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1. FOREX
CASE
STUDIES
REAL TRADE
EXAMPLES

2. Forexillustrated.com
Joining traders from New York • Tokyo • Singapore • Paris • London
Welcome!
If you are interested in finding out how professional forex
traders successfully trade step by step, this is the e-book for
you! Forget about vague and boring theory. Here, you will
see real trade examples and strategies based on real market
situations.
The purpose of this e-book is to share some of the best tips,
techniques, and observations that have worked for
successful traders.
You will see how experienced traders analyze the market,
what signals they are looking for, and how they determine
the entry and exit points of a trade.
What is a day like in the life of a pro forex
trader?

3. Case study 1
Trading EUR/USD Ahead of FOMC
Meeting, Eurozone CPI Release
Eric Dale is a seasoned currency trader. His trade
setups are based on sound fundamental and
technical analyses. On January 4, Eric notices that
technicals are signaling some real downside risk in
EUR/USD. The preliminary technical analysis
prompted him to consider a sell (short) position in
the pair.
In order to assess the macro-economic or fundamental scenario, Eric opens the economic calendar. He finds that
two major economic events are due today:
Fundamental Analysis
At 9:00 GMT, Eurostat is scheduled to release
Eurozone’s Consumer Price Index (CPI) report for
December. CPI is considered the best gauge for
inflation over a specific period of time. After some
more research on the economic release, Eric comes to
know that analysts are expecting a decline in
Eurozone’s CPI to 0.7% in December as compared to
0.9% during the same duration a year before.
Generally speaking, a high CPI reading (close to 2%)
is seen as bullish for EUR/USD and vice versa.
Eurozone CPI
At 14:00 GMT, Federal Reserve is due to announce
a Federal Open Market Committee (FOMC)
decision on the pace of monthly asset purchase
program and benchmark interest rate after a two-day
monetary policy meeting. Eric again opens some
news websites and finds that analysts are, almost
unanimously, expecting tapering in monthly asset
purchase program worth $75 billion and no change
in benchmark interest rate.
US Monetary Policy Meeting
After thorough research, Eric concludes that the fundamentals are reinforcing his preliminary technical analysis
about the potential downside risk in EUR/USD. He plans to conduct an in-depth technical analysis to make a final
decision.
Fundamental conclusions

4. Case study 1
A long shooting-star candle on the daily chart gave Eric a preliminary indication for the potential downside risk in
near future. After applying Fibonacci extension levels on the daily chart, Eric comes to know that the price took
retracement from 261.8% fib level resistance as demonstrated in the following chart.
Technical Analysis
The current market price is 1.3800; Eric knows that
the price will face huge resistance near 1.3891 because
now it is a confluence of 261.8% fib level and the
shooting star resistance. So he makes his mind to
open a sell position around 1.3800 if the Eurozone’s
CPI comes worse than expectations or in line with
expectations. The data is due just a few minutes later.
Analysis
At 14:00 GMT, the Federal Reserve announces a $10
billion cut in the monthly asset purchases program,
trimming it down to $65 billion and leaves the inter-
est rate unchanged. The US dollar appreciates after
the US central bank decision and consequently, the
EUR/USD accelerates the downside movement.
Fortunately, a mere couple of hours after the Fed
announcement, EUR/USD hit 1.3670 and Eric gets
130 pips Take Profit (TP), with a dollar value of
$130.
Eric earns $130 as Fed
announces tapering
Eurozone’s CPI data comes worse than the forecast.
Eurostat report shows that CPI declined to 0.5% in
December, more than the market expectations. Eric
sells EUR/USD at 1.3800 with 0.10 lot and places
stop loss at 1.3900, he sets his initial target around
1.3670. The current leverage of Eric’s account is 1:400
so $34.50 will be in use for this trade. Eric risked $100
on this trade as his stop loss was exactly 100 pips.
EUR/USD began falling following the CPI release
but after 40 pips slide Euro halted the downside
movement as investors turned their focus to FOMC
announcement.
Eric sells EUR/USD

