Ebook Forextrading HQ

How to Trade the Forex Market
Disclaimer
Information and strategies contained in this book are intended as educational
information only and should not be treated as advice or a recommendation to trade
nor used as a sole trading guide. The past is not a guide to future performance, and
strategies that have worked in the past may not work in the future. Digital options1 and
CFD trading involves a high level of risk and may not be suitable for all customers.
The value of any trade, and the income derived from it, can go down as well as up, and
your capital is at risk. Although due care has been taken in preparing this document,
we disclaim liability for any inaccuracies or omissions. Deriv is the manufacturer and
distributor of its products.
Products offered in deriv.com are considered complex derivatives and may not be
suitable for retail clients. CFDs are complex instruments and come with a high risk of
losing money rapidly due to leverage. 68% of retail investor accounts lose money when
trading CFDs with this provider. You should consider whether you understand how CFDs
work and whether you can afford to take the risk of losing your money.
Information presented is intended for retail and professional clients.
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Copyright © 2021 Vince Stanzione
1
Currently not offered to clients residing in the European Union and the United Kingdom
How to Trade the Forex Market
Vince Stanzione has been trading markets for over 30 years and has shared his
knowledge and experience in a number of books. He is the New York Times bestselling
author of The Millionaire Dropout and has created the “Making Money from Financial Spread
Trading” course. He has been quoted and featured favourably in over 200 newspapers,
media outlets, and websites including CNBC, Yahoo Finance, Marketwatch, Reuters.com,
Independent, Sunday Independent, Observer, Guardian, The Times, Sunday Times, Daily
Express, What Investment, Growth Company Investor, New York Times, Bullbearings,
City Magazine, Canary Wharf, Institutional Investor China, and Shares Magazine.
He is a self-made multi-millionaire who mainly lives in Mallorca, Spain, and trades

financial markets, including currencies, stocks, and commodities. For more information,
visit www.fintrader.net and follow him on Twitter @vince_stanzione.
CONTENTS
Introduction 05
Chapter 01. The basics of forex 07
Chapter 02. Who uses the forex market? 09
Chapter 03. Which currencies are on the forex market? 13
Chapter 04. Why trade forex on Deriv 16
Advantages of trading forex on DTrader 18
Advantages of trading forex on DMT5 23
Chapter 05. Currency pairs you can trade on Deriv 25
Chapter 06. Forex in more detail 28
Final note 56
Appendices 58
Glossary 72
INTRODUCTION
How to Trade the Forex Market | Introduction
INTRODUCTION
Foreign exchange – forex or the FX market, as it is commonly known – is one of the biggest marketplaces
in the world. Here, no trading floor exists; banks, brokers, companies, and governments trade among
themselves through high-tech computer networks, such as those offered by Reuters and Bloomberg.
It’s hard to comprehend the colossal amount You will be able to practise trading forex with a
of money traded in this market on a daily basis, demo account. So you can see it in action without
which totals around 6.6 trillion USD per day, as risking any money. As you become more confident,
reported in a 2019 survey by the BIS Triennial you can start using a real trading account. The
Central Bank Survey. Approximately 10% is great advantage of using Deriv services, which are
fuelled by companies trading overseas, needing available for clients above the age of 18, is that
to convert currencies for routine commerce, such you can start trading with just a small deposit.
as import/export businesses; the rest is pure
speculation and investment.
As these figures clearly show, this is a very

active trading sector, with the potential to yield
significant gains through smart, consistent
money-management principles.
This book explores the world of forex, especially This book explores
as accessed via Deriv online trading platform the world of forex,
(DTrader), as well as the leading platform
MetaTrader 5 (MT5). especially as
accessed via Deriv
online trading
platform (DTrader),
as well as the
leading platform
MetaTrader 5 (MT5).
6
THE BASICS OF FOREX
How to Trade the Forex Market | The basics of forex
THE BASICS OF FOREX

For many years, to participate in the FX market, you would have needed a substantial amount of trading
capital, as well as an FX broker or bank to manage your trades.
Today, it’s possible for anyone to trade currencies Whilst FX is a global market, the two biggest
– even with a small amount of money. You can trading centres are London and New York,
also trade in the FX market regardless of which accounting for 50% of the trading volume. This
country you are in. Prices are always being timeframe also coincides with many US economic
quoted and are universally accessible. data releases which are reported in the morning
New York time, such as unemployment numbers,
The currency market offers nearly 24 hours of
and these can cause sharp moves in currencies.
seamless trading – starting on Sunday at 9:00 pm
GMT, which is early morning in Asia, and carrying Although cryptocurrencies such as Bitcoin are
on all the way until Friday evening in New York, starting to be more frequently used for cross
or 10:00 pm GMT. Although the FX market is border transfers, the total volume of crypto
liquid almost all the time, the most active times exchanges is still tiny compared to the FX market.
are typically around 1:00 pm GMT to 4:00 pm
GMT when the London and US markets are both
open. This is also known as the overlap sessions.
Another busy time is around 8:00 am GMT, when
London initially opens and the Far East is closing
down for the day.
Both sessions
overlap
Figure 1. The most active times in FX are when London and New York are open; however,
there is adequate liquidity 24 hours a day with Sydney and Tokyo trading overnight.
8
WHO USES THE
FOREX MARKET?
How to Trade the Forex Market | Who uses the fx market?
WHO USES THE FOREX MARKET?
Online consumers, tourists,

foreign workers
Consumers may purchase goods online in Increasingly, credit, debit, or prepaid currency
a foreign currency, using their credit card or cards are being used in lieu of cash, but each still
payment service. The amount consumers pay requires an FX transaction. So do overseas ATM
in the foreign currency will be converted to their withdrawals.
home currency on their credit card statement,
Foreign workers may also send money home
which will require an FX transaction. Credit card
to their native countries, also requiring FX
companies will exchange smaller transactions
transactions. Popular services such as Western
together in block trades.
Union and MoneyGram allow funds to be sent to
Tourists will also go to a bank or currency another country, where the destination currency
exchange bureau to convert one form of currency may be different. For example, a worker earning
(i.e. their home currency) into another (i.e. the USD can wire these funds back home to New
destination currency) when using cash to pay for Zealand, where the recipient can collect this sum
goods and services in a foreign country. in the local currency.
Businesses
Businesses often need to convert currencies Companies trading commodities will likely do
when they conduct trades outside the boundaries their transactions in USD. For example, gold
of their home countries. Large companies need to is traded in USD per ounce. Yet the gold was
convert huge amounts of currency. likely mined in a non-USD country, probably
accumulating additional costs in other countries
A multinational company, such as Apple, converts
with their different local currencies along the way.
tens of billions of dollars each year from sales
made outside of the United States. Apple makes
60% of its revenue outside the US.
10
Commercial and investment banks

Commercial and investment banks trade currencies as a service to their commercial banking, deposit,
and lending customers. These institutions also participate in the currency market for hedging and
speculative purposes.
Figure 2. The 10 biggest FX banks and trading companies according to the 2020
Euromoney FX survey.
11
Governments and central banks

Governments and central banks trade currencies According to the International Monetary Fund
to improve economic conditions or to attempt (IMF), the following countries hold the biggest
to adjust economic or financial imbalances – amounts of USD reserves:
also known as currency intervention. Because
they are non-profit by nature, governments
and central banks do not trade to earn a profit.
However, because they tend to trade on a long-
term basis, it is not unusual for some trades to
earn revenue.
1 2 3 4
China Japan Saudi Arabia Switzerland
Investors and speculators

This is the category that applies to most readers Investors and speculators trade currencies
of this book. Investors and speculators require in an attempt to benefit from movements in
currency exchange whenever they deal in any the currency exchange markets. They do not
foreign investment – be it equities, bonds, bank intend to use the money itself for any practical
deposits, or real estate. For example, when I purposes; instead, their motives are purely driven
bought my home in Spain, I needed euros to by speculation and a simple desire to profit from
settle the purchase; however, my source funds the price differences. The actual principal is not
were in GBP and USD. changing hands.
12
WHICH CURRENCIES ARE
ON THE FOREX MARKET?
How to Trade the Forex Market | Which currencies are on the fx market?
WHICH CURRENCIES ARE

