A Project titled

“A study of Forex Trading “

Submitted to University of Mumbai

For partial completion of the degree of Master of Commerce

Under the faculty of Commerce
Submitted by
RAJESH ASHOK JADHAV
Roll No. 22

Under the guidance of

PROF. KRISHNAN JAIKUMAR

V.K. KRISHNA MENON COLLEGE OF

COMMERCE & ECONOMICS AND SHARAD
SHANKAR DIGHE COLLEGE OF
SCIENCE BHANDUP (EAST) . MUMBAI – 400042

1
 ACADEMIC YEAR: 2021 - 2022
V.K. KRISHNA MENON COLLEGE OF COMMERCE &
ECONOMICS ANDSHARAD SHANKAR DIGHE COLLEGE
OF SCIENCE BHANDUP (EAST) .
MUMBAI –

400042

CERTIFICATE

This is to certify that MR. RAJESH ASHOK JADHAV has

worked and duly completed her project work for the degree of
Master of CAOMMERCE (Accountancy) under the faculty of
commerce and her project is entitled “A study of Forex Trading
“under my supervision

INTERNAL EXAMINER EXTERNAL EXAMINER PRINCIPAL

DATE OF SUBMISSION:

2
 DECLARATION

I MR.RAJESH ASHOK JADHAV the undersigned hereby

declare that the work embodied in this project titled “A study of
Forex Trading”.From my own contribution to the research work
carried out under the guidance of PROF. KRISHNAN
JAIKUMAR is a result of my own
research work.
Wherever reference has been made to previous works of other, it
has clearly indicate such and included in the bibliography.
I hereby further declare that all information of this document
has been obtained and presented in accordance with academic
rules and ethical conduct.

(RAJESH ASHOK JADHAV)

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 ACKNOWLEDGEMENT

To list all have helped me in difficult because they are so numerous

and the depth is so enormous.
I would like to acknowledge the following as being idealistic channel
and fresh dimension in the completion of this project.
I take this opportunity to thanks University of Mumbai for giving me
chance to do this project.
I would like to thank my Principal, SAROJ V PHADNIS for
providingthe necessary facilities requested for completion of this
project.
I take this opportunity to thank our Co-ordinator PROF
.ANJANAASHOKAN for her moral support and guidance.
I would like to express my sincere gratitude towards my Project
Guide PROF. KRISHNAN JAIKUMAR whose guidance and care
madethe project successful.
I would like to thank my college library, for having provided various
reference books and magazines related to my project.
Lastly, I would like to thank each and every person who directly or
indirectly helped me in completion of the project especially my
parents and peers who supported me throughout my project.

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 INDEX

SR. NO. PARTICULARS PAGE

NO.

Chapter Introduction of Project 6

1

Chapter Objectives of the Study 13

2

Scope of the Study 14

Chapter Literature Review 15

3

Chapter Method of Data Collection 51

4

Chapter Data Analysis and 52

3 Interpretation

Chapter Findings and Suggestions 64

4

Chapter Conclusion 65
5

Chapter Bibliography 66
6

Chapter Appendix 67
7

5
 CHAPTER 1
INTRODUCTION

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 In this financial world, the foreign exchange market, which will be referred as Forex, is the
market, which trades with largest amount of money. Forex is a market that trades currencies
from different countries. In this market two currencies are traded against each other
according to what the market believes to be the relative strength between these two. Before
starting to trade Forex, it is important to acknowledge that the magnitude of analysis needed
to understand this market may be considerably greater than other options; Forex requires the
understanding and analysisof countries’ background, current news, and political and
economic situation, plus the influence of the rest of the
world’s economic environment. Being involved in the Forex market allows one to be
informed into the world’s social, political, and economic situations, making people
globalized citizens. By taking into account all of these factors, investors can make better
informed decisions that can profound effect on creating a better trading system for
themselves.

The purpose of this interactive project is to create a profitable trading system in the foreign
exchange market. The trading system could be either automatic or manual using the TradeStation
platform. The group was divided into two teams with one focused on manual trading and the other
focused on automatic trading. Each person in the group created a personal strategy and then
summarized themtogether to gain a broader sense of the foreign exchange markets.

7
 Definition

Foreign Exchange (forex or FX) is the trading of one currency for another. For example, one
can swap the
U.S. dollar for the euro. Foreign exchange transactions can take place on the foreign
exchange market, also known as the forex market.

Forex, also known as foreign exchange or FX trading, is the conversion of one currency
into another. It is oneof the most actively traded markets in the world, with an average daily
trading volume of $5 trillion.

Forex trading is the process of speculating on currency prices to potentially make a profit.
Currencies are tradedin pairs, so by exchanging one currency for another, a trader is speculating
on whether one currency will rise orfall in value against the other.

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 History of Forex trading

Below is a brief history of forex trading through theages.

1. Currency trading and exchange has been aroundsince ancient times, with
evidence of coinage exchange appearing in Ancient Egypt as early as259 BC.

2. By the end of the middle ages, currencies begunbeing traded through the first
network of international banks.

3. In the 15th century, Florence’s Medici family opened banks in foreign locations to
facilitate tradeand exchange currencies on behalf of textile merchants.

4. And during the 17th and 18th centuries Amsterdamalready maintained an active
Forex market, with exchange taking place between agents from England and
Holland.

5. But the roots of modern trading as we know it begun taking shape in the 19th
century.

6. In the US, firms such as Alexander Brown & Sonsbecame leading currency traders
around the 1850s,with new participants beginning to engage in the business of
foreign exchange trading by the 1880s.

7. But perhaps the single biggest event in the historyof currency trading happened in
the 1870s, when the Gold Standard Monetary System was created.

8. Before the First World War, there was much lesscontrol over international trade,
and the consequences of the war caused countries to abandon the gold standard
by this time.

9. In the period of 1899 to 1913 foreign exchangeholdings increased by 10.8%,

while holdings ofgold increased by only 6.3%, marking the importance of the
emerging Forex market.

10. By the end of 1913 nearly half of the world’s foreign exchange was conducted
using the pound sterling, but there were only two foreign exchange brokers
operating in London. The most active trading centers instead were Paris, New
York andBerlin.

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 11. But by 1928, foreign exchange trading was integral to the financial functioning of
the city, andtrade in London began to resemble its modern status.

12. In 1944, the famous Bretton Woods Accord was signed, which allowed currencies
to fluctuatewithin a range of ±1% from the currency's par exchange rate.

13. During President Nixon’s tenure the Bretton Woods Accord was scrapped along with
fixed ratesof exchange, resulting in a free-floating currency system.

14. The ineffectiveness of the Bretton Woods Accord and the European Joint Float
had causedthe Forex markets to actually close from 1972 toMarch 1973.

15. 1973 essentially marks the beginning of the modern Forex market, when the state
control of foreign exchange ended and complete floating and
relatively free market conditions began.

16. The same year Reuters introduced computermonitors that replaced the old
methods of telephone and telex for obtaining trading quotes.

