Stage 1 Introduction – Introduction
Welcome to The Social Traders written content. Alongside our video content we have broken everything down into a written series to propel your growth as a Social Trader.
First of all, let us tell you a bit about ourselves! The Social Traders was founded by Max Baker and Dylan Lavin; we have both been around the block with multiple trading strategies for a combined 10 years in the markets, experienced the good the bad and the outright scams in this industry. However, having done this we have developed a trading strategy that we now want to pass onto others, building a community with low barriers to entry and providing real clarity when trading the Forex, Commodities and Cryptocurrency markets.
Both Dylan and Max have traded both small and large accounts, been through the peaks and troughs associated with trading and most importantly know the industry inside and out and what to avoid. And this is a key point WHAT TO AVOID as most of you have an interest in trading you would have likely been enticed by signal providers offering “free signals” and flexing nice watches or cars.
- For those who are completely new to trading, ‘trade signals’ are essentially trading tips to help people in the market, most of the time they will come in the form of an entry point, take profit and stop loss.
Directly following signals without a true understanding of trading itself will only be detrimental to your trading in the long run. From our experience, purely following accurate ‘trading signals’ won’t work becuase by the time a trade has been sent out to the community the best entry has already gone, not to mention the fact that you will never actually be honing in on the skills that makes a profitable trader, you will simply be copying what is put out there for you. That is why at the social traders we will never send out a trade idea with an entry point, take profit and stop loss. We simply highlight areas of interest so that the traders in our community can capitalize on these areas having used the strategy learnt in this course.Our setup gives the less experienced traders a confidence boost in the markets whilst also providing a great discussion point within our community for the more experienced traders. With this strategy you will learn how to execute trades with precision, allowing for better risk/rewards, how to become mechanical with entries and how to master your trading mindset and psychology. You will experience a true representation of two traders who have been through it all, and want to pass on their knowledge to others.
What kind of strategy are we teaching?
So it wasn’t that long ago that traders used to think that technical analysis was just some form of magical hocus pocus. Now all experienced traders will be using some form of technical analysis to predict and enter trades. The market has changed and technical analysis has become the ‘go to’ for most forex traders due to its reliability and predictability in the long run.
All traders will have what is known as an edge. A trading edge is a technique or approach in the market that creates an advantage over other traders. Our edge is our strategy and community. The Social traders strategy will tip the odds in our favour so that every trade we place we have a higher chance of playing out then if we didn’t have a strategy at all. By the time you have finished and perfected this course you will be able to enter the market with an edge over the other traders – which in turn will make you more profitable in the long run.
- We will be looking at the overall market structure to get a clear and simple understanding of where the market is heading next.
- In this strategy we will be providing a mix of patterns, structure and more technical smart money concepts to create a clean, easy to use and understand edge.
We have found there is real reliability with this type of trading. Having worked with both technical and fundamental traders, we have found that our simplified swing strategy incorporating smart money – institutional concepts, will align with the most powerful strategies available whilst being easier to understand and execute. Having said that, we will be using a few other technical analysis techniques to improve our edge.
Overall, It is an excellent Swing Based strategy that allows you to leave the charts behind to get on with other tasks.
You will not force trades by staring at the charts all day.When I first started trading I would wake up in the morning desperately looking for positions on the live markets just so we had the thrill of being in a trade (I’m sure the majority of the traders reading this would have done the same). With experience we have found that the more time away from the charts combined with more time backtesting,forecasting and planning will lead to considerably better trading results. So with our strategy it means we can take up hobbies, run errands or even work a 9-5 as a transitory form of income before your trading results meet consistency.
Finally what really separates us from the rest is how simple and clean we will be keeping our chart work. Clean chartwork makes your analysis so much easier to understand and more importantly makes it easier for others to understand. WE KEEP OUR CHARTS CLEAN. Having come from multiple different strategies and communities we have seen it so often where the analysis in the chat rooms is just way too complex to understand. Traders combine too many indicators or strategies into one. Putting every single indicator onto your charts will not make you a better trader. To master your trading ‘edge’ learning and communicating with other traders is so important to you in the long run. Remember feedback is key for personal growth.
Stage 1 Introduction – What Is Forex Trading?
What is the foreign exchange? Who trades it? When can it be traded?
