Forex Trading Beginners Guide | Ahikyirize Daniel

Our regular guest, Ahikyirize Daniel decided to pour out his heart into this article we chose to call “FOREX TRADING BEGINNERS GUIDE”. This information is evergreen and it will be relevant even 10 years from today. In case you have been looking for a course or guide about forex trading, congratulations!

DISCLAIMER: The contents of this online free course for forex trading are entirely based on the information Daniel Ahikyirize shared from his experience. We are not responsible for any success stories or failures from following this guide!

BY AHIKYIRIZE DANIEL – DAYTTIME FOREX TRADER

To be honest with you, we are currently living in the best time ever to get rich online, and, well, I assume that’s why you’re watching this video. For those of you who may not know who I am, I’m Daniel Ahikyirize, a 24-year-old millionaire day trader. I’ve been trading for close to five years, during which I’ve generated hundreds of thousands of dollars entirely through trading. On top of that, I’ve been able to teach thousands of students how to make money forex trading.

The purpose of this video is to teach you how to start forex trading completely from scratch. I’ll show you what to do right from the beginning, guide you through the intermediate stages, and, lastly, explain how you can actually start making money. By the way, I’ll also show you how you can begin with as little as $50. Now, without further ado, let’s get started with our course. Alternatively, you can watch the full course here.

So, what is Forex trading?

Forex trading is the exchange of currencies. You could also call it the buying and selling of currencies. These days, we do it online, which we refer to as online Forex trading. Unlike Forex bureaus, everything is done entirely online. This means if you have a phone or a laptop, you’re good to go—you don’t need a physical Forex bureau to make money.

Let me give you an example. Say I have $100 and want to exchange it for 100 Kenyan Shillings. If I go to a Forex bureau, I’m essentially selling the dollar and buying the Kenyan Shilling. The difference in the exchange rate is where the money is made. Now, unlike doing it physically, this time around, you’re forex trading online. This means whenever you’re buying, someone else is selling, or whenever you’re selling, someone else is buying.

The Forex market is a massive global market, with over $6 trillion traded per day. I know that sounds crazy! Think about it—different countries have different currencies. If you’re in the US, you use the dollar. In the UK, it’s the pound. In Kenya, it’s the Kenyan Shilling. These currencies are exchanged every single day, which means there’s always money in circulation, and that’s what we’re tapping into for profits.

Let me quickly show you some results—both mine and those of people like you who’ve learned and now make consistent profits. For instance, here’s an account where I made over $6,000. That’s incredible because very few online businesses can generate such high returns. On another account with just $100, I was able to make up to $350. That’s a 300% return from just a few trades!

Now, these are my results, but let me show you results from other traders like you. Here’s an account in an Australian community where a trader with $3,000 made up to $600. Another example is an account with $28, which grew to $42. I know that sounds unbelievable, but it’s true.

Quick disclaimer: Your trading results will always vary. Also, I’m not a financial advisor—I’m simply sharing what I’ve learned and what has worked for me.

When trading, you need access to the Forex market. If I were to illustrate, you, the trader, need an intermediary to connect you to the financial markets. This intermediary is known as the Forex broker.

How to choose a forex broker | Forex Trading Beginners Guide

Choosing a Forex broker depends on you as a trader, but there are important factors to consider:

1. Regulation: All brokers must be regulated. You wouldn’t want to deposit money with an unregulated broker, would you?
2. Markets Offered: Decide if you only want to trade Forex or if you’re interested in trading stocks and cryptocurrencies as well.
3. Initial Deposit: Some brokers have high minimum deposits, while others allow smaller ones. For beginners, I recommend brokers that allow you to start with as little as $50 or $100.
4. Spreads, Commissions, and Fees: Brokers earn money through spreads (the difference between the buying and selling price). Choose a broker with tighter spreads to avoid excessive costs.
5. Transaction Rates and Other Fees: Be aware of additional charges, as they can affect your returns.

To save you the hassle of researching brokers, I’ve included a link to the broker I’ve personally used for the past two years.

How to open up a forex trading account

Now that you understand what a Forex broker is and how to choose one, let’s move on to opening an account. Once you click the link in the description, you’ll be directed to the broker’s page. Here’s what you need to do:

• Choose your country of residence. For instance, since I’m currently in Uganda, I’d select Uganda.
• Provide your email address and create a password.
• Complete the registration process by verifying your identity (e.g., using your national ID or passport).

Once your account is ready, you’ll have the option to open either a demo account or a real account. A demo account is for practice—you’re not using real money but rather virtual funds to test your forex trading skills. Key note: You won’t make money from a demo account; it’s purely for practice.

When creating a real account, you’ll have options like Standard, Pro, or Raw accounts. I recommend starting with a Standard account. You’ll also need to choose between MT4 and MT5 platforms and set your leverage. For leverage, I suggest 1:500—it’s a good balance. Lastly, choose your preferred currency; I personally trade in US dollars.

That means when I’m depositing or doing all my transactions, I’m doing all that in US dollars. That’s an option. You could decide to trade in your local currency because, at some point, it makes more sense.

Then, the nickname is, again, pretty easy. Fill in your nickname or your real name, and then the password. You now have a demo account. This is the same process you could actually use when opening a real account. It’s the same thing—just switch it up.

For a demo account, the biggest difference, as you can see, is the starting balance. Here, you’re not even depositing. I mentioned that. Now, something to really take note of, most importantly, is when you’re forex trading on your demo account, I recommend that you trade with an amount you could realistically start off with on your real account.

