Usermanual 297

AREA FX 51 SYSTEM
USER’S MANUAL
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Trading any financial market involves risk. This e-manual, software, and the website and its
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The information provided on this manual, software is not intended for distribution to, or use
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achieved by any particular trading program.
One of the limitations of hypothetical performance results is that they are generally
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VERY IMPORTANT – DO THIS FIRST

I’ve included the INSTALLER for Area 51 Forex in the members’ area. If you followed the
download instructions in the members’ area correctly you should have downloaded the
INSTALLER that will quickly install these indicators and template onto your MetaTrader4
platform.
Because I know A LOT of you want to just dive in the meat of the system, I structured this
manual so that you learn how to use the system’s Buy/Sell signals FIRST.
But after the first section, please also read the remaining sections. They’re also important to
your trading success.
First, if you haven’t got MetaTrader4 on your computer, you have to install Meta Trader 4
first. The following step will guide you through the installation steps.To use Area FX 51
System, you have to install Meta Trader 4 first. The following step will guide you through the
installation steps
1. Download Metatader 4.
http://www.lbsfx.com/tradingbonus/
If you download and open a LIVE account with LBFX broker, you will be awarded $1000
trading bonus.
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Follow the instruction on the screen to complete the set up
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Once you are done, click on the check box to launch Meta Trader 4.
2. Set up a demo account
You will be asked for opening an account when running Meta Trader for the first time.
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Fill up all the necessary information to open a new account and Click Next to continue
Now, you can set up the Area FX 51 System
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Choose your trading server and click next
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Click finish button to complete your account registration process.
Now, you can start to install and use The Area FX 51 System
To install it, just follow the following procedure
1. You need to close the Meta Trader if you are running it

2. Go to the place where you save the file areafx51.exe, double click on it to run the
installer.
3. The installer wizard will start and you have to follow the screen instruction to
complete the setup process. The setup process includes the following steps
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Step 1
You just have to click Next to continue to next step
Step 2
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Choose “I agree….” and click Next to continue
Step 3:
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Enter your serial number and click Next to continue
Step 4
Choose the root folder of your Meta Trader and click Next
Step 5
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Step 6
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Congratulations. You’ve completed
Running the system
To run The Area FX 51 System, just start your Meta Trader and load the template
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Your final chart will be something similar to this
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The Area FX 51 system is very easy to use. No complicated setup or rules needed. You just
follow exactly the signal generated by the system and place your trades. As you notice from
your chart that there’re two lines of text on the top right corner. These two lines of text are
used to tell you about the current trend and when you should enter a trade. That’s all you
need.
Now, I am going into the details and how you will place your trades based on the signal
generated by this system.
LONG TRADE RULES
For Buy (Long) Trades:
If there's a text signal: "Buy Signal: Enter With 3 Lots on CURRENCY PAIR at PRICE". For
example "Buy Signal: Enter With 3 Lots on EURUSD at 1.4332" then place a buy/long trade
with 3 lots.
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The program also outputs on another line: "Stop Loss Placed At..." For example: "Stop Loss
Placed At 1.4210". That's the level where you should place your stop loss at.
The program also outputs on another line: "Profit Target Placed At..." For example, "Profit
Target Placed At 1.4575". That's the level where you should set your take-profit target FOR
ONE LOT. For the other two lots, keep the take-profit targets open.
** After you place the trades, the program continues to monitor the trade. If the stop loss is
hit, then it'll show this message: "Stop Loss For Buy Signal On CURRENCY PAIR Hit"
** If price moves in our favor and hit the take-profit target for the first lot, the program will
show this message: "Profit Target For Buy Signal On CURRENCY PAIR Hit - Exit One Lot". At
this point, the first lot is closed in profit. For the remaining two lots, move the stop loss to
break-even.
** When the program shows this message: "Exit One Lot For Buy Trade On CURRENCY PAIR.
At Price. Keep the remaining lots open", exit the SECOND LOT, keep the third lot running.
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** When the program shows this message:"Exit All Remaining Lots For Buy Trade On
CURRENCY PAIR at Price", then exit the THIRD LOT.
ALTENATIVE SCENARIOS:
*** Scenario 1: We receive this message "Exit One Lot For Buy Trade On CURRENCY PAIR at
Price. Keep the remaining lots open" before the first take-profit target is hit. In this situation,
we do as the system recommends: Exit One Lot, Keep the remaining 2 lots open.
*** Scenario 2: We receive this message "Exit All Remaining Lots For Buy Trade On
CURRENCY PAIR at Price" before the first take-profit target is hit. In this situation, we do as
the system recommends: Exit ALL lots whether they're in loss or in profit.
SELL TRADES RULES
For Sell (Short) Trades:
If there's a text signal: "Sell Signal: Enter With 3 Lots on CURRENCY PAIR at PRICE". For
example "Sell Signal: Enter With 3 Lots on USDCHF at 1.0597" then place a buy/long trade
with 3 lots.
The program also outputs on another line: "Stop Loss Placed At..." For example: "Stop Loss
Placed At 1.0694". That's the level where you should place your stop loss at.
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The program also outputs on another line: "Profit Target Placed At..." For example, "Profit
Target Placed At 1.0404". That's the level where you should set your take-profit target FOR
ONE LOT. For the other two lots, keep the take-profit targets open.
** After you place the trades, the program continues to monitor the trade. If the stop loss is
hit, then it'll show this message: "Stop Loss for Sell Signal on CURRENCY PAIR Hit"
** If price moves in our favor and hit the take-profit target for the first lot, the program will
show this message: "Profit Target For Sell Signal On CURRENCY PAIR Hit - Exit One Lot". At
this point, the first lot is closed in profit. For the remaining two lots, move the stop loss to
break-even.
** When the program shows this message: "Exit One Lot For Sell Trade On CURRENCY PAIR
at PRICE. Keep the remaining lots open", exit the SECOND LOT, keep the third lot running.
** When the program shows this message:"Exit All Remaining Lots For Buy Trade On
CURRENCY PAIR at Price", then exit the THIRD LOT.
ALTENATIVE SCENARIOS:
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*** Scenario 1: We receive this message "Exit One Lot For Sell Trade On CURRENCY PAIR at
Price. Keep the remaining lots open" before the first take-profit target is hit. In this situation,
we do as the system recommends: Exit One Lot, Keep the remaining 2 lots open.
*** Scenario 2: We receive this message "Exit All Remaining Lots For Sell Trade On
CURRENCY PAIR at Price" before the first take-profit target is hit. In this situation, we do as
the system recommends: Exit ALL lots whether they're in loss or in profit.
Time Frames
Area FX 51 is designed to run with good results on 1-H, 4-H and Daily Timeframe.
Using Long Time Frame will generate less trades but I do believe it will get you very big
profit because the trends are usually very long.
Trade Examples
Now, I am going to show you a few trade examples with this system.
Trade example 1:
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In this example, we are going to use the Area FX 51 on EUR/USD pair, daily timeframe.
The system detected a major UP trend and then the entry indicator caught an entry signal
and displayed on the top right corner of the chart window.
We entered 3 lots at 1.4332 as suggested by the system with stop loss set at 1.4210 and
profit target at 1.4575 for the first lot. The two remaining lots we left the target profit open.
The trend went up strongly in our favor direction. When the profit target of the first lot was
hit, the system generated an alert and displayed on the screen
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We exited the first lot with profit of 243 pips. We left the two remaining lots opened and
moved the stop loss of these two lot to break even.
The trend continued to move up strongly and the system kept monitoring all two remaining
lots. When it displayed a message
We exit the second lot with 448 pips profit and keep the third lot opened.
When the system displayed
We closed the last lot with 798 pips profit. So, the total profit for 3 lots was
798 + 448 + 243 = 1489 pips.
Trade example 2:
In this example, we are going to use the Area FX 51 on GBP/USD pair, daily timeframe.
The system detected a major UP trend and then the entry indicator caught an entry signal
and displayed on the top right corner of the chart window.
profit target at 1.6675 for the first lot. The two remaining lots we left the target profit
opened.
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The trend went up strongly in our favor direction. When the profit target of the first lot was
hit, the system generated an alert and displayed on the screen
The trend continued to move up strongly and the system kept monitoring all two remaining
lots. When it displayed a message
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1059 + 739 + 329 = 2127 pips.
Trade Example 3
In this example, we are going to use the Area FX 51 on USD/CHF pair, daily timeframe.
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The system detected a major DOWN trend and then the entry indicator caught an entry
signal and displayed on the top right corner of the chart window.
The trend went down strongly in our favor direction. When the profit target of the first lot
was hit, the system generated an alert and displayed on the screen
The trend continued to move down strongly and the system kept monitoring all two
remaining lots. When it displayed a message
608 + 398 + 193 = 1199 pips.
Trade Example 4
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In this example, we are going to use the Area FX 51 on USD/CAD pair, daily timeframe.
The system detected a major DOWN trend and then the entry indicator caught an entry
signal and displayed on the top right corner of the chart window.
The trend went down strongly in our favor direction. When the profit target of the first lot
was hit, the system generated an alert and displayed on the screen
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The trend continued to move down strongly and the system kept monitoring all two
remaining lots. When it displayed a message
854 + 598 + 305 = 1757 pips.
IMPORTANT NOTICE: Because I know A LOT of you want to just dive in the meat of the
system, I structured this manual so that you learn how to use the system’s Buy/Sell signals
FIRST.
Now that you’ve already read the first section, please also read the remaining sections.
They’re also important to your trading success.
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INTRODUCTION
When it comes to any type of trading, if you take the time to study the success and failure of
those who trade, there are a few things that quickly become apparent.
1. Successful trading is not dependent solely upon a trading system.
2. Two people using the same systematic way of entering and exiting trades may ex-
perience completely different results.
3. There is no such thing as luck when it comes to trading.
From that, the question then becomes – Why?
If the system used to trade with is the same, then “Why is it that one person will succeed
and the next will fail?”
The answer to that question is a simple one, but also quite long.
First, it’s important to understand that your systematic method of trading (trading system)
does matter, but it isn’t the only thing you need to succeed as a trader.
To find real success there is a whole host of other elements that need to come together.
Most of those elements have to do with you, and my intention with this manual is to give
you all that you need to find success as a trader.
Too many publications, websites, and even Forex brokers teach that all you need to succeed
as a Forex trader is a good way to decide when to enter your trades, and when not to. Some
of them do go far enough to also preach proper money management, which is very
important, but for the most part they overlook the elements required to become a
successful trader.
That, of course, brings us to what this manual is about.
In this manual, we aren’t going to focus on trading systems. There are literally dozens of
other places out there that you can find a system for trading that has worked for someone
else, and can likely work for you.
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The problem is that without all of the other elements I just discussed, discovering that stellar
trading system is pointless. There is knowledge you need more than than just another
trading system before you’ll find real success as a Forex trader.
Let’s talk about what we’ll be covering throughout the following chapters, and how you can
make the most of what I’m about to teach you.
YOUR SUCCESS IN FOREX – HOW TO USE THIS MANUAL

