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To make money with Forex, you just need… (+ What is a Pip?)


Ok. After lots of theory, it is now time for you to take action!

Remember that the only way to actually achieve your dreams is to act on them…

Therefore, let’s now see how you can set everything up before making some real money with just a PC, an Internet connection and the right software platform…

The PC

Every PC is good for trading our strategy as our charts are not consuming too much CPU and RAM.

In fact, they are very minimalist and light, yet very powerful!

So every PC, desktop or laptop, will do the work.

You can also consider trading on the move, from a Smartphone (iPhone or Android) or a Tablet (iPad, Galaxy Tab, etc…) but you will need to use some more tricks.

If you are interested, just ask our support team and they will help you through this…

Second, the Internet connection

If you are on a PC, we strongly suggest you to use a cable and a solid connection.

Everything which is over the air might be risky.

Indeed, once you enter in a trade you have to be sure to exit in the right way, at the right time and a lost connection could make you miss a great opportunity to cash in.

And since it is just a matter of plugging a cable from your modem to your computer, it is well worth doing it.

Please don’t go for cheap and crappy connections. Choose a stable one.

That being said, most of the providers are stable nowadays!

The same applies for mobile connections. Go for fast and big networks, not for the small one.

The right platform

We have specific step-by-step videos on how to open a Forex account (that you will be able to see whenever you decide to join our “money-making” community).

So right now we assume that you have already chosen your broker and downloaded the trading platform.

For the rest of this video, we will then concentrate on the basic knowledge you have to master to use this trading software.

All you have to know is:

-what is a timeframe and the kind of available charts;

-how to draw lines;

-how to draw channels;

-how to draw shapes;

-how to place an order;

-how to exit the trade;

But before moving further, it is time to introduce a key concept in Forex trading:

His Majesty the “Pip”

This is actually how your revenue and expenses are measured.

A pip in Forex trading is a “Percentage In Point” or a “Price Interest Point”.

In other words, it is the smallest measure of price movement between two currencies in the foreign exchange currency market.

For example, if we have a current rate for EUR/USD = 1.4000.

And we add 1 pip to the rate, it’ll look like this:

EUR/USD = 1.4001.

A 1 digit change in the last decimal number of the rate is the smallest change of value of the EUR/USD pair.

When currency pair rate increases, for example, by 5 pips, it means the value of that pair (EUR/USD in our example) will look like this:

EUR/USD = 1.4000 + 0.0005 = 1.4005

Why do we need to talk in term of pips and not money?

The reason for this is simple.

In the foreign exchange market there is no world currency in which to express values.

The US dollar may be the most commonly traded currency but it is not involved in all trades.

If you are trading cross rates, i.e. two other currencies such as EUR/GBP or any other combination that does not involve USD, it would not make any sense to express your gains and losses in terms of US dollars.

Instead, we need something that is a small percentage of the value of whatever currencies we are dealing with.

This means that the monetary value of a pip varies according to the currency.

Six of the seven majors – the US Dollar (USD), the Euro (EUR), the British Pound Sterling (GBP), the Swiss Franc (CHF), the Australian Dollar (AUD) and the Canadian Dollar (CAD) – measure a pip as 0.001 (0.0001 in case your broker use the Pipettes).

Here a pip is 0.01% of a lot (0.001% for the pipettes).

So, if the lot size was $100,000, one pip would be worth $10. For a lot size of $10,000, one pip would be $1.

The seventh major, the Japanese Yen, (JPY) measures a pip as 0.01 of one cent.

So the exception is the Japanese yen, which has a much lower unit value than most currencies (you can get a lot of yen with dollars for example).

Because of this, the yen is only quoted to the second decimal point.

You might see a price USD/JPY of 110.15. In this case one pip is 0.01 or 1% but in yen, not dollars. So the pip value is JPY 1000, which at that price would be worth US $11.015.

These differences can be confusing when you are just starting out. But don’t worry, you get used to them along the way.

Anyhow, it is better for beginners to consistently trade with just one currency pair!

If you are trading one pair regularly every day you will soon get used to how much a pip means in terms of the actual gains in your account.

