A REPORT ON TECHNICAL ANALYSIS OF USDCAD

CURRENCY IN THE FOREX MARKET

A SUMMER INTERNSHIP REPORT

Submitted by

S.R.DHANALAKSHMI

1811027

in partial fulfillment of Summer Internship for the award of the degree

of

MASTER OF BUSINESS ADMINISTRATION

THIAGARAJAR SCHOOL OF MANAGEMENT,

PAMBAN SWAMY NAGAR,
THIRUPARANKUNDRAM, MADURAI- 625005
AUGUST 2019
 DECLARATION

I certify that

a. The work contained in this Summer Internship Program is original and has been done
by myself under the general supervision of my Industry and Internal supervisors.

b. The work has not been submitted to any other Institute for any degree or diploma.

c. I have followed the guidelines provided by the Institute in writing the report.

d. I have conformed to the norms and guidelines given in the Ethical Code of Conduct of
the Institute.

e. Whenever I have used materials (data, theoretical analysis and text) from other
sources, I have given due credit to them by citing them in the text of the thesis and
giving their details in the references.

f. Whenever I have quoted written materials from other sources, I have put them under
quotation marks and given due credit to the sources by citing them and giving
required details in the references.

S.R.DHANALAKSHMI
 ACKNOWLEDGEMENT

I would like to thank Jmarathon advisory services pvt ltd for providing me with the
opportunity to pursue my summer internship with them.

I also extend my gratitude to Mr. Sukesh Reddy, organisation guide for giving me the
opportunity to undertake my Internship program.

I like to express my sincere thanks to Prof N. Venkiteswaran, Director Thiagarajar School of

Management, without his approval I would not have done this project.

I am thankful to Dr. M. Selvalakshmi, Principal, Thiagarajar School of Management, for her

full- fledged support.

I would like to thank Prof. M Balaji, Dean M.B.A, Faculty, Thiagarajar School of Management,
for providing full support and guidance which made me complete this project.

I sincerely thank Dr. Vidya Suresh, Faculty guide, Thiagarajar School of Management, for her
encouragement, guidance and valuable ideas which helped me complete this project successfully.

Finally, I extend my heartfelt thanks to my friends and family members who have been a source
of inspiration and support during my internship.
 EXECUTIVE SUMMARY

Online trading is basically the process of buying and selling the financial products through
an online trade platform. The financial products are Shares, Commodities and currencies.
These platforms are provided by internet based brokers. These brokers are available to every
single person who wishes to try to make money from the market. Forex trading is one of the
most popular trading due to some of its major features. Today, the Foreign Exchange market
(Forex or FX ) is the largest financial market in the world. It has a daily average turnover of
over US$ 5.3 trillion, making it a largest and liquid in the world. Why trade has been done in
forex? And how the forex market works? have been explained. The major players and their
currencies have been discussed. The types of forex account have been explained. Forex market
involves two type of analysis which is fundamental and technical analysis. Under technical
analysis, all the candlesticks patterns have been explained. And also some of the strategies
like support and resistance, trend line have been elaborated. There are also some indicators in
Forex that helps each trader in which time they have to buy and sell their currencies. In this
technical study, USD-CAD currency has been analysed using indicators from the beginning
of May month to end of June month. This analysis has been done through demo account
which has been opened during internship programme. The snapshots of demo account clearly
explain the technical analysis of USDCAD currency.
 TABLE OF CONTENTS

