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the smallest change an exchange rate can make. Pip is thesmallest amount by which a currency quote can change.It is the last decimal of a price/quotation. For example,for EUR/USD a pip is the fourth decimal place – 0.0001;for currency pairs including the Japanese yen like USD/JPY,it is the second decimal place ( 0.01). If EUR/USD changedfrom 1.0800 to 1.0805, this would be a change of 5 pips.If USD/JPY changed from 120.00 to 120.03, this would bea change of 3 pips.Exchange rates are usually quoted to 5 figures. The first threedigits of the quote are called the big figure.PICTURE 3. Currency quotesNote that some Forex brokers also count the 5th andthe 3rd decimal places respectively. They are called «pipettes»and make the spread calculation more flexible.Calculating profitsIf you entered EUR/USD long at 1.0500 and prices moved higher to 1.0550, it means that you made 50 pips. There is a simpleformula for this: 1 pip in the decimal form / the current exchangerate of the quote currency to the US Dollar value per pip. In ourcase: 0.0001/1 0.0001 USD. It means that you will get this sumfor every pip of your profitable trade. As you can see is not a largesum of money. It’s because it is the value of a pip per 1 unit, buttraders operate with a bigger number of units — so called lots.Historically spot Forex trading is only available in specific12

amounts of base currency called lots. A STANDARD LOT SIZEequals to 100,000 units of a base currency. Later on, when Forexmarket opened for traders with smaller capital. You may comeacross such terms as «mini» and «micro» lots.LotStandardMiniMicroNumber of Units100,00010,0001,000Given all mentioned above, a VALUE OF 1 PIP is always different for you. It depends on the pair you trade and the sizeof your position in lots. Let’s see how to calculate it.So, if you open a long trade with one standard lot on EUR/USD,you will be buying 100,000 units. In this case, your profit willbe not 0.0001 USD for 1 pip the price goes in your favor, but0.0001 USD *(multiplied) 100,000 which is 10 USD.If you earned a profit of 50 pips trading 1 standard lot of EUR/USD, you profit will be 50* 10 500.You should remember that the US Dollar is a quote currencyin many pairs (EUR/USD, GBP/USD etc.). It means that the exchange rate of the quote currency to USD equals to 1. For suchpairs one pip will always cost about 10 when we tradea 100 000-unit contract (1 standard lot):100 000 * 0.0001 / 1 10 (PIP VALUE FOR EUR/USD)For the pairs where the US Dollar is a base currency (USD/CHF,USD/CAD), pip value depends on the exchange rate:100 000 * 0.0001 / 1.0195 9.8 (PIP VALUE FOR USD/CHF)13

For the pairs that include the Japanese yen the pip value is calculated as follows:100 000 * 0.01 / 120.65 8,28 (PIP VALUE FOR USD/JPY)8. What is spread?There are 2 types of currency prices at Forex are Bid and Ask.The price we pay to buy the pair is called Ask. It is alwaysslightly above the market price. The price, at which we sellthe pair on Forex, is called Bid. It is always slightly below themarket price.The price we see on the chart is always a Bid price. Lateron, we will find out how to check the Ask price in our trading platform. Ask price is always higher than the Bid priceby a few pips. The difference between these two prices is calledspread. Spread is commission we pay to our broker for everytransaction. You’ve probably faced a similar logic in a bank exchanger: rates are always different for sellers and buyers.SPREAD ASK – BIDFor example, the EUR/USD Bid/Ask currency rates are1.1250/1.1251. You will buy the pair at the higher Ask priceof 1.1251 and sell it at the lower Bid price of 1.1250. This represents a spread of 1 pip.The more popular is the currency pair, the smaller is the spread.For example, spread for EUR/USD transaction is usually verysmall or, as traders say, tight. Note that the cost of spreadon Forex is usually negligible in comparison with the expenses14

