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International Institute of Business Studies

Banglore-560032

CERTIFICATE

This is to certify that this Internship Report on Organizational Study at J WINGS is a


bonafide study of Rangudu Kiranmai, Ravulapalli Madukar, Rangaiahgari Madhu Babu,
Roja A, Revuri Dilli Babu, carried out under my guidance and supervision.

Place: Bangalore
Date :
Signature of faculty guide

Name of faculty guide


DECLARATION

We hereby declare that this Business Familiarization Report of Internship at J WINGS


submitted in partial fulfillment of the requirement for 3rd semester MBA Degree
Examination 2017 of University of Mysore through International Institute of Business
Studies , Bangalore in our original work and not submitted to any other university. This work
has been done under the supervision of Prof. Krishna Kumari.

Place: Bangalore
Date :

Name of the team members Reg. No. Signature of team members

Rangudu Kiranmai 16MB1729

Ravulapalli Madhukar 16MB2557

Rangaiahgari Madhu Babu 16MB1728

Roja A 16MB1735

Revuri Dilli Babu 16MB2558


ACKNOWLEDGEMENT

In the accomplishment of this project successfully, many people have best owned upon me
their blessings and the heart-pledged support, this time I am utilizing to thank all the people
who have been concerned with the project.

At first, I wish to express my sincere gratitude to Mr. Megesh Meg, Proprietor of the
company for providing me an opportunity to do my Internship and Project Work in

“J WINGS MANIFEST WEALTH ”.

I sincerely thank Mr. Kiran Kumar Reddy Banka, Mr. Gopal Krishna and Mr. Rakshith
Rakshi for their guidance and encouragement in carrying out this project work. I also wish to
express my gratitude to the officials and other staff members of J Wings Manifest Wealth who
rendered their help during my project work.

I also thank the Director of Institute Of Mathematics And Applications Dr. A.K.Mishra for
providing me the opportunity to embark on this project.

Last but not the least, I would like to thank my office batch mates who with their valuable
suggestions and ideas have been very supportive in various phases in completion of the
project.
CONTENTS

Certificate from the Company ------------------------------------------------------------------


Certificate from the Faculty Guide -------------------------------------------------------------
Declaration
Acknowledgement
1. Introduction
1.1 Introduction to the Study
1.2 Need of the study
1.3 Scope of the study
1.4 Introduction to the Industry
2. Industry Profile
3. Company Profile
3.1 Introduction of the Company
3.2 Grand Bloom Corporation (GBCFX)
3.3 Other Establishments
4. Literature Review
4.1 Introduction to Literature Review
4.2 Research gaps and conclusions
5. Research Methodology
5.1 Forex market
5.2 The Participants
5.3 Trading time
5.4 Major Currencies
5.5 Chart types
5.6 Indicators
5.7 Candlestick patterns
5.8 Factors affecting market
6. SWOT Analysis
7. Executive Summary
8. Conclusions and Suggestions
9. Bibilography
1.INTRODUCTION
1.1 INTRODUCTION TO THE STUDY
In the earliest of times, man traded furs and skins and eventually grains and oils, dried fish,
sheep, horses, cattle, and oxen. In time, with the division of labour and urban living, came a
new era in which new uses were found for metals (copper, bronze, gold and silver). Because
of their added usefulness, portability, and divisibility, their value increased and they were
eventually accepted as the medium of exchange. For convenience, standardized pieces of
metal, known as coins, came into use. Occasionally, when coins were in short supply,
substitutes were used as “promises to pay” metals on demand. As stores of metal became too
cumbersome to carry, paper receipts were issued for gold and silver deposited with
goldsmiths for safekeeping. As long as the goldsmith was honest and secure, such practice
was preferred, and eventually led to “banks” holding deposits for their customers and
transferring them by checks.

In time, people grew accustomed to using paper money as a substitute for gold and silver.
After many years of use of paper money, the ability to redeem the paper for precious metals
was revoked and the money became known as a fiat currency. At this point, the currency
derived its value from both the ability of the issuing government to produce hard assets as
back-up for its currency (through taxes, and borrowing) and the people’s willingness to
recognize (accept) the currency’s value. There is a world-wide competition among
governments to stimulate their own economies relative to all others through monetary
expansion.
Another consequence of legal tender laws was that each country, by requiring that its own
currency be used within its borders, shut out all other currencies, thus necessitating the
exchange of one currency for another by international businessmen and travellers. Thus was
born the phenomenon of exchange rates and the need for determining the price of one
currency relative to another.

The “price” of money is determined the same way the prices of all other commodities are
determined: through supply and demand, and expectations of future supply and demand. The
greater the supply and/or expected supply, given a constant demand, the lower the price. Of
course, the “price” of money is relative to the goods or other currencies that it will purchase.
The fact that the price of one ounce of silver can change at different rates relative to different
currencies demonstrates that the “prices” of the two currencies changed relative to one
another. Thus, it is apparent that the measuring stick, i.e. the currency, has changed relative to
other measuring sticks (currencies), and other commodities (one ounce of silver in this case).
1.2 NEED OF THE STUDY

The capital gains of an investor are on the performance of a particular company’s stock in the
stock market. The stronger the company’s share, the more profit the investor gets. So it is
necessary to ascertain, analyze and interpret the share of various firms in order to know its
position in the market. Investors can make wise investments with the help of the analysis.
Through this project, it tries to point out the company which ensure maximum return and
minimum risk in power sector where in investment could be made.
1.3 SCOPE OF THE STUDY

The study is to analyze the financial strength and future investment prospective of the key
players from power sector of the economy.

 Data considered for past few months, years.


 Capital market is featured by the weak form of efficient market hypothesis
 Research will be confined to only securities in power sector.
1.4 INTRODUCTION TO THE INDUSTRY
List of popular currencies:

COUNTRY SYMBOL CURRENCY NICKNAME

United States of America USD US Dollar Buck

Euro Zone Members EUR Euro Fiber

Japan JPY Japanese Yen Yen

Great Britain GBP Great Britain Pound Cable

Switzerland CHF Confoederatio Helvetica Franc Swissy

Canada CAD Canadian Dollar Loonie

Australia AUD Australian Dollar Aussie

New Zealand NZD New Zealand Dollar Kiwi


2. INDUSTRY PROFILE

Definition: The foreign exchange market is a global online network where traders buy and
sell currencies. It has no physical location and operates 24 hours a day, seven days a week. It
sets the exchange rates for currencies with floating rates.

This global market has two tiers. The first is the Interbank Market. It’s where the biggest
banks exchange currencies with each other. Even though it only has a few members, the
trades are enormous.As a result, it dictates currency values.

The second tier is the over-the-counter market. That’s where and individuals trade. The OTC
has become very popular since there are now many companies that offer online trading
platforms.