It doesn’t make any sense if, say, you started with $5,000 on your demo account but, in actual sense, when it comes to a real account, you’re going to trade with $100. It doesn’t seem realistic, so stick to that.

What are the major keywords used in forex trading?

Now, having created your first forex trading account, it’s time to interact with the forex market. But first, let’s understand the keywords used in trading.

1. Currency Pair:
   As the name suggests, it’s a pair, meaning a combination of two currencies. An example could be GBP/USD, EUR/USD, GBP/JPY, USD/JPY, and many more. When trading, we have two transactions happening simultaneously.
   
   For example, if you had the dollar and wanted the pound, you would deposit the dollar, exchange it at a forex bureau or bank, and get the pound in return. This means, in essence, you’re selling the dollar and buying the pound.
   
   That’s why it’s called a currency pair. Alternatively, you could call it a “quote.” Examples include:
   
   • Great Britain Pound (GBP) against the US Dollar (USD): GBP/USD
   • Euro (EUR) against the US Dollar (USD): EUR/USD
   • Pound (GBP) against the Japanese Yen (JPY): GBP/JPY
   • US Dollar (USD) against the Japanese Yen (JPY): USD/JPY
2. Currency pairs are divided into three types:
   
   • Major Pairs: These are the most traded pairs. For beginner traders, I recommend focusing on these as they are easier to analyze. Examples include EUR/USD, GBP/USD, USD/JPY.
   • Cross Pairs: These consist of major currencies but exclude the dollar. Examples include AUD/CAD, AUD/JPY. (Assignment: Generate as many cross-pairs as possible.)
   • Exotic Pairs: These involve currencies from emerging economies. An example is the USD/ZAR (South African Rand).
3. Ask Price & Bid Price:
   
   • The ask price is the price at which a trader is willing to sell.
   • The bid price is the price at which a trader is willing to buy.
   • The spread is the difference between the ask price and the bid price.
4. On forex trading platforms like MetaTrader 5, spreads are visible, so you don’t need to calculate them manually.
   
   Key Point: Tight spreads are favorable for traders, while wider spreads benefit brokers. When choosing a broker, prioritize one with tight spreads.
   
5. Leverage:
   Leverage is the use of borrowed capital to increase your buying power. For example, if your initial capital is $100 and your broker offers a leverage of 1:100, your trading power increases to $10,000.
   
   However, the bigger the leverage, the bigger the risk. In some countries like the US, leverage is regulated, with a maximum of 1:20. When forex trading, choose leverage wisely—neither too high nor too low.
   
6. Buying (Going Long) and Selling (Going Short):
   
   • Buying (Bullish): When a trader expects the value of a currency pair to increase. Buy low, and sell high.
   • Selling (Bearish): When a trader expects the value of a currency pair to decrease. Sell high, and buy back low.
7. Tip: Think of bulls pushing prices up and bears pushing prices down to remember the concepts.
   
8. Stop Loss and Take Profit:
   
   • A stop loss is an automated level that closes a trade if it goes against your prediction, protecting you from further losses. For example, if you open a buy trade and the price decreases instead of increasing, a stop loss limits your losses.
   • A take profit is an automated level that closes a trade when your desired profit target is reached.
9. When buying, place your stop loss below the price. When selling, place your stop loss above the price.

Obviously, as the trade goes into profit, at some point, you could decide to extend your stop loss past your entry or even into profit. We call that a break-even. In such an instance, your profit is fully secure, so even if the trade reverses, you will close with a profit.

Next up, we have a take profit. A take profit is just the opposite of a stop loss. It is an automated level that closes a trade once it hits the trader’s desired profit level. Even if you’re not watching the charts because you’re busy, all you have to do is set your take profit. Once the price hits that level, the trade will close with your profit secured, without requiring further action.

For example, if you’re buying, you would place your take profit somewhere above the current price. Conversely, if you’re selling, expecting the price to go down, you would place your take profit somewhere below the current price. These tools are very important for risk management, which is a detailed topic we’ll discuss in the next few minutes. If you’re not using stop loss and take profit levels as a trader, then, essentially, you’re gambling — and trading is not gambling. Always ensure you have these levels in place.

What is the margin in forex trading? | Forex Trading Beginners Guide

Now, let’s talk about the margin. This refers to the amount of money you must put up to open and hold a trading position. This money acts as collateral for the broker. Remember, you deposited money with the broker, and for you to open a bigger trading position (or any position), the broker needs collateral since they are essentially lending you leverage. If your margin is too low, the broker may not allow you to open a position.

There are two key concepts here: used margin and free margin. The used margin is the amount of money you’ve used to open and hold positions, while the free margin is the amount available to open new positions. These figures are displayed in your trading platform under equity, margin, and free margin, making it easy for you to keep track.

Now, let’s move to the concept of a pip. A pip is the smallest unit for measuring currency movements in forex trading. This brings us to the next term: lot size. A lot size refers to the number of currency units being traded in a Forex position. Understanding pips and lot sizes is crucial because they determine how much money you risk or earn on a single trade. I’ll provide examples when we trade live on MT5.

Now that you understand the keywords used in trading, let’s proceed to the apps you’ll need to start trading. For this example, I’ll be using my iPhone. First, go to the App Store and search for MT5. You’ll see various options, but we’ll focus on MetaTrader 5 (MT5). If you haven’t installed it yet, download it. Since I already have it installed, I’ll just open it.