Okay, so what are these other elements I keep saying are so important to your success.
There are actually a number of them, but to give you a quick rundown, a successful trader
will have:
1. A Firm Understanding of the Basics of Forex
2. At Least some Trading Experience (Practice accounts were made for a reason)
3. An understanding of when the right time to start trading with “real” funds is.
4. A Money Management System and an understanding of why this is important.
5. The right psychology – and this one is more important than you may think.
6. The drive to stay current with all things Forex and further their knowledge as a
trader.
7. A complete trading plan. This is necessary before you discover the trading system
that works for you.
Once you have all of those elements in place, only then should you be finding a trading
system that works for you and actually begin trading. Throughout the rest of this manual,
that is exactly what we will give you. By the time you are finished here you will have the
understanding you need to become a successful Forex trader.
We’ll work through all of the ideas I just shared, and then in the final chapter we’ll put it all
together to create your trading plan. You should read this manual from beginning to end,
and use it to create your own plan for success. By doing so you’ll ensure that you have
everything you need to succeed where the next guy may fail.
With that said, let’s get started. For most of us, it all starts with the basics, so that’s exactly
where we’ll begin.
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FOREX BASICS
Although my intention here isn’t necessarily to create a manual on the basics of Forex, it’s
such an important element that I decided to start here.
Too many traders today look at the world of Forex, they see dollar figures and possibilities,
and they just start trading. After all, that semi-automated trading software gives them
everything they need to trade, why not just start?
The answer to that question is obvious.
Without a clear understanding of what Forex is, how to trade it, and other simple things like
how to calculate pip-values and profits, that trader is almost guaranteed to fail. Since a firm
grounding of the basics of Forex is so important that is where we will start.
At any time, as we work through this chapter, if you don’t understand something stop.
There are many resources on the web that can help you take your basic knowledge further,
and taking the time to do a Google search and fill in the blanks will ensure that your success
puzzle is complete by the time you get to the end of this manual.
GETTING STARTED
The term FOREX refers to foreign exchange, and more specifically it refers to the huge
trading realm that now surrounds the currency exchange marketplace. To trade Forex
means to buy/sell one currency against another with the intention of profiting on the
difference in the exchange rate over a given period of time.
At this point in time, Forex is one of the largest trading vehicles in the world. To clarify this,
the average trading volume of all the world’s stock exchanges combined is about 167 billion
US dollars each day. As of 2007 the average volumes of the currency exchange markets
exceed 3.2 trillion US dollar each day.
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In other words, Forex is huge, and the growth of Forex is expected to continue for years to
come. As a trading vehicle it is one of the easiest markets to get into. And, if you take the
time to learn what you’re doing, it can be one of the most profitable.
All you need to get started in trading currencies is a Forex broker, and the software they use
to allow you to trade. With a broker’s software installed you are then able to instantly
connect to that broker and make trades in real-time.
CURRENCY PAIRS
Currency is always quoted and traded in pairs. That is, you are buying or selling one currency
against another, and the money you earn/lose is based on the exchange rate between those
two currencies.
Looking at the screenshot (from Metatrader) below, you’ll see a number of common
currency pairs.
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Some common currencies include USD/CHF (US Dollar/Swiss Franc), EUR/USD (Euro/US
Dollar), or the GPB/USD (British Pound/USD). When buying or selling a currency pair it is
important to understand the Bid/Ask prices and the Spread between them.
BID/ASK AND SPREAD