5. Case study 2
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6. Case study 3
Identifying the “Buy” Opportunity in
USD/JPY through MACD Divergence
Paul Anderson is an experienced technical trader.
His technical analysis is based on different
technical indicators and price action signals. On
February 5, Paul’s trading system generated a couple
of bullish signals about USD/JPY. He decided to
conduct an in-depth technical analysis on the pair
for a potential buying opportunity.
Paul was excited to see some strong positive divergence within the four-hour timeframe. MACD was showing
Higher Low (HL) while the price had printed a Lower Low (LL), as demonstrated in the following chart.
A strong bullish signal is generated when the price prints LL but the oscillator (such as MACD, RSI or CCI) fails
to follow the price movement and shows HL. Similarly, a strong bearish signal is generated when the price prints
HL but the oscillator shows LL. Divergence is considered one of the most authentic tools for technical analysis.
Positive Divergence
Paul noticed that both the Relative Strength Index (RSI) and the Commodity Channel Index (CCI) were retreat-
ing from oversold territories. This was the second major signal for a potential bullish reversal in USD/JPY.
RSI & CCI

7. Fundamental Analysis
Case study 3
After getting adequate bullish signals from technical analysis, Paul then checked out the economic calendar. He
found that no major event was due on February 5. A few medium-level economic reports about the US economy
were, however, scheduled for release on that day.
An RSI reading below 30 is considered an indication of oversold sentiment while a reading above 70 shows
overbought sentiment among traders. Similarly, a CCI reading below -100 gives an oversold signal while a
reading above +100 shows overbought sentiment. In the oversold market, price mostly takes bullish reversal
and vice versa.
The report shows the number of people who got
employed in the US over a specific period of time. It is
a monthly report which stirs moderate volatility in
US Dollar (USD). On February 5, the report gave the
downbeat reading of 127K; analysts had predicted
180K new jobs in January.
ADP Employment Change
The report, released by the Institute of Supply
Management (ISM), shows the performance of the
US services sector over a specific period of time. On
February 5, the report posted the upbeat reading of
54.0; market was expecting a 53.7-point reading in
January compared to 53.0 in the month before.
ISM Non-Manufacturing PMI
The report, released by Markit Economics, measures
the performance of the US services sector during a
particular time period. On February 5, the report
showed a 56.7-point reading in January; this was
broadly in line with the expectations.
Markit Services PMI
Based on the strong bullish signals from technical
analysis and mixed US economic reports, Paul finally
opened a long (buy) position in USD/JPY at 101.00.
He kept the stop-loss at 100.50 and the take profit at
102.50. His lot size was 0.10, i.e., he risked $50 for a
$150 potential profit. After two days, his analysis
turned out to be correct and he enjoyed 150 pips or a
$150 profit.
Paul went long and earned $150

8. Case study 4
Identifying a ‘Sell’ Opportunity in
USD/CHF through Trendline Resistance
Abdullah Khan has been trading currencies for a
long time. His technical analysis is mainly focused
on trendline support/resistance levels and price
patterns. In addition, he also keeps an eye on
fundamental events. On February 12, he realized
some serious downside risk in the USD/CHF
which prompted him to conduct an in-depth
technical analysis for the pair.
Abdullah drew trendlines on the daily chart which showed a downward slope channel in the pair. The slope chan-
nel further revealed that the price faced rejection at the channel resistance three times in the recent past.
To confirm the bearish sentiment on the pair, Abdullah inserted Fibonacci levels on the daily chart. He then came
to know that both the 50% fib level and the channel resistance were at the same point: 0.9027.
Technical Analysis

9. When two or more resistance or support levels combine at the same point, such point is known as
confluence. Confluence support and confluence resistance are considered the best levels for entry.
Based on the repeated rejection around channel resistance and the confluence resistance, Abdullah
concluded that his technical analysis as very bearish for the pair.
Based on the strong bearish signals from the technical
analysis and a relatively calm fundamental outlook,
Abdullah decided to open a short (Sell) position in
USD/CHF at 0.9027. He placed the stop-loss at
0.9057 and the take profit at 0.8927. His lot size was
0.10, which means he risked $30 for a potential $100
profit. The analysis turned out to be correct and
Abdullah got his target within 24 hours.
Abdullah sold USD/CHF and
earned $100
Fundamental Analysis
Switzerland’s Consumer Price Index (CPI) for the
month of January was due on that day. Analysts had
predicted 0.1% reading against the same reading the
month before. The actual outcome came exactly in
line with the expectations. In the US basket, the
monthly budget statement was due for release.
Economists were expecting a $27.50 billion deficit
for the month of January. However, the actual deficit
came out to be $10.42 billion. Since the US budget
statement is considered a medium-level economic
report, high volatility was not expected in
USD/CHF.
Case study 4

