to over leverage themselves. As a
consequence of this, they are often forced to exit a position at the wrong time. A good
rule of thumb is to never use more than 10% of your account at any given time.

Fundamental Analysis
Our trading system is designed around technical analysis, however, there are some
fundamentals every trader should be aware of.
Fundamentals Every Trader Should Know
Currency prices reflect the balance of supply and demand for currencies. Two primary
factors affecting supply and demand are interest rates and the overall strength of the
economy. Economic indicators such as GDP, foreign investment, and the trade balance
reflect the general health of an economy and are, therefore, responsible for the underlying
shifts in supply and demand for that currency. There is a tremendous amount of data
released at regular intervals, some of which is more important than others. Data related to
interest rates and international trade is looked at the closest.
Interest Rates
If the market has uncertainty regarding interest rates, then any bit of news regarding
interest rates can directly affect the currency markets. Traditionally, if a country raises its
interest rates, the currency of that country will strengthen in relation to other countries, as
investors shift assets to that country to gain a higher return. Hikes in interest rates,
however, are generally bad news for stock markets. Some investors will transfer money
out of a country's stock market when interest rates are hiked, believing that higher
borrowing costs will affect balance sheets negatively and result in devalued stock,
causing the country's currency to weaken. Which effect dominates can be tricky, but
generally there is a consensus beforehand as to what the interest rate move will do.
Indicators that have the biggest impact on interest rates are PPI, CPI, and GDP. Generally
the timing of interest rate moves are known in advance. They take place after regularly
scheduled meetings by the BOE, FED, ECB, BOJ, and other central banks.
International Trade
The trade balance shows the net difference over a period of time between a nation’s
exports and imports. When a country imports more than it exports, the trade balance will
show a deficit, which is generally considered unfavorable. For example, if US consumers
wanted Japanese products, major automobile dealers might sell US dollars to pay for the
import of Japanese vehicles with yen. The flow of dollars outside the US would then lead
to a depreciation in the value of the US dollar. Similarly if trade figures show an increase
in exports, dollars will flow into the United States due to increased confidence in the
economy and then the value of the US dollar would increase. From the standpoint of a
national economy, a deficit in and of itself is not necessarily a bad thing. However, if the
deficit is greater than market expectations then it will trigger a negative price movement.

Hanamiji

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