Whenever a currency pair is quoted (as shown in the chart above, and the order window
below), the prices are quoted with both a bid price and ask price.
The bid price is the price that you would pay to sell the currency pair (go short), and the ask
price is the price you would pay to buy the currency pair (go long). The difference between
the two numbers is known as the spread.
Looking at the order window below:
The bid price is 1.6280. The ask price is 1.6284. The spread is then 1.6284 – 1.6280 = 0.0004.
The spread is something that any trader should be aware of. It’s important to note that if
you made a trade with the intention of earning 30 pips, and the spread was 4 pips, the
currency pair would have to move 34 pips before you hit your profit target. This becomes
more important when you trade currency pairs that have a larger spread.
Most currencies are quoted with 4 decimal places, and the 4th decimal point is known as 1
pip. There are exceptions to this, so let’s take a moment to talk about pips, profits and
trades.
PIPS, PROFITS, AND TRADES
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When you trade Forex you will always calculate your profit or loss in pips. A pip is the
smallest price increment in Forex and the term itself stands for “percentage in point”.
With most currency pairs you’ll trade a pip is 0.0001. The exception to this is currency pairs
that include the JPY (Japanese Yen). In that case one pip is .01 of price movement.
To add some clarity here let’s talk about how to calculate a per-pip value and then move on
to calculating the profit from a single trade.
Let’s start by calculating a per-pip value. To do so, the formula looks like this:
(1 pip with proper decimal placement/currency exchange rate) x amount being purchased =
pip value.
Let’s assume we were about to trade 1 lot ($100,000 worth) of a currency pair. To give us
something to calculate, look at the buy window on the following page.
If we were to buy one lot of the GBP/USD currency pair, at the current ask price of 1.6289,
then our per-pip value would be:
(0.0001/1.6289) x 100,000 = ~6.13911
Of course we’ve just calculated the per pip value in British Pounds, to convert that number
back to USD, we need to multiply by the exchange rate again.
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6.13911 x 1.6289 = $10.
It should be noted here that whenever the currency pair includes the USD on the right side
of the pair (as is does with GBP/USD), the per-pip value will always be $10 for a full lot of
currency or $1 for a mini-lot ($10,000 worth of the currency pair).
Let’s take our example further by making an actual trade. We know the per-pip value is $10.
So let’s assume we actually entered this trade, and we made 200 pips on the trade itself.
200 pips x $10 per-pip = $2000 profit on the trade.
Let’s calculate a per-pip value one more time to provide another example. This time let’s
work with the USD/JPY:
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Again assuming we were going to trade 1 lot of currency, and in this case we were going to
sell (go short) at the current bid price, then our calculation would look like this:
(0.01/92.95) x 100,000 = $10.76.
In this case the USD is on the left hand side of the currency pair so our number is already in
US dollars.
With a per-pip value I am then able to calculate my profit/loss from any trade.
If I lost 20 pips, my loss would be 20 x 10.76 = $215.20
If I earned 34 pips, my profit would be 34 x 10.76 = $365.84.
If any of this is unclear at this point then you should take the time to do some of the math
yourself. Being able to calculate profit/loss is important.
A WORD ON LEVERAGE
The next thing that’s important to understand is that when you trade Forex you’ll almost
always be trading on leverage. Leverage means that, even though you are trading large lots
of currency ($10,000 for a mini-lot, or $100,000 for a full lot), you don’t need to put that
amount of money on the line to make the trade.
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Commonly you’ll see leverages of 50:1, 100:1, or even 200:1.
With a 100:1 leverage, I am able to trade $100,000 of currency while only putting,
100,000/100 = $1000 of my own money on the line.
This will become clearer as you work through some of the later chapters, but for now it’s just
important to note that it isn’t suggested that you trade with more than a 100:1 leverage.
Some brokers now have 400:1 and even 500:1 leverages available. New traders tend to look
at these large numbers and see bigger profit potential. The problem is that leverage is a
double edge sword.
If a 500:1 leverage allows you to amplify your profits by 5 times over a 100:1 leverage, it also
amplifies your losses to the same degree.
READING THE CHARTS

When it comes to Forex, almost every trade you ever make will be based off of a decision
you made while looking at the charts. For that reason, being able to quickly read a chart is
important.
In Forex there are two common types of charts. You’ll look at candle charts, and bar charts
on a regular basis. You’ll use these charts both to back test your trading systems based on
historical data, and to make more informed trading decisions now.
The common timeframes for Forex charts include: 5 minutes, 15 minutes, 30 minutes, 1
hour, 4 hour, daily, and weekly. Opening a chart for any given time frame will give you a
visual representation of what has happened to the price of that currency pair over time.
To clarify, let’s look at a quick example. On 30 minute EUR/USD chart below, you can see a
wealth of information. Along the bottom you have the time, along the right you have the
price data, and on the chart itself you have single candles. Each candle represents what
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happened to the price for that 30 minute time period.
Whether you decide to trade bar charts, or candle charts, being able to read the data placed
in from of you is important. Looking at a candle chart:
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Each bar on the chart above, represents what has happened in a single period for the
timeframe of the chart (i.e. on a 30 minute chart one candle represents 30 minutes), but it
also gives you price information for that period.
Looking at the numbers:
1. High Price
2. Opening Price
3. Closing Price
4. Low Price
The same data can be gathered from a bar chart:
Knowing these 4 simple numbers we can tell what happened in one period of time, and the
next, and the next….When you put it all together the charts give you a complete set of
price information that can go back months, or even years. This data is extremely useful
when attempting to make an informed trading decision.
Of course price data by itself usually isn’t enough. In most cases you’ll be adding indicators
to your charts that make it even simpler to make a decision on when to trade.
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CHART INDICATORS
When using charting software you’ll almost always be putting indicators on your charts. In
Forex there are literally hundreds of different indicators that you can use, and all of them
attempt to take historical and current data to better see what is happening with any given
currency pair, and to help you make a more informed trading decision now.
Below is a chart with a few indicators placed on it:
Some of the common indicators that you can expect to come across during your Forex
career include:
1. Moving Averages
2. MACD (Moving Average Divergence Convergence)
3. RSI (Relative Strength Index)
4. Stochastic
5. Even More – Often these will be dictated by the trading system you choose to use.
Let’s cover some of these more common indicators.
MOVING AVERAGES
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One indicator you’ll probably use often is moving averages. In Forex there are two common
types of moving averages. There are SMA’s (simple moving averages) and EMA’s
(exponential moving averages).
On the chart below you’ll see the 14 period SMA, and the 50 period EMA.
Moving averages are most often used to take historical price data and use it to determine
what is/will happen with the price. The indicator itself takes the price data, for a given
number of time frames, and averages it. It’s important to understand the difference
between an EMA and an SMA.
SMA (Simple Moving Average) – Takes the historical data and creates a price line from that
data. It gives no weighting for past prices or current prices.
EMA (Exponential Moving Average) – Calculates the average of price movement, but unlike
a simple moving average, it gives more weight to the most recent price data.
MACD
Another common indicator is the MACD (moving average divergence convergence)
indicator.
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This indicator is trend-following momentum indicator that shows the relationship between
two moving averages. MACD takes the difference between two EMA’s and puts the data on
a visual chart. It is intended to show the momentum of a trend, and to indicated reversals in
the trend.
Looking at the MACD indicator above can tell us a lot about price movement, even without
the chart.
The currency pair trended down and gained momentum from May 15th to May 18. At that
point the downtrend lost much of its momentum, and by the end of the day on the 18th
(when the grey lines and red line move above the center point) a divergence occurred;
which indicates a reversal of the trend.
RSI
The RSI (relative strength index) is an indicator that is used to show volumes. Its intent is to
show the strength of the current trend, and it will often be used in conjunction with another
indicator.
Looking at the RSI indicator above, the basic principle of using this indicator is that when
the RSI is about 70 the market is overbought. When the RSI is below 30, it indicates an
oversold market. Usually you’ll use the RSI in conjunction with indicators like the MACD, to
better determine when to enter/exit a trade.
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STOCHASTICS
The Stochastic indicator is another that is intended to show trend momentum. The indicator
attempts to show the current price as percentage value in relation to the high and low
extremes of price swings during a set time period.
Again with this indicator you’ll most often use 70% or 30% in an attempt to gain better buy
or sell signals. And, also like the RSI, stochastics will usually be used in conjunction with
other chart indicators.
MORE ON INDICATORS
The reality is that we’ve barely begun to touch the surface with indicators. For the newer
traders who read this manual, you should take some time to Google terms like “forex
indicators” or the specific indicators themselves. This will give you a better knowledge of the
indicators available to you, and what their purpose is.
At the very least, when you do have a trading system to work with, you should take the time
to learn everything you can about every indicator your trading system suggests. Doing so
will ensure you are able to make more informed trading decision.
BEARS, BULLS, AND TRENDS