ON THE FOREX MARKET?
By far, the US dollar remains the key currency in the forex market.
The table below shows 42 currencies that people Gold and Oil (which are quoted in USD per ounce
use around the world. Yet the majority of all FX or barrel). Companies that do business throughout
trades – i.e. approximately 80% – involve the US many parts of the world still report in USD. Even
dollar (USD). The USD remains the world’s reserve kidnappers, criminals, and drug dealers prefer to
currency, used when trading commodities such as be paid in USD!
ARS Argentine peso LTL Lithuanian litas

AUD Australian dollar LVL Latvian lats
BGN Bulgarian lev MXN Mexican peso
BHD Bahraini dinar MYR Malaysian ringgit
BRL Brazilian real NOK Norwegian krone
CAD Canadian dollar NZD New Zealand dollar
CHF Swiss franc OTH Other currencies
CLP Chilean peso PEN Peruvian new sol
CNY Chinese yuan (renminbi) PHP Philippine peso
COP Colombian peso PLN Polish zloty
CZK Czech koruna RMB Renmibi; see CNY
DKK Danish krone RON New Romanian leu
EUR Euro RUB Russian rouble
GBP Pound sterling SAR Saudi riyal
HKD Hong Kong dollar SEK Swedish krona
HUF Hungarian forint SGD Singapore dollar
IDR Indonesian rupiah THB Thai baht
ILS Israeli new shekel TRY Turkish lira
INR Indian rupee TWD New Taiwan dollar
JPY Japanese yen USD US dollar
KRW Korean won ZAR South African rand
Table 1. The 42 currencies used around the world
14
How to Trade the Forex Market | Which currencies are on the fx market?
Cryptocurrencies
such as Bitcoin
(BTC) are on the
rise, but they
are still in their
infancy. And yes,
Bitcoin is mainly
quoted in USD, so
you cannot escape
the mighty dollar.
This currency
essentially sets
the bar throughout
the globe.
15
WHY TRADE FOREX ON
DERIV
How to Trade the Forex Market | Why trade fx on deriv
WHY TRADE FOREX ON DERIV

Deriv offers attractive advantages over other brokers for trading FX.
Let’s first examine what it’s like to trade FX with regular brokers who only offer margin trading, often
with no safety measures (see Appendix G to learn more about margin trading and leverage). Imagine a
broker who is offering you 100:1 leverage. This offer would immediately enable you to trade $100,000
in currency with just 1% margin. At first, this seems like a bargain since all you would need is $1,000
deposited into the account. The broker provides the remaining 99% (i.e. $99,000). However, if a position
goes against your prediction, you will either have to quickly put up more funds – the dreaded situation
known as a margin call – or your trade will be closed out. As you can see, trading on margin is risky
because it can suddenly leave you way in above your head, forced to refuel your account with additional
funds to stay ”alive”.
Now, let’s take a look at trading the forex market on Deriv. With Deriv, you have two choices:
• Trading FX through digital options2 and multipliers on DTrader
• Trading FX through contracts for difference (CFDs) on Deriv MetaTrader 5 (DMT5)
We shall see what advantages each can offer below.
2
This trade type is not offered to Deriv clients in the United Kingdom, and any point on digital options throughout this book does not
apply to Deriv products and services provided for the UK residents.
17
ADVANTAGES OF TRADING FOREX ON DTRADER
Enjoy the thrill and stay safe

DTrader gives you the chance to trade FX via two you can cancel your trade within 1 hour if the
types of options: digital options and multipliers. market moves against your prediction. Deriv
Let us see how you can put each to good use. charges a small fee for this, but you’ll get your
whole stake back. The stop out feature also
Digital options have a fixed payout and a fixed
ensures that you’ll never lose more than your
premium. Before purchasing each trade, you’ll
stake because if your potential loss reaches your
know the exact cost of each trade and how much
stake amount, this feature closes your trade
you stand to gain or lose. At worst, the maximum
automatically.
that you could ever part with is the price initially
paid to purchase the trade; at best, you’ll win
back your initial stake plus the payout amount
displayed for your consideration when you first
bought the trade. Thus, as forex trading goes, the
digital option route is clear-cut and predictable
in terms of the potential outcomes. Your risk on
Multipliers allow
DTrader is strictly limited to your premium.
you to multiply your
Multipliers allow you to multiply your potential
profit up to 1,000 times without risking more potential profit up to
than your stake. You’ll enter your stake and 1,000 times without
choose the multiplier you want. You may earn
a profit by closing your trade when the market
risking more than
moves in your favour. By setting take profit and your stake. You’ll
stop loss amounts, you can manage your risk and
enter your stake and
minimise possible loss. With deal cancellation,
choose the multiplier
you want.
18
Be in control
When you’re trading digital options on DTrader, you can decide the length of your FX trade upfront. This
length can range from ticks to seconds to days. With digital options, your trades settle automatically with
no need to make a closing trade. If the trade moves according to your prediction, any profit that you make
is added to your account balance automatically with no waiting for settlement.
When trading FX on multipliers, it’s of course completely up to you when to close your trade.
You can also have several trades open simultaneously. For example, you could have a Rise (buy) trade on
USD/EUR to settle in 1 hour and also have a Fall (sell) trade on AUD/JPY to settle in 1 minute.
Enjoy flexibility
You can have multiple trades open on various FX pairs and other markets with Deriv at the same time.
With digital options, you can also have different timeframes on the same pair, so, for example, you could
go long on EUR/USD over the next 5 days but short on the same pair over the next 1 hour, and you could
potentially profit on both.
Multipliers give you even more flexibility. You can close the trade when you want, depending on the
market movement, and you also have factors you can set such as the multiplier, take profit, stop loss, and
deal cancellation to have more control over how the trade goes.
Trade with low amounts

Traditional forex brokers require currency to be purchased in standard contract sizes. Currency pairs are
generally traded as fixed unit quantities of the base currency (i.e. 100,000 units). For example, if you
were buying GBP/USD at 1.4559, you would be paying US dollars for British pounds as follows:
100,000 x 1.4559 = $145,590 USD for 100,000 GBP
A non-leveraged trade would oblige you to pay the whole sum.
Whilst multipliers use leverage, because of their unique structure, they still protect you from the risks of
margin trading and leaning on leverage, as do the non-leveraged digital options. They both also remove the
100k lot barrier to entry to the forex market. You can jump right into trading by purchasing contracts as
low as $1, working your way up at your own pace, as you gain greater confidence in your forex knowledge
and skills.
19
Have choices
When you trade forex on DTrader, there are three digital option trades that you can currently choose from.
Deriv plans to add more. Below, you are introduced to those offered on DTrader at the time that this book
is being written.
Rise/Fall
Predict whether the exit spot will be strictly higher or lower than the
entry spot at the end of the contract period. Select the Allow equals
checkbox to win the payout if the exit spot is higher than or equal to the
entry spot for Rise or if the exit spot is lower than or equal to the entry
spot for Fall.
Higher/Lower
Predict whether the exit spot will be higher or lower than a price target
(the barrier) at the end of the contract period.
Touch/No Touch
Predict whether the market will touch or not touch a target at any time
during the contract period.
20
Setting a Rise/Fall forex trade

Let’s take a quick look at a Rise/Fall option to see precisely how this all works using the DTrader platform:
4
1
5
Figure 3. Rise/Fall
Here we have the EUR/USD. The current spot Our stake is $10. 5 You can trade as little as $1
price is 1.19076. 1 on most markets. The returns offered can be seen.
We can predict that the first currency, the euro, If the trade is successful, we will be credited the
will go higher or lower against the USD. If we investment ($10) plus the payout amount. If we
think the euro will go higher, we select Rise, 2 lose, we only lose the initial $10.
and if we think it’ll go lower, we select Fall. 3 Some forex digital options trades allow selling
We can set the trade duration from a few seconds the contract before it expires to either gain a
to days as long as the contract expires on trading profit or close at a loss depending on the market
day. In the above example, we’ve set the duration position at that moment, but most options run
to 5 minutes. 4 until expiration.
21
Result of a Fall forex trade

