Welcome to FiveTic Forex – this trading course has been a long time

in coming and there were times when I thought it might never

happen.
But here we are.
I sincerely hope it meets your expectations and enables you to trade
the biggest markets in the world – Forex.
I look forward to working with you to achieve that goal together.
So let's get started.........

Contents

Disclaimer
Introduction
The Market
Technical Analysis
Making Money from the Market
FiveTic Method
Examples
Disclaimer

Whilst every effort has been made to ensure the accuracy of the
information within this course the author cannot be held responsible
for any errors or omissions.

Trading of any description involves the certainty of losing money.

Yes – losing money IS a certainty. No one on the planet can trade and
not lose money on some trades. Always the key element to being
profitable overall is to manage your losses and exploit your winning
trades. This course will show you how to do exactly that.
However, we are not responsible for your trading, we are not
responsible for your losses, we are not claiming that trading of any
description is easy; simple maybe, but easy no. It will require
dedication and perseverance on your part to win through.
Along the way many, in fact most will give up; trading is a hard thing
to do and I make no apologies for pointing this out.
You are trading with your money and only you can know how much
to risk, and what to assign as a trading account. Do not risk money
that you cannot afford to lose!
This is not just to cover myself – trading with money that you may
need at some point will ensure that you end up losing most of it and
giving up trading as something that just doesn't work.
But it only doesn't work for you.
You must have the attitude that the money you're trading with is
already lost – you must take losing trades as simply part of the job
that is trading – you must develop a winning attitude.
If you think you can do it – you can
If you think you can't do it – you can't
Simple.
Introduction

Trading is the hardest thing most people will ever do!

I have raced motorcycles at championship level, I have run

marathons in under three hours, I have changed careers several
times, I have built several houses with my wife with our own hands.
None compare to the challenge of trading successfully.
It truly is a hard thing to do and different to anything else I have come
across. But get it right and the feeling of success is amazing and worth
every ounce of pain along the way.
Trading is never a matter of just taking money out of the market – you
must be prepared to give most of it back and be satisfied with the
remainder. The saving grace is that the markets are so huge that you
can take a lot of money from them, give a lot back, and still have a tidy
sum left over for yourself.
If you can have that attitude, then trading will be a realistic possibility
for you. It's a realistic expectation of trading and will therefore be
achievable. Expecting to keep most of your winnings is unrealistic
and will lead you to eventually lose and stop trading.
My advice would be to trade as small as possible for six months
somehow. Forget making money – just trade – learn the art and skills
required and just plan on breaking even. Once you have mastered this
first step, progress to making small amounts regularly and build your
confidence. Then gradually build on this solid base; most aspiring
traders skip this essential first step and never have any solid
foundations for the future. Taking small steps is essential to success.
I wish you every possible success,

Matt
The Market

This is not intended for anyone with zero knowledge of the financial
markets and in this section we'll briefly look at the basics of currency
trading – but I will not be covering any aspects beyond that required
to put FiveTic Forex into practice.

FOREX, or foreign exchange.

In the beginning Joe wanted to buy a cart load of corn from Valentino.
Joe lived in one country and Valentino just across the border in
another. Joe's currency is Dollars and Valentino's is Peso's. So Joe and
Valentino discuss how much this cart load of corn is worth and finally
agree that Joe will pay $200 for the load. If Joe had bought the corn
from his neighbour he'd have had to pay $250 so he's got a good deal.
Valentino on the other hand could only have sold his corn to his
neighbour for 1500 pesos – the $200 he now has will enable him to
buy the new cart he'd like from Joe's country (better quality than he
can get in his country !) If he paid in pesos it would cost him 2000 so
he's got a good deal as well.
And so Fx was born !

Fx has no intrinsic value – it is simply an agreement between two

parties as to the relative worth of the transaction at that moment. You
can't “own” Fx, you can only trade it. It's merely a number that
fluctuates and you're betting that for a particular period it might go
either up (long) or down (short).
Many factors influence whether it moves up or down and at what
pace. In fact, so many that to try and use fundamentals as a guide in
the short term, is fruitless. We therefore, need to employ technical
analysis as our tool to decide how to trade. And that of course is what
this course is all about.
The Foreign exchange market is vast – I think it's a trillion dollars a
day are traded around the world. It's dozens of times bigger than all
the stock markets put together. It's traded around the world every
second of every hour for 24 hours a day.
What does this mean for us as traders?
Well, it means that unlike much smaller “open outcry” markets such
as most of the “commodities” no one has the power to manipulate the
market. It really is pure supply and demand, fear and greed, at work.
For these are the power behind the moves in Fx. Someone sees the
price going up and they think there's a quick buck to be made so they
buy in the hope of selling at a higher price in a few seconds, minutes,
hours or days. Likewise thousands of other traders do the same, and
guess what; because of the sudden rush of buyers the price does
indeed go up. Then the early buyers have enough profit so they sell;
soon others follow and the balance swings in favour of sellers and the
price falls.
And so it goes on.
No matter what time frame you look at there will be swings up and
down, all bought about by traders emotions around the world.