17. And in the mid-1980s Reuters developed a form of electronic Forex trading that
preceded theadvent of the Internet that served as a real-time closed network for
traders.

18. Today between $4 to 5 TRILLION are traded in the Forex market each day, making
it the largest financial market in the world.

From its humble beginnings as an exchange of metalcoins in Ancient Egypt to today’s

electronic transactions of billions of dollars in milliseconds, theworld of currency
trading has changed a lot over the
centuries, but the people’s need for trade and exchange has stayed the same.

10
The foreign exchange market works through financial institutions and operates on several
levels. Behind the scenes, banks turn to a smaller number of financial firmsknown as "dealers",
who are involved in large quantitiesof foreign exchange trading. Most foreign exchange dealers
are banks, so this behind-the-scenes market is sometimes called the "interbank market"
(although a fewinsurance companies and other kinds of financial firms are involved). Trades
between foreign exchange dealers can be very large, involving hundreds of millions of dollars.
Because of the sovereignty issue when involving two currencies, Forex has little (if any)
supervisory entityregulating its actions.

The foreign exchange market assists international trade and investments by enabling
currency conversion. For example, it permits a business in the United States toimport goods
from European Union member states, especially Eurozone members, and pay Euros, even
though its income is in United States dollars. It also supports direct speculation and evaluation
relative to thevalue of currencies and the carry trade speculation, basedon the differential interest
rate between two currencies.
In a typical foreign exchange transaction, a party purchases some quantity of one currency by
paying withsome quantity of another currency.

11
Forex Market is an exciting place. The one good thing about entering into the forex market is
that you can tradeanytime as per your convenience.

The global Foreign exchange market (‘FX’, ‘Forex’ or ‘FOREX’) is the largest market in the
world as measured by the daily turnover with more than US$5 trillion a day eclipsing the
combined turnover of the world’s stock and bond markets. The forex market measuring a
propelling turnover is one of the many reasons why so many privateinvestors and individual
traders have entered the market. The investors have discovered several advantages many of
which are not available in the other markets.

The foreign exchange market (Forex, FX, or currency market) is a global decentralized or
over-the-counter (OTC) market for the trading of currencies. This marketdetermines foreign
exchange rates for every currency. It includes all aspects of buying, selling and exchanging
currencies at current or determined prices. In terms
of trading volume, it is by far the largest market in theworld, followed by the credit
market.

12
 Objectives
To study Forex market & Risk management ingeneral as well as in forex
market.

To have a knowledge of different types of forex markets and various quotations in

Forex markets.

To study risk in the Forex market as well as volatility in Forex market.

To study the factors that force different types ofpeople in different markets.

To study various strategies of risk management.

13
 Scope

Scope of Forex management is very wide. All need Forex fortheir own purpose.
Companies, firms and individuals uses foreign currency for achieving their aims. So,
everywhere is Forex management.

If you are the Forex dealer, you need to buy or sell forex. So, there is big scope of forex in
forex business.

If any tourist will will visit any foreign country, he or she needthe currency of same country.
So, it will convert its owncurrency from bank.

Exporters will some time gets his sales earning in foreign currency. So, they need to convert
into their own currency.

Tax department also included in scope of Forex management because they are interested to get
service tax when other country's currency is converted into their own currency.

14
CHAPTER 3:LITERATURE REVIEW

15
The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-
the-counter (OTC) market for the trading of currencies. This market determines foreign
exchange rates for every currency. It includes all aspects of buying, selling and exchanging
currencies at current or determined prices. In terms of trading volume, it is by far the largest
market in the world, followed by the credit market.

The main participants in this market are the larger international banks. Financial centers around
the world function as anchors of trading between a wide range of multiple types of buyers and
sellers around the clock, with theexception of weekends. Since currencies are always traded in
pairs, the foreign exchange market does not set a currency's absolute value but rather
determines its relative value bysetting the market price of one currency if paid for with another.
Ex: US$1 is worth X CAD, or CHF, or JPY, etc.

The foreign exchange market works through financialinstitutions and operates on several levels.
Behind the scenes,banks turn to a smaller number of financial firms known as "dealers", who
are involved in large quantities of foreign exchange trading. Most foreign exchange dealers are
banks, so this behind-the-scenes market is sometimes called the "interbank market" (although
a few insurance companies and

16
 other kinds of financial firms are involved). Trades between foreign exchange dealers can be
very large, involving hundredsof millions of dollars. Because of the sovereignty issue when
involving two currencies, Forex has little (if any) supervisory entity regulating its actions.

The foreign exchange market assists international trade and investments by enabling currency
conversion. For example, it permits a business in the United States to import goods from
European Union member states,
especially Eurozone members, and pay Euros, even though its income is in United States
dollars. It also supports direct speculation and evaluation relative to the value of currencies and
the carry trade speculation, based on the differential interest rate between two currencies.

In a typical foreign exchange transaction, a party purchases some quantity of one currency by
paying with some quantity of another currency.

Present and Future

Foreign exchange was originally the province of multinational corporations that would collect revenue in one
country and need to return the funds to the parent corporation in another. This left the companies extremely
vulnerable to interest rate shifts over short periods of time and made valuation of foreign assets difficult if not
impossible. The in-house foreign exchange manager determined areas of exposure and maintained financial
equilibrium among corporations and their foreign outposts. As these divisions proved profitable on their own, a
market developed in speculating risk in the 1940s and 1950s in countries with exchangeable currency. To date,
these companies control the flow of over $74 billion around the globe each year. The market for foreign
exchange is growing steadily, and opportunities for those interested in the business should grow. However,
legislative changes should shape the way that foreign exchange markets do business over the next ten years,

17
The modern foreign exchange market began forming during the 1970s. This followed three
decades of government restrictions on foreign exchange transactions under the Bretton
Woods system of monetary management, which set out the rules for commercial and financial
relations among the world's major industrial states after World War II. Countries gradually
switched to floating exchange rates from the previous exchange rate regime, which remained
fixed perthe Bretton Woods system.

18
 Background Information

Financial Markets

In order to successfully trade in the financial market, thegroup first needed to investigate
trading at an introductory level. Understanding the type of markets is necessary for the
development of building a trading strategy. A financial market is a very broad term
describing any marketplace where buyers and sellers participate in the trade of assets such as
equities, bonds, currencies and derivatives. Financial markets aretypically defined by having
transparent pricing, basic regulations on trading, costs and fees, and market forces deciding
the prices of securities that trade.
Financial markets can be found in nearly everywhere in this world. Some of them are huge
with trillion of dollars trading a day, while others might be very small with only a few
participants.

A financial market is a market in which people trade financial securities and derivatives
at low transaction costs. Some of the securities include stocks and bonds, raw materials and
precious metals, which are known in the financial markets as commodities.

The financial market is a very broad term that primarily refers to a marketplace where
buyers and sellers participate in the trade, i.e., buying and selling of assets. Simply saying,
it is a platform that facilitates traders to buy and sell financial instruments and securities.

