Chaos Theory The Hunt is ON Why Price Patterns?

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Learn how using chaos Tell us your stories, the Underpinning nature, Want to improve your life
theory can clear things up! good, the bad and the ugly underpinning the Forex and your trading?

issue 2 | Second Edition

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Education, Got it?

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In Our Database
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Brought to you by the leaders in fibonaccipattern trading; FXGroundworks.com

Second Edition

CONTENTS
3. Fibonacci Patterns and
FXGroundworks
Fibonacci Pattern Trading is the
most effective way of trading
the Forex Market, with a 70%
success rate.
4. Chaos Theory and the
Financial Markets
Heard of the butterfly effect?
There is order in randomness.
5. Strange Attractors
What are they? Are they useful?
6. The Hunt is ON
How reliable are your brokers?
Which ones have cared about
whether you succeed or fail as a
trader?
have a life?
19. The biggest trade of 2011
Meet Beezer, the winner of our largest
winning trade.
20. Change - why should we?
Are you profitable, or not?
21. Actions and Reactions
Sir Isaac Newton’s law applies to the
Forex too.
22. Riding out Retracements
Can you - do you?
23. Jump Start your trading
6 months intensive training course for
the savvy trader.

8. Pattern Selection
Good patterns make the differ-
FXGROUNDWORKSMAG
ence between a good pattern
the best practical trading mag
trader and a great pattern trader.
EDITORIAL TEAM
10. Chart Replication John Breen
Joanna Simpson
13. Gambling or trading?
PROOF READERS
How do we know the difference Maggie Smith
between whether we trade or Simone Vaughan
just gamble? Toni-Lee Reardon

14. Coping with Volatility ADVISORS AND RESEARCH

Mike Anderson
How do we manage to keep our
Lana Frederickson
heads when the market is whip-
ping our trades to shreds? And I almost forgot, we want
to thank our readers for their
18. 10 Cool ways to live dedication and faithfulness to this
again magazine. You rock!
Are you so bogged down in the
Copyright © 2012
trading cycle you can’t seem to FXGroundworksMag
FXGROUNDWORKSMAG Second Edition
STRATEGIES | Methods

FIBONACCI PATTERNS &

FXGROUNDWORKS
FXGroundworks.com is the only website that specializes in fibonacci pattern trading by sifting through over 570
charts on every tick of the market to alert traders to specific price patterns. They provide you with the most ad-
vanced tools to seek out the most highly profitable patterns that fit into your trading plan. They focus on finding
price patterns for Forex Traders who want to trade with 70% probability on their side.
By FXGroundworks

F XG R O U N D W O R K S F I B O N A CC I PAT T E R N T R A D I N G I S
T H E M O S T E F F E C T I V E WAY O F T R A D I N G T H E F O R E X
M A R K E T. W I T H A ~70% S U CC E S S R AT E , L I T T L E W O N -
OVER
DER THE POPULARIT Y IT ’S GAINED OVER RECENT 1,450,000
YEARS.
PATTERNS
Fibonacci pattern trading sorts through the chaos of the currency
market and uses its power to harness patterns that make you less
IN THE
emotional when trading to earn money. DATABASE,
FXGroundworks also awakens you to the sheer beauty of the world STATISTICS
around us. They teach you to appreciate the marvel that is in and
around each of us and then they relate that to the currency market. ARE NOT A
The patterns they alert but it ain’t easy. If you’ve traded for a
GUESS, BUT A
you to give you the opportu- while and struggled to make a consis- FACT.
nity to sort out which ones tent profit, you will have learned that
suit your trading plan and already. The market has a mind of its
the most probable trades. own and a will of its own.

Their Education Center However with FXGroundworks,

is one of the best teaching
tools that one could want to
experience and their research
and development in this con-
tinually shifting environment
makes sure you learn to stay
at the top of your game.
Don’t let anyone tell you
that trading the Forex is fast
and easy. It might be fast
the learning curve is sure and steady.
You will convert to a safe and reliable
currency trader once you become a
member of the site, learn the methods
thoroughly and adopt the harmonic
principles and practices.
Want to know more? Go to www.
fxgroundworks.com and start your
journey towards a new career or kick
start your old one as a currency trader.

Second Edition FXGROUNDWORKSMAG

 CHAOS
THEORY
AND THE
FINANCIAL
MARKETS
a period of time the environment
does change from what might
have ultimately happened on any
given day. For instance, instead of
a tsunami devastating some island
nation, there may be a tornado in
North America.

These types of incidents are fre-

quently attributed to Chaos Theory
where a small alteration in condi-
tions can have a profound effect on
the longer term state of affairs of a
region.