Our challenge as traders is to predict these moves in advance; to

understand the mentality of the crowd that trades and capitalise on it.
Every market has a personality and getting a feel for this is as
important as understanding technical analysis.
There are very few totally mechanical trading systems that actually
work. Those that do are the result of masterminds of mathematics and
statistics. To obtain one would be a licence to print money and they
are therefore usually only found in the domain of the big institution.
What we, as individual traders need to do is use some “tools” that
allow us to analyse the market and use our intelligence and
experience to build a bigger picture, and make a decision whether to
trade, and if so how.
We'll now take a look at the technical aspects of the markets.
Firstly just exactly what is the market?
Forex, consists of around 30 currency “pairs” that are traded on
electronic exchanges around the world. For instance, we will be
trading the exchange rate between the US Dollar and the British
Pound. Traders call this pair “cable” (Dating back to the cable first laid
between US and Britain for telecommunications)
This pair currently trade around 2.1 US Dollars per British Pound
There is also the rate between the Australian Dollar and the New
Zealand Dollar. And the British Pound and the Euro, and so on. Now
with a bit of thought you'll see that in fact every pair is linked to every
other pair.
If the rate between the $ and the £ changes then the rate between the
$ and the Euro must change, if not, then the rate between the £ and
the Euro must change as all are inter-related. So a news story that
affects the Yen, can easily have repercussions on the rate of the Euro -
v- the $.
All of which makes the prediction of price movements “interesting”.
Having mentioned “news” it's worth noting that the currency markets
are very much affected by “news”. The exchange rates are simply a
joint agreement as to the value at any moment – a news story can
affect that value much more so than say stocks, where companies do
have a real world value and any news is always tempered by that facts
of real life.
So back to “cable” and a few facts.........
We know the current value is around 2.1 $ per £. It's actually
measured as 2.10000
The smallest measurement is a “pip”which is 0.0001. However you
will see on charts that this can be displayed as tenths of that. As far as
trades go you can only enter prices to one pip – not the tenths. Don't
worry all will become clear!
A pip is worth $10 per futures contract as each contract is for $100,000
(as mentioned this is not intended to be a beginners course so it is
assumed that you know what a futures contract is all about)
So a 10 pip move on Cable is worth $100.
Cable moves, on average 140 pips a day.
Cable futures are traded on the Chicago Mercantile Exchange using
Globex (the global Fx trading system)
To trade Currency futures you require a Margin Account with a broker
who deals with Fx. There are now dozens on the internet, and all, to
my knowledge, will offer a good service. The minimum account size is
usually $5000 and to trade a single contract will require $1000 margin
deposit.
When you open a trade, as with any commodity, there is a spread, i.e.
A difference between the selling price and the buying price – for
Cable the spread is usually 0.8 to 1.5 pips although at high volatility
times (after an important news release for example) this can increase
dramatically.
Charts are available from many sources, and a lot of them are FREE.
Many are also “real time”, that's to say they display the actual price
that you could trade at every second of every day. Beware – some do
not.
These charts will be able to display from a few ticks per bar to
monthly bars.

We've now covered pretty much all you need to know to move on to
look at how we can analyse a chart and see what methods there are
for predicting where the price is going next.......
Technical Analysis

There are literally libraries full of books on technical analysis, so

anything I write here will pale into insignificance compared to that.
However I will cover the major topics that I have found to be useful
(much of technical analysis is not useful !)

Firstly I must point out that pretty well all technical analysis is
constrained by being based on history. It's like trying to drive by only
looking out the rear window – you might know that at the moment
you're still on the road, but there's simply no way of knowing when
the next bend will appear, and you'll only know you're off the road by
the bumps !!
That said, if we think in a more “statistical” sense, and look at
probabilities rather than certainties, then it is still the best tool we
have.
And that's enough to make trading profitable.
So what are the indicators we can put in our toolbox?
They break down into :-
Mathematical lagging indicators
Mathematical predictive indicators
Visual indicators

Mathematical lagging indicators would include moving averages,

overbought and oversold indicators such as Stochastic, and trending
indicators such as ADX. There are of course a whole host of indicators
created by traders themselves, usually for specific markets under
certain conditions.

