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Market Mechanics Ep 3: How to Trade Forex For Beginners — Transcript

by Brad Goh (The Trading Geek) · 7,739 words · 1,256 segments · language en · Watch on YouTube

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0:00A lot of beginners tend to over
0:01complicate Forex. They think that they
0:04need 20 indicators, 10 different
0:07monitors, some secret strategy, and
0:10years of experience just to place a
0:12trade. When in reality, Forex is
0:15actually very simple when you understand
0:18what you are really doing. Because at
0:20the end of the day, you are just buying
0:22one currency and selling another.
0:25Welcome to episode two of my Market
0:27Mechanics mentorship series. In the
0:29first episode, I showed you how the
0:31market actually move. Now, in this
0:33second episode, I want to simplify Forex
0:36for you from the ground up. So, you
0:38actually understand what you are
0:39trading, how the different currency
0:41pairs move, what even is a currency
0:44pair, and how money is made or lost in
0:46the market, what's the best time to
0:47trade, how to pick a different trading
0:50style. Basically, I'll walk you through
0:52everything you need to know about Forex
0:54trading.
0:56With that being said, let's get right
0:57into it.
0:58So, what is Forex?
1:01The term Forex basically stands for
1:03foreign exchange. The foreign exchange
1:07market is the global marketplace where
1:10the world's currencies exchange hands at
1:12a mutually agreed rate, exchange rate.
1:16This exchange rate changes every single
1:19second, so the market is constantly
1:22fluctuating.
1:23So, as Forex traders, what we are pretty
1:26much trading is this exchange rate. We
1:29are betting on whether it's going to go
1:30up or down, and then we are trying to
1:34make money off our bet itself. That's
1:37it.
1:38The Forex market is the largest
1:39financial market in the entire world
1:43with a daily trading volume of $6.6
1:46trillion.
1:48Not a million dollars, not a billion
1:49dollars, but trillion dollars with a T.
1:52It is also 200 times bigger than the
1:55largest stock exchange, which is the New
1:57York Stock Exchange. So, there's a lot
1:59of trading volume, which means there's a
2:01lot of market participants, which also
2:04means there's a lot of liquidity, a lot
2:07of trading opportunities.
2:11So, the market is open 24/7,
2:15right? So,
2:16unlike the stock market, which is only
2:18open when the stock exchange is open,
2:22the Forex market is open 24 hours a day,
2:255 days a week from Monday to Friday.
2:29So, it's only closed during the
2:30weekends.
2:33So, Forex trading is pretty much the
2:35conversion of one currency into another.
2:39That's it.
2:40So, an example, you travel from
2:42Singapore to Australia,
2:45and you cannot be using Singapore
2:46dollars in Australia, right? So, as a
2:48result, you will go to a nearby currency
2:50booth at the airport, and then you will
2:52exchange your Singapore dollars into the
2:55Australian dollars.
2:57And with the exchange, there's the
2:59exchange rate, right? For example, one
3:02Singapore dollars equal X amount of
3:04Australian dollars.
3:06And what we are essentially trading,
3:07like I mentioned earlier, is the
3:09exchange rate.
3:11Forex markets are always quoted in
3:13currency pairs. The base currency is is
3:15on the left of a currency pair, while
3:17the quote currency is on the right.
3:20The base currency is always equal to
3:22one, and the quote currency is equal to
3:25the current quote price of the pair.
3:28This means that the price for a pair is
3:31how much of the quote currency it costs
3:33to buy one unit of the base currency.
3:37So, when you trade Forex, you are
3:39essentially buying one currency while
3:41selling the other.
3:43For example, in this example, it shows
3:46EUR/USD = 1.35361.
3:51Euro is the base currency.
3:55USD, US dollar, is the quote currency.
3:59So, what this means is that it would
4:01take 1.35361
4:04US dollars to purchase 1 euro.
4:08This is the exchange rate. So, this is
4:11something that you have to know because
4:13every single currency pair, it comes in
4:15pairs, right? That you can't just like,
4:17you know, buy or sell like euro or USD.
4:21If you are trading forex,
4:23you are going to be dealing with
4:24currency pairs, right? They come
4:26together.
4:28So, once again, that's just how the
4:29market works in forex trading, right?
4:32So, when you go on to Google and you
4:34search up how much uh conversion, like
4:37convert euro to USD, that's the exchange
4:39rate and that's what we are trading.
4:42When you buy your USD, what you're doing
4:44is that you're expecting the price of
4:46euro to rise. So, you buy euro, which is
4:50once again, the base currency, and you
4:52sell USD, which is the quote currency.
4:55So, if the euro strengthens against the
4:57USD,
4:59you make money.
5:00That's it.
5:01And if you sell your USD, what you're
5:03doing is that you're expecting the price
5:05of euro to fall. So, you sell euro,
5:08which is the base currency, and you buy
5:10USD, which is the quote currency.
5:13So, if the euro weakens against the US
5:15dollar, you make money.
5:18That's just how the market works, right?
5:19That's just how forex trading works.
5:21So, when you buy a pair just like this,
5:24you are predicting that the base
5:26currency is going to go up and the quote
5:28currency is going to go down. And if
5:30your prediction turns out to be right,
5:32you make money.
5:34If you sell, then you are literally
5:36betting that euro is going to go down,
5:38USD is going to go up.
5:42Remember, for one currency to go up,
5:43there will be another weakening against
5:45it. All currencies cannot go up at the
5:49same time.
5:50Just like in life, there is always going
5:53to be a winner and a loser.