Forex or FX stands for ‘Foreign Exchange Market’, it is the largest financial market in the world. It is a global market that allows the exchange of one currency to another.
When travelling abroad, you’re essentially using the FOREX Market; you are selling one currency for the chosen alternative. For example, if we wanted to travel to the USA from the UK, we would need to buy United States Dollars (USD) and sell our Great British Pounds (GBP).
To understand the size of the Forex Market – The New York Stock Exchange trades around $22.4 billion a day, whereas the Forex Market trades $5 trillion a day therefore proving huge volatility and liquidity. This is great for us as it creates amazing liquid trading conditions and opportunities for us to capitalise on frequently.
So what are we actually trading?
We’re essentially just trading MONEY!
Think of Forex as buying a share in a particular country, like buying a stock in a company.
If you’re buying Dollars, you’re buying a share in the US Economy. You are in effect making a bet that the US Economy is doing well, and hopefully will continue to do well, so therefore you will return a profit in the future when you decide to trade back. Vice versa, if you are selling the dollar, you are betting against the US Economy.
The Exchange Rate of one currency versus another currency is a reflection of that country’s economy, in comparison to other countries economies. Consequently, the stronger the economy of a country, the stronger the currency.
You may have noticed that currency pairs are broken into abbreviations? All currencies have 3 letters to aid us in distinguishing one from another. The way in which this is done is simple: The name of a country, paired with the name of their currency! The first two letters of the abbreviation identify the name of the country and the last letter identifies the name of the currency.
For example USD stands for the United States Dollar, United States being the country and the Dollar being the currency.
The Japanese Yen is a slight exception as it is broken down into its syllables. It’s broken down to JPY.The Swiss Franc is also an exception this is abbreviated to CHF.
Later on in the strategy we will be developing a small trading watchlist and so should help identify a few of the top traded currency pairs.
A currency pair is the value of a currency unit against the unit of another currency in the foreign exchange market. The currency that is used as the reference is called the Quote currency and the other currency that is quoted in relation is called the Base currency.
Let’s use EURUSD as an example:
The Quote currency is the Euro
The Base Currency Is the United States Dollar
CFDs
In forex trading you do not need to take possession of the currency to trade. When trading on the Foreign Exchange Market, you are trading a ‘CFD’ This stands for ‘Contract For Difference’. This is essentially a contract between an investor like you and I and a broker or bank. At the end of the contract, the two parties exchange the difference between opening and closing prices of a specified financial instrument, including shares, commodities and currencies.
When you are exchanging your currency to go abroad, you OWN the exchanged currency. When you are trading a CFD, you DO NOT OWN the exchanged or traded currency; you are simply trading the contract to make money on the difference when closed.
So who actually moves the Market?
Supply and demand of a currency is the main driver of the Forex Exchange movement. If the demand for a currency – for example, the US Dollar – increases, so will the rise in people looking to convert their currency into Dollars. This will lead to its price to go up, unless supply also rises to match the increased demand.
This is the same with supply: If the supply of a currency goes up without a parallel rise in demand, then its currency will drop in value.
With $5 trillion dollars being traded daily your input into the market won’t make the market move noticeably. This is where the central banks come in.
We will be entering the market in the area of high probability to capitalise on the movement created by the larger banks and institutions.
Central banks have a massive role to play in currency movement – they can control the supply and demand of a currency by controlling economic factors such as Base Interest Rate. Without going into too much economic detail – interest rates increase/decrease the foreign direct investment into a country. Typically, higher rates reduce investment, because higher rates increase the cost of borrowing. It also requires investment to have a higher rate of return to prove profitable and vice versa. Investment creates a demand for a currency causing the currency to rise in value.
When we put a buy position on USDCAD for example we are buying the United States dollar, we have created a demand for the dollar therefore increasing the price of the dollar against the Canadian Dollar – although the sizes of our positions within the entire market is negligible. Remember $5 Trillion dollars is traded on a day to day basis!
Other than traders like you and I, who Trades Forex and When Can It Be Traded?
Forex traders and investors are a diverse group, coming from a broad spectrum of backgrounds, ages and disciplines. From the individual who is brand-new to the market, to the most seasoned currency trader, engaging in forex trading is one of the most common methods of participating in the world’s financial markets.
