emilog-scale chart.Extent of corrective wave. Generally, a corrective wave will take themarket to the area of wave 4 of one lesser degree, especially whenthe corrective wave itself is a fourth wave. In other cases, the market often will find support at the top of wave 1 of one lesser degree.Rule of equality. Two of the subwaves of an impulse wave (waves 1, 3,or 5) are often related equally in terms of price advance and time.Rule of alternation. Waves, especially corrective waves, tend to varyin complexity and/or type from one to the next.
C
H
11A
P
T
E
R
MONEYMANAGEMENTPRINCIPLES●
Trade with Sufficient Capital
●
Exercise Discipline
●
Be Patient and Persistent
●
Employ Risk-to-Reward Ratios
●
Follow Trading Rules
●
Accept Losses
●
Always, Always Use Stops
●
When in Doubt, Stay Out
●
Never Overleverage Your Account
●
Make Realistic Goals That Can Be Achieved within Reason
●
Always Trade with Money You Can Afford to Lose
●
Protect Your Profits
●
Keep a Trading Log
139Copyright © 2004 by The McGraw-Hill Companies, Inc. Click here for terms of use.
140
FOREX MADE EASY
TRADE WITH SUFFICIENT CAPITALOne of the worst blunders that traders can make is attempting to trade withoutsufficient capital. This does not mean that you have to have a lot of money, butyou have to have enough to handle the movement in the market or youincrease your chance of getting blown out.The trader with limited capital not only will be a worried trader, alwayslooking to minimize losses beyond the point of realistic trading, but he or shealso frequently will be taken out of the trading game before he or she can realize any sense of success trading the system.The minimum required amount to open a foreign exchange market(FOREX) trading account is $2000, but I recommend that you start with$5000 to $10,000 in a regular account. A miniaccount can be opened with aslittle as $300 if more capital is not available; however, I recommend that youopen a miniaccount with at least $5000.A regular account—most often referred to as a 100k account—allowsyou to trade with lot sizes equal to $100,000. Each lot is worth $100,000 incurrency. It will take $1000 to trade one lot. This is a 1 percent margin.You can change the margin amount to whatever you feel most comfortable with from a risk perspective. When you open your account, you shoulddetermine what the default margin is or you may get one with a greater orlesser degree of risk than you are willing to accept.If you start at a 2 percent margin, then it will cost you $2000 to place aone-lot trade. As discussed in earlier chapters, currency moves in price interest points (pips), and in a regular (100k) account, each pip is worth about $8to $10. This is different in a miniaccount.The miniaccount was developed to accommodate investors looking for analternative to the stock market for diversification purposes. The small-dollarrequirement of the miniaccount allows many investors to participate inFOREX who previously were unable to do so.A miniaccount uses a different leverage calculation than a regular account.Instead of a lot controlling $100,000, the miniaccount lot is $10,000. Instead of$1000 or a 1 percent margin in a regular (100k) account, you need only $50.Pips in a miniaccount are worth, on average, $1 instead of the $10 in a regular (100k) account. This provides investors of all types with an easy way toget started trading in the FOREX.
EXERCISE DISCIPLINEDiscipline is probably one of the most overused words in trading education.However, despite the cliché, discipline continues to be the most importantbehavior one can master to become a profitable trader.
CHAPTER 11
MONEY MANAGEMENT PRINCIPLES
141
Discipline is the ability to plan your work and work your plan. It is theability to give your trade the time to develop without hastily taking yourselfout of the market simply because you are uncomfortable with risk. Discipline is also the ability to continue to trade your system even after you havesuffered a loss. Do your best to cultivate the degree of discipline requiredto be a world-class trader.
BE PATIENT AND PERSISTENTMany traders have become sorely disappointed when they have not attainedimmediate success. Be consistent in allowing yourself sufficient time toachieve success. Persistence is one of the most important qualities a tradercan possess.Short-term trading requires the ability to continue on even when yourtrading results are not good. Some of a trader’s greatest successes occurright after a string of losses. Those who quit too soon or apply their systemhaphazardly will not be trading in the market enough to allow their systemto produce the wins they are looking for.To develop persistence, you must force yourself initially to do everything according to the rules of your trading method or system. Followthrough on this commitment, and you will find that after you have takenevery trade according to your tested system, your consistency will havepaid off, and you will have profits to show for your efforts.