When you open MT5 for the first time, it will display a default view with no accounts signed in. Accept the terms, open a demo account, and proceed. A demo account, as mentioned earlier, is a practice account. You can open a demo account here and proceed to explore.

How to link the broker to the Forex trading account

Now, let’s link the broker to the account. Go back to the broker where you created your account. For example, I created an account with Exness. Check your account details, including the server information. In my case, the server is “Exness MT5 Trial.” So, type that into the MT5 app to ensure it connects to the correct server.

Once you’ve entered the server name, login details, and password, proceed to log in. If you enter the wrong server, even with the correct password and login details, it will display “Invalid Account.” Ensure the server matches your account information.

After logging in successfully, you’ll see your account details such as balance, equity, and free margin. Let’s now explore how the platform works. The first section is “Quotes,” which displays currency pairs like BTC/USD (Bitcoin against the US dollar). You can customize this list by adding or removing pairs. For example, you can add GBP/USD, USD/JPY, or EUR/USD based on your preference.

The second section is “Charts.” This is where you analyze market movements using candlesticks (red and green bars). Understanding how charts behave is crucial for making informed trades.

The third section is “Trade.” This is where you view your balance and active trades.

I mean your equity, your free margin. Now, if you opened a trade or a position right now, all your trades would reflect here, and that’s why we have this section. Lastly, we have the trade history.

Can I see all my past forex trading transactions?

In the trade history, all your past trades are displayed—essentially, your history of trades. For instance, if you took buy and sell positions, they would all be shown here. Your profit or loss would also appear here, as well as your deposits and withdrawals. You can see sections labeled as deposit, profit, swap, commissions, and balance.

The broker we are using doesn’t charge any commission, so the commission field will always remain zero, even on a real account.

Finally, we have the settings section. This is where you can switch accounts. For example, we are currently logged in with a demo account. If you want to switch to a real account, you just click here, navigate to the plus button, and proceed. You would enter the company or server name just like before. For instance, if we were dealing with “Excellence,” you would follow the same steps to log in with a real account. Once done, your platform would be set up.

Now, let me quickly show you how to take a trade using this platform. All forex trading activity happens within the chart section. There are two key buttons here: one for instant orders and another for pending orders.

If you want to open a buy position instantly, click the “Buy” button, and your position will be opened. Similarly, for sell positions, click “Sell,” and the trade will open instantly. Before doing this, though, you need to accept the terms and conditions on MT5. Once you do, you’re good to go.

Now, on this platform, we also have pending orders, which are the opposite of instant orders. With pending orders, you set a price level where you want your trade to be executed. For example, if you expect the price to sell when it reaches a certain level, you can place a pending order at that level. Once the price hits that point, the order will execute automatically. This means you don’t have to monitor the chart continuously.

Let’s go ahead and open a random trade on GBP/USD. We’ll open a buy position by clicking “Buy,” and there we go. Once your position is open, it will reflect here, as you can see. For example, “Buy 0.01 lots” is displayed.

The figure “0.01” represents the lot size, which is essentially a unit. To track your positions, navigate here, and your position details will be displayed. All active trades are shown in the trade section.

Now, let’s do a quick comparison of lot sizes to help you understand how they work. We just opened a position with a lot size of 0.01. Let’s now open another position with a slightly bigger lot size, say 0.1. We’ll adjust the lot size, click “Buy,” and there we go.

Should I invest little or more in forex trading?

You can now see the difference. The first position is 0.01 lots, while the second is 0.1 lots. Currently, we are in a drawdown (a loss) of $2 on the 0.1 lot trade, while the 0.01 lot trade shows a smaller loss. Similarly, when you are in profit, a larger lot size will result in higher gains.

However, please note that I’m not encouraging you to trade with bigger lot sizes just to chase large profits. Your lot sizes must remain appropriate and manageable. For example, in this scenario, we are forex trading with a $500 account. Ideally, the maximum lot size for this account should not exceed 0.05. I’ll explain this in more detail when we discuss risk management.

So, typically, we have these positions running again. If you wanted to close them, it’s really easy. There are two options: you could either long-press and then select Close Position, and from here, you can choose to close. But don’t close them now—I think we could use them later.

Alternatively, you could just scroll to your left, where you’ll see this yellow tick. From there, select Close, and at that point, your position would be closed, and it would reflect here. Let me show you how it works. There we go. Now our position is reflected. Here we were trading GU with a buy, and we made $0.02.

Using MT5 is honestly easy—it just takes practice. The more you use the platform, the easier it becomes. Some traders even use huge screens to trade. I don’t know if you’ve seen those massive setups, but you’ll still need a platform like MT5 because it’s easy to use, mobile, and accessible. That’s why most traders prefer using MT5.

What is TradingView? | Forex Trading Beginners Guide

Now, let’s move on to our next platform: TradingView. Just a quick reminder—you can also install TradingView on your phone. It’s really easy. Let me check if I have TradingView here. There we go!

TradingView is a platform most traders use for analysis. When trading, it’s essential to understand how prices are behaving. Rather than using MT5 for charts, many traders find it easier to use TradingView for analysis and MT5 for executing trades. However, TradingView does have a few limitations, particularly regarding brokers. TradingView only supports a limited number of brokers, unlike MT5, which allows you to link virtually any broker. Because of this, some traders choose to analyze on TradingView and execute trades on MT5—it’s just more convenient.

On TradingView, you’ll find your watchlist and charts for your analysis. Then there are other features, like Ideas, but I personally never use them. However, beginners can explore this section to see what other traders are thinking.