With an understanding of charts, it’s time to talk a little about the way in which the currency
markets can move. I’m not actually going to preach here that you should trade with the
trends (although you likely should). Rather I want you to have a better understanding of
price movement when it comes to Forex.
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At any given time, the price of currency pair may be doing one of the following:
1. Moving Up
2. Moving Down
3. Doing Nothing (staying close to the same level).
When the price is doing nothing there’s no point in trading so what we want to concentrate
on here is when it’s moving up or down.
When the price is on its way down, it’s said to be a downtrend (or a bearish market). When
price is moving up the currency pair is said to be trending up (a bullish market).
It’s also important to note that, within the larger trends, a currency pair tends to move in
waves. That is, unless it’s an extremely strong trend, the currency pair will tend to move in
one direction, then retrace slightly, then continue on:
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If a trend is well developed it will continue on that way until something happens (price hits
a major support/resistance level, or news release changes things).
There are a couple of reasons why it’s important to understand this.
First, by understanding the way that a currency pair will tend to move, you’ll be better able
to make informed decisions when it comes to entering and exiting your trades. Simply by
knowing that there very likely will be smaller retracements within the larger trend you’ll be
much less likely to exit the trade early when a small wave in price occurs.
More importantly though, knowing the basic dynamics of price movement can help you
make more informed trading decisions. If we know that a well developed trend is likely to
continue the same way for a while, then it probably doesn’t make sense to trade against
that trend.
There are exceptions to that idea, and there are trading systems that go against the trends
to scalp money from the market by taking advantage of the smaller movements with a
trend. But, for the inexperienced trader, simply knowing that a downtrend is likely to
continue to be a downtrend is a good indicator not to buy!
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CONCLUSION
We’ve covered a lot of material thus far, but in reality we’ve only began to touch the surface
of what Forex is and how to trade. We’ll be covering a lot more before you’re finished with
the manual, but a firm grounding in the basics of Forex trading is important.
For that reason, if you are new to Forex, I really do suggest that you set aside some time
each day to learn more. There is a huge amount of information on the basics of trading
available online. Take the time each day to learn something new. Take a few moments to
read over some new releases on Forex sites. Sign up for trading forums and get involved.
Taking a little time each day to do any or all of the aforementioned will help you to grow as
a trader.
Basic trading knowledge is your first piece in the puzzle to finding success as a trader. With
your first piece in place, it’s time to move on to the next piece of the puzzle.
In the next chapter we will talk about experience as a trader. This is one area that is too
often overlooked, and it is the one area that will almost always ensure failure at Forex.
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YOUR FIRST FOREX ACCOUNT

Once you have a good knowledge of the basics, the next element you need to succeed in
Forex is experience. That is, it isn’t enough to learn about charts and indicators. You also
need to gain some experience with the markets themselves.
Now, I’m not suggesting that you open up a real Forex account and start trading. In fact,
doing so is a bad idea.
What I am suggesting is that you make use of the best tool you’ll even be given to learn
Forex – a practice account.
PRACTICE, PRACTICE, PRACTICE

Every good Forex broker allows you to trade with a practice account. This simple no-money-
required account is your best tool to learn Forex trading.
It’s sort of like the old adage “practice makes perfect”. Although there is no such thing as a
perfect trader, practice will give you the experience to need to understand trading better. It
gives you the one tool that will allow you to learn to be a successful trader before you ever
put a dime of your own money on the line.
Opening a practice account is as simple as heading over to a broker (try Oanda, Alpari,
FXCM, or any other major broker) and submitting a simple online form. Don’t just signup for
a practice account though, use it!
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Figure 1: As shown in the Meta Trader Form Above - Opening a Practice Account is as simple
as filling out a form. Your practice account is the best tool you'll ever have to learn forex
success before you invest a dime of your own money
Spend time trading away your practice account. Take the time to lose your entire account
balance. Learn different trading systems. Practice reading and back testing different trading
system with charts. Trade the daily charts, the hourly charts, and even the 15 minute charts.
Use your practice account until you’re so sure of yourself as a trader that you can confidently
trade any currency pair in any market condition with a reasonable expectation that you’ll
win at least 30% of your trades.
Making heavy use of a practice account, before you ever put your own money on the line, is
the one idea that will gain you the experience you need to become a successful trader.
Unfortunately, it is also the often the most overlooked element of success amongst newer
traders.
Too many newcomers to Forex will find a trading system, trade it on a practice account for a
week, and come to the conclusion that they simply can’t lose. Of course that idea is never
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true when it comes to a high-risk trading vehicle and because of it they very often will lose
and give up on Forex before they ever gave it a chance.
Don’t be like 90% of the new traders out there. Make the decision right now to spend 3
months, 6 months, or even a year with a practice account first. That simple decision is the
best thing you’ll ever do for your trading career.
Once you’ve made that decision, let’s talk about the right time to start trading with your
money.
YOUR FIRST REAL TRADING ACCOUNT

Two of the most common questions asked by new traders are when should I start trading
(don’t believe the guy who tells you after a month of practice), and how much to start with.
Let’s deal with the answers to both questions separately.
WHEN TO START
When YOU should start trading with real money instead of a practice account is actually a
difficult question to answer. It really depends on how comfortable you are with trading, and
how sure you are of the systems you’ve put in place to trade with.
To give some general guidelines, you should have at the very least the following:
1. A Clear Understanding of all of the Elements of Success in Forex (see the next
chapter).
2. A trading system that you have both back tested, and traded successfully on a prac-
tice account for a period of at least one month (preferably two or three).
3. A confidence level that will allow you to enter your trades, following the rules you’ve
put in place, without worry or regret.
The sticking point of those three rules is usually #3, and as we get into the chapter on
trading psychology, it will become clear how important it is.
HOW MUCH TO START WITH
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The next question that needs to be answered is how much money you should put on the
line when you do actually start trading with your own money. Again this one is difficult to
answer, but it’s easy to set out some guidelines.
First, you should never start trading with money you can’t afford to lose.
If the money you put into your first Forex account will affect you or your family if you lost it
all, then you aren’t ready for live trading yet. Continue with your practice account and save
whatever you can each month until you have a decent amount saved, that won’t hurt you if
you lost it.
Next, you should never start with an account that is too small.
In this case you might open a Forex mini-account with $4,000 - $5,000, or you might start a
standard account with $20,000 - $30,000. But, you shouldn’t start an account with a 500:1
leverage and a $500 account balance.
Possibly you could open your Forex account with less than the numbers I stated, but you
should stick to a 100:1 leverage, and if you feel the amount you have on hand isn’t large
enough to fund the account you’ll be better off waiting and saving some more.
CONCLUSION
With an understanding of how important practice is to your own Forex success, let’s move
on to the other elements of success in Forex. In the next chapter we will begin to lay out
everything you need to succeed.
As you work through the rest of this manual, my suggestion is that you make heavy use of
your new practice account to put all of the elements in place. By doing so you’ll have a
complete game plan, a system that is tried and tested, and the experience required to
ensure your first Forex account is a profitable one.
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THE ELEMENTS OF SUCCESSFUL TRADING

Thus far we’ve talk about the importance of a firm grounding in the basics of Forex, and the
importance of practice to further that basic knowledge. From here on out, it’s time to start
putting together the rest of your trading puzzle.
In this chapter we’ll define the elements of your success, and in the following chapters we’ll
look at each one in a little more detail. Let’s just start with the basics of what we’ll be
covering throughout the rest of this manual.
THE RIGHT PSYCHOLOGY

One of the most important pieces to your success puzzle is your own trading psychology.
This covers everything from why you have decided to begin trading Forex to how you
approach trading. It also covers the steps you take to keep your emotions out of your trades.
A basic understanding of you, and why you’re here, is the one element that can work more
towards your own success than any other idea we cover in this manual. In fact, a poor
mindset and emotional trading is likely the number one reason why traders fail. The next
most common reason is a poor money management system.
MONEY MANAGEMENT
After you understand trading psychology your next piece to your success puzzle is a good
money management system. The money management rules you put in place are the only
tool you have to manage your risk. As such, your money management system is an integral
part of ensuring that you profit from your trading career.
Proper money management will help you to avoid large draw downs and large losses. It will
also better enable you to recover if you do experience a larger loss throughout your trading
career.
KNOWLEDGE IS EVERYTHING
The next element to ensure success in trading is knowledge. In this case I’m not talking
about understanding the basics (although that is part of it).
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Moreover, I’m referring to knowledge of the markets, current market conditions, news
releases that may affect your trades, and in general having a clear understanding of what’s
happening right now.
Sometimes this knowledge will be a required part of your trading system, and other times it
will just be looking at the bigger picture to ensure your trading fits with the current times. If
any of this is unclear at this point, it will be soon enough.
YOUR TRADING GAME PLAN

Finally when you clearly understand the three elements we just covered, you’re ready to put
everything together to create your trading game plan. This is really your plan for success,
and it includes bringing everything together to ensure you have a set of rules, ideas, and
tasks that you will consistently follow to ensure that you stay on the road to success.
TRADING SYSTEM(S)
After you have a game plan, and only after, you’re then ready to begin working to discover
and test different trading systems. Your trading system is the systematic set of rules that you
use to determine when to enter and exit your trades.
We won’t be covering specific trading systems in this manual, but there are a couple of
things I wanted to point out.
1. Your trading system should be secondary to everything else in this manual. If you’re
clear on trading psychology, using proper money management, and staying current
with the markets – you have the most important elements to your success. Your trad-
ing system then becomes secondary.
2. You should never rely on one trading system. You should work to back test, and use 2
or 3 systems under various market conditions before you ever use them on your live
trading account. Doing so will ensure you have something to fall back on when that
one stellar system just isn’t working anymore.
With all of that said, let’s move on to talk about trading psychology.
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WHAT IS TRADING PSYCHOLOGY?

