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SyllabusIn this self-study trading course, we will reveal to you some of the basic tactics on how to conquer and trade the markets and become a Trading Matador. While trading might seem to be a complicated thing, today many of our traders are beating the markets with the help of our comprehensive guides. Our trading course breaks each topic down presenting them in the simplest way possible. In an essence, each chapter consists of a module of knowledge, while the whole trading course will take you on a unique learning curve, improving your trading skills.

eToro Trading Academy - Lessons you can earn from

Syllabus

Basics of Forex

Lesson

1

The Forex Market- What is Forex? Introduces the Forex Market and gives you an idea of its size and scope. Benefits- Why Forex trading has become so popular over the last couple of years. Basic Terminology- Learn the lingo. Trading Hours.

A quick guide to eToros revolutionized trading platform

Lesson

2

In this lesson we will walk you through the various tools and order types provided on the trading platform. We will elaborate on how to establish a Forex position, how to manage the trade while the position is open, how to close the position and most important how to review your trades.

Fundamental Analysis

Lesson

3

This lesson will cover the forces that move the prices: The fundamentals. These include interest rates, economic growth, inflation, among others.

Technical Analysis Basics - Charts, Chart types, Timeframes

Lesson

4

The purpose of this chapter is to explain the first steps in conducting technical analysis. These steps involve learning the different types of charts and how to flip between the various time frames. Finally it will explain which time frames are suited for various types of traders.

The Lines - Trends, Trend lines, Support & Resistance lines

Lesson

5

Find out why there are certain prices on the charts that act as a magnet. Understanding the location of the currency pair is the basics of technical analysis and can often reveal future price movement.

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Syllabus

Fibonacci and Pullbacks

Lesson

6

Have you ever asked yourself why the price pattern doesnt move in a straight line? In this lesson we will cover price movements and pullbacks, using one of the most popular trading tools on the market. With the help of the Fibonacci tool you will be able to measure the extent of each pull back, helping you time your next entry and exit points.

Popular IndicatorsLesson

7

After completing the basics lessons of technical analysis, this lesson will dive into more advanced tools, used by technical traders.Indicators are normally plotted on the charts to confirm the traders assumptions. For example, some indicators will show a trader whether there are signs of weakness in the trend or whether the support and resistance levels are going to be broken.

Breakouts and Swing trading

Lesson

8

Knowing the rules of technical trading doesnt always help improve your success rate. Strategies and determination are key factors when technical trading. If you are not using proven strategies along with correct portfolio management, you will find yourself knowing the theory but unable to trade the trade. In this lesson, previous material will.Be exercised through trading strategies that suite all market conditions.

Trading Examples

Lesson

9

One picture is worth a thousand words. In this lesson we will cover a few trading examples using all the material that has been taught.Examine entry points and exit points while using different strategies. This lesson is designed to help you compare your current trades by comparing them with successful ones done by our dealing room.

eToro Trading Academy - Lessons you can earn from

SyllabusA key part of trading is diversifying your portfolio. Gold and Silver trading are two of the best ways of taking part in the rapid commodity market, prospering from the different trends. With the help of this lesson and our unique trading tools you will be able to adapt your trading strategies to benefit from the stimulating world of commodity trading. This lesson among, other things, will show you why and how Forex traders quickly become accustomed to commodity trading benefiting from the various trends.

Adapting technical analysis to commodity trading

10

Lesson

Crude Oil Trading Strategies

11

Lesson

Oil is the most traded commodity in the world and the center of the multi-trillion dollar international energy business. Find out how you can take part in this volatile market

Indices Trading the World

12

Lesson

Trading stock indices lets you take advantage of big movements in the market through one simple trade . Learn how you can start trading the world.

While this course is designed to give you the proper foundation in becoming a Forex matador, practice is required and recommended after each lesson. One must remember that successful traders are not born over night and with the right motivation and determination, you too can be profiting from the markets in no time at all. Should you require any information during this course, feel free to contact your account manager with any questions you might need answering.