TradingView offers both free and paid packages. I’d say the free version is sufficient as long as you can analyze and get a trade idea. Some traders prefer the desktop version of TradingView because it’s more user-friendly. Let me quickly show you how it looks. On your desktop, go to tradingview.com. Once there, you’ll see the same interface. If you’re already logged in, you won’t need to log in again. From here, go to Products and select Super Charts. And there you have it!

TradingView also allows customization. For instance, some traders prefer green and red candlesticks, while others might use black and white. You can adjust these settings by right-clicking on your chart, selecting Settings, and customizing it to your preferences.

Some of the most important tools include entry positions. For example, if you’re going long (buying), you can place an entry here. The red section represents the stop loss. Remember, a stop loss automatically closes a trade if it moves against your initial prediction. For instance, if you opened a buy position expecting the price to rise, but it started falling, you’d set a stop loss at a specific point. Once the price hits that point, your position will close automatically.

Personally, I use TradingView for analysis to get the figures—like a stop loss of 1.26403—and then paste those numbers into MT5. It’s straightforward. TradingView is great for analysis, while MT5 is ideal for trade execution and monitoring.

The next tool we’ll discuss is the Economic Calendar. In forex trading, we deal with currencies, which are influenced by economies. For example, if employment rates rise in the U.S., it will directly affect the dollar. As traders, we need to monitor these events.

For instance, by the time of filming this, there’s an event called NFP happening on Friday. Knowing this, I can prepare to trade accordingly. An economic calendar is essential for this purpose. For this example, we’ll use FastBull. Simply download the app or visit their website. From there, navigate to the Economic Calendar section.

For example, today, there are events affecting the Canadian dollar and the U.S. dollar at specific times (e.g., 6 PM East African Time). By using an economic calendar, you can also check events for tomorrow or the rest of the week. It’s an invaluable tool for traders.

Is it possible to interact with other traders during forex trading?

Additionally, some platforms have chat features where you can interact with other traders, but the most critical aspect is staying updated on the news. Personally, my trading routine starts with checking news events every morning. For example, if you plan to buy GBP/USD, but an unexpected economic event occurs that contradicts your analysis, the trade could move against you.

Now, you can only be prepared for that by having an economic calendar and keeping track of real-time events. That’s why it’s really, really important to have one.

Typically, we have many types of charts, but most traders mainly focus on three: the candlestick chart, the bar chart, and the line chart. This is a bar chart for GBP/USD on the hourly time frame, and this is how it looks. A bar chart is a combination of bars, and here’s how it appears. We have green bars and red bars. The green bars represent buyers (or bullish movement, where the price is going up), and the red bars represent sellers (or bearish movement, where the price is going down).

Now, a line chart is just a simple line graph. As you can see, it shows how the price is moving. On the vertical axis, you have the price, and on the horizontal axis, you have the time. It’s the same concept with a bar chart: the vertical axis represents price, and the horizontal axis represents time.

What is a candlestick chart in forex trading?

Lastly, we have the candlestick chart. A candlestick chart is a combination of candlesticks, and here’s how they look. For example, we have blue candlesticks representing bullish movement (buyers) and gray candlesticks representing bearish movement (sellers). Remember, you can customize the colors to your preference. For instance, some charts use green and red. It doesn’t matter as long as you understand the concept.

Most traders use candlestick charts, and for this course, we’ll mainly focus on candlestick charts because they’re much easier to read compared to bar charts or line graphs. While a line graph is also useful, it tends to leave out a lot of information. Candlestick charts, on the other hand, provide detailed insights, which is why most traders prefer them.

So, let’s understand what a candlestick is. Candlesticks are a technical tool that displays the price movement of an asset over time. A series of candlesticks forms a candlestick chart. Essentially, we have two types of candlesticks: bullish and bearish. As we mentioned earlier, a bullish candlestick represents an upward price movement, while a bearish candlestick represents a downward price movement.

What does the size of a candlestick indicate in forex trading?

The size of a candlestick indicates the momentum in the market. Large candlesticks suggest significant market pressure, while small candlesticks indicate less pressure. For example, a long bullish candlestick means buyers are pushing the price up aggressively, while a long bearish candlestick means sellers are exerting a lot of pressure.

Here’s an example of a bullish candlestick:

• The body is the main green part.
• The wicks (the lines above and below the body) represent the highest and lowest prices during that time frame.
• The bottom of the body is the opening price, while the top of the body is the closing price (since it’s bullish).

For a bearish candlestick:

• The body is red.
• The wicks follow the same concept.
• The top of the body is the opening price, while the bottom is the closing price (since the price is going down).

Let’s look at an example on GBP/USD on the H4 (four-hour) time frame. Here, the red candlesticks represent bearish movement (sellers), while the green candlesticks represent bullish movement (buyers). It may feel like rocket science initially, but you’ll get the concept as you practice. A candlestick chart is simply a combination of many candlesticks.

Each candlestick takes a specific amount of time to form. This is what we call a time frame. For example:

• On the H4 time frame, it takes four hours for one candlestick to form.
• On the hourly time frame, it takes one hour for each candlestick to form.
• On the M5 time frame, it takes five minutes for each candlestick to form.

Time frames are really important in forex trading. They help traders analyze the market based on their trading style:

1. Scalpers hold positions for a very short time, sometimes just minutes or seconds.
2. Day traders hold positions for a few hours during the day.
3. Swing traders hold positions for days, weeks, or even months.