To get started with your trading game plan, the first thing you need to look at is you.
Trading psychology is the one element that will almost guarantee you fail if you don’t
understand it, and constantly work to understand yourself as you trade.
This may not make a lot of sense at the moment, but it will all become clear as we work
through this chapter. With that said let’s get started by taking a look at you.
THE RIGHT REASONS.

To begin our look at your trading psychology, the first thing you need to do is ask yourself
some questions.
Really, if you don’t understand why you’re trading and what drives you then you’ll probably
never understand why you succeed or fail. More than that, if you come into Forex for the
wrong reasons, then you definitely will fail.
Take a moment to ask yourself:
• Why am I trading?
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• What do I expect to gain from trading?
For 80% of those who read this manual, there answer will be money.
The problem with that answer is that if money is the only reason you’re beginning your
trading career, then you most likely will fail. If you begin your trading career with dollar
figures in your head, and the image of you getting rich quick, then you’re setting yourself up
for a huge disappointment.
More importantly, money may work well as a short term motivator, but it rarely is enough to
see you through in the long run.
Many who read this probably won’t believe me when I say this, but even if you think money
is what motivates you, it often isn’t.
Think about it on a deeper level for a moment. Right now it’s very likely that you work a 9 to
5 job, and it’s also very likely that you believe the reason you do so is for money.
Is it really though? Why do you need money?
Possibly you have a family to feed, or a mortgage payment to make. Maybe you enjoy fine
cars and you need to meet those $2,000 monthly BMW payments. In any case is money the
only motivator?
If you have a family to support, then looking closer: keeping your family fed and healthy is
the motivator, not money. The same thing could be said about meeting those mortgage
payments (the need for shelter), or even about the car (you need a way to get around). In all
of the examples, money isn’t the motivator; it’s just a means to achieve a goal or a need.
Understanding this is extremely important because if money is your only motivator when
you begin trading, then I promise you won’t stick with it for long. Something as large as
Forex takes dedication to learn and stick with it. For most, the need of money will never be
enough for them to keep at it.
To take this idea further, and better understand why you want to begin trading, you should
take some time to do some self discovery. Grab a sheet of paper, and then begin to ask
yourself why, what, how.
As an example:
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Why do I want to trade Forex?
To Earn Money
What will I gain by earning money with Forex
I’ll be able to provide my family with (insert idea here – better house, better lifestyle, etc)
Why do I want to provide my family with a better lifestyle?
I like to make my wife happy…

What will I gain by making my wife happy?
We get along better when she’s happy, and I enjoy seeing her happy.
We could obviously keep going with this example and get down to an ultimate motivate of
improving your marriage or having more time to spend with your wide.
The reasons we take the time to discover our inner motivators is simple because it gives us
something more tangible to work towards.
Is money enough to keep you trying at Forex, even when it feels like you’re about to fail?
Probably not…
On the other hand, is a happier life where you and your wife get along better and have more
time to travel and spend time with each other enough to motivate you?
If you honestly see trading as a means to a happier life then you’re much more likely to stick
with it even when things don’t seem to be going the way you want them to.
Another Example taking a More Negative Stance:
Why do I want to trade Forex?
To quit my day job.

What will I gain by quitting my job?
I won’t have to put up with my bosses crap anymore?

Why does the boss’s attitude bother me?
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He never gives credit where credit is due, and I feel like I’m not rewarded for the work I do.
What makes me feel rewarded?
Praise from my boss and coworkers.

How will Forex help me to gain praise?
It won’t
Again with just a few questions we’ve gotten to the root of the problem, and in this case
we’re at a point where Forex can’t provide the solution.
If what really motivated this guy was praise and acceptance from his coworkers - that is
something he could never get from a trading career.
You don’t have to stop there. You can take your exercise in self discovery further by asking
yourself questions like:
What motivates me? Why?
What do I want to achieve? Why?
Will I be able to gain this as a Forex Trader?
The point here is to understand two things:
1. What really motivates you to succeed at something (your deeper motivators)?
2. Whether or not that motivation is something you can achieve as a trader.
By taking the time to do a little self discovery, you can find better reasons to work towards
your own success as a trader. Creating a better life for your family is something that can
motivate you for years to come.
If your only motivator was money, you’re more likely to give up than to continue when that
bad month comes. By the same token if you’re motivated by something like acceptance
from coworkers, then an at-home Forex career probably isn’t for you.
You should work at this exercise until you can come up with at least two good motivators,
besides money, that you feel you’ll be able to achieve as a Forex trader. These will become
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both your long term goals, and the two reasons that you should stick with it when things
just aren’t going your way.
Goals like “more time for family because I work from home” or “spending more time
holidaying with my wife and still being able to provide for her” will take you a lot further in
your Forex career than the want of money ever will.
THE EMOTIONAL NEED NOT APPLY

Once you have a couple of good goals/motivators to see you through, it’s time to talk about
your emotional side.
If you are someone who tends to get emotional over money, then success in trading will be
difficult. You’ll need to learn to keep your emotions in check, or you will fail.
Notice that I said “will fail” and not “probably will” or “might”. Trading with your emotions is
the best way to erase your trading account quickly, and in turn utterly fail as a trader.
If you aren’t sure whether you will be an emotional trader or not, just try this.
Picture for a moment that I have just given you a large sum of money. It doesn’t matter how
much, just picture whatever would be a large sum to you. Maybe it’s $1,000, $10K, $200K –
the amount doesn’t matter.
What does matter is that you imagine you have an amount that could make a difference in
your life right now. Reallu picture it…
What would you do with the money? What would you buy? Imagine being able to buy that
new car, or that new house, imagine what you’d feel like. See yourself doing whatever you
imagine
With that feeling in mind, now picture throwing that money in the trash instead.
How do you feel? Does it matter? Are you feeling that gut wrenching “no” feeling?
If the idea of taking a large amount of cash and throwing it away really bothers you, then
you very likely will be an emotional trader. The emotional trader really comes in two
varieties, so let’s talk about them both.
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THE OVERZEALOUS TRADER

The overzealous trader is the one who often trade solely off his emotions. That losing trade
(or large string of losing trades) leads them to become angry and to want to take revenge
on the market. They then end up losing even more trades because they allow their emotions
to rule them.
This type of trader will make bad trading decisions and end up turning that 2 or 3 loss streak
into a long string of losing trades. They end up ignoring their money management systems
and trading systems because they “know” that next trade is going to be a winner.
The overzealous trader can also come from the other end of the spectrum.
It feels good to win. After a couple of winning trades, the overzealous trader is on a high,
and is driven to make that next trade even bigger.
To do so he enters his third trade with double the lot size, even though his money
management rules say that he shouldn’t. The third trade moves against him and he erases
the profits from the first two winning trades.
After losing he becomes angry and suddenly feels the need to take revenge on the
market…. Are you seeing the cycle here?
Luckily avoiding becoming the overzealous trader is easy, and we’ll get to that shortly. Let’s
first cover the other type of emotional trader.
THE TIMID TRADER