19
Capital Market

Capital market is a market where buyers and sellersengage in trade of financial

securities. The most famous of the capital markets are the stock market and bond
market. The participants in the capital market consist of individuals and institutions.
Capital market consists of primary markets and secondary markets. According
to The EconomicTimes, “Primary markets deal with trade of new issues of
stocks and other securities, whereas secondary market deals with the exchange
of existing or previously-issued securities.”

Stock Market

The stock market is the market in which the investors issue and trade shares of
publicly held companies through exchanges and over-the- counter markets. Since the
stock market provides companies opportunities to capital money in exchange for
giving investors some percentage of company ownership, it is one of the most
importantcomponents of a free-market economy. In the stockmarket, the investors
can participate in the financialactivities of the companies whose shares they hold.
When the companies make profit, the investors receive profits through the dividends
and by selling their appreciated stocks at a profitable point

The stock market lets buyers and sellers negotiate prices and make trades. ...
Companies list shares of their stock on an exchange through a process called an
initial public offering, or IPO. Investors purchase those shares, which allows the
company to raise money to grow its business.

The stock market broadly refers to the collection of exchanges and other venues
where the buying, selling, and issuance of shares of publicly held companies
take place.

20
 Bond Market

The bond market is the market in which the issuance and trading of debt securities
occurs. Most trades in the bond market are made over-the-counter through organized
electronic trading networks. Bonds are verycommonly used in companies, municipalities,
U.S. and foreign governments to finance a variety of projects and activities. The bond
market is not open for all kinds of investors; only the investors on credit markets can buy
or sell bonds. The main categories ofbonds are corporate bonds, municipal bonds, U.S.
Treasury bonds, notes and bills.

Money Market

The money market is a segment of the financial market in which financial

instruments with high liquidity and very short maturities are traded.
Participants use the money market is a means for borrowing and lending in the short
term, from several days to just under a year. Money market securities consist of
negotiable certificates of deposit (CDs), bankers’ acceptances, U.S. Treasurybills,
commercial paper, municipal notes, euro dollars, federal funds and 11 repurchase
agreements (repos). Money market investments arealso called cash investments
because of their short maturities

.
Derivatives Market

The derivative market is a market based on another market, which is known as the
underlying market.
Almost any underlying market can be the base of derivative markets, such as
individual stock market,stock indices, and Forex market. There are many different
forms of this market. The most common forms are futures market, options market,
warrants market, contract for difference (CFD) market, and spread betting

21
 Forex Market

The Forex market is a global decentralized market for the trading of currencies.
According to Babypips,It is open twenty four hours a days, five days a week and all
year round. As the most liquid market in the world, the participants include large
banks, central banks, institutions, governments and retail investors.2 (Babypips) It is
also the market trading the largest amount of cash value. In this market, the
participants can buy and sell currencies at current or determined prices. However, the
Forex market does not determine the relative values of different currencies, but sets
the current market price of the value of one currency as demanded against another. In
a typical Forex market transaction, an investor purchases some quantity of one
currency by paying with some quantity of another currency.
The modern foreign exchange market began constructing during the 1970s after three
decades of government restrictions on foreign exchange transactions. This was he
period when the countriesgradually changed to float exchange rates from the Bretton
Woods system.

The forex market allows participants, such as banks and individuals, to buy, sell or
exchange currencies for both hedging and speculative purposes. The foreign
exchange (forex) market is the largest financial market in the world and is made up
of banks, commercial companies, central banks, investment management firms,
hedge funds, retail forex brokers, and investors.1

The forex market is made up of two levels—the interbank market and the over-the-
counter (OTC) market. The interbank market is where large banks trade currencies
for purposes such as hedging, balance sheet adjustments, and on behalf of clients.
The OTC market, on the other hand, is where individuals trade through online
platforms and brokers.

22
The performance of Forex market is influenced bylots factors, including political
events, economic growth, inflation and other economic factors.
Regional and international political conditions and events can have a profound
effect on currency markets and the strength of a nation’s currency.
The economic reports such as GDP, employment levels and retail sales describe
the levels of a country’s economic growth and health in detail.
Generally, the more healthy and robust a country’s economy, the better its currency
will perform, and then there are more demands for the currency. If there is a high
level of national or if inflation levels are predicted to be rising, usually a currency
will lose its value. This is because inflation makes things more expensive and then
the demand for theparticular currency drops. However, a currency maysometimes
strengthen when inflation rises becauseof expectations that the central bank will
increase interest rates to combat rising inflation.

23
 Forex Trading Terminology

Base/Quote Currency

The base currency is the first currency quoted in a currency pair in Forex. The quote
currency is the secondcurrency quoted in a currency pair in Forex. For example, for
the EUR/USD currency pair, the EURO would be the base currency, and the U.S.
dollar would be the base currency.

Bid Price

The bid price is the price at which a broker is willing to buy the base currency in
exchange for the quote currency. This represents that the bid is the best available price
at which a trader will sell to the market.

Ask Price

The ask price is the price at which a broker is willingto sell the base currency in
exchange for the quote currency. This means that the ask price is the best available
price at which a trader will buy from the market.

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Percentage In Point (pip)

A pip is the smallest price move that a given exchange rate makes based on market
convention. The value of onepip depends on the currency pairs and pricing
convention.Because most of major currency pairs are priced to four decimal places
(except Yen), the pip is defined to the last decimal point. For example, for the
currency pair of Euro and U.S. Dollar (EUR/USD), the exchange rate of 1.2800 (1
EUR = 1.2800 USD) changes to 1.2810, the price ratio increases by 10 pips. In this
case, if a trader buys 1 standard lot ($100,000) of EUR/USD, paying USD 100,000,
and after 5 pips change, the trader sells 1 standard lot, receiving USD 100,100 and
achieving a profitof 100 USD.4

Leverage

Leverage is the use of various financial instruments or borrowed capital, like margin,
options futures and so on, toincrease the potential return of an investment, or the
amount of debt for financing a firm’s assets. A firm is highly leveraged if it has
significantly more debt than equity. Leverage is most commonly used in real estate
transactions through the use of mortgages to purchase a house.

Leverage is the use of borrowed funds to increase one's trading position beyond
what would be available from their cash balance alone. ... Forex traders often use
leverage to profit from relatively small price changes in currency pairs. Leverage,
however, can amplify both profits as well as losses.

The concept of leverage is very common in forex trading. By borrowing money from
a broker, investors can trade larger positions in a currency. As a result, leverage
magnifies the returns from favorable movements in a currency's exchange rate.