Here you can see a trade I placed on USD/CHF for the USD to go lower against CHF after 2 minutes.
Notice it does not matter that the USD went higher at the start of the trade. What matters is the final
closing price of the contract, which was lower, and so the trade won.
In this case, yielding 84.4% was not bad for 2 minutes!
Figure 4. The result of a Fall trade
22
ADVANTAGES OF TRADING FOREX ON DMT5
Access the MT5 powerful platform

with your Deriv account
MetaTrader 5 (MT5) is a robust online trading Android or iOS mobile devices as well as desktop.
platform developed by MetaQuotes Software.
Whether you’re a new or experienced trader, you
Whilst, at first sight, MT5 can look a little
can easily access the MT5 platform via DMT5.
overwhelming, take it a bite at a time and you’ll
Select Deriv as your broker to gain access to trade
easily be able to rise to the challenge.
CFDs on forex with your Deriv account.
Some brokers still offer the older MT4 version
The screenshot below shows MT5 used by a Deriv
which was mainly used for forex trading. Deriv, on
client. You can use your demo or real account
the other hand, believes in staying at the forefront
to trade CFDs via DMT5. We can have multiple
and provides access to the latest MT5 platform
windows and arrays of indicators. We can trade
which has more tools and gives you access to
directly from the chart in real-time. MT5 also
not only the forex market, but also commodities,
allows for Algo trading and can be preset to make
stock indices, and Deriv’s own synthetic indices.
trades automatic per your set parameters.
I strongly recommend upgrading to MT5 if you
have been using MT4. MT5 can be used on
Figure 5. The MT5 platform
23
Get stopped out when things go

south
As mentioned in detail in Appendix G, CFDs do Stop out occurs when your margin level
not have a fixed payout and are more akin to (percentage of the equity to margin) reaches a
a futures contract than an option. A CFD is a certain level that depends on your account type.
derivative product that you can use to speculate Before this, your account will be placed under
on the future direction of a market’s price. You’ll margin call, which also depends on your account
never take ownership of the underlying asset (in type. This does not affect your ability to open
this case, currencies). Profit or loss results only new positions; it serves to alert you that your
from the difference in the price of the underlying floating losses have added up to a certain level. It
asset when the contract is closed. A CFD gives is best that you top up your account to keep your
you exposure to a market and allows you to go positions open.
long (trade for the price to go up) or short (trade
for the price to go down). The CFD will remain
open until you close it or it gets stopped out.
A CFD is a derivative
product that
you can use to
Set an automatic brake to lower speculate on the
your risk
future direction of
Using DMT5 to trade CFDs on forex gives you an
additional tool to manage your risk. You can set a a market’s price.
stop loss when you want to purchase the contract You’ll never take
so that if the market moves against you, your
position gets closed automatically if your loss
ownership of the
reaches that preset level. In this way, your loss underlying asset.
will not exceed what you judge to be affordable.
24
CURRENCY PAIRS YOU CAN
TRADE ON DERIV
How to Trade the Forex Market | Currency pairs you can trade on deriv
CURRENCY PAIRS YOU CAN TRADE

ON DERIV
Each currency has a standard three-letter code (see Table 1) regardless of which bank or broker you
use. Deriv utilises this same currency code system.
Deriv offers three types of currency pairs for online trading:
1
Major pairs
The most popular, commonly traded currency pairs, such as EUR/USD and USD/
JPY. All major pairs include USD since it’s the world’s most traded currency.
Figure 6. Major pairs offered on Deriv
2
Minor pairs
Currency pairs that don’t include USD, but still encompass the currency of
developed countries.
Figure 7. Minor pairs on Deriv
26
How to Trade the Forex Market | Currency pairs you can trade on deriv
3
Exotic pairs
Currency pairs consisting of one major currency and the currency of a
developing country, such as Turkey (available on DMT5).
Figure 8. Exotic pairs on Deriv
27
FOREX IN MORE DETAIL
How to Trade the Forex Market | Forex in more detail
FOREX IN MORE DETAIL

What makes a currency go up or
down in price?
The easiest way to look at a currency is to If you would rather trade an option that is not
pretend that it is a share of a given country, such subject to major real-world events, then take a
as Switzerland Inc. If the country is in good shape look at the synthetic indices offered by Deriv.
economically and politically, this hypothetical They are not affected by the news and are
share will be strong. If the country is in trouble, available round the clock. I also have a book
has defaulted on debt, is plagued by riots in that covers these. You can find more details at
the streets, or has no political leadership, the deriv.com.
share will be weak. If you look at the currency
crisis in nations such as Zimbabwe, you will see
what makes a currency weak and how it can be
devalued, sometimes to the point of making it
virtually worthless.
Here, we’re mostly discussing fiat money,

currencies issued by governments that aren’t
backed by a commodity like gold. Fiat comes
from a Latin word, which translates to it shall be,
showing how the worth of these currencies is
determined by order and accepted based on trust.
A strong currency likes stable political and

economic conditions. Money flows to the strong
and away from the weak. Figure 8. Zimbabwe
Traders are continually looking at fundamental 100-trillion-dollar note,
data issued by a country, checking the various
vital signs regularly to gauge its financial
which is worth a few US
health. For example, unemployment figures, dollars as a novelty item
gross domestic product (GDP), and inflation
and is no longer legal
numbers are all closely watched. Sociopolitical
events such as referendums and elections are tender
also closely monitored for potential changes in
government policy.
29
You’re always trading a pair

Unlike buying a company stock or a commodity, When quoting currency pairs, the first currency
in currencies, you are always trading in pairs. So is referred to as the base currency. The base
if you believe that the Japanese yen (JPY) will currency is always equal to one monetary unit of
weaken, this is only one half of the equation. You exchange.
still need to figure out the other side of the coin.
Examples:
The second part that still needs to be reasoned
out is to decide against which currency will • 1 US dollar
it weaken? The JPY may weaken against the
• 1 British pound
US dollar (USD) or euro (EUR). As previously
mentioned, the majority of trades are against • 1 Euro
the USD. However, you can undoubtedly trade
The second currency is known as the counter
currency pairs that do not include the USD as
currency or quote currency.
one side – for example, the Australian dollar/
Japanese yen (AUD/JPY) or the Swiss franc/euro
(CHF/EUR)
Buy High and Sell Low

Many of us have traded currencies on a small higher exchange rate gives you a greater amount
scale. If you have ever spent time abroad, you of the destination currency in return for your
have purchased Swiss francs, euros, Japanese home currency.
yen, US dollars, and the like. When you are
Now suppose you’ve come back from your trip
looking to buy a currency, you are interested in
overseas with unspent euros. You now want to
receiving as much foreign currency in return for
exchange this currency back into British pounds
your home currency as possible. Let’s say that
at the lowest EUR/GBP exchange rate available.
your home currency is the British pound (GBP)
You now wish to Sell Low so that your euros will
and you want to buy euros. In such a case, you
return maximum value in British pounds.
would prefer to have 1.20 EUR to the GBP rather
than 1.10. You wish to Buy High so that the
30
Learning the lingo: points, pips, and ticks

Points, pips, and ticks are terms that traders use to talk about price changes in financial markets.
Point
Point is the smallest price change on the left side of the decimal point — for example, if the price
of an asset changes from $15.00 to $17.00, the asset has moved 2 points.
Pip Tick
(percentage in point/price interest point)
Pip is the smallest price change on the In forex trading, a tick has the same
right side of the decimal point that an meaning as a pip. However, in other
exchange rate can make based on the markets, ticks aren’t necessarily
market convention. measured in factors of 10.
For most currency pairs, such as EUR/ For example, if the minimum price
USD, a pip is the fourth decimal place movement in a market is measured in
(the 1 in 0.0001 ). In other pairs, such increments of 0.25, each tick will equal
as USD/JPY, a pip will be the second 0.25, and each point will be 4 ticks.
decimal point (the 1 in 0.01).
Three states of forex market movement

Before we go into more depth with analysing currency price movements, it should be noted that the FX
market movement can only have three states:
Trend higher Trend lower Sideways range
We shall now explore each of these states in greater detail.
31
Trend higher
The lows are becoming higher. The highs are also • Rise/Fall: choose Rise when the market is
becoming higher. trending higher
In other words, whenever the market sells off, it • Higher/Lower: choose Higher when the market
rebounds at a higher price than the previous time. is bullish
This is considered to be positive or bullish activity
• In/Out3
because market participants are willing to pay
more than in the past. With a CFD on DMT5, you would want to buy
(long) the strong currency.
The types of trades that you would look to make
on DTrader during these market conditions are:
Figure 10. EUR/GBP: the euro is gaining against the British pound
3
Available on SmartTrader, a platform accessible to Deriv clients who do not live in the European Union or the United Kingdom
32
Trend lower
This is a downtrend: lows become lower, and • Rise/Fall: choose Fall when the market is
highs become lower too. trending lower
Any up moves are quickly sold off, as the market • Higher/Lower: choose Lower when the market
is losing energy. A helpful analogy is a boxer is Bearish
being knocked down gradually, taking longer
• Touch/No Touch
and longer to get up each time.
• In/Out
This is considered to be negative or bearish
activity because market participants are willing With a CFD on DMT5, you want to go short, so in
to pay less than in the past. The currency is the example below, you should sell (short) the
losing strength. USD.
The types of trades you would look to make on

