191551041 my-report

HARVEST FUTURES CONSULTANTS.

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01

CHAPTERS

CHAPTER-1:

INTRODUCTION

PAGE

NO.

02 CHAPTER-2:

STATEMENT OF PROBLEM

TITLE OF THE STUDY OBJECTIVES OF THE

STUDY METHODOLOGY LIMITATIONS OF THE

STUDY

03 CHAPTER-3:

INDUSTRY PROFILE

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04 CHAPTER-4:

CORPORATE PROFILE PROMOTERS PROFILE MISSION VISSION OBJECTIVES ORGANIZATION

STRUCTURE MANAGEMENT OF THE

COMPANY

05 CHAPTER-5:

THEORATICAL BACKDROP OF RATIO ANALYSIS,ANALYSIS & INTERPRETATION

06 CHAPTER-6:

FINDINGS SUGGESTIONS CONCLUSION

07 CHAPTER-7: ANNEXURE BIBLIOGRAPHY

TABLE OF CONTENTS

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CHAPTER 1

Introduction

1. CURRENCY TRADING IN GLOBAL MARKET

1.1 Introduction to forex

The foreign exchange market, which is usually known as "forex" or "FX," is the largest financial

market in the world. Compared to $74 billion a day volume of the New York Stock Exchange,

the foreign exchange market looks extremely large with its $4 TRILLION a day trade volume,

Forex, unlike other financial markets, is not tied to an actual stock exchange. Forex is an over-

the-counter (OTC) or off-exchange market.

1.2 Purpose:

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The foreign exchange market is the mechanism by which currencies are valued relative to one

another, and exchanged. An individual or institution buys one currency and sells another in a

simultaneous transaction. Currency trading always occurs in pairs where one currency is sold for

another and is represented in the following notation: EUR/USD or CHF/YEN. The exchange rate

is determined through the interaction of market forces dealing with supply and demand.

Foreign Exchange Traders generate profits, or losses, by speculating whether a currency will rise

or fall in value in comparison to another currency. A trader would buy the currency which is

anticipated to gain in value, or sell the currency which is anticipated to lose value against another

currency. The value of a currency, in the simplest explanation, is a reflection of the condition of

that country's economy with respect to other major economies. The Forex market does not rely

on any one particular economy. Whether or not an economy is flourishing or falling into a

recession, a trader can earn money by either buying or selling the currency. Reactive trading is

the buying or selling of currencies in response to economic or political events, while speculative

trading is based on a trader anticipating events.

1.3. Background

Historically, Forex has been dominated by inter-world investment and commercial banks, money

portfolio managers, money brokers, large corporations, and very few private traders. Lately this

trend has changed. With the advances in internet technology, plus the industry's unique

leveraging options, more and more individual traders are getting involved in the market for the

purposes of speculation. While other reasons for participating in the market include facilitating

commercial transactions (whether it is an international corporation converting its profits, or

hedging against future price drops), speculation for profit has become the most popular motive

for Forex trading for both big and small participants.

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CHAPTER. 2

RESEARCH PROBLEM

2.1. STATEMENT OF THE PROBLEM

In this study the research problem is acquiring a new investor many of the investor lack of the

knowledge about the forex market hence they know degree of risk and return our responsibility

to educate the investors.

2.2. OBJECTIVES OF STUDY:

To gain insight about forex currency market.

To study on currency trading risk management in forex market

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To identify the investors preference towards forex currency market.

To understand the degree of awareness among the investors towards currency market in

Bangalore.

To offer suggestions for better business of currency trading to investor

2.3. METHODOLOGY:

Methodology is the technique how the data is collected which requires for the study. There are

two types of data

a) Primary Data: Which is original in character, the data is collected by asking questions

directly to the Investors in the organization with prepared set of questionnaire. The

research design adopted in this study is descriptive research.

b) Secondary Data: Secondary data is the data which is already collected for some other

purpose, other than to solve problem at hand. This is not original in character. The main

sources of secondary data are books, magazines, Internet and other material given by the

company.

2.4. RESEARCH DESIGN:

A research design is a framework or blueprint for conducting the marketing

research project. It details the procedure necessary for obtaining the information needed

to solve the research problem. In this case, descriptive research is undertaken which

answers who, what, when, where, why, and how questions.

Research Design Exploratory Research &

Descriptive Research

Research Instrument Survey Method

Sample Size 30

Sample Scope Banglore

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Sampling Method Non Probability Sample (Convenience sampling)

Sampling Tool Percentage

2.5. LIMITATIONS OF THE STUDY:

The trader has to learn various things in market to trade currency.

The time span for my study was very short.

Respondent’s bias was another limiting factor

HYPOTHESIS FORMULATION.

Hypothesis is any assumption for the research effectively and efficiently. The hypothesis of my

research is that:

Forex market is very volatile in nature.

Forex changing day by day in economy growth.

Different factors like speculation, hedging forces different people to enter indifferent

market,

Risk is there in forex market and various risk management strategies are there to manage

it.

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CHAPTER.3

Industry profile

Foreign exchange market (Forex, FX, or currency market) is a global, worldwide

decentralized financial market for trading currencies. Financial centers around the world function

as anchors of trading between a wide range of different type of buyers and sellers around the

clock, with the exception of weekends. The foreign exchange market determines the relative

values of different currencies.

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The primary purpose of foreign exchange is to assist international trade and investment, by

allowing business to convert one currency to another currency. For example, it permits a US

business to import British goods and pay pound sterling, even though business income is in US

dollars. It also supports direct speculation in the value of currencies, and the carry trade,

speculation on the change in interest rates in two currencies.

In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying

a quantity of another currency. The modern foreign exchange market began forming during the

1970s after the decades of government restrictions on foreign exchange transaction (the Bretton

Wood s system of monetary management established the rules of commercial and financial

relations among the world’s major industrial states after World War II), when countries gradually

switched to floating exchange rates from the previous exchange rate regime, which remained

fixed as per the Bretton Woods system.

3.1. Market participants

3.1.1. Banks:

The interbank market caters for both the majority of commercial turnover and large amounts of

speculative trading every day. Many large banks may trade billions of dollars, daily. Some of this

trading is undertaken on behalf of customers. But much is conducted by propriety desks, which

are the trading desks for bank’s account. Until recently, foreign exchange brokers did large

amount of business, facilitating interbank trading and matching anonymous counterparts for

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large fees. Today, however, much of this business moved on to more efficient electronic systems.

The broker squawk box lets traders listen in on ongoing interbank trading and is heard is most

trading rooms, but turnover is noticeably smaller than just a few years ago.

3.1.2. Commercial companies:

An important part of this market comes from the financial activities of companies seeking

foreign exchange to pay goods or services. Commercial companies often trade fairly small

amounts compare to those of banks or speculators, and their trades often have little short term

impact on market rates. Nevertheless, trades flows are an important factor in the long-term

direction of a currency’s exchange rate. Some multinational companies can have an

unpredictable impact when very large positions are uncovered due to exposures that are not

widely known by other market participants.

3.1.3. Central banks:

Forex is fixing is the daily monetary exchange rate fixed by the national bank of each country.

The idea is that central banks use the fixing time and exchange rate to evaluate behavior of their

currency. Fixing exchange rates reflects the real value of equilibrium in the forex market. Banks,

dealers and online foreign exchange traders use fixing rates as a trend indicator.

The mere expectation or rumor of central bank intervention might be enough to stabilize a

currency, but aggressive intervention might be used several times each year in the countries with

a dirty float currency regime. Central banks do not always achieve their objectives. The

combined sources of the market can easily overwhelm any central bank. Several scenarios of this

nature were seen in the 1992-93 ERM collapse, and in more recent times in southeast Asia.

3.1.4.Hedge funds as speculators:

About 70% to 90% of the foreign exchange transactions are speculative. In other words, the

person or institution that bought or sold the currency has no plan to actually take delivery in the

end; rather, they were solely speculating on the movement of that particular currency. Hedge

funds have gained a reputation for aggressive currency speculation since 1996. They control

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billions of dollars of equity and may borrow billions more, and thus may overwhelm intervention

by central bank to support almost any currency, if the economic fundamentals are in the hedge

fund’s favor.