You will know how much one pip is worth in dollars or in your own currency…

|||Very Important: There are brokers that quote currency pairs beyond the standard “4 and 2″ decimal places to “5 and 3″ decimal places. They are quoting FRACTIONAL PIPS, also called pipettes. For instance, if GBP/USD moves from 1.51542 to 1.51543, it moved ONE PIPETTE.||||

All in all, a pip is a democratic way to calculate performances.

But remember to always try to think in pips, never in money.

Why?

Because this forces you to follow a certain discipline even when you are trading with small amounts.

Otherwise, especially with small amounts, you tend to exaggerate the risk, because you are unsatisfied with the amount of dollars (money) you are making.

This is a typical newbie behavior.

At first, you need to concentrate on the real performance, not on the dollars made.

Once you can prove to yourself you are making good pips consistently, you can risk more and more, and pull the accelerator of the Ferrari (watch previous video), for fast gains.

But you have got to learn it first!

Now coming back to what you need to trade, it’s important to say that we use 2 different platforms

One for analysis purposes and one for trading.

Why?

We like to use the FXDD for analysis because we like the time zone of this platform.

But we don’t use FXDD to trade, only to draw chart lines, find entry and exit price.

This, mainly because the time zone of this platform is perfect for our Daily Candle (we’ll speak about candles later).

At this stage just remember that we like the fact that the Daily Candle closes exactly at the end of the US session.

That is very important because we consider the end of the US session as the “real end” of the trading day.

That’s why we use FXDD platform, an American broker, and you can download the platfrom for free from this site: http://global.fxdd.com/en/forex-trading-software/metatrader.html

This is also the platform we will use together during the Webinars; in the live Trading Room, but…

Remember…

We use other brokers to trade.

This choice is more personal, and we will cover this subject in our step-by-step videos on how to set-up a Forex account, which you can see when you join http://SurfingThePips.com.

The platform: Metatrader

Metatrader is a software made by a very smart Russian team which is, after many years, still the best to perform analysis on your platform.

Moreover, it’s the easiest software available and comes for free to test with many brokers, including FXDD.

Which tools do we use to perform our analysis?

The good news is that we don’t use any indicators.

Nothing at all, because we believe that everything is already written in the price.

Indicators are just rounding what is already there…for someone who can read it.

The cool thing is that if you can read the price, instead of any indicators, you will be faster, much faster than the others.

As you’ll be able to pick up the trends faster you will make more money.

Furthermore, trading is not a videogame. All those arrows popping on the screen, coloured lines and stars blinking, the so-called indicators are just noise in the head of the professional trader.

The head of the trader has to be clean and empty and he always has to practice the same easy rules to win.

In fact, the more a rule is clear and easy, the more the trader will be successful and profitable.

This is why our system, at http://SurfingThePips.com is simple in appearance, but really powerful!!!

On the other hand, the more data a trader has to consider before entering a trade the more he will lose chances to catch THE trend before it’s too late.

Coming back to MetaTrader, although we don’t use any indicators, we have very good analysis tools to help us make the right decisions.

Let’s start with the timeframe and the type of chart we like to use

In fact, we like to use different timeframes depending on which http://SurfingThePips.com strategy we trade: TurboSurf, Intraday or Swing&Relax.

M5 for the first one, M30 (and H1 sometime) for the second one and H4 for the third one.

Which kind of chart do we use?

We only use the Japanese Candlestick Chart so you can forget about the bar and line chart.

If you use H4 timeframe we will have a ready-made candle every four hour, if we use the M30 every thirty minutes, etc.

The type of orders

Although there are various type of orders you can make, some of them very weird, using our TurboSurf, Intraday and Swing & Relax Strategy, we always use only one single type of order.

…the Stop-Entry order.

A stop-entry order is an order placed to buy above the market or sell below the market at a certain price.

That’s all.

For example, EUR/USD is currently trading at 1.4050 and is heading upward. You believe that price will continue in this direction if it hits 1.4060.

You can do one of the following to make it happen: sit in front of your computer and buy at market when it hits 1.5060 OR set a stop-entry order at 1.5060.

You use stop-entry orders when you feel that a price will move in one direction, without needing to stop all your other activities until it does actually reach your entry point!

In the next post, I’ll give you more details about the time we like to trade Forex, and the reasons behind this choice!

Continue to the next forex training lesson: When to trade Forex?

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