CHAPTER CONTENTS PAGE

Certificate
Acknowledgement
Declaration

Abstract
List of Tables
List of figures

Chapter I Introduction
1.1 Forex market
1.1.1 Major currencies and commodities
1.1.2 Cross pair currencies
1.1.3 Exotic currency pair
1.1.4 Forex Exchange rate
1.2 Indian market
1.3 Types of analysis
1.3.1 Fundamental analysis
1.3.2 Technical analysis
1.4 Software and websites
1.4.1 Forex factory
1.5 Objective of the project
1.6 Scope of the internship
1.7 Methodology
Chapter II Company Profile
2.1 About the company
2.2 Vision
2.3 Mission
2.4 Core values
 2.5 Services of Jmarathon
2.6 Branch
2.7 Product of the company
Chapter III Review of literature
Chapter IV Conceptual Framework
4.1 Type of trades
4.2 Trading terms
4.3 Candlesticks
4.3.1 Patterns
4.3.2 Support and resistance line
4.3.3 Stop loss and take profit
4.3.4 Additional pattern
4.3.5 Indicators
4.4 Strategy in Forex
4.5 Placing new order
4.6 Strategy and indicator for Indian
market
Chapter V Technical analysis of USDCAD
Chapter VI Conclusion
6.1 Conclusion
6.2 Recommendation
6.3 Scope for future research

\
 LIST OF TABLES

TABLE LIST OF TABLES PAGE

Table 1.1 Forex currency

Table 4.3.5 Pivot Point
Table 5.1 Daily price of USDCAD
LIST OF FIGURES

FIGURE LIST OF FIGURES PAGE

Figure 4.3 Bullish and bearish candle
Figure 4.3.1.a Hammer and hanging man
Figure 4.3.1.b Inverted hammer and shooting star
Figure 4.3.1.c Bullish and bearish engulfing
Figure 4.3.1.d Bullish harami
Figure 4.3.1.e Bearish harami
Figure 4.3.1.f Morning and evening star
Figure 4.3.2 Resistance and support line
Figure 4.3.5.a Pivot point
Figure 4.3.5.b Fibonacci retracement
Figure 5.1 RSI in meta trader 5
Figure 5.2 Bollinger band in meta trader 5
Figure 5.3 Bollinger with RSI in meta trader 5
Figure 5.4 ADX in meta trader 5
Figure 5.5 Moving average in meta trader 5
Figure 5.6 Two moving average in meta trader 5
 CHAPTER I: INTRODUCTION

1.1 FOREX MARKET

The forex market is the market in which traders can buy, sell and exchange on currencies.
The currency market is considered to be the largest financial market with over $5 trillion in
daily transactions. Forex is not only the trading of currencies but also commodities can be
traded. Generally, FOREX market operates 24 hours for 5 working days (24x5). Currencies
can be traded using both fundamental and technical analysis.

Table 1.1 Forex currencies

CURRIENCIES SYMBOL
Euro / US Dollar EUR/USD
US Dollar / Japanese Yen USD/JPY
British Pound / US Dollar GBP/USD
US Dollar / Swiss Franc USD/CHF
Euro / British Pound EUR/GBP
Euro / Japanese Yen EUR/JPY
Euro / Swiss Franc EUR/CHF
Australian Dollar / US Dollar AUD/USD
US Dollar / Canadian Dollar USD/CAD
New Zealand Dollar / US Dollar NZD/USD

1.1.1 MAJOR CURRENCIES & COMMODITIES

There are totally seven major currency pairs in Forex.

 USDJPY – US dollar Japanese yen

 USDCAD – US dollar Canadian dollar
 EURUSD – Euro US dollar
 USDCHF – US dollar Swiss france
 GBPUSD – Great Britain pound US dollar
 AUDUSD – Australian dollar US dollar

 NZDUSD – New Zealand dollar US dollar

There are two major commodities:
 XAGUSD – Sliver US dollar
 XAUUSD – Gold US dollar

The first currency is the base currency or first order currency and the second currency is the
quote or second order currency. Among these commodities, silver is more volatile than gold.

1.1.2 CROSS PAIR CURRENCY

A cross currency refers to a currency pair or transaction that does not involve the U.S.
dollar. Common cross currency pairs involve the euro and the Japanese yen. GBPJPY,
EURCHF are the examples of cross pair currency. US dollar is the base currency for all
currency pair. In sometimes, due to more volatility, news and liquidity, USD cannot be used
as a base currency in currency pairs.

1.1.3 EXOTIC CURRENCY PAIR

These currency pairs are less traded in market. It is not good to trade because the spread will
be more these kind of currency pair. So traders don’t enter these currencies until you get the
good knowledge.