3.1.5.Investment management firms

Investment management firms (who typically manage large accounts on behalf of customers

such as pension funds and endowments) use the foreign exchange market to facilitate

transactions in foreign securities. For example an investment manager bearing an international

equity portfolio needs to purchase and sell several pairs of foreign currencies to pay for foreign

securities purchases.

Some investment management firms also have more speculative specialist currency overlay

operations, which manage clients’ currency exposure with the aim of generating profits as well

as limiting risk. Whilst the number of this type of specialist firms is quite small, many have a

large value of assets under management (AUM), and hence can generate large trades.

3.1.6. Retail foreign exchange traders:

Individual retail speculative traders constitute a growing segment of this market with the advent

of retail forex platforms, both in size and importance. Currently, they participate indirectly

through brokers or banks. Retail brokers, while largely controlled and regulated in USA by

CFTC and NFA have in the past been subjected to periodic foreign exchange scams. To deal

with the issue, the NFA and CFTC began (2009) imposing stricter requirements, particularly in

relation to the amount of Net Capitalization required of its members. As a result many of the

smaller and perhaps questionable brokers are now gone or have moved to countries outside the

US. A number of the forex brokers operate from the UK under FSA regulations where forex

trading using margin is part of the wider over-the-counter derivatives trading industry that

includes CFDs and financial spread betting.

There are two main types of retail FX brokers offering the opportunity for speculative currency

trading: brokers and dealers or market makers. Brokers serve s an agent of the customer in the

broader FX market, by seeking the best price in the market for a retail order and dealing on

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behalf of the retail customer. They charge a commission or mark-up in addition to the price

obtained in the market. Dealers or market makers, by contrast typically act as principal in the

transaction versus the retail customer, and quote price they are willing to deal at.

3.1.7. Non-bank foreign exchange companies:

Non-bank foreign exchange companies offer currency exchange and international payments to

private individuals and companies. These are also known as foreign exchange brokers but are

distinct in that they do not offer speculative trading but rather currency exchange with payments

( i.e., there is usually a physical delivery of currency to a bank account).

It is estimated that in the UK, 14% of the currency transfers /payments are made via foreign

exchange companies. These companies selling point is usually that they will offer better

exchange rates or cheaper payments than the customer’s bank. These companies differ from

money transfer/remittance Companies in that they generally offer higher-value services.

3.1.8. Money transfer/remittance companies and bureau de changes

Money transfer companies/remittance companies perform high-value low-value transfers

generally by economic migrants back to their home country. In 2007, the Aite Group estimated

that there were $369 billion of remittances (an increase of 8%compared to 2006).the four largest

markets (India, China. Mexico and the Philippines) receive $95 billion.

The largest and best known provider is Western Union with 345,000 agents globally followed by

UAE exchange. Bureau de change or currency transfer companies provide low value foreign

exchange services for travelers. These are typically located at airports and stations or at tourist

locations and allow physical notes to be exchanged from one currency to other. They access the

foreign exchange markets via banks or non bank foreign exchange companies.

3.2. ABOUT FOREX

FOREX, FOREIGN EXCHANGE, foreign exchange market is a cash interbank market

established in1971. The FOREX is a group of approximately 4500currency trading institutions

including international banks, government central banks and commercial companies. FOREX is

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a true 24hrs market and trading begins each day in Sydney and moves around globe as the

business day begins in each financial centre, first in Tokyo, then in London and then New York.

(Timings New Zealand &Australia 02:30-12:30, Japan and Singapore :06:30 -14:30, Germany

and England :14:30-21:30, America :18:30-02:30). The forex market is larger than all other

financial markets combined. It is two ways market were both buying and selling can be done.

FOREX market is the largest financial market in the world with a daily average turnover of $4

trillion – it is 30 times larger than the combined volume of all us equity market. The most traded

currencies in forex market are US dollars, Euro, Japanese Yen, Pound sterling, Australian Dollar,

Swiss franc, Canadian Dollar, Hong Kong Dollar, Swedish Koran, and New Zealand Dollar,,

FOREX is the most liquefied market in the world.

CHAPTER.4

Company profile

4.1.Background and Inception:

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Harvest group was founded to provide the best possible, indices and stock trading experience for

online trade. Harvest group is backed by a large financial group of companies with over US $ 16

billion in assets under management.

Harvest group is takes pride in its stringent management control as far as its business

infrastructure goes. Utilizing its subsidiary companies or strategic alliances of Harvest

International Consortium Ltd. in Hong Kong and in Indonesia and Harvest Futures Consultants

India Pvt. Ltd, to provide paramount global financial advice network to our clients.

Harvest group was established in 2003. Harvest Group has a worldwide operation network

reaching 8 countries and 40 regions. USA Indonesia ,INDIA, Hong Kong , china, Vietnam,

Brunei, Malaysia, Philippines, Singapore, Taiwan, Laos and Thailand employing more than

1300 staffs to serve the global demanding market in financial services.

Harvest Group has built a strong team in the area of marketing in order to provide our clients

professional services as well as customer support. From senior management, seasonal financial

consultants, state of art trading platform as well as professional customer services team. Harvest

Group is dedicated in providing our clients the fastest, best possible financial service.

Harvest offer the long range of trading technology, featuring the powerful, MT4 (Meta Trading

4) station for individual traders and multi account platforms for asset, and PDA and Smartphone

solutions for trading on the move.

4.2. Nature of business carried:

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Harvest is a financial service providing company it operates globally. Harvest group has various

business activities like

1. Information & Training Centre

2. Futures Contract Transactions

3. Foreign Exchange Trading

4. Index Trading

5. Commodity Bullion Trading

4.3. VISION AND MISSION:

Vision:

To become most credible Future broker globally with the widest portfolio of financial

products that serves the clients globally, investing and transacting in Futures Exchange,

especially with major commodity products and Foreign Exchange.

Mission:

To give most credible advice to individual investors, on potential investment

opportunities in Future Exchange, balancing risk and profitability.

To educate the investing public on Futures Exchange and provide the complete

understanding so that they may exploit the maximum benefits.

To engage with all the stakeholders and help create an organized Futures Exchange that

is credible and transparent while promoting healthy and fair competition.

4.4. Service profile:

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The Harvest group is basically a financial service provider. It provides the various services as

follows.

1. Information & Training Centre

2. Futures Contract Transactions

3. Foreign Exchange Trading

4. Index Trading

5. Commodity Bullion Trading

4.5. Area of operation

Harvest group was established in 2003. Harvest Group has a worldwide operation network

reaching 8 countries and 40 regions. USA Indonesia ,INDIA, Hong Kong , china, Vietnam,

Brunei, Malaysia, Philippines, Singapore, Taiwan, Laos and Thailand employing more than

1300 staffs to serve the global demanding market in financial services.

In India harvest group operates mainly in Bangalore, Delhi, and Chennai.

Harvest group has channel partners in India at various places i.e. New Delhi, Mangalore

(Karnataka), Vijayawada (Andhra Pradesh), Chandigarh

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4.6. Ownership pattern:

“The Company” shall mean HARVEST FUTURES CONSULTANTS INDIA PVT. LTD

“Board” shall mean the Board of Directors of the Company.

“Board Members” shall mean the Members on the Board of Directors of the Company.

“Executive Directors” shall mean the Board Members who are in whole-time employment of the

company.

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4.7. CORPORATE INFORMATION

DATE OF INCORPORATION : 18th November 2009

REGD.OFF : Harvest Futures Consultants India Pvt.Ltd

#17 "Park View", Curve Road, Tasker Town

Bangalore-560051

Karnataka, India

BUSINESS ACTIVITIES : Advisory Consultancy Analysis CFD

EXECUTIVE DIRECTOR : Mr. Richard Tai Swee Keong (Malaysia)

BUSINESS DIRECTOR : Mr.Rajendran Pillai (Singapore)

DIRECTOR : Mr.Naveen Kumar H.M (India)

ADVOCATE : Chambers of Jayashri Mural

303,3rd Floor, Commerce House,

Millers Road, Bangalore-560052

AUDITOR : C.P Ethirajan

#38,1st Floor, Nehru Circle, Sheshadripuram

Bangalore-560020

COMPANY SECRETARY : S.P NagarajanS-818,8th Floor, South Block-Manipal centre

47, Dickenson Road, Bangalore-560042

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4.8. Infrastructure facilities.