Lorenz believed it was not fea-

sible to accurately forecast weather
however his experiment ultimately
CHAOS THEORY AND THE FINANCIAL MARKETS became known as Chaos Theory.
BY FXGROUNDWORKS His theory was based on the fact
that starting with the number 2 the
end result could be totally different
C H A O S T H E O R Y I S T H E S T U DY O F N O N - L I N E A R DY N A M I C S . I T S from a result with a starting value of
P R I N C I PA L P U R P O S E I S TO P R O V E T H AT T H E R E I S O R D E R I N 2.000001.
RANDOMNESS.
Using Chaos Theory provides us
with a way of taking something very
The Markets (Stocks, Futures or Forex), being non-linear, chaotic like the financial markets
suit this type of theory – the theory that from repetitive, and organizing the data so that we
seemingly haphazard behaviour, an orderly pattern emerges. can forecast future moves. We orga-
nize this data by using patterns and
In 1960, a meteorologist named Edward Lorenz set up an different principles.
experiment in which he attempted to model the weather. His
experiment eventually led to what has been termed ‘the but- We cannot calculate every pos-
terfly effect’ whereby the difference in the starting points of sible move in the market and which
an event could be so tiny that it can be compared to a butter- events will unfold and which will
fly flapping its wings. not, however we can use this infor-
mation to give us a statistical edge
Such flapping of a butterfly’s wings can produce a minus- and then it would just be a matter of
cule alteration in the atmosphere. The theory goes that over playing the odds and obeying your

FXGROUNDWORKSMAG Second Edition

money management rules when you
trade.
Fibonacci Pattern Trading is one
such method that embraces Chaos
Theory and attempts to harness its
pandemonium into predicted direc-
tions within the financial markets.
FXGroundworks.com is the pri-
mary educational site that can teach
traders about Chaos Theory, Fractals
and human repetition.
Amid the chaos of the market how
can we predict where price might go?
How can we envisage that self-or-
ganising clusters of price bars might
show us that there is order in chaos?
FXGroundworks.com have
utilised a way discovered many
years ago to harness the power of
fibonacci pattern trading and to
organise those patterns into their
site to give a more predictable way
of trading.
Not all of these patterns will work
out well and unless we keep the
losses on those pattern trades small,
and let the patterns that do work out
well have their head, we won’t suc-
ceed as traders.
Price will not always go where
we want it to go, however fibonacci
pattern alerts give you many op-
portunities to test the Chaos Theory.
In markets there is much success
to be had when price follows the
predicted pattern conjecture.
MANY
PATTERN
TRADERS USE
ATTRACTORS
TO HELP
EXPLAIN THE
MARKET.
STRANGE
ATTRACTORS
Strange attractors are used in the
market to further help us pinpoint
when we should be trading, and
when we should just be watching.
Have you ever looked at a chart
and wondered when it’s the right
time to get in? Of course - and this
is the problem our attractors can
solve for us and further organize our
charts.
An attractor is a set towards which
a variable, moving according to
the dictates of a dynamic system,
evolves over time - such as the
financial markets.
There are different types of
attractors - for instance the
point attractor or the limit cycle
attractor, however we use a strange
attractor because it is a non-integer
dimension attractor.
An example of a strange attractor
would be the Lorenz system. It looks
like a crazy 8 type pattern.
F XG R O U N D W O R K S E D U C AT I O N A L C E N T E R
MORE IN CHAPTER 7 OF OUR VIDEO EDUCATION
Second Edition
When trading around the attrac-
tor we have to be extremely care-
ful, as price could tend to get very
violent and sporadic. When price
moves away from the attractor we
can gain more of a statistical edge.
One of the first questions people
usually ask about an attractor is how
they can spot them or see them in
the market.
We have many lessons on this
however the best way is presented
in our videos in the Educational Cen-
ter. These quick resources will bring
to you everything you need to know
about attractors.
LORENZ
ATTRACTOR
(EXAMPLE OF
A STRANGE
ATTRACTOR)
FXGROUNDWORKSMAG
THE HUNT IS ON
I N T H I S V O L AT I L E F O R E X M A R K E T, H O W H A R D I S I T F O R U S TO F I N D A
R E P U TA B L E B R O K E R T H AT O F F E R S U S T H E B E S T S E R V I C E P O S S I B L E ?
How do we know which brokers have
BY FXGROUNDWORKS
good spreads and which ones may
widen spreads on us in times of
unpredictable price fluctuation?
The answer lies in examining the
brokers’ service and keeping an eye
on how they deal with our accounts.
This can be a time-consuming
exercise, with many traders too
busy analyzing charts and watching
for good opportunities to be able
to closely monitor the brokers’
activities. However unless we can do
that regularly, we may be susceptible
to some creative market makers
making off with more of our hard-
earned pips than we want them to.
FXGROUNDWORKSMAG Second Edition
We all have stories of our successes
and failures with brokers. At the
time of writing, some of us have
had several negative experiences
with brokers. One trader told us that
his broker closed a trade for a loss
when price went nowhere near his
stop – making it painfully obvious
they were after his money. In this
instance when challenged, the broker
reinstated his trade, realizing that
they had hunted stops before price
had even reached that point.
An experience with a different broker
came about when another trader
had a stop at break-even and a
news event occurred, causing price

