Manual Trading Educational Series

This guide is designed to educate people about the ways of trading the markets for maximum benefits. The candidates are not required to have any previous experience.

Moreover, this whole program is presented to all of you for free. So, get ready to soak yourself in knowledge and finish this through series of articles to get started with the world of trading.

For a beginner, the moment he opens up the broker platform, everything might seem overwhelming. To tackle this hurdle, let us talk about the basic terminologies in trading.

There are 4 things you should be aware of before you start trading and they are as follows:-

Buy and Sell Order

Buy Order – whenever you want to buy an asset or a specific pair, the order you execute is known as buy order. Unlike the traditional stocks, in CFD platform you can personally determine the amount of dollar figure per pip.

So, depending on your accounting balance you can gain or loose set amount of money per trade. However, there are some scenarios which interfere with the orders and we shall discuss that later in this series.

Leverage – leverage is the amount of amplified exposure provided to the retail clients by the brokers. Usually, leverage ranges from 1:1 all the way up to 1:1000. However, note that leverage is a double edged sword.

If you are not careful enough, the implications might not be pleasant. On the brighter side, with the right type of analysis, leverage will allow you to pocket significant returns.

Margin – Every broker requires the client to hold some amount of money in the form of margins. Basically, it is the minimum amount needed by they broker to provide you both liquidity and bail themself out if any adverse moment occurs.

Having high amount of margin ensures that you will not be taken out by small spices and it is also important in terms of risk management as well.

CFD

CFD stands for contract for difference. In reality most of the brokers offer CFD trading. You as a trader are not owing the actual underlying asset, instead you own a contract which mirrors the price of the asset. So, this is the reason as to why you need to look after money management.

Fundamental Analysis and Technical Analysis

The debate as to which type of analysis is better has been unsettled for a long time now. It mainly depends upon your personality and the approach you follow towards the market. Personally, we feel both go hand in hand but to get the odds on your side, it is better to know and understand both of them.

Fundamental Analysis is the way of predicting the price of an asset based on macro economical factors. The parameters usually include key details like retail sales, performance of real estate, GDP, Employment numbers and so on.

When conducting this type of analysis, make sure that you have well distinguished risk management. Most of the time fundamental analysis creates huge impact and if it goes the other way, then you should be able to handle the drawdown of it.

Though, the parameters discussed above is a good indicator of the economy, it does not guarantee the results. So, always be careful when trading and as a rule of thumb never risk more than 3% of your account size per trade.

Technical Analysis is a way of forecasting the turning points in the market using mathematical data. There are tens of thousands of indicators on the market but none of them are perfect.

Each indicator has its own advantages and disadvantages. However, when they are used with the correct trading process, they do help you secure decent returns.

Each of us is different and it is important to find the kind of trader you are, then select the indicators best suited for your style. Moreover, never apply any kind of analysis directly in the market without back testing. Though back testing has certain limitations, it is better to know how the process works with the historical data.

Triple Screen System

Triple Screen System is derived from the works of legendary trader Alexander Elder. This approach has been time tested and the accuracy it yields is exceptional.

However, it is a little tough to understand the framework of the process, but it certainly is worth the effort. In this guide, we have tweaked certain things to suit today’s market, but the underlying concept remains the same.

MACD Indicator

This indicator was created by Gerald Appel in the late 1970’s. It shows not only the direction of the trend, but also the momentum behind it. There are a lot of ways to use this tool, but in the triple screen system we mainly use it for gauging the direction. As you can see from the following example, the crossover is the first signal for entry.

Once the trade setup is spotted it is important to make sure that it is supported by healthy momentum. Lack of momentum means an aggressive move can happen with the underlying asset anytime. 

Ichimoku Kinko Hyo

This tool was developed by Goichi Hosata in the late 1930’s. At first glance this indicator overwhelms the users with its appearance. However, if you stick around for long then you will realise that it is the best tool in the trader’s arsenal.

Ichimoku shows the equilibrium of the markets. There are a few parameters as well, highest probability of targets but more importantly we are going to be focusing on are Tenkan – Sen and Kijun- sen.

We are not going to bore you with the mathematical formula but show you how effective it is. Tenkan – Sen and Kijun – Sen are kind of like the moving averages. However, the key difference is that it is more reliable.

If you adjust the number of periods to 20 and 40, we are sure that you are going to be fascinated by the accuracy. Since the crossovers in this indicator is not frequent, it will lead the way most of the times.

Support and Resistance

Support and Resistance is the oldest type of technical analysis. Whenever the price reacts aggressively at particular levels, then they are known to be either support or resistance.

We do not use this approach in the decision making process, instead they will be used for setting stop loss and take profit levels. One of the easiest way of figuring out the highest probability of targets is to use Bollinger bands and to use history as a guide. Here is an example.

The Key to Profits

There are only two things responsible for your success in trading, they are patience and persistence. Most of the trading approach out there has above 70% win rate, but people still fail to make money with them.

Remember, losing is inevitable, but on the bright side it is possible to cap the risk. Have the patience and be repetitive when it comes to a process. Once you find a strategy, stick to it for at least 3 months.

In this way, you will know how the approach works out at various seasons. Eventually concentrate on one niche, then trading will become like clock work i.e. less stressful and more rewarding.