The branches of the Harvest company are computerized and all transactions of trading

done with ease of operation

Telephone

Intranet and internet

Conference room

Training room

Help line : knowledge about trading and marketing.

Company e-mail

For each and every employee and advisors of the company will get their personal I

D where in they are recognized as the part of the Harvest and update things ,

Like perk, commission account, keep in track of target.

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4.9. Achievements and Awards:

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4.9. End to end process:

4.9.1. End to end process involves various steps:

Data gathering:

This is the first step which involves collection of data pertaining to the telephones numbers.

Tele calling:

Tele calling involves picking the numbers and making the calls with proper communication

skills.

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Fixing appointments:

Through proper communications, the employee will convince the person on telephone and

convince the people who are interested and fixing the appointment for the interested people.

Explanation about currency trading and forex.

The employee (business consultant) will communicate with customer and explain about rules and

regulation of the trading and also about the company.

Following interested people:

The company will follow the interested people for few days. Try to open the account as soon as

possible.

Opening the open:

When the person is ready to invest the money in the forex, the account is opened in the bank.

Trading are carried down.

Trading the account:

Once the account has been opened the client or the portfolio manager of the company will trade

the account with proper knowledge about the market. The all transactions are done through the

account. If the client is unable to trade, then behalf of the client the portfolio manager will trade

the account.

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4.10. Mc Kensey’s 7 S Frame Work

The McKinsey 7S model involves seven interdependent factors which are categorized as either

"hard" or "soft" elements:

"Hard" elements are easier to define or identify and management can directly influence them:

These are strategy statements; organization charts and reporting lines; and formal processes.

"Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and

more influenced by culture. However, these soft elements are as important as the hard elements

if the organization is going to be successful.

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Hard Elements Soft Elements

Strategy

Structure

Systems

Shared Values

Skills

Style

Staff


Strategy:

Strategy refers to the determination of the purpose and the basis long term objective of an

enterprise and the adoption of course of action and allocation of resources necessary to achieve

these aims.

Harvest aims at higher profitability through customer satisfaction and bringing awareness

about the forex market. Maximizing the investor’s wealth in short duration of time.

Structure:

It represents the way the organization is structured and who reports to whom. Business needs to

be organized in a specific form of shape that is generally referred to as organizational structure.

Organizations are structured in a variety of ways, dependent on their objectives and culture. The

structure of the company often dictates the way it operates and performs.

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Harvest has a well-build organization structure as:

Corporate office

Regional office

Branches

The head of the branch (Director) come down and assist the portfolio manager to perform well

various activities of the company and managers assist assistant portfolio managers and last stage

in the structure is business consultants.

SYSTEMS:

Systems define the flow of activities involved in the daily operation of business, including its

core processes and its support systems. They refer to the procedures, processes and routines that

are used to manage the organization and characterize how important work is to be done.

Harvest group’s systematic framework stands for rules and regulations, procedure and practices

that must followed to carry out tasks in the organization. These include the formal system

procedure of using intranet facility being the whole organization is computerized.

The flow of decision is from the top level directors through managers to business consultants.

STYLE:

“Cultural style, distinct management and how key managers behave in achieving the

organizational goal”. It includes the dominant values, beliefs and norms which norms which

develop over time and become relatively enduring the features of the organizational life.

Harvest follows participative style.

Harvest take collective decision at all levels of the management.

Leadership style: participative or democratic

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STAFF:

“Organization are made up of humans and its people who make the real difference to the success

of the organization in the increasingly knowledge based society”

The harvest has very efficient and multi skilled employees who has the strength and complete

knowledge about banking activities and flexibility to work in different departments.

SKILLS:

“Distinct capabilities of personnel and organizations as a whole”

Managerial skill

Computer skill

Inter personal skill

Creative and innovative skill.

SHARED VALUES:

Shared values are the core values of the company that are evidenced in the corporate culture and

the general work ethic. All members of the organization share some common fundamental ideas

or guiding concepts around which the business is built. The shared value or super ordinate goal

of the company is to achieve excellence in a particular field. These values and common goals

keep the employees working towards a common destination as a coherent team and are important

to keep the team spirit alive.

Consider the employees as the key recourses of the organization and provide

assistance.

Customer satisfaction rather than profit maximization.

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4.11. SWOT ANALYSIS OF HARVEST FUTURES CONSULTANTS PVT. LTD.

SWOT analysis is an acronym for the internal strengths and weaknesses of a firm and the external

opportunities and threads facing that firm. SWOT analysis helps managers to have quick

overview of the firm’s strategic situation and assess whether there is a sound ‘fit’ between

internal resources, values and external environment.

STRENGTHS:

1. Good working Environment

2. No competition.

3. Skillful employees.

4. Led by the dedicated and expertise focused professional.

5. Efficient trading with live, executable prices with instant trade confirmation

6. High liquidity.

7. Advanced analysis tools.

8. Real-time account risk management.

9. Metatrader4based platform.

WEAKNESSESS:

1. Lack of expertise in trading

2. Inaccessibility to innovative product or services that can assist you.

3. Emotional instability

OPPORTUNITIES:

1. A developing market such as the Internet.

2. Competitive market full of brokers

3.Moving into new trading strategies that offer increased profits with less cost and time saver e.g.

auto pilots or robots

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THREATS:

1. The ever emerging Internet market.

2. Lack of guidance on choice of broker.

3. Accessibility to tested and trusted forex auto trader (robot)

4. Emotional instability.

5. Constancy of power supply- this is a serious threat because to auto trade your PC must be on

24/7.

The application of the SWOT analysis is however subjective, that is, results cannot be

generalized because individual differences has a role to play in the final result.

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4.12. LEARNING EXPERIENCE:

Learning is a continuous process by which we acquire the knowledge that we apply to our future

endeavor. The university has given me an opportunity to learn many aspects pertaining to the

working of the organization. The objective of the project is to study the structure, style, system,

skills, strategy, staff, shared values and functioning of the organization. The theoretical study of

the management practices will not offer a useful insight if not supplemented by practical

exposure.

The Project work at Harvest Futures Consultants Private Limited exposed me to the

management practices. The strategy studied in theory in a controlled environment will fail to

deliver in the actual business scenario. Hence this study taught me that firms have to thrive iin

harsh market realities and even the best of the strategies may be ineffective.

It was an enriching experience to work in Futures Consultants Private Limited. It gave me an

good exposure where I acquired the practical knowledge about the overall functioning of the

organization. The project work has given me an opportunity to study the currency trading in the

global market and also how to manage the risk while trading. The project provided an

opportunity to relate theoretical aspects in working environment concepts such as delegation of

authority, reporting, services etc.

Constant growth and innovation trading and customer satisfaction has made Harvest group what

it is today. It helped me realize that any organization cannot be complacent with its current

position. It has to continuously innovate and come out with new ideas.

The interaction with the employees and customers gave me an insight and a firsthand experience

of the organizational scenario and has indeed widened my horizon of knowledge. The disciplined

friendly and supportive working environment leads to higher productivity, all the staff works in a

highly disciplined atmosphere.

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CHAPTER 5

5a. Trading Operation of the forex market:

Whereas there are thousands of securities on the stock market, in the FOREX market most

trading takes place in only a few currencies. These major currencies are most often traded

because they represent countries with esteemed central banks, stable governments, and relatively

low inflation rates.

The 8 most widely traded major currencies are as follows.

Symbol Country Currency Nickname

USD United States Dollar Buck

EUR Euro zone members Euro Fiber

JPY Japan Yen Yen

GBP Great Britain Pound Cable

CHF Switzerland Franc Swissy

CAD Canada Dollar Loonie

AUD Australia Dollar Aussie

NZD New Zealand Dollar Kiwi

Currency symbols always have three letters, where the first two letters identify the name of the

country and the third letter identifies the name of that country's currency.