Example: EUR/GBP, EUR/CH, GBP/JPY

1.1.4 FOREIGN EXCHANGE RATE

The Foreign Exchange Rate is the rate at which one currency will be exchanged for another
currency. For example, the exchange rate is 1.13, which means it takes US$1.13 to buy €1 as
per February 23, 2019.

Types of Exchange rate:

Fixed Exchange Rate:

A fixed Exchange Rate is a rate which is discharged by a legislature or national bank ties the
nation's money swapping scale to another nation's cash or the gold cost. The principle
motivation behind a fixed conversion scale is utilized to keep a money's an incentive inside a
point of confinement. It is likewise help the legislature to keep up low expansion, for the long
run. It keeps the low loan fees and builds exchange and speculation.

Floating Exchange Rate:

Floating Exchange Rate is the rate at which the cost of the money in a nation is set by the
forex market dependent on the free market activity to the next nation monetary forms. In the
event that cash is excessively high or low, it will influence the economy of the country. And
furthermore it makes contrary effect among individuals. It will influence exchange and the
capacity to pay obligations. The legislature or national bank should actualize the measures to
move their money into a progressively favoured cost.

INDIAN MARKET

The market timing of Indian market will be 9:00am -9:15am as pre-open session. In this
session the exchange collects the orders for few minutes. On this basis of orders received, the
open price of stocks will be announced and then orders will be moved to normal trading
session which will be from 9:15am -3:30pm. The products of Indian markets are equity,
commodity, derivatives, ETF (Exchange Trade Fund). The major exchanges are BSE
(Bombay Stock Exchange) and NSE( National Stock Exchange). The Securities and
Exchange Board of India (SEBI) is the regulatory authority of stock exchanges.

1.2 TYPES OF ANALYSIS

1.2.1 FUNDAMENTAL ANALYSIS

Fundamental analysis of a company based on the value of the company, political

factors like election results, EIC analysis( Economy Industry Company analysis) and volume
of stocks. Financial and non-financial analyses are in fundamental. Financial analysis consists
of the ratio analysis and annual report analysis etc. Non-financial analysis deals with the
technology, image of the company, and the products or services of the company. FOREX
factory is the website which will provide all the information about fundamental. This
fundamental analysis will be useful for forecasting the future currency pattern.
There are some factors will affect the fundamental.

 Interest rate
If the interest rates of banks are more, then people want to make more investments on
banks. It makes the economy more strong..
 Inflation
Inflation can be determined and calculated by using CPI and PPI. If inflation is more,
then interest rate will be high which makes the market to be strong.
 Gross domestic product (GDP)
With the increased level of GDP, then the market will become strong.
 Retail sales
If the sales are increased, economic growth will be developed and then the market
will become strong.
 Unemployment
If unemployment rate is high, then there will be no money in people’s hand and thus
money supply will be decreased, inflation will be low, interest rates will start to
reduce and the currency will become very weak.

1.2.2 TECHNICAL ANALYSIS

Technical analysis involves patterns, candlesticks, indicators and strategies. Technical

analysis allows traders to analyse historical price movement. Technical analysis depends on
price (opening, closing, high, low) of the currency and lot size.

There are three kinds of lots:

 Micro lot (0.01) - 1000 units
 Mini lot (0.1) - 10000 units
 Standard lot (1) - 100000 units

For example, if you buy a currency in 0.01 micro lot which means you buy 1000 units. Profit
also based on this kind of lots. If you choose standard lot, Profit will be more as well as in
case of loss which also will be high.
 Both fundamental and technical analyses are important to analyse and forecast a
particular currency. The main idea of the project is to analyse the behaviour of USDCAD
currency using technical analysis.