For swing traders, analyzing larger time frames like three months or a year is crucial to get an overview of long-term trends. For day traders, a time frame like H4 or H1 helps to see price movements over the previous day. Scalpers, on the other hand, often use the M1 or M5 time frames to capture short-term price movements.

Now that you understand the basics of charts and time frames, let’s dive into candlestick patterns.

Candlestick anatomy is important for understanding price behavior. Candlesticks vary in size, and their formations provide insights into market momentum. A candlestick pattern is typically a combination of one to three candlesticks. These patterns are used to analyze price movements and make forex trading decisions.

One common example is the engulfing candlestick pattern:

• A bullish engulfing pattern occurs when a large bullish candlestick completely engulfs the previous bearish candlestick. This indicates a potential reversal to the upside.
• A bearish engulfing pattern is the opposite: a large bearish candlestick engulfs the previous bullish candlestick, signaling a potential downward reversal.

Understanding candlestick patterns is crucial for making informed trading decisions. Let’s explore more examples and their significance in the next section.

So, whenever you see an engulfing bullish candlestick, it could, in some way, predict that the price is reversing and will continuously push to the upside. Why? Because we saw this huge bullish candlestick, meaning buyers were entering the market heavily. They entered, opposed the sellers, and closed above the previous sellers.

In such an instance, you would enter with buy orders if you’re given the right confirmation.

The same thing applies to bearish candlesticks. Say, out of the blue, you spot such a bearish candlestick—this would indicate that sellers are entering heavily and moving the price in the selling direction. Here, you would place sell orders, anticipating the price to push downward.

We also have indecision candlesticks. These indicate market uncertainty or a balance between buyers and sellers. At this point, buyers want to push the price up, while sellers want to bring it down. Sometimes, the volume is nearly equal, and neither side can decide the price’s next movement.

A doji is an example of an indecision candlestick. It typically has a very small body and wicks on either side. If you spot a doji forming, ask yourself: What was the price doing initially?

For example, if there was a downtrend, and suddenly a doji appears, it suggests indecision in the market. Sellers were initially in control, pushing the price downward, but now buyers are entering and opposing the movement. Often, a doji signals a potential reversal. You might see the price change direction and push to the upside.

Let’s look at an example on EUR/AUD on the H1 timeframe. Initially, we had the price pushing to the upside. Several examples of dojis can be seen here—each one signaling indecision. In one case, after the indecision candlestick, the price dropped significantly.

Next, we have the pin bar, also known as a hammer. This candlestick forms when the opening price is almost the same as the closing price, with a long wick on one side. It looks like a hammer. The long wick indicates sellers were in control initially, but buyers stepped in to reverse the movement. This is also a strong reversal pattern.

The shooting star is the opposite of a hammer. It has a long wick on the upper side and suggests a bearish reversal. For example, if the price was in an uptrend and a shooting star forms, you could anticipate a downtrend.

These are some of the most common candlestick patterns you’ll encounter. There are many others, but with practice, you’ll master identifying them.

What is technical analysis in the Forex trading beginners guide?

Now that you understand candlesticks, how they form, and how to interpret them, let’s move on to technical analysis.

Technical Analysis
Technical analysis uses historical price data to predict future market movements. In the forex market, price movements tend to be repetitive. For example, if the price previously shifted from an uptrend to a downtrend, it’s likely to happen again in a similar pattern.

The forex market generally moves in three ways: uptrend, downtrend, and sideways.

• In an uptrend, the price consistently forms higher highs and higher lows. To confirm an uptrend, we should see the price breaking previous highs to form new ones.
• In a downtrend, the price forms lower highs and lower lows. To confirm a downtrend, we need to see the price breaking previous lows to form new ones.
• In a sideways market, the price ranges between two levels without breaking above or below. In such cases, forex trading is not recommended since the market lacks a clear direction. However, if you choose to trade, you could open buy orders at the lower boundary and sell orders at the upper boundary.

Let’s look at a real-time example on GBP/USD. Currently, we can see a downtrend because the price is forming lower lows and lower highs. If the price breaks below the current level and continues downward, the trend will remain intact.

Similarly, scrolling back, we can identify clear uptrends and downtrends in the past. In an uptrend, remember to look for higher highs and higher lows, while in a downtrend, focus on lower highs and lower lows.

With this knowledge, you can better understand how price movements work and identify forex trading opportunities more effectively.

We see this: a series of higher highs, with the price trending upward. We have this area, and we have this. Now, what happened is that the price started off here. In fact, it started off here, pushed to form this higher low, came over here to form a higher high, a higher high, a higher high, until we had a reversal. Honestly, it was a bit easy to spot. You can find many examples when you are on the charts.

After understanding this, we need to ask: Is the price going to remain in the same direction forever? I mean, if it were an option, should we expect the price to continuously push upwards for 10 years or something? No, at some point, we will always see a reversal. And that’s what happens.

Say we initially had an uptrend; at some point, we will see a change, and then a change of structure. Let me quickly show you how a downtrend would look. Initially, we saw the price pushing downward, and at some point, we saw a reversal, and the price started moving back upwards. There we go.

Now, how do you confirm that this is a reversal? It is very important for you as a trader to understand how these reversals happen. By the way, this can also be a forex trading strategy. For those who trade reversals, this is what they look out for. They need to see that initially, we had buyers pushing the price upward, and then we can see a reversal. If you want to capitalize on that and take sales, that’s what reversal traders do. But let’s go ahead and see an example.