5:56Forex traders weigh up whether a
5:58currency looks likely to strengthen or
6:00weaken against another, and then they
6:03trade that pair accordingly. So, if I
6:06think euro is going to strengthen
6:08against your
6:09uh you against US dollar, this is where
6:11I'm going to be buying EUR/USD. If I
6:14think euro is going to weaken against
6:16the US dollar, I'm going to be selling
6:18EUR/USD.
6:20So, who trades Forex? There's a few
6:22market participants. Number one, we've
6:24got the big banks and large financial
6:26institutions. These are the whales,
6:28right? These are the people who are
6:29trading with millions or if not billions
6:31of dollars. They have a lot of
6:33liquidity, they have deep pockets. And
6:35then you've got the central banks and
6:37government. You've even got large
6:38commercial companies, because you must
6:40understand that when companies they are
6:43paying their employees overseas, they
6:45might want to convert the salary into
6:48that particular country's currency
6:50before paying them out, right? So,
6:52simple things just like this means that
6:53they are essentially still participating
6:56in the Forex exchange, right? The Forex
6:59market. And also, you've got the retail
7:01traders, which is us.
7:03Right? So, these are the market
7:04participants. These are the people that
7:05are playing in the game in which you are
7:08playing. So, if you do not understand
7:10the game, you are going to be losing to
7:12the people who does, which is the big
7:15banks, the large financial institutions
7:17with deep pockets who technically
7:20control the market.
7:22Now, how do you know when to buy and
7:24when to sell?
7:25How do you know whether the market is
7:27going up or down?
7:29You don't.
7:31The truth is, as retail traders, we
7:33cannot predict with 100% certainty where
7:37the market is going to go.
7:40And the best part is that we don't have
7:42to in order to make money. You heard
7:45that right. You don't need to predict
7:47what's going to happen next in order to
7:49make money in this market.
7:51Because trading is simply a probability
7:54game. Which means that every trade
7:57outcome is random.
7:59However, we can increase the probability
8:02of us winning a trade, of us predicting
8:05where the market is going to go, by
8:07developing an edge.
8:10An edge is what separates winning
8:13traders from losing traders.
8:17That's what an edge is. An edge is not a
8:19guarantee you will win a trade. An edge
8:22is not a guarantee that price is going
8:24to go up just because you predicted it
8:26to be.
8:27It's just
8:29something that puts the odds in your
8:32favor.
8:34Most beginner traders, they don't even
8:36have an edge. And as a result, they're
8:38not able to get consistent profits. They
8:41might make them some money here and
8:42there because of beginners luck, but
8:44they find it incredibly difficult to
8:46profit consistently.
8:49But once you master the three M's,
8:52and you start to focus on the process
8:54rather than the outcome, this is where
8:56you can transcend from the randomness of
8:58the market and start making consistent
9:01profits.
9:02I'm going to talk about the three M's in
9:03a bit.
9:05But that's all an edge is, right? Your
9:07edge is basically your trading strategy
9:11that allows you to make more profits
9:12than losses. That allows you to make
9:15more money when you are right than lose
9:19more money when you are wrong. That's
9:20it.
9:22And in order for you to develop an edge,
9:24you need to master these three M's.
9:26In order for you to achieve consistent
9:28profitability, you need to have these
9:30three M's in your arsenal.
9:33And that is method, which is having a
9:36profitable trading strategy that works
9:38in every market condition, money
9:40management, which is the ability to take
9:44trades with high risk to reward ratio
9:47while keeping your risk consistent. To
9:49put it in plain English, it's to
9:51basically make more money when you are
9:53right
9:54compared to losing when you are wrong.
9:57Right? So, make more money when you are
9:58right and lose less money when you are
10:00wrong. So, the wins, the profits are
10:02always outweighing your losses.
10:04And then, you need mindset, right? The
10:07ability to execute trades based on
10:10mechanical rules on your trading system
10:13rather than emotions.
10:16So, those are the three M's. And over
10:18the next 30 days,
10:21throughout this entire Market Mechanics
10:23Mentorship series, I'm going to be
10:25teaching you everything you need to know
10:27to build a profitable trading strategy,
10:30manage your risk, and develop the
10:33mindset of a professional trader, a
10:35profitable trader.
10:37So, yeah, we're going to have lessons
10:38that is catered towards each one of
10:41these core pillars. And once again, you
10:43need all three.
10:45Just like a stool that you can see on
10:47the screen right here, if you take one
10:49leg
10:50away from the stool, the stool is going
10:52to fall. You need all three legs to
10:56become consistently profitable.
10:58You need method, money management, and
11:01mindset.
11:02Now, let's take some time to talk about
11:04currency pairs.
11:06Currency pair is basically a price quote
11:10of the exchange rate for two different
11:13currencies traded in the Forex market.
11:16And all currencies are identified by its
11:18own ISO currency code.
11:21Here's what I mean, right? So, for
11:23example, the Great Britain or England,
11:27the currency is the Great Britain pound,
11:30which is, in short, GBP.
11:33And then for the Japan,
11:35which is using Japanese yen,
11:38their currency code is JPY, Japanese
11:43yen, Great Britain pound.
11:46And then for the US,
11:47they are using the dollar, which means
11:50it's US dollar.
11:52So, this is the own individual ISO
11:56currency code. Every single country has
11:58one.
12:00Now, there are three types of currency
12:03pairs. There's your major currency
12:04pairs, your minor currency pairs, and
12:06your exotic currency pairs. Major
12:08currency pairs are the currency pairs
12:10that include the US dollar. So, I'm
12:12talking about your USD, GBP USD, NZD
12:15USD, USD JPY, USD CHF,
12:19USD CAD.