1.3 SOFTWARE AND WEBSITE

1. Meta Trader 5 – This software helps the investors to perform the technical analysis in
FOREX market. The demo as well as real account trading can be done by using this
software.
2. Forex Factory – This website helps to provide details about the fundamentals for
FOREX market trading.
3. Money Control -This website helps to provide information about the fundamentals for
Indian market trading.
4. Investing.com – This website is used to perform technical analysis for both FOREX and
Indian market
5. NSE India – This website is for Indian market which gives information about National
stock exchange.
1.3.1 FOREX FACTORY

The FOREX factory website will give the impacts which affect the market by denoting it in
different colours. Yellow indicates less impact, orange indicates medium impact and red
indicates high impact. There will be an actual and forecast impact. If the forecast is more than
the actual then that currency is taken as weak. If the base currency is strong, then the
currency can be bought and if base currency is weak, then it can be sold. If both the
currencies are strong which means there is no movement in market. There is no need to buy
or sell the currency.

For example, CAD currency has 0.2% actual impact and 0.4% forecast impact. Forecast is
more than actual impact and therefore CAD is weak. If we take its pair like USDCAD, here
CAD is weak and USD (base) is strong. Therefore, it is advisable to buy. In case CAD is
strong and USD is weak, it is advisable to sell.
1.4 OBJECTIVE OF THE PROJECT
 To Study types of Currencies traded in forex market and how they trade with the
help of forex charts and graphs.
 To study about the technical analysis of USDCAD currency in the forex market.
 To forecast the future movement of USDCAD

1.5 SCOPE OF THE INTERNSHIP

Jmarathon advisory services private limited provided me a great opportunity to learn about
forex market in a theoretical manner as well as practical manner. My overall internship is
about finance and also marketing an online course which will be done by the company. The
learning from technical analysis part is very useful to trade in the demo account as well as
real account. My internship program gives a better confidence about investing money and
trading using currencies. It is really a good platform to learn for earn.

1.6 METHODOLOGY

Source of data: By using Meta trader 5 Software, the data has been collected.

Nature of the data: Quantitative

Type of the research: Descriptive type

Tools used: Meta trader 5 software, Investing.com

Period of the analysis: The analysis is done for two months (May 2019 to June 2019)
 CHAPTER II: COMPANY PROFILE

2.1 ABOUT THE COMPANY

J Marathon advisory services private limited company maintains portfolios of clients in terms
of both FOREX and Indian stock market and provides the financial advices to them to
achieve short term as well as long term financial goals. The company is also training the
students on global markets. The headquarters is in Bangalore and it has other two branches
which are located in Chennai and Hyderabad.

J Marathon advisory services private limited was previously named as JWings manifest
wealth. They provided services like stock market, investment planning, Wealth creation,
Advisory services, and Insurance.

2.2 J MARATHON VISION STATEMENT

To be the most trusted and professional services organisation recognized by our
clients providing good services, that is value for money and more than their level of
expectations.

2.3 J MARATHON MISSION STATEMENT

To develop life long relationship with the clients by providing them the good quality
of services & address their issues which is related to financial terms.

2.4 CORE VALUES OF J MARATHON

 "To learn & earn" is the main passion for the organisation.
 To provide training and to create awareness programs on investment by well versed
professionals.
 Have tie-ups with various trading agencies and brokers which will help to the clients
while they are trading in the market.
2.5 SERVICES OF J MARATHON
 Training and development
The training has been provided to the students who have more interest in this field.
Intraday trading strategies will be provided. The training will be in the form of demo
account and weekly tests will be conducted. Practice in Demo version gives boost and
confidence to students to develop interest in the field of Investment. This will help the
self-investment planning of the student.

 Investment planning
We need to make good decision of future investments to achieve certain goals in life.
To invest better and safe, investments, risks, inflation, systematic planning has to be
understood clearly. Thus, J Marathon helps to make investment for better future planning.
 Advisory services
Client’s funds are being pooled from the clients and the portfolio managers advise
them to invest in blue-chip stocks or currency markets. Jmarathon makes it easier by
offering guidance and best experience.
 Indian stock market and FOREX market portfolios
J marathon has a tie- up with “Zerodha” Company to open demat account for Clients
and also has tie-up with “Grand Bloom Company Forex Limited” to open International
FOREX real account.