to spike. The broker stopped the trade out for -34 pips,
even though it was at break-even. In this instance, they
would not make good the trade nor reinstate it to break-
even and the money was lost. The broker’s reasoning
was that they could not prevent some trades from being
affected in high-volatility markets and they could not
guarantee stops even though this trade was at break-
even. In effect they assured the trader that having her
trades at break-even was not safe during high-volatility
market movement. So be aware of this problem if you
have an open trade in a volatile environment such as
NFP or around news announcements; there may be a
detrimental effect on your pair of choice.
These and other instances leave us wondering how we
find a decent broker and what does the term ‘decent’
mean?
Most people when asked what constitutes a decent broker will reply,
‘one where I know my money is safe, and where they’re not likely to
go into liquidation, taking my money with them’.
Others might say, ‘a decent broker is one who doesn’t hunt my stops
and allows me to have a fair go when trading’. Yet others have an
opinion of good customer service getting their vote.
These things would be ideal but we know we don’t live in an ideal
world. Brokers would not be in business if traders won all the time
and they (the brokers) lost money.
So the hunt for a reliable, ‘decent’ broker is on.
We’d like your stories – horror stories or good stories so we can
collate a general overview of traders’ best and worst experiences.
Email your stories to:
info@fxgroundworks.com
.
Second Edition FXGROUNDWORKSMAG
 PATTERN
SELECTION
MADE EASY
Pattern selection and pattern
validation techniques can mean the
difference between a good pattern
trader, and a great pattern trader.
As we commenced the develop-
ment of creating the “score” that
analyzes the validation of the struc-
ture of the pattern (and thus help us
with our pattern selection) we took
into account over 1,450,000 pat-
terns that are now in our database.
Statistics play a huge role in your
decision making skills, and with well
over half a million patterns turning
out some of the most tested fibo-
nacci pattern research the industry
has yet to see, you can be confident
that the information we share with
you is well tested.
There are two critical conditions
when looking at the structure of the
pattern. One of the most critical
conditions you can observe when
looking at a pattern is the internal
structure, and the other; the external
structure. Both get presented at the
time a pattern is identified and both
are equally important.
Imagine you’re building an apart-
ment building that is going to be 18
stories high. The internal strucutre
(the support columns for example) of
the building has to be engineered to
hold the weight of all the floors, to
stand up during an earth quake and
to be able to withstand strong winds.
The external structure also has to be
strong - that could be likened to the
soil that the building is going to be
FXGROUNDWORKSMAG Second Edition
built upon.
This can best be explained by
a little adventure I had recently.
I was looking at an invest-
ment property that was right
along the Atlantic Ocean. A
beautiful Condo with suites large
enough to be considered the
same area as your medium-sized
house. However, the developer
ran into a problem. The build-
ing was later ruled unsafe and
didn’t get licensed because the
ground it was built on, wasn’t
safe. So even though the build-
ing looked great, the investment
did not.
Likewise with patterns, even
if a pattern looks good, some-
times the investment or trade
we make doesn’t always make
sense based on external factors.
In the building example, the
building could fall over, and in
our case the trade would stand
a greater chance of failing.
What goes into the pattern
validation? Understand that the
elements we use to “score”
these patterns are long and
rather complex. We don’t just
look at the pattern, but we look
at the surrounding candlesticks
of the pattern to identify the vol-
atility of the external structure.
And this is just the beginning.
When we take out the microscope
we can start to examine more of the
specifics.
How many bars should a pattern
contain before it’s considered struc-
turally sound? How many pips from
the first fib of the reversal zone to
the last valid fib of the reversal zone
do we allow when giving the trade
enough time to work out?
We can dive deeper and ask the
question, what is more important, a
pattern with lots of bars or a pattern
where the ratios are most preferred?
Does one give more significance
than the other?
All these questions have answers;
and all the answers once compiled
give us results. When you use the
pattern validation tool at FXGround-
works you will discover the ability
to quickly identify the structure of
every pattern without the need to
do all the analysis yourself.
Experience fibonacci patterns
without the difficulties most pat-
tern traders face. Just another tool
available at FXGroundworks.com.
Pattern Validation
Analyzes the structure of every fibonacci pattern!

