As Day traders we are attempting to make only high probability traders. In other words we only want to trade when we believe the odds are in our favor. If we want to take advantage of the probability factor, we should not change our trading strategies depending on profit or loss on individual trades. Whether we make profit or loss if we trade in a systematic and disciplined manner, we will still be in the game till the game till the end until we book profits, even if we incur loss continuously in first few trades.

Now we will understand how probability factor affects our trading by analyzing the individual and weekly results of two weeks in the form of a small statement.

If we compare the results of two weeks, we will find that at the end of every week we got profit in 21 trades and we incurred loss in 9 trades on average out of total 30 trades on every week. Our percentage of success for every week is 70%.

When we compare individual trades, we will find that we incurred loss in all our trades on both Monday and Tuesday in second week. Since we have proceeded with our trading strategy without changing or modifying it even after incurring loss in all trades for two days, again from Wednesday onwards the odds turned in our favor and we finally finished the 2nd week with our regular success rate.

So, it is very very important that if we want to take advantage of the probability factor, we should not change our trading strategies depending on profit or loss on individual trades. Whether we make profit or loss if we trade in a symmetric and disciplined manner, we will still be in the game till the end until we book profits, even if we incur loss continuously in first few trades.

Another important point in this probability analysis is to realize that regardless of the system or method you use to trade there will be occasions when you have losses or even string of losses. When these losses occur, it is important to have faith in your day trading technique and you should not lose faith or you should not change your trading techniques or methods depending on loss or profits you earn on individual trades.

The final point to be made in the above analysis is that as we can see from the above examples, any trading techniques or methods will go through tough times when it has more losses than wins. There is  where money management comes in to play. You should follow strict money management principles which helps you to stay in trading even if you incur losses continuously in all trades for few days. So if you want to take complete advantage probability factor, you should also follow strict money management techniques like following strict stop losses to keep all your losses small and utilizing only little multiple exposure on your margin money depending upon your trading methods etc.,

DRAWDOWN : Drawdown is a frightening word in day trading. But every day trader will experience some drawdown. In day trading, drawdowns are simply unavoidable. We can define drawdowns as the percentage of money we lose from our capital after finishing a trade. For example if you start day trading with a capital of $1500 and a few trades if you lose $300 your draw down would be 20%.

Now let’s say you make more trades and gain $600 which brings you to $1800($1200+$600 = $1800). After this on next trade you lose $300. Now your draw down would be 16.7% (percentage of $300 in $1800). The $1800 was your equity peak as that was the highest point in the period we looked at. Maximum drawdown is the lowest point your account reaches between equity peaks in a given period. For example, if you started your account with $1500 and the lowest amount you had in your account over a six month period was $750, then you had a 50% draw-down. You would need to make $750 from the lowest point in order to get back to break even.


Detailed table below shows how much percentage of profit you require to recover a given percentage of drawdown.

Draw-down recovery can confuse many traders. If a trader loses 20% of his account he thinks he needs to make 20% in order to get back to break-even. This is in fact not true. If you started with $1500 and lost $300 (20%), you would need to make 25% in order to get back to break-even. If you calculate $300 as a percentage of $1200 (not the original of $1500) it works out to 25%. As your draw-down increases, the amount you need to make back increases faster. Now you must be aware that following strict money management techniques is as important if not more important than your trading technique or trading system! 

To reduce draw-down in your trading career, you should you should concentrate on two important things. One is following strict risk management techniques and the other is following strict money management techniques.

In risk management, you should follow strict stop loss levels. You should minimize your losses by following strict stops and you should exit from a trade with a small loss if the trade goes against your expectation. If you stop, then you will be able to identify your risk.

In money management, you should not utilize too much multiple exposure on your margin money. If you use your multiple exposure on your margin money, the draw-down will multiply as per the rate of your multiple exposure. Suppose if you use 5 times multiple exposure on your margin and if you incur 4% loss on that trade, the draw-down would be 20% (4 x 5 = 20). 

If you habitually utilize 5 times multiple exposure and if you incur 4% loss continuously in 5 trades, you will lose all your capital and you will be thrown out of business. Even if you incur loss continuously in 3 trades, the draw-down would be 60% and you will be in do or die position to earn more than 150% of profit on your remaining capital to simply get back to break even. So, you should plan your money management in such a way that even if you continuously incur loss in 20 trades one after the other, you should be in a position to stay in the game till the end until you book profits, even if you incur loss continuously in twenty trades.

