Assignment discussion-
Sophistication and management of the trading strategy:
1. Timing of the trades: how many days in total have you been trading?
2. Mix of instruments: have you tried day trading, limit orders and forward transactions?
3. The number of currencies: have you traded too many currencies?
4. Fund allocation: have you allocated too much fund for certain transactions?
5. Risky trades: why gold/oil/index trades?
6. Too many unexpected losses: any lesson(s) learned?
Use of theoretical tools:
7. Apply the theory, not explain it again.
8. Justify why you applied the theory in different context.
9. No need to show graphs (can just cite the sources such as textbook/lecture slides).
10. Technical analysis: be sure to explain if you have used (including sources).
Research and external sources:
11. Have you done a comprehensive research?
12. Have you missed some important news/events?
13. Have you tried to justify transactions according to news/events?
Use of trade and risk management tools:
14. Active use of take-profit/stop-loss functions.
15. Justify the effectiveness of these tools.
16. Options: be sure to explain if you have traded.
Presentation/clarity of expression/referencing:
17. Cover sheet: have you supplied all information as required?
18. Executive summary: have you supplied all information as required?
19. Appendix: have you supplied all information as required?
20. Analysis: have you tried to show the link between transactions and the theory?
21. Citation and referencing: have you followed a consistent style?
22. Expression of ideas, terminologies: have you been satisfied with the report's quality?
In this assignment, students are required to:
(A) Speculate with virtual money on a real internet trading website.
(B) Write a report (maximum of 2,000 words) on their trading experience.
(A) Internet trading game
The Unit Team will provide each student with a free demo account with Easy Forex, an online foreign exchange trading website. The url for Easy Forex is https://www.easy-forex.com/au/. You will have access to many of the features on the website that actual traders receive, including real-time quotes, news and a variety of charts (though some features that are licensed from third parties are not available on demo accounts). Please note that the website works best with Internet Explorer. You can download Internet Explorer from the Deakin Software Library: https://www.deakin.edu.au/software/internet.php.
Each student will be given an account on this website with AUD 50,000 virtual money. The goal of the exercise is simple: to make as much money as possible. Easy Forex provides access to foreign exchange spot markets and forward markets in order for you to perform your speculative activities.
The website has a 'Learn' tab, which contains information on the basics of forex trading. Please take the time to understand how the trading platform works before commencing your trading activities.
All students will receive an email (from the Unit Team) that contains a username and password for an account on Easy Forex within the first week of April 2016. On receiving this, please do not change the settings (i.e. please do not change the email and password on the account). The url for direct access to the login area on Easy Forex is https://www.easy-forex.com/au/. You can access your account by entering the username and password in the "SECURE LOGIN" area.
I would highly recommend that you do not start trading straight away; rather, it would be very useful to spend some time reviewing the features on Easy Forex. Even before you receive the username and password for your account, you can practise trading (and familiarise yourself with the platform) by using the 'Trading Simulator' that is available in the 'Learn' section of Easy Forex (you will need to login as a 'guest'). The foreign exchange market reacts very rapidly to news, so it is highly recommended that you do make it a point to spend a few minutes every day keeping track of how economic variables impact the forex market.
Please note that your account will not be replenished if your funds run out; this is to ensure that you manage risk while trading.
Disclaimer: Deakin University is not responsible for the content that appears on Easy Forex. The use of Easy Forex in this unit is for educational purposes only. Easy Forex is one of many firms providing services for transacting in the foreign exchange market, and students who wish to invest in the foreign exchange market are advised to research the market thoroughly to find a suitable firm for their purpose. Successful speculation in this assignment does not guarantee success in actual speculative trading.
Please note: The demo accounts function in exactly the same way as a normal account, so if your funds run low you may receive a default message from Easy Forex reminding you that your account needs to be replenished using funds on a credit card. This may be a default setting on normal Easy Forex accounts, but as demo account holders you do not have to, and should not, provide any information of a personal nature to Easy Forex. So if you do receive any such message, please ignore it.