This is GBP/USD on the chart, and here’s what we’re dealing with. Initially, we see the price pushing upwards, breaking all our highs. The price was actually forming newer higher highs until it reached this point. Now, remember, for us to confirm that the uptrend is still on, we needed to see the price continue pushing upwards. But now, what’s happening is that the price has reached this area and then starts coming back down. Instead of breaking above, we see a change.

At this point, we can’t easily confirm a reversal, because the price could come back down here and then push upwards again. We can only confirm a reversal if the price breaks and violates the previous higher low. Here’s an example: we initially had that push upwards, then we see huge bearish momentum. The price breaks below this point, which is a very important level.

This break indicates a change of structure. Why? Because we had the price pushing upwards, and then suddenly, we saw it break below this level. At this point, we can now say, “Okay, we have a downtrend happening, or a change of structure.” Why? Because we initially had an uptrend, and now we are reversing to a downtrend.

Let’s go ahead and see some more examples. I just saw a similar example with the current price action. We initially have a downtrend. Let’s mark out some of our levels: we have this, this, and this. In such an example, we need to see the price completely break above these levels. If that happens, we could confirm that we now have a change of structure and potentially buyers coming in. But until we see that, we can’t confirm a reversal.

I didn’t mention this, but whenever levels are broken, we can always expect retests. Let me show you what I mean. Let’s take an example with these levels: we have this, then this, and then this. What happens is that whenever these levels are broken, the price will often come back to retest the level before continuing upwards. It could break, retest, and push upwards again. This is called a “break and retest” strategy. The price breaks out, comes back for a test, and then continues its move.

On the other side, even for key levels, if we have a price range between two levels, whenever this level is broken, we should expect a retest before continuing. So, it’s not about just jumping into a trade immediately after a breakout. These levels will often be respected with a retest, and that’s when you can enter a trade. I’ll show you that in a minute.

Now, let’s talk about fundamental analysis. This is the use of economic data to find trades. Remember what we discussed about economic calendars? When we trade currencies, we are also dealing with the economies of different countries, and this affects how the price behaves.

For example, if the UK has high employment rates, that could strengthen the pound. This would mean the value of the pound increases, and as traders, we would consider buying the pound and selling any currencies against it. So, we use economic data to find potential trades, and this can easily be done using an economic calendar.

Let’s consider an example: you could analyze gold using technical analysis and find buy signals. But if the news is negative, the price of gold could sell off, despite the technical analysis suggesting otherwise. In such situations, traders often use pending orders. They set orders above and below the current price, and when one is triggered, they are ready.

By the way, I didn’t mention this, but when we have major news events, we tend to see huge price movements. You could suddenly see a massive bullish candlestick pushing the price upwards, or a huge bearish candlestick pushing it downwards. Some of the most traded economic events include NFP (Non-Farm Payroll), which happens on the first Friday of every month, and CPI (Consumer Price Index), among others. There are many events that you can easily monitor on your economic calendar.

Personally, I don’t trade based on fundamentals. Whenever I know that news is coming up, I stay out of the market because I haven’t developed a trading strategy specifically for forex trading news. This is an important takeaway.

At this point, you should have a good understanding of how trading works. Let’s cover one of the most important topics: risk management.

If you didn’t know about this, it’s a whole subject, and it’s crucial. When we are trading, we have two options: buying or selling. This means you have a 50/50 chance of winning. If you’re not buying, you’re probably selling. The same applies on the other side; if you’re not winning, you’re probably losing. So, it’s always a 50/50 chance.

Some people try to compare forex trading to gambling, but the key difference is risk management. Risk management allows you to manage your trading investment or capital. You can determine how much money you’re willing to risk to make a certain amount, or how much you want to make in a month by risking a specific amount. If you don’t use risk management, then you’re essentially gambling.

But for the fact that you are watching the video up to this point, please ensure proper risk management, because it’s key, and I’ll show you why. Now, let’s imagine you areforex trading with an account of $100 and using 0.01 lots. In this example, you make $1 for every 10 pips, and then you make $20 for 20 pips. If, say, you made 100 pips, you would have probably made up to $10 again, reflecting the lot size, okay?

The same thing applies if someone else used, say, one lot size for this account and made 10 pips—that’s about $100 already on the table. But that’s really, really risky, and that’s why we need to ensure proper risk management. Back to it.

Now, how do you easily do that? Here’s how: with this, you have the ability to say, “I am going to risk one to make two.” In this example, we have a risk-to-reward (RR) ratio of 1:2. The first “R” stands for risk, and the next one is reward. It means if you risk one, you’re making two—or you could raise it to one to make five, or two to make 10.

All in all, your reward must be bigger than your risk. Think about it: if you are risking a lot to make less, you won’t even stay in the game for long, because, honestly, it doesn’t pay off. And by the way, take it from me—there are losses in trading, and they are completely inevitable. You can’t avoid them. So the only option is: how am I going to stay conscious and, in the long run, make money?

Real-life example of Forex Trading Scenario

Now let’s assume you stick to an approach where you risk one to make two. Let’s say you took a sample of 10 trades, lost five, and won five. What happens is you lost 5R, but then you made 10R, and the difference is 5R. This means that, regardless of your losses, you still have your account capital intact. More than that, you’ve also made money. That’s a worst-case scenario, where you have a 50% win rate. But think about it—if you had an 80% win rate, where you place 10 trades, win eight, and lose two, that means you made eight times the two.