DTrader during these market conditions are:
Figure 11. USD is weak against the CHF. Traders would rather hold CHF.
33
Note that in the USD/CHF chart seen in Figure 10,

we also see a trading range over the last few
months. There’s a resistance (top) of 0.93 and a
support (bottom) of just over 0.90. For most traders,
this would be dead money, but with Deriv, there’s
the chance to profit from range digital options.
74.56
Figure 12. Stays Between: With Deriv, even a stagnant market might work to
your advantage.
34
Sideways range
Markets can also be dull or range-bound, with very little movement in either direction. Such periods
can last for weeks and sometimes months.
Let’s say every time the EUR/AUD exchange rate reaches 1.61, there’s support from buyers. This amount
would be the lower range that can be seen in the image below. Then every time the exchange rate gets
up to 1.66, we find resistance from buyers. This amount would be the higher range.
Figure 13. Sideways range
Prices can bounce between the two levels for a long period of time. At some stage, the equilibrium is
broken, and a new trend or range is established. This state is often overlooked, but a currency can stay
in a sideways range for weeks or even months. A sideways range is a case in which buyers and sellers
are equally matched. In this case, price levels have been formed that attract buyers (or support) and
sellers (or resistance).
35
Most traders don’t profit from ranging markets. Resistance levels occur when the consensus is
However, with Deriv, you can trade and profit that the price will not move higher. It is the point
from range markets. Let’s see how. at which sellers outnumber buyers. Resistance
can be seen as a ceiling for the exchange rate.
Support levels occur when the consensus is that
the price will not move lower. It is the point at
which buyers outnumber sellers. Support can be
seen as a floor for the exchange rate.
Figure 14. USD/CHF settled into a range of 0.92 and 0.90 for a few months
For trading in the situation shown in Figure 13, we can choose a Higher/Lower digital option. If we take the
low-risk view that this situation will continue, we can select 0.92 as the barrier over the next 7 days. The
return is 21%. As long as the USD/CHF ends below 0.92, we will be paid our return, which in this example is
USD 21.
21% is still a respectable return for a seven-day investment.
36
Let me show you another way of trading the same scenario using Ends Between/Ends Outside 4 that you
can find on the SmartTrader platform, also accessible through Deriv. This offers a little more risk but an
extra 9.5% return. If we select a higher barrier of 0.92 (same as the previous example) but also add a lower
barrier of 0.90, we can increase the return.
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Figure 15. Ends Between/Ends Outside
4
Available on SmartTrader, a platform accessible to Deriv clients
who do not live in the European Union or the United Kingdom
37
HOW TO EVALUATE A CURRENCY
In this guide, we will spend more time focusing on technical analysis, charting, and system trading than
fundamentals and economic indicators. Let’s start with an overview of fundamental analysis.
Fundamental analysis
As previously mentioned, traders are always Twitter is also a good source of these
looking for clues to the vitality of a country’s announcements. Below you will see an example
economy and currency. They analyse from the Bloomberg TV Twitter account.
fundamental data, such as unemployment
figures, inflation, GDP, and even new car
sales. These types of figures can all provide a
temperature reading of sorts to help gauge an
economy’s relative strength.
Key economic data releases are scheduled ahead

of time so that traders can be prepared. For
example, US employment data is always released
during the first Friday of the month. As a more
specific example, consider February employment
statistics that are issued on the first Friday of
March every year.
Calendars showing the significant release dates

for economic data sources can be found at
various sites, including:
• Yahoo! Finance
• Investing.com
• Bureau of Economic Analysis for the US

Department of Commerce
Figure 16. Bloomberg TV tweet
38
Typically, before and after a major announcement, and helps traders remain up to date on
a currency becomes more volatile as traders global markets and well prepared for market
predict, interpret, and react to the news. movements. Below is a screenshot of MT5 in
which you can see the economic calendar menu.
MetaTrader 5 (MT5), which is accessible via
DMT5, has a robust calendar tool. The MT5
calendar marks events in order of significance
Figure 17. How to access the economic calendar on MT5
39
Problems with fundamental analysis

A problem with fundamental analysis – or trading Major banks produce a vast amount of analysis
based on the news – is that, in many cases, the on economies, much of which is available for free.
data looks back, so it only reflects upon what has
However, it is questionable how useful this data is
already happened.
to the financial trader, especially in shorter-term
The other problem is that data can be interpreted trades. For most traders, technical trading will
in many different ways. For example, a higher offer an easier way to follow the FX market, and
unemployment number can be seen as professional tools are now available to all.
unfavourable, in that a greater percentage of
On a side note, Deriv is a pioneer of developing
people out of work can imply more benefits
synthetic indices which trade round the clock
being shelled out at the government’s expense,
and are not affected by the news. You can learn
fewer people paying tax, and an overall weaker
more about these in my new book How to Trade
economy. However, on the plus side, it would also
Synthetic Indices.
typically mean that wage inflation remains low
because current employees are less likely to ask
for a pay rise if others are ready to swoop in and
take their jobs. It would also mean that central
banks are less likely to raise interest rates.
Major banks produce a vast amount of analysis on

economies, much of which is available for free.
However, it is questionable how useful this data is to
the financial trader, especially in shorter-term trades.
40
Technical analysis
Disclaimer: There is no guarantee that analysing the past performance of the market, whether on
financial or synthetic indices, can lead to successfully predicting future market movements. These
technical analysis tools merely help to gain a better understanding of how markets move and how
such data can be analysed for a better-informed decision when trading. Please remember that trading
always involves risk, and you should consider this when trading.
Getting technical Candlestick charts

Technical analysis ignores the news and There are various types of charts that can be
economic data, focusing purely on price trends used to analyse forex. However, to keep things
and volume. It primarily involves studying simple, we will look at candlestick charts here.
chart patterns, showing the trading history and
Candlestick charts are said to have been
statistics for whatever market is being analysed.
developed in the 18th century by the legendary
Even traders who prefer a fundamental analysis
Japanese rice trader Homma Munehisa. The
approach sometimes use technical analysis
charts gave Homma and others an overview of
afterwards to determine a good entry price.
open, high, low, and close market prices over a
Start with a basic price chart which would show certain period. This method of charting prices
the indices trading price in the past and look proved to be particularly interesting and helpful
for a trend or pattern that could help determine due to its uncanny ability to display five data
future pricing. points at a time, instead of just one. The method
was picked up by Charles Dow circa 1900 and
Before delving into technical analysis tools, let’s
remains in common use by today’s financial
first learn more about charts and timeframes.
market traders.
41
Candlesticks are usually composed of the body, of the body. The closing price is at the top. If the
typically shaded in black or white illustrating asset has closed lower than it opened, the body
the opening and closing trades, and the wick, is black. The opening price is at the top. The
consisting of an upper and lower shadow closing price is at the bottom. A candlestick need
illustrating the highest and lowest traded prices not have either a body or a wick. In the examples
during the time interval represented. throughout this book, we have used red for a
down candle instead of black, and green for an up
If the asset has closed higher than it opened, the
candle instead of white.
body is white. The opening price is at the bottom
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Figure 18. Basic candlestick composition
42
Timeframes
Depending on which timeframe you use in a chart, the trends and patterns will look very different. Many
traders examine multiple timeframes for the same currency pair, such as the EUR/JPY in one-minute,
one-hour, and one-day charts.
Deriv offers comprehensive charts across different timeframes, ranging from very short-term (i.e. mere
ticks, or seconds) to one-day bars.
A short-term timeframe: 1 minute