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Lot size
In the Forex market, there are three sizes of lots: micro, mini and standard. A micro lot
consists of 1,000 units of the base currency. A mini lot equals to10,000 units of the base
currency. A standard lot is the equivalent to 100,000 units of the base currency

Short/Long
Taking a long position on a currency pair means that a trader buys the base currency
and wants thevalue of the base currency will increase and/or the value of the quote
currency will decrease. Taking ashort position means that a trader buys the base
currency and wants the value of the base currencywill decrease and/or the values of
the quote currency will increase

Margin Call

A margin call usually occurs when an investor borrows money from a broker to make
investments. When the investor decides to use margin to buy or sell securities, he
actually pays for them with both hisown funds and borrowed money from a broker.
According to Investopedia, “A margin call is the demand of a broker on an investor
using margin to deposit additional money or securities so that the margin account is
brought up to the minimum maintenance margin.” When the account value depresses
to a value calculated by the broker, the investor receives the margin call.

Stop Loss

A stop loss order is an order, which a broker places to sell a security when it arrives a
certain price. It is designed to restrict an investor’s loss on a position ina security. If the
value of a trade is below the predetermined certain price, a market order will be
triggered and it will be sold at the next available price.Stop loss order performs well if the
market is declining in an orderly manner, but not if the market is disorderly or vary
sharp

26
 Overview of Portfolio Management

Assets and Securities

It is best to know and understand the different typesof securities and investments, in
order have a betterunderstanding of options that can be taken when investing in the
markets. There are several types each with its own advantages and risks.

Stocks

Stocks may be the most well known security. A stockis a security that represents a claim
on the corporation’s assets and earnings. There two types of stock, common and
preferred. A common stock usually gives the owner the ability to vote at shareholders’
meetings and receive dividends. Preferred doesn’t necessarily give you the benefit held
by common stock, but gives investors a higher claim on assets and earnings.

An investor may buy the stock of a specific companyfor many reasons. The first being,
capital appreciation or profit, when the stock increases in price. Stocks out of the
securities listed later on, offer “the greatest potential of growth (capital appreciation)
over the long haul. Investors willing to stick with stocks over long periods of time have
been rewarded with strong, positive returns.” according to the Securities Exchange
Committee6 (SEC 2016). Another is the dividend payment, which occur when the
company the stocks are bought from distributes the earnings made to stockholders.
Lastly, while notpertaining to profit, by owning a large amount of shares in a company,
it may be possible to attend shareholder meetings and be able to influence the company.

Mutual Funds

Mutual funds are made up from a fund created by pooling money from several
investors. The goal of mutual funds is to use the larger group fund in orderto invest in
varying securities such as stocks, bonds and other assets. Mutual funds can have
different objectives, such as high risk, low risk, long term, short term. A major
advantage of a mutual fund is that it can afford to purchase different securities that not
only diversify it, but also create a portfolio that anindividual may not be able to afford
or manage.

27
Exchange Traded Funds (ETF)

An exchange traded fund, or ETF, is a security that can be bought similar to a stock, in
the stock market.ETF’s focus on tracking an index, bond or major assets. ETFs are
similar to mutual funds but generally have a higher daily liquidity and lower feesthat a
mutual fund shares. The can also experience several price changes throughout the day,
as they are being exchanged. Some examples of ETF’s are the Spider (SPY) that tracks
the S&P 500 Index, or the QQQ that tracks the Nasdaq 100. Investopedia brings
attention to several that track specific industries such oil (OIH), energy XLE or
commodities such as gold (GLD) and silver (SLV) (Investopedia-. While not as well
known there are other ETF’s whichtracks the movements of currency globally. Currency
ETFs are similar, but are usually invested in one typeof currency or several. The goal of
Currency ETF’s isto imitate the pattern of the currency in the foreign exchange market.
They can be popular with investors that want to get into to the field of the foreign
exchange market, but not necessarily trade individually. The more common currency
ETF’s following the top international currencies such as theUSD, CAD, EURO, British
pound and JPY.

28
Hedge Funds
Similar to the mutual funds, are the hedge funds. Hedge funds are a different type of
investment opportunity. Traditionally, these usually focus on using a large fund in order
to make a high return. Hedge funds are usually run by a private investment group that
opens to certain investors. The manager of the hedge takes a percentage of the profits.
Whenmoney is pooled into a hedge fund, the individual takes a percentage of the profit,
but doesn’t own individual assets of the hedge fund.

Commodity
Basic goods that are commercially used an exchangeable with others of the same
type, are commodities. They can be traded on in a commodity exchange, as long as
they reach the minimum standards. Commodities are products withlittle
differentiation, such as oil, gas, grains and gold. Some new technological ones
include cell phone minutes and bandwidth. The exchange, including the sale and
purchase of commodities areusually done by futures contracts, which help set the
standards, quantity and quality of the goods exchange.

29
 Trade Station

Trade Station is a professional electronic trading platform, trading software and

online financial brokerage. It provides extensively functionalities for finding trading
opportunities, analyse market, executing trades and monitoring positions. Althoughit
comes with comprehensive proprietary trading analysis tools such as predefined
strategy components and indicators, individuals can modify the existing indicators
and strategies as well as build and customize their own analysis tools using Easy
Language, which is the programming language that drives all of analysis in Trade
Station.

Individuals can also access a large number of TradeStation compatible products

developed by independent third parties through Trade Station’sTradingAPP, as well as
participate discussion and get ideas about strategies, money management andtechnical
analysis on TradeStation discussion forums.29 Our team chooses TradStation from
various trading platform because it is relatively easier to learn, it supplies sufficient
functionalities for our research and it is free.

A demand-driven quality culture, together with a quality infrastructure system and its
conformity assessment services, support economic operators (in particular SMEs), to
achieve and prove conformity with market requirements, compete on international
markets and connect to global value chains. UNIDO’s interventions in this respect span
from policy and governance advice to the development of quality infrastructure
institutions and conformity assessment services, including the support of the private
sector in achieving compliance with international standards.

30
 Developing a Trading System

Trading Sessions

Forex market is open 24 hours a day, but the marketis not active for whole day. There
are times when price action is consistently volatile and periods when it is muted.
Moreover, different currency pairs exhibit varying activity over certain times of the
trading day due to the general demographic of those market participants who are online
at the time. Therefore, it is important for traders to choose the right trading sessions to
fit their strategies and trading styles.

Trading sessions can be divided into four majorones: the Sydney session, the Tokyo
session, the London session and the New York Session. The actual open and close hours
of those sessions are based on local business hours which could change between
summer and winter.

A market participant must determine what kind of volatility will work best with their
personality andtrading style firstly. If more substantial price action isdesired, trading
the session overlaps or typical economic release times may be the preferable option. If
high volatility is desired, a trader should find a time frames that are most active for
the pair ofcurrency he or she would like to trade

Position Sizing

Position sizing is used to set the correct amount of unit to trade in market. Determining
the appropriate position sizing has positive impact on trading result. Position sizing
reflects the risk involved in trade and is crucial to be used for risk management. It is
important to take trader’s account size and risk tolerance into consideration to calculate
the position size. More specifically, traders need to know their stop levels and the
percentages or dollar amounts they are willing to risk in order to determine the right
position size.