That’s 16R, and then on the other side, you lost two. So the difference is 14R, meaning you still make money. Because with trading, you’re looking at the long run. You’re not looking at it as today, when you want to gamble, make a bit of money, and then go out. No, this is a career. So it doesn’t make any sense if, say, you made some money today and then lost everything tomorrow. No, no, no. And that’s where risk management plays the biggest role.

So it’s very, very important that you stick to such systems. You can easily do this by having a Forex calculator installed on your phone. You can easily get free ones on the App Store. Just go ahead, type in “forex trading calculators,” and you’ll find some. Install it on your phone, and it will ask for your forex trading capital. You know how much you’re trading with—say it’s $100—then fill in the pair that you’re trading and the stop loss.

Back to what we mentioned, we said your stop loss automatically closes off your trade. So, it’s important to manage risk. You don’t want to let the trade run until it drains out your account. So that’s key. You’ll fill in your account size and stop loss, and the calculator will generate the suitable lot size that you’re supposed to use.

How can I handle risk management in forex trading?

Risk management is really, really crucial, and I can honestly say that if you’re good with your trading strategy but bad with risk management, it will be very hard for you to stay in. You can make money, but you won’t stay in for long. Those are two different things. Now, the next thing you need to know is trading psychology. So, funny enough, your trading strategy and risk management take up 40% of your success as a trader, and the remaining 60% goes to your trading psychology.

I know you’re wondering, “What’s this all about, Daniel?” Well, here it is: psychology is the study of human emotions, and in this case, we’re talking about trading psychology, dealing with your emotions as a trader. When you’re dealing with money, emotions are involved. You remember what I mentioned earlier? I said a demo account and a real account are honestly the same.

The difference is that one is virtual money, but the other is real cash. So, whenever we deal with our own money, emotions come in. From my experience in the previous five years of trading, here’s what happens. Whenever you’re trading, you want to make money, right? But on the money-making part, most people fear losing money. We have two things here: the fear of losing money and the desire to make money.

Now, here’s what happens. More often than not, a trader will make money, but they want to make more, because we have a love for money, and we call that greed in trading. Greed itself is a dangerous habit in forex trading. Think about it: you’ve made money. Say you’re forex trading with $100 and you made $10. That’s 10% of your account, right? But you want to make more. What happens is you’re probably going to get back in and lose the $10 you made. Why? Because you’re greedy. You want to make more.

When your emotions take control, you are out of the formula. Then, on the other side, we have fear. Most traders fear losing money. But think about it: there’s no business where you make money without risking money, and trading is no different. What you must understand is that losses are part of trading, and you need to be ready to go over them. You need to ensure proper risk management and know what you’re risking and what you intend to make. With such an approach, you’ll overcome the fear of losing money.

Next up, we have revenge trading in forex trading. Let’s say you opened a trade, took a loss, and now you want to make back the money you lost. We call that revenge trading. But think about it—losses are part of forex trading. Are you trying to make back the money you lost? That’s not the only trading day. I mean, there’s always tomorrow as a forex trading day.

You should think of it like this: “I took a loss today, but I can make the money I lost, or even more, tomorrow.” But most traders will go back trying to make the money they lost, and in reality, they end up losing more because they are already emotional and can’t control their actions.

On the other hand, we also have excitement. Again, you’re excited about the money, and that brings us back to greed. Then, there’s overtrading. You want to make money and think that overtrading will make you more money. But in reality, it doesn’t. What works is taking a few good trades and not overtrading. Overtrading happens when you have your phone or laptop and see a trade, and you want to take it. It’s like you’re literally taking any trade that seems like an opportunity to you.

It’s much better to take a few good trades. Take two trades and you’re good. By the way, I only trade once or twice a day, and I’ve stuck to this for the past three years, and it has made me profitable.

The easiest way to get over your emotions and avoid trading psychology issues is by having a trading plan. A trading plan is basically an approach for you as a trader on how you intend to trade, how you intend to manage your risk, how you plan to manage the money you’ve made, and your whole trading process. A trading plan increases efficiency, and in return, you won’t have to struggle with your emotions.

Now, imagine in your forex trading plan, you state that you’ll trade only once a day. That’s it. You’ll come over to the chat, take one trade, and then you’re done. Having a plan will systematically improve your forex trading in the long run. It also helps you avoid emotional distractions. Additionally, journaling is important. Write down the history of all the trades you take. How did you perform? What did you look for before taking the trade? Nowadays, there are electronic journals you can find online. You input your information, and it records your trades.

Your forex trading strategy is the approach you use to find trades and make money. A strategy can be developed using technical analysis or fundamental analysis. For this one, we’ll be using technical analysis, which uses historical or present data to predict future price movements. This is the strategy I personally use. The number one rule is finding the overall trend. Is the price in an uptrend? If so, look for buying opportunities. If the price is in a downtrend, look for selling opportunities.

Let’s go over to charts, and I’ll show you how to find the overall trend. You can easily spot the trend on larger time frames, such as the H4. We can see the price was initially pushing downward, but at this point, there’s a reversal, and now the price is pushing upward.

Once you have the trend, mark out key levels. Key levels can vary. Some people mark out support and resistance levels, while others mark demand and supply zones. I’ll tell you about that shortly. For this example, let’s mark this area as a demand zone. A demand zone is where we see massive buying activity. Look here—the price came into the zone and then saw a huge buying pressure that pushed the price up.

You could also mark it as a line if you prefer. Here’s another demand zone. Similarly, we have a supply zone, which is an area where price sells off massively. The price entered this area and then sold off sharply.

