Street Smart For Ex

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ALL RIGHTS RESERVED

Street Smart Forex
Table Of Contents
Chapter 1 Introduction ________________________________5
1.1. When to Enter the Market? ...................................................................5
1.2. When to Exit the Market? ...................................................................10
1.2.1. Cut Your Losses Short ..............................................................10
1.2.2. Take Part of Your Profits...........................................................11
1.2.3. Let Your Profits Run .................................................................11
1.2.4. Take your profit when your trade runs out of steam ...................12
Chapter 2 General Trading Tips _______________________14

2.1. Understanding Forex Trading .............................................................14
2.1.1. About Currency Pairs and Exchange Rates ................................14
2.1.2. Understanding the Standard Contract Size .................................15
2.1.3. What is the Pip? ........................................................................16
2.1.4. How to Calculate the Profit .......................................................17
2.2. The Concept of Leverage....................................................................21
2.3. Money Management ...........................................................................21
2.4. Your Trading Equipment ....................................................................23
2.4.1. Your Computer Equipment .......................................................23
2.4.2. How to choose your Forex Broker.............................................23
2.4.3. Charting Software .....................................................................30
2.5. Monitor More Than One Currency Pair...............................................37
2.6. Technical Analysis..............................................................................38
2.6.1. Exponential Moving Average....................................................38
2.6.2. Moving Average Convergence Divergence................................40
2.6.3. Relative Strength Index .............................................................42
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2.6.4. Support/Resistance Levels.........................................................43

2.6.5. Zigzag Signals...........................................................................46
2.7. Paper Trading .....................................................................................47
Chapter 3 Intraday Trading Strategy ___________________48

3.1. Entry Strategy.....................................................................................48
3.1.1. Step 1: Staying out of Sideways Market ....................................48
3.1.2. Step 2: Identifying the Long-Term Trend ..................................49
3.1.3. Step 3: Getting an Entry Signal..................................................50
3.1.4. Step 4: Confirming with the Signal Strength..............................52
3.1.4.1. Zigzag Signals (12 Points)..................................................52
3.1.4.2. Support/Resistance Levels ( 8 Points).................................54
3.1.4.3. Relative Strength Index (6 Points) ......................................60
3.2. Exit Strategy.......................................................................................63
3.2.1. Action 1 Cut Your Losses Short:............................................63
3.2.2. Action 2 Take Part of Your Profits:........................................63
3.2.3. Action 3 Give Your Trade Enough Space:..............................63
3.2.3.1. Recursive Trailing Stop Formula ........................................63
3.2.4. Action 4 Take Your Profit when Your Trade Runs out of
Steam:...............................................................................................65
Chapter 4 Intraday USD/CAD Trading Example _________66

4.1. Trading Day Preparation.....................................................................66
4.1.1. Determining the Support/Resistance Levels...............................66
4.2. Entering the Market ............................................................................68
4.3. Exiting the Market ..............................................................................71
Chapter 5 Intraday EUR/USD Trading Example__________78

5.1. Trading Day Preparation.....................................................................78
5.1.1. Determining the Support/Resistance Levels...............................78
5.2. Entering the Market ............................................................................80
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5.3. Exiting the Market ..............................................................................83
Chapter 6 Long-Term Trading Strategy _________________90

6.1. Entry Strategy.....................................................................................90
6.1.1. Step 1: Staying out of Sideways Market ....................................91
6.1.2. Step 2: Identifying the Long-Term Trend ..................................92
6.1.3. Step 3: Getting an Entry Signal..................................................92
6.1.4. Step 4: Confirming with the Signal Strength..............................94
6.1.4.1. Zigzag Signals ( 12 Points).................................................94
6.1.4.2. Support/Resistance Levels (8 Points)..................................96
6.1.4.3. Relative Strength Index (6 Points) ....................................100
6.2. Exit Strategy.....................................................................................103
6.2.1. Action 1 Cut Your Losses Short:..........................................103
6.2.2. Action 2 Protect Part of Your Profits:...................................103
6.2.3. Action 3 Let Your Trade Enough Space to Make Even More
Profit: .............................................................................................103
6.2.3.1. Recursive Trailing Stop Formula ......................................103
6.2.4. Action 4 Take Your Profit when Your Trade Runs out of
Steam:.............................................................................................104
Chapter 7 Long-Term EUR/USD Trading Example ______105

7.1. Trading Preparation ..........................................................................105
7.1.1. Determining the Support/Resistance Levels.............................105
7.2. Entering the Market ..........................................................................107
7.3. Exiting the Market ............................................................................111
Chapter 8 Long-Term GBP/USD Trading Example ______119

8.1. Trading Preparation ..........................................................................119
8.1.1. Determining the Support/Resistance Levels.............................119
8.2. Entering the Market ..........................................................................121
8.3. Exiting the Market ............................................................................124
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Chapter 1
Introduction
Dear forex friend, I would like to thank you for giving me the opportunity to present to
you the Street Smart ForexTM trading system. As I have promised there will be no
unnecessary information in this book. I assume that you are already familiar with the
concept of forex trading. If you are totally new to the forex trading game you can find all
of the necessary basic info inside the Chapter 2. All of the other chapters deal directly
with the system itself. You should read each chapter carefully. Everything is explained in
detail. The first chapter that you are just reading is just a short introduction to the logic
that is behind my "Street Smart ForexTM" trading system. The basic skeleton of each
trading system consists of two elements. Entering the trade and exiting the trade. Each of
those elements is equally important.
1.1. When to Enter the Market?

The profitability of a trading system is not based on the quantity of entry signals that it
produces. It is based on the quality of entry signals. The entry signal needs to have the
highest possible probability that the trade will move in your desired direction. After years
of trading many different trading systems I have found out that most of them have one
large flaw. They were producing way too many entry signals which as a result is greatly
reducing the profitability of a trading system. Just have a look at the picture below to
understand what I am talking about:
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Figure 1-1
As you can observe on the chart above the typical trading system has produced nine entry
signals during given period of time. Out of those nine signals only two would have
resulted in the net profit and the other seven signals would have produced the net loss.
Obviously something needs to be done about that.
Now have a look again at the same picture but without losing signals.
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Figure 1-2
It looks much better. Doesnt it?
You can imagine how dramatically the trading system would change if we could find the
method that filters out all those bad signals.
So I challenged myself to find it out. I knew that some bad signals would always be there
but I needed to find a way to minimize them.
After spending countless weeks and months fine tuning and testing different trading
szstems I found out that there were four elements that needed to be implemented into my
trading system in order to avoid the poor quality signals.
First: Do Not Trade Sideways Market

Sideways market is a market in which the price fluctuates evenly between support and
resistance lines. Each time it touches the support line the price starts moving higher only
to hit the resistance line and change the direction. You could observe in the charts above
that all of the losing signals occurred when the market was behaving in a sideways
fashion. When we enter a trade during sideways market we place a bet that the market
will move in a certain direction although the market has still not shown which trend it will
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follow next. That means we have only 50% chance to be right or wrong. In that case it is
the same as flipping a coin and saying Bearish or Bullish.
So the first objective of my trading system is to find a way to identify if the currency pair
that we want to trade is in the sideways market. If it is in the sideways market than we
wait or we move to the other currency pair. If it is not in the sideways market than we go
to the next step.
Second: Do not Trade against the Long-Term Trend

If you were ever swimming in the river you would know that it is much easier to swim
with the current than it is to swim against the current. Regardless of how strong a longterm market trend is, the market never moves only in the direction of the trend there are
always minor movements against the major market trend. These deviations usually dont
last very long and after them the market moves again in the direction of the long-term
trend. However it is precisely those minor movements that are likely to produce losing
entry signals.
Any system that generates entry points will provide us with entry points both against and
in the same direction as the long-term trend. Even though there may be money to be made
in both cases, by following only the entry points in the same direction as the long-term
trend we will get the higher quality trades leading to the higher profits in the long run.
Lets have a look at the chart below:
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Figure 1-3
Let us assume that on the 02/25 you get a bearish entry signal and even though the longterm trend is clearly bullish you decide to get in against the long-term trend. The market
does not move far enough in our direction, so we dont reach our target profit. Instead the
market reverses and we are stopped out facing a loss for this trade. It is not only a pity for
that trade, even more we miss to catch this nice 350 pips move!
Third: Getting into the Trade at the right moment

Once the trend has started, it is very important to jump into the trade as soon as possible.
If you are the last one to get in, what will probably happen is that by then, winning
traders, who were in earlier, start to cash in on their profits, the rally loses steam and your
position starts to fall. Basically it means that we need to find the signal that has the
highest probability that the trade will go in our direction.
Fourth: Pay Attention to the Signal Strength

Its not the same to push 100 or 20 kg. You dont use the same power. Same holds for
Forex markets. Sometimes you expect a 30 pips move, in other cases 100 pips. The more
relevant signals collaborate the move, the higher profit you expect.
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For this purpose I have developed a new concept (formula) which I call the Signal
Strength, where I combine the power of major forex indicators. We will use the formula
to calculate the target profit expectations.
1.2. When to Exit the Market?

Most traders make a mistake by thinking that entering the trade is more important than
exiting the trade, and if they have found an entry strategy with positive expectations, the
job is done. Nothing could be further away from the truth. Exit strategy is equally if not
more important than entry. Average traders typically use a simple trailing stop as their
exit strategy. Even though a trailing stop may work ok in certain cases, definitely it is not
the best option for a proper exit strategy.
Why? Because a trailing stop does not fulfil all the basic fundamental requirements for a
proper exit strategy. Especially when it comes to let your profits run.
So, which are the basic fundamental requirements for a proper exit strategy?
Well, lets show them to you:
Cut your losses short
Take part of your profit
Let your profits run
Take your profit when your trade runs out of steam
1.2.1. Cut Your Losses Short

This requirement is linked to the question how much capital we can risk on one trade.
This is where it gets tricky. You have probably heard hundreds of times that you need to
protect yourself against large losses in order to protect your start up capital. However if by
cutting your losses short you think running out of a trade like a scared rabbit as soon as
the trade goes against you, you will be in a big trouble. You CAN NOT trade currencies
in such fashion. The key to currency trading success is to catch a major movement. You
will not be able to do that if you dont give your trade a chance. By properly
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implementing my entry strategy you have done everything you can to enter the trade with
a high probability that it will go in your direction. However, it doesnt mean that it will do
so immediately after you placed a trade. You need to give it some space. How much
space? Enough space so that you dont get stopped out all of the time while at the same
time tight enough so that if you are wrong you preserve majority of your capital to fight
another day.
If the stop loss is reached we will get out of the trade immediately, no questions asked.
You cannot cut corners with the stop loss rule. It needs to be followed every single time
without exception. Failure to follow the stop loss rule is the number one reason for failure
among beginning traders. It is true that sometimes price will turn around just after you get
out, but there is no way to know this in advance. It only takes a few stubborn incidents to
entirely devastate your initial trading capital.
1.2.2. Take Part of Your Profits