on the stock or options markets. As spread is quoted in pips,a trader can easily calculate the cost of every trade by multiplying the spread in pips by the value of 1 pip.9. How to predict where exchange rates will go?As in any market, in FX market prices (exchange rates) are driven by supply and demand: If buyers exceed sellers, prices go up. If sellers outnumber buyers, prices go down.There are many different factors which influence supply & demand for a particular currency and, consequently, its exchangerate vs. other currencies. For example, national economic performance matters a lot. If the euro zone’s GDP is higher thanexpected, with all things equal the euro will appreciate versusits counterparts and you can make a profit buying EUR/USD.You may learn about all important events from our economiccalendar (see 10).Moreover, there are so called technical tools & indicators. Whenyou see a currency pair chart in your trading terminal, it’s assumed that this chart reflects all the information available tothe market. As a result, you can use the previous price actionto foresee the future. According to this concept, previous highsand lows represent important levels where a currency pair maylinger and reverse. If such level is breached, a big move mayfollow and a big move means good profit opportunities. Moreover, you will be able to identify trends – rising, descendingand sideways – and open your positions in direction of a trendgetting profit.15

To sum up, to make a good trading decision you need to perform market analysis. There are 2 main types of Forex marketanalysis: technical and fundamental.Some traders consider themselves to be «TECHNICALTRADERS». They rely on the price movement patterns andtechnical tools in their analysis and don’t pay much attentionto the economic news flow. The only thing that matters, according to them, is the price of the currency/financial asset. Otherthings are just distractors.Another team of traders disagrees with these «technicians» andadvocates the FUNDAMENTAL WAY OF MARKET ANALYSIS.These traders scrutinize macroeconomic releases and news inorder to unravel the future direction of the market – they are theadherers of fundamental analysis.The first group of people is generally made of short-term daytraders who take positions for a day, several hours, minutes,or even seconds. Fundamental traders act more strategically.They prefer holding positions for days, weeks, or even months.TABLE 2. Comparison of technical and fundamental analysis (pt.1)DefinitionTechnical AnalysisFundamental AnalysisUses price movements them-Explains which fundamental (economic) factorsselves to predict future pricecaused the price moves seen on the chart andmovements.what factors will determine the price movementsin future.Source of DataPrice chartsEntry SignalsPrice formations and technical Buy (sell) when the asset becomes under(over)Type of TraderEconomic releases, news eventsindicator signalsvaluedShort-term day tradersUsually long-term position traders16

TABLE 2. Comparison of technical and fundamental analysis (pt. 2)Technical AnalysisTime HorizonPosition is held for days,Fundamental AnalysisPosition is held for days, weeks, monthshours, minutes, secondsMain Concepts Dow theory, support & resistance, price patternsComparison of the actual economic figures withthe expected/historical readingsBoth fundamental and technical analysis have their advantagesand drawbacks, so it’s best to combine these 2 methods. Youcan learn more about these things when you get started. FBSanalytics will be very helpful for this purpose.10. How to use economic calendar?Fundamental factors are not an abstract concept. Traders facethem daily in a form of economic news, published in the economic calendar.Let’s have a look at the economic calendar. For each date, youcan see a list of scheduled economic releases correspondingone of the major Forex currencies. Pay attention to the releasetime: make sure that you have made adjustments for your timezone. You can see that all events have different impact: thehigher this impact is, the stronger move of the market is expected, so you can focus on the most important events. Mostnews in the calendar represent economic indicators and havenumerical values. The previous reading is available in advance.The forecast is the medium forecast of 20-240 economists surveyed by big agencies like Bloomberg, Reuters, etc. The actualreading is the reading published by the official source (the nation’s statistics agency or an analytical center). For most indicators, if the actual reading is higher than the forecast one, it’s17

positive for the currency in question. Unemployment indicatorsare the exception: for them the lower the reading, the better forthe currency.PICTIRE 4.Economic calendarat fbs.comBy the way, there are different ways to use the economic calendar. Some market players trade “the news”. It means thatthey open positions in accordance with their expectations fora change in economic indicators (for example, eurozone GDPis expected to improve – we buy the euro). Others, on the contrary, avoid the news as trading them is associated with risks oftoo rapid price movements. Such traders prefer to wait until themarket “digests” the news and enter the already shaped trend.No matter what strategy you choose, we strongly recommendyou following the news in order to be aware of the market moving impulses. Some data releases increase volatility and causesudden moves on the market. The best example is the US nonfarm payrolls (NFP). The release of this indicator may lead to anunexpected closure of your position under a stop-loss order.18