Before completing your assignment and turning it in, please ensure that all open positions are closed. If a position remains open after the due date (12 May 2016), it will be closed at any time by the unit team during the marking process, and any losses will be counted toward your final account balance (while any profits will not be counted).
Assessment:
The speculative component of this assignment is marked out of 15. Grades are based on performance in trading, that is, the amount of money (denominated in AUD) in the account when the assignment is submitted.
There is a hurdle requirement to pass this component of the assignment: you must undertake at least 12 transactions (or deals) by the due date of the assignment (12 May 2016) using the demo account provided to you by the Unit Team. For the purpose of this assignment, a transaction is defined as entering into an open position and eventually closing it before submitting the assignment. So, for example, if you buy USD 100,000 on 10 April 2016 and close this position on 15 April 2016, you would have completed one transaction. Any student who undertakes between 1 and 11 transactions during the trimester using the demo account provided will receive a score of 4.5 out of 15. Any student who does not conduct any transaction will receive 0 out of 15. In order to calculate the scores, accounts will be ranked on performance. The distribution of scores for those who satisfy the hurdle requirement (at least 12 transactions) is shown in the table below:
|
Ranking of student (with at least 12 transactions)
|
Score
|
|
Top three students
|
15.0
|
|
Next 5%
|
13.5
|
|
Next 15%
|
12.0
|
|
Next 15%
|
11.0
|
|
Next 15%
|
10.0
|
|
Next 15%
|
9.5
|
|
Next 15%
|
9.0
|
|
Next 10%
|
8.5
|
|
Remainder
|
8.0
|
You will realise as you commence trading that the foreign exchange market is extremely volatile. Trading in this market is, therefore, a very risky proposition. The purpose of this trading game is not to make you a forex trader (though some of you may find that you have a talent for it). Rather, it is meant to provide you with insights into the functioning of the foreign exchange market, which is best achieved by participating in it.
(B) Report
The report must start with a cover sheet (using the template posted on CloudDeakin). On the cover sheet of your report, please provide the information as requested (your last name, first name, and student ID; username and password for your trading account; the final account balance and the number of transactions undertaken for each instrument; the currencies traded; and the word count). Your assignment will only be graded when all information required in the cover sheet are provided.
Immediately after the cover sheet, please provide a 1-page executive summary. The executive summary should show a brief account of your overall strategy, the financial instruments you have used, the number of transactions and currencies you have traded, and justify the total losses/profits on your account and whether or not you have undertaken any risk management activities.
In the body of the report, please provide a detailed description of the trading strategy you have employed. You do not need to explain every transaction; this would be virtually impossible given the word limit. Rather, your report should attempt to show the sophistication and management of the trading strategies, highlight how you have used the theoretical tools developed in this unit, any research you have conducted on the foreign exchange market, and the manner in which you have approached your trading activity, using specific transactions as examples. You should also discuss the use of risk management tools available on the Easy Forex platform during the trading period.
Please note that any news item or report that helped you make your decisions should be carefully referenced, and if possible, included in the Appendix.
In an Appendix to the report, please include the information below. First, click on the 'My Account' tab located on the top right of the trading platform when you log-in, and then:
(1) Click on 'My Summary' and print the screen.
(2) Click on 'My Closed Positions', set the date from when you commenced trading to when you stopped, and print the position data (you can use the print icon on the webpage). Please note that there are different tabs for Day Trading, Limit Orders, and Forwards.
(3) Click on 'My Statement', set the date from when you commenced trading to when you stopped, and print your statement (you can use the print icon on the webpage).
Please note that even if you lose money while speculating, it is quite possible for you to do well in this component of the assignment if you are able to provide a clear and logical account of your strategy, and possibly some insight into why it led to losses. Similarly, students that make money must also substantiate their strategy in the report in order to do well in the assignment.