Human nature is such that it values a sure profit much more highly than the probability of
a much higher profit. The traders mind works in the same fashion. They take their profits
too soon. That is why I have included this step into my exit strategy. We will protect part
of the profit and the rest will stay in the trade to milk out the maximum profit.
In this way we are going out of a trade as a winner and we are not going to follow
the rest of the trade with the anxiety.
Once we have decided that we will take part of our profits, the remaining question is the
right price level at which we will do so. Is 30 pips the right target or maybe we should
better wait until 50 pips are reached...? For this purpose we use the concept of the Signal
Strength formula: the more independent indicators collaborate our trade, the stronger our
trade is and the higher profit we expect.
1.2.3. Let Your Profits Run

As mentioned above, the key to currency trading success is to catch major market
movements. And for that purpose we need to give our trade a chance by giving it some
space for moving in our desired direction. The key issue is hereby to determine the proper
space depending on your current trade situation. It is not the same situation, when you just
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have entered a trade or when you are already in with a current positive balance of 200
pips. In the first case the main focus is to protect your trading capital, in the second case
you dont need to protect your capital any more as you definitely will close your position
with profits. The focus hereby is to give your trade more space than when you entered the
trade in order to make even more money.
In order to be profitable in the long run we need to extract as much profit as possible from
every single trade. So we need to stay in the trade as long as the trade goes in our
direction. Most exit strategy methods out there, as for example a trailing stop, do not
fulfill above requirement as they will lead to exiting a position too soon. For this purpose
I have developed a Recursive Trailing Stop Formula that extracts as much profit from our
trade as possible.
1.2.4. Take your profit when your trade runs out of steam
Once the market has been recognized as sideways, all the signals which in the past
brought us to enter the market are not valid any more. That means that it is equally
probable that the market goes towards or against our trade. And the odds are definitely not
good enough for staying longer in the trade. Even more, if we would stick to the trade, it
could occur that we turn a win into a loss!
Havent you noticed how often the previous market trend is reversed, after the market has
been developing sideways for certain time period? Lets have a look at the picture
below
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Figure 1-4
In the picture above we can observe that after staying in the sideways market for a period
of time the price have completely changed its direction. Therefore if our trade enters a
sideways market after certain period of time we will get out of the trade and wait for the
next opportunity.
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Chapter 2
General Trading Tips
In this chapter I want to give you some general trading tips that may help you to improve
your trading, especially if you are a novice trader. If you are already an experienced trader
this chapter might not be of interest to you, so you might just throw a glance at it.
2.1. Understanding Forex Trading

2.1.1. About Currency Pairs and Exchange Rates
When trading currencies, you dont trade a single currency, but always currency pairs.
Thats the reason why when looking at forex quotes you will always see the currencies
quoted in pairs, as for example EURUSD, GBPUSD or USDCAD. To every pair you will
see an exchange rate quoted. The first currency of the pair is known as the base
currency, the second one as the counter or quote currency. The exchange rate gives
the amount of the quote currency which needs to be sold to buy 1 unit of the base
currency.
EURUSD is the rate of 1 euro in US dollars, GBPJPY 1 British pound in Japanese yens,
i.e., the first currency is always defined in terms of the second one. For example in picture
below the exchange rate of 1.5736 means that for 1 euro you can get 1.5736 US dollars.
You could also write it like 1 euro / 1.5736 US dollar.
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Figure 2-1
Even though there are 100s of currency pairs out there, you should pay only attention to the
major currency pairs, which are the most traded. It is estimated that activity in these
currencies comprises more than 85% of the daily foreign exchange volume.
Liquidity is essential when trading foreign currencies. Currencies that are illiquid
generally will have wider trading costs (spreads), they also will have a much greater
chance to have "fast market" conditions where liquidity can be non-existent and volatility
greatly increased, and they are also often more susceptible to short term market
manipulation or deception, like false technical breakouts.
The major currency pairs are assumed to be:
EURUSD
Euro and US dollar
USDJYP
US dollar and Japanese yen
USDCHF
US dollar and Swiss franc
GBPUSD
British pound and US dollar
AUDUSD
Australian dollar and US dollar
USDCAD
US dollar and Canadian dollar
EURGBP
Euro and British pound
2.1.2. Understanding the Standard Contract Size

When trading a currency pair, the standard contract size is called a "lot. A lot can have
different values for different currency pairs. At present, the major currency pairs have the
lot value equal to 100,000 units. But 100,000 of what? When we buy, we give money for
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Street Smart Forex
goods. When we sell, we get money for goods. But with currencies, we buy and sell
simultaneously since we get one currency for another one. This is why it is common
practice to consider that we get the first currency of the pair (base currency) when we buy
and give, respectively, the second currency (quote currency).
A standard lot for USDCAD is $100,000 US dollars. If we buy one lot of USDCAD, it
means that we get $100,000 US dollars and give a number of Canadian dollars equal to
100,000 times the actual exchange rate. If the current exchange rate of USDCAD is 1.1,
then buying one lot of USDCAD means that we get $100,000 US dollars and give
$110,000 Canadian dollars. The other way round if we sell one lot of USDCAD at the
same exchange rate, it means that we give $100,000 US dollars and get $110,000
Canadian dollars.
Most of the forex brokers offer also the possibility to trade mini lots, which are one tenth
of a standard lot (for example 10,000 units instead of 100,000 units).
Here you can find the lot and mini lot definition for the major currency pairs:
Currency Pair
Lot size
Mini Lot size
EURUSD
100,000 euros
10,000 euros
USDJYP
100,000 US dollars
10,000 US dollars
USDCHF
100,000 US dollars
10,000 US dollars
GBPUSD
100,000 British pounds
10,000 British pounds
AUDUSD
100,000 Australian dollars
10,000 Australian dollars
USDCAD
100,000 US dollars
10,000 US dollars
EURGBP
100,000 euros
10,000 euros
Table 2-1
2.1.3. What is the Pip?

The pip is the smallest price change of the exchange rate. For example when trading
EURUSD the smallest price change is 0.0001, for example a move from 1.5231 to 1.5232
is called a 1 pip move. Here you can find the pip definition for the major currency pairs:
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Currency Pair
Pip size
EURUSD
0.0001
USDCHF
0.0001
GBPUSD
0.0001
AUDUSD
0.0001
USDCAD
0.0001
USDJYP
0.01
EURGBP
0.0001
Table 2-2
2.1.4. How to Calculate the Profit

The profit of your trade is calculated in the following manner:
Step 1: Calculating the Pip Value per Lot
The pip value per lot is calculated according to the following formula:
Pip Value per lot = lot size x pip size in units of the quote currency (second currency of
the pair)
Here you can find the pip value per lot for the major currency pairs:
Currency Pair
Pip Value per Lot
EURUSD
10 US dollars
USDCHF
10 Swiss francs
GBPUSD
10 US dollars
AUDUSD
10 US dollars
USDCAD
10 Canadian dollars
USDJYP
1000 Japanese yen
EURGBP
10 British pounds
Table 2-3
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Step 2: Calculating Your Profit in Terms of the Quote Currency

The profit is calculated according to the following formula:
profit = lot size x pip size x pip value per lot in units of the quote currency
Example 1:
Sold 3 lots of EURUSD at 1.5675 and bought them at 1.5610
In this example, we made 65 pips profit (as we sold at a higher price than we bought). The
pip value for EURUSD is 10 USD, so the total profit
= 3 lots x 65 pips x 10 USD pip value per lot = 1,950 US dollars.
Example 2:
Bought 2 mini lots of GBPUSD at 1.9170 and sold them at 1.9250:
In this example, we made 80 pips profit (as we bought at a lower price than we bought).
The pip value for GBPUSD is 10 USD, so the total profit
= 0.2 lots x 80 pips x 10 USD pip value per lot = 160 US dollars.
Step 3: Converting Your Profit to Your Deposit Currency
Though it is possible to make trades using various currency pairs, the trading result is
always written in only one currency - the deposit currency. If the deposit currency is US
dollar, profits and losses will be shown in US dollars, if it is euro, they will be, of course,
in euros. The most usual is that you run your forex account in the deposit of your country.
If you live in US, then you will probably run your account in US dollars. If you live in
France, then in euros.
The profit is converted into your deposit currency by using the appropriate exchange rate.
For example if your account is in euros and you made a profit of 1,000 US dollars, then
you can convert your profit in euros by dividing with the actual exchange rate for
EURUSD.
In the following example we will assume that the deposit currency is US dollars.
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Example 1:
Sold 5 mini lots of EURGBP at 0.7915 and bought them at 0.7815:
In this example we made 100 pips. The pip value for EURGBP is 10 GBP, so the total
profit is 0,5 lots x 100 pips x 10 GBP per pip = 500 British pounds.
The exchange rate of GBPUSD was 1.8500 (for 1 British pound you can get 1.85 US
dollars), when the position was closed:
500 British pounds x GBPUSD exchange rate
= 500 British pounds x 1.85 US dollars / 1 British pound = $925 US dollars
Example 2:
Bought 2 lots of USDJPY at 105.60 and sold them at 105.20:
In this example, we made 40 pips (as we sold at a lower price than we bought). The pip
value for USDJPY is 1000 JPY, so the total profit is
= 2 lots x 40 pips x 1000 YPJ pip value per lot = 80,000 JPY yen.
The exchange rate of USDJPY was 105.20 (for 1 US dollar you can get 105.20 JPY yen),
when the position was closed. In order to get the amount of dollars we need to divide by
the exchange rate.
80,000 JPY yen / USDJPY exchange rate
= 80,000 JPY yen x 1 US dollar / 105.20 JPY yen = $760.46 US dollars
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Summary Tables
Currency
Profit in US dollars:
Profit in euros:
Pair
number of lots x pips x ...
EURUSD
10 US dollars
10 US dollars / EURUSD
USDCHF
10 Swiss francs / USDCHF
10 Swiss francs / USDCHF / EURUSD
GBPUSD
10 US dollars
AUDUSD
10 US dollars
USDCAD
10 Canadian dollars / USDCAD
10 Canadian dollars / USDCAD / EURUSD
USDJYP
1000 Japanese yen / USDJPY
1000 Japanese yen / USDJPY / EURUSD
EURGBP
10 British pounds x GBPUSD
10 British pounds / EURGBP
Currency
Profit in Canadian dollars:
Profit in Australian dollars:
Pair
EURUSD
10 US dollars x USDCAD
10 US dollars / AUDUSD
USDCHF
10 Swiss francs / USDCHF x USDCAD
10 Swiss francs / USDCHF / AUDUSD
GBPUSD
AUDUSD
USDCAD
10 Canadian dollars
10 Canadian dollars / USDCAD / AUDUSD
USDJYP
1000 Japanese yen / USDJPY x USDCAD
1000 Japanese yen / USDJPY / AUDUSD
EURGBP
10 British pounds x GBPUSD x USDCAD
10 British pounds x GBPUSD / AUDUSD
Currency
Profit in British pounds:
Profit in Japanese yens:
Pair
EURUSD
10 US dollars / GBPUSD
10 US dollars x USDJYP
USDCHF
10 Swiss francs / USDCHF / GBPUSD
10 Swiss francs / USDCHF x USDJYP
GBPUSD
AUDUSD
USDCAD
10 Canadian dollars x USDCAD /
10 Canadian dollars / USDCAD x USDJYP
USDJYP
1000 Japanese yen

