Profitable Forex Trading Using High and Low Risk Strategies: Book 1, #4

By Jim Brown

In this book, I will go over my thoughts on Forex trading and how the markets have evolved over the years, including some basic knowledge on what affects the markets. My aim of the book is to get you to think a little differently on your approach to trading. The majority of traders fail at trading successfully long term, so I will present you with many ways and techniques on how to approach the FX market a little differently.

This book is primarily written for intermediate/experienced Forex traders, where you should have at least an intermediate understanding of how the Forex market works and understand basic trading terminology. The book is not limited to Forex trading, as these trading methods can be used on any trading instrument's price chart e.g. Stocks, Futures, Metals, Commodities, Metals, Indices, or Crypto.

Also, please note that this book also covers some higher-risk trading strategies that may not be suitable for all traders. By this, I mean there is mention of trading without stop losses, high leverage accounts, multiple trades on the same Forex pair/s at the same time, which may include trades in opposite directions at the same time (hedging), and a variation of martingale trade management techniques. Some may not be comfortable with this, or they may reside in a jurisdiction that doesn't allow this type of trading. But having said all that, I will also show the same trading setups using the more traditional lower-risk style of trading, so please don't be put off by the mention of higher-risk trading as I do cater for all levels of risk.

As a part of a download package that accompanies this book, you will be provided with custom indicators for MT4 and MT5, as well as some templates for those platforms. You will also be provided the same indicators (scripts) for TradingView, but be aware that TradingView's Basic (free) plan only allows a maximum of two (2) indicators per chart, so you would have to at least subscribe to their Essential plan to get the full benefit from this book as that plan allows a maximum of five (5) indicators per chart.

I wish you the best of luck with your trading journey.

Jim

• Language: English
• Publisher: Jim Brown
• Release date: Mar 29, 2024
• ISBN: 9798224332120

Jim Brown

I became interested in the Forex markets in 2002 after attending a stock trading meeting at a private residence. One guy announced that he had made a killing by trading the Yen against the US dollar. Who knew that the individual on the street could even trade currencies? Up until then, it was only the banks or wealthy individuals with access to this type of trading. A whole new industry was born. At first there weren't many reputable brokers around, their platforms were unreliable, spreads were huge and the internet was dial up. Forums popped up and 'trading gurus' appeared.  There was money to be made by those who were were smart at the time, either by straddling the news releases or exploiting the carry trade. But brokers also got smarter and either shut these advantages down or created trading conditions that made it difficult to profit from. My problem was, I listened to too many so called 'gurus' and got caught up in all the hype. Always thinking they were smarter than me as their systems were complex, and therefore must be better than anything I could come up with. So for a few years, I bounced around different systems, blowing accounts and giving back profits I had managed to make. There were good times and bad times, but I never gave up. I soon realized that some of the 'gurus' were the real deal, and started to pay attention to them to see what they had to offer. I became smarter with my money management, got out of the day trading habit and generally simplified my trading methods so they were easy to implement and explain. I have also dabbled with building my own trading robots with mixed success and use them at times to assist me with my trading. I now make a living from trading Forex, mainly off the 4hr or Daily charts. My systems are simple and profitable overall. I love trading Forex and I see it as having a huge potential to make some serious income. It is not as easy as some would make you believe, but if you keep it simple, control your money management, and be consistent, then there is no reason that you too shouldn't succeed in the world of Forex trading. Patience, courage and discipline.....

Book preview

PREFACE

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For those who can’t wait or don’t have the patience, there will be information at the end of the book providing a link to subscribe and access to the download package which will include the custom indicators, templates, scripts and instructions - all that is required for MT4, MT5 and TradingView. I mention this now because in my previous books, I received many emails from readers asking me how they could get access to the indicators before finishing the book, despite the download link being listed in the book’s Table of Contents. Some people are too impatient, or keen to get started. Take your time folks, slow down and smell the roses as the markets aren’t going anywhere.

You will also find a document in the download called ‘Read This First.’ There is a reason it has that title. Even if you are an experienced trader, I would suggest that you also read this document. You would be surprised at the number of questions I receive from readers with the answer they are looking for in that document I have learned from some mistakes I made in my previous books where I assumed certain things from my readers. Hopefully, this book will go into a little more detail and explain things better.

I am also assuming that the reader has some basic knowledge of Forex trading. This was mentioned in the description of the book prior to purchase, to ensure that potential buyers are aware of this requirement. If not, then I suggest you do some research or, you can always read my first book, Forex Trading: The Basics Explained in Simple Terms. This book was written in 2016 and other than some statistics, the information is still very relevant to this date. Not much changes in this industry, and this particular book is exactly like the title suggests, Forex trading explained in very simple terms. Some readers have suggested it is too basic and that the information can be sourced for free over the internet, and I get that.

