Module 1: Forex Basics & Terminology
1.1 What is Forex?
- Definition: Forex trading, also known as foreign exchange or currency trading, involves buying and selling currencies with the goal of profiting from the fluctuations in their exchange rates. Forex is the most liquid and heavily traded market on the planet, outstripping all other markets with an average trading volume of $7.51 trillion per day. Several factors contribute to this unrivaled turnover, starting with the fact that the forex market is open 24 hours a day, 5 days a week.
- Market Participants:
- Banks (Interbank Market)
- Hedge Funds & Institutions
- Retail Traders (You!)
- Trading Hours: 24/5 (Opens Sunday 5 PM EST, Closes Friday 5 PM EST).
1.2 Key Forex Terms
| Term | Definition | Example |
|---|---|---|
| Pip | Smallest price move (0.0001 for most pairs) | EUR/USD moves from 1.1000 → 1.1001 = 1 pip |
| Lot Size | Trade volume (Standard = 100,000 units) | 1 lot EUR/USD = €100,000 |
| Spread | Difference between Bid & Ask prices | EUR/USD Bid: 1.1000, Ask: 1.1002 → 2-pip spread |
| Leverage | Borrowed capital to amplify trades | 1:100 leverage → Control 100,000with100,000with1,000 |
| Margin | Collateral required to open a trade | 1% margin = 1,000for1,000for position |
📊 Module 2: Currency Pairs & Market Mechanics
2.1 Types of Currency Pairs
- Majors (EUR/USD, USD/JPY)—High liquidity, tight spreads.
- Minors (EUR/GBP, AUD/NZD)—No USD, slightly wider spreads.
- Exotics (USD/TRY, EUR/PLN)—High volatility, wide spreads.
2.2 How Forex Prices Move
- Bid/Ask Price:
- Bid = Price buyers are willing to pay.
- Ask = Price sellers are offering.
- Example:
- If EUR/USD Bid = 1.1000, Ask = 1.1002 → Spread = 2 pips.
📈 Module 3: Technical Analysis (TA) Deep Dive
3.1 Candlestick Patterns
| Pattern | Meaning | Example |
|---|---|---|
| Doji | Market indecision | Price opens & closes near the same level |
| Engulfing | Reversal signal | Bullish engulfing after a downtrend |
| Hammer | Potential bullish reversal | Long wick below small body |
3.2 Support & Resistance
- Support = Price floor where buyers step in.
- Resistance = Price ceiling where sellers dominate.
- Example:
- EUR/USD bounces at 1.0800 support 3 times → Strong level.
3.3 Indicators
- Moving Averages (MA):
- 50 MA vs. 200 MA crossover → Trend change signal.
- RSI (Overbought/Oversold):
- RSI > 70 = Overbought (Sell signal).
- RSI < 30 = Oversold (Buy signal).
📰 Module 4: Fundamental Analysis (FA)
4.1 Economic Indicators
| Indicator | Impact | Example |
|---|---|---|
| Interest Rates | High rates strengthen currency | Fed hikes rates → USD rises |
| Non-Farm Payrolls (NFP) | U.S. jobs data → USD volatility | NFP beats expectations → USD surges |
| CPI Inflation | Rising inflation → Rate hike expectations | EUR CPI jumps → ECB may hike rates |
4.2 Geopolitical Events
- Brexit (2016): GBP/USD fell 1,000 pips in one day.
- Russia-Ukraine War (2022): EUR/USD dropped 500 pips in a week.
⚖️ Module 5: Risk Management & Psychology
5.1 The 1% Rule
- Never risk more than 1% of the account per trade.
- Example:
- 10,000 account→Max loss per trade=∗∗10,000 account→Max loss per trade=∗∗100**.
5.2 Stop-Loss Strategies
- Fixed Pips: Always use a 50-pip stop-loss.
- Support/Resistance: Place stop below key levels.
5.3 Trading Psychology
- FOMO (Fear of Missing Out): Avoid chasing trades.
- Revenge Trading: Don’t trade to recover losses.
💡 Module 6: Trading Strategies (Beginner to Advanced)
6.1 Price Action Trading
- Pin Bar Strategy:
- Look for pin bars at support/resistance.
- Enter with 1:2 risk-reward.
6.2 Breakout Trading
- Example:
- EUR/USD breaks 1.1000 resistance → Buy with stop-loss at 1.0950.
6.3 Scalping (5-Minute Charts)
- 5-10 pips per trade, high frequency.
- Example: Trade GBP/USD during the London session.
🎓 Final Project: Demo Account Challenge
- Trade 10 times using learned strategies.
- Maintain a trading journal (entry/exit, reasoning).
- Achieve 1:2 risk-reward consistently.