/ USDJPY / GBPUSD
GBPUSD
1000 Japanese yen
EURGBP
10 British pounds
10 British pounds x GBPUSD x USDJYP
The table is to be used as following: we trade 3 lots AUDUSD, make a profit of 50 pips ,
our deposit currency is in euros and the actual EURUSD exchange rate is 1.5, then our
profit in euros is: 3 lots x 50 pips x 10 US dollars / 1.5 (EURUSD exchange rate) = 1,000
euros
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2.2. The Concept of Leverage

Many beginning traders dont fully understand the concept of leverage. Basically, if you
have a start up capital of $5,000 and if you trade on a 1:50 margin you can effectively
control a capital of $250,000. However, a two percent move against you and your capital
is completely wiped out. If you are a beginning trader you should not use more than 1:20
margin until you get comfortable and profitable and then and only then you can attempt to
use higher margins. What does 1:20 margin mean? It means that with your $5,000 you
will control a capital of $100,000. Lets say you are trading EUR/USD and by using my
entry strategy you have decided to enter the trade on a long side. That means that you are
betting that USD will depreciate against Euro. Lets say current EUR/USD rate is 1.567.
Again, if your trading capital is $5,000 and you are using 1:20 leverage you will
effectively be exchanging $100,000 to Euros. If the current rate is 1.567 you will receive
100,000/1.567 = 63,816 Euros. If the trade goes in your direction the margin will work in
your favor and 1% decline in USD will mean 20% increase in your start up capital. So if
EUR/USD rate moves from 1.567 to 1.583 you will be able to exchange your 63,816
Euros back to $101,000 for a profit of $1,000. Since your start up capital was $5,000 it is
effectively a 20% increase in your account. However, if the trade went against you and
USD appreciated 1% vs. Euro your account would be reduced to $4,000. That would not
have happened as my system as built in hard stops to prevent such an outcome.
2.3. Money Management

As explained in the chapter before the leverage gives basically a trader the possibility to
control a higher capital, than his real start up capital. That way he is able to control higher
contract size and to make higher profit, if the trade goes in his direction. But at the same
time he is taking higher risk, if the trade goes against him.
Resuming, leverage is a powerful tool but it should be used by traders carefully!
I recommend you to start trading first without using this tool. Once you are confident with
the system and able to make profits, you can use some leverage taking a well-defined risk.
How can this look like?
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Example 1: Intraday Rules, EURUSD, 3% risk level, $10,000 account size

Well, let us assume that you want to trade EURUSD using my Intraday Street Smart
ForexTM trading system and that your account size is $10,000. First of all you need to
define how much risk you want to take very time you enter a trade. For example, lets say
you want to take a risk level of 3% per trade ($300 per trade). Ok, in my Intraday Street
Smart ForexTM trading system after entering the market we place a 30 pips stop order in
order to cut possible losses short. That means the maximum loss we may suffer is 30 pips.
Now, it is about to calculate the leverage we will use according to the defined risk level of
3%:
Lot Size x 0.0030 pips = $300 Lot Size = $100,000 = 1 lot
$10,000 : $100,000 = 1 : 10
That means that you will use a leverage of 1 : 10 by trading 1 lot EURUSD.
Example 2: Longterm Rules, GBPUSD, 3% risk level, $20,000 account size
Well, let us assume that you want to trade GBPUSD using my Long-Term Street Smart
ForexTM trading system and that your account size is $20,000. First of all you need to
define how much risk you want to take very time you enter a trade. For example, lets say
you want to take a risk level of 3% per trade ($600 per trade). Ok, in my Long-Term
Street Smart ForexTM trading system after entering the market we place a 60 pips stop
order in order to cut possible losses short. That means the maximum loss we may suffer is
60 pips. Now, it is about to calculate the leverage we will use according to the defined
risk level of 3%:
Lot Size x 0.0060 pips = $600 Lot Size = $100,000 = 1 lot
$20,000 : $100,000 = 1 : 5
That means that you will use a leverage of 1 : 5 by trading 1 lot GBPUSD.
Please, remind yourself that one of your main aims should not only to make profit, but
also to protect your trading capital.
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2.4. Your Trading Equipment

Before you can start trading you need the following trading equipment:
appropriate computer equipment
a forex broker
a suitable charting software
2.4.1. Your Computer Equipment

Unfortunately, you cannot go into real forex trading with an outdated computer system or
an unstable and slow Internet connection. If you enter a position, you cannot afford that
your computer system crashes or that your Internet connection fails. That way you could
miss a proper exit signal which would have protected your already achieved profit or what
is much worst, directly after you enter a position, it could happen that you are not able to
place your stop order, because your Internet connection or computer fails. This is traders
suicide, as you could lose all of your trading capital, if suddenly the price of the currency
pair drastically changes!
On top of that you cannot afford that you follow the market price or place market orders
with a considerable time delay (either because your Internet connection or your computer
is too slow), because this will cost you lots of money in the long run.
As a rule of thumb you can use the following check: Is your computer and Internet
connection 100% stable? Are you able to follow the market price and to place market
orders in real-time without any time delay? If not, you should enhance your computer
equipment, starting with the weakest part of the chain.
2.4.2. How to choose your Forex Broker

Without a reliable broker, even the best traders may have a limited chance of success.
Every trader I know has at least one horror story about his/her broker. What happens if
you try to sell your position because the value of your holdings is quickly depreciating
only to find out that your brokers server is down. By the time they fix the problem you
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Street Smart Forex
may be out of 100s even 1000s of dollars. This is especially true when trading
currencies.
When choosing your broker, youll need to take into account several factors. You also
need to understand that while one broker may be an excellent choice for one form of
trading it may be a terrible choice for another form of trading. If you are not happy with
the service and performance that you receive from your broker you should look for
another one. It is not worth your time or money to be loyal to someone whose service
isnt working for you.
There are literally hundreds of brokers that you can choose from. When it is time to
choose your broker, take the time to get informed about several prospective brokers.
Although you can always change your broker later it is often a frustrating experience, so
try to do everything in your power to make sure that you do it right the first time. By
choosing your broker carefully you will save yourself valuable time and money.
Your forex broker should have the following properties:
Low Trading Costs

Although brokers do say that it is not in their interest that you lose your money, you
need to remember that they make profit whether you win or lose. Equities and futures
brokers make their profits on commissions that traders pay to them for every trade
they make. Forex brokers make their profits from spreads. Spread is the difference
between bid price (the price you sell at) and ask price (the price you buy at). Every
currency quote has these two numbers displayed. For example, a EUR/USD quote of
1.5701 / 1.5703 means bid(sell): 1.5701 and ask(buy): 1.5703, a spread of 2 pips.
Didnt you notice that every time you enter a trade, you start with a negative balance
account? Well, that is the spread your broker is earning from you. If you would buy
and sell immediately 1 lot EUR/USD, then you would make a loss of $20: as you
would buy at 1.5701 and sell at 1.5703 $100,000 x (1.5703 - 1.5701) = $20.
Figure 2-2
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More trades you do, more money your broker makes. This is why many brokers that
cater to currency traders prefer traders who make many trades during the day. They
even hold courses that teach you how to scalp in and out of positions all day long.
Although this approach has worked out for some traders who were trading highflying
Nasdaq stocks in the late 90s for a currency trader it is a sure way to slowly lose all
of his money.
Here is an example of the danger of such a system. Lets say a trader has $2,000 in
capital and is using 1:5 leverage to buy/sell $10,000 per trade and lets say that he
trades 20 times daily as some of those courses and strategies teach. Average spread
being around 5 pips he would spend $5 per trade. At 20 trades per day this would
equal $100 per day in spreads. It is five percent of the traders capital each day just in
spreads. 20 trading days a month and it would equal 100% of traders capital each
month. You are better spending your money anywhere else.
The importance of spreads depends greatly on your trading style and your trading
system If my system generates several entry signals per day and you are using
relatively tight stops in order to limit your losses, then spread size is very important to
you. With such trading style the difference between a broker that has average spread
of 4 pips and a broker that has an average spread of 8 pips is of huge importance. 5
trades per day can mean $40 per day, $800 per month, $9,600 per year if you are
trading in $10,000 per trade. Adds up quickly, doesnt it?
Some forex brokers will request, in addition to the spread, a commission per trade.
For example they may ask 5$ for every lot you want to trade. One would normally
assume that brokers asking for commission are in any case more expensive than the
other commission-free ones. Well, that is not always the case, as brokers asking for
commissions offer typically much lower spreads than the commission-free ones.
For example assume that we have a broker A that requests for trading the major
currency pair EUR/USD 3 pips and a broker B that requests for trading the same
currency pair 1 pip plus 5$ per lot. What would be the costs for trading 1 lot
EUR/USD? With broker A the costs would be $30 per trade (3 pips x $100,000), with
broker B the costs would be $15 per trade (1 pip x $100,000 + 5$)!
So dont automatically disregard the brokers requesting commissions. Sometimes they
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are cheaper than the commission-free ones! In the Table 2-4 below you can find the
trading costs of several forex brokers at the time of this writing.
Fast Execution of Market Orders

In order to successfully place a trade you need to be able to get the most favorable
price at any given time. This is especially true for market orders. When trading
currencies, prices move extremely fast and by the time your order gets filled it may be
at a price that is very different from the price you were trying to get, which was
exactly the price displayed at your monitor at the time you placed your order. The
losses we suffer in case such a scenario occurs are known as slippage costs. Even the
brokers that normally provide fast executions occasionally may take longer to fill your
order. High trading volumes may affect the speed of their executions and when prices
move quickly your limit orders may become outdated.
Appropriate 24-hour Customer Service

You should be able to contact the customer service even if the brokerage firm has
technical problems and lots of clients call the customer service at the same time.
Further you should be able to contact the customer service by different ways, 24-hour
phone service as a must-have. Think about the possibility, that while you have an
opened position your internet connection fails. In such case you need somebody on
the phone being able to let you know what is happening with your trade.
High System Reliability