The other type of emotional trader is the timid trader. With this trader it’s fear that rules
him. He simply hates losing money so he becomes conservative to the point where he rarely
enters a trade.
He probably has built up a system of rules so lengthy that he might enter a trade once a
month. Often, even when he has that clear entry signal he, avoids it (fear of losing keeps
him from entering).
Although the timid trader probably won’t erase his trading account as quickly as the
overzealous trader, he’s still damaging his trading career. By avoiding what could be
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profitable trades he is reducing the amount he earns, and in turn missing out on a good
portion of the potential profits.
Again becoming the timid trader is simple to avoid, let’s talk about how.
BALANCING IT OUT – YOU

Okay, so we’ve talked about the two common types of emotional traders, now let’s talk
about how not to become one of them. The idea is quite simple actually; to avoid becoming
overzealous or overly timid with your trading simply avoid all of the following emotions:
• Happiness
• Sadness
• Fear
• Jealousy
• Anger
• Greed
• Elation
• <Insert Emotion Here>
• Etc…
In other words – avoid all of them.
The currency markets do not care how you are feeling, and in turn they won’t respond to
your emotions. Never allowing your emotions to become part of your trading will take you a
long way towards success in Forex.
Now some may think this is easier said than done, but it doesn’t have to be difficult.
Before we trade, we setup a money management system to make clear rules on how much
we can risk. We use a systematic method of trading to determine when to enter our trades
and when to exit them (this may also be defined by your money management system).
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Using clearly laid out rules to enter our trades, size our trades, and exit our trades we better
enable ourselves to trade without emotion.
CONCLUSION
With our brief lesson in trading psychology over I wanted to take a moment to discuss why
it’s so important. In this chapter we didn’t really take any complicated steps. We simply took
some time to discover our inner motivators, and then we talked a bit about emotions. It may
not seem like a lot, but these two steps may go further towards your own success than
anything else I could ever teach you about trading.
Think about it for a moment:
In every career, in every job, and even just in life – there are those days that you just don’t
want to. You know the ones I’m talking about, the days where you could just say “screw it”
and stay in bed.
When it comes to Forex, and more specifically working from home, it’s sometimes too easy
to do just that. Even if you love Forex trading more than any other job you’ve ever had, I
promise there will be days when you’re frustrated and you could just as easily give up as
continue.
By taking the time to discover your own motivators before you begin trading you have
tangible reasons to continue doing it. Understanding your ultimate goals, and what you can
achieve by working hard at Forex, is important to ensuring you’ll continually work at it and
ultimately succeed at it.
Then consider:
The emotional trader usually doesn’t realize that they are trading with their emotions.
Really, most of the time this trader will have no idea what trading psychology is. They also
rarely understand why we setup money management rules and use a good trading system.
In turn they may think they are following the rules, and have no idea why it isn’t working for
them.
By simply understanding the psychology behind the emotional trader and becoming aware
of your own emotions you are now better equipped to keep your emotions out of your
trades.
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The psychology behind the trade isn’t necessarily complicated. It’s simply understanding
why you are working towards your own success, and realizing that your emotions can work
against you.
With that said let’s move onto money management. Not only is managing money important
to minimize risk, it’s also one of the key elements that will help you keep your emotions out
of your trades.
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MONEY MANAGEMENT MATTERS

The next piece of the puzzle to your success is money management. Put simply, money
management is a simple set of rules that you put in place to ensure that you manage your
risk consistently. It isn’t complicated, but it is important.
By following a simple set of rules to keep our risk level the same, not only are we managing
risk but we also manage to:
1. Keep everything systematic; this greatly reduces the likelihood that your emotions
will become part of your trades.
2. Give ourselves an easy way to avoid large draw downs to our accounts.
We already talked about the first point in the last chapter. Now let’s talk about the second.
THE DANGER OF DRAWDOWN’S

You may have heard the word drawdown before. In your Forex career you’ll likely hear it
often. The important thing for you is to understand here is what an account drawdown is,
and then to ensure you manage your money so that you don’t experience one.
To clearly demonstrate what an account drawdown is, let’s use an example.
A fellow trader, who I know quite well, had a bad habit of removing his stop once a trade
went is his favor. For the purpose of our example I’ll call him John (and yes this is a true
story).
Now this is an experienced trader who had used this system of trading for a couple of years,
and had never experienced large problems.
Every time I saw him I always made jibes about his avoidance of stops, and how he would
regret it one day. Of course he always replied that “what works, works”…
Since he was an experienced trader I never really thought that I would be proven right, but
unfortunately for him, I was.
Now it’s important to understand here that we’re talking about a trader who holds a large
trading account (around $2 million) and who earns a good living solely from Forex.
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At any rate when this happened he was 2 months into a long trade on the USD/JPY. The
currency had trended up for quite some time and he was close almost 200 pips ahead on the
trade. He had 100 lots into this particular trade.
If you do the math we’re talking huge dollars here.
I had talked to John the day prior, and he was excited about his winning trade. Of course I
made the comment “I bet you forgot to set your stop” and of course he had.
The problem this time was that the currency pair suddenly moved against him. A major
news release turned the currency pair against him, and while John slept his 200 pip winning
trade turned into a 100 pip loser (I think it was actually about – 92 pips).
Suddenly a trade that stood to earn John $200,000 was losing him $100,000.
Now if he had been smart at that point he would have cut his losses, and accepted that he’d
lost 5% of his account on a single trade. That isn’t what he did though.
With the anticipated turnaround of the currency he averaged down into the trade (bought
another hundred lots) to attempt to recover some of his losses. At this point, I wouldn’t say
that what he did was unreasonable. He wasn’t really following his own system, but I also
expected the pair to recover from the press release.
Unfortunately though, the currency didn’t turn around. It continued to drop throughout the
day, and by the end of the day it had dropped another 100 pips.
At that point John had 200 lots into the trade and in total he was losing $300,000. He did
then cut his losses, but in a single trade he had drawn his account down by 15%.
Now John is an experienced trader, and although that one trade damaged his trading
account for a few months, he did eventually recover from it (he’s smart enough to use stops
to protect his profits now). The point of this story is that a 15% drawdown doesn’t just
require 15% to recover.
To get his account balance back to what it was before he lost the trade, John had to recover
17.6%.
Let’s put clarify this by doing the math. If John’s account balance was an even $2,000,000,
then a $300,000 loss represents:
300,000 / 2, 000, 000 = 0.15, or 15% of his current balance
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After losing that trade, his account is then $1,700,000, and to get back to his original $2
million he needs to recover:
300,000/1,700,000 = .1764 or 17.6%
His account balance is now smaller, so he has less to work with the next time he trades, and
he has to make up a larger percentage to earn back the 15% he lost. A fifteen percent
drawdown isn’t necessarily huge. Assume for a second that John hadn’t exited when he did
though.
If he was an emotional trader (which he isn’t) he could have just as easily averaged down
again and ended up losing 20%, 25% or even 30% of his account.
Here’s what it would look like to recover then:
Draw Down Percentage to Recover

5% 5.3%
10% 11.1%
15% 17.6%
20% 25%
25% 33%
30% 43%
40% 67%
50% 100%
60% 150%
When you begin to look at the percentages it becomes clear how badly drawdown’s can
affect your trading.
Luckily it’s fairly simple to avoid this type of problem. Managing your money properly will
ensure that you can trade comfortably and not worry as much as the trader who doesn’t
setup a clear method to manage risk.
A MONEY MANAGEMENT SYSTEM THAT FITS YOU