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.

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 the exception 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 by setting the market price of one
currency if paid for with another.

Ex: 1 USD is worth X CAD, or CHF, or JPY, etc..

The foreign exchange market works through financial institutions, 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 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 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.

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 per the Bretton Woods system.

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.

The foreign exchange market is unique because of the following characteristics:

 Its huge trading volume representing the largest asset class in the world leading to
high liquidity,
 Its geographical dispersion,
 Its continuous operation: 24 hours a day except weekends, i.e., trading from 22:00
GMT on Sunday (Sydney) until 22:00 GMT Friday (New York),
 The variety of factors that affect exchange rates,
 The low margins of relative profit compared with other markets of fixed income, and
 The use of leverage to enhance profit and loss margins and with respect to account
size.

Types of Transactions in foreign exchange market:

As the name suggests, a spot transaction


literally means spot delivery of the
Spot Transactions
exchanged currency, but practically speaking,
spot transactions need to be settled within
two days by directly exchanging one
currency for another.

The delivery of the exchanged currency takes


Outright Forwards
place on an agreed future date at an agreed
exchanged rate at the time of the contract.
The market rate at the time of the exchange
dates can be anything and does not matter.
A contract that simultaneously agrees to sell
an amount of currency at an agreed rate and
Forex Swaps
to repurchase the same amount of currency
for a later value at a later date from the same
party, also at an agreed rate. In both cases,
the interest is inclusive.
A swap of currencies where interest and
principal in one currency are exchanged for
Currency Swaps
interest and principal in another.

An option contract gives the buyer the right


Forex Options
(but not the obligation) to exchange one
currency for another at a predetermined
exchange rate on or before the maturity date.

Market Size and Liquidity


The foreign exchange market is the most liquid financial market in the world. Traders include
governments and central banks, commercial banks, other institutional investors and financial
institutions, currency speculators, other commercial corporations, and individuals. The
average daily turnover in the global foreign exchange and related markets is
continuously growing. According to the 2010 Triennial Central Bank Survey, coordinated by
the Bank for International Settlements, average daily turnover was $3.98 trillion in April
2010 (compared to $1.7 trillion in 1998). Of this $3.98 trillion, $1.5 trillion was spot
transactions and $2.5 trillion was traded in outright forwards, swaps, and other derivatives.

In April 2010, trading in the United Kingdom accounted for 36.7% of the total, making it by
far the most important centre for foreign exchange trading in the world. Trading in the United
States accounted for 17.9% and Japan accounted for 6.2%.

For the first time ever, Singapore surpassed Japan in average daily foreign-exchange trading
volume in April 2013 with $383 billion per day. So the order became: United Kingdom
(41%), United States (19%), Singapore (6%), Japan (6%) and Hong Kong (4%).

Turnover of exchange-traded foreign exchange futures and options has grown rapidly in
recent years, reaching $166 billion in April 2010 (double the turnover recorded in April
2007). As of April 2016, exchange-traded currency derivatives represent 2% of OTC foreign
exchange turnover. Foreign exchange futures contracts were introduced in 1972 at
the Chicago Mercantile Exchange and are traded more than to most other futures contracts.

Most developed countries permit the trading of derivative products (such as futures and
options on futures) on their exchanges. All these developed countries already have fully
convertible capital accounts. Some governments of emerging markets do not allow foreign
exchange derivative products on their exchanges because they have capital controls. The use
of derivatives is growing in many emerging economies. Countries such as South Korea,
South Africa, and India have established currency futures exchanges, despite having some
capital controls.

Foreign exchange trading increased by 20% between April 2007 and April 2010, and has
more than doubled since 2004. The increase in turnover is due to a number of factors: the
growing importance of foreign exchange as an asset class, the increased trading activity
of high-frequency traders, and the emergence of retail investors as an important market
segment. The growth of electronic execution and the diverse selection of execution venues
has lowered transaction costs, increased market liquidity, and attracted greater participation
from many customer types. In particular, electronic trading via online portals has made it
easier for retail traders to trade in the foreign exchange market. By 2010, retail trading was
estimated to account for up to 10% of spot turnover, or $150 billion per day (see
below: Retail foreign exchange traders).

Foreign exchange is traded in an over-the-counter market where brokers/dealers negotiate


directly with one another, so there is no central exchange or clearing house. The biggest
geographic trading center is the United Kingdom, primarily London. According to The city
UK, it is estimated that London increased its share of global turnover in traditional
transactions from 34.6% in April 2007 to 36.7% in April 2010. Due to London’s dominance
in the market, a particular currency’s quoted price is usually the London market price. For
instance, when the International Monetary Fund calculates the value of its special drawing
rights every day, they use the London market prices at noon that day.

Market participants
 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 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.

 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.
 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.

 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 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 favour.

 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.
 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 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.

 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.

ABOUT FOREX

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


established in 1971. The FOREX is a group of approximately 4500currency trading
institutions including international banks, government central banks and commercial
companies. FOREX is a 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.

Future Prospects of Forex in India:

The forex trading showed a rapid growth in the last couple of years. The comparison of the
last decade from current decade shows a rise of 400 billion USD. The transaction of forex in
India is recorded ten times from the biggest financial market the Bombay Stock Exchange.
This growth was started from the year 1990, when the Indian government liberalized the
foreign exchange market by the old method of the exchange transaction due to crisis in
foreign exchange and unbalance payment of trade.

After the liberalization of the foreign exchange market, the role of reserve bank of India is
limited to support only the Indian rupee but the forex trade in India is free to trade. Today
Forex in India is considered as a large hub internationally because of its output in terms of
transaction and immense interest of the general public.

Present Scope of Forex in India:

Presently, all the entities including banks and financial institution are allowed to participate in
forex trading. This open space has created unlimited opportunities for an individual to invest
in forex trading. As the system is decentralized and open for worldwide buyers and sellers,
there is a lot of potential seen in forex trading in India.

Most of the transactions are seen on online portal by individuals with a forexbroker and
register forex institutions. All the online portals carry benefits and risk with the capacity of
trading that needs to be examined by traders. The attraction is increased by the involvement
of Reserve Bank of India (RBI) to evaluate the amount of foreign exchange enters in the lieu
of forex in India. All the brokers are registered with the regulatory authority that decreases
the risk of scam.

Fundamental Aspects of the Growth of Forex in India:

The forex itself has proved to be the most liquidate business in the world and this has grabbed
the eye of investors to invest in forex trading business. The attraction can be examined that
financial institutions, banks, corporate companies, and even government are investing in
forex business and their total turnover is above 5 trillion US dollars. According to the reports
the growth of 41% annually is seen in the forex business that is based on individual and
companies in the market who are investing thousands of dollars in this business.