10. Case study 5
Long-Term Trade Opportunity Identified
by Inverse H&S Pattern
Sarah Robertson is an experienced independent
trader. Her trades are based on different price
patterns and extensive fundamental research. On
February 27, Sarah observed the Inverse Head &
Shoulder (H&S) pattern in NZD/USD which
gave her a potential buying opportunity in the pair.
Inverse H&S is one of the most famous and reliable price patterns among traders. The pattern consists of a head,
two shoulders and a neckline. The neckline is derived by joining the peaks of the two shoulders. A breakout
through neckline confirms the authenticity of the H&S pattern. Traders tend to buy an asset if the price breaks the
neckline of the inverse H&S pattern.
Sarah decided to wait until the price breaks the neckline, which was around 0.8347. Meanwhile, she decided to go
over the fundamental events relating to NZD/USD.
Inverse H&S Pattern

11. Since the trade opportunity identified by the Inverse
H&S Pattern was long term, Sarah decided to study
all of the major events which were due in next 2-3
weeks. She came to know that the most significant
event pertaining to New Zealand’s economy was the
interest rate decision by the Reserve Bank of New
Zealand (RBNZ). The event was due on Wednesday,
March 12. Sarah conducted some more research to
get clues on the RBNZ rate decision. She learned that
the RBNZ was expected to increase the interest rate
by 0.25% to 2.75%, according to the median
projection of different economists surveyed by
Bloomberg.
Generally speaking, the currency of a country is
positively correlated to the interest rate, i.e., if the
country increases the interest rate, the currency also
tends to appreciate and vice versa. Sarah was very
optimistic that if the RBNZ announced an increase in
the benchmark interest rate, NZD/USD would rise
considerably.
Case study 5
Fundamental Analysis
On March 3, the price broke the neckline, confirming
the Inverse H&S Pattern. After getting favorable
signals from both the technical and fundamental
analyses, Sarah eventually opened a long (buy)
position in NZD/USD at 0.8350 with 0.10 lot size.
She placed the stop-loss at 0.8300 and her target was
0.8550, which means she risked $50 for the potential
profit of $200.
As expected, RBNZ announced an increase in the
benchmark interest rate by 0.25% on March 12 and
consequently, NZD/USD rallied above 0.8550.
Thus, Sarah got the Take Profit (TP) worth $200.
Sarah Earned $200

12. Case study 6
Identifying Long-Term Buying
Opportunity in Gold for $1000 Profit
Jonathan Millet is a seasoned commodity trader.
His trades are based on long-term fundamental
and technical analyses. He keeps the trades open
for weeks and months. In January 2014, he noticed
some real bullish strength in the Gold price. Like a
professional trader, Jonathan planned to conduct
thorough technical and fundamental analyses for
potential buying opportunity in the precious
metal.
Jonathan found that a classic double-bottom price pattern was obvious on the weekly chart of the yellow metal.
Among traders, the Double-Bottom Pattern is considered one of the strongest signals for bullish reversal. Techni-
cally, Jonathan was 70% convinced of the buy trade. However, before making an entry, he wanted to see more
confirmation signals through technical indicators and fundamental analysis.
Double-Bottom Price Pattern

13. Markit Services PMI
The services sector Purchasing Managers Index
(PMI) released by a private firm Markit Economics
showed that the services sector in the US grew by
55.7 points in December compared to 55.9 points
the month before. A lesser reading is seen as bullish
for Gold.
Fundamental Analysis
A number of major economic events pertaining to the US economy were due on January 6. Jonathan decided to
wait for the outcomes of the events before opening a buy trade in Gold.
Case study 6
The Parabolic Stop and Reverse method or simply Parabolic SAR is a famous technical indicator. It generates buy
or sell signals through the placement of dots. When the dots show below the candles, it means the bulls have started
dominating the price and the upside rallies are likely in the near future. Conversely, if the dots show above the
candles, then the indicator generates the opposite i.e., bearish signals.
On January 6, Jonathan noticed that the Parabolic SAR had generated some real bullish signals, reinforcing the
double-bottom pattern. In addition, some other technical indicators such as the Relative Strength Index (RSI) and
Commodity Channel Index (CCI) were also showing oversold readings. These are more signals for potential
bullish reversal.
Parabolic SAR
Factory Orders
The manufacturers in the US received 1.5% more
orders in November as compared to 0.5% decline the
month before. Analysts, however, were expecting a
1.8% increase in the November orders so the data
downbeat the expectations.
Jonathan Goes Long and earns $1000
After getting a couple of strong bullish signals through the technical analysis and downbeat US data, Jonathan
finally opened a long (buy) position in gold. He bought a 0.10 gold lot at $1240 an ounce. He placed the stop-loss
around the swing low of the previous daily candle which was $1218; his long-term target was $1330. A couple of
days later, US non-farm payrolls came in worse than expectations and gold shot to $1265. This further encouraged
Jonathan to keep his trade open. When the precious metal reached $1290, he brought his stop-loss at breakeven
point, i.e., at the price of entry. Now, Jonathan was completely risk-free. Fortunately, gold never approached $1240
after his entry and kept printing new highs until the yellow metal hit $1340 on March 3. Thus, Jonathan achieved
his target and earned $1000.