However the point was to collate all the information in one place and really break it down for the complete beginner. The book has received some great reviews, so there must be some decent content in it. By reading it as a beginner, you would certainly have enough knowledge and confidence to start your own Forex trading journey. So, I won’t be going into the basics in this book; and everything will be explained in fairly clear and simple terms. 

While I appreciate thoughtful questions, I encourage you to explore basic research before asking.  If a question is easily answered through a simple internet search, my response is likely to include humour and sarcasm. If you are still having issues after this, then I am here to help, via email or any of the JAGfx social media platforms.

Throughout this book, I may repeat myself at times. Generally, there is a reason I do this as it normally refers to something I consider important or relevant enough that repeating it helps get the message across. I also appreciate that English may not be the first language of some readers. By making the same point in slightly different variations, it may assist with the understanding.

INTRODUCTION

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My name is Jim Brown and I am a full time foreign exchange trader, commonly known as a Forex or FX trader. I am Australian but I am currently living in various countries across South East Asia and I have also written three other books on Forex Trading:

1.  Forex Trading, The Basics Explained in Simple Terms

2. MT4/MT5 and TradingView High Probability Forex Trading Method

3.  Trading Forex with Divergence on MT4/MT5 and TradingView

These books have generally been well received by traders who have read them, ranging from beginners to more experienced traders. There is no fluff in these books, and everything is laid out nice and clear for the reader. This book will be no different.

I began looking at trading the Forex markets in early 2002, which was considered the early days for online retail traders. Banks, institutions and very wealthy individuals had been trading the currency markets for a few years before this. Modern Forex trading began in the early 1970s when the US allowed the United States dollar to float freely in the Forex market. However, Forex trading has been around since the existence of the first coins coming into circulation, in some form or another.

In this book, other than me going on a rant every now and then, I will share my thoughts on the current situation of trading the Forex market. I will also provide you with different trading ideas. Similar to my previous books, I am only providing a framework, or a few trading ideas, encouraging the reader to take these ideas and make them their own. Experienced traders understand there are thousands of ways to trade the markets. The trick is to find something that works for you and that you are comfortable with. Once you are at the stage where you are consistently overall profitable, and with drawdown under control, then it’s simply a matter of scaling up to your desired level.

Ideally you want trading your system to become routine and have the confidence to trade your system without hesitation or doubt. It can be very rewarding if you get this right, but it does require work on your part. Even though it can look easy at times, there will be times where you will be pulling your hair out and wondering what went wrong as the mind games set in. Trust me on this.

I am going to cover some of the basics first and clarify a few things. Even though I did state that this book was aimed at intermediate and higher level Forex traders, I know some beginner Forex traders will read this, which will lead to questions I often receive, so I’ll try to cover these questions before they are asked.

One thing I should clarify is that there is no central or physical exchange for the Forex market. For example, if you were trading XYZ stock on the New York Stock Exchange (NYSE), then no matter which broker you were using to trade the XYZ stock, the prices would be exactly the same across all brokers as controlled by the NYSE. This is not necessarily the case with the Forex markets, as there can be slight variations to price on the same pair across different brokers. To keep it simple, brokers obtain their liquidity (funds to trade) from various sources. Since there is no central exchange controlling prices, these prices can vary slightly at times. Having said that, there shouldn’t be a huge difference in pricing across reputable brokers, perhaps a pip or two at most.

This brings me to my next point. The vast majority of technical indicators used on charts use a mathematical formula based on historical data (pricing), and as pricing can vary at times, this affects the maths formula of the indicators. So what John may have on his charts may vary slightly to Mary’s charts, even if both are looking at the same pair on the same time frame using the same indicators, and this could even be the case if they are both using the same broker. I’m frequently asked questions like ‘my charts don’t look the same as yours’ or ‘I didn’t get the same buy/sell signal as you’, and this explains the reasons why.

Another thing I should mention about Forex brokers is that some use a different start/end time for their trading. The majority of Forex brokers these days use 5pm EST (New York) as their daily close time. This would give you 5 candlesticks for the week, and others use midnight GMT as their close time resulting in 6 candlesticks for the week, which again would affect the look of some indicators; this is without mentioning daylight saving adjustments twice a year for most brokers. Ideally, if possible, choose a broker that bases its start/close time on the NY EST to make things easier.

This may sound a little overwhelming and confusing, but the easiest way around this is to use the same platform for all your analysis and not worry about what other traders are seeing or doing. Pick one and stick with it to be consistent over the long term. It doesn’t matter if you do your analysis on one platform and trade from another platform, as long as you use the same one for all of your analysis. Sometimes you will get a worse trade fill than me or another trader, but other times you will get a better trade fill than me or another trader. It tends to work out reasonably even over the long term. Trade what you see and not what others are seeing.