Functions of Foreign Exchange


The following are the three functions of foreign exchange:

Transfer Function:
It transfers purchasing power between the countries involved in the transaction. This function
is performed through credit instruments like bills of foreign exchange, bank drafts and
telephonic transfers.

Credit Function:
It provides credit for foreign trade. Bills of exchange, with maturity period of three months,
are generally used for international payments. Credit is required for this period in order to
enable the importer to take possession of goods, sell them and obtain money to pay off the
bill.

Hedging Function:
When exporters and importers enter into an agreement to sell and buy goods on some future
date at the current prices and exchange rate, it is called hedging. The purpose of hedging is to
avoid losses that might be caused due to exchange rate variations in the future.

Determinants of Exchange Rates

The following theories explain the fluctuations in exchange rates in a floating exchange
rate regime (In a fixed exchange rate regime, rates are decided by its government):
 International parity conditions: Relative purchasing power parity, interest rate
parity, Domestic Fisher effect, International Fisher effect. Though 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 and capital] 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. It failed 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 quantities of 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 demand for, assets denominated in
those currencies.”

None of the models developed so far succeed to explain exchange 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 in the end currency prices are a result of dual forces of demand
and supply. 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. No other market
encompasses (and distils) as much of what is going on in the world at any given time as
foreign exchange.

Supply and demand for any given currency, and thus its value, 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:
These include: (a) economic policy, disseminated by government agencies and central banks,
(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 central bank 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 in the value of a country’s currency.
 Balance of trade levels and trends: The trade flow between countries illustrates the
demand for goods and services, which in turn indicates demand for a country’s currency
to conduct trade. Surpluses and deficits in trade of goods and services reflect the
competitiveness of a nation’s economy. For example, trade deficits may have a negative
impact on 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’s economic growth and
health. Generally, the more healthy and robust a country’s economy, the better its
currency will perform, and the more demand for it there will be.
 Productivity of an economy: Increasing productivity in an economy should positively
influence the value of its currency. Its effects are more prominent if the increase is in the
traded sector.

Political conditions:
Internal, regional, and international political conditions and events can have a profound effect
on 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 its currency.

Market psychology:

Market psychology and trader perceptions influence the foreign exchange market in a variety
of ways:

 Flights to quality: Unsettling international events can lead 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 weaker counterparts. The US dollar, Swiss franc and gold have been
traditional safe havens during times of political or economic uncertainty.
 Long-term trends: Currency markets often move in visible long-term trends. Although
currencies do not have an annual growing season like physical commodities, business
cycles do make themselves felt. Cycle analysis looks at longer-term price trends that 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”. To buy the rumor or sell the fact can also be an example of the cognitive
bias known as anchoring, when investors focus too much on the relevance of outside
events to currency prices.
 Economic numbers: While economic numbers can certainly reflect economic policy,
some reports and numbers take on a talisman-like effect: the number itself becomes
important to market psychology and may 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 apparent patterns that traders
may attempt to use. Many traders study price charts in order to identify such patterns.

These are the main players of the foreign market, their position and place are shown in the
figure below.

At the bottom of a pyramid are the actual buyers and sellers of the foreign currencies-
exporters, importers, tourist, investors, and immigrants. They are actual users of the
currencies and approach commercial banks to buy it.

Risk aversion:

Risk aversion is a kind of trading behaviour exhibited by the foreign exchange market when a
potentially adverse event happens which may affect market conditions. This behaviour 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,
the choice of a safe haven currency is more of a choice based on prevailing sentiments rather
than one 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.
3. COMPANY PROFILE
3.1 INTRODUCTION OF THE COMPANY
In an era of constant changing and volatile financial market, investors need Qualified Trained
and an unbiased professional to assist them in achieving their short term and long term
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Our mission is to develop meaningful & life long relationship with the clients by providing
them the highest quality services & address every aspect of their financial related issues. Our
vision is to be the most trusted & respected professional services firm 24ehavior24d by our
clients to deliver excellent services, which is valued for money beyond their expectation. J
wings, during the course of its lifetime, has tied up with several establishments to provide
better client coverage to both domestic as well as international clients.

Mission Statement:
To develop a meaningful and life long relationship with the clients by providing them the
highest quality service and address every aspect of their financial related issues.

Vision Statement:
To be the most trusted and respected professional services firm recognized by our clients
delivering excellent services, which is value for money and more than their expectations.
Values:
1. Integrity
2. Pursuit of excellence
3. Accountability
4. Collaboration
5. Passion.

We are having a more than a year of experience in financial service sectors. We offer
technology based services for our clients to effectively monitor their portfolio and
help them in reaching their financial goals. We focus at being the most reliable
prompt and efficient provider of financial services. We endeavor to be one stop
solutions for financial boutique and to be immense help to our investors, learners and
provide help regarding stock market, advisory services, training, investment planning,
wealth creation and insurance.

Service profile:

J WINGS company is a financial service provider. It provides the various services as follows.

1. Financial Planning:
To achieve your dreams and fulfill your future obligations, you need to carefully plan
your finances. This can be done via sound financial planning that takes into account
your current and future needs, your individual risk profile and your income to chart
out a roadmap to meet these anticipated needs.

2. Investment Planning:
Placing of funds into the proper investment vehicles based on the investor’s future
goals, time horizon and priorities. This also takes into account the safety of the
investments as well as liquidity and level of return. Ideally, proper investment
planning will allow the investor’s funds to produce financial rewards over time.

3. Risk Management:
Risk management is the continuing process to identify, analyze, evaluate, and treat
loss exposures and monitor risk control to mitigate the adverse effects of loss. While a
variety of different strategies can mitigate or eliminate risk, the process for identifying
and managing the risk is fairly standard First, threats or risks are identified. And then
the vulnerability of key assets like information to the identified threats is assessed.

4. Risk Control Techniques:


a) Avoidance of activities which cause loss
b) Reduction of the frequency of loss-risk prevention
c) Reduction of the severity of loss-risk reduction
3.2 GRAND BLOOM CORPORATION (GBCFX)

Grand Bloom Corporation (GBCFX) is one of the major tie-ups for Jwings that deal with the
forex market. GBCFX is one of the fastest growing FX, commodity, metals and exchange
traded CFD (Contract for Difference) service providers to retail and institutional customers.
Established in 2015, they have been providing their customers with the best service, tools and
resources to help them succeed in reaching their trading goals. They are driven to provide
customers with ultra-competitive pricing, reliable trade execution and innovative trading
tools. Clients of GBCFX can trade on multiple trading platforms using their desktop or
mobile devices. They also provide personalized FX training programs, Dealing Room
specialists, rewarding Introducing Broker programs and innovative Institutional Partner
offering, giving traders the opportunity to make the most of the currency market.