EMPLOY RISK-TO-REWARD RATIOSMost beginning traders believe that a good entry into the market is the keyto success. Unfortunately, most are very wrong. Money management is byfar the most important criterion of trading, no matter what you are trading.Every successful trader will agree that managing your trades correctly isthe number 1 key to consistent profits.A risk-to-reward ratio compares the potential for reward against thepotential for loss. A trader must view his or her trade as a businesstransaction. Risk is identified by counting the pips between the forecasted entry price and the forecasted price at which one would exit themarket in a losing trade. Reward is identified by counting the pipsbetween the forecasted entry price and the forecasted price at which onewould exit the market in a winning trade. To manage risk effectively, itis necessary to find high-probability trades that have a 1:1.5 or greaterrisk-to-reward ratio. This depends largely on the time frame you arelooking to trade.
FOREX MADE EASY
142
The longer time chart, such as a day, week, or month, requires you tobe willing to accept a larger drawdown. For example, if you are using anactive setting and your profit potential is only 30 pips, you may want to setyour stop loss at about 15 pips from entry. However, with a longer timeframe, your profit potential will be 200 pips, and you will need to set yourstops at around 100 pips.The reason you need to set larger stop limits with a longer time frameis that small trends occur with large trends. A retracement on a short timeinterval is much smaller compared with a long-term interval. Your trade isgoing to recycle, and in order for you not to be stopped out, you have toabsorb the loss of the recycling. Therefore, you need to calculate the riskto-reward ratio appropriately.Traders agree that the most important thing, next to maximizing profits, is minimizing losses. Yet precious little is actually written about thisvital aspect of trading. A trading system or method that wins only 50 percent of the time can still be extremely profitable.Now I can hear most of you saying to yourselves, “How can you makethe huge returns if you are only profitable 50 percent of the time?” It is reallyvery simple—money management. You see, if you are able to manage yourmoney effectively, you only need to be right about 50 percent of the time.The unfortunate thing about 90 percent of today’s traders is that theirprimary focus tends to be on making money and not on protecting whatthey currently have. You have a 50/50 chance of the market going your wayjust by flipping a coin. In the event that a trade does not develop in a reasonable amount of time or the market begins to form an opposite setup, youshould employ the strategy of cutting your losses short to protect and preserve your capital. In short, you cut your losses short and let your winnersrun. This simple strategy lets 50/50 trading earn a profit when a novicetrader might experience a loss.The following table shows possible risk-to-reward ratios and the winratios required to break even in a trading system.Risk-to-Reward Ratio(in pips)
Win RatioRequired to Break Even
40/20 (2:1)40/40 (1:1)40/60 (1:1.5)40/80 (1:2)60/20 (3:1)60/60 (1:1)60/90 (1:1.5)60/120 (1:2)
67%50%40%33.5%75%50%40%33.5%
CHAPTER 11
MONEY MANAGEMENT PRINCIPLES
143
In order to use risk-to-reward ratios effectively, you must study themethod you plan to employ and then backtest the system and determinehow accurate it is. When backtesting, consider that market conditionschange from period to period and therefore that you must take strong trendsand nontrends into account. Then you must evaluate how much you can riskper trade based on your trading account.Typically, you should not enter a position with more than 10 to 15 percent of your cash position and a stop loss of no more than 3 to 5 percent ofyour account. Find the right balance for yourself in the beginning, and youwill be a step ahead of the game.In the trade log shown in Figure 11-1, note that the trader has made 10trades. Half the trades are successful, and half the trades are not. In the end,however, because the trader has cut his or her losses short, the account windsup with a $1000 trading profit, all because of good money management.
FOLLOW TRADING RULESThe proper execution of trades is one of the most important aspects ofbecoming a profitable trader and one of the most difficult to learn. The problem comes with the initial analysis of a market. When you are studying examples of past trades, it is much easier to recognize direction, entries, and exitsthan if you are trading live.Recognizing opportunity in the “now” is much more difficult to do. Todevelop this skill, you must pay very close attention to specific price patternsand the chart positions of indicators.FIGURE 11-1 Sample tradelog (hypothetical, of course)
Buy USD/JPY ($200)Sell GBP/USD ($200)Buy USD/CHF (+$400)Sell EUR/USD ($200)Sell USD/JPY (+$400)Buy EUR/USD (+$400)Buy USD/CHF (+$400)Sell GBP/USD ($200)Buy USD/JPY ($200)Sell EUR/USD (+$400)Net profits: $1000
144
FOREX MADE EASY
Following trading rules and a trading system is no easy task. It requiresdiscipline for a trader to obey the rule that he or she is following even whenthe initial response or the opening trade does not work out. Trading rulesare not perfect, and they will all fail you at times.The successful trader learns to overcome the emotion and continue tofollow the rule that he or she believes in, knowing the odds are now in hisor her favor. Trading should occur only when the right setups are presentand when confidence is high.