Here, we see one of the most actively traded currency pairs – EUR/JPY – over five hours. Each candle
represents one minute, and we see opportunities to profit from up or down trades.
Figure 19. EUR/JPY short-term timeframe
43
THREE TECHNICAL ANALYSIS TOOLS
This guide doesn’t aim to go into the hundreds of possible technical trading tools, patterns, and
indicators, but the following can give you an understanding of the main tools available. This brief
overview is designed to help you get started in trading via CFDs or digital options so that you can begin
to build up your knowledge. Deriv and MT5 offer access to excellent complementary charts and tools
with over 30 technical indicators, but we will stick to three of the main ones here:
Moving averages
Price channels: Donchian channels
Relative strength index (RSI)
It’s important to keep your trading system simple at the beginning. As you progress, you can add extra
tools to refine your abilities further.
44
Moving averages
It’s hard to trace the precise origins of the moving Every charting software package incorporates
average (MA), although this concept is often the moving average, as it is one of the most
attributed to Richard Donchian. He was a great fundamental aspects of trading. You will also find
pioneer of systematic trading in the 1950s and it on the various charts featured on the internet.
’60s. The methodologies that he developed You don’t need to worry about working it out
over 40 years ago still serve as the basis of manually on your own.
many complex systems used by the world’s best
traders.
The dictionary defines an average as the quotient

of any sum divided by the number of its terms.
Let’s suppose that you need to work out a 10-day

moving average of the following numbers: 10, 20,
30, 40, 50, 60, 70, 80, 90, 100.
Every charting software
You would add these figures and divide by 10 (i.e.
package incorporates
the total number of items in the set), to arrive at
an average of 55. the moving average,
Now when tomorrow’s price comes in – let’s say as it is one of the most
105 – you would remove the oldest number (i.e. fundamental aspects of
10) and add 105 to the end of the series. The
average of this set would now be 64.5.
trading. You will also find
it on the various charts
featured on the internet.
You don’t need to worry
about working it out
manually on your own.
45
Types of moving averages

Moving averages can be calculated for any data series, including all sorts of different indicators
associated with a particular currency (e.g. open, high, low, close, volume, etc.). To start, concentrate on
the simple moving average. Whilst some have tried to be clever by deviating from this straightforward
standard in various ways, it is best to stick with a simple approach, particularly as you first begin to trade.
In software or on the internet, simple moving average is often abbreviated as SMA.
There are five popular types of moving averages:
Simple/arithmetic
Exponential
Variable
Triangular
Weighted
46
Applying moving averages to currency pairs

Here’s the basic rule of thumb with moving averages in the context of forex markets: when looking at the
relationship between timeframes and moving averages, the choice of the period you select on the moving
average indicator significantly impacts the results.
A few simple pointers: the following chart shows the AUD/USD with a 20-day simple moving average. The
chart timeframe is daily. If I changed the time to 1 minute, it would then become a 20-minute simple
moving average.
Figure 20. AUD/USD chart with a 20-day simple moving average
Shorter vs longer timeframes

The advantage of a shorter-term moving average, timeframe selected, so it’s a trade-off – but still
as in the case of 1 minute, is quicker results, with worth examining. Deriv allows you to trade very
the moving average reacting with high sensitivity short-term digital options – such as holding for
to price movements. The disadvantage is that two minutes and, in some cases, even less time.
you receive more false signals with such a short
47
Whilst you can also trade on tick charts, a moving average of less than 1 minute has no real value, and I
would not advise it. Popular moving averages are 20 days, 50 days, and 200 days for longer-term trading.
For shorter terms, 20 minutes, 60 minutes (1 hour), 4 hours, and 8 hours are all popular. These time
intervals can be easily set up in DTrader as you can see below:
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Figure 21. Setting the chart type and time interval
48
Advantages and limitations of moving Popular trading systems based on

averages moving averages
Moving averages have their limitations; however, SMA crossover is a popular strategy based on
they can be a good place to start in your the simple moving average technical indicator.
quest to build a winning system. Here are key It triggers if two SMA indicators with different
considerations to factor in along these lines: periods are crossing over, and it uses that as a
signal to purchase a contract, for example, a 20
When the price breaks below the moving average,
period (longer MA) crossing a 5 period (shorter
it triggers a sell signal. Some traders also allow
MA). You can also use just one moving average,
some leeway; they wait for one or two days
as outlined previously.
after the moving average breaks before making
the trade. If the price moves above the moving This strategy is built to run in Deriv Bot (DBot),
average, you would be looking to place bullish a free tool for creating and applying your own
bets (up trades), and if it breaks below, you will automated strategies. You can use DBot to trade
place bearish bets (down trades). using both virtual and real money accounts. For
more information on DBot, see Appendix E.
Using a technical system – such as the moving
average – helps to reduce the impact of emotions
on trading decisions. Rather than basing your
trades solely on what you believe should happen,
your trades are factually grounded in what is
actually happening with the market data points.
A moving average can also prevent you from
making stupid mistakes, such as trading against
a trend.
Moving averages work best when prices are If the price moves
“moving” either up or down. In a sideways range,
the moving average will go flat and give out many
above the moving
false signals. average, you would be
looking to place bullish
bets (up trades), and
if it breaks below, you
will place bearish bets
(down trades).
49
An example of 2 moving averages

crosses
We can have one or more moving averages on a I have used 20 hours, but that could be 20
chart at once. I personally like 2 moving averages minutes or 20 days for a longer-term system.
with a slower (long term) MA and a quicker (short There is also nothing to stop experimenting with
term) one. A buy and sell signal is given when the other timeframes, such as using 10 hours.
two cross over.
The image below shows the 1-hour chart with
Let’s use the USD/CHF as an example. We will the 20 hours (green line) and 5 hours (red line).
use 1-hour charts and a 20-period and 5-period I have marked the cross-overs with arrows
MA, so that would be 20 hours and 5 hours. showing the buy and sell points.
Figure 22. Two crossed-over moving averages
SMA as a short-term system

For those looking for more signals and quicker trades, a simple moving average can be used, with the
timeframe adjusted from daily to much shorter periods, such as one hour or even one minute. Thus, a
“20-period simple moving average” becomes the average of the last 20 minutes or hours.
Deriv allows you to trade extremely short-term digital options – such as holding for one minute and, in
some cases, even less time.
50
Short-term trade example

Below, we see a one-minute chart (in which each If we have a buy signal (price above SMA) as
bar represents one minute), using a 20-period in the first arrow, we will consider a Rise trade.
simple moving average of 20 minutes. This chart In this example, a 2-minute Rise trade is being
provides an extremely short-term view, so the offered with a potential price of 95.5%. At the
next two to three minutes would be the ideal second arrow (sell), we would place a Fall trade.
timeframe for the purchase of these trades.
Figure 23. Short-term SMA chart
This is a very simple system that can be programmed to trade automatically using DBot or an MT5 trade
so you would not have to keep monitoring.
It’s also possible to test a system with a demo account. You could also use a CFD trade which would
remain open as long as the price remains above the moving average (long trade). When it falls below, you
close the trade. You can also then open a new trade (short trade).
51
Forex price channels: Donchian channels
The Donchian channel is an indicator used in Of course, we can also stop and reverse to do
market trading, developed by Richard Donchian. exactly the opposite for long trades:
It is formed by taking the highest high and the
• Enter Long when the price hits 20-minute
lowest low for a set period, such as 20 days.
high Donchian channel
The area between the high and the low is the
Donchian channel for the period chosen. This tool • Close Sell when the price hits 20-minute low
is available within Deriv charts, with adjustable Donachian channel
settings for the period length. Twenty days is
A simple system like this can be programmed into
the conventional timeframe, which is why the
MT5 or using DBot so trades can be automated,
Donchian channel is often referred to as the 20-
and I will cover more about DBot later on. I have
day rule or the 4-week rule.
used 20 minutes, but that could be 20 hours or
In the example below, we see the AUD/CAD one- 20 days for a longer-term system. There is also
minute chart with a 20-minute Donchian channel. nothing to stop you using 10 minutes.
We can see that the price had been trending
higher but is now trending lower. Down digital
options or short CFDs would be the way to trade
in this case. Whilst we see rebounds, the lows are
getting lower. The Donchian channel
If you were short on a CFD, your basic system is an indicator used
could be: in market trading,
• Enter Short when the price hits 20-minute developed by Richard
low Donchian channel
Donchian. It is formed
• Close Buy When the price hits 20-minute
high Donchian channel
by taking the highest
high and the lowest low
for a set period, such as
20 days.
52
Whilst basic, this system has some powerful as long as the winning trades make more points
advantages: than the losing ones. You can also profit from
down moves as well as up.
1. Winning trades are left to run.
The middle line on the chart below is just a 50%
2. You have an exact exit strategy (no guessing).
line of the High/Low channels. Some traders may
3. The system is rule-based. use this as a first warning sign of an impending
trend change.
4. Your risk is always defined.
Even with more losing trades than winning ones,