12:21So, this is the euro USD, uh the Great
12:24Britain pound US dollar,
12:26the New Zealand dollar against the US
12:28dollar, the US dollar against Japanese
12:30yen, the US dollar against Swiss franc,
12:32the US dollar against Canadian dollar.
12:35And then you've got the minor currency
12:36pairs, which is pairs that include any
12:37two of the major currencies except the
12:40USD. So, minor currency pairs do not
12:43have USD inside.
12:44So, it's stuff like euro JPY, euro Swiss
12:48franc, Great Britain pound Australian
12:50dollar, Great Britain pound Japanese
12:53yen, Australian dollar against the
12:55Canadian dollar, and Australian dollar
12:57against the Swiss franc.
13:00And then we've got the exotic currency
13:01pairs, which is the pairs that include
13:03one major currency and one currency from
13:06emerging markets.
13:08Now, for the majority of you guys
13:09watching this, I would advise you to
13:11just stay away from exotic currency
13:12pairs, but it's good for you to uh I
13:14just understand what they are.
13:16Just to give you some example, US dollar
13:18against the Singapore dollar, US dollar
13:20against the Thai baht, US dollar against
13:23the Hungarian dollar, uh US uh
13:25Australian dollar against the Mexican
13:27pesos, if I'm not wrong. Correct me if
13:29I'm wrong. But the Canadian dollar
13:31against the Singapore dollar, right? So,
13:35yeah, those are the list of some
13:36examples of the exotic currency pairs.
13:39And to be honest with you,
13:41I don't even know, like, damn, because I
13:43don't even touch down for my entire
13:45trading career. I've been trading for
13:46like 7 years right now, and never have I
13:49ever traded a single one of these exotic
13:52currency pairs. So, yeah, you're much
13:54better off just staying away from them
13:56and sticking to the major currency
13:59pairs. All right. So, for my beginners
14:02out there, you want to stick to the
14:03major currency pairs, because these are
14:05the currency pairs with the most amount
14:06of liquidity, volatility, and trading
14:10opportunities.
14:11So, I'm talking about your USD, GBP USD,
14:15NZD USD, USD JPY, USD CHF, and USD
14:20Canadian dollar. Right? So, yeah, stick
14:22to these, and you'll be good.
14:25And my advice for you is to experiment
14:27with all the major currency pairs. If
14:29you don't know what to choose, try all
14:31of them. Try different flavors. Try
14:33Western cuisine, Japanese cuisine,
14:36Australia cuisine,
14:38Turkish cuisine. Try everything, and
14:40then see what you like. And then once
14:42you have found out what you like, and
14:43which one is the best for you, you want
14:46to stick to one to four currency pairs.
14:48Right? So, I would advise you to have
14:50like, maximum
14:52three to four currency pairs on the
14:53watch list. So, if one currency pair
14:55doesn't offer you opportunity, you can
14:57switch to another one. And if that one
14:59doesn't, you can switch to another one.
15:01Yeah, so,
15:02you can have multiple, right? But at any
15:04given moment, you should only focus on
15:06analyzing the charts of one currency
15:08pair.
15:09Okay?
15:10Next up, let's talk about some Forex
15:12language and lingo, which is some
15:14terminologies, which you might not be
15:16familiar with. That is exclusively for
15:19Forex traders. Okay? So, this is like
15:22the language we actually use as forex
15:24traders. So, it's like um
15:28speaking a different slang, speaking a
15:30different dialect, all right? So, you
15:31need to understand these terms because
15:33if not, you will not be able to
15:34communicate with other forex traders and
15:36you will not be able to understand the
15:39terms that your forex trading platform
15:42and broker is using.
15:44Number one is pips.
15:47Now, what is pips?
15:49A pip stands for percentage in point.
15:52And it's the smallest price movement any
15:55exchange rate can make.
15:57It measures the amount of change in the
15:59exchange rate for a currency pair in the
16:02forex market.
16:04And a pip is basically the fourth number
16:08after the decimal point. Right, so in
16:10this case, this is the decimal point. 1
16:132 3 4, this is a pip, right? So, it's
16:16the fourth number after the decimal
16:18point.
16:21And pips
16:23is basically what allow us to know how
16:26to calculate our profit and losses as
16:29forex traders.
16:31All right, so if you look at this case
16:32in this right here, EUR/USD right now
16:35the exchange rate is 1.0926.
16:39Which means that
16:40this right here is the pip, right? So,
16:43once again, it's the fourth number after
16:45the decimal place except for Japanese
16:48yen pairs, which I'm going to talk about
16:49later on. And in this case, if the price
16:52of EUR/USD goes from 1.2468
16:56to 1.2470,
16:58you can see what changed was
17:01this right here went from 68 to 70.
17:05What just happened is that we just made
17:07two pips, right? We just gained two
17:09pips.
17:10All right, so
17:112468
17:132470, you can see the difference is two
17:15pips, right? Because the only thing that
17:17changed was this last number right here.
17:20Another thing another example, 1.2576 to
17:231.2566.
17:25This time round, price went down by 10
17:28pips. All right, because 2576 - 2566,
17:32the difference is 10 pips.
17:35And then next you got 1.2176
17:37to 1.2276.
17:39This time round, which decimal which
17:42number after the decimal point actually
17:44change? It was this one right here,
17:46which is the hundredth pip. Okay, so if
17:49this is the pip, this
17:51this is the tenth pip and then this is
17:52the hundredth pip.
17:54So in this case, if
17:56it changed from 1.22 1.2176 to 1.2276,
18:01the difference is 100 pips.
18:04So, that's just how the math works in
18:06the Forex world, right? If you don't
18:08understand this, don't worry as with
18:10more practice, you'll get more familiar
18:12with it, right? Just like a language,
18:14the more you speak the same language,
18:16the more you you well versed you can
18:19become at speaking that particular
18:20language itself.