To ensure you keep your risk to a manageable level you really only need two simply
percentages and a few supplementary rules. The first number you need is a % risk that we
Area FX 51 System
User Manual | 66
are willing to risk on any single trade, and the second is a % risk for our entire account
balance.
We will use the first percentage to ensure we never risk more that %R of on a single trade.
The second percentage will tell us how many open trades we can have at once.
%R
Your %R is the number that you use to calculate proper trade sizes, and in turn ensure you
risk only a small percentage of your float on any given trade. For new traders this number
should be 2% - 3%.
It’s important to note here that your %R should fit well with your own trading psychology.
Let’s do some math to clarify here. As an example if you have a $100,000 account balance
then at a 3% risk level your maximum risk on any trade is:
100,000 x 0.03 = $3,000.
If the idea of losing $3,000 bothers you, then you should set your %Risk lower. A 2% or 1.5%
risk level may be more appropriate for you. As a general rule 2% is a good number to use for
both new and experienced traders.
By using a risk level or 2%, you could lose 10 trades in a row before you drew your account
down by 17%. By the same token, if you were using a 10% risk level if you lost 10 trades in a
row you draw your account down by 60%. The smaller %R allows us breathing room to grow
our account over time, while avoiding a lot of the risk involved.
Setting a %R, and following it religiously, allows us to keep our risks to an acceptable level. It
also helps use to ensure that we consistently move our accounts forward.
TOTAL ACCEPTABLE RISK

The next number you need for a good money management system is a total percentage you
are allowed to risk at one time. For most traders 10% - 15% is an acceptable number.
This is the amount of your entire account that you can have on the line at once. If your %R
level was 2%, and your total acceptable risk is 10%, you could then have 5 trades open at
once.
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Since this is more than most traders will trade at a single time anyway, a 10% total risk is
usually sufficient.
CALCULATING TRADE SIZE

With most trading systems your stop level will be defined for you. This is actually the reason
we use a %R instead of a dollar figure when setting our maximum risk level. We can use the
percentage to calculate an appropriate trade size that allows us never to risk more than our
acceptable risk.
Let’s walk through a couple of examples to add clarity.
If your trading system was giving you a buy signal on the EUR/USD, and suggesting a 30 pip
stop, then we have all we need to calculate a proper trade size.
Assuming your account balance was $120,000, and using a 2% risk level, your acceptable
risk is:
$120,000 x 0.02 = $2400.
We know that each pip on the EUR/USD is worth $10 (see the section on calculating per-pip
values if you don’t), and our system uses a 30 pip stop.
We are then risking 30 x $10 = $300 for every lot of currency we trade.
From our acceptable risk we can then trade:
$2400/$300 = 8 full lots of the currency pair.
Let’s walk through another example using mini-lots.
If your Forex Mini-Account had a float of $24,238, and you were using a 2% risk level then
your maximum risk for a trade would be:
$24,238 x .02 = $484.76.
Assuming you were trading the EUR/USD and your trading system used a 50 pip stop, then
with each mini lot you trade you would be risking $50 (1 pip on a mini lot is $1).
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We should then trade:
$484.76 / $50 = 9.69 mini lots.
In this case, we can’t trade .69 of a mini lot so we just trade 9.
CONSISTENCY AND RISK

The last thing that is important to mention about managing risk is that consistency is
important. We set a maximum %R because that is exactly what it is intended to be – the
maximum.
From that, whenever we calculate our lot size to trade we always round down. Using the
example we used in the last section we said that:
$484.76 / $50 = 9.69 mini lots.
In this case, we can’t trade .69 of a mini lot so we just trade 9.
The human tendency here is to round up and trade one full lot of currency (or ten mini-lots).
The idea is that the more you trade the more you earn. There is of course some truth to that
statement, but by trading 10 lots when we should only trade 9, we are basically throwing
our money management system out the window.
It is important that you always stay within your acceptable risk level and never exceed it.
Doing so will ensure you are properly managing your risk, but it will also help you to
properly manage your emotions.
If you ALWAYS trade within your acceptable risk level, then you’ll have a harder time
breaking your own rules when you are on that 5-loss streak and feel like taking revenge on
the market.
THE OTHER ELEMENTS OF MONEY MANAGEMENT

With a method of managing risk we have a money management system. However, our
system is not yet complete. We need to add some rules to round out our system and ensure
that we properly manage our risk.
Along with your %R you should also keep the following five rules in mind:
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User Manual | 69
1. Never trade without a stop. Your stop loss is your way of ensuring you follow your
own money management system. It protects you from losing too much, and can also
be used to protect your profits as your trades move in your favor. If the trading sys-
tem you are using doesn’t define stops, decide on a stop level to use and stick to it
consistently.
2. Never use stops larger than your take profit levels. Some trading systems suggest
ideas like setting a 200 pip stop and a 100 pip take profit level. The theory here is that
you are allowing your trades more room to breathe. In reality you’re just consistently
risking twice as much as you earn and eventually will eliminate your trading account
by doing so.
3. Avoid complex money management systems with increasing risk levels. Especially
when you’re just starting with Forex, you should completely avoid money manage-
ment systems that increase/decrease risk levels as you win/lose. These types of sys-
tems are too complex and generally make it harder to follow your own rules.
4. Avoid concepts like averaging down. The concept of averaging down (buying into a
losing trade to reduce losses) might work in theory. In reality though it rarely does.
You should completely avoid trading with ideas like this as they will only add to your
losing positions.
5. Never add to a losing position. From rule number four, you should never add to a los-
ing trade. Even if you use an odd trading system that suggests it (and there are some
that do) you should never add money to a losing position. The idea simply doesn’t
make sense.
CONCLUSION
With a money management system in place you now have a way to properly manage your
risk. From here it’s time to move on to place our final pieces of your success puzzle, and then
to bring it all together with your trading game plan.
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STAYING CURRENT – KNOWLEDGE IS EVERYTHING

Now we come to our final piece of your success puzzle. Your final piece is knowledge.
Ideas like “knowledge is power” or “an informed trader is a successful trader” hold true, and
although this is one of the shorter chapters of this manual, it’s by no means less important
than the others.
We touched on the idea that knowledge was important in the first chapters of this manual.
At that point we were referring to a firm grounding in the basics of Forex before you ever
make a live trade. It doesn’t stop there though.
You also need to know what’s happening right now to make more informed trading
decisions. This knowledge can be split into three separate categories, and you should take
time to look at all three before you trade.
NEWS MATTERS
The first area where you should stay up to date is with any news that relates to Forex.
Especially with currency pairs that you regularly trade, having this knowledge will allow you
to make better trading decisions.
Most brokers now provide a free news service to members, and if your broker doesn’t there
are dozens of free news services out there that cater to Forex traders. There are also paid
subscription services that will allow you to keep up with the most current new releases for
any given currency. In this case I’m not going to recommend how you keep up with the
news, just that you should.
Although you should never trade with the news (trading the news is basically just trading
with your emotions), you should use it both to decide when not to trade and to protect your
existing trades.
To give some examples as to why:
If my trading system was giving me a buy signal on the USD/JPY but I knew that the US
would be releasing a change in the bank rates on that day I would avoid that trade.
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Currencies tend to be extremely volatile and unpredictable when major news is released.
Knowing when a big news release is about to occur will help you avoid some bad trades.
The same idea can be used to protect the profits of your current trades.
If I was into a trade on the EUR/USD that was ahead and a news release suddenly comes out
that will affect that currency pair, I can raise my stop to protect my profits. Possibly the
movement from the news will be temporary and my winning trade will continue on its way,
but by protecting my profits I take one more step in protecting myself when news happens.
KEEPING UP WITH CURRENCIES

Along with keeping up with the news, you should keep up with the currency markets in
general. Specifically you want to know everything you can about the currencies that you
trade. This time I’m not talking about the news, I’m talking about knowing the data from the
charts.
With any currency I trade I can tell you how that currency is currently trending, what the
average daily price movement has been for the past week or two, and I’m aware of the
current market volatility. It may seem like a small thing, but these simple tidbits of
knowledge can go a long way in helping you to avoid bad trades and in maximizing profits
from the trades you do make.
If you trade 3 or 4 major currency pairs on a regular basis you should take some time each
day to look at what is happening and what has happened with those currencies.
HAVING A CLEARER UNDERSTANDING