Now Available!

FXGroundworks.com

Second Edition FXGROUNDWORKSMAG

ONE OF THE BIGGEST CHALLENGES TRADERS FACE
DA I LY I S F I G U R I N G O U T H O W M U C H TO R I S K O N
ANY PAR TICULAR TR ADE. C AN WE C ALCULATE IT
Bad Example
S TAT I S T I C A L LY ?
Risk is equal to
GAMBLING OR the reward.
TRADING?
The long-term outcome of gambling is loss.

Gamblers who started the habit in their teens are

around three times more likely to remain habitual adult
gamblers. Life in general seems to endorse gambling,
with lotteries, well-known horse races, dog races; in fact
some people will bet on two flies crawling up a wall, if
they have a predilection to gamble. Gambling is a very
broad problem and is not as clear cut as we think. It is
in every walk of life.

As traders, we need to learn not to be gamblers. Our

approach when trading should be based on consid-

ered, practical and techni-

cal evaluation of our price
pattern trading opportu-
nity; our position and our
risk. The question to ask
ourselves is, are we gam-
bling instead of trading? Do
we need to get immediate
results from trading, or are
we content to let a trade
ride and be able to accept
a small loss or appreciate a
good winner.
Bad
If traders gamble, they consider jumping into a trade loss will sometimes hold the platform until price moves
around news, trying to capitalize on which way the in their brokerage’s favor. The trader who has closed out
market might head. Some traders take what’s known as the short trade is now forced into a losing position that
OCO trades (one cancels the other) which simply means can’t be closed out because the broker may have frozen
they will put two trades on the same pair, one short, the the platform. This freezing of the platform and move-
other long. They are gambling with a 50-50 chance of be- ment of the spread by the broker, is called slippage.
ing right (or wrong). The difficulty with this gamble is the Brokers often blame this slippage on their liquidity
stop placement and the risk involved and the fact that providers. It could be a combination of both companies
price may not continue the way they think it should. For conspiring against the poor luckless news trader.
instance a pair might go up (long) which results in the
trader closing out his short position. The pair can move Risk versus reward objectives help counter the tendency
up 20 - 30 pips before slamming back down again in one for traders to jump into a trade based on emotion. They
fell swoop. The broker, unable and unwilling to take the can take a considered approach based on pure math-

FXGROUNDWORKSMAG Second Edition

 ematical calculations. This objective is consequently tak-

Good Example ing away the aspect of gambling on a trade and replacing
it with more of a premeditated assessment of a reason-
able outcome.
Risk is half the Analysis and decision-making helps remove the emo-

reward. tional (gambling) aspect and allows traders to confine

their prospective trading strategy to a 1:2 – 1:6 risk ver-
sus reward base.

Anything less than 1:2 becomes unworthy of the time

to trade when the return is no more than risking one
pip to gain one or one and one half pips. Anything more
than a ratio of 1:6 becomes an improbable trading sce-
nario.

If we find we are unable to cease trading breakouts,

fake-outs, news and volatility then we know we have an
urge to gamble. And we know our long-term prognosis as
traders if we are just gamblers, is failure. So, don’t let’s
speculate on the news events or similar volatile times
like Non-farm Payroll (NFP) out of the United States.
Let’s take a studied, calculated statistical approach.

While we cannot predict when we’re going to take a

winning trade, we can use fibonacci pattern trading to
give us an edge to know that 70% of the time, the PRZ
will give us a measured point where price might turn.
Good Let’s not gamble at all...let’s use price pattern trading to
give us an edge.

That edge is available through the tools at FXGround-

works where the site automatically scans for a valid risk
vs reward and then lets you filter these results to show
the good patterns to take rather than the bad.

Good
LEGEND
Yellow is the entry point.

Red is the point where you get

out of the trade.

Green = Target Point (1st)