18:22So yeah, don't worry about this. Just
18:23know that this is how we calculate like
18:25the the the the pips, right? This is how
18:27we calculate the the dollar move in
18:29Forex.
18:31And like I said, the pips works a little
18:34bit differently on Japanese yen pairs.
18:36Because Japanese yen pairs only go out
18:38to two decimal places.
18:41So one pip is the second number after
18:46the decimal point.
18:48Right, so in this case, it'll be this
18:49one right here, right? 1.70.67,
18:53if it goes to 170.68,
18:56then guess what? We just plus one pip.
19:00As simple as that. If it goes to 170.77,
19:04then we just plus 10 pips, right? The
19:06difference is 10 pips.
19:09And then we got the pip pet, right?
19:11Which is this small little
19:13number that is attached to the entire
19:17exchange rate. This is the pipet, right?
19:20This is the micro pips. This is 1/10 of
19:23a pip.
19:24Right? So, yeah, if this is the pip,
19:26this is 1/10 of the pip.
19:29So, one pipet equal to 0.00001,
19:32right? So, if price move from 1.0926
19:363 2
19:381.09265,
19:41guess what? We just plus 0.2 pips. We
19:44just plus two pipets. Okay? So, yeah,
19:48it's just this small number that is
19:50attached to the
19:52exchange rate itself.
19:54Next up, we got lot size.
19:56Lot size is like
19:58the amount of units of a certain
20:02currency pair you're going to be buying
20:04or selling.
20:06Because in Forex, Forex is traded in
20:08lots.
20:10A standard lot is equivalent to 100,000
20:13units of the base currency.
20:16This is $100,000
20:18if you were trading in US dollars.
20:21And every time price move by one pip,
20:24you are making or losing $10. Right? So,
20:28it's $10 per pip.
20:30Now, mini lot is 0.1 lot, and that is
20:3410,000 units. Every time price move by
20:37one pip, that's $1 per move.
20:40And micro lot is 0.01 lot, and if price
20:44move by 1,000 units, this is where you
20:46are making or losing 10 cents.
20:50Okay? So, that's the lot size itself.
20:54So, I'm going to show you how to combine
20:56the lot size and the pips to calculate
21:00your P&L later on, but for now, just
21:02understand that when we're talking about
21:04lots, we are I'm about the units in
21:07which you want to buy or sell a specific
21:10currency.
21:13And here are some other terms that I
21:14want you to familiarize yourself with.
21:16Bullish basically means you expect price
21:18to increase. So, if I say I'm bullish,
21:20I'm expecting price to increase and I'm
21:22going to look for longs. I'm going to
21:23look for look to buy.
21:25If I'm bearish, that means I'm expecting
21:27price to fall. If I will say I want to
21:29enter for a long position, it means I
21:31want to enter for a buy order.
21:33If I want to
21:35enter for a short position, it means I
21:37want to sell.
21:39And then, you got stop loss and take
21:40profit, which is how you exit a trade.
21:43Right, stop loss is pretty much
21:45if you place a stop loss at a certain
21:46price point, that means you want to
21:48close the trade at that particular price
21:51if the trade does not go as planned.
21:54What if the whole trade goes well? Then,
21:56if that's the case, you want to set a
21:57take profit, which is a profit goal
22:00that once you hit
22:02you get out of the trade if the trade
22:04ideal when as planned.
22:06Now, let's talk about how you make money
22:08in forex trading.
22:10You do so by correctly predicting a
22:12currency pair price movement.
22:16Opening a position that stands to
22:18profit.
22:19Example, if you are bullish on euro,
22:22right? That means you are thinking euro
22:24is going to go up. It's going to
22:25strengthen against the US dollar. As a
22:28result, you're going to buy EUR/USD.
22:30Okay? Because, once again, you are
22:31betting that euro is going to strengthen
22:34against the US dollar and price is going
22:36to go up.
22:37And then, later on, a few minutes later,
22:39a few hours later
22:41EUR/USD did go up. So, your trade ideal
22:45when as planned.
22:46As a result, you make money.
22:49If you are bearish on the Great Britain
22:51pound and you sell GBP/USD
22:54once again, betting GBP/USD is going to
22:56go down, and later on, GBP/USD does go
22:58down, the Great Britain pound does
23:00weaken against the US dollar, you make
23:03money.
23:04That's it.
23:07And now let's talk about the math behind
23:09it. How do you actually like quantify
23:12the P&L?
23:13How much money can you potentially make
23:15or lose on any given trade?
23:17Well, it's determined by a lot size,
23:21which is the amount of units that you're
23:22purchasing or selling, and whether you
23:24enter for a buy or sell, and however
23:27much does it go up or go down,
23:30which is determined by the pip distance.
23:34Now, let's look at that example right
23:36here.
23:37So, once again,
23:40this is how you determine however much
23:43does a particular currency go up or go
23:46down. It's by looking at a pip
23:48difference,
23:49and also the lot size itself.
23:52All right, so those are the two
23:53concepts. So, let's look at an example.
23:56If you buy EUR/USD, and right now
23:59EUR/USD is sitting at 1.250,
24:03once again, you're buying EUR/USD, that
24:05means you are thinking that EUR is going
24:06to strengthen against the US dollar. So,
24:08if EUR goes up,
24:10you make money.
24:13And then, let's say later on, after you
24:15enter for the long position,
24:17EUR/USD went up by 10 pips. It moved
24:20from 1.2500
24:22to 1.2510.
24:25So, as a result,
24:27guess what?
24:29You have potentially just made 10 pips.
