4 things you have to know to be a successful forex trader...

4 T H I N G S Y O U H AV E T O

K N O W T O B E A

S U C C E S S F U L F O R E X

T R A D E R

HOW TO BECOME A TARGET TRADER

IN THE FOREX

4 THINGS YOU HAVE TO KNOW TO BE ASUCCESSFUL FOREX TRADER

Table of Contents

Introduction to Forex Target Trading 3

Who are the Big Boys? 4

The Trend 8

Fibonacci ratios 13

Support & Resistance 16

Divergence 17

Summary 20


Introduction to Forex Target Trading

Thank you in advance for taking the time to read this Forex e-book. First, let me say that I wantyou to succeed. Like most traders, when I first saw the Forex market I said to myself:

“How hard can this be…. you buy low and you sell high. This is a cakewalk.”

Several thousand dollars in the hole later, I realized that it was not the cakewalk that Ienvisioned. I expect you are there also.

There are literally hundreds of Forex Training books out there. I have readmost of them. I picked up lots of pieces along the way. That is one of theproblems with trading. As I explain to my students, the Forex is like getting a5000-piece jigsaw puzzle every day, with all the pieces mixed up and someonehas taken away the box cover. You must figure out what the puzzle is by

putting one piece at a time into the puzzle and then suddenly, one piece goes in and yousuddenly know what the box cover looks like. All the books I have read, my personal mentorsand all the Professional Traders I have met have contributed their pieces of the puzzle.

We developed a methodology based on what we learned about how the Big Boys operate in themarket. The Big Boys are those large banks who operate daily in the forex market. Our dailyjob is to figure out their agenda and then execute our trades in concert with them. We want tobe a sniper not a machine gunner. To the novice retail trader, the market looks random andchaotic with no logic to it. That could not be further from the truth. This eBook will reveal toyou exactly how the market makers manipulate the market and how you can profit from theirmoves in the market.

Surprisingly, it is not that hard, requires no rocket science or fancy algorithms and is availableevery day to every trader on the planet.

So, let’s get started.


Who are the Big Boys and how can I trade withthem?

Here are the top banks in the Forex:


As you can see, these top 15 players (Big Boys) account for about 86% of everything you seewhen looking at a chart. So, when these players create a trend, they mean business and theywant that trend to happen. This is because 80% of the money is made following a trend andonly 20% is made against the trend. Once a direction is established, the Big Boys use previoussupport and resistance, Fibonacci ratios and the Fibonacci sequence to keep the move going. Atthe end of the move, divergence ultimately tells the traders that we are nearing the end of thismove and a correction is imminent.

Is there a formula that will help a trader learn the above and ultimately become successful in theForex?

YES! And here it is:

Trade For Pips DailyObviously, this is what we want to do each day, but the above is a mnemonic. A mnemonic isan easily memorized saying in which the first letter stands for something I need to know.

T = Trend

F= Fibonacci ratios

P= Previous support/resistance

D= Divergence

Now the interesting thing is that when the above comes together on a chart we will see what wecall Wide Open Spaces (WOS) and we can also see that the Big Boys almost always run thosebig areas in just a short while. So, guess where your trade is hiding? In those Wide OpenSpaces.


Here is what I mean:

Interestingly, the first time traders see this, their initial reaction is usually “Wow, you have toomany lines on your chart, man!”

But what they fail to correlate is that every time they made a trade near one of these lines andthe market went against them, they could have negated that loss. If they had only known thatBig Boy level was there, they would not have made the trade and waited for the wide-openspace instead above or below it depending on market direction. And you can clearly see thatonce they broke into that wide-open space, the Big Boys moved right to the targets


We figure out the Big Boys by using technical analysis. Ok, this is where most traders fail totruly put their effort. Most retail traders opt for a shortcut because they want to make moneyfast. Technical analysis is time consuming and requires real work in the charts and it is NOTtrading. Technical analysis forces us to find all the areas where we CANNOT trade, so that theonly thing left in the chart is an area where we CAN trade. In other words, a WOS.

Mark Twain said this:

The dictionary is the only place where success comes before work.

Traders erroneously think (as I did) that this market is simple and should propel you intostratospheric money making in weeks. NOT SO. Most traders can see the market (after thefact) but make the mistake of NOT understanding the WHY of the market move and concentrateon just getting an entry and then clicking their profit out WAY TO SOON.

To be successful, you have to learn to “LET YOUR WINNERS RUN and CLICK YOURLOSSES OUT EARLY”. Unfortunately, for the vast majority of traders it is just the opposite.We “LET OUR LOSERS RUN and CLICK OUR WINNERS OUT EARLY”.

WHY?