Second Edition FXGROUNDWORKSMAG


2008 = Subprime Mortgage Crisis
FOR A FEW MONTHS A YEAR,
WE WONDER WHY WE CHOSE
THE CAREER WE CARVED OUT
F O R O U R S E LV E S A S C U R R E N C Y
TRADERS. VOLATILIT Y WILL PLAY
A B I G R O L E I N YO U R B I G G E S T
W I N N E R S A N D YO U R B I G G E S T
LO S E R S . H O W E V E R , I F YO U R
MONE Y MANAGEMENT IS TIGHT
E N O U G H YO U R LO S E R S W I L L B E
K E P T S H O R T, A N D YO U R W I N -
N E R S W I L L B E L E F T TO G R O W
A N D T U R N O U T TO B E S O M E O F
T H E G R E AT E S T T R A D E S YO U ’ V E
EVER MADE.
VOLATILITY
CAN HURT
YOU IF NOT
RESPECTED.
USE IT
CAREFULLY.
FXGROUNDWORKSMAG Second Edition
BY FXGROUNDWORKS
COPING WITH
VOLATILITY
For a few months a year, we
wonder why we chose the career we
carved out for ourselves as currency
traders.
Those months are generally when
the market movers are on holidays
and volume dries up. It can also
happen when countries intervene in
the future of their home currency to
influence its strength and bring their
currency back to a more manageable
level.
There are reasons markets are
volatile. It is generally caused by
human intervention or catastrophic
events that are beyond our control.
As pattern traders, we need to care
less about that unpredictability – all less you’re riding it in the right direc-
we need to do is lower our risk and tion, and unless you have decisive
make the most of our opportunities and affordable stops in place, it can
after these large movements occur. be a heart stopper.
Ever been in a trade where you If a trader was holding a short po-
have no stop or have placed a wide sition on a pair that has a high ATR,
stop to try to avoid that ever-present they could suffer a shattering 1,000
threat of being stopped out? The pip move against them within a
precariousness of the market can couple of days. If they’d had a valid
impact on traders who have this long price pattern and it went their
approach to trading. It is the most way, giving them 1,000 pips in the
probable way of draining your ac- bank, they would have been happy
count balance. with the direction and figured they
These explosive trades that move were a hero.
hundreds of pips in a day or two are It shows what can happen in the
the ones some people clamour to market in the blink of an eye and
ride all the way to the bank. But un- gives the reason for setting valid
Wall Street crash of 1987
stops even more importance.
Volatility is not a long term recipe
for success as a trader; it can be a
recipe for a short term career as a
trader.
Not all markets experience volatil-
ity. The more stable markets don’t
experience it so much but the Forex
market, with its high demand - trad-
ers moving money around - is often
quite volatile. There are pairs that
are not as volatile as others and
these pairs suit the more conserva-
tive trader. The pairs that are volatile
need a well disciplined trader who is
able to control their trade and their
risk and not take profits too soon.
Currency pairs that are unstable
are not preferred for the special-
ist trader. Low volume in the Forex
market is also an environment where
many gains can be wiped out be-
cause traders feel they ‘have to be in
a trade’ no matter whether the rest
of the world is on holiday, or not.
Price levels themselves are not
only critical, it is the movement of
price levels that we focus on to form
our patterns. Of course, if volume is
low it takes much more time for pat-
terns to form but in higher volume
environments, the patterns form
more quickly and therefore offer
more opportunity for traders to place
their trades.
The other thing to consider is that
with economies struggling through
the financial burdens of depres-
sion or the heady signs of regrowth,
many traders tend to speculate on
which way they think the currencies
may go. Given the thrashing about in
the European economies, it’s almost
impossible to get a handle on that or
know which way the Euro will head.
Rescue packages abound where
countries are financially ‘propped up’
by others however in the long run,
someone has to pay the fiddler and
STOCK MARKET
CRASH OF 1929.
ONE OF THE
MOST VOLATILE
DAYS IN THE
HISTORY OF
TRADING.
Second Edition
the saying ‘there is no such thing as
a free lunch’ has never been more
self-evident. Borrowed money is
never acceptable to use as collateral;
if you find you’re in trouble after a
particularly volatile trade and your
account is compromised, make sure
you don’t use borrowed money to
top up your account balance.
So the next time you’re tempted
to place an order with no stop or
a wide stop, think again and put
something manageable in place.
Better to take a small loss if things
don’t go your way, than a huge one.
FXGROUNDWORKSMAG