Mathematical predictive indicators include such things as Fibonacci,

and Elliott Wave theory
Visual indicators would be manually drawn trend lines or support
and resistance lines.

Rather than try to explain these in detail here there is a video that
covers these 3 separate subjects and is available to view HERE.
(Obviously an Internet connection is required to view). A summary of
the video is........
Simple Indicators.

Here we see a chart with a simple 20 period moving average. What's it

tell us? The normal expectation is that if the price is below the moving
average and the line is pointing down then the trend is down and we
can expect prices to continue to fall and vice-versa.
Indicators can become fantastically complex and purport to tell us
something about the market – however, developing a trading method
from them is another matter entirely.
Always bear in mind that these things are called “indicators” and they
are just that. The skill of being able to “read” the market, albeit helped
by the indicators, is what differentiates winning traders from losers.
Mathematical Predicting Indicators

In this topic we'd include trend lines, as above or Fibonacci and Elliot
wave analysis as below.

Whilst these do have a place in understanding the market, and being

able to read the market, alone they are of little practical use as a
trading tool. (Doubtless someone will contact me and tell me they use
these to make millions each year – I await your email !)
There are some other indicators that any of you familiar with FiveTic
Trading as applied to the Indices will recognise. These are Bollinger
Bands and moving averages that we've already covered.
Bollinger Bands are used as a statistical measure of the range within
which the price should trade for a given % of the time. The upper and
lower bands can be adjusted, and are based on the number of
standard deviations from the mean of the data over the previous
number of bars set within the indicator. So setting the upper and
lower bands to 1 standard deviation would mean that the price would
trade within the bands, statistically speaking, say 66% of the time.
Setting them to 2 standard deviations would be 97% of the time.
It gives a mathematically accurate prediction. However, in FiveTic
Forex we'll be using them in a somewhat unconventional way. More
of that later!
That's all I want to cover in this section and we'll now move onto ways
that traders actually make money from the markets.
Making Money from The Markets
There are as many ways to make money from the markets as there are
people trading them. However, I believe that they fall into a limited
number of general methods. I cover these in more detail in this video.
1 Let the Trend be your Friend!
Use “something” to tell you that a market has made a move that
signifies the beginning of a new “trend”. Open a position and stick
with it till the end of the trend.
Markets “trend” for, in general, about 30% of the time. For the
remainder they move in an apparently random up and down fashion.
Of course these smaller moves are the result of traders around the
world being out of balance – so for an hour there are more buyers
than sellers so the price slowly rises – then for the next 15 minutes
there are more sellers so the price falls, and so on. A trend occurs
when one side manages to stay in command for an extended period
and thus cause prices to generally continue moving in that direction.
The problem is that every trend starts out looking just the same as the
small random moves so you either have to wait for the trend to
become established (thus missing a proportion of the overall move)
or, take every small move as the start of a trend and accept a very high
proportion of losing trades.
Add to this the even more difficult subject of when to exit the trade
and lock in your profit. Fear and greed abound here – greed makes
you wait for even more profit with the frequent outcome being that
you give most of the profit available back – or fear causing you to
jump out with just a tiny fraction of the eventual profit available.
Most systems in this category would see more than 50% losing trades
and rely totally on the 20% of trades that produce good profits from
long trends.
Psychologically a very tough method to trade.
2 Overbought and oversold
It is a fact that markets can only move so far in one direction before
moving for at least a small move in the opposite direction. Now these
terms are relative and after a big news story the market can indeed
move a very long way before taking a breather – these tend to be the
exception.
This is the category that FiveTic trading uses for the indices.
This type of trading produces many more winners than losers but
with no big winners as winning trades are against the prevailing trend
and therefore tend to be relatively small in nature. Additionally losers
will predominate whenever there is an “exceptional” move that
doesn't take a breather. So even with this fairly mechanical system an
ability to read the market is beneficial.

3 Patterns
Books are available on using patterns to trade the markets. One of the
most notable is Ken Rogers, who, 20 years ago was using patterns to
make a fortune (and maybe still does for all I know)
As price action is the result of crowd psychology it is inevitable that
repeating patterns will emerge as “the crowd” respond in a similar
manner to similar situations.
Some of the patterns used would be, double tops and bottoms, flags,
channels, triangles, and so on. Normally a break of the pattern would
initiate a trade which is then managed in numerous different
fashions.
In my experience a reasonably successful method to trade but with
the disadvantage of requiring huge time to learn to recognise the
patterns and everything being subjective.
There is also a limited number of set-ups in any given time so the
availability of trades is also limited.
4 Bar Patterns
An uncommon trading method, but one we'll look at more closely
later, looks for specific bar shapes. More often applied using Japanese
Candlesticks rather than routine bar charts but equally valid.
Each bar is in itself a snapshot of the price action during that timeslot.
If certain bar shapes emerges in a certain market condition there is a
statistical probability of what the market will do next. Again based on
human psychology.
Normally used within other systems as a trigger signal rather than
traded just on their own.