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Table of Contents

1.Basics of ForexThe Forex Market What is Forex?Page

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Benefits

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Basic Terminology

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Trading Hours

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What is Forex?

Over the last couple of years Forex trading, also known as currency trading, has become one of the most popular forms of investment. As currencies are traded all over the world and there is no specific central exchange or meeting place for this market, participants from across the globe have made Forex the largest traded market. Due to the amount of buyers and sellers at any given moment, traders can easily liquidate their positions with the click of a mouse, while benefiting from further advantages that this market has to offer. While some of the participants in this market are simply seeking to exchange a

foreign currency for their own purpose, for example a large U.S corporation requiring Euros to import goods from Europe, a large part of the market is made up of currency traders, who speculate on movements of exchange rates, similar to stock prices. Due to the markets leverage (a term that will be explained later on during this lesson), currency traders can take advantage of even small fluctuations and not necessarily wait for months on end to see profits. For example, an investment of only $200 can yield on certain days over $480, in less than 1 hour.

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The Forex Market - What is Forex?The Forex market as we know it today evolved during the 70s when countries adopted a floating exchange rate. This basically means that the power of supply and demand began to affect the markets price. Think about it, once upon a time most exchange rates were fixed, meaning they never changed, nowadays if you go and buy Euros; you are affecting the demand and pushing the price higher. If there is a seller willing to sell you his/her Euros, then your demand is met by the supplier and the transaction takes place In other words you are receiving your Dollars worth in Euros. As the Forex market is so vast and there are buyers and sellers taking part in it 24 hours a day, 5 days a week, a buyer will always be able to purchase a foreign currency, while a seller will always be able to find a buyer for his currencies (selling a currency).

Illustration

This is called liquidity and basically what it means is that traders are always able to open and close positions - buy and sell currencies.

Today participants range from small investors to large ones, all benefiting from this active market.

So, Who are the Major Players?Government and Central Banks Even though governments and central banks try to keep a free market, they can often have a major influence on currency exchange rates due to various methods they use to stimulate the economy or restrain the economy from overheating. For example, towards the end of 2007 the Federal Reserve began to lower interest

rates to help the U.S economy. This had a direct affect on the Dollar affecting its price. Another example is China, which has been keeping its Yuan low against the U.S Dollar for years.

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The Forex Market - What is Forex?Banks In addition to central banks, commercial banks take a major part in the Forex market. These banks transact with each other, exchanging currencies on a day to day basis. The larger the bank, the more volume it trades. Hedge Funds A hedge fund is a fund that can take both long and short positions in all the tradable markets, including Forex, to reduce future losses. Hedge funds will often use the Forex market to preserve future profits. For example, if a hedge fund located in the U.S, is trading securities in Europe, the last thing the hedge fund manager wants is to see is all of his profits vanish into thin air, due to the devaluation of the EURO. In other words he doesnt want to see his profits being offset by losses when converting back his money into Dollars. A hedge fund will often trade the currency market to prevent devaluation of its portfolio. Retail Forex Brokers Unfortunately most individual investors cant gain access to the interbank market, due to low volume. Over the last couple of years and especially with the development of the internet smaller brokers now allow individual traders to take part in the world of Forex trading. Brokers like eToro, who are regulated by various authorities such as the NFA, provide direct access for retail traders (individuals), allowing them to trade low volume lots. Interbank market- A group of large banks, that buys and sells currencies between one another. Retail traders, dont normally have access to the Interbank market. Individual Investors Individual market investors make up a fair portion of the daily volume traded on the Forex market. As on stocks, various currency pairs are traded throughout the day by individuals through retail Forex Brokers. While most of the trading is speculative trading for individual portfolios, some have taken this form of income to the next level, becoming money managers of numerous accounts.

