Forex Trading And Investment

Transcription

WORCESTER POLYTECHNIC INSTITUTEForex Trading andInvestmentInteractive Qualifying Project ReportSubmitted to the Faculty ofWORCESTER POLYTECHNIC INSTITUTEin fulfillment of the requirements for theDegree of Bachelor of ScienceJoe DiChiaraRichard DennenKaung Myat WinSubmitted: March 07, 2012Approved:Professor Hossein Hakim

Table of ContentsTable of Figures . vAbstract . 1Section 1: Introduction . 2Section 2: Background Information . 42.1: Economic Markets . 42.1.1: Stock Market . 42.1.2: Forex Markets . 62.2: Fundamental Analysis in Forex Trading . 92.2.1: Gross Domestic Product. 92.2.2: Interest Rates . 102.2.3: Inflation . 132.2.4: Unemployment . 142.2.5: Resources and Commodities. 152.2.6: Political and Economic Events, News, and Announcements . 162.2.7: Save Havens and Stability . 182.2.8: Why Use the Gartman Letter . 192.3: Technical Indicators . 202.3.1: Simple Moving Average . 202.3.2: Exponential Moving Average . 222.3.3: Bollinger Bands Indicator . 252.3.4: Average Directional Movement Index (ADX) . 272.3.5: Relative Strength Index (RSI) . 282.3.6: Moving Average Convergence-Divergence (MACD) . 302.3.7: Stochastic . 322.3.8: Head and Shoulders Pattern . 352.3.9: Parabolic Stop and Reversal (Parabolic SAR) . 362.3.10: Commodity Channel Index (CCI) . 392.3.11: Demarker Indicator . 412.3.12: Alligator Indicator . 442.3.13: Fractals . 472.3.14: Aroon Indicator . 502.3.15: Gator Oscillator . 522.4: Money and Risk Management . 552.4.1: Money Management . 55ii

2.4.2: Risk Management . 562.4.3: Rules of Entry and Exit . 582.4.4: Risk and Psychology . 592.5: Introduction to Platforms . 612.5.1: MetaTrader4 . 612.5.2: TradeStation. 622.5.3: Comparison between MT4 and TradeStation . 64Section 3: Methodologies . 663.1: Forex Strategies . 663.1.1: Trading Plan with 100,000 Accounts . 663.1.2: Trading Strategy . 693.2 Robot Trading. 723.2.1: Kaung’s Programming Project. 723.2.2: Richard’s Programming Project . 743.2.3: Joe’s Programming Project . 803.2.4: Group’s Programming Project . 83Section 4: Methodology Applications . 874.1: Creating a Business Company . 874.1.1: Company Structure and Layout . 874.2: Agencies Regulating Forex Trading in the U.S. . 924.2.1: Securities and Exchange Commission . 924.2.2: Commodities and Futures Trading Commission . 934.2.3: National Futures Association . 934.3: Licenses . 944.3.1: Series 3 License . 944.3.2: Series 30 License . 954.4: Marketing the Company . 954.4.1: Performance Measures . 954.4.2: Reaching the Customer Base . 964.4.3: Features That Will Make Us Stand Out . 974.4.4: Different Types of Trading Options. 984.5: Past Performances and Client Disclosure . 99Section 5: Results . 1015.1: Kaung’s Program Results . 1015.2: Richard’s Program Results . 102iii

5.3: Joe’s Program and Manual Trade Results . 1035.4: Group Programming Results . 104Section 6: Conclusions and Recommendations . 1076.1: Recommendations for Future Projects . 107Section 7: References. 110Appendix A: Economic Issues in the News . 114European Debt: A Continuing Crisis . 114Operation Twist Revisited . 117A New Direction for the Swiss Franc . 118The Wheat Market . 119Canada: A Growing Rift across the Border . 120Turmoil in the East . 122The Race to the White House . 125Appendix B: Programming Codes and Flow Charts . 127Appendix C: Summary of Manual Trades. 139Appendix D: Other Forex Brokers . 141FOREX.com . 141Etoro. 144Hot Forex. 146Trading Point . 147FXCM . 148Appendix E: Example Trading Journal . 150Trade 1 . 150Trade 2 . 151Trade 3 . 152Trade 4 . 153iv

Table of FiguresFigu

focus of our IQP is learning how to trade in the forex market and seeing how realistic it is to start a company off of what we learned. 2 Section 1: Introduction The physical trading of goods and commodities has been around for thousands of years and impacts everyday lives. Back then it was the trading of clothes and food, while today people trade on a wide range of food, clothes, electronics .