31
Set Up

The Set-Up refers to the condition or set of conditions that are determine if the
market is preferable before actually trading. It is the indicatoror a group of
indicators that make traders aware a trading is in the making but not actually get
tradersinto the market

Entry Conditions
Entry conditions are often combinations of tradefilters and trade triggers. Trade filters
identify set up condition. They generally used to check if current market is favorable
by the system, but doesn’t actually prompt any trade. Trade triggers are actual
conditions that define when a trade will be made. Trade filters should occur before trade
triggers. Oncethe market passes through the filter, the trade triggers will decide what
exactly trader need to do inthat market.

Exit

Exit rules used to close out positions once certain conditions are satisfied. As soon
as a trade is entered, exit rules should be considered to exit thetrade. Profit target
and stop loss points are prevalent used in designing exit strategies to minimum risk
and eliminating emotion effect.

32
Trading Sessions

The Forex market can be broken up into four major trading sessions: the Sydney session,
theTokyo session, the London session, and the New York session.
Below are the open and close times for each session:
New York opens at 8:00 am to 5:00 pm EST (EDT)
Tokyo opens at 7:00 pm to 4:00 am EST (EDT)Sydney opens at 5:00 pm to 2:00
am EST(EDT)
London opens at 3:00 am to 12:00 noon EST (EDT)
And so, there are hours when two sessions overlap: New York and London: between
8:00 am — 12:00 noon EST (EDT)
Sydney and Tokyo: between 7:00 pm — 2:00 am EST (EDT)
London and Tokyo: between 3:00 am — 4:00am EST (EDT)

Best Times during the Day to Trade

Forex

Logically, the best time to trade is when there is anoverlap in trading times between
open markets.
Overlaps equal higher price ranges, resulting in greater opportunities. Here is a
closer look at thethree overlaps that happen each day.

U.S./London (8am to noon): The heaviest overlap within the markets occurs in the
U.S./London markets. More than 70% of all trades happen whenthese markets
overlap because the U.S. dollar and the euro are the two most popular currencies to
trade. If a trader is looking for the most optimal timeto trade, then this would be the
ideal time.

Sydney/Tokyo (2am to 4am): This time period is notas volatile as the U.S./London

33
overlap, but it still offers a chance to trade in a period of higher pip fluctuation. The
ideal currency pair to aim for in this period is the EUR/JPY pair, as these are the two
main currencies influenced.

London/Tokyo (3am to 4am): This overlap sees the least amount of action of the three
overlaps becauseof the time and the one-hour overlap gives littleopportunity to watch
large pip changes occur.

Understanding the markets and their overlaps can aid a trader in arranging his or her
trading schedule. Sometimes the profits come from the trade using the overlaps and
information asymmetry.

34
 Market participants

Unlike a stock market, the foreign exchange market is divided into levels of access.
At the top is
the interbank foreign exchange market, which ismade up of the largest
commercial
banks and securities dealers. Within the interbank market, spreads, which are the
difference between the bid and ask prices, are razor sharp and not known to players
outside the inner circle. The difference between the bid and ask prices widens (for
example from 0 to 1 pip to 1–2 pips for currencies such as the EUR) as you go down
the levels of access. This is due to volume. If a trader can guarantee large numbers of
transactions for large amounts, they can demand a smaller difference between the bid
and ask price, which is referred to as a better spread. The levels of access that make
up the foreign exchange market are determined by the size of the "line" (the amount
of money with which they are trading). The top-tier interbank market accounts for
51% of all transactions.[61] From there, smaller banks, followed by large multi-
national corporations (which need to hedge risk and pay employees in different
countries), large hedge funds, and even some of the retail market makers. According
to Galati and Melvin, “Pension funds, insurance companies, mutual funds, and other
ins investors have played an increasingly important role in financial markets in
general, and in FX markets inparticular, since the early 2000s.” (2004) In addition,he
notes, “Hedge funds have grown markedly over the 2001–2004 period in terms of
both number and overall size”. Central banks also participate in the foreign exchange
market to align currencies to their economic needs.
titutional

35
Commercial companies

An important part of the foreign exchange market comes from the financial
activities of companies seeking foreign exchange to pay for goods or services.
Commercial companies often trade fairly small amounts compared to those of
banks or speculators, and their trades often have a little short-term impact on
market rates. Nevertheless, trade flows are an important factor in the long-term
direction of a currency's exchange rate.
Some multinational corporations (MNCs) can havean unpredictable impact when
very large positionsare covered due to exposures that are not widely known by
other market participants.

Central banks

National central banks play an important role in the foreign exchange markets. They
try to control the money supply, inflation,
and/or interest rates and often have official or unofficial target rates for their
currencies. Theycan use their often substantial foreign exchange reserves to stabilize
the market.
Nevertheless, the effectiveness of central bank"stabilizing speculation" is doubtful
because central banks do not go bankrupt if they make large losses as other traders
would. There is also no convincing evidence that they actually make a profit from
trading.

36
Foreign exchange fixing

Foreign exchange fixing is the daily monetary exchange rate fixed by the national bank
of each country. The idea is that central banks usethe fixing time and exchange rate to
evaluate the behavior of their currency. Fixing exchangerates reflect the real value of
equilibrium in the market. Banks, dealers, and traders use fixing rates as a market trend
indicator.

The mere expectation or rumor of a central bank foreign exchange intervention

might be enough to stabilize the currency. However, aggressive intervention might
be used severaltimes each year in countries with a dirty
float currency regime. Central banks do not always achieve their objectives. The
combinedresources of the market can easily overwhelm any central bank. Several
scenarios of this nature were seen in the 1992–93 European Exchange Rate
Mechanism collapse, and in more recent times in Asia.

Investment management firms

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

customerssuch 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
currencyoverlay operations, which manage clients'currency exposures with
the aim of generatingprofits as well as limiting risk. While the number of this
type of specialist firms is quite small, many have a large value of assets under
management and can, therefore, generate large trades.

37
Non-bank foreign exchange companies

Non-bank foreign exchange companies offer currency exchange andinternational payments to private
individuals and companies. These are also known as "foreign exchange brokers" but are distinct in that
they do notoffer 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 currency transfers/payments are made via Foreign
ExchangeCompanies.[66] These companies' selling point is usually that they will offer better
exchange rates or cheaper payments than the customer's bank.[67] These companies differ
from MoneyTransfer/Remittance Companies in that theygenerally offer higher-value services.
The volume oftransactions done through Foreign Exchange Companies in India amounts to
about US$2 billion[68] per day This does not compete favorably with any well developed
foreign exchange market of international repute, but with the entry of online Foreign Exchange
Companies the market is steadilygrowing. Around 25% of currency transfers/payments in India
are made via non-bank Foreign Exchange Companies.[69] Most of these companies use the USP
of better exchange rates than the banks. They are regulated by FEDAI and any transaction in
foreign Exchange is governed by the Foreign Exchange Management Act,1999 (FEMA).

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 currency transfers/payments 1 are made via
Foreign Exchange Companies 2. 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.

38
Retail foreign exchange traders

Individual retail speculative traders constitute a growing segment of this market.