ACCEPT LOSSESLosses are going to happen in the course of trading. Since no trading system is 100 percent accurate, even the flawless application of a trading system will create some losses. Develop the ability to admit to your losses.Sometimes traders will remove their stops and let their losses run. Theydo this because they are unwilling to admit that their forecast of marketdirection or their timing of entry into the market was incorrect.Losses occur primarily for two reasons. The first is when the traderfails to follow established tested rules and guidelines of a trading system.The second is when the trading system fails to encompass unexpectedchanges in market conditions. In either case, by anticipating the reasons formost of the losses you are going to take, you can put precautions into placebeforehand to help reduce losses in the future.
ALWAYS, ALWAYS USE STOPSStops are orders in the market placed a distance from your entry price inthe event that market prices turn and move dramatically opposite from theanticipated direction. The idea behind a stop is to prevent a loss from“running” too far and thereby consuming excessive capital in one singletrade.Too often traders are so convinced of where they believe marketprices are headed that they lose their sense of reality and begin to trade onhope. They choose not to trade with a stop or remove their stop, hopingthat market direction eventually will turn their way and their loss willturn into a win.By the time the realization comes that the market or position is not goingto move upward and that their hope was an illusion, they have risked far morethan they wanted to at the outset of their trade, and the result is a devastating,excessive loss. Be wise and follow the experts: Always use stops.
CHAPTER 11
MONEY MANAGEMENT PRINCIPLES
145
Most traders in the past, even the greatest ones, have always sufferedthe most in a time of quick uncertainty, such as the September 11 terroristattacks in New York and Washington. Catastrophic events will have atremendous effect on the market. Using a stop will allow you to be takenout of the market and sit on the side until things even out a bit. You canalways get back in, but once all your money is gone, it is gone!These strategies are not just for the FOREX. They are good for all markets that you trade. If stock traders were to follow the same strategy of usingstops, most of the traders to whom I have spoken over the last few yearswould have been far better off and had more capital to enter the market again.
WHEN IN DOUBT, STAY OUTIf you come to a point in your market analysis in any trading session whereyou have no confidence as to an accurate forecast of market direction, simply choose not to trade. The old saying “A lost opportunity is better thanlost capital” is true.In such cases, wait for market conditions to become clearer, andincrease the probability of success by trading when trade setups are strong.This is far more important to understand in the FOREX than in the stockmarket.The FOREX moves a lot more, and the leverage allows you to have theopportunity to make a lot more money much faster. Therefore, if you do notsee the opportunity to get in, you can afford to sit on the sidelines. Learn tobe a patient trader and let the market come to you.
NEVER OVERLEVERAGE YOUR ACCOUNTLeverage is another key to making money in the FOREX. No other marketin the world allows the leverage that this incredible market offers. Normally, 100:1 leverage is the amount that most brokerages allow investors totrade with. For each $1000 that you put up in cash, the brokerage allowsyou to control $100,000 worth of currency.Think about this for a moment. It is really incredible. The broker hasloaned you $99,000 dollars secured only by your $1000. This huge leverageis what allows you the potential to make the kinds of returns that theFOREX offers. However, it also enables you to lose some or all of yourmoney if you trade foolishly.Leverage is a wonderful moneymaking tool, but when it is abused, itcan lead to financial destruction as well. Think about consumer credit
146
FOREX MADE EASY
cards, for example. The bank lets you borrow large sums of money on yourword that you will pay it back, but when credit is abused, it can lead tobankruptcy for many. Therefore, just like managing your credit-card debt,you need to manage your trading leverage.Most people would not go out and rack up huge debt that they knewthey could not pay because it would not be responsible, right? Well, whentrading the FOREX, if you started with a $10,000 account, should you startby trading 10 lots using all your cash? No, that also would be foolish.A very conservative yet very effective method of trading is to neverleverage more than 20 percent of your account at any one time. Thus, with$10,000, you realistically should only trade two lots. Using good moneymanagement and discipline, you could quickly grow your account in a relatively short amount of time.The compounding factor of money is a very powerful thing.Because many people have a desire to get rich quick, they take unnecessary risks and tend to focus more on the dollar signs than on propertrading principles.If you truly want to make consistent profits and exceptional returns onyour hard-earned money, take it from someone who has been there: Followthese simple but effective money management rules.If you are starting with a miniaccount, start by trading only one position of a tenth of a lot. You will not able to make huge money, because theposition size is only one-tenth of a normal account, but the percentage ofreturns will quickly allow you to start trading larger sums of money and, inthe end, will allow you the success you seek.