And some background information; it is believed the first generation of Forex online trading platforms appeared sometime in 1996. I started my journey a few years later and around the same time Metaquotes came on the scene. This company is responsible for the development of the very popular Metatrader platforms, MT4 and MT5. I can recall trading off their very clunky MT3 platform before MT4 was released in 2005, with MT5 being released in 2010. In these early days, a good spread on pairs like the EUR/USD and USD/JPY was around 3 pips, with spreads on the GBP/USD and AUD/USD being anywhere from 5 to 6 pips. Things have certainly changed.

I am by no means claiming to be an expert in this field, but I do have a lot of experience and have seen many different types of markets and all the fads/marketing hype/scams etc., that seem to be fairly commonplace in most trading communities. I do believe I can offer you, the reader, some knowledge by sharing my experiences in this field, which will hopefully give you a better understanding of things and also get you thinking a little differently to other traders out there. More on this will be discussed later in the book. 

Throughout this book, you will find links to various websites and articles that will relate to something that I have briefly touched on. You can go to these websites if you would like to gain further knowledge on something that may be of interest to you. My knowledge on some subjects mentioned is limited so here I rely on, what I believe, smarter people than me explaining the subject in a more in depth and technical way. From my experience of interacting with my previous readers and running a fairly large online support group, I understand that some people want to know what’s ‘under the hood’, and love to get deep and dirty. Hopefully these links will scratch that itch.

1

FOREX TRADING BASICS

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First up, for those not quite familiar with Forex trading, I will give you a very brief rundown of what it is and how it works. However, most of this information is freely available on the internet. There is an abundance of information out there on this subject, which can be a little overwhelming for those of you new to this industry. As previously mentioned, you can always check out my first book, ‘Forex Trading: The Basics Explained in Simple Terms’.

(https://www.amazon.com/dp/1535198567/)

Forex, what does that mean? It simply means Foreign Exchange. You may also hear it called the Currency market, the FX market, the Spot FX market etc., generally they are all the same. It is the buying and selling of currencies from various countries across the entire world.

Forex trading is a little different to Stock trading. If you were trading Stocks, you are only trading an individual instrument, e.g. Amazon (AMZN). Forex trading is traded in what they call ‘pairs’. This means a Forex instrument is made up of two currencies. Examples of this would be the EUR/USD, which involves the Euro and the United States Dollar, or the GBP/JPY, which involves the Great British Pound and the Japanese Yen.

There are eight major currencies:

1. USD (United States Dollar)

2. EUR (Euro)

3. JPY (Japanese Yen)

4. GBP (Great British Pound)

5. CHF (Swiss Franc)

6. CAD (Canadian Dollar)

7. AUD (Australian Dollar)

8.  NZD (New Zealand Dollar)

When trading Stocks, there is always the chance that an individual company can go broke, or their Stock price falls heavily and possibly to zero. This doesn’t happen often, but it has happened. Think of well-known companies like MF Global, Radio Shack, Kodak, Texaco, Chrysler, Enron, Toys R" Us and Blockbuster.

Whereas if you trade any of these eight currencies, there is very little chance of any of them going bust or to zero. Their central banks or governments wouldn’t allow it, and if they did, then those countries would be in serious financial trouble. There are conspiracy theorists that may have a different opinion, but I’ll let that slide for now as I am being a realist here and going with what is commonly accepted today in the current financial world.

There are other currencies like the Mexican Peso, the Singapore Dollar, the Turkish Lira, the South African Rand, and many more. I won’t cover them all as different brokers offer different pairs to trade. These can be a little more volatile at times due to government instability and other various issues, so you have to be a little more careful when trading these currencies.

These days, you can also include hybrid pairs like XAU/USD, which is Gold and the US Dollar, or something like BTC/USD, which represents Bitcoin and the US Dollar. There are plenty of instruments to trade on most Forex platforms, so you won’t be lacking for choices. This especially the case if you are trading on MT5 or TradingView.

Now I will go into some statistics regarding the popularity of both individual currencies and currency pairs to give you an idea on what the majority of traders are actually trading. Trading the EUR/USD accounts for about 28% of the total market, which makes sense, as the United States and Europe are two of the largest economies on the planet.  

This is followed by USD/JPY with about 13% of the market share, then the GBP/USD at about 11%. The list goes on with the AUD/USD at 6%, the USD/CAD at 5%, the USD/CHF at 5% and the NZD/USD at 4%. You will notice that all of these pairs involve the USD, which means that it is the most heavily traded individual currency by far.

It is not until we look at the next pair on the list, which is the EUR/JPY which accounts