FX Trading Simulation Instructions

FNCE3302 Winter 2017

Final Report
Due Date: April 6, 2017
Instructions:
Step One: Registration – Website: oanda.com
Please register for your free FX Trade Practice account before January 26. Please be certain that your account is USD ( not CAD ) based.

Step Two: Minimum Required Trades & Restrictions

1. Execute a minimum of 30 trades/orders as follows in 2-7.
2. Complete at least 12 market orders (purchases or sales)
3. Input at least 2 take profit orders, input at least 2 stop loss orders, input at least 2 limit orders
4. Complete at least 2 trades in excess of $400,000 US long/short.
5. ALL trades must exceed $50,000 US long/short or the foreign currency equivalent.
6. Trade at least 8 different currencies from 3 continents
7. Trade at least two currency pairs which are an intermediate or managed currency regime. (eg. managed float, crawling peg, peg within bands)
IMPORTANT restriction/condition: At least 20 of your trades listed in Step Two above must be completed by February 28. (otherwise -10)

Step Three: Complete Trading, trading commentary and analysis ( as detailed below )

FX Trading Grading Rubric ( /100)

1) Trade Execution (35 marks) UPDATED MARCH 28/17
➢ Please complete the trades as outlined in Step Two.
➢ BEFORE APRIL 6 please provide me with your OANDA Trade Practice username and password using the form on Blackboard. Failure to do so may prevent me from
being able to grade your execution of the trades. I will be logging into our account to verify your trading activities

2) In class presentation &written summary (20 marks)

Each student will be assigned a region of the world on which to update the class. Dress is casual, however please prepare a succinct, concise update. The update must not
exceed 3 minutes in length, be focused (one currency, two or three facts) and current (prior week’s events). My suggested outline is: 1. List two or three significant events from
one country in your region 2. How it impacted the currency (a visual helps) 3. Share your portfolio and/or make a trading recommendation based upon information you present.
Please hand in a summary of your research on the morning of your presentation. A grading rubric for the presentation may be found on Blackboard.

3) Trading Commentary and analysis (45 marks) Answer the following questions utilizing the report template provided. References are expected where appropriate.
a. Provide justification for at least 5 of your trades. In other words, summarize why you decided to make that specific trade. Research and insightful discussion are
expected. Be trade specific. (15 marks total)
b. Which trade had the greatest impact on your USD portfolio value? Briefly discuss “why?” (5 marks)
c. List and discuss 5 unique underlying macroeconomic, structural or geopolitical factors which impacted the value of your portfolio. Be trade specific and look
back over the entire span during which you conducted your trades. Your answer should be evaluative and cover at least 3 currencies (i.e. Why did a certain
currency behave a certain way? ) For example, consider specific macroeconomic news, political events, regulatory changes, reserve rebalancing etc. Marks will
be deducted if you only evaluate your portfolio based on one factor (e.g. only political events) (25 marks total)
 FX Trading Simulation Report Template
Your name: ____Ahsan Tariq______
FINAL dollar value of portfolio: $ 100,920.01_________
Please also hand-in a printout of your executed trades with the Step Two requirements highlighted.
3) Trading Commentary and analysis
Part a.
Provide justification for at least 5 of your trades. Research and insightful discussion are expected. Be trade specific. (15 marks total)

Trade Date Currency Pair Amount(s) Exchange Rate Justification

Jan. 31, MXN/USD 400,000 20.82319 The Peso had just begun its recovery after a weeklong affair of setting record
2017 devaluation. However, I did not believe a devalued Peso represented a fair picture of the
Mexican economy; low unemployment and rising CPI. So, I anticipated the MXN/USD to
appreciate eventually and saw opportunity for a decent return.
Jan. 31, CAD/USD 200,000 1.30323 The positive news was reported for the Canadian economy as it grew 0.4% for Nov,
2017 2016. The economic outlook seemed positive. The crude oil prices also started to rise,
which lead to anticipate an appreciation of the CAD.
January, 31. NOK/USD 400,000 8.25109 I had just learned of the high correlation of NOK with Commodity prices from Cathy’s
2017 session. I got interested in currency and decided to examine the trend of Oil current. It
was trending upwards. So I decided to take a long position on the NOK/USD, anticipating
it to appreciate as well.
Mar, 29, CNH/USD 700,000 6.88068 News was announced of the Chinese State government decision to help manufacturing
2017 sector. My understanding was that positive news for manufacturing is usually a
depreciated currency. So, I took a short position on the Yuan anticipating it to depreciate
as well.
Mar. 29, USD/AUD 500,000 0.7659 This trade was largely based on the recent record-setting performance of Dow-Jones, the
2017 Fed’s decision to hike the rate, and the overall positive outlook of the U.S. economy

Winter2017 FNCE3302-001/003 FX Trading Report Template

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Part b.
Which trade had the greatest impact on your USD portfolio value? Briefly discuss “why?” (5 marks total)
Trade Date Currency Pair Amount(s) Discussion
February 1, MXN/USD $2128.24 It was close to the US. presidential inauguration. The previous week had been by a week-long sell-off of the
2017, 8:45 MXN. This lead to a significant depreciation of the Peso, reaching an all-time low on Jan. 17, 2017. However,
pm given the state of Mexican economy, I felt that it was not the fair intrinsic value, i.e. undervalued. So I saw a
chance for a healthy return by taking the long position.

Reuters. (2017). Mexico peso hits record low on Trump uncertainty, more weakening feared. Retrieved from:
http://www.reuters.com/article/us-mexico-peso-intervention-idUSKBN14U1ZG

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Part c..
List 5 underlying factors which impacted the value of your portfolio? Be trade specific. (25 marks total)

Underlying Factor and brief discussion (be sure to apply it to specific currencies or trades)

The political factors had arguably the greatest impact on my portfolio. Protectionist rhetoric from U.S. administration played a significant role in
1. depreciation of the Mexican Peso. This allowed me to take a long position on the currency for a cheap market price anticipating a healthy return.

The regulatory policies by the Mexican central bank also impacted my trades of the currency. The bank intervened to maintain the value of the Peso 3
2. times within a frame of 2 months. So, when the headlines reported that the Peso had reached an all-time low nearing the U.S. inauguration, I anticipated
the currency to rebound quickly after a significant devaluation. As expected, the central bank raised the interest rate by 50 basis points at the beginning of
February, appreciating the MXN.
Mar. 29, 2017, 11:38 pm: Chinese government announced regulatory changes to discourage home buyers and ease financing for manufacturers. This
3. impacted the CNH/USD to slightly depreciate. Usually, manufacturers welcome the depreciated currency because it allows them to boost exports. I
anticipated it to appreciate which justified my trade position. Ultimately my assumption turned out to be wrong.

Source: https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/china_news/2017/03/29/Chinas-Market-News-Regulators-Support-
Producers-Restrict-Home-Buyers.html
Feb. 27, 2017: My short position on the AUD/USD turned out to be wrong as the AUD appreciated. The AUD’ appreciation was largely said to be due to
4. gross Australian company profits reported in the Q4, 2016. The forecasts were expecting an 8% increase, but it increased 20%.

Source: https://www.investing.com/news/forex-news/forex---pound-weaker-in-asia-on-brexit,-scotland-views,-aussie-up-462265
February 1, 2017. CAD/USD slightly depreciated. Positive job growth in U.S. helped uptick the USD against the CAD. This was despite positive news for
5. the WTI – related CAD as the WTI rose. The market determined the job market news to be more significant then WTI price news.

https://www.investing.com/news/forex-news/forex---usd-cad-trims-gains-ahead-of-fomc-decision-457183

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