2.6 BRANCH
The summer internship offered by the company is Adyar, Chennai branch.
HR – Krishna kumar S
Organizational guide – Sukesh reddy K
2.7 PRODUCT OF THE COMPANY
One part of my internship is marketing. The product of this company is an online
certification course called “LEARN2EARN INDIAN STOCK MARKET AND FOREX
MARKET” which has 39 lessons. It is valid for 180 days and it is of online access. It covers
both the Indian and FOREX market. This course provides the trading tactics, investing
strategies and knowledge about the future investment planning. This course also contains the
technical analysis indicators and all the type of patterns which will be occurred in the forex
market.
 CHAPTER III: REVIEW OF LITERATURE

Harris (2001) study clarifies that the ideal powerful request techniques for exchanging issues
looked by every single dealers. The outcome gives principles to how to exchange and how to
oversee exchanging little arranges. The current ideal accommodation procedure relies upon
what future systems will be embraced. The investigations don't for how to exchange huge
requests. The principle is around little requests permits us for further examine.

Richard Lions (2002) The paper is about overflow analysis in forex market. Another kind of
examination is associated with Forex advertise which is overflow analysis, however central
and specialized examination are there. Request stream examination utilize the progression of
purchase and offer request to both clarify about remote trade rates and estimate the future
snapshot of monetary standards. It likewise talked about how forex market is advancing and
this advancement influences the request stream investigation.

M.A.H. Dempster(2002 )This paper is about preferred position of developmental

calculations to the support learning issue utilizing a half and half credit task approach.

Specialized examination is utilized to break down the prescient worth with respect to future
developments of outside trade costs and this article speaks to strategies for mechanized high-
recurrence FX exchanging dependent on transformative fortification finding out about sign
from an assortment of specialized pointers. These sorts of strategies are connected to
GBPUSD, USDCHF and USDJPY trade rates at different frequencies.

Dr Bertrand Maillet and Thierry Michel (2005) The investigation is about the specialized
examination return ideal benefits in European money trade rates. The primary procedure was
getting to the market with the moving average method. The specialists took the less unstable
nature tests, so the examination isn't helpful. It isn't that much successful one.
Paul A. Weller, Geoffrey C. Friesen, and Lee M. Dunham, (2007)

The examination taken by him was Head and Shoulder pattern. It was utilized to perceive and
discover the generous changes in cash costs. The adjustments in cash costs show significant
positive autocorrelations factually and monetarily.

Nagendran (2008) The Study plans to process why forex exchange is more dangerous than
Indian market. The most significant hazard is the swapping scale hazard and resultant
introduction. Another most significant reason in India the real monetary standards are
extremely high unpredictable when contrast with different nations. The need of great
importance is to foresee the exactness of the trade rates .It is utilized to choose the supporting
positions. This paper fundamentally manages the forex rate developments in India and to give
potential answers for this conversion standard test utilizing specialized examination.

More stunning (2009) The scientist has done a multi year test in forex market utilizing basic
moving normal pointer. Verifiable costs in the Dow Jones Industrial Average were utilized to
test an assortment of moving normal criteria to purchase and sell. It is utilized to see the
purchase and hold strategy. It was discovered that the moving midpoints test couldn't rival the
purchase and hold strategy and the authentic value developments would not estimate future
execution.

Saeed Rasekhi(2011) The examination speaks to that an examination of Forex showcase

productivity dependent on vacillation investigation. The effective market theory (EMH)
speaks to that advantage costs mirror all accessible data. From that theorists can't anticipate
the future conduct of advantage costs and benefits subsequent to changing for hazard. The
EMH was before long connected to different markets including Forex (FX). It likewise
discloses to decide changes in the level of wastefulness over the entire time frame has been
partitioned into four sub periods. The level of wastefulness isn't steady over a specific
timeframe.
Jacob Gyntelberg(2012) This article shows a review of present moment multi-cash
speculation procedures, for example, force, convey exchange and term spread methodologies.
It demonstrates that proof on their drawback hazard properties and clarifies about their
exhibition over recorded piece of monetary market unrest. It additionally speaks to that the
techniques of tail dangers and that they don't perform consistently because of misery periods
in worldwide market. Financial exchange speculations highlights are more prominent
drawback hazard.