10
COOL WAYS
TO HELP
IMPROVE
YOUR
TRADING
AND LIVE
LIFE AGAIN
1. Have a look whether the
method you're using is allowing
you to live the lifestyle you want.
If it isn't, then it's time to look for
a new method. Some people think
the harmonic method of trading is
hard, but things are only as hard as
we make them. You've heard many
people say, 'trade what you see'.
That also applies to harmonic trad-
ing. Don't try to guess where the
harmonic trade might go - use the
pattern alerts on FXGroundworks.
com to show you the trades, and
wait until the pattern forms be-
fore choosing your entry and stop
points.
2. Are you stuck in front of
the screen all day, worried that if
you leave it you will miss a great
opportunity or get stopped out?
Harmonic trading allows us to see
more clearly where to enter and
FXGROUNDWORKSMAG Second Edition
exit trades. Choose a time frame that
suits your lifestyle and the hours
you want to devote to trading. Lower
time frames mean more volatile
price movement and more attention;
higher timeframes (with stops to
suit and with less volatility) allow us
more time away from the screen.
3. Are you managing your risk
so that a couple of trades don't wipe
out your account balance and end
your trading career?
Place stops in a logical place and
leave them there. If they get hit,
then you're as well out of the trade.
If you move them, you stand to lose
more pips if price continues to move
against you. Although if a big move
looks like it's going against you and
you think your stop will be taken
out, consider killing the trade early if
you have a reasonably wide stop.
4. Watch news events - are you
up to speed with where your pairs
are and when they are at the mercy
of news?
Always look to see what news events
are scheduled before entering a new
trade. You need to consider your cur-
rent trade too, if you are in a trade
with scheduled news. Don't neces-
sarily close the trade out, but make
sure your stops are either at break-
even or are at a place where you
can protect some pips if price goes
against your trade.
5. Don't invent ways to stay in
a losing trade.
Necessity is the mother of all inven-
tions. However it isn't necessary for
you to stay in a losing trade but it
is essential to make sure your stops
are not at the point where the los-
ing trade is killing your account. If
you've placed a reasonable stop then
be satisfied with that choice. If you
are sure price is going to turn in the
next time frame or you know there's
a news event coming up later that
day and you move your stops, you
are inventing ways to stay in that
trade.
6. Be satisfied to take targets at
set points.
Don't trust your emotional self to be
able to figure out whether to stay
in a trade or not. Trust the pattern
points and take some of your trade
off when price reaches those targets.
Even though Michael Douglas made
the phrase well known in the movie
'Wall Street', ‘Greed is good’, greed is
not good.
7. Don't take things personally.
We are not wrong when we take a
trade and it goes against us - it's
just the way the market is moving.
If you become depressed or in the
doldrums because you've had sev-
eral losing trades, re-evaluate your
reasons for taking the trades in the
first place (FXGW teaches us how to
do that) otherwise we do ourselves
an injustice. It isn't personal - it's
merely a losing trade.
8. Get up early (unless you
trade a session that doesn't al-
low you to trade until the wee
small hours of the morning) and go
through your charts diligently.
Go to bed early (don't burn the
midnight oil) and get up early. Tired
traders are not the best traders to be
around or to be making decisions.
Many trades that we shouldn't have
taken are taken when our concentra-
tion levels are shot.
9. Never stop learning about
the markets and learn as much as
you can about how your preferred
pairs fluctuate.
Without studying the markets, the
charts and the pairs you want to
trade, you will be bewildered when
things don't go your way and pleas-
antly surprised if they do. Knowledge
is power - the power to make good,
harmonic trading decisions.
10. Improve your memory.
Study pairs more closely so you can
tune in to where your trade is without
necessarily being in front of your screen.
A good memory (such as counting the
cards as they come out in poker) will
always give you an edge. It will also help
you remember that person you bump
into in the street :)
Most traders at some point
in a year of trading will hit a
losing streak no matter what
system you trade.
The question is, can you
keep doing what you’re do-
ing regardless of the results,
knowing you will overcome
these losses?
If one trade matters to you,
then you’re trading the
wrong way. However, if you
are basing your results over
many trades, then you’re
going to understand that
sitting through both winning
and losing streaks becomes a
walk in the park.
YOUR BEST
FIBONACCI TRADE?
LARGEST TRADE OF 2011
Instrument: GBPCHF
Timeframe: H1
Pattern: Butterfly
Method: HAT - Harmonic Auto Trader
INTERVIEW: was almost fun to see how far I
FXGW: Beezer, the GBPCHF trade could let it go, and once we got
worked out really well for you. over 1600 pips I had pulled the
Can you tell us when this trade plug. By the time the trade was
was fired off and what you were done I only had 1 lot left.
doing?
BEEZER: It was automatically FXGW: Was that a record trade for
triggered in July. I was actually you?
asleep at the time as it was a
trade that got fired during the BEEZER: Yes, but when you take
European session. When I woke trades like this there is also a little
up it was up about 30 pips. luck on your side. I can’t remem-
ber a time in recent past I saw any
FXGW: Can you tell me about the pair drop almost 2,000 pips in a
trade? How many lots you had couple weeks. I’ve had a couple of
on? Where you took profit? Or any other trades around 500+ and love
other information you recall about to see the patterns work out like
the trade etc... this. 50 pips seems small now!
BEEZER: I had 3 lots that were FXGW: How has your trading been
entered for me and I always take going since you started with har-
one of the lots off at the B point. monics and the HAT?
From there I did let the trade run
and it seemed like every day it BEEZER: Good, overall I’ve been
kept going and going. Soon it pleased. I feel like I’ve been mak-
ing a lot of progress.
FXGW: Well thank you for letting us
know all about the GBP/CHF. Amaz-
ing trade and great job!
Second Edition FXGROUNDWORKSMAG
CHANGE?
SHOULD WE CHANGE WHAT WE ARE DOING?
H O W N E C E S S A R Y I S I T T H AT, W E C H A N G E T H E WAY W E T R A D E ?
How neccessary is change in our trading?
Change...should we?
How necessary is it that we
change the way we trade and the
method we trade with?
The answer is simple. If we are
making plenty of money trading the
method we’re using and there’s little
or no room for improvement, change
isn’t necessary.
But if we’re not making money; if
we’re in that group of 95% of trad-
ers who can’t seem to succeed; if
we’re digging ourselves into a hole
with our account balance plummet-
ing, it’s time to alter our approach.
The messenger for change is our lack