MAKE REALISTIC GOALS THAT CAN BE ACHIEVED WITHINREASONEmotions and money do not mix. Simply treat each trade as a businesstransaction and don’t get emotionally attached to a trade. When you have aloss, take it and move on. Don’t beat yourself up over it.Learning how to lose is probably more important than winning,because a new trader typically will take the first loss, wonder what he orshe did wrong, and then sit on the sidelines and let all the profitable tradesgo by. Discipline is a key factor in trading, and it is a learned trait. It takesa bit of time to get used to, so accept your losses and move on. Once youhave proven it to yourself, trust the software or trade system you are usingto take you through the winning trades.
CHAPTER 11
MONEY MANAGEMENT PRINCIPLES
147
ALWAYS TRADE WITH MONEY YOU CAN AFFORD TO LOSETrading with money you cannot afford to lose is a very foolish thing to do,yet it is common among beginning traders. When trading, be sure to tradeonly with money that will not affect your lifestyle. You are trying toimprove your lifestyle, not hamper it.When a trader trades with money that he or she can afford to lose, he orshe tends to be more focused and more disciplined. Such a trader is notworried about any single loss. Simply, he or she is looking forward to theoverall return.Don’t borrow money to trade on. Don’t use your life savings. And don’tuse the money that you would use to pay your monthly bills. This is just aroad to disaster. Traders who do this have the same mentality that gamblershave. Remember this: Traders are not gamblers. If you must compare trading to gambling, then compare yourself to the casino owners. As a disciplined trader, you trade with probabilities on your side so that in the end,like the casino owners, you will come out way ahead.
PROTECT YOUR PROFITSProtecting your profits is another factor that helps to ensure consistent success. If you are a longer-term trader such as a swing trader or position trader,it is important to protect your profits by using a trailing stop loss. For example, let’s say that you are taking a long position (buying) in the USD/JPY andyou are looking for a larger return than $400. Now let’s say that your goal is$800 rather than $400, and you are currently sitting at a $500 profit.Most professional traders would take this opportunity to trail their stoploss to at least an even position or, better yet, to lock in a portion of theseprofits so that they have no chance of taking a loss. Remember, however,that your goal is $800 or a loss of, let’s say, $400, a 2:1 risk-to-reward ratio.Let’s assume that the market, for whatever reason, starts making a largemove against your position. If you protected at least a portion of the tradeor moved your stop to breakeven position, then you would have avoided atleast one loss that you were not willing to risk in the first place.
KEEP A TRADING LOGKeeping a log of trades is like taking a snapshot in time. You will find thatafter making your first analysis, market conditions develop so rapidly that
148
FOREX MADE EASY
it can be difficult to remember exactly what you saw in the beginning thatcaused you to enter the market. By recording just a few notes about eachtrade you make and the technical picture you see, you will sharpen yourskills in recognizing strong trade setups.As a convenience, most trading software keeps track of all the detailedinformation of your trades, including times, open prices, closing prices,and so on. A detailed trading log, along with good trading software reports,offers the trader a complete picture of trades for later analysis.Trading the FOREX, as you can see, has a tremendous amount of possibilities. You have to use good common sense when you trade. This marketmoves so much that you will not sit in a trade and watch it do nothing.You often will see currency pairs trade in ranges, whether big ones orshort ones. Practice good money management and use good risk management, and you will see the opportunities transpire.