24:31But, how do you turn that into P&L? Do I
24:33have to determine that how much money
24:34have you made on this trade itself?
24:37Well, the next thing we look at is the
24:38lot size, which is the amount of units
24:41that you have purchased.
24:42So, in this case, let's say the lot size
24:44you used was the one lot, the standard
24:46lot, which means you have essentially
24:48purchased 100,000 units of EUR/USD.
24:53So, 100,000 units of EUR/USD, and price
24:56moved up by 10 pips.
24:59And every single time price moved by one
25:01pip, that is $10.
25:03You take 10 pips, which is however much
25:06it went up by,
25:08times $10 per move, right? Per pip move,
25:11and you get $100 itself.
25:15So, it's basically your lot size, the
25:17amount of units,
25:19times
25:21the
25:22dollar per pip move.
25:24And that is how you calculate the
25:26profit.
25:27Now, if you don't understand, let me
25:28just give you like a quick example.
25:31Okay, so in this case, let's say same
25:34exact scenario right here, guys, right?
25:37You enter for a buy.
25:39Price also moved by 10 pips. But this
25:41time round, instead of using one lot,
25:44instead of using a standard lot, you
25:46only use a 0.5 lot, which is half of a
25:48standard lot.
25:49So, as a result, you can expect your
25:51profit to half.
25:53So, instead of making $100, you are
25:55making $50.
25:57Because you use 0.5 lots, right? Which
26:00is
26:01essentially you are entering for a buy
26:03for 50,000 units of EURUSD, and every
26:07time price moved by one pip, that is $5
26:08per move, and you take $5 per move,
26:11times the amount of pips which the move
26:15actually entailed, which is 10 pips, and
26:17you made $50.
26:20Now, let's go another example just to
26:23reinforce your understanding of this.
26:25Let's say you sell GBPUSD. Right now,
26:27GBPUSD is 1.2828. And price went down by
26:3120 pips.
26:33Okay, so you can see price went down
26:35from 2828 to 2808.
26:38So, in this case, the lot size you use
26:40is 0.2, right? Which is means you are
26:43just selling about 20,000 units of
26:46GBPUSD.
26:47And every time price moved by one pip,
26:48that's $2 per pip.
26:50So, this is where you can calculate your
26:55lot size, right? You can calculate your
26:57loss and you realize that you will
26:59actually
27:00lose 20 pips.
27:02Wait. If you are selling and price did
27:05move down by 20 pips, there's a mistake
27:08right here. You are actually making
27:10money.
27:12Okay, so in this case, if you actually
27:15end up for a buy
27:17instead of a short, this is where you
27:19will incur a loss of 20 pips
27:22and times $2 per pip, that is $40. All
27:26right, so there's a mistake right here.
27:27Just change this and replace it with
27:29buy.
27:30So, if you went for a buy for GBPUSD and
27:33the market move against you by 20 pips,
27:36and you take that times the dollars per
27:37pip, this is where
27:39you will lose $40.
27:41As simple as that.
27:43So, this is the formula that you can
27:45use, right? Which is pip movement, which
27:46is the pips times the position size,
27:49which is the dollars per pip, and that
27:51is where you get your profit and loss.
27:53So, that's how you can calculate it. But
27:55don't worry because of the modern age,
27:57we got a lot of tools and softwares that
27:59help you with identifying the pip
28:01distance.
28:02Uh so, this shouldn't be a problem
28:04whatsoever.
28:05And also, with more practice, you will
28:07get a hang of this.
28:10Now, next question I get quite often is
28:12what time should you be trading Forex?
28:16Like I've shared with you earlier on,
28:18the Forex market is open 24 hours a day,
28:205 days a week. But not every hour has
28:23good movement. Not every session give
28:25you clean setups.
28:27Timing matters a lot in trading.
28:31The Forex market have three main
28:33sessions, right? There's the Asia
28:35session, which is a combination of the
28:37Sydney session and the Tokyo session.
28:40And then you got the London session, and
28:41then you got the New York session.
28:44And each session has the different
28:45personality, different speed, different
28:48level of volatility.
28:50The Asia session is usually much more
28:52slower.
28:54There's going to be lower volatility.
28:56Price can stay in consolidation for
28:58longer and it's like less active
29:00overall.
29:02So, this session right here is not
29:03really ideal for beginners who is
29:05looking for strong move.
29:07And then you got the London session,
29:08which is one of the most active session.
29:10This is the strong trading volume enters
29:13the market. This way you can expect much
29:15more cleaner move, much better trading
29:17opportunities. And it's a great session
29:20for many major currency pairs. I
29:22specialize in this session itself. All
29:24right, just to show you that. Uh to me,
29:26I really believe that this is one of the
29:27best sessions if you want to trade
29:30profitably.
29:31And then you got the New York session,
29:32which is also very active, right? Brings
29:34about strong volatility. And this is
29:37also a session where a lot of high
29:39impact news tends to happen.
29:42And this could be another key session
29:44that you might want to pay attention to.
29:47Now, the next question becomes which is
29:49the best time to trade?
29:51Now, in my humble opinion, I believe
29:54that the best times to trade are usually
29:56when the trading volume is the highest.
29:58And this is usually occurring within the
30:01London session or the New York session
30:04itself.
30:05The reason why I want to trade when
30:06there's more trading volume is because
30:08more trading volume means more
30:10liquidity, means better price movement,
30:13means cleaner setups, means more
30:15predictable price movement, and also
30:18more trading opportunities.
30:21So, a big mistake that a lot of
30:23beginners tend to make is that they try
30:25to trade all day. They wake up, you
30:27know, they start trading at 9:00 a.m.
30:28then they trade all the way to 9:00 p.m.