of success in our chosen career as a
trader.
We need to employ a strategy that
FXGROUNDWORKSMAG Second Edition
what we’ve learned so far has not
given us the edge we need.
Many traders use systems that
rely on linear math but as the Forex
market is non-linear it’s impossible
to see how two such systems fit
together. Fibonacci Pattern Trading
is based on non-linear data and an
approach that sends clear signals on
entry and exit points.
Some people are uncomfortable
with the fact they have to learn pat-
tern ratios and fib levels; some over-
analyze and try to micro-manage
the process of learning the patterns.
We can make learning pattern trad-
ing easy or we can make it hard.
The method itself is simple
involves personal growth, along with enough; it’s we humans who tend
a shift in mindset to face the fact to over-complicate things. The fact
that we will never succeed as traders that these fibonacci patterns are
unless we understand that maybe found in nature, found in wildlife
our approach and our attitude need and subsequently found in the
modification. Forex market, make them a strong
influence and give a physiological
We need a clear picture of where connection with traders.
we want to be as traders and then
take the steps to get to our goal. It’s FXGroundworks teaches traders
not enough to say, ‘I want to be rich the Fibonacci pattern trading ap-
beyond my dreams’ because unless proach and they provide those pat-
we have a great method of how to terns alerted on the MT4 platform,
‘get rich’ we simply can’t succeed. to make it easy to learn the method.
So how do we succeed? Go to FXGroundworks.com and
check out the patterns. Make time
To some degree we need to ‘re- for a change.
program’ our view of the market and
the signals it sends us. We need to
revisit our trading plan to make sure
our risk is within acceptable bound-
aries and we need to realise that
 ACTIONS REACTIONS
Thrust is the forward force that pushes the engine and, therefore,
the airplane forward. Sir Isaac Newton discovered that for “every
action there is an equal and opposite reaction.” An engine uses
this principle.
Let’s consider Sir Isaac Newton’s third
law of motion: ‘To every action there is
always an equal and opposite reaction:
or the forces of two bodies on each
other are always equal and are direct-
ed in opposite directions’.
This is very true when applied to the
Bull and Bear Forex Market. If fear
grips the trading world, the herd
mentality seems to take effect and
stampedes people into selling what
they consider to be a currency that is
at risk.
The equal and opposite reaction is
when other traders see the sell-off of
the currency as an opportunity and
begin buying the currency, causing it to
rise in value once more, albeit a little
slower than the rush of selling. (Gen-
erally, the bearish trade moves three
times more quickly than the bullish
trade - the exception to this rule is on
NFP data and news releases.)
The law of the Forex Market is to un-
derstand the risk and keep that risk to
a minimum; that way, we will survive
the roar of the market whether it goes
for us, or against us.
The main thing to remember when
trading the market, is the ebb and
flow of money that is based on peo-
ple’s emotions. So you take a trade,
an unexpected news event comes
out and fear and greed take over. The
trade goes your way...you feel like the
world is your oyster. You take another
trade and it also goes your way and
you’re flying high.
Then the rot sets in. The unkind
market takes a swing at your position
(literally) and heads the wrong way.
This is the time for your action and
reaction to come into play.
So, have you set a reasonable stop,
so that the market won’t trample your
account on its way to oblivion? Or
have you set a wide stop, or no stop
in the hope of lasting the swing out
and recovering the pips you thought
you’d already won?
The smart trader, who will live to fight
another day, sets a reasonable stop.
Always. And doesn’t move their stop.
Ever.
Second Edition
The trader who is yet to learn the
law of action and reaction might set
no stop or a stop hundreds of pips
away thinking that the currency
couldn’t possible move that far.
The trader might learn that currency
pairs with a high ATR (average true
range) can move hundreds of pips in
one market trading day, if an unex-
pected (or even an expected) event
occurs.
Traders who trade longer term time
frames such as Daily / Weekly /
Monthly, may have a reasonably
distant stop but they should never
trade without a stop.
Traders who trade 15 minute up to
4-hour time frames should place a
more limited stop, based on their
positions and their trading plan
which will include their risk toler-
ance. The lower the time frame, the
smaller the stop but remember, the
lower the time frame, also the more
volatile price action may be.
Trading takes some time to learn
and price pattern trading is no ex-
ception. However, it’s an easier path
than trying to figure out moving
averages or complicated indicators
and trying to trade a method that
uses linear math in a non-linear
market.
Better to trade fibonacci patterns,
the method that uses non-linear
math.
Go check out FXGroundworks.com
and take the six-month Jump Start
Program for the best leg-in to trading
you can get.
FXGROUNDWORKSMAG
The importance of stop placement.
RIDING OUT THE RE
WHY DO MOST PEOPLE LOSE MONEY AS
INDIVIDUAL INVESTORS OR TRADERS?
BECAUSE THEY’RE NOT FOCUSING ON
LOSING MONEY. THEY NEED TO FOCUS ON
THE MONEY THAT THEY HAVE AT RISK
AND HOW MUCH CAPITAL IS AT RISK IN
ANY SINGLE INVESTMENT THEY HAVE. IF
EVERYONE SPENT 90 PERCENT OF THEIR
TIME ON THAT, NOT 90 PERCENT OF
THE TIME ON PIE-IN-THE-SKY IDEAS ON
HOW MUCH MONEY THEY’RE GOING TO
MAKE, THEN THEY WOULD BE INCREDIBLY
SUCCESSFUL INVESTORS.
18 | Magazine First Edition
FXGROUNDWORKSMAG Second Edition
One of the most emotional parts of
trading is watching our pair retrace,
either working itself toward our stop
or cutting some of our profits.
So how do we survive the emo-
tional roller coaster of retracements?
The first step is recognizing that
there is a retracement. The second
step is realizing our emotional self
and that self is fearful that price will
go against us.
William Delbert (WD) Gann (1878 -
1955), one of the recorded greatest
traders in technical trading grew up
a Christian on cotton land. At the
tender age of 24 in 1902, he made
his first trade in cotton futures and
became a devotee of trading.
Studying many forms and move-
ment of the markets, he concluded
that the market was moved by ‘vi-
brations’. He claimed that he could
forecast the market’s movement with
mathematics.
Opinions are divided over the rel-
evance or the accuracy of his analy-
sis. So be that as it may, how do we
make the most of Gann’s theories to
help us with controlling our emo-
tions?
 Have you heard some of the stories your
colleagues tell about the trade that ‘was’?
H AV E A G O O D W I N N I N G T R A D E T U R N I N TO A B A D LO S I N G T R A D E?
TRADERS BLOWING A GOOD OPPORTUNIT Y? THIS DOESN’ T HAPPEN
I F YO U L E A R N TO T R A D E W I T H F XG W - K E E P YO U R P R O F I T S