Sbaih (2016) This paper concentrated on mental components like broker's pressure,
disposition and character with exchanging practices, feelings which lead to great gainful
exchanges. This examination inspects the impact of feelings, state of mind and worry in
exchanging conduct. Positive state of mind and consistent exchanging feelings will give the
certainty to the brokers. All nations around the world, forex dealers face same issues, same
difficulties and passionate predispositions.

Nima Zarrabi(2016) This paper deals that the profitability of technical trading rules in the
foreign exchange market taking into data snooping bias and transaction costs. A universe of
7650 trading rules is involved to six currencies quoted in U.S. dollars. The out-of-sample
results reveal a large number of profits over short periods. It is based on the Sharpe ratio.
They are not consistently profitable and so the overall results are more consistent.

Matthew Lorig, Zhou Zhou and Bin Zou (2019) This study is about on the exponential
moving averages of an underlying risky asset. Mathematical analysis has been explained for
EMA. This indicator is the best buy and hold strategy. The buy-and-hold strategy has a
slightly high Sharpe ratio if we use this exponential moving average indicator. This paper
advised the traders to be careful during their trading by using EMA, because the transactional
costs are very high.
 CHAPTER IV: CONCEPTUAL FRAMEWORK

4.1 TYPES OF TRADES

There are four different types of trades.

 Intraday trading– Intraday means "within the day." The trade which happens in
single day i.e. before 3.30 in Indian market and within 24 hours in FOREX. If the
trade is not closed by the trader, then it will be automatically closed. This is called as
Square off. Short-term traders use one-, five-, 15-, 30- and 60-minute intraday charts
when trading within the market day.
 Swing trading– Swing trading is a type of trading that used to capture profits in a
stock over a period of a few days to several weeks. If the trade continuous for more
than a week then it is called as swing.
 Long term trading– Long term refers to the extended period of time .if the trade
continuous for more years then it is called long term trade
 Delivery trading– Delivery based trading means buying shares and holding them for
certain period of time is called delivery based trading. Once you take delivery of
shares you can hold them as long as you want. Holding the stock for next day
irrespective of swing is called as delivery.

4.2 TRADING TERMS

A. POSITION

A position is the amount of a currency which is holding by an individual. The position

can be either short or long. Taking a long or short position comes down to whether a
trader thinks a currency will appreciate or depreciate, relative to another currency. When
a trader thinks a currency will appreciate they will “Go Long”, and when the trader
thought that the currency to depreciate they will “Go Short”.

Long – buy and sell

Short – sell and buy
 When traders enter a short position, they expect the price of the currency to
depreciate. To short a currency means to sell the underlying currency that its price will go
down in the future, allowing the trader to buy the same currency back at a later in a lower
price.

When traders enter a long position, they expect the price of the currency to appreciate.
For long a currency means to buy the currency that its price will go up in the future, allowing
the trader to sell the same currency back at a later in a higher price.

B. PIP

Percentage in point (Pip) is standardized unit which represents very small change in currency
in terms of places like ones, tens, and hundreds and so on. For eg: if the price is $1.2345 6,
(from the last decimal) 5 is 5 pips, 4 is 40 pips, 3 is 300 pips, 2 is 2000 pips and 1 is 10000
pips. 6 - 0.6 pips is called tick moment which should not consider for calculate profit and
loss.

C.SPREAD

Spread is the difference between bid price and offer price.

For example, the bid price of USDCAD is 1.13063 and the sell price is 1.13100, then the
spread is 37. So the spread is defined as the difference between bid price and sell price.

4.3 CANDLESTICKS

A candlestick is a type of price chart used that displays the high, low, open, and closing
prices of a currency for a specific period. It contains body and wicks (shadow).The wide part
of the candlestick is called body. The candlestick's shadows show the day's high and low.

There are two kinds of candlesticks.