30:29and then they go to sleep. They do it
30:31all over again.
30:32When you do this, what happens is that
30:34you tend to become tired mentally by
30:37staring at charts all day.
30:39And not only that, the hidden cost of
30:41doing that is also overtrading, which
30:44means you could
30:45enter
30:46and make money during the Asia session,
30:48and then during the London session you
30:50continue trading, and then you start
30:52getting lost and directionless, and now
30:54you give back the money that you have
30:55made in Asia session during the London
30:58session itself.
30:59So, yeah. You don't need to be at the
31:01charts all day to be profitable. A much
31:03smarter trading approach is to find one
31:06specific window and just focus on that
31:09window, whether that's the London
31:11session, the Asia session, or the New
31:12York session, but just stick to one.
31:15And you want to pick the trading session
31:17that fits your lifestyle.
31:19And once you do that, you want to learn
31:21how price behave during that time. Get
31:24really, really good at trading your
31:26specialized currency pair in that
31:29particular trading window.
31:32So, next up, let's talk about the
31:34different analysis in Forex trading.
31:36There's three types of analysis. There's
31:38your technical analysis, fundamental
31:40analysis, and sentiment analysis.
31:42Technical analysis is the chart work,
31:45right? It's basically the study of price
31:46past price and volume data. It's the
31:49ability to analyze charts to identify
31:52trends or patterns.
31:54So, this is where we pretty much
31:55implement market mechanics, where we
31:57look at the chart and try to predict
31:59where price is most likely going to go
32:01based on the price action.
32:04So, technical traders will often analyze
32:07the historical price data
32:09on the charts to identify trends or
32:11patterns which will help them predict
32:13future market behavior.
32:15And then you got fundamental analysis,
32:17which is the study of underlying
32:19economic and financial news and
32:21announcements that might impact the
32:24market.
32:26And there's a lot of different factors
32:28that actually influence how and why
32:30price move, and that is stuff like
32:32monetary policy, interest rates,
32:35inflation, gross domestic product,
32:38non-farm payroll, Federal Open Market
32:40Committee, any comments from feds and
32:42central banks, economic chaos or
32:44prosperity, war, right? You know,
32:48widespread sta- uh pandemics like the
32:51COVID-19 pandemic. All of this stuff
32:53actually
32:54causes the entire sentiment of the
32:56market to change, which causes the price
33:00to actually move. Right? So, for
33:01sentiment analysis, we're actually
33:03gauging how the general public feel
33:05about something. And this is where we
33:07like to analyze people's emotions,
33:09opinions, and attitudes. Where we look
33:11at social media, where we look at
33:13reviews, where we look at articles.
33:15Right? For example, right now because of
33:18the World War III that is going on right
33:20now with Iran and the United States,
33:22there's a lot of fear in the market. So,
33:25if we know that, then that is where we
33:26can expect the prices of stocks, um
33:30other commodities. Now, for stocks and
33:33other assets, more risky assets like
33:36crypto to start falling. And then we can
33:38expect prices of oil to actually go up,
33:41prices of gold to actually go up. Right?
33:43So, that's pretty much using sentiment
33:45analysis. Using the sentiment of the
33:47market to kind of predict how like where
33:51price is most likely going to move based
33:53on how the general public feel about
33:55that particular asset.
33:58Next up, we got the different trading
33:59styles, right? So, these are the
34:00different trading styles that you can
34:02adopt as a trader. You got your
34:04scalping, you got your intraday trading,
34:07you got your position trading, and your
34:08swing trading. Scalpers are pretty much
34:11people who are getting in and out fast,
34:13right? Anywhere from a few seconds to a
34:16few minutes. Basically, less than an
34:18hour. And they're targeting a small
34:20amount of pips. And their entry time
34:22frame will probably be like the lower
34:23time frames. And then for intraday
34:25traders, these are people who are
34:27entering and exiting the trade within 24
34:30hours.
34:31Right? So, this is where they tend to
34:32target a little bit more. They tend to
34:34target 10 to 100 pips. And then you got
34:36swing traders who are people who are
34:38holding the trade for days or even
34:40weeks. And since they're holding the
34:41trade for so long, you can expect them
34:43to target like a much
34:46more significant amount of pips.
34:50And then you got your position traders
34:51who are like
34:52not really like long-term investors, but
34:54also not really like swing traders, but
34:56these are the people who are holding the
34:57trade for weeks or even months. Right?
35:00So, they can expect them to target a
35:02lot more pips.
35:04Now, which one should you choose? Should
35:06you be a scalper? Should you be an
35:07intraday trader? Should you be a swing
35:09trader?
35:10It depends on these three things.
35:13It needs to fit into your schedule.
35:15Right? So, if you're working a 9-to-5
35:17job and you find it hard to scalp,
35:20you find it hard to concentrate on the
35:21charts and stay at for like a few hours
35:24after work, then you might be better off
35:26opting for intraday trading or even
35:28swing trading.
35:30It needs to align with your goals. Okay?
35:32So, based on what you want to achieve
35:36from the market, based on your desired
35:39outcome, you want to choose a trading
35:41style that fits with it. For example, if
35:43you want to be a person that want to
35:45travel the world, enjoy life, then
35:48perhaps swing trading is perfect for
35:50you. You can enter a trade on Monday,
35:51check the charts here and there
35:53throughout the week, and then get out on
35:54Friday. You don't have to stare at
35:56charts all day like a scalper. Right?
35:58So, align your trading style with your
36:00goals. And last but not least, you want
36:02to find a trading style that suits your
36:03personality.
36:06If you're someone that's more calm, more
36:07relaxed, you don't like to stare at
36:09charts all day because it's quite
36:10stressful, go for swing trading.