there’s a chance that you can still make money
Figure 24. AUD/CHF Donchian chart
53
Relative strength index (RSI)
The relative strength index (RSI) indicator measures a share’s performance against itself. It is often
used to identify buying opportunities in market dips and selling opportunities in market rallies. The
value of the RSI is always a number between 0 and 100. The indicator was developed and introduced
into practice in 1978 by an American engineer J. Welles Wilder, real estate developer and famous
technical analyst. It is still widely in use.
RSI is often used to identify buying opportunities

in market dips and selling opportunities in market
rallies. The indicator was developed and introduced
into practice in 1978 by an American engineer.
54
How to trade the RSI with digital

options and CFDs
The chart below shows an example of the EUR/ When we see the RSI down at 30, it’s a good time
USD, to which we can apply this tool to inform to look at up (e.g. Rise and Higher) trades.
trading decisions. A low number (30 and below)
In this example, we can see the RSI at 50,
indicates a more oversold market. A high value
which is fairly neutral (midway), so the RSI is not
(70 and above) indicates a more overbought
providing a clear buy or sell signal. Thus, in this
market. The higher and lower horizontal lines
case, it would be best to hold off from placing a
on the graph are at 30 and 70, i.e. the levels at
trade, until clearer signals appear.
which markets are often regarded as oversold or
overbought. If we are using a CFD, we will look to buy (go
long) when we see the RSI down at 30, and we
When the RSI moves to 70, it’s a good time to
would look to sell (go short) at 70 or over.
look at down (e.g. Fall and Lower) trades.
Figure 25. RSI applied to EUR/GBP
55
FINAL NOTE
How to Trade the Forex Market | Final note
FINAL NOTE
I hope you found this short guide of use and that you will refer back to it in due course. This book has shown
the many ways that forex can be traded on Deriv via DTrader and DMT5.
Using Deriv services allows you to trade a great selection of markets. You will find additional resources,
charts, and tools on the deriv.com website.
Wishing you success,

Vince Stanzione
57
APPENDICES
How to Trade the Forex Market | Appendices
APPENDICES
General points about trading and Deriv
Appendix A
Why trust Deriv

Any trade or contract is only as good as the “counterparty”. This is also known as
“counterparty risk”. Deriv has been in business for over 20 years and is an award-
winning online trading service provider which, whilst at the cutting edge, is conservatory
managed with zero debt. The company is regulated and audited. You can see copies of
Deriv licenses on its website.
Unlike some brokers that make it easy to deposit money yet hard to withdraw, Deriv
enables you to withdraw easily and securely. Please note that whilst Deriv processes
your withdrawal requests efficiently and quickly, the period it might take banks or other
financial institutions to perform withdrawals can be longer. Deriv tries to give you an
estimate of the total waiting time.
All your money is segregated and held in secure and licensed financial institutions. In
this way, in the unlikely event of Deriv becoming insolvent, all your money will be returned
to you because it is never merged with Deriv’s.
Deriv has over 1.8 million trading accounts opened with more than 8 billion US dollars
of total trade turnover, so you’re in good hands.
Each trade, even if the trading capital is small, is given a unique reference ID number
for the opening and closing. This means that each trade has a full audit trail that can
be checked, so there is no way that the outcome can be manipulated either by Deriv
or the trader.
On a side note, if you place a trade and then for whatever reason, lose internet
connection, your trade still continues as it’s placed with the Deriv servers. You can still
check the outcome once your connection is re-established. I had this happen to me
whilst travelling in Thailand.
59
Appendix B
Opening a real account

If you rehearse and rehearse, the curtain will never go up.
Having a demo account is a great way to practise, but for a chance to profit from
markets, you will need a real account. Rules and regulations will apply depending on
the country you are based in. Deriv aims to make the process as simple as possible. If
you are requested for a copy of your ID, please provide it as soon as possible to avoid
delays in setting up your account.
Once your real account is open, set yourself a trading goal or plan. Just keep in mind
that trading should not be considered as a means to earn a living, to solve financial
problems, or to make financial investments. Synthetic indices on Deriv are available
round the clock, so you can always come back to trade on Deriv in your leisure time.
You can make trades in USD, GBP, AUD5, or EUR even if you are based in a country that
has a different base currency. For example, if you’re based in Indonesia, your home
currency is IDR, but you can still trade in USD, which may be more stable than your
home currency.
5
Trading on Australian dollar is not currently possible for Deriv clients residing in the European Union or the United Kingdom
60
Appendix C
Seven top tips for trading on Deriv

1. Start small and build up.
Albert Einstein was once asked what mankind’s greatest invention was. He replied:
“Compound interest.” There’s even one claim that Einstein called compound interest
the “eighth wonder of the world.”
I have been in the trading business for over 35 years, and I started small. It was
through the power of compounding that I could build up to where I am now. You need
to understand compounding to perceive what a powerful tool it can be. Below is an
excerpt from one of my favourite fables which sums this up. The same principle can be
used when trading with Deriv.
Excerpt from A Grain of Rice by Helena Pittman
The daughter of the Chinese emperor was ill, and he promised riches beyond compare
to whoever could cure her. A young peasant named Pong Lo entered the palace. With
his wit and bravery, he restored the princess’s health and won her heart. As a reward,
Pong Lo asked for her hand in marriage. The emperor refused and asked Pong Lo to
think of anything else he would like.
After several moments of thought, Pong Lo said, “I would like a grain of rice.”
“A grain of rice! That is nonsense! Ask me for fine silk, the grandest room in the palace,
a stable full of wild stallions – they shall be yours!” exclaimed the emperor.
“A grain of rice will do,” said Pong Lo, “but if His Majesty insists, he may double the
amount every day for a hundred days.”
So on the first day, a grain of rice was delivered to Pong Lo. On the second, two grains of
rice were delivered; on the third day, four grains; on the fourth day, eight grains; on the
fifth day, 16 grains; on the sixth day, 32 grains; on the seventh day, 64 grains; and on
the eighth day, 128 grains. By the twelfth day, the grains of rice numbered 2,048.
61
By the twentieth day, 524,288 grains were delivered; and by the thirtieth day,
536,870,912, requiring 40 servants to carry them to Pong Lo. In desperation, the
emperor did the only honourable thing he could do and consented to the marriage. Out
of consideration for the emperor’s feelings, no rice was served at the wedding banquet.
2. Manage your money wisely.
Risk too much, and a few bad trades will make you lose your trading bank. Risk too
little, and it’s going to be a long time before you see any decent profits. As previously
explained, money management does not have to be very complicated, but a simple
system will ensure that no single trade can wipe out your trading account. The mistake
many new traders make is trying to grow their account too fast.
3. Don’t let your emotions overwhelm you.
Trading with a demo account and trading with real money are not the same. As in
most walks of life, when real money is at stake, irrational and instantaneous reactions
might take over. Since trading can become addictive, it is important to know how
to stay in control and remain reasonable especially when trading with real money.
Besides reading the following tips, please visit Secure and responsible trading and
begambleaware.org for more information.
It may not be possible to trade logically all the time; after all, we are humans, with
occasional impulsive decisions. But by using a system and steadily applying practical
experience, you can train your reasoning powers to have a more permanent presence.
Be careful about taking in too much news and over-monitoring your position. It is easy
to overreact to a news story that may cause a short-term spike but is actually not that
important in the long run.
Using mobile devices and apps can cause you to make snap decisions that you
may later regret. The same sound judgment should be used with all trade purchase
decisions, no matter how or where they’re ultimately executed.
62
4. Profit potential exists in all markets.
Many still believe that in order to make money, the price of a share, market, currency, or
commodity must go up. However, this is not true. As I have outlined in this guidebook, you
can profit from up, down, and even sideways movements, so don’t see falling markets as
a negative.
5. When in doubt, sit it out.
If you watch financial news channels such as CNBC or Bloomberg, it seems that you
should always be doing something, since the channels are filled with “breaking news.”
Remember: these channels have to fill their airtime, and in many cases, the best trade
is, in fact, no trade. If you are not sure, or do not see an opportunity you are happy with,
then do nothing and just wait for the next one. With the many markets offered by Deriv,
you will likely find plenty of opportunities at any time of the day or night.
6. The higher the returns, the lower the chance of a payout.
Deriv offers a vast selection of trading opportunities ranging from lower-risk trades with
returns of 5-10% to those with higher returns of 100% or more. Deriv prices trades
based on mathematical probabilities. Of course, unexpected events do happen, but
overall, if you are being offered returns of more than 200% for a trade lasting a day or
less – just as an example – the reason for such generous returns is that the likelihood of
a payout is fairly slim. Keep in mind it’s readily possible to “mix and match” your trades
on Deriv.
7. Decide carefully on your approach to trading.
Some people trade casually, and that is perfectly fine. Some approach it with a more
serious attitude. While I do not encourage you to view trading as a means to earn
a living, to solve financial problems, or to make financial investments, and while I
certainly don’t deny the role of chance in trading, I do believe there are ways to trade
more smartly, especially when it comes to financial indices. See the tips under “Keep
your emotions in check and trade wisely”. For instance, keep solid records of your
winning and losing trades. A diary can help with this to complement the tracking tools
you’ll find on deriv.com, enabling you to keep tabs on your winnings. Also, stick to a
trading system to help minimise emotional decision-making.
63
Appendix D
Keep your emotions in check and trade wisely