5 The Rest.
There are now a huge number of “wacky” ways to trade. I have
personal experience of using the phases of the Moon to trade (the
Earth/Moon/Sun relationship moves oceans so it's not unreasonable
to expect it to affect us humans – is it?)
I have tried to understand a system that used option price volatility as
a predictor of futures price movements. Similarly using one that used
price in one market segment to anticipate movements in another. All
very difficult to understand and even more difficult to trade with.
FIVE TIC FOREX – THE METHOD !!

Finally we have reached a point where we look at how we use a

couple of indicators and bar patterns to trade the Fx markets.

Before we get started I must mention “news” again. I have already

explained the effect that news can and does have on the Fx markets.
Do be aware of news coming out, you should know when it is coming
out and what it concerns and whether it is it expected to have an
effect on the markets.
That's not to say don't ever trade around news releases – just take it
into account when doing so.

Overview
For the purpose of this course we are looking at the GBP/USD pair or
Cable. The techniques will apply to many other markets and feel free
to experiment. You'll need to modify the profit targets and stop loss
figures and maybe even the length used within the indicators, but, as
the method is based on the basic functions that drive the markets you
ought to find little difficulty in transporting the method.

A 15 minute chart barchart is used – this is chosen as a good balance

between the opposing factors of, price movement, commission
payments, natural volatility of the Cable market, and number of trades
produced.
You could, if you wished, use a 5 minute chart to produce more
trades, but you would also need to reduce the profit target and
stoploss. You would, by doing this, pay a greater proportion of your
profits in commission. It's all about balance and finding the right
formula for you. If you wished you could apply this to a daily chart
and just watch the market once a day for a couple of minutes.
I believe this is a versatile method of trading and with practice and
perseverance can be adapted to suit most peoples wishes.

Chart Set Up (Covered on video here)

I use Tradestation as my charting package and trading platform. The

chart I use is above.
For non Tradestation users the indicators should be easy applied to
any package. The exception is the coloured bars which to my
knowledge are only available in Tradestation or Supercharts. However,
don't worry, they are only used to easily identify particular bar
formations and can still be recognised without colour. As it's a 15
minute chart you'll easily have time to study each bar for a few
seconds to see if it conforms.
The set-up is as follows:-
15 minute bar chart of GBP/USD
Simple moving average of 21 bars using the close price
Bollinger Bands with 9 bar as the length and 0.75 std. Dev. Above and
below.
“UP” bars and “DOWN” bars. These are defined as bars where the
open is in the lower 33% of the bar and the close is in the top 33% (for
UP bars).

Trades (Overview of the System on Video Here)

There are 2 distinct categories of trade,

1 The trend initiation
2 The trend continuation
Let me reiterate – these are NOT mechanical trades. Yes, you would
take “most” of the trades, but you can significantly improve on a
mechanical approach by learning at least the rudiments of reading
the market. Now this is admittedly, half art and half science, but by
observation and utilising the many examples I give later you will be
able to improve with time.
No trading system I have ever seen works “out of the box”. They all
require learning and dedication to master.
Once achieved, you have a skill that no one can take away and the
satisfaction of knowing that you can make a lot of money, anywhere in
the world, with just an internet connection and a laptop.
The Trend Initiation Video here

The signal to look for (talking short trade here) is when a DOWN bar
occurs that closes below both the moving average and the bottom
Bollinger Band, AND all 3 lines (moving avg, top and bottom Boll.
Bands) are either level or down
The trade is then taken by placing a sell on a stop at 3 pips below the
low of that bar.
The profit target is set at 15 pips (so 18 pips below the low of the signal
bar) and the stoploss is set at 20 pips (so 17 pips above the low of the
signal bar).
Then basically just let it run.
There are a couple of variations that you can incorporate if you wish
regarding the stoploss. If there is a “natural” level at which to place the
stoploss that is around the 20 pip area then use that instead. If, after
the first bar in the trade, it's a “downbar” then move the stoploss to 3
pips above the high of that bar to reduce risk. Repeat this if the
situation allows.
There are a few conditions that should make you wary of taking the
trade:-
A If the price, the moving average, and the Bollinger Bands are all
closely together then stand back and look at the chart. Is there a
natural level of support or resistance that the price should break
through before trading.
B Is the signal bars low, lower than previous bars by a reasonable
margin. If not then use the previous low (or high) as the entry level.
C Don't forget the news
D Is this really a new trend or just a correction in a bigger trend.
Stand back, close the bars together and just make sure that this is not
just a correction.
I actually use a chart with no indicators at all to check this. Indicators
just confuse the picture in this situation.