Bullish

It is referring to Buy or Bull candle which specifies that Opening at low price and closing at
high price. The bullish candle is a green coloured body with high price, closing price at the
upper wick and low price, opening price at lower wick. This bull candle denotes the uptrend.
Bearish
It is referring to Sell or Bearish candle which specifies that Opening at high price and closing
at low price. The bearish candle is a red coloured body with high price, opening price at the
upper wick and low price, closing price at lower wick. This bear candle denotes the
downtrend.

Figure 4.3 Bullish and Bearish candle

Doji
A doji is the candlestick for a currency has an open and close that are equal and are often
components in patterns. Doji candlesticks look like a cross, inverted cross or plus sign. It is
not much important but it acts as a trend reversal indicator.

4.3.1 CANDLESTICK PATTERNS

Candlestick pattern is a movement of prices and it is shown graphically on a

candlestick chart. The purpose of candlestick pattern is to know about the trend reversal.
There are three types of Candlestick pattern. They are Single Candlestick, Double
Candlesticks and three Candlesticks.

A.SINGLE CANDLESTICK

A single candlestick pattern is formed by just one candle. Single candlestick has 4 types of
pattern: Hammer, Hanging man, Inverted hammer and Shooting star.
 i. HAMMER
It denotes bullish reversal.

It can be happened at the bottom of the trend. The Lower wick of hammer should be
twice that of the body. The Upper wick should be smaller than lower wick. It should be
appeared after a downtrend which means that there will be an uptrend. Thus, hammer
gives the signal to buy.

ii. HANGING MAN

It represents bearish reversal. It can be happened at the top of the trend. The lower wick
of hanging man should be twice that of the body. The upper wick should be smaller than
lower wick. It should be appeared after an uptrend which means that there will be a
downtrend. Thus, hanging man gives the signal to sell.

Figure 4.3.1.a Hammer and hanging man

iii. INVERTED HAMMER

It represents bullish reversal.
 It can be shown at the bottom of the trend
 The upper wick of inverted hammer should be twice that of the body
 The lower wick should be smaller than upper wick
 It should be appeared after a downtrend which means that there will be an uptrend

So, inverted hammer gives the signal to buy.

 iv. SHOOTING STAR

It provides bearish reversal.

 It should happen at the top of the trend

 The upper wick of shooting star should be twice that of the body
 The lower wick should be smaller than upper wick
 It must be appeared after a uptrend which shows that there will be a downtrend

Thus, shooting star gives the signal to sell.

Figure 4.3.1.b Inverted hammer and shooting star

B.DOUBLE CANDLESTICKS

Double or two candlesticks has four types of patterns. There are Bullish engulfing, Bearish
engulfing, Bullish harami and Bearish harami.

i) BULLISH ENGULFING
It represents bullish reversal.
 It will be happened at the bottom of the trend
 It should be appeared after a downtrend which represents that there will be an uptrend
 present candle should be bull and Previous candle should be bear
 Bull candle engulf the bear candle including the wick

So, bullish engulfing gives the signal to buy.

ii) BEARISH ENGULFING
It represents bearish reversal.
 It will be happened at the top of the trend
 It should be appeared after a uptrend which means that there will be an downtrend
 present candle should be bear and Previous candle should be bull
 Bear candle can engulf the bull candle including also the wick

So, bearish engulfing gives the signal to sell.

Figure 4.3.1.c Bullish and Bearish engulfing

iii) BULLISH HARAMI

It represents bullish reversal. Harami is suitable for long term investment. It should be
happened at the bottom of the trend
 It should be appeared after a downtrend which means that there will be an uptrend
 present candle should be bull and Previous candle should be bear
 Bear candle engulf the bull candle including the wick

So, bullish harami gives the signal to buy.

Figure 4.3.1.d Bullish harami

iv) BEARISH HARAMI
It represents bearish reversal.
 It will be happened at the top of the trend
 It should appear after a uptrend which means that there will be an downtrend
 present candle should be bear and Previous candle should be bull
 Bull candle engulf the bear candle including the wick

So, bearish harami gives the signal to sell.