For most traders, it is a combination of the emotions of Fear and Greed and the LACK OFKNOWLEDGE IN ANALYZING THE MARKET. Most novice traders don’t know wherethe market will go so they take any small profit just so they can have a winner. Sound familiar?If you take only 5 pips on a trade and then accept one loser with a 30 pip stop, it takes you 6 (5pips) trades in a row JUST TO BREAK EVEN. You must have 90%+ winners to 10 % losers tostay ahead of this losing curve. If you can do that, then you are one of the greatest traders on theplanet and can stop reading this eBook. If not, keep reading.

Real Professional Traders know EXACTLY where the market is trying to go and they doeverything in their power to stay in the trade until that destination is reached. In other words:they analyze the market, determine where it should go, then at the opportune moment they enterthe trade (not too early or you live with a large drawdown – a move AGAINST you), manage itto a profitable position and then manage it to the destination.

Surprisingly, this analysis is not that hard, has predictable results and does not require that yoube a rocket scientist. There are four things that you must know. If you know these four thingsyou should have a good idea of where the big boys are going.


In our workshops, we call this being the “tick on an elephant”. In the wild, an elephant can gopretty much wherever it wants to go. The Elephant is the Big Boys – bankers who are the oneswho really move the market. We are the tick - we just want to bite onto the elephant and gowherever he is going.

Big Boys (the elephant) have a vested interest in going to certain places in the market. Why, is asecret I can’t tell you (or I’d have to kill you as the movie says HA!), but suffice it to say thattheir destination is predictable, whether going long or short.

Here are the four things:

1. The trend

2. Fibonacci levels

3. Previous support and/or resistance

4. Divergence

So, let’s look at each of these ‘pieces’ for our trade analysis to find theWide Open Spaces that we can trade.

The TrendYou’ve probably heard the following motto: "the trend is your friend". Finding the trend will help youbecome aware of the overall market direction. The Big Boys have no problem finding the trend becausethey use the 240 minute and higher charts. These larger charts are ideally suited for identifying thelonger-term trend. Our problem is we can’t trade these charts because we don’t have all the money in theworld. But the elephant is using these charts to determine his direction so; we MUST find and use thesame trend that the elephant is using.

How do you do that? Regardless of what charts you are using you need to always determine the trend ofthe Big Boys. You change your chart to a 240-minute (ideally, but sometimes a day) chart and plot thetrend.

TIP: YOU SHOULD THINK LIKE THE ELEPHANT WHEN YOUARE DETERMINING THIS TREND.


Big Boys You

Here we have a 240-minute chart. We can see immediately that we have come off a high from theprevious up trend and broken out of that structure and are now beginning to trend down. So, what is theelephant thinking?

Remember that 95% of the trading in the Forex is SPECULATIVE so the Elephant is only thinking aboutone thing; where is the most profit?


Of all the possibilities for the elephant, the MOST profit is going short (selling) and they have alreadymoved substantially in that direction to achieve it. Yes, there are still lots of Bulls in this market (the bigboys who want to still go up) but the Bears (those going short) have wrested control of the market awayfrom the bulls so the Bears are now in control. You can see that by the bright red color of the candles.These are Bear candles and the Big Boys are making this happen. It is very clear on the previous uptrendthat the bulls had control and then began to sell near the top.

So, we’ll trend this DOWN for now! But we don’t enter a trade down until it proves it!

It looks like this:

Once you have found the overall trend, you move that chart down to the 60 minute andconfirm that it still shows the same direction here. If the 60 minute confirms what youknow on the 240 then this becomes the trend of the day. Many times, the 240-minute trendis going in one direction but the 60-minute chart shows the opposite move since on this timeframe the market is correcting. These corrections become opportunities later since the

“pullback is your friend”. Once confirmed you move to the time frame you wish to enter your trade –typically the 10-minute chart for our level of trading. Once you know the big boys trend, you can buy onthe dips during rising trends, and sell the rallies during downward trends.


Note: in our testing, we found that the 5-minute chart gives the most false positives of any chart, the 15-minute is a little late so the 10-minute is the optimum entry chart for intraday trading. “Yes, but my MT4doesn’t have a 10-minute chart”? Welcome to “free charts” that cost you a ton!

NEVER TRADE AGAINST THETREND OF TODAY!

If we were going to actively trade this market we would ONLY BE INTERESTED in the nexttwo hours (yes, I know it is a 24-hour market but the big boys are rich and only need to actuallywork two hours at a time – actually they trade the first 2 hours because that is the overlappingmarket), so it is important to see who is in control on the 120-minute chart.

So, we’ll move to the 120-minute chart to see what it looks like from this vantage point. If you are usinggreat charts, the trend you put on the 240 will move down to the 120 when you open it. It looks like this:

They only really have two choices: continue north which would be a counter trend move of the currenttrend or continue the movement from the crash at the trend heart-line (50% -dotted line above) turn southagain the bottom of the trend-wall. The degree of probability is determined by the dominant trend. Thedominant trend is down so the safer trade is to SHORT or Sell the currency since the Trend of the day


(60 minute) would also match the Dominant trend (240 minute). We simply need to WAIT FOR THEREACTION. By the way, the “WAIT TRADE” is the most important trade to learn. On average, thereare only 1-2 REAL opportunities per session! But with 3 major sessions per day that is all you need!