You should always remember that following strict risk management techniques and money management techniques is more important than following profitable day trading techniques and stock selection methods to earn profits in day trading. You should only risk a small portion, again repeat a small portion of your trading capital in one trade.

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Risk Disclaimer:
You must know that trading in stock market and currency exchange market has varying element of risk, and its is generally not an appropriate avenue for someone of limited resources or limited investment and limited trading experience and low risk tolerance. Further, trading in Stocks Market and in currency exchange market is regulated by and is subject to applicable laws in your jurisdiction and may or may not be permitted under such applicable laws. Before deciding to invest in stock market and currency exchange market you should carefully consider the applicable laws, your investment objectives, risk appetite and your current financial condition. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. In case you suffer adverse consequences or loss, you shall be solely responsible for the same

Why day traders incur Heavy losses?

Why day traders incur Heavy losses?

Most day traders incur heavy losses in the first few weeks of their trading and leave day trading after losing all the capital.  why would they lose all their money and quit trading? not because they are inefficient. These day traders have just an above average education on financial markets and lack of trading education.


All newbie traders think that trading is easy and a way to quick money.  They think that since they are successful in their early activities they can trade consistently with high accuracy. They think that they can invest small amount and trade for large LOT SIZE to earn big profits by utilizing high LEVERAGE on their margin amount and fail to understand the effect of trend reversal on their trading capital because of too much exposure. They ignore to understand that day trading is a highly challenging business which will reward only to disciplined traders. Most importantly they ignore to understand that they should learn before starting day trading.

you should thoroughly educate yourself to earn consistent profits in day trading, also you need to educate yourself on the psychological approach of the market and strong discipline to follow money management techniques for your account size. You should also educate yourself in the correct entry and exit methods of your currency pair.

Trading is not an exact science, But more of an art, There is no magic formula. Trading is all about probability. Art to correctly apply from a set of rules on specific chart patterns carefully and allocating the probability of that event to result in success.  The way you approach the market psychologically has much to do with your success as any trading plan.


Money management plays a crucial role in becoming a successful trader.

An adequately funded account is necessary, not only to be able to take the traders you want but also you don’t feel every trade is a life or die situation. If you have an only small capital, trade with that capital only. Don’t try to make big money by utilizing up to high leverage on your small capital. To become a successful trader ask and answer yourself the following questions How much equity do I need to start? How much should I risk on each trade? Am I undercapitalized?

As you begin the journey to become a successful trader you will confront your deepest fears. Your armor on this journey will be confidence, knowledge and believe in yourself that you can achieve your dream.

As a day trader, you have to realize that you have no control over the market and if you accept this fact then you should also accept that you cannot influence the direction of the market.

Intense excitement when you hit a winning streak is almost detrimental as becoming depressed when you have a string of losses. As a day trader, you have to learn to balance the state of impartiality over winning and losing of trades. You have to accept the fact that you will have losing trades readily as you will have winning.

Reach the stage where you comfortably accept the loss for the knowledge that your method of trading will produce profits in the longer term.

Once you become a disciplined day trader, then the possibilities are endless to earn consistent profits in a day trading.

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Risk Disclaimer:
You must know that trading in stock market and currency exchange market has varying element of risk, and its is generally not an appropriate avenue for someone of limited resources or limited investment and limited trading experience and low risk tolerance. Further, trading in Stocks Market and in currency exchange market is regulated by and is subject to applicable laws in your jurisdiction and may or may not be permitted under such applicable laws. Before deciding to invest in stock market and currency exchange market you should carefully consider the applicable laws, your investment objectives, risk appetite and your current financial condition. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. In case you suffer adverse consequences or loss, you shall be solely responsible for the same

Paper Trading

Paper Trading For Beginners.

What is paper trading and benefits of paper trading.

Paper trading is nothing but  trading with pen and paper without actually entering into any  monetary transaction. In paper trading you test your knowledge,  understanding accuracy and performance of you trading strategy . Instead of actually buying and selling currency you decided to trade, you actually mark the entry price in your notebook,  as the market touches the entry price and mark the termination of the trade, either profit booked or stop loss hit on the same paper. This trading record will tell you how your trading strategies working and how effective are you in initiating trade using your currency pair selection methods.

you can at least spend a few weeks paper trading before you go live with real money and time to familiarize yourself with your currency pairs selection methods. After learning this technique you should open a trading account in demo, 

then watch the real time price action of your selected currency pairs to spot buy signals as per your technique. If the price action gives buy signal you should initiate a Trade on paper by writing down the exact entry price, exit price and stop loss price  and open the same trade in demo account, After finishing the trade you should also write down whether you have made profit or loss on that trade. For every trade, you should also write down your comments on the trade regarding how you have identified buy signal, How you have classified that buy signal, (as strong signal or medium), if it ended in profit, what you have learned from that trade and if it ended in loss what you have learned from that trade.