If you find out that the brokerage system is down too often, then you have to choose
another brokerage. You cannot afford that after you enter a position, the brokerage
system fails! For the same reason you need stable computer equipment, you also need
reliable brokerage system.
High Company Reliability

If you do not completely trust your broker, you wont feel comfortable transferring
your funds to them. Of course, there is no 100% guarantee in life, but you can
minimize possible risks. First you will request that the brokerage company is
regulated by a governmental agency from a country of your trust. Brokerage
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Street Smart Forex
companies are usually regulated by the US agencies CFTC and NFA, sometimes also
by agencies from other countries such as FSA (UK), SFBC (CH) or ASIC (AU).
Would you trust a brokerage company which is not regulated or even one which is
regulated by an offshore island? Second you will request that the brokerage company
is over five years in the market. And third that it has offices in several places around
the world, desirable of course also in your residence country.
Below you can find a list of brokers that are appropriate for forex trading (see Table 2-4).
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Account Conditions
Trading Costs
Company Reliability
Forex Broker
Min.
Deposit
Max.
Leverage
Commission
Spread on
Majors
Since
Regulated By
$200
100:1
No
2 to 4
2004
FSA (UK)
$2,000
100:1
No
2 to 3
2002
SFBC(CH)
www.alpari-idc.com
www.ac-markets.com
$2,000
100:1
No
2 to 3
1989
NFA(US),
FSA(UK),
ASIC(AU),
BAFIN(DE),
OSC(CA)
$200
400:1
No
3 to 4
2003
CFTC/NFA (US)
$300
200:1
No
1 to 2
2004
SFBC(CH)
$250
200:1
No
2 to 3
1998
CFTC/NFA (US)
$2,000
200:1
No
3 to 4
2006
Polyreg (CH)
$300
200:1
No
2 to 4*
1999
CFTC/NFA (US),
FSA(UK),
FSA(JAPAN)
$500
200:1
No
2 to 4
2004
NFA (US)
$250
400:1
No
3 to 5
2001
CFTC/NFA (US)
www.cmcmarkets.com/us
www.cmsfx.com
www.crownforex.com
www.forex.com
www.forex.ch
www.fxcm.com
www.fxlite.com
www.fxsol.com
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Account Conditions
Trading Costs
Company Reliability
Forex Broker
Min.
Deposit
Max.
Leverage
Commission
Spread on
Majors
$500
200:1
No
3 to 5
$250
400:1
No
3 to 5
2001
CFTC/SEC (US),
FSA (Japan),
ASIC (Australia)
$7,500
50:1
$3/100k
1 to 2
2000
CFTC/NFA (US)
$5,000
50:1
$2/100k
2 to 2
1998
$250
100:1
No
2 to 3
2001
NFA(US),
CFTC(US)
$400
100:1
Yes
1 to 2
2002
CFTC/NFA (US)
$200
100:1
No
3 to 5
2000
CFTC/NFA (US)
$2,000
200:1
No
2 to 3
2005
SFBC(CH)
$1
50:1
No
1.2 to 2.5
2001
CFTC/NFA (US)
$2,000
100:1
No
2 to 3
1998
DFSA(DK)
Since
Regulated By
CFTC/NFA (US)
www.gfsforex.com
www.gftforex.com
www.hotspotfx.com
www.interactivebrokers.com
www.interbankfx.com
www.mbtrading.com
www.mgforex.com
www.migfx.ch
www.oanda.com
www.saxobank.com
Table 2-4
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2.4.3. Charting Software

In order to implement my system you need charting software capable to place some TA
signals (EMA, MACD and RSI) and capable to draw lines on the chart. These features are
usually provided by any charting software, so you should be able to implement my system
regardless which charting software you are using.
Usually when you open an account in a brokerage firm, you get free or discounted
charting software. If you do not feel comfortable with the provided charting software, I
recommend that you to take a closer look at the following charting software programs.
Most of them provide a one month free trial period so you can try several of them before
you decide which one suits your needs. Here is a short list of some of the software
providers. There are many others out there and you can find them by doing simple Google
searching.
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Free Charts
Metatrader
Website: http://www.metaquotes.net/metatrader/
Metatrader offers several technical indicators and time frames, but what sets the package apart is its builtin language for programming custom indicators and trading strategies. With this feature you can analyze
the market, enter pending orders, and automatically trigger trades generated by my system. It is the best
charting software for free out there.
Figure 2-3
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FXtrek
Website: http://quote2.fxtrek.com/misc/fxcm2.asp
FXtrek offers a suite of increasingly sophisticated packages. Here you can gain access to FXtrek's free
package, which makes for an extremely efficient starter kit for the beginning technician. The charts
feature the most popular time frames, including tick and 1 minute. In addition, it offers the most
commonly used indicators used for FX analysis. Java-based.
Figure 2-4
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Stratagem
Website: http://scharts.fxcorporate.com/
Designed for ease of use, this package contains a menu bar that allows you to execute the most common
charting actions with a single click of the mouse. The user friendly layout offers you the ability to
organize and tile workspaces. This package includes 14 technical indicators, 7 different time frames, and a
multiple-chart viewing capability. Java-based.
Figure 2-5
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Premium Charts
eSignal
Website: http://www.esignal.com
Costs: $115/Month plus Data feed $50/month for the FX
E-signal are a well established name in the charting software arena. E-signal offer reliable charts with a
slew of technical indicators, drawing tools, as well as alerts, back testing capabilities, and a helpful
support team. Windows based.
Figure 2-6
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Amibroker
Website: http://www.amibroker.com/
Costs: SOFTWARE COST: Professional - $229.00 one time purchase fee. Standard - $149.00 one time
purchase fee, FX DATA FEED COST: Varies based on Data feed Provider
AmiBroker offers a robust professional charting package with such features as alerts back-testing, and
indicator customization all accessible via a clear, user-friendly interface. AmiBroker is also noted for
their exceptional Customer Support team, which distinguishes itself with superior service quality and
efficiency. Windows based.
Figure 2-7
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CQG
Website: http://www.cqg.com/
Costs: SOFTWARE COST: $545/month, FX DATA FEED COST: $100/month
CQG charts offer a robust charting solution with alerts, back testing, the ability to export to excel, and a
large number of technical indicators. CQG provides worldwide data coverage including futures,
options, and stock exchanges. Windows based.
Figure 2-8
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2.5. Monitor More Than One Currency Pair

As I did not want to confuse our reader with too much information at once, I decided to
monitor only one currency pair in my examples.
Once you get more comfortable using the "Street Smart ForexTM" trading system, I
recommend that you monitor more than one currency pair at the same time. That way,
you will get more entry signals and in consequence you will enter more trades generating
a higher profit.
First you have to decide how many currency pairs you are going to monitor at once. I
recommend starting with two currency pairs, as it is a manageable number. If at any time
you do not get enough entry signals, you can just increase the number of monitored
currency pairs.
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2.6. Technical Analysis

For those of you who are not familiar with the Technical Analysis (TA) tools used in my
system I want to explain them to you in detail.
The TA tools used in the Street Smart ForexTM trading system:
Exponential Moving Average (EMA)
Moving Average Convergence Divergence (MACD)
Relative Strength Index (RSI)
Support/Resistance
Zigzag Signals
2.6.1. Moving Average

Moving averages are one of the most popular and easy to use tools available to the
technical analyst. They smooth a data series and make it easier to spot trends, something
that is especially helpful in volatile markets. The picture below shows a candlestick chart
with a 20-period moving average as blue line
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Figure 2-9
The two most popular types of moving averages are the Simple Moving Average
(SMA) and the Exponential Moving Average (EMA).
A X period simple moving average (SMA) is calculated by adding up the closing prices
of the last X bars and then dividing that number by X. Lets say we plot a 3 period SMA
on the daily chart of the EUR/USD. The closing prices for the last 3 days are as follows:
Day 1: 1.4345
Day 2: 1.4360
Day 3: 1.4375
The simple moving average would be calculated as follows:
(1.4345+1.4360+1.4375)/3= 1.4360
Moving averages are available in almost all charting packages as signals to be added to
your chart. So actually you do not really need to understand how these signals are
calculated. You only need to know how to add them to your charts within your charting
software. In the picture below I show how to set the settings within eSignal for adding a
150 period EMA to a 5 minute chart. Something similar will be in any other charting
software.
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Figure 2-10
2.6.2. Moving Average Convergence Divergence

Moving Average Convergence Divergence, also known as MACD, is a technical analysis
tool from which a trader can get bullish or bearish signals.
MACD is a tool also available in almost all charting packages. So you only need to know
how to add MACD tool to your charts and how to use it for generating signals. Within an
MACD chart, you will usually see three parameters that are used for its settings, two
lines (base line and signal line) and optionally a histogram.
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Figure 2-11
The base line is the difference between a fast and slow exponential moving average. The
period of the fast EMA is given as the first parameter (12 in Figure 2-11), the period of
the slow EMA is given as the second parameter (26 in Figure 2-11).
The signal line is the moving average of the base line. The period of this moving
average is given as the third parameter (9 in Figure 2-11).
The histogram is the difference between the base line and the signal line.
In my system we will be using a MACD(12,26,9) within a 5 minute chart. That is a 12period fast EMA and a 26-period slow EMA for the calculation of the base line. And a 9
period MA for the calculation of the signal line. For generating signals we will only be
looking at the base line and at the signal line and not at the histogram. That is the reason
why I recommend hiding the histogram if possible. In the picture below I show how to set
the settings within eSignal for adding a MACD(12,26,9) to a 5 minute chart.
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Figure 2-12
2.6.3. Relative Strength Index

The Relative Strength Index, also known as RSI, is one of the most used indicators from
the oscillators toolbox.
Figure 2-13
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In my system I use a 14 period RSI from a 5 minute chart together with an upper band at
60 and a lower band at 40 for determining the Signal Strength.
RSI is a tool available in almost all charting packages. So actually you do not really need
to understand how RSI is calculated. You only need to know how to add it to your
charts within your charting software. In the picture below I show how to set the settings
within eSignal for adding a 14 period RSI to a 5 minute chart. Additionally we define an
upper band at 60 and a lower band at 40.
Figure 2-14
2.6.4. Support/Resistance Levels