RETRACEMENTS no loss); only to see the loss esca-

By considering the Gann principle
(whether we believe his work was
accurate or not), where geometrical
mathematics and vibrations move
the market, we can start to under-
stand that pullbacks, reversals or
movements in the market are natural
and those movements are non-linear.
The market does not and can-
not move in a straight line. Humans
move the market, entering and exit-
ing trades many times in one day,
with over three trillion dollars traded
daily - a phenomenal feat, unheard
of in Gann’s time.
Therefore it’s necessary to recog-
nize that we can always expect price
to move around, not descending or
ascending in a straight line but in
an ordered chaotic method and once
we make sense of that, we can then
cope with the fact that retracements
will always occur.
It’s up to us to ignore the fear of
missing out, the fear of losing our
hard-won pips, the fear of being
wrong and it’s up to us to keep our
losses within our budget and make
the most of our profits.
Fear is also our primary emotion if
we let our winning trade turn into a
losing trade.
Many traders have second-
guessed their strategy after they’ve
witnessed a reasonable profit return
to their entry point; march endlessly
on past the break-even mark (where
they could have exited the trade for
late as price retreats further from
our entry and turns into a bad losing
trade.
So watch these retracements;
figure out if you need to trail stops;
consider your trading plan and stick
to it. A lot of traders don’t focus on
how they take profits - that it is just
as important as how they protect
themselves from risk.
We need to have a little faith in
ourselves, a little faith in our meth-
od, a little faith in our trading plan
and a whole lot of patience.

Fear is one of several emotions

that drives traders to reconsider their
positions when they see their pips
being eroded; greed is not an emo-
tion but is an offshoot of fear. Put
these two things together and they
make a powerful force to be reck- U S E S E N S I B L E S TO P P L A C E M E N T S , R E L A X A N D H AV E P E A C E
oned with. O F M I N D.
BY FXGROUNDWORKS

Second Edition FXGROUNDWORKSMAG

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