11. How to open a trading account at FBSThe process of opening an account at FBS is simple.1. Visit the website fbs.com.2. Click the “Open an account” button in the top right corner of the website. You’ll need to go through the registration procedure and geta personal area.3. You can register via a social network or enter the data required for account registration manually.Let’s go through the second option. Firstly, you will need to choosean ACCOUNT TYPE. FBS offers a variety of account types. If you area newbie, choose cent or micro account to trade with smaller amountsof money as you get to know the market. If you already have Forextrading experience, you might want to choose standard or unlimitedaccount. Zero spread account suits those who can’t or wouldn’t liketo pay spread. Instead these traders pay commission from 20 fora trade. In order to find out more about the account types, check the«Trading» section of FBS website.Next you have to set the currency of your account and fill in your fullname, email and mobile number. Have a look at FBS customer agreement. Make sure that you read through it carefully.When you read all the information, click that you accept the customeragreement and then press the «Open an account» button.4. Congratulations! Your registration is finished. The system has generated for you a temporary password. We strongly recommend youto change it and create your own password.Type in the new password and press «Save password». You will seeyour account information. Make sure you carefully save your passwords and keep them in a safe place. Note that you will need to enteryour account number, trading password and trading server to MetaTrader 4 to start trading.5. Check your email. There will be a registration email. Follow the link19

in this letter in order to confirm your email address and complete theregistration. To become able to withdraw money from your account,you need to verify your profile in a PERSONAL AREA you got at FBSwebsite.How to deposit money on your accountYou can deposit money on your account in your Personal Area.Have a look at «Financial operations» section. Choose theaccount number in the drop-down menu, the payment system,specify the amount of money you want to add to this accountand choose the currency. Then press «Confirm». Withdrawalsand internal transfers are done in the same fashion.You can also choose «Deposit funds» option here and lookthrough the list of payment system and their options. You willbe able to monitor the status of your financial requests in thebox on the right.PICTURE 5. A view of a trader’s personal area20

12. The interface of MT4In order to login into the trading terminal, press «File» — «Loginto Trade Account». Enter your account number, password andserver name in the box. Check your «Connection status» in thelower right corner. If you see these green&blue columns andthe speed of your Internet connection, it means that you areconnected to the server and able to trade.PICTURE 6. MT4 interfaceAt the top, there’s the main menu, where all commands andfunctions are represented.Below you will see 4 toolbars, which are built into MT4: «Standard», «Charts», «Line Studies», and «Timeframes». The toolbars are customizable, you can manage them by pressing View— Toolbars.To the left from the chart there is a Market Watch tool. It contains the list of the currency quotes. If you don’t see there the21

currency pair you need, point the cursor bar at the window,right-click and press «Show All». As a result, you’ll see all tradeinstruments provided by the broker.To open a new chart of a currency pair, right-click on the necessary trading instrument in the «Market Watch» window andchoose «Chart Window». Another way to do this is to leftclick at this pair in the «Market Watch» window and then dragit to the chart window without releasing the click. You can alsopress File — New Chart or click on theicon («Create a newchart»).All your open accounts, advisors and indicators are collectedin the «Navigator» window. You can easily control the key components of your trade here.At the bottom of the screen you can see the «Terminal» panel.It shows the amount of money you have on our account andhow much money we’ve used on your trades. You can alsomodify your positions and review your trade history here.Choose «Account history» tab at the bottom of the terminal.Right-click in the terminal window and choose «All history».You can also request your account history for any particularperiod.Price charts consume the biggest part of the screen. Chartsare used to perform market analysis, using various technicaltools. You can add indicators, linear tools, figures and text bypressing «Insert» button in the main menu and choosing theelement you need.By default, only Bid price is reflected on the chart in Meta Trader. To see the ask price, choose «Charts» -- «Properties» in the22