5. 1. Major Currency Pairs

The currency pairs listed below are considered the "majors". These pairs all contain the U.S.

dollar (USD) on one side and are the most frequently traded. The majors are the most liquid and

widely traded currency pairs in the world.

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Pairs Countries FX Geek Speak

EUR/USD Euro zone / United States "euro dollar"

USD/JPY United States / Japan "dollar yen"

GBP/USD United Kingdom / United States "pound dollar"

USD/CHF United States/ Switzerland "dollar swissy"

USD/CAD United States / Canada "dollar loonie"

AUD/USD Australia / United States "aussie dollar"

NZD/USD New Zealand / United States "kiwi dollar"

The chart below shows the ten most actively traded currencies in forex market.

The dollar is the most traded currency, taking up 84.9% of all transactions. The euro's share is

second at 39.1%, while that of the yen is third at 19.0%. Because two currencies are involved in

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each transaction, the sum of the percentage shares of individual currencies totals 200% instead of

100%.

5.2. Timing of various markets:

Summer

TIME ZONE EDT GMT

Sydney Open

Sydney Close

6:00 PM

3:00 AM

10:00 PM

7:00 AM

Tokyo Open

Tokyo Close

7:00 PM

4:00 AM

11:00 PM

8:00 AM

London Open

London Close

3:00 AM

12:00 PM

7:00 AM

4:00 PM

New York Open

New York Close

8:00 AM

5:00 PM

12:00 PM

9:00 PM

Winter

Zone T ITIME ZONE EST GMT

Sydney Open

Sydney Close

4:00 PM

1:00 AM

9:00 PM

6:00 AM

Tokyo Open

Tokyo Close

6:00 PM

3:00 AM

11:00 PM

8:00 AM

London Open

London Close

3:00 AM

12:00 PM

8:00 AM

5:00 PM

New York Open

New York Close

8:00 AM

5:00 PM

1:00 PM

10:00 PM

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The foreign exchange market operates 24 hours a day, and, unlike the stock market, have no

official openings or closings. It moves in response to geopolitical events, press releases from key

central banks, and reports on the economy from government statistical bureaus, among many

other factors. When traders are inactive in one part of the world due to nightfall, there are traders

elsewhere who are actively engaging in trades as it is daytime in their locations.

5.3. How Trading Works Currencies are always quoted in pairs, such as GBP/USD or USD/JPY. The reason they are

quoted in pairs is because in every foreign exchange transaction, this is simultaneously buying

one currency and selling another. Here is an example of a foreign exchange rate for the British

pound versus the U.S. dollar:

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The first listed currency to the left of the slash ("/") is known as the base currency (in this

example, the British pound), while the second one on the right is called the counter or quote

currency (in this example, the U.S. dollar).

When buying, the exchange rate tells how much has to pay in units of the quote currency to buy

one unit of the base currency. In the example above 1.51258 U.S. dollars has to pay to buy 1

British pound.

When selling, the exchange rate will tell how many units of the quote currency available for

selling one unit of the base currency. In the example above, to sell 1 British pound, 1.51258 U.S.

dollars are required.

The base currency is the "basis" for the buy or the sell. In the pair EUR/USD buying this pair

means, buying the base currency and simultaneously selling the quote currency i.e. "buy EUR,

sell USD." While buying the pair the trader has believed that EURO will ‘appreciate’ and USD

will ‘depreciate’.

Going Long or ShortA long position is a situation in which one purchases a currency pair at a certain price and hopes to

sell it later at a higher price. This is also referred to as the notion of "buy low, sell high" in other

trading markets. In Forex, when one currency in a pair is rising in value, the other currency is

declining, and vice versa. If a trader thinks a currency pair will fall he will sell it and hope to buy it

back later at a lower price. This is considered a short position, which is the opposite of a long

position.

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On every exchange, a trader has a long position on one currency of the pair and a short position

on the other currency. A trader defines his or her position as an expression of the first currency

of the traded pair. The first currency in a pair is known as the base currency. The second

currency in the pair is called the counter currency. When a trader buys the base currency he or

she takes a long position on a pair, if a trader sells the base currency he or she shorts the pair.

5.4. How to Read a Forex Chart

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The Trader would select the specific currency pair (example like, the Euro versus the Dollar

and the desired time period or timeframe for each bar of the FX Chart. The example below

shows a snapshot of a real time one day candlestick Chart of the Euro versus the U.S

The Forex Chart shows a strong day move to the upside in the Euro versus the dollar, from a

high of 1.3368 (bar on 23rd February 2012) to 1.3456 on the 24th February 2012). This is a

difference of 0.0088 or 88 pips (in Forex trading, a "pip" is the smallest tick in the price of a

currency, which is similar to a "tick" in Stocks). In dollars, this move is equivalent to an amount

of US$ 880 per lot for a standard lot

5.5. Margin and Leverage

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5.5.1. Margin

The real meaning of margin is actually good faith deposit.

a.Initial Margin

The amount of money required to open a trading account.

b.Required Margin

The amount of money required to trade one particular instrument. For example, GBPUSD,

required margin is US$1000. It means that you need to have more than US$1000 in your trading

account to initiate a trade.

c.Call Margin.

If the trader has a losing position with a floating loss, then broker might issue a call margin on

trader account. A call margin is an amount of money required to maintain trader’s losing

position. If the call margin is not fulfilled, the losing position might suffer an automatic

liquidation.

5.5.2. Leverage.

The phenomenon of moving a larger object with lesser effort with the use of fulcrum is known as

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leverage.

Trading futures allows the use of smaller amount of money to trade a bigger amount by giving a

leverage of 100:1. The actual amount of money per forex contract is US$100,000.00. But, by

using leverage, you need only US1, 000.00 margin to trade 1 forex contract.

5.6. Meaning of a pip.

The unit of measurement to express the change in value between two currencies is called a "Pip".

If EUR/USD moves from 1.2250 to 1.2251, that is ONE PIP. A pip is the last decimal place of a

quotation, given that four decimal places are used for pairs without the Japanese yen. If a pair

does include the Japanese yen, then the currency quote goes out two decimal places

5.7. Bid price, Ask price and the Spread

A bid price is the rate at which the market is prepared to buy a specific currency pair in the

Forex trading market. This is the price that a trader will receive when selling (shorting) a

currency pair. An ask price is the rate at which the market is ready to sell a particular currency

pair. This is the price that a trader will have to pay in order to buy (long) the currency pair. The

bid/ask combination comprises a quotation, which is based on a floating exchange rate. The

disparity between the bid and ask is known as the spread, which reflects the difference between

the rate offered by a market maker such as CMS to sell a currency pair and the rate at which the

market maker will buy the pair. The value of the spread is greater for currencies that are traded

less frequently on the market than for the cluster of the major trading currencies. Contrary to

stock market firms, Forex market makers generally do not charge a commission for every

transaction, and instead obtain their compensation from the spread.

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On the EUR/USD quote above, the bid price is 1.3456 and the ask price is 1.3459. If trader wants

to sell EUR, he has to click "Sell" and he will sell EUR at 1.3456. If he wants to buy EUR, he

has to click "Buy" and you will buy euro at 1.3459.

5.8. Aspects of Trading:

Most trades on the forex market are a result of traders speculating on price movements. Although

good instincts and speculatory skills are invaluable to any trader, there are also other, more

scientific indicators that traders use to decide whether they will buy or sell a certain currency.

These are found by fundamental technical and sentimental analysis. A trader may utilize both

technical and fundamental analysis before making any forex trades.

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5.9. Market Analysis

5.9.1. FUNDAMENTAL ANALYSIS .

According to this method, the analysis of economic indicators, social factors and government

policy of a business cycle can forecast price movement and trends of the market. The

fundamentals of any country, multinational industry, or trading bloc lie in the combination of

factors like social, political, and economic influences. However, it is rather hard to stay aside

from all these variable factors. Therefore, the sphere of complicated and subtle market

fundamental lets the explorer know and understand more details of a dynamic global market

during the analyzing.