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Benefits

Forex trading has become so popular over the last couple of years, that many portfolio managers are now diversifying their money into the various pairs, to prosper from the daily trends. In addition to conventional trading, hedging strategies are often used on currency pairs to offset other open positions on other tradable assets. Once thought as only a rich mans game, Forex trading is slowly catching the attention of smaller investors, taking part in this dynamic world due to its enormous benefits and potential profits. Forex Market Characteristics1

Daily trade of over $3 trillion, 10 times larger than any stock market. You can always buy or sell a position. 24 hour market- Reduces the after hour surprises like on Stocks. Leveraged market- Allowing investors to start off small but trade large amounts. Globalization- Allowing traders to participate from across the globe.

Advantages over Stocks Enormous liquidity - Often stock traders find that they cant liquidate their positions as there are no buyers in the market. You must remember that unlike stocks, currencies are traded on a global scale and not just on one exchange. This means that you can always open and sell a position. Complete control - Stock sessions are only normally open for about 7 hours a day. Just imagine if the CEO of stock2 1

ABC suddenly resigns during the markets closed hours, can you image what will happen to your stock? In Foreign exchange, the markets are open 24/5, meaning that you have complete control of your positions at all times. The Market closes on Friday after the U.S stock session at 21:00GMT and re-opens on Sunday at 22:00GMT. It is important to note that even though the market closes you still have the option to hold the position open.

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BenefitsLong and Short Positions - Why only profit from something going up? Forex traders can profit from the market, irrespective of the trends direction. For example; by taking a glance at the following chart you can see that the EUR/USD currency pair begins by increasing, but slowly forms a down trend shortly thereafter. Basically what it means is that at first the Euro is evaluating against the Dollar, but thereafter the Dollar gains back its strength as the price decreases.3

Advantages over Stocks What this means is that when the pair is going up you can profit from the Euros strength by buying the pair Long. When the pair is going down you can profit from the Dollars strength by selling the pair Short. Leveraged Market- In order to purchase a stock that costs $25, a trader will normally require a sum of $25, unless his broker is willing to give a small leverage.

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BenefitsTo purchase 10 shares at a price of $25 per share requires $250. Thanks to leverage, Forex traders can purchase various currencies with a much lower investment. On the eToro Platform you can customize your leverage from 5:1 and up to 500:1, allowing you to trade larger positions than the amount in your balance. This allows a trader to determine his/her own leverage. If you are more of a risk taker, then you can increase you leverage level. If you are more of a conservative person, you can set your risk level (leverage) to a much lower level Please note that leverage will be explained in more depth later on in this tutorial Commission Free- Unlike stocks whereas brokers charge their traders a flat fee for opening a position, Forex brokers only charge the spread (the difference between the bid and ask price) Thousands of stocks vs. 6 major currency pairs- Often new stock traders lose their confidence due to the vast amount tradable assets. What to buy? When to buy it? Which sector to choose from? Even though the Forex market has dozens of pairs to choose from, most of the daily volume is circulated around 6 major currencies. These 6 currencies provide the bulk of the Forex trading transactions.5 4

Major CurrenciesUnited States Dollar Euro-zone Euro Japanese Yen British Pound Sterling Swiss franc Australian Dollar

CurrencyUSD EUR JPY GBP CHF AUD

Code Symbol$ $

No manipulation- Due to the vast amount of traders that take part in the Forex market from across the globe, it is virtually impossible for one person or investment firm to influence the price movement.

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Basics of Forex

7

Forex Terminology

Similar to every new field one must learn the fields basic terminology or in other words the market lingo. In this section we are going to explain the common terms used by Forex traders so that in the following lessons, you will understand the concepts when explained along with charts. In the Forex market, a currency is always traded in a pair. Remember that if someone living in Europe wants to buy Dollars, he or she has to sell (convert) his/her Euros to receive the same equivalence in Dollars. Normally that same person will go to an exchange and say:

Can you please change me over these Euros to Dollars.

When requesting to change Euros, the dealer at the exchange immediately does a transaction that involves two currencies; the EURO and the Dollar, or in other words the EUR/USD pair. He/she buys Euros with your Dollars, at the current market rate. According to the previous example we saw that in order to take part in the Forex market two different currencies are required. These two currencies together are known as a pair. For example the USD/JPY pair (U.S Dollar against the Japanese Yen).