C
H
12A
P
T
E
R
SIX STEPS TOSUCCESS●
Identify Current Long- and Short-Term Trends and Which Trend toTrade
●
Check News and Market Announcements
●
Identify Support and Resistance Levels
●
Use Studies and Indicators for Entry
●
Buy at Dip Bottoms (Uptrends) or Sell on Rally Tops (Downtrend)
●
Use Proper Money Management
IDENTIFY CURRENT LONG- AND SHORT-TERM TRENDS ANDWHICH TREND TO TRADEAs a foreign exchange market (FOREX) trader, you will quickly get comfortable with the time intervals you find most appealing to your style oftrading. While there is no specific time frame that works 100 percent of thetime, I strongly recommend that you start with a long-term chart and workyour way down to a short-term chart.By analyzing a daily chart first, you will be able to determine the longterm trend. This long-term trend will be one of three trends—an upward,149Copyright © 2004 by The McGraw-Hill Companies, Inc. Click here for terms of use.
150
FOREX MADE EASY
downward, or sideways trend. Determining a possible position trade on adaily chart will help you to look for specific indicators in shorter-timeinterval charts for entry time and price.If a daily chart does not show an upward or downward direction, youcan work your way down to a 180- or 60-minute chart and look for a possible swing trade. This follows the same pattern all the way down to superactive traders, who use minute charts for entry and exit signals.Picking a trend is one of the first and most important decisions you willmake after reviewing the long- and short-term trends and checking whatannouncements and market news are coming up in the near future. Themaxim “The trend is your friend” holds true today as it has in the past andis the number 1 tool used in history.It is crucial to follow a trend and not anticipate one with an early entry.While studying charts and intervals, you may notice a possible trend reversal. Don’t trade until that trend develops.
CHECK NEWS AND MARKET ANNOUNCEMENTSThe FOREX is driven largely by the world financial markets and domesticand international news. It is very important to stay on top of breaking news,economic announcements, and monthly and weekly reports. As an example, every month the U.S. markets report unemployment rate, consumerconfidence, and gross domestic product (GDP), which have huge impactson the U.S. dollar.A good trading strategy to follow is make sure that you are comfortablewith the potential news if you plan to enter a trade before the news comesout. If you do decide to enter a trade prior to news being announced, makesure that you have your stops placed.Some news will affect the market very quickly and very drastically.Other events, such as wars, government elections, holidays, and even badweather, may have significant impacts that may be unique to each currencypair in the FOREX.Getting to know the behavior of currency pairs is very important. TheU.S. dollar, for instance, is directly related to the price of gold or oil. TheJapanese yen is sometimes controlled partially by the Bank of Japan (BOJ)to stay within a certain range to promote Japan’s large export industry.Such examples can be found on almost all the major currencies, andowing to the differences in behavior of currency pairs, I recommend thatyou get to know several of them in depth and trade only those. Knowing
CHAPTER 12
SIX STEPS TO SUCCESS
151
how and why certain currency pairs act the way they do will give youinsight and possibly increase your profits.
IDENTIFY SUPPORT AND RESISTANCE LEVELSSupport and resistance levels are very important to identify and use correctly. These levels are used not only to determine entry and exit prices butalso in setting stop-loss and limit orders.Many trend reversals occur directly after a bounce off a major support orresistance price level. Properly identifying these price levels will help you tounderstand why a currency is changing trends. Many beginning traders askwhy the currency changes trend just as they enter into it. Well, these supportand resistance levels are a huge factor for these trend reversals.
USE STUDIES AND INDICATORS FOR ENTRYA proper entry into a position is one of the most important parts of tradingany market. By being able to use several charts and indicators, you willmake better decisions for profitable trades. It is important to have indicators that show the same trends and to avoid entering a position where indicators show mixed signals. Look for a strong confirmation by a couple ofindicators before you enter a position.As you look at long- or short-term trends, check the indicators such asthe moving average convergence and divergence (MAC/D), the relativestrength indicator (RSI), and the stochastic indicator for possible overbought or oversold signals. Even though the currency pair is strong oneway or another and there may not be a support or resistance price level inthe near future, the pair may be in an overbought or oversold condition,making a reversal a distinct possibility.
BUY AT DIP BOTTOMS (UPTRENDS) OR SELL ON RALLY TOPS(DOWNTRENDS)While the market moves in trends, it has its small retracement trends. Tomaximize your potential profits, you should enter or add to your positionsat dip bottoms or rally tops (see Figures 12-1 and 12-2). This will allow youto enter stop limits for a true trend reversal and avoid getting stopped out bya retracement. Resistance and support levels will help you with determining the retracements and possible entry points.