It is possible to predict the conditions of the economy but unlikely the market prices by using the

fundamental analysis. The trader should have a certain plan of action concerning the ways of

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using the information as entry and exit spots in a certain strategy of trading. Forex fundamental

analysis is a fundamental strategy of trading widely used by online trader of forex. This strategy

contains some estimation where the different basic criteria, except for the price movement, are

taken into consideration during currency trading. The economic conditions in the currency native

country along with a number of other factors are the obligatory elements of these criteria. Any

fundamental part of the economy is included into the fundamental analysis. A decent forex

fundamental analysis includes a number of macroeconomic factors like economic growth rates,

interest rates, inflation, unemployment level and others. The market supply and demand coming

from political and social powers is the aim of fundamental analysis. The market supply and

demand balance forms the currencies prices. The interest rates and the overall economy strength

are the two key factors that influence the supply-demand balance. The overall health of the

economy can be understood through a number of economic indicators like GDP. The frequent

inability of online forex fundamental analyses to find the entry and exit points is forex

fundamental analysis key problem. Due to this factor, the risk control, especially provided with

the leverage, gets quite complicated. Only a piece of an enormous amount of information coming

every day is considerable. The interest rates and international trade are the factors analyzed the

most carefully. In order to create the forex trading strategy fundamentalist traders create models.

The empirical data is gathered in these models for further forecasting the possible price trends

and market behavior basing on the key economic indicators.

Sometimes it happens that two analysts possessing the same data come to different conclusions

about the market behavior. Still you should research the fundamental data and find out their best

fitting to the style of trading and expectations before getting down to any analysis. Any data

making the country tick is considered as fundamental by forex traders. The fundamentals are the

combination of certain plans, unpredictable behaviors, and unforeseen events found out from the

factors like interest rates and the policy of central bank and even natural disasters. That is why it

is better to be aware of the affective contributors of all these factors than to all the fundamentals

listed.

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Fundamental elements of the economy:

1. The Basic Concept

The economy will be affected by the investment performance. The expected returns may change

due to inflation or deflation influence. That is why it is important to take the economy trends into

consideration, while planning the strategies of investment.

A. Business Cycle

The activity of the economy is generally shown by the business cycle. The business cycle

consists of four stages: recovery (also known as expansion), peak, contraction (also called

recession), and trough.

The growth of business activity, the increase of demand and production, as well as the expansion

of employment can be seen. The interest rates generally rise during this phase due to money

borrowing by businesses and consumers for their expansion.

B. Inflation

At the moment of business cycle peak the amount of goods on demand gets higher than the one

offer, which is followed by the price increase and inflation. At the inflationary environment, the

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amount of money offered for the goods is too high and it makes the conditions for the prices to

rise. This lowers the customer's ability for purchasing.

The demand declines lowering the economic activity due to the prices increase. The recessionary

phase follows this process.

C. Deflation

During deflation the economical activity lowers making the employers fire the workers and

lowering the demand. This is generally followed by the prices lowering that turn into deflation.

The trough phase comes after that. Deflation is characterized as a process of strong and

prolonged prices reduction. The following demand rise is caused by low prices. It creates the

conditions for the economy to come into the expansion phase.

2. Gross National Product (GNP)

Gross National Product is one of the key indicators of the economic activity. All the services

provided and the goods produced within the US economy form the GNP. There are 4

components included in the GNP. They are consumer spending, government spending,

investments, and net exports.

Gross National Product adjusted for inflation (Real GNP) being in decline during two successive

quarters is a sign of recession.

3. Indicators of the Business Cycle

There are three types of indicators describing the economy movements during its entering into a

certain phase of the business cycle. The ones generally used by the economists are leading,

coincident, and lagging indicators.

4. The business cycle's effect in Forex

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Forex market There are three types of indicators describing the economy movements during its

entering into a certain phase of the business cycle. The ones generally used by the economists are

leading, coincident, and lagging indicators.

The US dollar movements in the Forex market are usually trending the opposite direction to the

interest rates. For instance, the increase of incomes caused by the interest rates uptrend declines

the US dollar index accordingly.

5. Monetary Policy

The control of money and credit supply within the economy is the general aim on the monetary

policy. The interest rates are affected by these processes, which cause the economic activity

decline. The monetary policy is mainly interested in the inflation control.

6. The activity of the Federal Reserve System (FRS)

The US monetary policy is directed by the Federal Reserve System. The nation's central bank is

the Federal Reserve System. It was established in 1913 by the Act of Congress and created 12

Federal Reserve districts within the country. The Federal Reserve Board of Governors located in

Washington D.C. is responsible for district banks activity coordination. The seven members of

the board are appointed by the President and the nominees require the confirmation of the Senate

later.

5.9.2. TECHNICAL ANALYSIS:

Traders have a second tool to use in trading. Technical analysis, which has become extremely

popular in the last two decades, consists of using charts, trend lines, support and resistance

levels, technical indicators, and pattern identification to study the market's behavior. Traders use

these technical factors to identify buying and selling opportunities. Over long historical periods,

currency behavior has produced trends and patterns that are identifiable.

Technical analysis is a method used by currency traders to predict price movements and future

market trends by studying what has occurred in the past using charts. Technical analysis is

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concerned with what has actually happened in the market, rather than what should happen, and

takes into account the price of instruments and the volume of trading, and creates charts from

that data as a primary tool. One major advantage of technical analysis is that experienced

analysts can follow many markets and market instruments simultaneously.

Technical analysis is built on three essential principles:

1. Market action discounts everything!

This means that the actual price is a reflection of everything that is known to the market that

could affect it. Some of these factors are: fundamentals (inflation, interest rates, etc.), supply and

demand, political factors and market sentiment. However, the pure technical analyst is only

concerned with price movements, not with the reasons for any changes.

2. Prices move in trends.

Technical analysis is used to identify patterns of market behavior that have long been recognized

as significant. For many given patterns there is a high probability that they will produce the

expected results. There are also recognized patterns that repeat themselves on a consistent basis.

3. History repeats itself.

Forex chart patterns have been recognized and categorized for over 100 years, and the manner in

which many patterns are repeated leads to the conclusion that human psychology changes little

over time. Since patterns have worked well in the past, it is assumed that they will continue to

work well into the future.

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Candlesticks Charts

Candlestick charts have been developed in the 18th century by Munehisa Homma, Japanese rice

trader of financial instruments and they were introduced to the Western world by Steve Nison in

his book, "Japanese Candlestick Charting Techniques.

Candlesticks are usually composed of the body (black or white), and an upper and a lower

shadow (wick): the area between the open and the close is called the real body, price excursions

above and below the real body are called shadows. The wick illustrates the highest and lowest

traded prices of a currency during the time interval represented. The body illustrates the opening

and closing trades. If the currency price closed higher than it opened, the body is white or

unfilled (bullish), with the opening price at the bottom of the body and the closing price at the

top. If the currency price closed lower than it opened, the body is black (bearish), with the

opening price at the top and the closing price at the bottom. A candlestick need not have either a

body or a wick.

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Here is an example of a candlestick chart for GBP/USD.

The purpose of candlestick charting is strictly to serve as a visual aid. Candlestick charts have

various advantages like:

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Candlesticks are easy to interpret, and are a good place for beginners to start figuring out chart

analysis. Candlesticks are easy to use. Candlesticks studying may help trading well. Candlesticks

and candlestick patterns have cool names such as the shooting star, which helps you to remember

what the pattern means. Candlesticks are good at identifying marketing turning points - reversals

from an uptrend to a downtrend or a downtrend to an uptrend.

Technical analysis of candlestick patterns.

Japanese candlesticks cheat sheet.

From the single, dual, and triple candlestick formations the trader can easily identify what kind of pattern candlestick he is looking while whenever you are trading.

Number of Bars Name Bullish or Bearish? What It Looks Like?

Single

Spinning Top Neutral

Doji Neutral

White Marubozu Bullish

Black Marubozu Bearish

Hammer Bullish

Hanging Man Bearish

Inverted Hammer Bullish

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Shooting Star Bearish

Number of Bars Name Bullish or Bearish? What it Looks Like?