36:14If you're someone young who likes the
36:15adrenaline, who likes the excitement,
36:17who is very impulsive, right? Who is
36:20very aggressive, who has a high risk
36:22tolerance, you might want to go for
36:24scalping.
36:25So, based on these three criteria,
36:28ask yourself which is the trading style
36:31that suits you the most.
36:33And then that's the one that you want to
36:34pick.
36:36And I will always
36:38preach the importance of just
36:39experimenting with everything. Right?
36:42Like I said, try the different cuisines.
36:44See which one you like best.
36:46And then once you try all of them out,
36:47then you can define which is the one
36:49trading style that you want to focus on
36:52and then just continue to get better at
36:54mastering that particular trading style
36:56itself.
36:58And a lot of you guys have seen me
37:00catching these high RR trades, right?
37:03Where I'm catching 1:10 RR trades, 1:8
37:05RR trades, where I'm, you know, making
37:07$8,000 when I'm only risking $1,000.
37:11These are what we call sniper entries.
37:13These are high risk reward trades, and
37:16you can only catch these if you are
37:18either very good at entering and exiting
37:20trades, or you have a hybrid approach,
37:23which means you use the entry time
37:26frames of a scalper,
37:28but you use the higher time frames of an
37:30intraday trader. Right? So, as a result,
37:33you are able to enter, get all these
37:35tight stop loss, and able to target um a
37:39zone that is on the higher time frame
37:40itself.
37:41So, once again, we're we're going to
37:42cover more about this later on, but if
37:44you want to catch these high RR trades,
37:46it's going to be much easier for you to
37:48do so if you have more of a hybrid
37:49approach, like a scalper and also
37:51intraday trader or intraday trader or
37:53also like a swing trader.
37:57Next up, let's talk about choosing a
37:58trading broker.
38:00Now, a broker, which is is basically a
38:03company or a firm that helps you execute
38:05your trades.
38:06So, when you're choosing a broker, you
38:08want to look for the following criteria.
38:09It needs to be licensed and regulated.
38:11It needs to be at a safe and secure
38:13location. You need to be able to
38:15withdraw your money as and when you
38:17wish. It needs to have a quality
38:19customer support, which is able to help
38:22you out with your queries and your
38:23doubts.
38:24It needs to have low trading cost. It
38:26needs to have a minimum deposit and also
38:28leverage. And it needs to offer a
38:30platform.
38:33So,
38:34when it comes to broker, my best advice
38:36is do not use a broker because your
38:37favorite trading guru asked you to do
38:39so. Be it me or someone else on YouTube
38:42or Instagram, don't just use it because
38:44they promote it.
38:47Always do your own due diligence.
38:50Because it's your money, which is your
38:52responsibility.
38:54The last thing I want to happen for you
38:56is
38:57you trust your hard-earned money with a
38:59broker and then the broker runs away
39:01with your money. The broker doesn't
39:02allow you to withdraw your money, which
39:05is ridiculous.
39:06So, I personally recommend Eightcap
39:09because you have super tight spreads, it
39:11allows you to execute trades really,
39:12really fast, you have deep liquidity,
39:14you have educ- educational resources,
39:16which is really good for beginners. It
39:18has an economic calendar and it allows
39:20you to stay informed.
39:21Right? So, once again, this is just my
39:23personal recommendation for you.
39:25Still go and do your own due diligence.
39:27If you feel like Eightcap is the one for
39:29you because it's licensed, regulated, it
39:31meets all the criteria that I just
39:32mentioned, then by all means go and
39:34create an account with them.
39:36And when in doubt, you're much better
39:38off just sticking to the safest brokers
39:40out there, which is the ones that you
39:41can see on the screen right now.
39:44So, here's my execution process.
39:47I tend to connect my broker to a trading
39:49execution platform like MetaTrader or
39:51cTrader.
39:52And then once I do that, I will analyze
39:54the charts on TradingView.
39:56And then once I develop my trade bias,
39:58whether I want to enter for a buy or
39:59enter for a sell, I like to execute my
40:02trades on either MetaTrader or cTrader,
40:04which is the trade execution platform.
40:08Now, here's an optional step.
40:10You can also connect your trading
40:12account, your MetaTrader or cTrader
40:13account to a trading super app like Edge
40:15Flow, so you can plan, execute, journal,
40:19and review our trades all in one place
40:20instead of juggling 10 different apps
40:23just to trade.
40:25Edge Flow is a trading super app that I
40:26personally built to help retail traders
40:29trade in a much more disciplined manner
40:32so that they can actually achieve
40:33consistency and they don't have to like
40:35waste their time, you know, spreading
40:36themselves thin by using different apps
40:38to journal, calculate their lot size,
40:41review their trades, and execute their
40:42trades. Instead, they can have
40:44everything in one place. Link in the
40:46description.
40:48Now, the reason why I wouldn't recommend
40:49you to connect your broker to
40:50TradingView is because you might rush
40:53into trades without thinking through
40:54properly.
40:56You might enter into buy and sell orders
40:58or manage your open trades accidentally.
41:00And most importantly, you will get
41:02emotional when watching our profit and
41:04loss fluctuating as you analyze the
41:07charts.
41:09Now, let's briefly talk about trading
41:10costs. Your broker makes money based on
41:13your trading volume. They want you to
41:15take as many trades as possible and take
41:17them as often as possible
41:19because of this, right? You got your bid
41:22and ask spread, you got your
41:23commissions, you got swap or carry or
41:26roll over fees. All of these are the
41:28fees that you will incur if you are
41:30actively day trading.
