Macro Mechanics - The Best Rules Based Macro FOREX Strategy

In this video, we will be going over the infrastructure of the forex market. You will learn how the banking system keeps the forex market open 24 hours a day, six days a week.

We will take a look and why businesses and consumers exchange money to buy goods, services, and financial assets.

Professional traders organize their investment opportunities in the forex market by firstly analysing what currencies they want to invest into and what currencies they want to ignore altogether.

This comes down to the following fundamental reasons.

1. Currency Regime set by the governent and central bank

2. Floating Exchange Rate

3. Pegged Exchange Rates

4. Commodity Exports

5. Interest Rates & Money Supply 

The fundamental reason behind this is volatility in the exchange rate. The more volatile a countries currency is in exchange rates the more opportunities traders have to profit from the price changes.

Therefore, in this video, we cover the key factors that make certain currencies more volatile than other currencies and what tradeable set of currencies we want to focus on.

In video one, we looked at how we understand an exchange rate value when exchanging one unit of the base currency into the quote currency and vice versa.

In this video, we will now be covering how the market calculates the actual valuation of what the base currency is actually worth when exchanging it into the quote currency.

To find out how this value is calculated, we will be looking at a country's imports minus exports that create's a positive or negative current account balance.

The current account balance is basically like a personal bank account for a country that shows whether a country has more money coming into their country through the sale of their exports, relative to how much money is going out of their country to pay for imports.

If a country sells more exports to the rest of the world and has more money coming into their country then money going out to pay for imports, then a country has a positive current account balance, resulting in the rest of the world reserves of that country's currency decreasing.

Vice versa applies when a country buys more then they sell, resulting in rest of world reserves increasing.

The value of the rest of world currency reserves of one country is compared to the value of another country's rest of world reserves and the two are compared as a ratio to create an exchange rate.

You will learn how interest rates and the price of commodity exports can cause the rest of reserves to dramatically increase or deacrease and affect the value of an exchange rate.

In this video, I will breakdown exactly how money is made when buying and selling exchange rates

In this video, we will take a closer look at inflation and interest rates.

We will be analysing the key economic data the professional markets watch extremely closely to assess the likelihood of inflation or deflation within a country.

This economic data allows professional traders to know whether the central bank will likely raise or lower interest rates to get inflation to their target.

Once we have a clear idea about whether inflation is expected to rise or fall, we can then focus on using breakeven inflation rates covered in the next video to forecast inflation rates over different time periods to help us generate trade idea's in the markets. 

In this video, we look at how professional traders forecast inflation expectations into the future using breakeven inflation rates.

This strategy is extremely important as it allows investors to start to bet on the expectations that the central bank will hike or lower interest rates to either contain or ignite inflation.

Traders can then try to find investment opportunities by comparing two country's relative inflation expectations that diverge from each other as this can offer trade idea's based on interest rate differentials.

In this video, we are going to analyse how the interest rate on government bonds, also known as the "yield" has a big impact on the currency markets.

Bond Yield's move in line with inflation expectations and huge amounts of investment flows into countries that pay a higher interest rate on government debt over the rate of inflation.

I will be covering showing you live examples in the markets of situations where bond yields affect currency pairs to trend in favour of the currency with a relatively higher yield than it's counterparts.

We will be covering using Excel spreadsheets to see how this has played out in history.

This video will help you learn how to use bond yields differentials to generate trade ideas.

In this video, we will be looking at why Oil prices are so important to understanding inflation expectations and central bank policy with interest rates.

Professional traders are constantly looking at Oil forecasts to see what will happen with bond yields, breakeven inflation rates and interest rate probability pricing which I will touch on in the next video.

This will help you generate trade idea's when you are closely watching Oil prices combined with your other economic indicators.

In this video, we will be covering how professional traders can see how much the markets are pricing in their expectations for a country's central bank to raise or lower interest rates in upcoming meetings.

This is a really great tool as it allows us to see the fundamental reason's why investors are buying or selling a currency in the markets based on either commodity prices or interest rate change expectations.

This will enable you to spot markets trends as you will fundamentally know what's driving investors' towards the speculative positions in the currency markets.

In this video, I will be showing you through my personal excel spreadsheet trade ideas watch-list whereby I take all the fundamental analysis we have covered up to this point to start generating trade ideas.

This will show you why we must always first fundamentally understand what's driving the markets bias toward's buying or selling a country's currency, based on expectations for inflation / deflation, commodity price changes, bond yield's and interest rate adjustments by a country's central bank.

Once we have completed our fundamental analysis, we can then start to move onto technical analysis strategies to try and time our fundamental trade ideas into winning trades.

I will be covering in this video how we analyze charts from scratch.

We will look at historical exchange rate prices shown on a chart, how to understand candlesticks in different time frames to understand what historical price movements in exchange rates can tell us about market trends.

One of the main technical analysis strategies that all professional traders need to understand is support and resistance levels.

These historical price levels can affect markets from falling or advancing beyond these levels, and due to support and resistance historically being used as profit targets, stop loss area's and even political and central bank intervention, we must know how to identify these key price levels in exchange rates to use them to our advantage.

In this video, I will be going over the technical analysis strategies that I personally use to time my fundamental trade idea's into winning positions.

I keep it very simple with technicals using just a few strategies.

Remember, it's not the timing strategies that we focus on first, we firstly understand that macroeconomic fundamentals driving the currency moves and then secondly use the technicals to time our fundamental bias.

As part of my technical analysis timing strategies I also use moving averages to confirm my fundamental bias is starting to play out in the currency exchange rate.

Sometime's I don't wait until the moving averages cross over when I am extremely confident in my fundamental analysis behind the trade idea. Therefore, using moving averages is subjective. However, it's still good to use when riding a trend and using a cross-over to know when a trend may have come to it's end and momentum has turned.

Now that we are ready to start taking positions in the markets we must first understand some key risk management metrics.

I will be showing you how we must understand the following key points to ensure our hard-earned money is always protected in the markets.

1. Pips, Points & Percentages

2. Units, Lots & Profit and Loss Percentages

3. Volatility

4. Risk Management Position Calculations

5. Order Types

In this video, I will be showing you how exchange rate price changes are calculated in pips / points and how we use this understanding to calculate volatility in percentage terms

This is extremely important when we move onto calculating volatility in the following videos for our risk management strategies.

In this video, I will be going over how we calculate the monetary value that will be credited or debited to or from your trading account on each pip / point of movement in the exchange rate.

This will be extremely important for you to understand when placing orders into the markets using lot sizes with many brokerages accounts.

My risk management spreadsheet will help you take all the information we have learnt in the risk management section of this course, to quickly calculate the monetary value you should place on a position based on volatility and your risk tolerance.

I will cover why risk to reward is so important to helping your accounts grow over the long term.

In this video, I will be showing you how to update my excel spreadsheets to keep an updated record of volatility for all forex currency pairs.

This will help you with your risk management strategies when knowing where to place your stop loss when trading on daily, weekly, and monthly time frames.

In this video, I will be going over how we place different types of trades into the live markets using different types of orders. This will allow you to combine technical analysis price level breakouts to trigger orders to be executed by your broker without you having to manually do it yourself.

Therefore, learning how to use order types with technical strategies can be very useful.

I will also cover how we understand the amount we are putting on trading positions when using lot sizes on the MT4 platform.