Support and resistance is the most basic concept of technical analysis. Support is created
at points below current price where there is enough buyers to prevent and eventually
reverse decline of the underlying instruments price. Resistance is created at points above
the current price where there are enough sellers to stop and eventually reverse advance in
the underlying instruments price.
Support and resistance are often established around key exponential moving average such
as 20 day MA and 50 day MA or around key Fibonacci Retracement levels. Sometimes
they simply establish around round numbers such as 1.15, 1.10, 0.75 etc
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Figure 2-15
Figure 2-15 is a hourly candlestick chart for EUR/USD. As we can observe from the chart
resistance was established around 1.5820. For several days in the row Euro was unable to
break through resistance level. When a price is unable to move through key resistance
level for several times, it is considered a bearish signal and if it moves through key
resistance level, coupled with other TA indicators it is considered a strong buy signal.
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Figure 2-16
Figure 2-16 is a daily candlestick chart for EUR/USD. As we can observe from the chart
support was established around 1.4350. For several months in a row Euro was unable to
break through support level, and on the final bounce off the support line it picked up
momentum and started a multi month rally.
Support and resistance should not be used alone when looking for potential entry signals
but rather in the combination with other signals. When the price reaches resistance level
and starts reversing it is usually an entry opportunity on the short side. When the price
reaches support level and starts reversing it is usually an entry opportunity on the long
side. Such trading approach, when a trader anticipates the price to bounce off
support/resistance level is also called swing trading.
On the other hand traders who anticipate continuation of the current price trend after the
price crosses support/resistance level are said to be using breakout trading approach.
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2.6.5. Zigzag Signals

The zigzag signal is the most effective chart pattern signal and also one of the simplest to
determine.
The reason why the zigzag signal is so effective is that it is based on a fundamental
characteristic of forex markets. As said before regardless of how strong a market trend is,
the market never moves only in the direction of the trend there are always minor
movements against the major trend. These deviations usually dont last very long and
after them the market moves again in the direction of the long-term trend.
That means if the market is bullish, then we will get both upward and downward
movements but the upward movements will be stronger. Under such market condition we
will repeatedly see bullish zigzag signals: a major upward movement interrupted by a
minor downward and continued by a major upward movement.
Figure 2-17 Bullish Zigzag Signals in a Bullish Market

Figure 2-17 is a daily candlestick chart for EUR/USD showing a clearly bullish period
(the price climbed from 1.25 up to 1.46). As we can observe from the chart we have major
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upward movements interrupted by minor downward movements forming several zigzag

signals.
2.7. Paper Trading

Before going into real trading, I recommend that you get the needed experience doing
paper trading using one of the numerous demo accounts offered by online brokerage
companies. You have to get comfortable with placing buy and sell entry market orders,
placing exit stop orders and entering the market long/short. You have also to get used
with your trading platform and especially with your trading system. Because, when you
enter the forex trading battle, you have to be confident with these things. When you do
paper trading using a demo account, then you place entry and exit orders using a real-time
or pre-recorded chart quotes. Every time you close a position, the position is recorded and
your demo trading capital updated.
Online brokerages offering demo accounts are for example:
Once you have done paper trading and become confident, you are ready to trade
for real. Be careful, watch your finances wisely, and dont hesitate to pull out of a
trade if it is not going in your direction. Trading shouldnt be a gamble. With the
right tools, ammunition and experience you will be able to make your trading
endeavor a success.
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Chapter 3
Intraday
Trading System
For the purpose of explaining my trading system I will be using eSignal charting
software. Which software and which trading platform you will be using is entirely up to
you, however my setup will give you general ideas of what capabilities should your
software have. Principles and rules that are explained in this system can be used to trade
any currency pair.
3.1. Entry Strategy

My entry strategy is based on the following steps:
Step 1
Staying out of Sideways Market
Step 2
Identifying the Long-Term Trend
Step 3
Getting an Entry Signal
Step 4
Confirming with the Signal Strength
3.1.1. Step 1: Staying out of Sideways Market

Sideways market is recognized when within the last 2 hours the highest price differs from
the lowest price by less than 30 pips. If this is the case we do not enter the market.
Otherwise we go to step 2.
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Figure 3-1 Sideways Market
3.1.2. Step 2: Identifying the Long-Term Trend

For identifying the long term trend we will use 150-period Exponential Moving Average
(EMA) on a 5 minute chart, as I found out that EMA is the best indicator for this purpose.
It is as simple as following:
The long-term trend is bullish when EMA(150) is rising.
The long-term trend is bearish when EMA(150) is falling.
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Figure 3-2
If the long-term trend is recognized as bullish, we will look ONLY for bullish entry
signals and if the market is bearish we will look ONLY for bearish entry signals.
3.1.3. Step 3: Getting an Entry Signal

An Entry Signal is a point in time where there is the highest possible probability that the
trade will go into our desired direction.
What I found is that there is one indicator (MACD) that gets rid of low quality signals by
slightly changing it. For that purpose the +3/-3 pips range is added to the conventional
way of using MACD.
We will add MACD(12,26,9) to the 5 minute chart and plot the +3/-3 pips range. Our
set up should look as shown in the figure below.
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Figure 3-3
We get a bullish trigger signal if the base line crosses the signal line from below to
above and the base line gets outside the +3/-3 pips range.
We get a bearish trigger signal if the base line crosses the signal line from above to
below and the base line gets outside the +3/-3 pips range.
In the example below around 05:30AM we get a bearish signal as the base line crosses the
signal line from above to below and the base line is outside the +3/-3 pips range.
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Figure 3-4 Bearish Entry Signal
3.1.4. Step 4: Confirming with the Signal Strength

The Signal Strength is calculated by adding the points assigned to the Zigzag,
Support/Resistance and RSI signal.
I will now explain Zigzag, Support/Resistance and RSI signals respectively:
3.1.4.1. Zigzag Signals (12 Points)

For recognizing zigzag signals we will use 1 minute chart.
A bullish zigzag signal is recognized when we get a major upward movement, followed
by a minor downward and finished by a major upward movement.
Here is an example on a chart:
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Figure 3-5 Bullish Zigzag Signal

A bearish zigzag signal is recognized when we get a major downward movement,
followed by a minor upward and finished by a major downward movement.
Here is an example on a chart:
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Figure 3-6 Bearish Zigzag Signal

3.1.4.2. Support/Resistance Levels ( 8 Points)
Support and resistance is the most basic concept of technical analysis. Support is created
at points below current price where there is enough buyers to prevent and eventually
reverse decline of the underlying instruments price. Resistance is created at points above
the current price where there are enough sellers to stop and eventually reverse advance in
the underlying instruments price.
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Figure 3-7
How to determine the support/resistance levels?

Even though support/resistance levels are one of the most commonly used tools, there are
many different approaches how to determine them. I have found the following approach
as the best one for our purposes.
Step 1:
Determining when the trading day starts and ends
Although forex market is in essence a 24-hour market, for the purpose of my strategy we
need to define when does the trading day start and when does it end. Lets have a look at
figure below:
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Figure 3-8
The figure above shows 15-min candlestick charts for USD/JPY and EUR/USD
respectively. What do they all have in common? We can observe that the time of the
lowest trading volume for all of them is at approximately 5pm EST or 10pm GMT. That
is the time when almost all of the Forex Trading Centers around the world are closed.
Therefore we will use 10pm GMT as the time when previous trading day ends and the
new trading day begins. Here is an example: You live in Europe. It is Thursday morning
9amGMT. Previous trading day has started on Tuesday 10pmGMT and it has ended
Wednesday 10pmGMT. Another example: You live in North America. It is Thursday
morning 9amEST. Previous trading day has started on Tuesday 5pm EST and it has ended
Wednesday 5pm EST. For those who dont know: Eastern Standard Time (EST) =
Greenwich Mean Time (GMT) 5 Why is it important to determine when does the
trading day start and when does it end? It is important because we will need values such
as Previous Day High, Previous Day Low and Previous Day Close later on for
determining the support and resistance levels.
Step 2:
Determining Previous Day High, Previous Day Low and Previous Day Close
Once we know that previous trading day ended at 05:00 PM of previous day, we need
to determine Previous Day High, Previous Day Low and Previous Day Close:
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Figure 3-9
The figure above is a 15 min candlestick chart for EUR/USD. From the chart above we
can determine that:
Previous day High PDHigh = 1.4579
Previous day Low PDLow = 1.4478
Previous day Close PDClose = 1.4519
Step 3:
Determining Pivot Point
The Pivot Point (PP) is calculated as:

PP = (PDHigh + PDLow + PDClose) / 3
For the example above the PP is found to be:
Pivot Point PP = (1.4579 + 1.4478 + 1.4519) / 3 = 1.4525
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Step 4:
Determining the Support and Resistance Levels S1, S2, R1 and R2
The S1, S2, R1, R2 Support and Resistance Levels are calculated using the following
formulas:
R1 = (PP x 2) PDLow
R2 = PP + (PDHigh - PDLow)
S1 = (PP x 2) PDHigh
S2 = PP - (PDHigh - PDLow)
For the example above the S/R levels for the next trading day are:
Figure 3-10
R1 = (1.4525 x 2) - 1.4478 = 1.4572
R2 = 1.4525 + (1.4579 - 1.4478) = 1.4626
S1 = (1.4525 x 2) - 1.4579 = 1.4471
S2 = 1.4525 - (1.4579 - 1.4478) = 1.4424

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Although it may look a little difficult at the beginning, you will get comfortable with the
calculations after some practice. And these calculations need to be done only once before
the start of your trading day!
How to get signals based on the support/resistance levels?
A bullish Support/Resistance signal is got, when:
the price bounces from above at a S/R level (bullish bouncing) or
the price crosses from below to above a S/R level (bullish breakthrough)
Figure 3-11 Bullish Support/Resistance Signals

A bearish Support/Resistance signal is got, when:
the price bounces from below at a S/R level (bearish bouncing) or
the price crosses from above to below a S/R level (bearish breakthrough)
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Figure 3-12 Bearish Support/Resistance Signals

3.1.4.3. Relative Strength Index (6 Points)
In my strategy we will be using a 14 period RSI on a 5 minute chart together with an
upper band at 60 and a lower band at 40:
if RSI is above 60 (upper level), then we read this as a bullish signal
if RSI is below 40 (lower level), then we read this as a bearish signal
In the example below we read a bearish signal as the RSI is less than 40.
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Figure 3-13
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ENTRY STRATEGY RULES

Entering on the LONG side
We will enter on the LONG side
If the Market is NOT Sideways Market
Long Term Trend is Bullish meaning EMA(150) is rising
MACD base line crosses the signal line from below to above and the base line gets
outside the +3/-3 pips range.
And the SCORE (Zigzag + S/R + RSI) is greater or equal to 12.
Zigzag signal is bullish = 12 Points
Support/Resistance signal is bullish = 8 Points
RSI is greater than 60 = 6 Points
Entering on the SHORT side

We will enter on the SHORT side
Long Term Trend is Bearish meaning EMA(150) is falling
MACD base line crosses the signal line from above to below and the base line gets
And the SCORE (Zigzag + S/R + RSI) is greater or equal to 12.
Zigzag signal is bearish = 12 Points
Support/Resistance signal is bearish = 8 Points
RSI is less than 40 = 6 Points
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3.2. Exit Strategy