There are three types of accounts that can be opened on the GBCFX trading platform i.e.,
micro account, mini account and a standard account. The minimum deposit for each of these
accounts varies. A micro account is opened with $200 with a leverage ratio of 1:400 and bid-
ask spread starting from 3 pips. Mini accounts and Standard accounts are opened with $2500
and $10,000 respectively and leverage of 1:200 and 1:100 respectively. The trader may
choose the trading account that best suits his experience and financial possibilities. For
example, beginners usually prefer the micro account and then upgrade themselves after
gaining sufficient experience in trading and making expected profits.
6. OTHER ESTABLISMENTS

J wings has also tied-up with several other companies to provide services and products to their
clients. One of them is Zerodha dealing with Indian Stock Markets registered at Bangalore. They
are amongst the fastest growing, top volume contributors on NSE, BSE, MCX-SX and MCX,
with average daily trading turnover of over ₹10,000 crores. They have been instrumental in
introducing and popularizing “discount broking” in India, taking trading platforms to a whole
new level the way most developed markets trade globally. A discount broker is a stockbroker
who carries out ‘buy and sell’ orders at a reduced commission compared to a full-service broker
but provides no investment advice. Other tie-ups include Star Health Insurance and HDFC credit
cards.
4. LITERATURE REVIEW
4.1 INTRODUCTION TO LITERATURE REVIEW
The project was done at J wings Manifest. The study conducted is quantitative in nature and not
qualitative; only quantitative data from Meta Trader 4 FX Market, a platform for trading
currency, are used for analysis and interpretation. Data Collection for analysis as primary data
was collected from live market i.e., [Meta Trader 4 FX Market it a platform for trading currency]
in Jwings and secondary data was collected through books, newspapers, other publications and
the Internet).

An Introduction to the Foreign Exchange Markets:


Published in 2008 By CreativeBusinesses.com, Inc.,This article provide a detailed description of
FOREX market, they consist of the spot market, the forward contract market, the futures options
market, and the market for exchange traded funds (ETFs). It describes who the Market
Participants are and the symbols that are used to designate the various currencies are
standardized world-wide.

The FOREX markets have become the world’s most liquid and continuous markets with trillions
of dollars being traded daily. Whether trading in the spot market, the futures markets, or the
options markets, speculators and hedgers can find an instrument and the leverage that meet their
needs. From complex speculative strategies to everyday hedging techniques, the FOREX
markets provide the forum for dealing with currency fluctuations. They are: U.S. Dollar = USD,
Canadian Dollar = CAD, Euros = EUR, British Pound = GBP, Japanese Yen = JPY, Swiss Franc
= CHF and the Australian Dollar = AUD.

This study reveals the detailed information on foreign exchange market. i.e., the types market,
market participants, currency symbols and strategies used by participants.

Technical Analysis in the Foreign Exchange Market:


Published in 2011 By Christopher J. Neely and Paul A. Weller,This article study introduces the
subject of technical analysis in the foreign exchange market, with emphasis on its importance for
questions of market efficiency. “Technicians” view their craft, the study of price patterns, as
exploiting traders’ psychological regularities. The concept behind technical analysis is that past
price action may repeat itself so traders try to observe price patterns in predicting future moves.
This study helps an investor to understand how to analysis forex market using technical tools
such as Relative Strength Index(RSI), Stochastic oscillator, Moving Average Convergence
Divergence(MACD), Number theory etc.

Technical Analysis in Forex- A Strategy for Individual Trader in Intra-Day Trading:


Published in 2009 By Miikka Linden,The objective of the study was to create a simple and
profitable strategy for Foreign Exchange Market (forex) currency trading for an individual
investor.The study is a project-based thesis and creates a strategy for forex trading that uses
technical analysis (predicting the price movements according to price movements in the
exchange rate chart) as a method of forecasting exchange rate movements.

How To Trade Forex On News Releases:


Published in 2011 By Kathy Lien, This report shows how the currency market is particularly
prone to short-term movements brought on by the release of economic news from both the U.S.
and the rest of the world. According to a study by Kathy Lien: It is important to keep focus on
the market moment depending on the current state of the economy, such as: Interest rate
decision, Inflation (consumer price or producer price), Unemployment.The study is a project-
based thesis and creates a strategy for forex trading that uses technical analysis (predicting the
price movements according to price movements in the exchange rate chart) as a method of
forecasting exchange rate movements.

Forex forecasting:
This article provides insight into one of the two major methods of analysis used to forecast the
30ehavior of the Forex market. Technical analysis and fundamental analysis differ greatly, but
both can be useful forecast tools for the Forex trader.
This article shows how traders combine both technical and fundamental approaches for superior
results.
4.2 RESEARCH GAPS AND CONCLUSIONS

Due to fast and high volatility in the forex market predicting or interpretation may not be
100% accurate. By using only 5 Technical analysis indicators we may not be able to achieve
the desired result.

Data analysis is done for a short time, most probably for intra-day traders. Hence it may not
give accurate results. For more accurate results we need to analyze two to three months data
and then arrive at an investment conclusion.

The study is mainly based on the past historic data. As such it is subject to the limitations of
the secondary data. There is a possibility of the data becoming obsolete.
5. RESEARCH METHODOLOGY
5.1 FOREX MARKET
Foreign Exchange trading, or Forex trading, is the practise of buying and selling a currency of a
country. Currencies can be bought and sold for various reasons, anything from pure speculation
on the moves in exchange rates to businesses or individuals needing to buy a currency for
investment purposes.

It is a extremely lucrative and liquid market with a daily turnover of around $4trillion USD. It is
easily one of the largest and most volatile financial markets in the world.

Key Facts of the Forex market:

 Very high liquidity in the markets from the extreme volumes.


 Long trading hours, 24 hours a day from 22:00gmt on Sunday to 22:00gmt on Friday.
 Use of leverage to earn greater profits.
 London is the global centre for FX, it account for about 35% of the total worldwide daily
volume.
 New York accounts for 17% of total volume with Tokyo at 6%.
 Activity in Forex trading is growing rapidly, more than doubling since 2001.
 Ten main institutions make up 80% of the entire market volume. Deustche Bank makes up
20% of the total daily volume.
6.2 THE PARTICIPANTS

Banks:
Generally, the biggest counter parties in trading as they trade on the back of their own
proprietary trading accounts, corporations, funds and governments.

Commercial Companies:
These are the type of companies that are exposed to foreign exchange in the paying or selling of
their goods or services coming in from abroad. Foreign exchange will be used by them for either
hedging or settlement of trading balances.

Central Banks:
These are major contributors to the forex market. They use tools such as interest rates and fiscal
policy to control inflation, money supply and the value of their currency. They can attempt to
stabilise the market using their own reserves.
When trying to manipulate the markets they are limited by their own reserves and fear of going
bankrupt.