Key levels help you understand where price might react again. These levels may have been respected in the past, and we can expect similar reactions in the future. The key is not to overcomplicate things. Look at what happened here—price entered the zone, and sellers came in.

We can see that the price went to this area and then sold off massively, so we could expect the same thing to happen again. However, keep in mind that once the price moves off here, we could expect another significant sell-off, because that happened previously.

Now, the rule of thumb here is that you’re not going to take trades before you confirm. Now that we have our levels, you just can’t jump in and say, “Oh, I have my trend, I have my key levels, now let me go ahead and take buys.” Nope. The next step is finding confirmation so you can get your entries.

What I personally do is scale down to smaller time frames. So, we are currently on the H4. Now, we could go over to H1 and see how it’s looking. Here’s how it looks on H1. Under H1, what do I see? Well, I see a push to the upside, a bit of momentum. We see the price pushing to the upside. But then there’s something I’m noticing. The price goes up here, then turns back down, and now we are here.

The good thing is that it did break the previous high, which is great news. So, we can place more emphasis on this point of view. Why? Because this is a point where the price got to, and then reacted off insanely. Now, how about we see more reactions back to this area, and then we can enter our buys?

At this point, we’ll have to wait. We’ll scale down to M15. In such an instance, we need to wait and see how the price behaves around this area. Then, we’d be able to take our buys with a take profit up to this point that we marked out and a stop loss just slightly below this area. Now, going back to H4, and there we go, just like that.

A rule of thumb here is that before I take a trade, I always have to cross-check all my criteria. Again, in this example, we started with the trend, saw that the trend is to the upside, and then drew out the key levels. Thirdly, we went down to smaller time frames to find entries and confirmations. That’s how we get our entry.

I’m always going to go back two times to make sure everything is correct before making the entry. Now, in this example, say our entry is at this point, 26.40.76. The stop loss would be slightly below this area, because this is a key level. It’s important when placing your stop losses. That would be 26.31.53. An easier way, again, is for me to just carry this order to my MT5, place it, and then let it run.

That’s just an example of how I would trade in such an instance. Let’s move on and try another pair, say, GBPJPY. What are we dealing with here? Well, we can see a clear downtrend at the moment. What comes to mind? Sells, because we already see huge selling momentum. We can go ahead and mark out some of our key levels. I’ve marked out all this, but let me go ahead and redo it.

This is a good supply zone, and this is also a good supply zone. Remember, supply zones are areas of huge selling pressure. We also have another one here, and many more, but these are the key ones. We can also mark out some of these levels. This is the last low that had to be broken. So, this is the low that had to be broken to form this move.

What do we expect? Remember how we mentioned that the price could come back here, and we’d expect more sales. Now the question should probably be, “Daniel, are we going to take short-term buys back to this level?” No. Why? Because the overall trend is to the downside, and we’re not going to trade against the trend. We have to follow the trend.

So, let me quickly scale down to H1. On H1, we already see a momentum push. Let me show you how this works. Whenever the price pushes in a momentum phase, it’s never a good idea to scale in entries at that point. Why? Because we already have orders in. So, if you just out of the blue scaled in right here and came in with your sells, you’d likely be met with a drawdown.

Whenever the price moves down, it’s going to pull back to collect more orders at this point, then push down, come back for a pullback to collect more orders, and then push down again. So, your main idea as a trader is to wait for these areas because that’s where most traders are getting in, rather than jumping in when the price is already in a momentum push.

Back to GBPJPY, we already see a huge momentum push. Now, this is on the H1. If we go down to M5 and M15, you can see how it looks. It’s huge. We already see a series of bearish candlesticks. At this point, we can’t just decide to scale in sells. Nope. We need to wait for the price to pull back to this area and then look for entries.

Now, at this point, you’d have to wait a bit, because you just can’t scale in entries before the setup shows up. Alternatively, you could set a pending order at this area and let the price hit that point, whether you’re watching the charts or not. That would be a much better idea.

It’s important to stay patient whenever your setup isn’t ready. You may have done all the right analysis, but entering before the setup happens could put you back in drawdown or get you stopped out, even though you’ve found better trades.

So, a quick recap here: We started with the trend, drew out the key levels, saw those levels being broken, and then went down for confirmations. Now we see a momentum push, but we can’t take a trade at this point. We need the price to come back to this area, give us a clear confirmation, and then we’ll be good for entries.

For confirmations, you can also use candlestick patterns, just like we discussed earlier. Incorporating these into your trading will make it much easier.

Since you’ve watched the video up to this point, I believe you’re now fully equipped with the right knowledge to start making money. I’ve shown you my entire forex trading journey from A to Z, and by the way, I have over 100 videos on the channel for you to watch and learn from.

Also, if you’re a passionate trader looking to fast-track your trading journey in the shortest time possible, this is for you. I run an academy with over 1,000 students. These people are just like you, and you saw the results I showed you earlier. They’re making tremendous progress. This is very possible for you, but it all comes down to you taking action right now.

I’ll go ahead and put the link in the description. When you click it, you’ll be taken to the best forex trading academy in Africa, where you’ll have access to myself and four other millionaire mentors. You’ll also have five Zoom trading sessions every week—Monday, Wednesday, Friday, and Sunday—along with access to an exclusive community of winners, just like yourself.

There’s nothing to lose and so much to gain. For the fact that you’ve watched this video up to this point, this is a sign for you to get inside. Once you’re in, there’s no looking back.

And by the way, remember to like and subscribe. I’ll see you in the next one. Cheers. Bye.