Double

Bullish Engulfing Bullish

Bearish Engulfing Bearish

Tweezer Tops Bearish

Tweezer Bottoms Bullish

Triple

Morning Star Bullish

Evening Star Bearish

Three White Soldiers Bullish

Three Black Crows Bearish

Three Inside Up Bullish

Three Inside Down Bearish

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Support and Resistance

Support and resistance is one of the most widely used concepts in trading. Strangely enough,

everyone seems to have their own idea on measuring of support and resistance.

From the diagram above diagram we can see that, the zigzag pattern is making its way up (bull

market). When the market moves up and then pulls back, the highest point reached before it

pulled back is now resistance.

As the market continues up again, the lowest point reached before it started back is now support.

In this way resistance and support are continually formed as the market oscillates over time. The

reverse is true for the downtrend.

Plotting Support and Resistance

One thing to remember is that support and resistance levels are not exact numbers.

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Often time trader can see a support or resistance level that appears broken, but soon after find out

that the market was just testing it. With candlestick charts, these "tests" of support and resistance

are usually represented by the candlestick shadows.

Notice how the shadows of the candles tested the 1.4700 support level. At those times it seemed

like the market was "breaking" support. In hindsight we can see that the market was merely

testing that level.

The various levels of support and resistance:

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“Support and resistance are levels where the price will potentially stall and even sometimes

reverse.”

Fibonacci retrenchment

Traders use the Fibonacci retracement levels as potential support and resistance. Since plenty of

traders watch these same levels and place buy and sell orders on them to enter trades or place

stops, the support and resistance levels may become a self-fulfilling prophecy.

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They key Fibonacci extension levels are the 23.6, 38.2%, 50.0%, 61.8%, 100%, 138.2% and

161.8%.

Traders use the Fibonacci extension levels as potential support and resistance areas to set profit

targets. Again, since so many traders are watching these levels and placing buy and sell orders to

take profits, this tool tends to work due self-fulfilling expectations.

In order to apply Fibonacci levels to charts, trader needs to identify Swing High and Swing Low

points.

A Swing High is a candlestick with at least two lower highs on both the left and right of itself.

A Swing Low is a candlestick with at least two higher lows on both the left and right of itself.

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Because many traders use the Fibonacci tool, those levels tend to become self-fulfilling support

and resistance levels or areas of interest.

When using the Fibonacci tool, probability of success could increase when using the Fib tool

with other support and resistance levels, trend lines, and candlestick patterns for spotting entry

and stop loss points.

Moving Averages

A moving average is simply a way to smooth out price action over time. By "moving average", it

is mean of average closing price of a currency pair for the last 'X' number of periods.

The simple moving average of 14 days period can be shown as below.

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A moving average indicator is used to help us forecast future prices. By looking at the slope of

the moving average, trader can determine the potential direction of market prices.

Moving averages smooth out price action.

There are different types of moving averages and each of them has their own level of

"smoothness".

Generally, the smoother the moving average, the slower it is to react to the price movement.

Calculation:

Simple Moving Average (SMA)

Simple, in other words, arithmetical moving average is calculated by summing up the prices of

instrument closure over a certain number of single periods (for instance, 12 hours). This value is

then divided by the number of such periods.

SMA = SUM (CLOSE, N)/N

Where:

N — is the number of calculation periods.

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Bollinger Bands

Bollinger bands are used to measure a market's volatility.

Basically, this little tool tells us whether the market is quiet or whether the market is LOUD!

When the market is quiet, the bands contract and when the market is LOUD, the bands expand.

Notice on the chart below that when price is quiet, the bands are close together. When price

moves up, the bands spread apart.

The Bollinger Bounce

One thing the trader should know about Bollinger bands is that price tends to return to the middle

of the bands. That is the whole idea behind the Bollinger bounce. By looking at the chart below

we can tell by next period market will fall as upper Bollinger band acting as a resistance.

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As per the trader predictions now market price settled back down towards the middle area of the

bands. This shows the Bollinger bands act as resistance. Similarly lower band will act as support.

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This is a classic Bollinger bounce. The reason these bounces occur is because Bollinger bands

act like dynamic support and resistance levels.

The longer the time frame you are in, the stronger these bands tend to be. Many traders have

developed systems that thrive on these bounces and this strategy is best used when the market

is ranging and there is no clear trend

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Calculation:

Bollinger bands are formed by three lines. The middle line (ML) is a usual Moving Average.

ML = SUM [CLOSE, N]/N

The top line, TL, is the same as the middle line a certain number of standard deviations (D)

higher than the ML.

TL = ML + (D*StdDev)

The bottom line (BL) is the middle line shifted down by the same number of standard deviations.

BL = ML — (D*StdDev)

Where:

N — is the number of periods used in calculation;

SMA — Simple Moving Average;

StdDev — means Standard Deviation.

StdDev = SQRT (SUM [(CLOSE — SMA (CLOSE, N)) ^2, N]/N)

Stochastic Oscillator

The Stochastic Oscillator Technical Indicator compares where a security’s price closed relative

to its price range over a given time period. The Stochastic Oscillator is displayed as two lines.

The main line is called %K. The second line, called %D, is a Moving Average of %K. The %K

line is usually displayed as a solid line and the %D line is usually displayed as a dotted line.

There are several ways to interpret a Stochastic Oscillator. Three popular methods include:

Buy when the Oscillator (either %K or %D) falls below a specific level (e.g., 20) and

then rises above that level. Sell when the Oscillator rises above a specific level (e.g., 80)

and then falls below that level;

Buy when the %K line rises above the %D line and sell when the %K line falls below the

%D line;

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Look for divergences. For instance: where prices are making a series of new highs and

the Stochastic Oscillator is failing to surpass its previous highs.

Calculation:

The Stochastic Oscillator has four variables:

%K periods. This is the number of time periods used in the stochastic calculation;

%K Slowing Periods. This value controls the internal smoothing of %K. A value of 1 is

considered a fast stochastic; a value of 3 is considered a slow stochastic;

%D periods. his is the number of time periods used when calculating a moving average of

%K;

%D method. The method (i.e., Exponential, Simple, Smoothed, or Weighted) that is used

to calculate %D.

The formula for %K is:

%K = (CLOSE-LOW (%K))/(HIGH(%K)-LOW(%K))*100

Where:

CLOSE — is today’s closing price;

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LOW(%K) — is the lowest low in %K periods;

HIGH(%K) — is the highest high in %K periods.

The %D moving average is calculated according to the formula:

%D = SMA (%K, N)

Where:

N — is the smoothing period;

SMA — is the Simple Moving Average.

Pivot Points Support and Resistance Lines (PP)Pivot Points Support and Resistance Lines, PP indicate the average price and potential lines of

support and resistance in a certain time space. We get current values of the indicator from data

received at the previous period.

Very often PP is based on day, week and month periods. The plot period must differ from the

indicator period by one time at least. Otherwise, if they coincide, the indicator line will look like

a dot and will carry no information. For example, if a PP indicator is laid on a day plot, then by

each trade day bar you will see dots instead of lines. And if the indicator period is less than the

plot period, you will not see the values at all.

When you analyze the market situation, it is recommended to use several PP indicators based on

week, month and year periods. If two or more levels coincide, they intensity each other. Before

taking a long or a short position, you should wait until the price crosses all coinciding levels.

Before this, you should not open any positions.

Support and resistance levels, received with the help of the indicator, allow predicting possible

levels of Stop Loss and Take Profit with high precision.

The following rules are also just:

If the PP is next to the opening price of the current bar, the probability of getting profit is

higher;

On a growing market, when a price drops below the central axis, you should not open a

short position immediately as a side trend as possible. Most probably, the price will re-

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test the level. If the market will not be able to overcome, the turning point, we may speak

about a market turn. This thesis is right for the "bear" trend.

To hold long-term trade, you must know the location of week, month and year timeframe central

axis. It is obvious that if the price is lower than those turn lines, we may speak about a strong

descending trend. On the other hand, if the price is higher than the week, month and year central

axes, it is a glaring example of a bullish trend.