Hedge funds and speculators:


A common statistic is that 70%-90% of all forex transactions are speculative, meaning the only
reason the currency is bought or sold is to create a profit from the price fluctuations.
Hedge funds play a massive role using the power of leveraging (ie. Using millions of dollars to
trade billions). Big hedge funds are able to overwhelm central banks when they are attempting to
intervene in the market.

Investment Management Firms:


These are generally smaller participants. They invest money into markets from around the world
and will require currency to purchase foreign assets. They are the type of institutional investor
that invests on the behalf of others, such as pension funds.

Other players:
Retail forex brokers, non-bank forex companies (offering forex to private individuals and
companies) and money transfer/remittance companies.

The big guns and their codes:

Central Banks
Role of Government:
Governments want to achieve ‘sustainable growth’. They do this by controlling the level of
activity in the economy and measure the activity in terms of the level Gross National Product
(GNP). The forex markets pay close attention to this too, as there is a well-established
relationship between this and the spending power in the economy.

A government will use interest rates to try to control growth and inflation. If there is low growth,
they will try and reduce interest rates in an attempt to decrease the cost of credit and stimulate
upwards pressure on spending and economic activity.

The government may also use fiscal policy, where they increase or decrease public spending and
taxation. This is a way of adjusting individuals and households disposable incomes as well as the
amount of money in circulation.

Banks:
Behind central banks in terms of size and ability to move the market are the banks which you
learnt about in the previous section which make up the interbank market. As well as executing
trades on behalf of their clients, the banks own traders often try to earn profit by taking their own
speculative positions in the market with their banks own funds (proprietary trading). Most
players in foreign exchange do not have the size and clout to move the market in their favour.
Many of these bank traders are an exception to this rule and can leverage their huge buying
power and inside knowledge of client order flow to move the market in their favour.

Hedge Funds:
The next level of participants is the large hedge funds who trade in the foreign exchange market
for speculative purposes to try and generate a return for their investors that is over and above the
average market return. Most forex hedge funds are trend following, meaning they tend to build
into longer term positions over time to try and profit from a longer term uptrend or downtrend in
the market. These funds are one of the reasons that currencies often times develop nice longer
term trends, something that can be of benefit to the individual trader.

Large corporations are forced to participate in the forex market due to their overseas earnings
and trade. Depending on where the company headquarters are located they need to convert all
income into their country currency. As the value of the currency in which the overseas revenue
was earned can rise or fall before that conversion, the company is exposed to potential losses
and/or gains in revenue which have nothing to do with their business. To remove this exchange
rate uncertainty many multinational corporations will hedge (buy one of something and one of
the opposite) this risk by taking positions in the forex market which negate any exchange rate
fluctuation on their overseas revenues.

Large corporations also buy other corporations overseas, called cross border mergers and
acquisitions. This can drive the value of a currency up as demand is created for the currency to
buy the company or down as supply is created when the company is sold. (Obviously only the
larger of mergers and acquisitions have this effect)

Individual Investors

Investors seeking yield:


In countries where interest rates have been close to zero for many years, such as
Japan individuals will buy the currencies or other assets of a country with a higher interest rate in
order to earn a higher rate of return on their money.
Travellers:
When you travel to a different county with a different currency you must exchange your money
into the money of where you are going. You are actually trading in foreign exchange.

Individual speculators who actively trade:


People who try to profit from the fluctuation of one currency against another.
7. TRADING TIMES
Unlike the futures and equity markets, the forex market trades actively 24 hours a day.

Asian Trading Session:


The first major money center to open and therefore the start of the first major session in the forex
market is the Asian Trading session which corresponds with the start of business hours in Tokyo
at 2200 GMT on Sunday.

While still considered one of the three major money centers, only 7.6% of forex transactions
flow through Tokyo trading desks, so the Asian trading session is the least active of the three.
While there is active trading in Yen based currency pairs during Asian hours the market for
currencies outside of Yen based pairs is relatively thin, making Asian trading hours a time when
the larger banks and hedge funds in the market will sometimes try and push the market in their
favour.

European Trading Session:


Begins with the start of London business hours at 0800 GMT. While New York is considered by
most to be the largest financial center in the world, London is still king of the forex market with
over 32% of all forex transactions taking place in the city. Before the Euro there were more than
a dozen additional currencies in Europe making foreign exchange part of every day life for both
individuals and businesses operating in the region. In addition to this, London is situated
perfectly from a time zone standpoint with business hours for both the large eastern and western
economies taking place during London trading hours.

US Trading Session:
Begins with the start of New York business hours at 1300 GMT. New York is a distant second to
London in terms of forex trading volumes with approximately 19% of all forex transactions
flowing through New York Dealing Rooms.

The most active part of the US Trading session, and the most active time for the forex market in
general, is from about 1300 GMT-1700 GMT when both London and New York trading desks
are open for business. You can see very large volatility during this time as in addition to both
New York and London trading desks being open, most of the major US economic
announcements are released during these hours as well.

The trading day winds down after 2100 GMT with most electronic platforms closing for business
at around 2300 GMT on Friday.
8. MAJOR CURRENCIES

Lets us now look at the main currencies that we will be trading.


US Dollar (Greenback/USD):
Many people think that the US Dollar is loosing its status, there is no doubt that as of the writing
of this and most likely for the foreseeable future, the US Dollar still reigns supreme over all other
currencies of the world. The price for the majority of traded commodities such as oil is quoted in
US Dollars and the US Dollar represents over 60% of the worlds currency reserves (the currency
held by central banks). Combine this with the fact that the US Economy is by far the largest
economy in the world results in a market where over 80% of all currency transactions involve the
US Dollar. As we can probably imagine after hearing this, currency traders pay heavy attention
to what is happening with the US Economy, as this has a very direct affect not only on the US
Dollar but on every other currency in the world as well.

The Euro (EUR):


Introduced in 1999 as part of an overall plan to unify Europe into something known as the
European Union. The differing laws and currencies of the European countries were making them
less competitive in the global market place. To try and fix this problem and create one entity with
a common set of laws and a common currency, 15 countries joined what is now referred to as the
European Union and 12 of those countries adopted the Euro as their common currency. While
the economies of the individual countries that make up the Euro Zone don’t come anywhere
close to the size of the US Economy, when combined into one Euro Zone economy they do, and
therefore some say the Euro will eventually rival or even replace the Dollar as the main currency
of the world.

Japanese Yen (JPY):


Japan, which is the second largest individual economy in the world, has the third most actively
traded currency. After experiencing impressive growth in the 60’s, 70’s and early 80’s Japan’s
economy began to stagnate in the late 1980’s and has yet to fully recover. To try and stimulate
economic growth, the central bank of Japan has kept interest rates close to zero. It is also
important to understand at this stage that Japan is a country with few natural energy resources
and an export oriented economy, so it relies heavily on energy imports and international trade.
This makes the economy and currency especially susceptible to moves in the price of oil, and
rising or slowing growth in the major economies in which it trades.