program menu or press F8 key on your keyboard. In the openedwindow choose tab «Common» and put a check for «Show Askline» option. Then click OK.It is better to enlarge the chart you are currently analyzing. Youcan also customize the color scheme of every chart (right-clickon the chart — «Properties»). You can choose the predefinedcolor diagrams or set you own color scheme. If you wantto save the scheme you’ve set and use it for some other charts,press «Charts» — «Template» — «Save template». Then, whenyou open a new chart, simply press «Charts» — «Template» –«Load template».There are 3 different chart types:1. Line chart. It reflects dynamics of an asset’s closing prices.2. Bar chart. Consists of vertical columns. Highest and lowest pointsare the maximum and minimum prices of the period. Horizontal linesto the left and to the right mark opening and closing prices.3. Japanese candlesticks. The most popular chart type among the traders that is considered to be the most user-friendly type as well. Japanese candlesticks show the opening, the closing, the highest and thelowest price of a period.PICTURE 7.Structure of a Japanesecandlestick23

The most popular colors for candlesticks are green and red.For the green candle, the closing price is above the openingprice (bullish candle). For the red candle, the closing price is below the opening price (bearish candle). The wicks show thehighs and lows. Candlestick is a quick and simple way to understand what the market was doing during the defined timeperiod.Each candlestick represents a designated time period. If weswitch to M30, each small candlestick represents 30 minutesof price movement. On the H4 chart, each candle representsa 4-hour price movement.13. How to open/modify/close a trade in MT?If you know what currency pair you want to buy or sell, go to thetrading terminal to open you trade. To do this, you need to placeorders – give special commands to your broker in Meta Trader.How to open an order?There are several ways to open a trading order:1. Choose «Tools» – «New order» in the program menu.2. Right-click on the chart; go into «Trading» – «New order».3. Double-click on the name of the trading instrument in the «MarketWatch» window.4. Click on the «New Order» button on the toolbar.5. Press F9 key on the keyboard.After you execute one of the options listed above, an order boxwill open. You will need to fill in the following fields.24

PICTURE 8. A new order window in MT4At the very beginning, check the SYMBOL. Choose fromthe drop-down list (this will automatically be set to the symbol on the active chart). A corresponding tick chart appearsin the left pane.The next is trading VOLUME in terms of lot size. Remember we talked about lots (see 7)? 1.0 is equal to 1 lot,or 100,000 units. Many traders select smaller volumes.Now it’s time to set the STOP LOSS and TAKE PROFIT. Thesefields are blank by default. You can enter this information rightaway or later or choose not set these levels at all.STOP LOSS (SL) is an exchange rate at which your trade willbe automatically closed if the price goes in an adverse direction. Thus, SL limits your loss and eliminates the anxiety everytrader inevitably faces while being in a losing trade withouta plan. It’s necessary to understand that no trading system willbring profit on every trade, and losses are natural. Successfulrisk management means that losses should be minimized.25

Stop loss order can be an efficient solution for that. For example, you enter a stop order 50 pips away from your entry point.As soon as the market moved 50 pips against you, your stoporder would automatically close you out of that trade protecting you from losing more than 50 pips.If you’ve decided to use a stop loss order, it’s very important to find a good place for it. If the stop order is too closeto the current price, there’s a risk that the volatile price willhit this order during a false move and then go in the directionyou’ve expected it to, so you’ll lose money and earn nothing.If the stop order is too far from the current

Trading platforms for FX are called Meta Trader 4 and 5 (MT4 and MT5) and it can be easily downloaded from here. FBS offers such software for different operating systems, in-cluding the ones