In paper trading, the impact of fear and other emotions will be very minimal since there is no money involved. Naturally you will be very confident while paper trading when compared to real trading. This results in high success ratio. So, even if you have come out with high success ratio in paper trading, you then invest decent capital in real trading account during first few weeks and after earning profits you can invest large capital to earn more profits.

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What is Moving Average

The moving average or MA is one of the most common and trend following technical indicators. Having spent little time looking at price charts you must have noticed that most often price of an instrument will move up and down. In fast moving markets you may find that the price be spikes up only to drop straight down later before surging up again increasing the potential for false signals. the moving average smooths the data and help filter out the noise from random price movements and makes it easier to spot the trend. 

MA are used to determine the direction of trends and to confirm reversals, To understand MA  when the price is above the MA line it is consider the currency to be in an uptrend in the opposite manner if the price is below the moving average line it is considered it to be in a downtrend. 

The crossover of the moving average line usually considered as trend reversals. Moving averages can also used to identify areas of support and resistance, many traders consider the moving average line as support and resistance level indicator and trades based on it. 

Often the price of an instrument will find support at the moving average line when the trend is up and will find resistance at the moving average line when the trend is down. so moving average will helps to identify whether the currency is moving up down or if it’s ranging or it can tell you if a trend is still in motion and whether it is reversing or losing momentum.

Moving average is considered as trend following or lagging indicator, therefore it will not warn you in advance about the trend reversals but it will confirm when a trend change has taken place at the most basic level when the price crosses up and over the moving average. traders consider this as a signal to buy once it crosses down under the moving average line it is considered as a signal to sell. 

There are two most popular type of Moving average.

  • Simple Moving average (SMA)
  • Exponential Moving Average(EMA)

Simple Moving Average 
Let’s discuss the simple moving average or SMA first and show you how its calculated, A simple moving average is formed by calculating the average price of a currency over a specific number of periods/days. it is possible to create moving averages from the Open, High, and low value  but most moving averages are created using the closing price. a 10-day simple moving average is calculated by adding the closing prices for the last 10 days and dividing the total by 10, this calculation gives equal weight to each day its called  moving average as the oldest price is dropped each time a new period becomes available.

Ensuring that the average is based only on the last X number of periods in our example for the last 10 days have in mind that the longer the simple moving average period the more it lags and the slower it is to reach to the most recent price movement and this brings us to its downside as equal weight is given to all periods considered in the calculation the simple moving average is slower to respond to rapid price changes that might prove to be important so how you counter this with another type of moving average either a weighted or an exponential moving average the weighted and exponential moving averages are calculated differently from one another but both types give more weight to recent periods and thus more emphasis on what traders are doing at the moment so as a result weighted and exponential moving average responds faster to price action  by distributing more weight to recent periods and less to older periods.

They reflect a quicker shift in sentiment which can be due to changes in supply and demand or important news events that impact the traded instrument to illustrate what we mean if you were to plot an exponential moving average and a simple moving average on a chart. you will see that the exponential moving average is closer to the current price than the simple moving average. apart from the type of moving average you also have to decide on the time period. this will largely depend on the type of trend you are analyzing.

Commonly used time periods 10 to 20 for short term trends
50 for midterm and 200 for long term trends. 

which moving average to use and the period will depend largely on your objective.

EMA or Exponential Moving Average
     Exponential moving average are also called exponentially weighted moving average and calculated by applying more weight to recent prices to reduce the lag as in simple moving averages, 

The weight applied to the most recent price depends on the specific period of the moving average, shorter EMA period to add more weight on the recent price. calculating EMA is not as simple as calculating an SMA.

The important thing is that the exponential moving average puts more weight on recent prices. therefore, it reacts quicker to recent price

Use simple moving averages if you’re planning to hold a position for a longer period of time as exponential moving average might be too sensitive and give false breakout signals you should also use simple moving averages if you just like to filter out the noise and random price fluctuations to determine the overall market direction. 