British Pound (GBP):


While the United Kingdom is a member of the European Union it was one of the three countries
that opted out of joining the European Monetary Union which is made up of the 12 countries that
did adopt the Euro. The UK’s currency is known as the Pound Sterling and is a well-respected
currency of the world because of the Central Bank’s reputation for sound monetary policy.

Swiss Franc (CHF):


While Switzerland is not one of the major economies of the world, the country is known for its
sound banking system and Swiss bank accounts, which are basically famous for banking
confidentiality. This, combined with the country’s history of remaining neutral in times of war,
makes the Swiss Franc a safe haven currency, or one which attracts capital flows during times of
uncertainty.

Australian Dollar (AUS):


“The Aussie” is heavily dependent upon the price of gold as the Australian economy is the
world’s 3rd largest producer of gold. As of this lesson interest rates in Australia are also among
the highest in the industrialized world; creating significant demand for Australian Dollars from
speculators looking to profit from the high yield the currency and other Australian Dollar
denominated assets offer.

New Zealand Dollar (NZD):


“The Kiwi” is heavily dependent on commodity prices, with commodities representing over 40%
of the country’s total exports. The economy is also heavily dependent on Australia who is its
largest trading partner. Like Australia, as of this lesson New Zealand also has one of the highest
interest rates in the industrialized world, creating significant demand from speculators in this
case as well.
Canadian Dollar (CAD):
“The Loony”. Like its commodity currency brothers, the Canadian Economy, and therefore the
currency, is also heavily linked to what happens with commodity prices. Canada is the 5th largest
producer of gold and while only the 14th largest producer of oil, unbeknownst to most; it is also
the largest foreign supplier of oil to the United States. Its relationship with the US does not end
here either as the country exports over 80% of its goods to the United States, making the
economy and currency very susceptible to what happens not only with commodity prices, but to
the overall health of the US Economy as well.

The Majors:
The most liquid and thus the most widely traded major currency pairs on the forex market. Their
prices are less volatile than that of smaller less-known foreign currencies. Trade Major
Currencies involving the Majors constitutes up to 90% of all trades on the Forex Market.
EUR/USD | USD/JPY | GBP/USD | USD/CHF

The Commodity Pairs:


Major currencies trading associated with commodities:
AUD/USD | USD/CAD | NZD/USD
5.5 CHART TYPES
Charts show historical data that can be analyzed in a clear way. Being able to analyze patterns
and indicators can give traders an insight into what may happen next. It is important to realize
that charts are not definitive, but do represent possible things that you can take advantage of. The
various types of charts are detailed below.
Candlesticks

Each bar represents the trading over the period taking into account the high, low, open and close.
Time is factored into the price movements.
Line Chart

Line charts take the closing price of a particular time frame and plots it against time. By using
this method the chart is a lot smoother and can show trends much better.
Bar Chart

Bar charts display the price information in the same way as a regular candlestick chart. The
smaller body of the candle helps to remove the amount of clutter displayed.
5.6 INDICATORS
Support and Resistance:

Support occurs at a price low or price trough in the market. When a market is falling in value it
will usually encounter support at some point. It is the point at which the buyers come in and
overpower the sellers that have forced the market down to the point of support. The price should
bounce back up from a support point.

Resistance is the opposite. It occurs at a price high or price peak. When a market is rising, it will
be the point where sellers enter the market and overpower the buyers. The price should bounce
back down from a resistance point.

The next time the market then goes towards this point of support or resistance we would expect a
bounce again as there will now be more traders believing in the level due to the previous bounce
from it. These points can just be picked off a chart as below.

After a certain amount of bounces, it is a good idea to expect a break through this level. When a
break occurs, an area of resistance will then turn into support, and vice versa. This is because the
level will still remain a level, but any level below the market is considered support and any level
above as resistance. On short-term timeframes (5min, 15min) generally expect a good level to
hold 3-4 times. On longer-term timeframe levels (60min, daily, weekly) expect a level to hold
4-5 times. Also, if a level was a very strong level, when it breaks, we can expect a big break, as
stops get hit and more traders enter the market.

Trend lines and Trend Channels:

Support and Resistance levels can also come in the form of trend lines and trend channels. In
these instances, the line will act as support or resistance. The main difference with these types of
support and resistance levels compared to what we previously discussed is that these levels
change as the line changes in time. The line is constantly moving as it is trending upwards or
downwards. A trend line can be drawn from as little as two points, and then expecting there to be
a level when the market touches the line again. Trend lines should always be drawn from left to
right. The longer a trend goes on, the stronger it becomes, but as we discussed before levels are
there to be broken and will eventually break. The same rule applies as discussed earlier.
Breakouts:

When trend lines do break it can give a good indication of the future direction of the market.
They can mean that a trend is broken and the market may change the characteristics it has been
displaying whilst in the trend. When looking for a trend line break, an important indicator to
monitor is volume. High volume on the break would normally mean that the market is
determined to break out strongly. Again, as stated before when a resistance trend line breaks it
usually will turn into support.
When you spot a trend line, it is a good idea to see if there is a parallel line running to it. This is
often the case. If there is, it is a good idea to draw it in and this then becomes known as a channel
or a trend channel. It will normally show that the market has been trading between these two
lines in the past.
Trend Channel:

If we feel a channel is going to hold then the idea is to buy at the bottom of the channel or sell at
the top of the channel. Then we would like to hold it to the other side of the channel where you
would look to exit the position for a winner. Sometimes the other line will be very far away and
it may not be possible to hold the trade all the way, but it is a good idea to trail stops as the trade
moves on side to bank some profit in case the market turns before it reaches the other side of the
channel. These trailing stops can be moved as wil be discussed in the trailing stop section later.
When a channel breaks, it is normally a stronger break than that of just a trend line.
5.7 CANDLESTICK PATTERNS
Candlesticks:
Candlesticks originated from Japanese rice trading markets a few centuries ago. A candlestick is
a bar that shows the difference between the opening and closing prices, as well as the high and
low of a specific time period. A positive bar is green and a negative bar is red. We can change
the colors but we feel these colors are a good fit visually. Below is what a basic candlestick
represents.