Calculation:

PP = (HIGH + LOW + CLOSE) / 3

R1 = 2 * PP - LOW

R2 = PP + HIGH - LOW

R3 = 2 * PP + HIGH - 2 * LOW

S1 = 2 * PP - HIGH

S2 = PP + LOW - HIGH

S3 = 2 * PP + LOW - 2 * HIGH

Where:

PP — the central axis (any price can perform as it);

R1, R2, R3 — the 1st, 2nd and 3rd levels of resistance;

S1, S2, S3 — the 1st, 2nd and 3rd levels of support;

HIGH — the max price in the previous period of the indicator;

LOW — the min price in the previous period of indicator;

CLOSE — the closing price in the previous period of indicator.

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5b.RISK MANAGEMENT IN CURRENCY TRADING .

5b.1. Steps in the risk management:1. Establish context

2. Identify the risks

3. Analyse and evaluation of risks

4. Treatment of risks

1. Establish context:

Risk management is done in order to minimize the adverse effects of potential losses at least

possible cost. Managing of risk depends upon his needs and perception. Foreign market plays an

important role in economy of any country and risk is managed by different strategies in foreign

market to maximize profit in long run and give a boost to economy.

2. Risks involved in currency trading

Forex Currency trading is quite a lucrative option to gain huge profits but there are risks involved

too, which a trader needs to understand well before jumping into forex trading. While trading in

forex, investors come across various types of risks in foreign exchange trading. The five main

types of risks involved in foreign exchange trading are defined below.

Exchange Rate Risk

Interest Rate Risk

Credit Risk

Country Risk

Operational risk

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3. Analyzing and evaluating the risks

a.Exchange Rate Risk:

The value at which the currency is traded is the exchange rate. It is always defined in terms of

another currency. The forex trade shows how much one currency is worth in terms of the other.

The trader has to deal with risk when the price changes suddenly. This commonly happens as a

result of changes in demand for one of the currencies. Changes in demand are often caused by

changes in basic economic events such as taxations, employment rate and other factors. Political

volatility can change the forex rate considerably in a few seconds

A position is a subject of all the price changes as long as it is outstanding. In order to cut short

these exchange rate risks and to have profitable positions, the trading should be done within

manageable limits. The common steps are the position limit and the loss limit. The limits are a

function of the policy of the banks along with the skills of the traders and their specific areas of

expertise. There are two types of position limits daylight and overnight. The daylight position

limit establishes the maximum amount of a certain currency which a trader is allowed to carry at

any single time during. The limit should reflect both the trader's level of trading skills and the

amount at which a trader peaks. Whereas, the overnight position limit which should be smaller

than daylight limits refers to any outstanding position kept overnight by traders. te position and

loss limits can now be implemented more conveniently with the help of computerized systems

which enable the treasurer and the chief trader to have continuous, instantaneous, and

comprehensive access to accurate figures for all the positions and the profit and loss.

b. Interest Rate Risk:

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The interest rate risks in foreign exchange trading are related to the currency swaps, futures,

forward out rights and options in foreign currency exchange trading. The interest rate risks are

those foreign exchange trading risks which refer to the profit and loss generated by both the

fluctuations occurred in the forward spreads and by forward amount mismatches and maturity

gaps among various transactions in the forex book. The mismatch amount is the difference

between the spot and the forward amounts. On a daily basis, traders balance the net payments

and receipts for each currency through a special type of swap, called tomorrow or rollover.

Limits of the total size of mismatches are set up by the management to minimize interest rate

risks in forex trading. However, different banks have different policies to cut back the losses.

However, the most common approach is to separate the mismatches, based on their maturity

dates, into up to six months and past six months. Then all the transactions are put into

computerized systems to calculate the positions for all the delivery dates and the profit and loss.

There is a continuous analysis of the interest rate environment necessary to forecast any changes

that may affect the outstanding gaps.

c. Credit Risk:

Other kinds of risks involved in foreign exchange trading are credit risks. These are associated

with the probability that an outstanding currency position might not be repaid as agreed upon

because of a voluntary or involuntary action by the other party. In such a case, the forex trading

occurs on regulated exchanges, where all trades are settled by the learning house. In these types

of forex exchanges, the investors of all sizes can deal without any credit concern. The following

forms of credit risk are known. There are two types of credit risks in foreign exchange trading,

the Replacement risk and the settlement risk.

d. Country Risk:

The country risks in forex trading are arise in case of there are a party is unable to receive an

expected amount of payment because of the government interference in the matters of insolvency

of an individual bank or institution. The country foreign exchange trading risks are linked to the

interference of government in forex markets. It falls under the joint responsibility of the treasurer

and the credit department. The government control on foreign exchange activities is still present

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and implemented actively. For the investors, it is important to know or how to be able to

anticipate any restrictive changes concerning the free flow of currencies

e. Operational Risk

This type of risk comes from company’s business functions. It is a wide-ranging type of risk. It

comes from the risk related to people, processes and systems through which the company works.

There are also other risks involved in forex trading. Here I consider these ones to be the most

important for highlighting.

• Electronic trading with customers – forex trading activity is mainly focused on remote

electronic workstations. It demands more attention regarding specific precautions as for system

access and passwords.

• “Off-site” Trading – Forex trading takes place on an hourly basis.

•Mis-trades – This can happen for many various reasons.

• Disputes – Commonly there are many misunderstandings between brokers and traders.

Due to troubles in the world economy Foreign Exchange market is a very popular way of making

money. Those who are looking for effective strategy might be interested but unmanaged. But

please make sure to read about scams before dealing with forex trading.

4.Treatment of risks in forex:5b.4.Risk management tools

Both new and experienced traders make good and bad trades over a long period of time. The

difference between them is that the more experienced trader has a grasp of the importance of risk

management as an integral part of a successful Forex trading strategy. Proper risk management

can maximize the positive and minimize the negative aspects of the regular ups and downs of

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trading. In addition to basic limit and stop orders, Forex offers a range of risk management tools

that can give trader an edge over the market.

a. Limit and stop orders

When placing a market order, many experienced traders already know the levels at which they

will want to exit the trade. The 24 hour nature of the Forex market makes it difficult for a trader

to make timely trading decisions. This is even more important since large market moves may

happen while trader is away.

b. Trader's Guardian

Trader's Guardian provides a number of tools to help analyze and assess trader’s risk exposure in

the market. The Margin Use Level(s) feature displays your used and usable account margin for

each account on bar graphs. To help prevent trader from falling below trader usable margin, a

Warning Level is displayed at all times. Keep track of trader’s exposure in opened positions as

well as his exposure in different currencies, with the Instruments Exposure and Currency

Portfolio tools.

c. Trailing stop trading system

This feature is an invaluable way to simplify trader’s trading and help protect trader’s positions.

The trailing stop works like a regular stop order that moves up or down if your original position

is moving in a favorable direction, while not moving if your position is moving in an unfavorable

direction. If trader has a long position, for example, and set up a trailing stop, it will move up as

the position's price rises. When the price begins to fall, the trailing stop stays in place until it is

triggered. It is up to you, the trader, to set the number of pips the stop will trail the market price.

The trailing stop trading system helps clients lock in potential profits while controlling for

possible market reversals.

d. Trader's Range

The Trader's Range feature is a handy way to minimize the costs associated with missing an

entry or exit on a position, during an extremely fast moving market. Trader’s Range lets a trader

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choose a certain amount of pips in either direction from the current market price that he or she is

willing to accept. Utilizing Trader's Range takes the place of entering an order, getting re-quoted

and then having to manually accept a new price. Proper use of Trader’s Range eliminates the

hassle of approving a re-quote when trying to enter orders and helps trader’s orders get filled

even in volatile markets.

e. Bundled Entry Orders

Bundled entry orders allow a user to set limits and stops for the pending position when creating a

new entry order. This ensures that even if the order is executed while trader is away from the

computer, the order is completely covered by associated limits and stops.

If your position reaches your desired profit target, the limit order will close your trade with a

profit. If the trade goes against, the stop order will close out position at preset level, limiting

losses. Once a bundled Entry order is placed it does not require any direct supervision, as its

execution and the levels at which it will close have already been predefined by the trader.

f. Forex Autopilot

The Forex Autopilot technology helps users design and run automated Forex trading systems.