Along with keeping up with all of the currencies you trade, you should take the time to gain
an even clearer understanding of the ones you are about to trade. Even if my trading system
is giving me an entry signal, I never enter a trade without first knowing support/resistance
levels, yesterday’s price movement, and anything else I feel is important for that particular
trade.
For example, I often trade the trends on the 4 hour charts.
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As it’s supposed to my software often gives me buy and sell signals that follow the trends.
Before I ever enter a trade though, I plot out support and/or resistance levels on 1 Hour
Charts, the 4 Hour charts, the Daily Charts, and sometimes even the weekly charts.
I wouldn’t be doing myself any favors by entering a trade based on the 4 Hour charts when
the currency pair was about to hit a major support/resistance level on the daily charts.
Knowing the specific details of what’s happening before you make a trade will help you to
avoid bad trades over and over again.
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PUTTING IT ALL TOGETHER – YOUR TRADING GAME PLAN

So here we are, you’ve made it to the final chapter of this manual and you actually now have
all of the elements that you need to become a Forex Success. We just need to take a little
time to bring it altogether to complete your Forex puzzle. After we’ve done so you’ll be
prepared for life as a profitable trader.
Now many who read this manual will likely say “But wait, don’t we need a system to trade
with?”
The answer is both yes and no. Yes we do need one because it adds to our systematic rules
and gives us both clear rules to enter and exit our trades as well as another way to keep our
emotions at bay. The answer is also no.
Remember when I said that your trading system is secondary to your trading game plan?
If you never used a real trading system at all, simply by working to increase your knowledge,
using proper money management, and understanding the psychology of trading you most
likely would succeed.
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In fact, I know a trader who only trades one currency pair and all he ever does is enter long if
the currency is in an uptrend, and goes short if it’s in a downtrend. Compared to most of the
complex trading systems out there his way of trading is quite simple, and most traders
probably wouldn’t pull it off successfully.
The reasons this particular trader can is because he has a clear understanding of the
concepts in this manual.
He follows his money management principles religiously, he works to learn everything he

can about the currency pair he trades, he never trades with his emotions, and in general he
has an excellent game plan that works for him.
Now, I’m not suggesting you follow his example. You should find a trading system that
works for you. What I am suggesting is that your systematic way of entering and exiting
your trades is secondary to everything I’ve taught you in this manual.
From that let’s finish off your success puzzle with the final piece – your trading plan.
YOUR TRADING PLAN

When we take everything you’ve learned thus far and begin to put it altogether you can
state it as a complete trading plan. To ensure you find success in your Forex you should take
the following 10 steps before you ever make a live trade, and you should work with them all
throughout your trading career.
1. Work to understand the basics of Forex before ever making a live trade.
2. Use a practice account until you are comfortable trading any currency pair in any
market condition.
3. Open your first Forex account with money that won’t affect you if you lost it all.
4. Ensure you save enough money to create an account that you can trade successfully
at a 100:1 leverage.
5. Have a clear understanding of your reasons for trading and your motivations to do
so. These are your goals that will see you through the rough days.
6. Understand how your own emotions can affect your trades, and work to keep your
emotions out of the mix.
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7. Create a money management system and use it EVERY TIME you trade (including
with your practice account). If you use the system we laid out for you it should look
like this:
a. Never risk more that 2% - 3% (define your own %R here) on a single trade
b. Never risk more than 10% - 15% (define your own maximum risk level here) of
your account balance across all trades
c. Never trade without a stop.
d. Never use stops larger than your take profit levels.
e. Avoid complex money management systems with increasing risk levels.
f. Avoid concepts like averaging down.
g. Never add to a losing position.
8. Take some time to read any news that affects the currency pairs you trade, every day.
9. Always work to ensure you have a good knowledge of the state of the currency mar-
ketplace in general (ie trends, daily trading ranges, etc).
10. Before you make a trade always look at the specifics of that currency. You should
know where support/resistance levels are on all of the charts, the average price
movement from the day prior, and anything else you feel will help you make a more
informed trading decision.
ADDING IN YOUR TRADING SYSTEM – YOUR PRACTICE ACCOUNT REVISITED

Once you have your 10 steps to success plan memorized forward, backwards, and sideways
only then should you begin looking at some of the different trading systems out there.
As we said earlier a trading system is a set of rules that allows you to systematically enter
and exit your trades. Most trading systems will also define your stop/loss and take profit
levels.
When if comes to choosing a system I’m not going to actually recommend one. There are
trend systems, scalping systems, short-term trading systems, long-term systems, those that
use just a few indicators, and those that put 20 indicators on your charts at once. The system
you choose doesn’t matter as long as it matches the following criteria:
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User Manual | 76
1. It’s simple enough for you to clearly understand
2. It fits your own trading psychology and makes it simple for you to keep your emo-
tions out of your trades
3. It fits with your money management system.
4. It works for you.
To determine #4 from the list, you should re-visit your practice account.
I told you that a practice account was the best tool you could ever use when learning
trading success, it’s also the best tool you’ll ever have to test a trading system.
Some traders will tell you that back testing a trading system is enough. You should back test
every trading system you intend to use, but that shouldn’t be the only way you test it before
trading it on your live Forex account. You should also work with the system on a practice
account before you ever risk your own money with it.
Doing so will ensure you have the final element of your success plan – a trading system that
has been tested, tried, and that works for you to earn profits over time.
Wishing you success,
Brandon Milner, Keith Peterson, and Rich Kerber
Area FX 51 System

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AREA FX 51 SYSTEM

All rights reserved.

Risk Disclosure Statement.

VERY IMPORTANT – DO THIS FIRST

Follow the instruction on the screen to complete the set up

2. Set up a demo account

Now, you can set up the Area FX 51 System

Choose your trading server and click next

Click finish button to complete your account registration process.

To install it, just follow the following procedure

1. You need to close the Meta Trader if you are running it

You just have to click Next to continue to next step

Choose “I agree….” and click Next to continue

Enter your serial number and click Next to continue

Congratulations. You’ve completed

Running the system

Your final chart will be something similar to this

LONG TRADE RULES

For Buy (Long) Trades:

SELL TRADES RULES

For Sell (Short) Trades:

When the system displayed

798 + 448 + 243 = 1489 pips.

When the system displayed

1059 + 739 + 329 = 2127 pips.

When the system displayed

608 + 398 + 193 = 1199 pips.

When the system displayed

854 + 598 + 305 = 1757 pips.

1. Successful trading is not dependent solely upon a trading system.

3. There is no such thing as luck when it comes to trading.

From that, the question then becomes – Why?

That, of course, brings us to what this manual is about.

YOUR SUCCESS IN FOREX – HOW TO USE THIS MANUAL

1. A Firm Understanding of the Basics of Forex

4. A Money Management System and an understanding of why this is important.

The answer to that question is obvious.

BID/ASK AND SPREAD

Looking at the order window below:

PIPS, PROFITS, AND TRADES

(0.0001/1.6289) x 100,000 = ~6.13911

6.13911 x 1.6289 = $10.

200 pips x $10 per-pip = $2000 profit on the trade.

(0.01/92.95) x 100,000 = $10.76.

If I lost 20 pips, my loss would be 20 x 10.76 = $215.20

If I earned 34 pips, my profit would be 34 x 10.76 = $365.84.

Commonly you’ll see leverages of 50:1, 100:1, or even 200:1.

READING THE CHARTS

happened to the price for that 30 minute time period.

Looking at the numbers:

The same data can be gathered from a bar chart:

Below is a chart with a few indicators placed on it:

2. MACD (Moving Average Divergence Convergence)

3. RSI (Relative Strength Index)

Let’s cover some of these more common indicators.

BEARS, BULLS, AND TRENDS

3. Doing Nothing (staying close to the same level).

There are a couple of reasons why it’s important to understand this.

YOUR FIRST FOREX ACCOUNT

PRACTICE, PRACTICE, PRACTICE

YOUR FIRST REAL TRADING ACCOUNT

HOW MUCH TO START WITH

THE ELEMENTS OF SUCCESSFUL TRADING