Candlestick Patterns:
A candlestick where the open and close are the same. When seen alone, doji’s are normally
neutral patterns; it is when they are combined with other patterns that they become important.
5.8 FACTORS AFFECTING MARKET

Market volatility is due to the following factors:

1. Fundamental Factors
2. Technical Factors
3. Sentimental Factors

Fundamental Factors:

The Forex Market is influenced by many fundamental factors like:

 Economic Conditions
 Political Causes
 Inflation Rates
 Natural Calamities and War conditions
 Interest Rates
 Social Reasons

Sentimental Factors:
This includes the following:
 Emotions
 Perceptions
 Greed
 Fear
 Patience
 Beliefs
 Courage
 Myth
Technical Factors
There are hundreds of indicators through which Technical Analysis is performed for market
prediction. The most important ones which we will analyzing here are as follows:
1. RSI (Relative Strength Index)
2. Stochastic Oscillator
3. Pivot Point Calculation
4. Fibonacci Retracement Levels
5. Bollinger Bands
6. Moving Averages (Both Simple & Exponential)

RSI (Relative Strength Index):

The relative strength index (RSI) is another one of the most used and well- known momentum
indicators in technical analysis. RSI helps to signal overbought and oversold conditions in a
security. The indicator is plotted in a range between zero and 100. A reading above 70 is used to
suggest that a security is overbought, while a reading below 30 is used to suggest that it is
oversold. This indicator helps traders to identify whether a security’s price has been
unreasonably pushed to current levels and whether a reversal may be on the way.

RSI can be calculated by the following formula:


RSI = 1- (100/(100+ RI)) ,
Where RI stands for Relative Index.
The standard calculation for RSI uses 14 trading days as the basis, which can be adjusted to meet
the needs of the user. If the trading period is adjusted to use fewer days, the RSI will be more
volatile and will be used for shorter term traders.

Stochastic Oscillator:

The stochastic oscillator is one of the most recognized momentum indicators used in
technical analysis. The idea behind this indicator is that in an uptrend, the price should be
closing near the lows of the trading range, signaling downward momentum.

The stochastic oscillator is plotted within a range of zero and 100 and signals overbought
conditions above 80 and oversold conditions below 20. The stochastic oscillator contains two
lines. The first line is the %K, which is essentially the raw measure used to formulate the idea of
momentum behind the oscillator. The second line is the %D, which is simply a moving average
of the %K. The %D line is considered to be the more important of the two lines as it seen to
produce better signals. The stochastic oscillator generally uses the past 14 trading periods in its
calculation but can be adjusted to meet the needs of the user.
Pivot Point Calculation:
A pivot point analysis is often used in conjunction with calculating support and resistance
levels, similar to a trend line analysis. In a pivot point analysis, the first support and resistance
levels are calculated by using the width of the trading range between the pivot point and
either the high or low prices of the previous day. The second support and resistance levels are
calculated using the full width between the high and low prices of the previous day.

The calculation for a pivot point is shown below:


Pivot point (PP) = (High + Low + Close) / 3

Support and resistance levels are then calculated off the pivot point like so:
First level support and resistance:
First resistance (R1) = (2 x PP) – Low
First support (S1) = (2 x PP) – High

Second level of support and resistance:


Second resistance (R2) = PP + (High – Low)
Second support (S2) = PP – (High – Low)

Third level of support and resistance:


Third resistance (R3) = High + 2(PP – Low)
Third support (S3) = Low – 2(High – PP)
Here, PP stands for Pivot Point, S1,S2 &S3 stands for Support 1,2 &3, R1,R2 &R3 stands
for Resistance 1,2 & 3.

Fibonacci Retracement Levels:


Fibonacci retracement is a very popular tool among technical traders and is based on the key
numbers identified by mathematician Leonardo Fibonacci in the thirteenth century. However,
Fibonacci sequence of numbers is not as important as the mathematical relationships,
expressed as ratios, between the numbers in the series. In technical analysis, Fibonacci
retracement is created by taking two extreme points (usually a major peak and trough) on a
stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%,
50%, 61.8% and 100%. Once these levels are identified, horizontal lines are drawn and used
to identify possible support and resistance levels. Before we can understand why these ratios
were chosen, we need to have a better understanding of the Fibonacci number series. The
Fibonacci sequence of numbers is a s follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.
Each term in this sequence is simply the sum of the two preceding terms and sequence
continues infinitely. One of the remarkable characteristics of this numerical sequence is that
each number is approximately 1.618 times greater than the preceding number. This common
relationship between every number in the series is the foundation of the common ratios used
in retracement studies.
The key Fibonacci ratio of 61.8% - also referred to as “the golden ratio” or “ the golden
mean” – is found by dividing one number in the series by the number that follows it. For
example: 8/13 = 0.6153, and 55/89 = 0.6179.
The 38.2% ratio is found by dividing one number in the series by the number that is found
two places to the right. For example: 55/144 = 0.3819.
The 23.6% ratio is found by dividing one number in the series by the number that is three
places to the right. For example: 8/34 = 0.2352
For reasons that are unclear, these ratios seem to play an important role in the stock market,
just as they do in nature, and can be used to determine critical points that cause an asset’s
price to reverse. The direction of the prior trend is likely to continue once the price of the

asset has retraced to one of the ratios listed above. The following chart illustrates how
Fibonacci retracement can be used. We can notice how the price changes direction as it
approaches the support / resistance levels.

In addition to the ratios described above, many traders also like using the 50% and 78.6%
levels. The 50% retracement level is not really a Fibonacci ratio, but it is used because of the
overwhelming tendency for an asset to continue in a certain direction once it completes a
50% retracement.
Bollinger Bands:

A band plotted two standard deviations away from a simple moving average developed by
famous technical trader John Bollinger.

In this example of Bollinger Bands®, the price of the stock is banded by an upper and lower
band along with a 21-day simple moving average.

Because standard deviation is a measure of volatility, Bollinger Bands adjust themselves to


the market conditions. When the markets become more volatile, the bands widen (move
further away from the average), and during less volatile periods, the bands contract (move
closer to the average). The tightening of the bands is often used by technical traders as an
early indication that the volatility is about to increase sharply.
This is one of the most popular technical analysis techniques. The closer the prices move to
the upper band, the more overbought the market, and the closer the prices move to the lower
band, the more oversold the market.

Moving Averages:

Most chart patterns show a lot of variation in price movement. This can make it difficult for
traders to get an idea of a security’s overall trend. One simple method traders use to combat
this is to apply moving averages. A moving average is the average price of a security over a
set amount of time. By plotting a security’s average price, the price movement is smoothed
out. Once the day-to-day fluctuations are removed, traders are better able to identify the true
trend and increase the probability that it will work in their favor.

Types of moving averages:

Simple Moving Average (SMA):

This is the most common method used to calculate the moving average of prices. It simply
takes the sum of all of the past closing prices over the time period and divides the result by
the number of prices used in the calculation. For example, in a 10 – day moving average, the
last 10 closing prices are added together and then divided by 10. As you can see in Figure 1, a
trader is able to make the average less responsive to changing prices by increasing the
number of periods used in the calculation. Increasing the number of time periods in the
calculation is one of the best ways to gauge the strength of the long – term trend and the
likelihood that it will reverse.