Following actions define my exit strategy:
3.2.1. Action 1 Cut Your Losses Short:

Immediately after entering the market we place a stop order. 30 pips below entry price if
the entry signal was bullish or 30 pips above entry price if the entry signal was bearish.
3.2.2. Action 2 Take Part of Your Profits:

Depending on the number of points (SCORE) we got from the Signal Strength, we will
define target profit as follows.
Signal Strength
12-18 pts
20 pts
26 pts
number of pips distance from the

target level to the entry price
30 pips
40 pips
50 pips
Table 3-1: Target Level

In the case the price reaches the target level we close only half of the position. The other
half is still in trade to make even more profit.
3.2.3. Action 3 Give Your Trade Enough Space:

3.2.3.1. Recursive Trailing Stop Formula
The basic idea of my Recursive Trailing Stop Formula is as follows:
The more the market moves in the direction of our trade, the more space we want to
allow our trade in order to make even more profit.
So in order to avoid that we are stopped out just at the moment when our trade needed just
a little more space, we need a wider space to the actual price than 30 pips. The key
question is, how much exactly we want to risk in order to be able to make even more
profit?
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I have answered this question by using a proprietary Recursive Trailing Stop Formula
for recalculating the stop order every time the market moves in our direction. This method
behaves in a way that the more the market moves in the direction the more space we want
to allow our trade.
Every time the price moves 30 pips in our direction we readjust the stop order by using
the following Recursive Trailing Stop Formula:
Current stop order = Old stop order + Previous Stop Loss x 0.85
Equation 1
Here is an example for the usage of the Recursive Trailing Stop Formula:
Figure 3-14
We enter long (bullish) the market at the price of 1.3450
First stop order is set 30 pips below the entry price:

First Stop Order at 1.3450 0.0030 = 1.3420
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Street Smart Forex
If the price moves 30 pips in our direction, here it means that the price reaches 1.3480,
then the stop order is readjusted to:
New Stop Order = 1.3420 + 0.0030 x 0.85 = 1.3420 + 0.0025 = 1.3445
If the price moves again 30 pips in our direction, here it means that the price reaches
1.3510, then the stop order is readjusted to:
New stop order = 1.3445+ 0.0025 x 0.85 = 1.3445 + 0.0021 = 1.3466
And so forth
3.2.4. Action 4 Take Your Profit when Your Trade Runs out of Steam:
We close the position in case the market gets sideways and our actual balance is
positive. In this case Sideways market is recognized, when within the last 4 hours the
highest price differs from the lowest price by less than 30 pips.
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Chapter 4
Intraday USD/CAD
Trading Example
In this example we are going to trade the currency pair USD/CAD.
Ok, today it is February 26. 07:00 AM. Before we start trading we have to do the
following preparations:
4.1. Trading Day Preparation

4.1.1. Determining the Support/Resistance Levels
First we need to determine the Support/Resistance Levels. For that purpose we open a 5
minute candlestick chart and check for the Previous Day High, Previous Day Low and
Previous Day Close. Remember that end of previous trading day is defined at 05:00 PM
EST of previous day.
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Figure 4-1
From the chart above we can determine that:
Previous day High PDHigh
= 1.0129
Previous day Low PDLow
= 0.9946
Previous day Close PDClose
= 0.9959
The Pivot Point (PP) is calculated to:
Pivot Point PP
= (PDHigh + PDLow + PDClose) / 3

= (1. 0129 + 0.9946+0.9959) / 3
= 1.0011
The S1, S2, R1, R2 Support and Resistance Levels are calculated to:
R1 = (PP x 2) PDLow
= (1.0011x 2) - 0.9946
R2 = PP + (PDHigh - PDLow) = 1.0011 + (1.0129-0.9946)
= 1.0194
= (1.0011 x 2) - 1.0129
= 0.9894
= 1.0011- (1.0129- 0.9946)
= 0.9828
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= 1.0077
The S/R levels for the trading day are:
Figure 4-2
4.2. Entering the Market

Now we are ready to start.
Step 1: Check if the market is recognized as non-sideways. For that purpose we need to
look at the 5 minute chart and pick up the highest and lowest values within the last two
hours. As we can see from figure below the market is non-sideways as the highest price
(0.9968) differs from the lowest price (0.9905) by more than 30 pips.
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Figure 4-3
Step 2: Identify the long-term trend. For that purpose we add EMA(150) to a 5 minute
chart and check if the EMA is rising or falling. As EMA is falling the long-term trend is
recognized as bearish. So we will look only for bearish entry signals.
Figure 4-4
Step 3: Getting an entry signal. At 07:10 we get a bearish trigger signal, as the base line
(blue line) crosses from above to below the signal line (red line) and the base line is
outside the 3pips range.
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Figure 4-5
Step 4: Confirm with the Signal Strength. The Signal Strength is calculated by adding the
points assigned to the Zigzag, Support/Resistance and RSI signal.
As we can see from the figure below:
There was no Zigzag signal
that makes 0 points
The last S/R signal is bearish
that makes 8 points
The RSI is below 40
that makes 6 points
If we add up all these points, we come to Signal Strength of 14 points.
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Figure 4-6
As the Signal Strength is 14 points we place an order for entering the market. In this
example we sell 5 lots of the currency pair USDCAD at the price of 0.9914.
4.3. Exiting the Market

Ok, now we are about to find how far we will let the market move before we exit our
position.
First of all we place a stop order 30 pips above the entry price. That means at 0.9914 +
0.0030 = 0.9944. Its represented by the thick blue line in the picture below.
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Figure 4-7
We will also determine the target level. The Signal Strength was determined to be 14
points and based on Table 3-1 at page 63 we get a target level 30 pips below the entry
price at 0.9884
Figure 4-8
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At 08:05 the target level is reached so we close half of our position (2.5 lots) at the price
of 0.9884 making a profit of 759$.
Figure 4-9
As the price has moved 30 pips in our direction (from 0.9914 to below 0.9884) we also
readjust the stop order to 0.9919 using the Recursive Trailing Stop Formula:
New stop order
Old stop order + Previous Stop Loss Distance x 0.85
0.9944 - 0.0030 x 0.85 = 0.9944 - 0.0025 = 0.9919
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Figure 4-10
At 11:30 the price has moved again another 30 pips in our direction (from 0.9884 to
below 0.9854). So we readjust the stop order to 0.9898:
New stop order
0.9919 - 0.0025 x 0.85 = 0.9919 - 0.0021 = 0.9898
Figure 4-11
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below 0.9824), so we readjust the stop order to0.9880:
New stop order
0.9898 - 0.0021 x 0.85 = 0.9898 - 0.0018 = 0.9880
Figure 4-12
below 0.9794), so we readjust the stop order to 0.9865:
New stop order
0.9880 - 0.0018 x 0.85 = 0.9880 - 0.0015 = 0.9865
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Figure 4-13
Around 20:25 we recognize that our trade has run out of steam: the market is sideways as
within the last four hours the highest price (0.9824) differs from the lowest price (0.9800)
by less than 30 pips. Due to this we exit our trade closing our position (remaining 2.5 lots)
at the price of 0.9809 making a profit of 2,702$.
Figure 4-14
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Street Smart Forex
At the end using the intraday Street Smart ForexTM trading system a profit of
759 USD + 2,702 USD = 3,461 USD is achieved (see Figure 4.17).
A profit of 3,461 USD for one trading day.
Figure 4-15
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Chapter 5
Intraday EUR/USD
Trading Example
In this example we are going to trade the currency pair EUR/USD.
Before we start trading we have to do the following preparation:
5.1. Trading Day Preparation

In our example it is 8AM EST on January 24. First we need to determine the
Support/Resistance Levels. For that purpose we open a 5 minute chart and check for the
Previous Day High, Previous Day Low and Previous Day Close. Remember that the end
of previous trading day is defined at 05:00 PM EST of previous day.
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Figure 5-1
Previous day High PDHigh
= 1.4683
Previous day Low PDLow
= 1.4510
Previous day Close PDClose
= 1.4628
Pivot Point PP
= (PDHigh + PDLow + PDClose) / 3

= (1.4683 + 1.4510 + 1.4628) / 3
= 1.4607
R1 = (PP x 2) PDLow
= (1.4607 x 2) - 1.4510
R2 = PP + (PDHigh - PDLow) = 1.4607 + (1.4683 - 1.4510)
= 1.4780
= 1.4531
= (1.4607 x 2) - 1.4683
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= 1.4704
= 1.4607 - (1.4683 - 1.4510)
= 1.4434
The S/R levels for the next trading day are:
Figure 5-2

look at the 5 minute chart and pick up the highest and lowest values within the last two
hours. As we can see from figure below the market is non-sideways as the highest price
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Figure 5-3
Step 2: Identify the long-term trend. For that purpose we add EMA(150) to a 5 minute
chart and check if the EMA is rising or falling. As EMA is rising the long-term trend is
recognized as bullish. So we will look ONLY for bullish entry signals.
Figure 5-4
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Step 3: Getting an entry signal. At 08:50 we get a bullish trigger signal since the base line
(blue line) crosses signal line (red line) from below to above the and base line gets outside
the 3pips range.
Figure 5-5
The last Zigzag signal is bullish
that makes 12 points
The last S/R signal is bullish
that makes 8 points
The RSI is above 60
that makes 6 points
If we add up all these points, we come to a Signal Strength of 26 points.
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Figure 5-6
As the Signal Strength is 26 points we place an entry order. In this example we buy 5 lots
of the currency pair EURUSD at the price of 1.4677.