14. Case study 7
Identifying Buying Opportunity in
USD/RUR amid the Ukraine Crisis
Samuel Rae is an experienced currency trader. He
loves to trade exotic currency pairs. Sam came to
know about the Ukraine crisis through the media.
Being a vigilant news trader, he soon realized that
the Russian ruble might hit fresh all-time lows
against the greenback in such a scenario. He
decided to buy USD/RUR on dips.
A referendum was due on March 16 in Crimea (a
Ukrainian territory where almost 70% are
Russian-speaking) to decide whether the people want
to join Russia or restore the 1992 constitution. After
conducting an extensive research on the referendum,
Sam found that an overwhelming majority of Crimea
was likely to vote in favor of Russia. The western
countries had already threatened that if Russia
recognized Crimea, it would have to face strict
sanctions, similar to what it had suffered in the Cold
War era.
Two things were clear from the news analysis:
• Crimea was expected to vote in favor of Russia
• Russia was expected to face sanctions from the
western countries
It was very obvious that the Russian currency and
stock markets would react sharply on any sanctions
from the west. It was a strong indication that after the
referendum, the Russian ruble could hit new lows
against the dollar.
Crimea Referendum
It is generally observed that in a crisis situation, the
Russian Central Bank always intervenes into the open
market to support its currency. There was a possibility
that the Russian bank might cap the USD/RUR after
the referendum. Thus, Sam decided not to open a buy
position ahead of the referendum. He wanted to see
the actual results of the referendum and then the
reaction in the market.
Central Bank Intervention
Things happened exactly as Sam expected. Crimea
voted to join Russia and Russia promptly recognized
Crimea. The western countries rejected the
referendum and started imposing sanctions on Russia.
To avoid the steep fall in ruble, the Russian central
bank intervened which consequently appreciated the
Russian currency against the US dollar. This was an
ideal scenario for Sam because he knew that the bank
would not be able to support the Russian ruble for a
long time, especially when the US monetary policy
was due on March 19. Sam was ready to buy
USD/RUR on dips.
Crimea Joins Russia,
USD/RUR Tumbles

15. Case study 8
Identifying Long-Term Trade
Opportunity in Silver after China’s
Manufacturing Slowdown
Michael Harding has been trading commodities
for the last 10 years. He loves to identify and trade
the long-term trends in the metals for big profits.
In February, Mike came to know about the
manufacturing slowdown in China which
prompted him to look for potential trade
opportunities in precious metals.
On Wednesday, February 19, HSBC Holdings PLC said that China’s manufacturing activity slowed down in
February for the third month in a row, a sign that the world’s second largest economy is struggling to maintain
steady growth. The HSBC Manufacturing Purchasing Managers Index (PMI) declined to 48.3 points compared to
49.5 points in January; analysts had predicted a decline to 49.4. A PMI reading above 50 shows expansion in the
manufacturing activity and vice versa. Since the Asian nation is the largest consumer of the precious metals,
investors always tend to sell gold and silver on negative developments relating to China.
Manufacturing Slowdown in China
Mike found that silver was testing the crucial
resistance area around $21.80-$22.00, i.e., the
76.4% fib level. Moreover, the current level was the
last major resistance before the swing high of the
previous wave. Technically, price mostly takes deep
correction from the last resistance level before the
previous high.
Technical Analysis
China grew at 7.7% in 2013, the slowest pace in
more than a decade. Economists believe that the
pace of growth is expected to slow down further
during the course of the current year. Slow growth
in the Asian nation means low demand for silver
and other precious metals. Moreover, the Federal
Reserve policymakers clearly indicated in the
January meeting that the central bank wanted to
drop the entire Quantitative Easing (QE) program
by the end of October this year. The end of the
stimulus means stronger US dollar (USD) or, in
other words, cheaper silver because the prices of
commodities are negatively correlated to the dollar.
Macroeconomic Scenario