41:32The bid and ask spread for every buy
41:34order there must be an equivalent sell
41:36order for a trade to take place.
41:38Bid price is basically the price that
41:40you sell to the market. Ask price is the
41:43price that you buy from the market. And
41:46the difference between the bid and ask
41:48price is your spread.
41:51So, this is why a lot of times if you
41:54enter for a buy, you will almost
41:56immediately get into a drawdown.
41:59Like you will automatically lose money.
42:00You will automatically be down like $100
42:03even though price is not moving against
42:04you at all. It's because of this. It's
42:06because of spreads.
42:09So, in this case, you can see
42:11the bid price is 1.38085.
42:16And then the ask price, which is the
42:18price they buy from the market, is
42:201.30870.
42:22So, as a result, the difference of this
42:23is 1.5 pips, right? And that's the
42:26spread. So, if you enter for a buy in
42:28this case, you would immediately be in a
42:30drawdown of 1.5 pips, which is the
42:32spread.
42:34Because if you want to get out of the
42:35position, you have to sell at the bid
42:36price.
42:38Next up, we've got a commission, which
42:39is usually a fixed amount per trade by
42:41the broker. Example, $7 per lot on each
42:44trade.
42:45And round trip, which is two trades,
42:48right? Which means you buy and sell or
42:49vice versa. You're essentially paying
42:52$7, uh $14 in commission in this case
42:55itself, right? So, if you actually
42:56entered for a buy
42:58the first time round, right? And this is
43:01where you will pay $7 commission. And
43:03you enter for a sell,
43:05this is where you pay another $7 in
43:07commission.
43:08So, the total commission cost for
43:10trading one lot on EUR/USD is $14.
43:15So, that's This is like a fixed amount
43:17that your broker charge.
43:19And then you've got a transaction cost,
43:20which is the commission plus spread
43:22times the pip value, right? So, this is
43:25an example on how you calculate it. Once
43:27again, I'm not going to go too deep into
43:28this because this should be explained on
43:31your particular broker, and they should
43:33make it very, very clear on what's the
43:35transaction cost. And you want to make
43:36sure that you pick a broker with low
43:39transaction cost.
43:41So, you got the rollover, right? Which
43:43is moving open position from one trading
43:45day to another. And swap, which is the
43:48fee that you have to pay if you hold
43:49your trades overnight. And this only
43:52apply for swing traders or position
43:53traders because these are the people who
43:55are holding the trade overnight.
43:57And this is calculated by adjusting the
43:59closing level of your open position with
44:01the interest rates of the currencies
44:02involved.
44:04And the rates can change daily as they
44:05are based on the underlying market
44:07price.
44:09If you buy currency with higher interest
44:10rate, you receive interest. If you buy
44:13currency with lower interest rate, you
44:14pay interest. And this payment is known
44:16as the carry.
44:18So, for example, if you buy one lot of
44:21EUR/USD at the current price, bid and
44:24ask price is this, after 24 hours, the
44:26bid and ask price change to this.
44:29Now, for you to roll over your position,
44:31right, which is holding the trade
44:32overnight, you're going to be selling at
44:351.1378
44:37and then buying back at 1.13805,
44:41which means you will have to pay the
44:42difference, which is the 2.5 points. And
44:45if you take that times the dollars per
44:47pip, right, which is $10 since you're
44:49buying one lot,
44:51the swap fee is $25.
44:53Yeah, so all of these are the costs that
44:55you have to incur as
44:56um if you're trading with a broker, and
44:58these are fixed costs. It's like the
44:59cost of doing business. You can't really
45:01avoid them if you're a trader. All you
45:04can do is to find a broker that have
45:07very low fees so that you can minimize
45:10like the amount of money you actually
45:13give to them so you can save more
45:14profits for yourself.
45:16My advice is don't worry too much about
45:18the transaction costs, right? I know,
45:21you know, this can be quite alarming.
45:23You know, you need to pay quite a lot of
45:24money, you know, all of these little
45:26costs add up, but in the long run, over
45:29the grand scheme of things, I would say
45:31it's pretty worth it uh since you're
45:33going to be making a lot more money than
45:35what you're paying to the broker itself.
45:37Like I said, you're much better off just
45:39finding a broker that offer you low
45:41transaction costs and fees and just
45:44stick to it.
45:46So, now that you understand what Forex
45:48is and how trading actually works, the
45:50next step is to learn how to read the
45:52chart itself.
45:54So, in episode three, I'm going to break
45:56down market structure and show you
45:59exactly how to tell whether the market
46:01is bullish, bearish, or simply pulling
46:04back.
46:05And this is where you can learn how to
46:06develop a daily bias to determine
46:08whether to buy or whether to sell.
46:10So, that next lesson, we go back to the
46:12charts, we get away from the slides, and
46:14we delve deeper into market mechanics.
46:17So,
46:19if you guys have enjoyed this longest
46:21lesson, please go and like and subscribe
46:23so that you can get notified when the
46:24next episode of this Market Mechanics
46:27Mentorship Series actually gets
46:28released. And I look forward to seeing
46:31you guys in the next episode. And as
46:33always, remember, you're just one trade
46:35away.

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Use the transcript to take notes, quote the speaker, build a study guide, generate a summary with ChatGPT or Claude via the YouTube Summary tool, or export it as a timed subtitle file with YouTube to SRT. You can also re-open it in the transcriber to choose a caption track available on the video.

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YouTube2Text is a free YouTube transcript generator — no signup, no daily limit. Paste any YouTube link and get the full transcript instantly, with timestamps, click-to-jump, caption language selection, AI prompts for ChatGPT, Claude, and Gemini, and exports to TXT, SRT, VTT, or Markdown.