Exponential Moving Averages can be calculated in two ways – 
1. percent-based EMA, A percent-based EMA has a percentage as its single parameter 
2. period-based EMA, period-based EMA has a parameter that represents the duration of the EMA.

The formula for calculating exponential moving average is:
EMA (current) = ((Price (current) – EMA (prev)) x (Multiplier) + EMA (prev)

  • Percentage-based EMA, “Multiplier” is equal to the EMA’s specific percentage.
  • Period-based EMA, “Multiplier” is equal to 2 / (1 + N) where N is the specified number of periods.

The Choice of Moving average depends on your trading objective, time duration, type of trading. 

Introduction to Technical Analysis

When it comes to trading Fx or any instrument we look at technical analysis and chart to interpret the future price movements, but there is a common misconception among the traders. 
Technical analysis is not magic system that can predict each movements in the market and  most traders do believe that if only they can get a chart right, if only they understand the moving average right, if only they understand the MACD right they can become rich, Im so sorry because i have to disappoint you, Understanding technical analysis can only helps you improve your success ratio. 

For trading there are two main approach to analysis Market.

  1. Fundamental Analysis 
  2. Technical Analysis

Both can be used effectively if understood and put to use properly  

Fundamental Analysis: 
                Many traders use Fundamental Analysis as it would be easier to grasp the outcome of News releases, Headlines, Political Economic Event, Conflict news between two nation, terror attacks, quarterly earnings report, but the fact is Fundamental analysis cannot predict weather the instruments is going up or down, and it doesn’t tell you how far it goes up or how far it goes to fall down. 

Technical Analysis: 
                    Technical analysis is method of analyzing the historical price movements and volume to determine the probabilities of future price movements of securities like stock, currency, index etc,,, this technician looks to take emotion out by applying rules.A fundamental analyst looks at economic trends of a company or a country if an asset is price is lower than the expected he would buy, if the price is higher than expected he would sell, 
Very often technical analyst is not concerned with the fundamental strength or weakness of a company, the prevailing economic situation, corporate performance or government policies and believes that the chart has every bit of information and he looks weather the market is over brough or oversold and understand the mass psychology bias of buyers and seller in the market technicians believe that history tends to repeat, 

                                   “I believe the future is only the past again, entered through another gate.” 
                                                                                                                             – Sir Arthur Wing Pinero, 1893

The real time demand and supply for a particular instrument determines the price of that particular instrument at that particular time, Markets are manifestation of human psychology and they are driven by the emotional forces of greed and fear. These emotional forces influences and determines the demand and supply for stocks since the traders emotion and estimations change continuously for many reasons, the price of instrument will also fluctuates accordingly as per the demand and supply forces. This fluctuation serves as basic for technical analysis to predict future price movements. 
Demand increases if the trader hopes the profit increases, supply increases the the trader fear of loss increases, the imbalance in demand and supply forces results in rise and fall of prices .
With technical analysis a trader can easily understand the entry and exit points, price trend and other factors and predict where the price is heading. 

Principle of Technical Analysis, 
Each price represents a momentary consensus of value if all market participants, large commercial interest and small speculator, fundamental researcher, technicians and gambler at the moment of transaction 
Technical analyst believe that the current price chart reflects all the possible information. The market price reflects the sum knowledge of all participants, like traders, investors, portfolio managers, buyers, selles, market strategist, Technical analyst looks at the price and what it has done in the past and assume it will perform similarly in future under similar circumstances. 
A technical analyst know the price of everything but value of nothing and they focus only on two factors, the current price and historic price. 
The principles of support, trend, resistance, and trading in range can be used on any chart, Technical analysis can be used on any time frame and on any tradable instruments like stocks, commodity, Forex. Etc. 

Chapter-2 Beginners, Terminology

To become a successful trader one should  first be familiar with the basic terminologies “words that we use in everyday trading “ these concepts are easy to understand and require no financial background

Base Currency and Quote Currency ​

The quote currency tells us how much it is worth against 1 unit of the base currency. So if we say the EURUSD is trading at 1.3000 it means 1 euro equals $1.30. 

“Got it? Nooo”
Here i make even simpler to understand.
Currencies are always traded in pairs, this is because we always buy one currency by selling the other currency simultaneously


The first currency mentioned in the pair”EURO” is known as the base currency and the currency on the right USD in called the quote or secondary currency. Whatever action we do weather buying or selling always happens to base currency, if we buy EURUSD it means we are buying the base currency EUR by selling USD and if we want to buy USD then we simply sell the pair.