16. Case study 7
The Federal Reserve kept the interest rate unchanged
and reduced the QE by $10 billion to $55 billion as
expected. USD/RUR shot up and within a six-hour
duration, Sam collected the $125 profit. Sam’s
patience and extensive research is a perfect role model
for beginner traders who often lose in the volatile
market.
Sam Earned $125
Traders were widely expecting another tapering (activities used by the central banks to improve the conditions for
economic growth) on March 19 from the US Federal Reserve after a surprise jump in February non-farm payrolls.
Sam bought USD/RUR with a 0.50 lot size at 35.90, which was the 161.8% fib level. He carried out the trade with
15 pips stop-loss just ahead of the monetary policy decision from the Fed. His target was 36.15, i.e., 25 pips or $125
profit.
Technical Analysis

17. Case study 8
Mike Concludes His Analysis
& Sells Silver
After getting strong bearish signals from both the
technical and fundamental analyses, Mike decides
to go short on silver. He sells the white metal at
$21.80 with a 0.10 lot size, keeping the stop-loss at
$22.20, well above the 76.4% fib level resistance.

18. Identifying the ‘Buy’ Opportunity in
GBP/USD Ahead of US Non-Farm Pay-
Angela Ripley is an expert currency trader. Her
technical analysis is based on trendline
support/resistance, Fibonacci levels, MACD
divergence, and overbought/oversold signals
through RSI and CCI. Moreover, she keeps a close
eye on macro-economic events and daily news
releases. On February 7, Angela noted the repeated
rejection in GBP/USD around 1.6250 that
prompted her to conduct an in-depth technical
analysis for a potential buying opportunity in the
pair.
Like a typical technical trader, Angela first inserted Fibonacci levels into the chart. She found that 1.6250 was 50%
fib support of the last major rally. 50% fib level is considered the most significant support/resistance level among
currency traders; it is observed that price takes a rebound from 50% fib level in almost 65%-70% cases. Angela felt
a strong bullish feeling about the pair. However, her technical analysis was incomplete; she wanted to get some
more confirmation signals.
Angela conducted swing analysis on the daily chart. She found that 1.6308 was the ‘swing low’ of the previous
downward wave. It is pertinent that in about 70%-80% cases, price takes retracement from the very first support
level after the ‘swing low’ of the previous wave. In the case of GBP/USD scenario, 50% fib level or 1.6250 was the
first support level after the ‘swing low’ of the previous wave. This was the second strong signal for a long-term
bullish reversal in the pair. Therefore, Angela was feeling very much convinced about the buy trade.
Technical Analysis
Case study 9

19. Furthermore, Angela found that the Relative Strength Index (RSI) and the Commodity Channel Index (CCI)
were also showing oversold readings. An RSI reading below 30 and a CCI reading below -100 are considered over-
sold signals among traders.
Fundamental Analysis
After getting numerous “Buy” signals from the tech-
nical analysis, Angela moves onto the fundamental
analysis. She found that Britain’s docket was empty
for the day; however, in the US, the labor depart-
ment was scheduled to release non-farm payrolls and
unemployment rate reports for the month of Janu-
ary. Upon further research, Angela came to know
that analysts were expecting a better non-farm
payrolls reading as well as a decrease in the unem-
ployment rate for January. According to the median
projection of different analysts, non-farm payrolls
rose by 150K in January compared to 113K increase
in the month before. The unemployment rate ticked
down to 6.7% in January compared to 6.8% in the
previous month. She decided to buy GBP/USD in
case of worse than expected US job data.
In the US morning session, the labor department
released the reports showing that non-farm payrolls
in the US rose just by 75,000 in January, missing the
median projection of analysts by a long shot. Moreo-
ver, the unemployment rate also rose to 6.9% contrary
to the forecast.
Angela bought GBP/USD promptly after the
releases; her order got filled at 1.6287. She placed the
stop-loss at 1.6230 and the take profit at 1.6650. She
bought the pair with a 0.10 lot size which means the
values of her risk and reward were $57 and $363,
respectively. Just an hour after the entry, Angela’s
trade was in $110 profit. Being a seasoned trader,
Angela didn’t close the order before her target. Even-
tually after the one-week patience, she got her target
and earned $363.
Angela bought GBP/USD and
earned $363
Case study 9

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