Ok, now we need to find out how far we will let the market move before we exit our
position.
First of all we place a stop order 30 pips below the entry price. That means at 1.4677 0.0030 = 1.4647. (Figure 3-8)
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Figure 5-7
We will determine the target level. The Signal Strength was determined to be 26 points so
we get a target level 50 pips above the entry price at 1.4727 (Table 3-1 at page 63).
Figure 5-8
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At 09:10 the price has moved 30 pips in our direction (from 1.4677.to above 1.4707). So
we readjust the stop order to 1.4672 using the Recursive Trailing Stop Formula:
New stop order
1.4647 + 0.0030 x 0.85 = 1.4647 + 0.0025 = 1.4672
Figure 5-9
At 10:05 the target level is reached so we close half of our position (2.5 lots) at the price
of 1.4727 making a profit of 1250$.
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Figure 5-10
At 11:30 the price has moved again 30 pips in our direction (from 1.4707.to above
1.4737), so we readjust the stop order to 1.4693:
New stop order
Old stop order + (Previous Stop Loss Distance x 0.85
1.4672 + 0.0025 x 0.85 = 1.4672 + 0.0021 = 1.4693
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Figure 5-11
At 13:50 the price has moved again 30 pips in our direction (from 1.4737.to above
1.4767), so we readjust the stop order to 1.4711:
New stop order
1.4693 + 0.0021 x 0.85 = 1.4693 + 0.0018 = 1.4711
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Figure 5-12
Around 20:00 we recognize that market is sideways as within the last four hours the
highest price (1.4777) differs from the lowest price (1.4748) by less than 30 pips. Due to
this we exit our trade closing our position (remaining 2.5 lots) at the price of 1.4763
making a profit of 2,150$.
Figure 5-13
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At the end using the intraday Street Smart ForexTM trading system a profit of
1,250 USD + 2,150 USD = 3,400 USD is achieved (see Figure 5.14).
A profit of 3,400 USD for one trading day.
Figure 5-14
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Chapter 6
Long-Term
Trading System
The Long-Term Street Smart ForexTM trading system, another viable trading approach,
is suitable for those of you who have day jobs that prevent you from closely monitoring
your positions during Market hours. This trading approach is called Long-Term Trading
or Swing trading. This is a way of trading in which a trader is holding his/her positions for
a few days/weeks. Long-Term trader is trying to capitalize on larger swings in the forex
price. Sometimes Long-Term traders time frame is one day, sometimes it is a few days
and in the exceptional situations even a few weeks.
Both approaches, Long-Term and Intraday Street Smart ForexTM trading system, are
very similar, as only the values of some parameters are changed. Because of that fact I
will not repeat all the explanations as done before for the Intraday Street Smart ForexTM
trading system. Basically, I am only going to repeat the basics of the system pointing out
the main differences between the Long-Term and the Intraday approach. So even you
may already know that long-term trading is the kind of approach you are searching for, I
highly recommend that you also read the chapter 3 that deals with the Intraday system as
you will find some useful information there.
6.1. Entry Strategy

My entry strategy is based on following steps:
Step 1
Staying out of Sideways Market
Step 2
Identifying the Long-Term Trend
Step 3
Getting an Entry Signal
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Step 4
Confirming with the Signal Strength
One important remark before we start in detail. In the long-term trend approach I will
very often make use of 4 hour charts. But this does not mean that one needs to follow the
market every four hours, as this system is intended to be used in the way that we check
the charts only once per day. We do so in order to decrease the time frame we keep a
position to acceptable value of few days and in the exceptional situations even a few
weeks.
6.1.1. Step 1: Staying out of Sideways Market

Sideways market is recognized when within the last 3 days the highest price differs from
the lowest price by less than 150 pips. If this is the case we do not enter the market.
Otherwise we go to step 2.
6.1.2. Step 2: Identifying the Long-Term Trend

For identifying the long term trend we will use 125-period Exponential Moving Average
(EMA) on a 4 hour chart, as I found out that EMA is the best indicator for this purpose.
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It is as simple as following:
The long-term trend is bullish when EMA(125) is rising.
The long-term trend is bearish when EMA(125) is falling.
Figure 6-2
If the long-term trend is recognized as bullish, we will look only for bullish entry signals
and if the market is bearish we will look only for bearish entry signals.
6.1.3. Step 3: Getting an Entry Signal

For obtaining an entry signal we will add MACD(12,26,9) to the 4 hour candlestick chart
and plot the+20/-20 pips range. Our set up should look like as per below.
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Street Smart Forex
Figure 6-3
We get a bullish trigger signal if the base line crosses the signal line from below to
above and the base line gets outside the +20/-20 pips range.
We get a bearish trigger signal if the base line crosses the signal line from above to
below and the base line gets outside the +20/-20 pips range.
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Street Smart Forex
Figure 6-4
6.1.4. Step 4: Confirming with the Signal Strength

The Signal Strength is calculated by adding the points assigned to the Zigzag,
Support/Resistance and RSI signal.
6.1.4.1. Zigzag Signals ( 12 Points)
We will use 1 hour chart for recognizing these signals.
We will recognize a bullish zigzag signal in case we get a major upward movement,
followed by a minor downward movement and followed again by a major upward
movement.
Here an example from a candlestick chart:
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Figure 6-5 Bullish Zigzag Signal

We will recognize a bearish zigzag signal in case we get a major downward movement,
followed by a minor upward movement and followed again by a major downward
movement.
Here an example from a candlestick chart:
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Figure 6-6 Bearish Zigzag Signal

6.1.4.2. Support/Resistance Levels (8 Points)
How to determine the support/resistance levels?
Even though support/resistance levels are one of the most commonly used tools, there are
many different approaches how to determine them. I myself have found the following
approach as the best one for my purposes.
Step 1:
Determining Previous Two Weeks High, Low and Close
We need to determine Previous Two Weeks High, Low and Close
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Street Smart Forex
Figure 6-7
The figure above is a one day candlestick chart for EUR/USD. From the chart above we
can determine that:
Previous two weeks High P2WHigh = 1.4350
Previous two weeks Low P2WLow = 1.4125
Previous two weeks Close P2WClose = 1.4329
Step 2:
Determining Pivot Point
The Pivot Point (PP) is calculated as:

PP = (P2WHigh + P2WLow + P2WClose) / 3
For the example above the PP is found to be:
Pivot Point PP = (1.4350 + 1.4125 + 1.4329) / 3 = 1.4268
Step 3:
Determining the Support and Resistance Levels S1, S2, R1 and R2
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The S1, S2, R1, R2 Support and Resistance Levels are calculated using the following
formulas:
R1 = (PP x 2) P2WLow
R2 = PP + (P2WHigh P2WLow)
S1 = (PP x 2) P2WHigh
S2 = PP - (P2WHigh P2WLow)
For the example above the S/R levels for the next trading day are:
Figure 6-8
R1 = (1.4268x 2) - 1.4125 = 1.4411
R2 = 1.4268 + (1.4350-1.4125) = 1.4493
S1 = (1.4268 x 2) - 1.4350 = 1.4186
S2 = 1.4268 - (1.4350- 1.4125) = 1.4043
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Although it may look a little difficult at the beginning, you will get comfortable with the
calculations after some practice. And these calculations need to be done only once before
starting your trading!
How to get signals based on the support/resistance levels?
A bullish Support/Resistance signal is got, when:
the price bounces from above at a S/R level (bullish bouncing)
the price crosses from below to above a S/R level (bullish breakthrough)
Figure 6-9 Bullish Support/Resistance Signals

A bearish Support/Resistance signal is got, when:
the price bounces from below at a S/R level (bearish bouncing)
the price crosses from above to below a S/R level (bearish breakthrough)
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Figure 6-10 Bearish Support/Resistance Signals

6.1.4.3. Relative Strength Index (6 Points)
In my strategy we will be using a 14 period RSI from a 4 hour chart together with an
upper band at 60 and a lower band at 40 for determining the Signal Strength as following:
if RSI is above 60 (upper level), then we read this as a bullish signal
if RSI is below 40 (lower level), then we read this as a bearish signal
In the example below we read for the RSI a bullish signal as the RSI is higher than 60.
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Figure 6-11
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ENTRY STRATEGY RULES

Entering on the LONG side
We will enter on the LONG side
Long Term Trend is Bullish meaning EMA(125) is rising
MACD base line crosses the signal line from below to above and the base line gets
And the SCORE (points added) is greater or equal to 12.
Zigzag signal is bullish = 12 Points
Support/Resistance signal is bullish = 8 Points
RSI is greater than 60 = 6 Points
Entering on the SHORT side

We will enter on the SHORT side
Long Term Trend is Bearish meaning EMA(125) is falling
MACD base line crosses the signal line from above to below and the base line gets
And the SCORE (points added) is greater or equal to 12.
Zigzag signal is bearish = 12 Points
Support/Resistance signal is bearish = 8 Points
RSI is less than 40 = 6 Points
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6.2. Exit Strategy

Following actions define my exit strategy:
6.2.1. Action 1 Cut Your Losses Short:

Immediately after entering the market we place a stop order 60 pips below entry price.
6.2.2. Action 2 Protect Part of Your Profits:

Depending on the number of points we got for the Signal Strength, we will define target
levels as follows.
Signal Strength
12 pts
14 pts
18 pts
20 pts
26 pts
number of pips distance from the

target level to the entry price
40 pips
50 pips
60 pips
80 pips
100 pips
Table 6-1 Target Level
In case the price reaches the target level we close only half of the position as the other half
should "let the profits run..."
6.2.3. Action 3 Give Your Trade Enough Space:

6.2.3.1. Recursive Trailing Stop Formula
The basic idea of my Recursive Trailing Stop Formula is as follows:
The more the market moves in the direction of our trade, the more space we want to
allow our trade in order to make even more profit.
I have answered this task by using a proprietary Recursive Trailing Stop Formula for
recalculating the stop order every time the market moves in our direction. As the
information about the last stop order goes into the calculation of the new stop order it is a
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so called recursive formula. This method behaves in the way that the more the market
moves in our directio the more space we want to allow to our trade.
Every time the price moves 100 pips in our direction we readjust the stop order by using
the following Recursive Trailing Stop Formula:
New stop order = Old stop order + Previous Stop Loss Distance x 0.85
Start Value for Stop Loss Distance is 100 pips
6.2.4. Action 4 Take Your Profit when Your Trade Runs out of Steam:
We close the position in case the market becomes sideways market and our actual
balance is positive. Sideways market is recognized, when within the last 4 days the
highest price differs from the lowest price by less than 150 pips
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Chapter 7
Long-Term EUR/USD
Trading Example
In this example we are going to trade long-term the currency pair EUR/USD and we will
check the charts once per day at 20:00 in the evening.
Ok, today it is Wednesday, February 20. Before we start trading we have to do the
following preparation:
7.1. Trading Preparation

First we need to determine the Support/Resistance Levels. For that purpose we open 1 day
candlestick chart and check for the Previous Two Weeks High, Previous Two Weeks Low
and Previous Two Weeks Close.
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Figure 7-1
Previous two weeks High P2WHigh = 1.4757
Previous two weeks Low P2WLow
Previous two weeks Close P2WClose = 1.4710
= 1.4440
Pivot Point PP
= (P2WHigh + P2WLow + P2WClose) / 3

= (1.4757 + 1.4440 + 1.4710) / 3
= 1.4636
R1 = (PP x 2) P2WLow
= (1.4636 x 2) 1.4440
R2 = PP + (P2WHigh P2WLow) = 1.4636+ (1.4757-1.4440)
= 1.4953
= 1.4515
= (1.4636 x 2) - 1.4757
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= 1.4832
= 1.4636 - (1.4757-1.4440)
= 1.4319
Figure 7-2

look at the 4 hour chart and pick up the highest and lowest values within the last three
days. As we can see from figure below the market is non-sideways as the highest price
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Figure 7-3
Step 2: Identify the long-term trend. For that purpose we add EMA(125) to a 4 hour chart
and check if the EMA is rising or falling. As EMA is rising the long-term trend is
recognized as bullish. So we will look only for bullish entry signals.
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Figure 7-4
Step 3: Getting an entry signal. On Thursday, December 21 we get a bullish trigger
signal, as the base line (blue line) crosses from below to above the signal line (red line)
and base line is outside the 20 pips range.
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Figure 7-5
The last Zigzag signal is bullish
that makes 0 points
The RSI is above 60 (bullish)
that makes 6 points
If we add up all these points, we come to Signal Strength of 18 points.
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Street Smart Forex
Figure 7-6
As the Signal Strength is18 points we place an order for entering the market. In this
example we buy 2 lots of the currency pair EURUSD at the price of 1.4803.