Many individuals argue that the usefulness of this type of average is limited because each
point in the data series has the same impact on the result regardless of where it occurs in the
sequence. The critics argue that the most recent data is more important and, therefore, it
should also have a higher weighting. This type of criticism has been one of the main factors
leading to the invention of other forms of moving averages.

Exponential Moving Average (EMA):


This moving average calculation uses a smoothing factor to [place a higher weight on recent
data points and is regarded as much more efficient then the linear weighted average. Having
an understanding of the calculation is not generally required for most traders because most
charting packages do the calculation for you. The most important thing to remember about
the exponential moving average is that it is more responsive to new information relative to
the simple moving average. This responsiveness is one of the key factors of why this is the
moving average of choice among many technical traders. As you can see in Figure 2, a-15-
period EMA rises and falls faster than a 15 – period SMA. This slight difference doesn’t
seem like much, but it is an important factor to be aware of since it can affect returns.
9. SWOT ANALYSIS
SWOT analysis (alternatively SWOT Matrix) is a structured planning method used to evaluate
the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business
venture. A SWOT analysis can be carried out for a product, place, industry or person. It involves
specifying the objective of the business venture or project and identifying the internal and
external factors that are favorable and unfavorable to achieving that objective. The technique is
credited to Albert Humphrey, who led a convention at the Stanford Research Institute (now SRI
International) in the 1960s and 1970s using data from Fortune 500 companies. The degree to
which the internal environment of the firm matches with the external environment is expressed
by the concept of strategic fit.

Setting the objective should be done after the SWOT analysis has been performed. This would
allow achievable goals or objectives to be set for the organization.
Strengths are characteristics of the business or project that give it an advantage over others
Weaknesses are characteristics that place the team at a disadvantage relative to others
Opportunities are elements that the project could exploit to its advantage
Threats are elements in the environment that could cause trouble for the business or project
Identification of SWOTs is important because they can inform later steps in planning to achieve
the objective.

Users of SWOT analysis need to ask and answer questions that generate meaningful information
for each category (strengths, weaknesses, opportunities, and threats) to make the analysis useful
and find their competitive advantage.

J Wings is a company functioning since 2015 in training and educating individuals about global
market and to sharpen their skills to participate in the financial world.
J Wings came alive with the intention to provide support and guidance to new comers to the
trading world. With our knowledge and years of experience in trading we have customized the
training programme and made it simple for a layman to understand the financial market.
In this time the company has developed various strengths and taken different opportunities to
grow and be at a position where it is at this point of time. Similarly the company has some
weaknesses that the company tirelessly works to overcome. The company has very tactically
dealt with the threats that have come on its way and move forward positively from every speed
breaker in the way of its progress.

Strengths Weakness
1. High liquidity for investors 1. Newly established in India.
2. Emphasis on building stronger bond 2. Its only for niche market
with customers i.e. (less brokerage 3. Growth and Expansion
compared to others).
3. Training and consulting

Opportunities Threats
1. Growing Forex market 1. Stringent economic policies world over
2. Emerging stock markets 2. Highly competitive environment
3. Expansion in untapped market 3. Govt. policies and global financial
4. Expansion in emerging economies crises
7. EXECUTIVE SUMMARY

The foreign exchange market, which is usually known as “forex” or “FX,” is the largest financial
market in the world, even larger than the New York Stock exchange. Trading in foreign
exchange markets averaged $5.1 trillion per day in April 2016. This went down from $5.4 trillion
in April 2013, a month which had seen heightened activity in Japanese yen against the
background of monetary policy developments at that time.

The forex OTC market is by far the largest and most popular financial market in the world,
traded globally by a large number of individuals and organizations. Unlike other financial
markets like the New York Stock Exchange, the forex market has neither a physical location nor
a central exchange. The forex market is considered an Over-the-Counter (OTC) market due to
the fact that the entire market is run electronically, within a network of banks, continuously over
a 24-hour period. This means that the spot forex market is spread all over the globe with no
central location.

Forex trading is the simultaneous buying of one currency and selling another. Currencies are
traded through a broker or dealer, and are traded in pairs; for example the Euro and the U.S.
Dollar (EUR/USD) or the British pound and the Japanese yen (GBP/JPY). When we trade in the
forex market, we buy or sell in currency pairs.

Exchange rate movements are influenced by tangible and intangible factors such as Economic
performance, inflation, productivity and confidence in the economy. It also depends upon the
respective country’s government policies where stronger policies ensure a booming economy.
At the end of the World War II, the whole world was experiencing so much chaos that the major
Western governments felt the need to create a system to stabilize the global economy.

The “Bretton Woods System,” came into existence that set the exchange rate of all currencies
against gold. This stabilized exchange rates for a while, but as the major economies of the world
started to change and grow at different speeds, the rules of the system soon became obsolete and
limited.

But soon enough the Bretton Woods Agreement was abolished and replaced by a different
currency valuation system. The USD (United States Dollar) became the base currency for
determining the exchange rates with respect to its supply and demand policies. At first, it was
difficult to determine fair exchange rates but with the advancements in technology and
communication, it became relatively easy to determine the rates.

After Internet-based trading platforms came into existence, many individual traders started to
dominate the market and hence the forex market grew both with respect to its size and liquidity.
8. CONCLUSION

The foreign monetary exchange market is the biggest financial market in the world. Bigger than
the New York stock exchange and Futures Market combined. And will reduce “buy-in” limit
now, even small time players can join the forex trading market place. That doesn’t mean
everyone should join, however. Buying an auto-trading program sold to you with the promise of
making you millions probably won’t. In fact, it may cost you everything you own. The only way
to win forex trading is the good, old-fashioned way hardwork and a solid understanding of the
market.

One has to be clued in to global developments, trends in world trade as well as economic
indicators of different countries. These include GDP growth, fiscal and monetary policies, inflow
and outflow of currency, local stock market performance and interest rates.

The currency derivatives market is highly leveraged. In the stock market a 20% margin gains a
five fold leverage. In forex futures, the margin payable is just 3%, so the leverage is 33 times.
This means even a 1% change can wipe out a third of the investment. However, the Indian
currency markets are well regulated and there is almost no counter party risk.

Liberalization has transformed Indian’s external sector and a direct beneficiary of this has been
the foreign exchange market in India. From a foreign exchange starved, control-ridden economy.
India has moved on to a position of $150 billion plus in international reserves with a confident
rupee and drastically reduced foreign exchange control. As foreign trade and cross border capital
flows continue to grow and the country move towards capital account convertibility, the foreign
exchange market is poised to play an even greater role in the economy, but is unlikely to be
completely free of RBI interventions any time soon.