Currently, they participate indirectly through brokers or banks. Retail brokers, while
largely controlled and regulated in the US by the Commodity Futures Trading
Commission and National Futures Association, have previously been subjected to
periodic foreign exchange fraud. To deal with the issue, in 2010 the NFA required its
members that deal in the Forex markets to register as such (I.e., Forex CTA insteadof a
CTA). Those NFA members that wouldtraditionally be subject to minimum net capital
requirements, FCMs and IBs, are subject to greater minimum net capital requirements
if they deal in Forex. A number of the foreign exchange brokers operate from the UK
under Financial ServicesAuthority regulations where foreign exchange trading using
margin is part of the wider over-the- counter derivatives trading industry that
includes contracts for difference and financial spread betting.
There are two main types of retail FX brokers offeringthe opportunity for speculative
currencytrading: brokers and dealers or market
makers. Brokers serve as 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 behalfof 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 principals in the transaction
versus the retail customer, and quote a price they are willingto deal at.

39
 Financial instruments

Spot

A spot transaction is a two-day delivery transaction (except in the case of trades

between the US dollar,Canadian dollar, Turkish lira, euro and Russian ruble, which
settle the next business day), as opposed to the futures contracts, which are usually
three months. This trade represents a “direct exchange” between two currencies, has
the shortest time frame, involves cash rather than a contract, and interest is not
included in the agreed- upon transaction. Spot trading is one of the most common
types of forex trading. Often, a forex broker will charge a small fee to the client to
roll- over the expiring transaction into a new identical transaction for a continuation
of the trade. This roll- over fee is known as the "swap" fee.

Forward

One way to deal with the foreign exchange risk is toengage in a forward transaction.
In this transaction, money does not actually change hands until some agreed upon
future date. A buyer and seller agree on an exchange rate for any date in the future,
and the transaction occurs on that date, regardless of what the market rates are then.
The duration of thetrade can be one day, a few days, months or years. Usually the date
is decided by both parties. Then the forward contract is negotiated and agreed uponby
both parties.

40
Non-deliverable forward (NDF)

Forex banks, ECNs, and prime brokers offer NDF contracts, which are derivatives that
have no real deliver-ability. NDFs are popular for currencies with restrictions such as
the Argentinian peso. In fact, a forex hedger can only hedge such risks with NDFs, as
currencies such as the Argentinian peso cannot be traded on open markets like major
currencies.

Swap
The most common type of forward transaction is the foreign exchange swap. In a
swap, two parties exchange currenciesfor a certain length of time and agree to reverse
the transaction at a later date. These are not standardized contracts and are not traded
through an exchange. A deposit is often required in order to hold the position open
until the transaction is completed.

Futures

Futures are standardized forward contracts and are usually traded on an exchange
created for this purpose. The average contract length is roughly 3 months. Futures
contracts are usually inclusive of any interest amounts.
Currency futures contracts are contracts specifying a standard volume of a particular
currency to be exchanged on a specific settlement date. Thus the currency futures
contracts are similar to forward contracts in terms of their obligation, but differ from
forward contracts in the way they are traded. In addition, Futures are daily settled
removing credit risk that exist in Forwards.[78] They are commonly used by MNCs to
hedge their currency positions. In addition they are traded by speculators who hope to
capitalize on their expectations of exchange ratemovements.

Option

A foreign exchange option (commonly shortened to just FX option) is a derivative

where the owner has the right but not the obligation to exchange money denominated
in one currency into another currency at a pre-agreed exchange rate on a specified
date. The FX options market is the deepest, largest and most liquid market for options
of any kind in the world.
41
 Advantages of Forex Market

Flexibility

Forex exchange markets provide traders with a lot of flexibility. This is because there is no
restriction on the amount of money that can be used for trading. Also, there is almost no
regulation of the markets. This combined with the fact that the market operates on a 24 by 7
basiscreates a very flexible scenario for traders. People with regular jobs can also indulge in
Forex trading on the weekends or in the nights. However, they cannot do the same if they are
trading in the stock or bond markets or their own countries! It is for this reason that Forex
tradingis the trading of choice for part time traders since itprovides a flexible schedule
with least interference in their full time jobs.

Transparency: The Forex market is huge in size and operates across several time zones! Despite
this, information regarding Forex markets is easily available. Also, no country or Central Bank has the
ability to single handedly corner the market or rig prices for an extended period of time. Short term
advantages may occur to someentities because of the time lag in passing information. However, this
advantage cannot be sustained over time. The size of the Forex market also makes it fair and
efficient.

42
 Trading Options

Forex markets provide traders with a wide variety oftrading options. Traders can trade
in hundreds of currency pairs. They also have the choice of entering intospot trade or they could
enter into a future agreement. Futures agreements are also available in different sizes and with
different maturities to meet the needs of the Forex traders. Therefore, Forex market provides
an option for every budget and every investor with a differentappetite for risk taking.

Also, one needs to take into account the fact that Forex markets have a massive trading
volume. More trading occurs in the Forex market than anywhere else in the world. It is for
this reason that Forex provides unmatched liquidity to its traders who can enter and exit the
market in a matter of seconds any time they feel like!

Transaction Costs

Forex market provides an environment with low transaction costs as compared to other
markets.When compared on a percentage point basis, the transaction costs of trading in
Forex are extremely low as compared to trading in other markets. This is primarily
because Forex market is largely operated by dealers who provide a two way quote after
reserving a spread for themselves to cover the risks.Pure play brokerage is very low in
Forex markets.

43
Leverage

Forex markets provide the most leverage amongst all financial asset markets. The
arrangements in the Forex markets provide investors to lever their original
investment by as many as 20 to 30 times and trade in the market! This magnifies both
profits and gains. Therefore, even though the movements in the Forex market are
usually small, traders end upgaining or losing a significant amount of money thanks
to leverage

44
 Disadvantages of Forex Market

Counterparty Risks

Forex market is an international market. Therefore, regulation of the Forex market is a difficult
issue becauseit pertains to the sovereignty of the currencies of many countries. This creates a
scenario wherein the Forex market is largely unregulated. Therefore, there is nocentralized
exchange which guarantees the risk free execution of trades. Therefore, when investors or
tradersenter into trades, they also have to be cognizant of the default risk that they are
facing i.e. the risk that thecounterparty may not have the intention or the ability to honor
the contracts. Forex trading therefore involvescareful assessment of counterparty risks as well
as creation of plans to mitigate them.

Leverage Risks
Forex markets provide the maximum leverage. Theword leverage automatically implies risk
and a gearing ratio of 20 to 30 times implies a lot of risk! Given the fact that there are no limits
to the amountof movement that could happen in the Forex market in a given day, it is possible
that a person may lose all of their investment in a matter of minutes if they placed highly
leveraged bets. Novice investors are more prone to making such mistakes because theydo not
understand the amount of risk that leverage brings along.