The Autopilot effectively automates clients’ trading strategies by allowing them to setup Forex

trading systems and automatically generating trades based on these systems. Trading systems can

operate on countless of factors such as market conditions and multiple technical indicators. Forex

Autopilot not only generates signals based on trader’s custom trading systems but can also be set

to automatically create orders and execute trades whenever a buy or sell signal is generated.

Forex Autopilot also allows you to verify the effectiveness of trading strategies by visually back

testing trading systems on historical chart data.

By default VT Trader™ includes a number of automated trading systems. Though fully

functional these systems are provided as samples and are by no means to be considered trading

recommendations. Nevertheless these Forex trading systems can provide buy and sell signals as

well as generate orders. These systems can be used to help guide trader in creating his own

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personalized trading system. trader can either adjust the included systems and use them as a basis

for his automated trading systems or easily develop new trading systems from scratch.

Forex Autopilot's intuitive Trading System Builder allows clients to easily create and configure

new systems. Once a trading system is configured, VT Trader™ will automatically open and

close positions at specified parameters. These parameters can include price levels, moving

average crossovers, and even technical indicator levels. When certain conditions are met, as

defined by the user in his or her trading system, orders are triggered. Forex Autopilot will

manage your account even while trader is away as long as VT Trader™ is running. This way, the

trader can implement his Forex trading strategies without having a watch on the market all day

long.

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CHAPTER.6

OBSERVATUONS AND FINDINGS

How to avoid typical pitfalls and start making more money in forex trading

1. Trade pairs, not currencies. - Like any relationship, the trade has to know both sides.

Successful or failure in forex trading depends upon being right about the both currencies and

how they impact one another, not just one.

2. Knowledge is power – when starting out trading forex online, it is essential that the trader

understand the basis of this market, if he want to make the most of his money.

3. Independence – if trader is new to market, trader will either decide to trade his own money or

give his money to broker to trade it behalf of him.

4. Tiny margins – Margin trading is one of the biggest advantages in trading forex as it allows

trader to trade amounts for larger than the total of his deposits. However, it can also be

dangerous to novice traders as it can appeal to the greed factor that destroys many forex traders.

The best guideline is to increase leverage in line with experience and success.

5. No strategy – The aim of making money is not a trading strategy. A strategy trader’s map for

how he plans to make money. Trader strategy details the approach he is going to take, which

currencies he is going to trade and how he will manage risk. Without a strategy, he may become

one of the 90% of new traders that lose their money.

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6. The only way is up/down - when the market is on its way up, the market is on its way up.

When the market is going down, the market is going down. That’s it. There are many systems

which analyses past trends, but none that can accurately predict the future. But if the trader

acknowledges himself that all that is happening at any time is that market is simply moving.

Trader will be amazed at how hard it is to blame anyone else.

7. Trade on the news – most of the really big market moves occur around news time. Trading

volume is high and moves are significant. This means there is no better time to trade than when

news is released. This is when the big players adjust their positions and prices change resulting

in a serious currency flow.

8. Exiting trades – if the trader places a trade and it is not working for him, he has to get out.

There is no use of staying in trade and hoping for reversal. If the trader is in a winning trade, he

should not talk himself out of his position because he is bored or want to take stress: stress is a

natural part of trading; he gets used to it.

9. Don’t trade too short-term – if you are aiming to make less than 20 points profit, don’t

undertake the trade. The spread, the trader is trading on will make the odds against trader far too

high.

10. Don’t be smart – the most successful traders I know keep their trading simple. They don’t

analyse all day or research historical trends and track web logs and their results are excellent.

11. Ignoring technicals – understanding whether the market is over –extended long or short is a

key indicator of price action. Spikes occur in market when it is moving all one way.

12. Emotional trading – without that all –important strategy, the trader trades essentially are

thoughts only and thoughts are emotions and a very poor foundation for trading. When the

traders are upset and emotional, the trader doesn’t tend to make the wisest decisions. So the

trader should sway away is emotions.

13. Confidence – confidence comes from successful trading. If trader lose money early in stage

of his trading career its very difficult to regain it; the trick is not to go off half cooked; the trader

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has to learn the business before he stat trading and he should always remember that ‘knowledge

is power’.

RECOMMENDATIONS/ SUGGESTIONS

1. Trade defensively:

The best offense is a good defense. The trader has to be thinking what he could can lose

as opposed to what he could gain.

2. Adhere to own trading strategy:

Every trader needs a clear personal trading strategy. An important part of trader’s trading

plan is to set a limit on what trader willing to lose. Set stop losses based on that limit.

Stick to own trading plan and avoid impulse trades. If the trader did not understand what

the market is doing or if the trader’s emotional equilibrium is severely disturbed, then he

has to close out all his positions and take a break. Trader should not trade on market

rumors or tips, trade based on his strategy.

3. Controlling emotions:

Recognize that all traders sometimes experience high levels of stress and suffer losses

from time to time. Anxiety, frustration, depression and at times desperation, are all part of

the trading game. Trader has to stay focused on what he is doing. Trading is should be on

the basis of informed, rational, decisions, not emotions and wishful thinking.

4. Isolation of trading from the desired profits:

The trader should not hope for a move so much that his trade is based on HOPE.

Although hope is a great virtue in other area of life, It can be great hindrance to a trader.

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5. The trader should not form new opinions during trading hours:

The trader has to decide on a basic course of action, should not let the ups and downs

during the day upset his trading.

6. The trader has to take a trading break:

One successful trader commented. “When I fall to 90% of mental efficiency, I began to

break even. Anything below that I begin to lose.” Trading is hard work and it is often

very smart to quit while trader is ahead and give himself a small vacation. Most traders

don’t do this for themselves and they burn out.

7. Avoiding trading of too many currencies at once:

Once the account grows to a sizable amount, the trader will be able to trade many

currencies at a time and still be sticking to the rules of money management. This is not

always be an best idea.

8. Monitoring a position properly:

Moving the stop losses up to insure profit, and cancelling orders that were not filled even on

one trading position requires much concentration and mental alertness.

9. Stop losses do their job and protect trader:

Don’t ever cancel a stop loss to let incur a loss of more than stop order because the trader

is hoping the market will turn around. Always let stop losses will be the maximum the

trader will lose.

10. Be patient with a position:

Not every signal trader will take will immediately take into profit. It sometimes takes

several hours or more to be in profit on apposition when day trading and sometimes

weeks on a long term trade. When the position is at loss and trader decide to get out, the

should not make a 180 degree turn. The trader has to wait for the next good signal in the

right direction.

11. Learn to comfortably deal with losses.

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Traders must learn to accept losses because they are part of business. When trader gain

emotional stability to accept a loss without hurting pride or outlook on his trading, he is

on his way to becoming a successful trader.

12. Let profit run:

Successful traders should never take a profit just for the sake of taking a profit. They

have reason to close out a profitable position. It is good to have an approximate profit

target in mind.

13. Act promptly:

The forex market is not kind to those who procrastinate. Therefore, the rule of thumb is

act promptly. This doesn’t mean that the trader should be impulsive, and get in trades

hastily but if trader see a good signal it is better to place a trade. The key is not to be

hasty and not to hesitate, but to find a balance between the two.

14. Know the price trend:

Whatever time frame of the market trader is trading in, it is helpful to know the trend.

15. The trader should be honest with himself:

If the trader is breaking his own rules of trading or if he is not putting stop losses on

correctly or not disciplining himself to have a non-emotional, levelheaded attitude about

trading, then trader should be honest with him about the things he could correct so that he

can move through those obstacles.

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CONCLUSION:

1. The forex market is flexible; feasible because of it is a 24HR market.

2. It has features like 24 hour liquidity, 100 percent leverage, professional management of

funds, higher risk to earn more, availability of many markets, opportunity to earn profits

in either direction.

3. The trader has to take risk based upon the size of his investment account and his

strategies. Higher the risk, higher is the profits.

4. The trader should study the market carefully and make decisions based on his positions

i.e., buy or sell.

5. The trader (other than investor) has to trade safely thinking it’s his own investment.

6. The trader should not trader during the period of fundamental news.

7. Technicals can judge the market and the trader can catch the trend in a better way.

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191551041 my-report

Education