152
FOREX MADE EASY
The use of Fibonacci retracement tools will help you in calculating abuy or sell price and in determining the currency pair’s retracement potential. I strongly advise you to look at the currency pair’s trend history todetermine what the retracement percentage usually is.
USE PROPER MONEY MANAGEMENTThe use of money management is the last step on your road to success—butperhaps the most important. Proper money management minimizes capital lossand maximizes profits. I cannot stress enough that the proper use of moneymanagement will be the ultimate tool and key in your success in the FOREX.As I mentioned earlier, trading with sufficient capital is very important. This will allow you to stay in positions as they develop and not forceyou to take quick profits and losses. Be patient. Employ risk-to-rewardratios that will allow you to be profitable in the long run, even if you haveseveral positions that did not have a profitable outcome.Follow the same rules each and every time, and accept your losses.Trading in the FOREX or any other market with money you cannot affordto lose is never a wise idea. It will make you a nervous trader, and emotionswill start running your trades. Last but not least, always use stop limits!
153
FIGURE 12-1 EUR/USD Daily Chart 2002–2003
154
FIGURE 12-2 USD/CHF 180-Minute Chart 2002–2003
C
H
13A
P
T
E
R
GETTINGSTARTEDWITH A TRADINGSTATION●
Access the PremiereTrade Web Site
●
Install and Run the Dealing Software
●
Open a Demo Trading Account
●
Dealing Rates Window
●
Open Positions Window
●
Accounts Window
●
Multiple-Accounts Window
●
Order Window
●
Placing a Market Order
●
Placing a Stop/Limit on Open Position
●
Change Price on a Stop/Limit (Open Position)
155Copyright © 2004 by The McGraw-Hill Companies, Inc. Click here for terms of use.
FOREX MADE EASY
156
●
Delete a Stop/Limit on Open Position
●
Close an Open Position
●
Placing an Entry Order
●
Change an Entry Order
●
Canceling an Entry Order
●
Reports
●
Customizing the Trading Screen
●
Trading Station Options
ACCESS THE PREMIERETRADE WEB SITEThe PremiereTrade Web site is a very helpful resource. There you will findspecial announcements, daily analyses, file or program downloads, onlinelessons and tutorials, scheduled classes, and other useful information. Toaccess this area, go to the PremiereTrade Web site at www.premieretrade.com.
INSTALL AND RUN THE DEALING SOFTWAREFollow the online instructions and links to download the PremiereTradeDealing Station. By installing this software, you will be able to placetrades, review foreign exchange market (FOREX) news, analyze charts,and study indicators.You will need either a real or demo account. When you download thePremiereTrade Dealing Station with its step-by-step instructions, you alsowill be instructed on obtaining a user name and password.Should you have any questions or difficulties with downloading orinstalling the PremiereTrade Dealing Station program, you can contact thetechnical support staff through the PremiereTrade Web site.
OPEN A DEMO TRADING ACCOUNTYou can obtain a demo trading account online at the PremiereTrade Website. After you register, you will receive a user name and password by email. Go to www.premieretrade.com, and then follow the tutorials.After you have accessed your new demo account, follow the tutorialsfor step-by-step instructions on how to begin placing practice orders.
CHAPTER 13
GETTING STARTED WITH A TRADING STATION
157
Within 30 days of the first time you successfully access your charts, youwill need to open your live trading account. Follow the instructions at theend of the broker tutorial to open your real, live trading account.If you have problems receiving a demo trading account user name andpassword, installing your demo account, or accessing your demo accountfor the first time, after reading the tutorials, contact PremiereTrade directly.A list of contact numbers is available on the Web site.
DEALING RATES WINDOWFigure 13-1 shows the Dealing Rates window.
CURRENCYEach row in the Dealing Rates window contains information about a specific currency pair. In the first column, the currency pair is defined. Thereis a three-letter abbreviation for each currency. For example, EUR/USDstands for the euro/U.S. dollar currency pair. The first currency listed inevery pair is the base currency.FIGURE 13-1 Dealing Rates
158
FOREX MADE EASY
The exchange rate refers to the amount of the second currency that canbe exchanged for one unit of the base currency. For example, if theexchange rate