Here's a buy set up

And here's the big picture of that trade – notice the trendline I've put
on. It's a good line of resistance at 3 previous points, so I checked that
there was enough space to get the 15 pip profit before it hit this line.
There was actually over 20 so I took the trade.
The Trend Continuation Trade Video Here

In this set up we are using the fact that markets almost always take a
breather at some point in a trend. Our expectation is then that the
trend will resume.

Firstly let's define a “trend”. For this course a trend is when the upper
Bollinger Band goes below the moving average. Talking a down trend
here, but here's a good illustration of an Up trend.
So what we're looking for is the market taking a breather. That, for this
course is when a “downbar” appears in an Up trend. (and vice-versa
of course)
The downbar must appear at the right place however.
Ideally we want the situation shown below.

Here we got a successful Trend Initiation trade – the market then gives
a big Up bar followed immediately by a Down bar. The market has
run out of steam – but given time we expect the trend to resume. This
is our breather set-up and we now look to get on board the trend.
There are 2 ways of entering this trade.
Firstly buy on a stop order 3 pips above the high of either the Up bar
or Down bar. OR
Buy on a stop order 3 pips above the lowest high following the Down
bar IF there's enough space to take the 15 pip profit without the
previous high being exceeded.

These trades are only valid all the time we are in a “trend” as
previously defined. So if the lower Bollinger band fell below the
moving average then that's no longer a trend and we don't trade it.
Additionally the price should not go below the moving average ( be
slightly generous here – if it does go below but then the close is way
back above the moving average then that's still OK.)
The profit targets are as for the Trend Initiation trade. That's 15 pips
and a 20 pip stoploss.

Profit Targets verses Trend Following.

There are 2 entirely different schools of thought about profit taking.

One says that you take a fixed profit on every trade – the advantage is
that on most trades you will make a profit. The downside is that the
stoploss probably needs to be bigger than the profit target thus giving
comparatively bigger loses and requiring the win/loss ratio to be
quite high. Also occasionally by exiting with just a small profit a big
run will be missed and the opportunity to make a big profit never
available.
On the other hand if you try a ride the trend on every trade you will
find many trades end up as losers, or at best break-even. On the
upside, there will be occasions when a big trend is ridden well and a
large profit is obtained.
On balance the former method is preferred as the psychological
effects are easier to deal with. No one finds it easy to trade a method
that has more losers than winners.
There is however a method that gives the best of both worlds.
Initially trade the fixed profit method already outlined. Later, as
confidence develops adopt the following method.
Trade 2 contracts on every trade. One is exited at the profit target as
above, the other is left to run with the trend as will be described later.
This has the advantage of pocketing a profit to offset the possible loss
incurred by the second position whilst still exposing the possibility of
a big winner by following the trend.
Here we have a trade of short 2 contracts that initially went against us
and got within a few pips of being stopped at the initial stop level. It
then fell away nicely and hit our 15 pip profit target where we took off
1 contract.
At this point the stop is moved to position A. This is 3 pips above the
most recent Downbar. When another Downbar occurs the stop is
continually moved lower to B, C, etc. until eventually at H the price
moves up through the stop level and we're out. The profit on the trade
was the initial 15 pips plus a further 135 from following the trend !!
Please be warned – they aren't all this good! But just this one winner
would pay for many losing trades and overall will add to the
profitability of FiveTic Forex.
Additionally there would have been 2 Continuation trades that could
have been taken along the trend and these should be treated exactly
as normal trades.
I would expect that by now you have a fair idea of how this trading
method works and how to apply it in real life. It's now up to you to
practice this until you have the confidence to do it for real.

At this point I'll mention that on the Website

Http://www.FiveTicTrading.com/Forex/faq
there is a Frequently Asked Questions section that is continually
being updated where you may well find answers to your own
question.

If it's not answered there then by all means ask me here.

I wish you every success in trading and hope this course has taken
you a step closer to the reality of trading profitably.

Best wishes for your success,

Matt Sharp
AND FINALLY,

To aid your efforts there is additional support available via the

Members Website. Here I will issue any updates and amendments to
the course that are developed as a result of feedback.
I will post a weekly summary of trades for the previous week together
with a video showing some interesting trading situations that
occurred or a particular point relating to the course.

I will share others experiences and feedback to help you and any
useful additional information.