Operational Risks
Forex trading operations are difficult to manage operationally. This is because the Forex market
works allthe time whereas humans do not! Therefore, traders have to resort to algorithms to
protect the value of their investments when they are away. Alternatively, multinational firms
have trading desks spread all across the world. However, that can only be done if trading is
conducted on a very large scale.
Therefore, if a person does not have the capital or the know how to manage their positions
when they areaway, Forex markets could cause a significant lossof value in the nights or on
weekends.

45
 Determinants of exchange rates

In a fixed exchange rate regime, exchange rates are decided by the government, while a
number of theorieshave been proposed to explain (and predict) the fluctuations in exchange
rates in a floating exchange rate regime, including:

International parity conditions: Relative purchasing power parity, interest rate parity,
Domestic Fisher effect, International Fisher effect. To some extent the above theories
provide logical explanation for the fluctuations in exchange rates, yet these theories
falter as they are based on challengeable assumptions (e.g., free flow of goods,
services, andcapital) which seldom hold true in the real world.

Balance of payments model: This model, however, focuses largely on tradable goods
and services, ignoring the increasing role of global capital flows. Itfailed to provide
any explanation for the continuous appreciation of the US dollar during the 1980s
and most of the 1990s, despite the soaring US current account deficit.

Asset market model: views currencies as an important asset class for constructing
investment portfolios. Asset prices are influenced mostly by people's willingness
to hold the existing quantitiesof assets, which in turn depends on their expectations
on the future worth of these assets. The asset market model of exchange rate
determination states that “the exchange rate between two currencies represents the
price that just balances the relative supplies of, and demandfor, assets denominated
in those currencies.”

None of the models developed so far succeed to explainexchange rates and volatility in the
longer time frames.
For shorter time frames (less than a few
days), algorithms can be devised to predict prices. It is understood from the above models
that many macroeconomic factors affect the exchange rates and inthe end currency prices are
a result of dual forces
of supply and demand. The world's currency markets can be viewed as a huge melting pot: in
a large and ever-changing mix of current events, supply and demand factors are constantly
shifting, and the price of one currency in relation to another shifts accordingly. Noother
market encompasses (and distills) as much of what is going on in the world at any given
time as foreign exchange.

46
Supply and demand for any given currency, and thus itsvalue, are not influenced by any
single element, but rather by several. These elements generally fall into three categories:
economic factors, political conditions and market psychology.

Economic factors

Economic factors include: (a) economic policy, disseminated by government

agencies and centralbanks, (b) economic conditions, generally revealed through
economic reports, and other economic indicators.

Economic policy comprises government fiscal policy (budget/spending practices)

and monetary policy (the means by which a government's centralbank influences
the supply and "cost" of money, which is reflected by the level of interest rates).
Government budget deficits or surpluses: The market usually reacts negatively to
widening government budget deficits, and positively to narrowing budget deficits.
The impact is reflected inthe value of a country's currency.
Balance of trade levels and trends: The trade flow between countries illustrates the
demand for goodsand services, which in turn indicates demand for a country's
currency to conduct trade. Surpluses anddeficits in trade of goods and services
reflect the competitiveness of a nation's economy. For example, trade deficits may
have a negative impacton a nation's currency.
Inflation levels and trends: Typically a currency will lose value if there is a high
level of inflation in the country or if inflation levels are perceived to be rising. This
is because inflation erodes purchasing power, thus demand, for that particular
currency. However, a currency may sometimes strengthen when inflation rises
because of expectations that the central bank will raise short-term interest rates to
combat rising inflation.
Economic growth and health: Reports such as GDP, employment levels, retail sales,
capacity utilization and others, detail the levels of a country'seconomic growth and
health. Generally, the more healthy and robust a country's economy, the better its
currency will perform, and the more demand for itthere will be.
Productivity of an economy: Increasing productivityin an economy should positively
influence the valueof its currency. Its effects are more prominent if the increase is in
the traded sector

47
Political conditions

Internal, regional, and international political conditions and events can have a profound
effecton currency markets.
All exchange rates are susceptible to political instability and anticipations about the new
ruling party. Political upheaval and instability can have a negative impact on a nation's
economy. For example, destabilization of coalition
governments in Pakistan and Thailand can negatively affect the value of their currencies.
Similarly, in a country experiencing financial difficulties, the rise of a political faction that is
perceived to be fiscally responsible can have the opposite effect. Also, events in one country
in a region may spur positive/negative interest in a neighbouring country and, in the process,
affect itscurrency.

48
 Market psychology

Market psychology and trader perceptions influence theforeign exchange market in a

variety of ways:

Flights to quality: Unsettling international events canlead to a "flight-to-quality", a

type of capital
flight whereby investors move their assets to a perceived "safe haven". There will be a
greater demand, thus a higher price, for currencies perceived as stronger over their
relatively weakercounterparts. The US dollar, Swiss franc
and gold have been traditional safe havens duringtimes of political or economic
uncertainty.

Long-term trends: Currency markets often move in visible long-term trends.

Although currencies do nothave an annual growing season like physical
commodities, business cycles do make themselves felt. Cycle analysis looks at
longer-term price trendsthat may rise from economic or political trends.
"Buy the rumor, sell the fact": This market truism can apply to many currency
situations. It is the tendency for the price of a currency to reflect the impact of a
particular action before it occurs and, when the anticipated event comes to pass, react
in exactly the opposite direction. This may also be referred to as a market being
"oversold" or "overbought".[75] To buy the rumor or sell the fact can also be an
example of the cognitive bias knownas anchoring, when investors focus too much on
therelevance of outside events to currency prices.

Economic numbers: While economic numbers can certainly reflect economic

policy, some reports andnumbers take on a talisman-like effect: the number itself
becomes important to market psychology andmay have an immediate impact on
short-term market moves. "What to watch" can change over time. In recent years,
for example, money supply, employment, trade balance figures and inflation
numbers have all taken turns in the spotlight.

Technical trading considerations: As in other markets, the accumulated price

movements in a currency pair such as EUR/USD can form apparentpatterns that
traders may attempt to use. Many traders study price charts in order to identify such
patterns

49
 Risk aversion

Risk aversion is a kind of trading behavior exhibited by the foreign exchange market when a
potentially adverseevent happens that may affect market conditions. This behavior is caused
when risk averse
traders liquidate their positions in risky assets and shift the funds to less risky assets due to
uncertainty.

In the context of the foreign exchange market, traders liquidate their positions in various
currencies to take up positions in safe-haven currencies, such as the US dollar. Sometimes,
thechoice of a safe haven currency is more of a choice based on prevailing sentiments rather
thanone of economic statistics. An example would be the financial crisis of 2008. The value
of equities across the world fell while the US dollar strengthened. This happened despite the
strong focus of the crisis in the US

50
 Methods of Data Collection

Data is a collection of facts, figures, objects, symbols, and events gathered from different
sources. Organizations collect data to make betterdecisions. Without data, it would be
difficult for organizations to make appropriate decisions, and so data is collected at various
points in time from different audiences.

We can categorize data collection methods into primarymethods of data collection and
secondary methods of data collection.