The great thing about forex is low entry barriers to the market. To trade forex all you need is a computer, an internet connection and brokerage account. While each person who enters the marketplace has a unique set of goals and objectives, forex traders are typically divided into two major categories. These are Institutional and Retail Traders.
So who are the institutional players?
First up we have:
The Government or Central Banks – examples include the European Central Bank, the Bank of England, and the Federal Reserve or the FED as you may hear it called.
These are regularly involved in the Forex Market. Just like companies; national governments participate in the Forex Market for their operations, international trade payments, and handling their foreign exchange reserves.
Another big player are The Investment Banks
For example JP Morgan, Citibank, UBS, Deutsche Bank.
These banks have huge amounts of capital and due to the banks large presence in the Forex Market, they have the ability to drive short term market trends and counteract retail traders due to the sheer size of the accounts being traded.
You may have heard of market manipulation before? It’s the big players like the one mentioned now that have the capital to break through potential support or resistance zones created in the market and change the overall trend of price action.
Now surprisingly we also have Large Companies and Business as a big player.
In the 21st century companies are now more global than ever. Samsung, for example, might produce its phone batteries in China, screens in Vietnam and Logic boards in the United States. But, at each stage of production Samsung would have to convert its base currency into different currencies in order to purchase the parts required. This moves the Foreign exchange market as currency is being transferred from one country to another.
And then finally we are then left with,
Speculators and Individual Investors
This is where we come in! often referred to as ‘Individual Traders’ as we buy or sell securities for personal accounts.
The majority of market movement comes from the Large companies and Super Banks. Our aim is to get into the market at the right point in order to be taken with the market movement and volatility created by the large institutions. We don’t want to be caught on the ‘wrong side of the market’ as they say.
When Can the Forex Market Be Traded?
The Forex Market can be broken up into 4 main trading sessions:
The Sydney trading session : this trading session runs from the 9 pm GMT to 5 am GMT
The Tokyo trading session : this trading session runs from 11 GMT to 7 am GMT
The London trading session : this trading session runs from 7 am GMT to 3 pm GMT
And then lastly the New York trading session : this trading session runs from 12 am GMT to 8 pm GMT
Between 8 am GMT and 3 pm GMT is where you’ll see the most forex movement as this is when the London and New York session cross over. The London/New York crossover is when the markets become really interesting, in this period you’ll get traders from the two largest financial centres in the world begin to trade (14:00-16:30pm GMT).
This is especially volatile when political news is released surrounding the United States Dollar and Canadian Dollar. The volatility created will see the largest FX movements so we must be prepared to capitalize on these moves hours, days or weeks in advance – this is where our forecasting comes in (we’ll touch upon this later in a later video)
Entry Types
When entering the market there are 5 different types of entries that all traders NEED to know. All of these entry types will be covered in this video, we’ll be going over what each entry type is and then later in the strategy you understand how we use them on the live markets.
These are the 5 Entry types:
Buy stop
Sell stop
Buy limit
Sell limit
Market execution.
So first up is the Market execution, this one is really straight forward.
A market order is a buy or sell order to be executed immediately at the current market prices. As long as there are willing sellers and buyers, market orders are filled.
Sometimes within the Forex market there are not willing buyers or sellers to meet your order and so ‘slippage’ occurs. Slippage is more likely to occur in the forex market when volatility is high, perhaps due to news events, or during times when the currency pair is trading outside peak market hours.
Buy Stop
A buy stop order is when you are buying a financial instrument above the market. Unlike a market execution this is an order type that will NOT automatically enter you into the trade. You will only be entered into a buy position when price action touches your entry order.
Sell Stop
A sell stop order is essentially the opposite of a buy stop. A sell stop order is when you are selling a financial instrument below the market. You will only be entered into a sell position when price action touches your entry order.
We have found that both the Buy and Sell stop orders offer the best risk protection out of all the order types, so take note of these they’re going to be used a lot.
Buy Limit
A Buy limit is an order to enter a buy position below the market. You will be buying a financial instrument when the price has been sold down to your order price to then be entered into a buy position. You use this type of entry order when you believe the price will reverse upon hitting the price you specified.
Sell Limit
Essentially the opposite to a Buy limit. A Sell limit is an order to enter a sell position above the market. You will be selling a financial instrument when price has been brought up to your order price to then be entered into a sell position. You use this type of entry order when you believe the price will reverse upon hitting the specified price.