Ok, now we need to find how far we will let the market move before we exit our position.
First of all we place a stop order 60 pips below the entry price. That means at 1.4803 0.0060 = 1.4743. Its represented by the thick blue line in the picture below.
111
Street Smart Forex
Figure 7-7
We will also determine the target level. The Signal Strength is determined to be 18 points
and based on Table 6-1 Target Level at page 103 we get a target level 60 pips above the
entry price at 1.4863
Figure 7-8
112
Street Smart Forex
On Tuesday, February 26, when we check the charts at 20:00, we recognize that the target
level has been reached. So we close half of our position (1 lot) at the price of 1.4994
making a profit of 1,910$.
Figure 7-9
At the same time we also recognize that the price has moved two times 100 pips in our
direction (from 1.4803 to above 1.4903 and from 1.4903 to above 1.5103). So we readjust
the stop order using the Recursive Trailing Stop Formula two times:
For the first 100 pips move:
New stop order
Old stop order + Start Value Stop Loss Distance x 0.85
1.4743 + 0.0100 x 0.85 = 1.4743 - 0.0085 = 1.4828
For the second 100 pips move:

New stop order
1.4828 + 0.0085 x 0.85 = 1.4828 + 0.0072 = 1.4900
113
Street Smart Forex
Figure 7-10
On Wednesday, February 27, when we check the charts at 20:00, we recognize that the
price has moved again 100 pips in our direction (from 1.5103 to above 1.5203). So we
readjust the stop order using the Recursive Trailing Stop Formula:
New stop order
1.4900 + 0.0072 x 0.85 = 1.4900 + 0.0061 = 1.4961
114
Street Smart Forex
Figure 7-11
On Thursday, February 28, when we check the charts at 20:00, we recognize that the price
has moved again 100 pips in our direction (from 1.5203 to above 1.5303). So we readjust
the stop order using the Recursive Trailing Stop Formula:
New stop order
1.4961+ 0.0061 x 0.85 = 1.4961 - 0.0052 = 1.5013
115
Street Smart Forex
Figure 7-12
On Tuesday, March 04, when we check the charts at 20:00, we recognize that our trade
has run out of steam: the market is sideways as within the last four trading days (02/29,
03/02, 03/03 and 03/04) the highest price (1.5275) differs from the lowest price (1.5142)
by less than 150 pips. Due to this we exit our trade closing our position (remaining 1 lot)
at the price of 1.5194 making a profit of 3,910 $.
116
Street Smart Forex
Figure 7-13
At the end by using the long-term Street Smart ForexTM trading system a profit
of 1,910 USD + 3,910 USD = 5,820 USD is achieved (see Figure 7.14).
A profit of 5,820 USD in only two trading weeks.
117
Street Smart Forex
Figure 7-14
118
Street Smart Forex
Chapter 8
Long-Term GBP/USD
Trading Example
In this example we are going to trade long-term the currency pair GBP/USD and we will
check the charts once per day at 20:00 in the evening.
Ok, today it is Thursday, December 13. Before we start trading we have to do the
following preparation:
8.1. Trading Preparation

First we need to determine the Support/Resistance Levels. For that purpose we open 1 day
candlestick chart and check for the Previous Two Weeks High, Previous Two Weeks Low
and Previous Two Weeks Close.
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Street Smart Forex
Figure 8-1
Previous two weeks High P2WHigh =
2.0825
Previous two weeks Low P2WLow
2.0181
Previous two weeks Close P2WClose =
2.0407
Pivot Point PP
= (P2WHigh + P2WLow + P2WClose) / 3

= (2.0825 + 2.0181 + 2.0407) / 3
= 2.0471
R1 = (PP x 2) P2WDLow
= (2.0471 x 2) 2.0181
R2 = PP + (P2WHigh P2WLow)
= 2.0471 + (2.0825 - 2.0181) = 2.1115
= (2.0471 x 2) - 2.0825
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Street Smart Forex
= 2.0761
= 2.0117
= 2.0471- (2.0825- 2.0181) = 1.9827
Figure 8-2

look at the 4 hour chart and pick up the highest and lowest values within the last three
days. As we can see from figure below the market is non-sideways as the highest price
121
Street Smart Forex
Figure 8-3
Step 2: Identify the long-term trend. For that purpose we add EMA(125) to a 4 hour chart
and check if the EMA is rising or falling. As EMA is falling the long-term trend is
recognized as bearish. So we will look only for bearish entry signals.
Figure 8-4
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Street Smart Forex
Step 3: Getting an entry signal. On Friday, December 14 we get a bearish trigger signal,
as the base line (blue line) crosses from above to below the signal line (red line) and base
line is outside the 20 pips range. Even though we check the charts at 20:00 in the evening,
the last bar we see is the 16:00-hour bar, as on Friday the market closes at
approximately 16:00 (EST).
Figure 8-5
The last Zigzag signal is bearish
that makes 8 points
The RSI is below 40 (bearish)
that makes 6 points
If we add up all these points, we come to a Signal Strength of 26 points.

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Street Smart Forex
Figure 8-6
As the Signal Strength is 26 points, we place an order for entering the market. In this
example we sell 2 lots of the currency pair GBPUSD for the price of 2.0176.

Ok, now its about to find how far we will let the market move before we exit our
position.
First of all we place a stop order 60 pips above the entry price. That means at 2.0176 +
0.0060 = 2.0236. Its represented by the thick blue line in the picture below.
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Street Smart Forex
Figure 8-7
We will also determine the target level. The Signal Strength was determined to be 26
points and based on Table 6-1 Target Level at page 103 we get a target level 100 pips
below the entry price at 2.0076
125
Street Smart Forex
Figure 8-8
On Wednesday, December 19, when we check the charts at 20:00, we recognize that the
target level has been reached. So we close half of our position (1 lot) at the price of
1.9976 making a profit of 2,000$.
Figure 8-9
126
Street Smart Forex
At the same time we also recognize that the price has moved two times 100 pips in our
direction (from 2.0176 to below 2.0078 and from 2.0078 to below 1.9978). So we readjust
the stop order using the Recursive Trailing Stop Formula two times:
For the first 100 pips move:
New stop order
Old stop order + Start Value Stop Loss Distance x 0.85
2.0236 - 0.0100 x 0.85 = 2.0236 - 0.0085 = 2.0151
For the second 100 pips move:

New stop order
2.0151 - 0.0085 x 0.85 = 2.0151 - 0.0072 = 2.0079
Figure 8-10
On Thursday, December 20, when we check the charts at 20:00, we recognize that the
price has moved again 100 pips in our direction (from 1.9976 to below1.9876). So we
New stop order
2.0079 - 0.0072 x 0.85 = 2.0079 - 0.0061 = 2.0018
127
Street Smart Forex
Figure 8-11
On Monday, December 24, when we check the charts at 20:00, we recognize that the
price has moved again 100 pips in our direction (from 1.9876 to below 1.9776). So we
New stop order
2.0018- 0.0061 x 0.85 = 2.0018 - 0.0052 = 1.9966
128
Street Smart Forex
Figure 8-12
On Wednesday, December 26, when we check the charts at 20:00, we recognize that our
trade has run out of steam: the market is sideways as within the last four trading days (26,
25, 24 and 23) the highest price (1.9872) differs from the lowest price (1.9732) by less
than 150 pips. Due to this we exit our trade closing our position (remaining 1 lot) at the
price of 1.9872 making a profit of 3,040$.
129
Street Smart Forex
Figure 8-13
130
Street Smart Forex
At the end using the long-term Street Smart ForexTM trading system a profit of
2,000 USD + 3,040 USD = 5,040 USD is achieved (see Figure 8.14 ).
A profit of 5,040 USD in only two trading weeks.
Figure 8-14
131
Street Smart Forex

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Chapter 2 General Trading Tips _______________________14

2.6.4. Support/Resistance Levels.........................................................43

Chapter 3 Intraday Trading Strategy ___________________48

Chapter 4 Intraday USD/CAD Trading Example _________66

Chapter 5 Intraday EUR/USD Trading Example__________78

5.3. Exiting the Market ..............................................................................83

Chapter 6 Long-Term Trading Strategy _________________90

Chapter 7 Long-Term EUR/USD Trading Example ______105

Chapter 8 Long-Term GBP/USD Trading Example ______119

1.1. When to Enter the Market?

First: Do Not Trade Sideways Market

Second: Do not Trade against the Long-Term Trend

Third: Getting into the Trade at the right moment

Fourth: Pay Attention to the Signal Strength

1.2. When to Exit the Market?

Cut your losses short

Take part of your profit

Let your profits run

Take your profit when your trade runs out of steam

1.2.1. Cut Your Losses Short

1.2.2. Take Part of Your Profits

1.2.3. Let Your Profits Run

2.1. Understanding Forex Trading

Euro and US dollar

US dollar and Japanese yen

US dollar and Swiss franc

British pound and US dollar

Australian dollar and US dollar

US dollar and Canadian dollar

Euro and British pound

2.1.2. Understanding the Standard Contract Size

Mini Lot size

100,000 British pounds

10,000 British pounds

100,000 Australian dollars

10,000 Australian dollars

2.1.3. What is the Pip?

2.1.4. How to Calculate the Profit

Pip Value per Lot

1000 Japanese yen

Step 2: Calculating Your Profit in Terms of the Quote Currency

number of lots x pips x ...

number of lots x pips x ...

10 Swiss francs / USDCHF

10 Swiss francs / USDCHF / EURUSD

10 Canadian dollars / USDCAD

10 Canadian dollars / USDCAD / EURUSD

1000 Japanese yen / USDJPY

1000 Japanese yen / USDJPY / EURUSD

10 British pounds x GBPUSD

10 British pounds / EURGBP

Profit in Canadian dollars:

Profit in Australian dollars:

number of lots x pips x ...

number of lots x pips x ...

10 Swiss francs / USDCHF x USDCAD

10 Swiss francs / USDCHF / AUDUSD

10 Canadian dollars / USDCAD / AUDUSD

1000 Japanese yen / USDJPY x USDCAD

1000 Japanese yen / USDJPY / AUDUSD

10 British pounds x GBPUSD x USDCAD