THE WAIT TRADE:Not one person in the history of trading has ever lost one dimetrading the WAIT TRADE. It is the hardest trade to master –staying OUT OF THE MARKET until the reaction has occurredand then taking the trade when it sets up, proves itself and

comes to you.

Here is what our trend looks like on a chart we can trade – the 10-minute chart (the trend line is carrieddown from the upper chart time compressions). You can also see that if we get a sell signal (inside theyellow circle below) we have plenty of room or a WOS to the target. Again, we WAIT for the reaction!


Once you have the Trend figured out and you are WILLING TO WAIT FOR THE REACTION. Younow need to know where this movement has the potential to move. Should it break north the next stopwould be back to the top. This would create a DOUBLE TOP and is common in the Forex Market (as aretriple tops). But since the greatest Profit is SOUTH or SHORT, we need to use Fibonacci ratios (Fibs) topredict its movement. So, we will be interested in the Fib ratios BELOW US. Will it trade to there? Noone knows – you just plan your trade and WHEN it does what you have planned to do, you react asthe market reacts.

Fibonacci LevelsFibonacci ratios are the basis of many Forex trading systems used by a great number of professionalForex brokers around the globe, and many billions of dollars are profitably traded every year based onthese levels.

Fibonacci was an Italian mathematician and he is best remembered by his world-famous Fibonaccisequence, the definition of this sequence is that it’s formed by a series of numbers where each number isthe sum of the two preceding numbers; 1, 1, 2, 3, 5, 8, 13 ...But in the case of currency trading what ismore important for the Forex trader is the Fibonacci ratios derived from this sequence of numbers, i.e..500, .382, .618, etc.

Your own body uses Fibonacci ratios. If they weren’t there, you could not walk very well.


Fibonacci ratios or “FIBS” as they are called are extensively used in the Forex Market. Fibs are used onevery single chart compression. Our mentored students learn to use fibs 10 different ways!

The market uses fibs AFTER a move to determine where to get in to continue the move. This is called aretracement. The typical entry point is the .500 (or 50%) or the .618 retracement to resume the uptrend ordown trend although any Fib value can be used. You can think of it as we had a 50 pip move down andno one is interested in continuing unless they get a discount. So, the market RETRACES to a known fibratio like the 50% and then money is enticed back into the market. Sort of like going to Wal-Mart and noone wants to buy socks today, so you will hear an announcement “ATTENTION WAL-MART shopper.There will be a 50% discount on socks today for all those in the store for the next 30 minutes”. Nowanyone in the store who may have a need for socks are now enticed into making that purchase.

The enticement works in trading just as it does at Wal-Mart.

In trading, it looks like this:

The retracement is actually your friend. It allows the retail trader the same opportunity to take advantageof the pullback and enter with the big boys for the target!

But for novice traders, one of the least used aspects of Fibs is that the elephant uses these Fib ratioson the 240, day or larger charts as his TARGETS! So, if you want to know where the elephant isgoing you go back to a 240 chart and put the Fib ratios on IN THE DIRECTION OF THE TREND to seewhere the elephant is heading. And guess what? You can know this BEFORE a move occurs!


Next is a BEFORE and AFTER on the 240-minute chart after the uptrend is over and the downtrend hasstarted. We use the LAST trend to determine where the elephant is going. WHY?

Because that is precisely the information that the Big Boy is using.

Before:

After (can you see the WOS?)


One thing that CAN stop these targets from getting hit is previous support or resistance.

If the elephant runs into HISTORICAL support in an Uptrend (or the reverse in a downtrend) it has thepossibility to turn the market early. This is because PREVIOUS SUPPORT acts as RESISTANCE inthe future and PREVIOUS RESISTANCE acts as SUPPORT in the future. So, let’s understand this.

Previous Supports and/or Resistance

Support and resistance levels are points where a chart experiences recurring upward or downwardpressure. A support level is usually the low point(s) in any chart pattern (hourly, 240 minute, weekly orannually), whereas a resistance level is the high or the peak point of the pattern. These points areidentified as support and resistance when they show a tendency to reappear. It is best to buy/sell nearsupport/resistance levels that are unlikely to be broken.

Once these levels are broken, they tend to become the opposite obstacle. Thus, in a rising market, aresistance level that is broken, could serve as a support for the upward trend, whereas in a falling market;once a support level is broken, it could turn into a resistance.