Primary Data Collection

Data that has been generated by the researcher himself/herself, surveys, interviews,
experiments,specially designed for understanding and solving theresearch problem at hand.

Secondary Data Collection

Using existing data generated by large government Institutions, healthcare facilities etc. as part
of organizational record keeping. The data is then extractedfrom more varied data files.

Method used :

For this project I have used primary method of datacollection. I have collected data
by sharing a questionnaire regarding the topic in the format of a googleform. I have circulated
the form asked people about theiropinion regarding the topic through different questions. I have
collected responses of nearly 50 people.

51
Data Analysis and Interpretation

52
The above diagram represents that people who have responded the
questionnaire
94.1 % of the people are below the age of 25 years
The remaining 5.9 % people are above the age of 25 years.

53
The above diagram represents that people who have responded the
questionnaire
The people who were aware about the forex trading were 73.1 %
The people who were unaware about the forex trading were 26.9 %

54
The above diagram represents that people who have responded the
questionnaire
35.8 % of the people invest in forex trading
The remaining 64.2 5 of the do not invest in forex trading

55
The above diagram represents that people who have responded the
questionnaire
The 30 % of the people are investors currently
Whereas the percentage of brokers and dealers is 3 % respectively.
The remaining 64 % of them fall into other category i.e. they are not
amongst the investors or brokers and dealers

56
 The above diagram represents that people who have responded the
questionnaire
The 77.1 % of people have no experience in foreign exchange trading.
9.1 % of people have experience of 2 months into trading
6.9 % of the people have 6 months experience into forex trading.
Also 6.9 % people are just the beginners.

57
The above diagram represents that people who have responded the
questionnaire
According to 41.2% people Technical factor determines the foreign exchange
rates
The rest of the factors like Technical, Behavioural and Speculation determines
foreign exchange rate is the form of 19.6% respectively.

58
The above diagram represents that people who have responded the questionnaire
According to 23.5 % of the people GDP influences the exchange rates

According to 47.1 % of the people Interest rates influences the exchange rate
Political stability influences the exchange rate is the opinion of the 9.8 % people.

The rest of the factors like Unemployment, BOP Position and inflation rates influences 6.5
% of exchange rates respectively.

59
The above diagram represents that people who have responded the questionnaire

According to 34 % of the people fundamental factors is reflected in foreign exchange market on

Intra-day basis.

38% of them said that 1 month is needed for fundamental factors to reflect in foreign exchange
market.

According to 18% and 10% of them it requires 3 months and year to reflect in foreign exchange
market respectively.

60
The above diagram represents that people who have responded the
questionnaire
According to 37.3 % people their peers or society influence their trading
decisions.
Market judgements influence 29.4 % of the people‘s decision
Rumours affect 15.7 % of the decision of the people
11.8 % and remaining 5.8 % are affected by Banda wagon and over reaction to
news

61
The above diagram represents that people who have responded the questionnaire

Usefulness of fundamental analysis in predicting trends and turning point is 33.3 % and 29.4 %
respectively.

Usefulness of technical analysis in predicting trends and turning points is 11.8 % and 25.5 %
respectively.

62
The above diagram represents that people who have responded the questionnaire

According to 49 % of the people Technical factors make the trading strategies successful.

Whereas 23.5 % and 21.6 % of believe that Behavioural and Fundamental factors make trading
successful

The remaining 5.9 % of them believe speculation strategy is successful.

63
 Findings and Suggestions

For a short-term trader with only delayed information to economic data, but real-
time access to quotes, technical analysis may be the preferred method.
Alternatively, tradersthat have access to up-to-the-minute news reports and
economic data may prefer fundamental analysis.

Managing risk and managing your emotions go hand in hand. When people feel
greedy, fearful, or another emotion, this maybe when they're more likely to make
mistakes with risk. And this is what often causes failure.

Trading small will allow you to put some money on the line, but it will also allow you
to expose yourself to very small losses if you make mistakes or enter into losing
trades. This will teach you far more than anything that you can read on a site, book,
or forex trading forum, and it gives an entirely new angle to anything that you'll learn
while trading on a demo account.

Currency trading is great because you can use leverage, and there are so many
different currency pairs to trade

64
 Conclusion

Although foreign exchange may be confusing, in today's global marketplace, there is a

critical need for almost everyone to understand foreign exchange like never before. As the
world shrinks, there is an ever-increasing likelihood that is required to address the risks
associated with the fact that there are different currencies used all around the world and that
these currencies have an immediate impact on the world. One must be able to evaluate the
effects of, and actively respond to, changes in exchange rates with respect to consumption
decisions, investment portfolios, business plans, government policies, and other life choices.
Moreover,there is an ever-increasing probability that one has to transact in these foreign
exchange markets in his or her personal or professional life.

There are several controversial issues in exchange rate economics that are currently under
debate. Exchange rate determination in developing countries such as Indonesia is avery
complex task and a crucial issue in managing the stability of the currency and the economy.
The choice of an exchange rate regime and model for determining an exchange rate and its
associated policy is essentially a socialchoice problem.

65
 Bibliography
http://www.investopedia.com/terms/s/sma.asp
https://en.wikipedia.org/wiki/Foreign_exchange_market
http://www.investopedia.com/articles/trading/09/determine-position-
size.asp
http://www.babypips.com/school/preschool/when-can-you-trade-
forex/trading-sessions.html

66
APPENDIX

67
1.Are you aware about forex trading?
.Yes
.No

2.Do you invest in forex trading?

.Yes
.No

3.Your current position is?

1.Dealer (RBI REGISTERED)
2.Investors
3.Broker /Sub Broker (SEBI REGISTERED)
4.Other

4.What is your experience in foreign exchange trading (No of Years)

1.One
2.Three
3.Four
4.Above five

5.Which factors in your opinion determines the foreign exchange rates

1.Technical
2.Behavioural factors
3.Speculation
4.Fundamental factors

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6.Rate your opinion on constituents of fundamental factors that are able to
influence the foreign exchange rates
1.Interest rates
2.Political stability
3.GDP
4.Unemployment
5.Balance of payment position
6.Inflation rates

7.As per your opinion how quickly information of fundamental factors is

reflected in foreign exchange rates?
1.Intra day
2.1 month
3.3 months
4.Yearly
5. >1

8.Which of the following behavioural factors influence your foreign

exchange trading decisions
1.Peers/Social Influences
2.Banda wagon effect(same behavioural patterns as others)
3.Rumours
4.Market Judgement
5.Over reaction to news

9.Rate your perceived usefulness of fundamental analysis and technical

analysis in predicting trends and turning points
1.Usefulness of fundamental analysis in predicting trends
2.Usefulness of fundamental analysis in predicting turning points
3.Usefulness of technical analysis in predicting trends
4.Usefulness of technical analysis in predicting turning points

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10.Following are the trading strategies which one according to you is highly
successful
1.Technical factors
2.Behavioural
3.Fundamental factors
4.Based on speculation

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