Regardless of how big or small your account is, it is important to trade responsibly
and stay in control of your emotions (visit Secure and responsible trading and
begambleaware.org for more information). If you react impulsively to market
movements when you’re trading with real money, chances are that you’ll suffer serious
losses. It makes sense to slow down a little.
If you’re going through a bad run, then take a step back, reduce the size of your trades,
or maybe even go back to using a demo account for a while. Deriv does not place a time
limit on demo accounts, and you can use your real and demo accounts side by side. In
fact, since Deriv is committed to responsible trading, it encourages you to use all of the
measures it offers to stay in control at all times.
There’s a practical tip that might help you manage your risks while trading. Let’s say you
start with a $1,000 account. If you limit your risk on any one trade to 5% of the account,
this practice would allow you to keep trading, even with a bad run. Let’s observe this
simple system in action.
The maximum stake on a single trade should never be more than 5% of your account
total. So initially, 5% of your $1,000 account balance would be $50. If your balance
goes down, then your trade size is proportionately reduced.
Let’s say that – following a few losing trades – your account balance decreases to $900;
5% of this amount would now be $45. If you have had a good run, then your allowance
per trade proportionately increases.
Suppose you’ve had a few winning trades in a row and your account balance has risen
to $1,200; your 5% maximum per trade is now $60.
The key is that no one trade should ever blow your trading account.
64
Table 2. Gains needed to recover from losses
If your account goes down 50%, how much do you need to put on the line to get back to even? Most will
say 50% to make up for the previous losses, but here’s the problem: You would need the account to move
100% to make this strategy work. As any trader will tell you, this is a not a wise approach.
Big losses are hard to recoup

The maths of percentages shows that as losses get larger, the returns needed to recover to breakeven
point increase at a much faster rate. A loss of 10% necessitates an 11% gain to recover. Increase that
loss to 25%, and it takes a 33% gain to get back to breakeven. A 50% loss requires a 100% gain to
recover. An 80% loss necessitates 500% in gains to get back to where the investment value started.
Therefore, it is important to avoid big losses from the get-go. To do so on DTrader, use only a small
65
fraction of your account balance to purchase a trade so that if the market moves
against you, your loss would be an amount you can easily afford. For leveraged trading
on DMT5, you need to be extra vigilant. Cut your losses at an affordable point. Better
still, use Deriv’s stop loss feature to make it automatic. Also, follow the tips below.
Remember, above all, that synthetic indices are influenced by chance and their patterns
are by no means reliable.
Tips to help prevent losses from spiralling out of control

Whilst it is great to learn about trading, remember that there is a difference between
synthetic indices and other markets. Synthetic indices are generated randomly and
are not predictable, so it is not wise to grow confident in your techniques when you’re
trading them.
You may not be able to control the index price. Still, the money-management principles
described in this book can help you control the amount of risk you place on any one
trade, the amount of margin you use, and the total percentage of your account being
invested at any time.
Watch that ego. Don’t mistake a lucky run with skill. After a good run, many become
overconfident and start taking stupid risks. After a poor run, many attempt to play
catchup, trying to make their losses back fast. Both of these slippery slopes are easy
ways to lose your trading capital.
Many books have been written on money management with complicated formulas.
The key principle is quite simple: no single trade should ever cause you irrecoverable
financial or emotional damage. However sure you are that XYZ is going to rocket, only a
percentage of your trading bank should ever be risked.
Take care when trading on mobile devices

When real money is at stake, you need to be careful. Technology is wonderful; today,
you can carry the power of a supercomputer in your pocket. It’s now possible to make
trades on the move from a mobile device from anywhere but do take care. Some tend
to trade very differently on mobile devices than they do when they are sitting at a laptop
or desktop. Be sure to apply the same level of strict discipline to trades purchased on
mobile devices as you would on your desktop. It’s all a matter of mindset.
66
Appendix E
Be a Deriv affiliate and earn

an extra income
Deriv is expanding in many new territories, and it is on the lookout for talented and
hardworking partners. You can promote Deriv to your friends and contacts or market
Deriv’s services. In return, Deriv shall pay you a generous commission. As well as
earning commission from Deriv, you can look at developing trading systems and
providing education to new traders.
Some of Deriv’s best clients are also its best affiliates. To find out more, please visit
https://deriv.com/partners/
67
Appendix E
DBot6 Automated trading

You can automate your trading strategies, no matter what your underlying asset is. The
trading bot you use will keep tabs on the market movement for you and execute your
desired strategy whilst you’re away from your device.
Deriv has a simple trading bot called DBot which allows you to input your own trading
rules with no computer programming skills. You can also import ready-made strategies.
A simple system such as ‘buy when two simple moving averages cross’, or ‘buy after 3
upticks’ can be easily programmed in.
Figure 26. DBot
Deriv currency trading is also compatible with third-party vendor trading systems where you can use
trading software which would plug into your Deriv account. MT5 has a growing number of plugs in and
Scripts which allow you to trade systematically.
6
Not offered to Deriv clients residing in the European Union or the United Kingdom for financial products
68
Appendix G
Margin trading and leverage

Margin trading allows you to make an investment using leverage. Now, what is
leverage? Leverage gives you the chance to make an investment which is larger than
your actual capital amount. A way to think of it is like a home loan or mortgage where
you put up 10%, and the bank provides the rest.
For example, you have $1,000 in your account but would like to buy $10,000 worth
of an index. Without leverage, this is impossible. But if a broker offers to boost your
purchase power, or in other words, give you leverage, your wish can come true. Deriv
offers up to 1:1000 leverage. With global interest rates remaining low, the cost of
borrowing money remains low, and leverage proves to be cost-effective. Leverage is
offered at no extra charge.
Leverage magnifies your gains; of course, it will also magnify your losses. However,
with Deriv, it is not possible to go into a negative balance because Deriv applies a stop
out and negative balance protection to protect your account against losses that might
exceed your equity. All the same, when trading CFDs, it is important to monitor your
open positions closely because you may lose more than your initial investment if the
price moves against your prediction. You can use stop loss to limit your risk.
Of course, just like a maximum speed limit, you don’t have to drive right at the limit,
and you don’t have to take your account to the maximum margin.
If used sensibly, leverage can help to build up your account, but you should be aware
of the risks as well.
69
Appendix H
FAQs
Opening an account
I’m new to trading. Where do I start?
The first step is to open an account. You can apply online in just a few minutes.
Do I need to send any documents?

Deriv works to a high compliance standard as required by its regulators. Know Your
Client (KYC) is now required in many countries. Deriv works hard to make this as
simple as possible and not cause unnecessary delays.
Do you offer demo accounts?

Deriv offers a demo account, so you can get the hang of trading before staking any
actual currency of your own. There is no time limit on a demo account, and a real
account and demo account can run concurrently.
Will I need to install any software?

Deriv is entirely web-based and requires no software installation. You can also use a
tablet or other mobile device. MT5 does require an app to be downloaded, and this is
available at Google Play Store and Apple App Store.
How soon can I start trading?

You can open a Deriv account, deposit funds, and begin trading within minutes.
Financial security
How safe is my money with Deriv?
Your money is always safe with Deriv and held in segregated accounts at all times.
How does Deriv make money?

Deriv has thousands of clients taking a variety of positions on financial markets at
any time and earns a small margin on these trades. It does not charge clients any
commission.
70
If I make too much money, will my account be closed or will I be banned?

No. Deriv encourages successful clients and will not close or limit a winning account.
Deriv can hedge trades into financial markets, which means they have no vested
interest in the client’s final result.
Depositing and withdrawing funds

Do I need to deposit any funds to open an account?
You don’t need to deposit any money to open an account, but you need to deposit
funds before you can start trading.
How do I fund my account?