Let’s look at the chart we did above with a support line put on and see the reactions that occur at thispoint. REMEMBER: PREVIOUS SUPPORT acts as RESISTANCE in the future and PREVIOUSRESISTANCE acts as SUPPORT in the future. I have taken the Fibs off so that it does not confuseyou.


So, since the market REACTS at this historical support level you must know where it is! This is viceversa in a downtrend.

This last part of our formula is how you determine if the market is going to reverse. It is calleddivergence and unlike other indicators that you might use on a chart it is a LEADING INDICATOR!

A note about indicators: All indicators that chart companies use are LAGGING indicatorsEXCEPT for four! The four that are not lagging are the four we are talking about. That is whereso many new traders get caught. They rely on lagging indicators to tell them the market is goingto do something and do not learn how to use the four indicators we are using. Our business isANTICIPATION. Therefore, lagging indicators, while nice, are about WHAT IS HAPPENINGNOW, not what we can ANTICIPATE happening! New Traders tend to think of indicators aslittle Crystal Balls which foretell the future. Don’t become an INDICATOR JUNKIE!

Divergence

Divergence is a key concept in trading Forex. When a pattern shifts out of the norm, it is a signal thatsomething is either fundamentally or technically different. When divergence occurs, trading opportunitiescome with it.

A MACD is the tool we use to show divergence. It is called a MACD because it stands for MovingAverage Convergence Divergence.

When the market is trending, it is CONVERGING and the MACD shows that convergence. But as thetrend begins to fall apart, the MACD starts to trend in the opposite direction of the trend. This is calledDIVERGENCE. It means that the market is potentially setting up to reverse direction. Now the problemis that no one knows exactly when the reversal will come, but the probability is very high at a pointwhere multiple factors come together at the same place to produce the momentum needed to reverse anentire market. In other words, a REACTION!

I’ll bet you can’t guess what those factors are? Yep, that’s right. At a point where the Trend wall (froma higher compression chart like a 240 minute), a fib (from a higher compression chart like a 240 minute),and a historical support or resistance (from a higher compression chart like a 240 minute) all cometogether to produce the environment that is right for a reversal.

Divergence is present when the Price action (trend) of the candlesticks is going the OPPOSITEway of the MACD.

You can find divergence on any chart. I like the 60 minute since it is high enough (and 1/4th of a highercompression chart like a 240 minute), and still small enough for me to take advantage of any move itprecedes.


If divergence is present and I am trading in the direction of the trend, it tells me to stay close to themovement by keeping my stop tight. The reversal could come at any time.

The end is near – but not necessarily here

Here’s a picture of divergence in an uptrend foretelling a move down:


Here’s the result:


Summary

So, when you do all this work on a chart it reveals what the Big Boys want to happen. It also revealswhere the best opportunities are to accomplish the overall goal of the Big Boys. And it is these areas(WOS) where you can take advantage and trade with the big Boys. So, guess where your trade ishiding? In those Wide Open Spaces. Also, remember, that these Big Boys are not trading for a measly5-8 pips. They are trading for hundreds of pips, so NO CLICKING out for 5!

So, look at these next charts, and see if you can spot where the opportunity is and then what did the BigBoys (remember they are 86% of what you see on the charts) do with that area.


What did the Bib Boys do with that WOS? They ran the area to the target!


Here’s another one:

We teach Target Trading in the Wide Open Spaces every day in our live room in both the London and theNew York sessions. If you come and sit in one of our rooms, you will see traders just like you makehundreds of pips. You can sit in the room for 7-days and just watch if you like. You can also get a 10-day trial of our amazing charting software that is designed to help a trader find the WOS and themomentum in the market.

Both of those are FREE!

See us at www.proacttraders.com


About ProAct Traders

ProAct Traders has the most AMAZING award winning Forex Trading Software you have everseen and a Forex Target Training Protocol for both new and experienced traders using time-tested proven methodologies that consistently create high probability trading returns. Weare Forex TARGET TRADERS and we look for high probability setup entries with realistictargets that we can find on our charts and DON'T CLICK OUT FOR 5 PIPS!

Scott Barkley is a co-founder of ProAct Traders and is an award-winningForex Trainer who has mentored students all over the world since2004. Scott has had one of his students win the FXCM " King of TheMini" contest 3 times! One of his students is now the chief trainer for aInternationally known Global Forex Training organization. Several of hisstudents have gone on to be professional fund managers and banktraders. One of his trader won the Forex Roll contest in 2014!

Scott has won numerous awards for his training especially in Europe. Inaddition, he has been a guest trainer for FXDD at venues around the

world and is a sought-after speaker in Eastern Europe at the University level - even sitting in forprofessors at times.

Our corporate motto is: No Trader Left Behind”.

Scott is currently a Forex Analyst for:

Invest.com

MarketFy.com

FXStreet.com

4 things you have to know to be a successful forex trader...

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