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Forex TerminologySymbols - as Forex is traded all across the globe, an international dialect must be used among the participants to help them understand and communicate with each other. To recognize the different pairs each currency is abbreviated by a minimum of 3 letters, and is classed as a symbol. For example; Great British Pound- GBP New-Zealand Dollar- NZD Bid: a price at which a broker/dealer is willing to buy. Ask: a price at which a broker/dealer is willing to sell. If you recall in the Forex benefits section we mentioned the word spread. Basically Forex brokers like eToro dont charge commission, either they charge a spread. The spread is the difference between the BID and the ASK price.

Basics of Forex

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Forex TerminologyPip or Points: Price Increase Point (PIP) is the term used in the currency market to represent the smallest incremental move an exchange rate can make. Leverage (or in other words your risk level): The amount of credit you can get from your investment, i.e. 100:1 leverage is a 1% margin requirement. Traders in the Forex market normally take advantage of the day to day movement using leverage.For example if the rate of the EUR/USD is now trading at 1.3332 and then it increases to 1.3333, it means that the EUR/USD has increased by 1 PIP. For example, if you have $300 and want to take advantage of a 50 pip move then your profit will be as follows; EUR/USD rate = 1.3332 According to the EUR/USD rate above, your $300 are worth $300/1.3332= 225 If the price of the EUR/USD now jumps up by 50 pips to 1.3382 then your Euros will be now worth in Dollars the following: 225*1.3382=$301.10 You made a $1.01 profit. Not really worth all the hassle is it?

To make the Forex market more attractive brokers allow you to use leverage, meaning that they allow you to trade on their money. Instead of trading on just $300 you can now trade on a leveraged account.

For example; $300 x (200 leverage) = $60,000 of buying power, This means that your trading capital is now $60,000 and not $300.

Now lets see now how much can profit from that same 50 pip move: Step Step1 2

$60,000/1.3332= 45004.5 45,004.5*1.3372= $60,225

Your Profit: $60,225-$60,000= $225 Your small $1 profit has now turned into a $225 profit

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!!!! a ge!!!!!! r t is leve T ha

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Important note: All brokers have special protection orders that prevent you from losing more than your initial investment.

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Forex TerminologyPositions Long Position: Is a position where profits are made from an increase in the price. For example, if you buy the Euro and Sell the Dollar. Short Position: Is a Position where profits are made from a decrease in price. For example, profiting from the declining Euro and the rising Dollar. Lot: Is the standard size of a transaction; one standard lot is equal to 100,000 units of the base currency or 10,000 units if it is in a mini account. Daily High: The highest price the currency pair traded that particular day. This is also known as an intraday high. Daily Low: The lowest price the currency pair traded that particular day. This is also known as an intraday low. Tick: The minimum change of a price. Volatility: Refers to the tendency of prices/variables to fluctuate over time. It is most commonly measured using the coefficient of variation (the standard deviation divided by the mean). The higher the volatility, the higher the risk involved.

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Market Hours

Even though we mentioned before that the market is open 24/5, new traders tend to think that they can trade whenever they choose. Even though that is true, it is best to open and close trades when volume is high. By taking a look at the diagram below you can see when the Forex market is most active, therefore, having the largest outcome of trades and presenting the most movement.

CityTokyo New York London Sydney

Market Hours7:00 pm to 4:00 am EST 8:00 am to 5:00 pm EST 3:00 am to 12:00 noon EST 5:00 pm to 2:00 am EST

ConclusionIn this lesson we covered the basics of the Forex Market, the terminology and the major participants. In our next Lesson A quick guide to eToros revolutionized trading platform we will cover our unique eToro trading platform. Before opening positions it is important to understand thoroughly all the features we provide and the different market orders. Should you have any questions regarding this lesson, feel free to contact your personal account manager.Congratulations! You have now finished the first lesson.

Basics of Forex

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