Deriv offers a range of common deposit and withdrawal methods, from credit and
debit cards to bank wires, e-cash, Bitcoin, and e-wallets.
Is it possible to deposit and withdraw the same funds through different payment
methods?
Unfortunately, no. Funds initially deposited through one payment method must be
withdrawn through the same system; funds cannot be transferred to an alternate
system for withdrawal. However, Deriv offers a wide variety of payment methods to
suit your specific needs and preferences.
71
GLOSSARY
How to Trade the Forex Market | Glossary
GLOSSARY
Barrier(s) Contract for difference (CFD)

The barrier of a digital option trade is the price A contract for difference (CFD) is an agreement
target you set for the asset being traded. You can between an investor and a CFD broker to exchange
choose trades that stay below or go above a price the difference in the value of a financial product
target or stay between two targets. between the time the contract opens and closes.
Bid price Counterparty

When trading a CFD, the bid price is the price The counterparty is the other party that
you can sell. In the pair of quoted prices, the participates in the trade with you. If you trade
first price is the bid price; for example, 1.2810 forex on Deriv, your counterparty will be Deriv.
(bid)/12811 (offer).
Derivative
Bearish A derivative is a financial instrument whose value
This refers to a market in decline. Someone with is determined by reference to an underlying
a negative view on a market would be a Bear. market. Derivatives are commonly traded in the
inter-bank market, and digital options are one of
the simplest forms of derivatives.
Bullish
This refers to a market that is rising. Someone
with a positive view on a market would be a Bull. Duration
The duration is the length of a purchased trade.
(See also Contract period.)
Digital option
A digital option is a contract purchased by
a trader, based upon predicting the future Ends Between/Ends Outside trades
movement of a selected asset’s price with two An Ends Between trade pays out if the market exit
possible outcomes, which pays a predetermined price is strictly higher than the low-price target and
amount if the prediction is correct. strictly lower than the high price target.
An Ends Outside digital options trade pays out if

the market exit price is either strictly higher than
Contract period
the high price target or strictly lower than the
The contract period is the timeframe of a trade. It
low-price target.
is also called the duration. On DTrader, a contact
can last from a few seconds to months.
73
Entry spot price Indices

The entry spot price is the starting price of the Stock market indices measure the value of a
trade purchased by a trader. selection of companies in the stock market. For
example, in the USA, the S&P500 would have
500 of the largest companies.
Expiry price
The expiry price is the price of the underlying
asset when the contract expires. In/Out trades
These are trades in which the trader selects a
low and high barrier and predicts if the market
Forex will stay within these barriers or go outside them.
In foreign exchange markets, traders can enter (See also Stays Between/Goes Outside trades.)
contracts based on the change in the price of one
currency as it relates to another currency. For
example, a Rise trade in the EUR/USD market Market exit price
is based upon a prediction that the value of the The market exit price is the price in effect at the
euro will rise in relation to the value of the US end of the contract period.
dollar.
No Touch trades
Fundamental analysis These are trades in which the trader selects a
Fundamental analysis is a method of quantitative price target and predicts that the market will never
and qualitative analysis used by traders to touch the target before the expiry of the trade.
determine the macroeconomic outlook of a
country and currency. Inflation, unemployment,
and interest rates are just a few of the One Touch trades/Touch trades
considerations in fundamental analysis. These are trades in which the trader selects a
price target, and predicts that the market will
touch the target before the expiry of the trade.
GMT
GMT stands for “Greenwich Mean Time,” the
official time used in the UK during winter. In Offer price (ask price)
summer, the UK changes to British Summer Time, When trading a CFD, the offer price or ask price
which is GMT+1 hour. All times on the Deriv site is the price you buy. In the pair of quoted prices,
use GMT all year round. the second price is the offer price; for example,
1.2810 (bid)/12811 (offer).
Higher/Lower trades
These are trades in which the trader predicts if a Payout
market will finish higher or lower than a specified The payout is the amount paid to a digital options
price target. trader if their prediction is correct.
74
Pip asset can be bought or sold at a particular time.

Pip stands for “percentage in point,” which is
Premium
generally the fourth decimal place (i.e. the “1” in
The Premium is the amount that a trader must
“0.0001”).
pay to enter into a trade. These funds must be
available in your account.
Profit
Profit is the difference between the purchase price
Stays Between/Goes Outside trades
(i.e. the stake) and the payout on a winning trade.
A Stays Between trade pays out if the market
stays between (i.e. does not touch) both the high
barrier or the low barrier at any time during the
Pair
period chosen by a trader. A Goes Outside trade
In currency trading, we are always trading a pair
pays out if the market touches either the high
such as USD/EUR.
barrier or the low barrier at any time during the
period chosen by a trader.
Resale price
The resale price indicates a contract’s current
Spread
market price. Resale prices are on a best-efforts
Spread is the difference between the Bid and the
basis and may not be available at all times after
Offer. This is where the broker makes their profit.
purchase. (See Sell option for more details on
The tighter the spread, the better.
selling contracts before expiry.)
Tick
Return
A tick is the minimum upward or downward
The return is the money realised when the
movement in the price of a market. A tick chart is
contract expires. (See Payout.) Rise/Fall trades
the shortest possible chart timeframe.
These are trades in which the trader predicts if
a market will rise or fall at the end of a selected
timeframe.
Technical analysis
Technical analysis is a system of analysis
whereby historical data is examined to predict
Sell option
future trends in the prices of assets. Charts and
It is sometimes possible to sell a digital option
indicators are often used.
before the expiry of a trade, but only if a fair price
can be determined. If this option is available, you
will see a Sell button next to your trade.
Underlying
Each digital option is a prediction concerning the
future movement of an underlying market, i.e. the
Spot price
specific type of asset involved in a given trade; for
This is the current price at which an underlying
example, EUR/CHF
75

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What are some of the risks involved in forex trading?

What are some of the risks involved in forex trading?

What are some of the major currency pairs traded on the forex market?

What are some of the major currency pairs traded on the forex market?

How to Trade the Forex Market

Information presented is intended for retail and professional clients.

For more information please visit deriv.com

Published by: First Information

Copyright © 2021 Vince Stanzione

He is a self-made multi-millionaire who mainly lives in Mallorca, Spain, and trades

Chapter 01. The basics of forex 07

Chapter 02. Who uses the forex market? 09

Chapter 03. Which currencies are on the forex market? 13

Chapter 04. Why trade forex on Deriv 16

Advantages of trading forex on DTrader 18

Advantages of trading forex on DMT5 23

Chapter 05. Currency pairs you can trade on Deriv 25

Chapter 06. Forex in more detail 28

As these figures clearly show, this is a very

THE BASICS OF FOREX

WHO USES THE FOREX MARKET?

Online consumers, tourists,

Commercial and investment banks

Governments and central banks

Investors and speculators

WHICH CURRENCIES ARE

ARS Argentine peso LTL Lithuanian litas

Table 1. The 42 currencies used around the world

WHY TRADE FOREX ON DERIV

• Trading FX through digital options2 and multipliers on DTrader

• Trading FX through contracts for difference (CFDs) on Deriv MetaTrader 5 (DMT5)

We shall see what advantages each can offer below.

ADVANTAGES OF TRADING FOREX ON DTRADER

Enjoy the thrill and stay safe

Trade with low amounts

100,000 x 1.4559 = $145,590 USD for 100,000 GBP

A non-leveraged trade would oblige you to pay the whole sum.

Setting a Rise/Fall forex trade

to 5 minutes. 4 until expiration.

Result of a Fall forex trade

In this case, yielding 84.4% was not bad for 2 minutes!

Figure 4. The result of a Fall trade

ADVANTAGES OF TRADING FOREX ON DMT5

Access the MT5 powerful platform

Figure 5. The MT5 platform

Get stopped out when things go

CURRENCY PAIRS YOU CAN TRADE

Deriv offers three types of currency pairs for online trading:

Figure 6. Major pairs offered on Deriv

Figure 7. Minor pairs on Deriv

Figure 8. Exotic pairs on Deriv

FOREX IN MORE DETAIL

Here, we’re mostly discussing fiat money,

A strong currency likes stable political and

You’re always trading a pair

Buy High and Sell Low

Learning the lingo: points, pips, and ticks

Three states of forex market movement

Trend higher Trend lower Sideways range