PIP or Point in Percentage

Pip or point in percentage A pip is a number value. In the Forex market, the value of the currency is given in pips. One pip equals 0.0001, two pips equal 0.0002, three pips equals 0.0003 and so on. One pip is the smallest price change that an exchange rate can make. Most currencies are priced to four numbers after the point. 
​Pip is used to calculate the profit and loss of each trade, the movement of EURUSD currency pair from 1.2000 to 1.2001 is a movement of one pip, if the price quote has only two places after the decimal like most commodity the pip equals to one cent.

BID price, Ask Price and Spread

All currency pairs have two prices, as we buy at a price and sell at different.

BID Price : A bid price is the highest price that a buyer is willing to pay

Ask Price : Ask price is the price at which the market is ready to sell. 

Spread : The difference between the price you can sell it and the price you can buy is spread at 
 Forex prices are always quoted using four numbers; so, for this example, EUR/USD bid price is of 1.1200 and ask of 1.1205. Thus, the spread would be 0.05, or $0.0005

Leverage: When most people think about trading, they think they would require a large amount of capital to begin, well this may be the case for stocks, bonds, and other investment, forex is much more accessible due to use of leverage. leverage is used by both investors and companies. Investors use leverage to increase the returns that can be provided on an investment, and brokers makes profit on spreads by allowing you to trade larger units/Lots

Leverage is the percentage of funds that you are borrowing from your broker and its usually stated in Ratio like 50:1 or 500:1, what it means to you as a trader, In the case of 50:1 for every $1 you invest your broker will let you borrow $50 and a trader using higher leverage are able to control a larger funds than what you are originally invested, and that can be really great if your trades are going in your direction, but if you are on the wrong side of a trade, you an lose a lot of money very quickly


A lot is what you determine for each pip you want to earn when you place a trade of certain units and these units called Lots. 

There are basically three lots size.

  1. Micro Lot = 1000 Units 
  2. Mini Lot = 10,000 units
  3. Standard lot = 100,000 units.

Chapter-1 Beginnners, Introduction to Forex

What is Forex

Before we understand about Forex market, let’s understand what is MARKET?  I hope you all are very familiar with the market,

Yes, you got it Right. The same market you visit to your daily life needs, when you are in need of fresh green vegetable you will visit the nearest Vegetable market, or if your requirement is meat, you will visit the meat market,

A market is a place, platform or system to exchange of goods and services or in simple terms to where a buyer meets sellers. 

There are various segments of market namely Real Estate Market this market typically involves agents representing both buyers and sellers for land, Job Market, a platform to connect employee and employer 
And Financial Market, A platform to exchange economics and the financial instruments are Stocks, Currency/Forex, Bonds, derivatives, money market, commodity, cryptocurrency.

Now let’s understand about Forex. 
Forex is an abbreviation of Foreign Exchange, also known as Fx or currency market and it is a place currency are traded, and the daily turn over exceeds over 5 trillion dollars, If compared with combined world stock market transaction, It doesn’t even come close to this market.

Why Fx Market.
Exchanging currencies are important to conduct imports and exports, a country like India imports the mobile phone from China and has to make payment in Dollars equivalent to chines yens, and India on the other side provides software services to the European country such various purpose of exchanging currencies globally makes the foreign exchange market large and easily liquid, 

Pros and Cons of Fx
Fores is a great starting point for traders, but many do end up trading excessively, because of leverage, where you only have to put up two percent of an overall contract size compared to one with the stocks, a small account can trade large size where win can be quite big you only need small deposit to obtain it. 

Fx is a 24 hour market, with a laptop and internet connection you can trade any hour of the day from anywhere in the world. 

Now, let’s discuss about the downside of forex, well let’s get back to leverage.

  • Big losses, If you are clueless about the exposer and how to wisely trade with leverage.
  • 24 hours, yes you could trade around the clock but there is handful of peak hours. When the moves are large it is worth your time trading.
  • No central Exchange, The exchange is actually a broker but now regulation has clamped down the bucket shops that have dominated the forex industry for years.

Learning to trade Forex can be a wonderful opportunity, success only through determination and professional mindset with understanding risk. 
Trade Forex like running a business with a reputed broker

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