Figure 4.3.1.e Bearish Harami

C.THREE CANDLESTICKS

Three candlesticks has two patterns. They are Morning Star and Evening Star.

i) MORNING STAR

It represents bullish reversal. The first and third candlesticks are longer than second. The
conditions for morning star are:

 First candle should be bear and third candle should be bull

  Second candle can be bull or bear
 It should be happened at the bottom of the trend
 It should appear after a downtrend which means that there will be an uptrend

So, morning star gives the signal to buy.

ii) EVENING STAR

It represents bearish reversal. The first and third candlesticks are longer than second. The
conditions for evening star are:

 First candle should be bull and third candle should be bear

 Second candle can be bull or bear
 It can be happened at the top of the trend
 It should appear after a uptrend which means that there will be an downtrend

So, evening star gives the signal to sell.

Figure 4.3.1.f morning and evening star

4.3.2 SUPPORT AND RESISTANCE LINE

The concept of support and resistance is the basic thing of Forex technical analysis. Forex
traders have an idea to buy at the areas of support in an uptrend. Similarly, Forex traders have
an idea to sell at the areas of resistance in a downtrend.

Support and Resistance are the lines which denote the trend reversal. These lines can be
vertical, horizontal and diagonal. Resistance lies at the top of the trend and Support lies at the
bottom of the trend. There will be trend zones in the chart which is been separated by many
support and resistances. Once trend hits two or three times the support, the trend may enter
into next zone and may break the support. If trend hits the resistance two or three times then
it can break the resistance and may enter into the next zone which is above the previous one
or it may consolidate in the same zone.

This strategy represents that if trend touches the support, it is advisable to buy and which
means there are more sellers. If trend touches the resistance, it is advisable to sell which
means there are more buyers.

Figure 4.3.2 resistance and support

4.3.3 STOP LOSS AND TAKE PROFIT

Stop loss (SL) or stops is defined as an order to limit the losses on trade.
Take profit (TP) or target price is an order to close trade when price reaches as a profit level.
For example,

If you placed a Buy order on USDCAD at 1.385 and set stop loss at 1.375 and target level of
1.395, when price moves below your entry and hits 1.375 your order is closed for a loss of 10
pips. Likewise, when price moves to 1.395, your order is closed for a profit of 10 pips.

If you placed a sell order on USDCAD at 1.385 and set stop loss at 1.395 and target level of
1.375, when price moves below your entry and hits 1.375 your order is closed for a profit of
10 pips. Likewise, when price moves to 1.395, your order is closed for a loss of 10 pips.

4.3.4 ADDITIONAL PATTERNS

A. Head and Shoulders

This pattern consists of two shoulders and one head sandwiched between the shoulders. It
represents the uptrend candle. The connecting line of the tip of shoulders is called Neckline.
This neckline can act as both support and resistance. There will be six entry points in one
pattern. If support and resistance is broken, short position should be made (sell and buy).This
will also happen in diagonal trend also. The entry will be done when the trend hits the
neckline. The exit will be done when the trend reaches before the support.

B. Inverted Head and Shoulders

The inverted head and shoulders pattern will be in an inverted manner. It represents the
downtrend candle. If support and resistance have been broken, long position should be made.
This will also happen in diagonal trend also.

C. Double top

In Double top, the trend hits the resistance two times. It will hit the neck line after two
triangle formations and the trend will fall. When the trend hits neckline, Entry can be done. If
resistance has been broken, short position should be made.
D. Double bottom

In Double bottom, the trend hits the support two times. It will hit the neck line after two
triangle formations and the trend will rise. If support has been broken, long position should
be made.

E. Triple top

In Triple top, the trend hits the resistance three times. It will hit the neck line after three
triangle formations and the trend will fall. If resistance has been broken, short position should
be made.

F. Triple bottom

In Triple top, the trend hits the support three times. It will hit the neck line after three triangle
formations and the trend will rise. If support has been broken, then long position should be
made.

G. Consolidation

It is weak pattern. Consolidation means neither bullish nor bearish which moves in the same
direction. After consolidation, breakout will happen either to bull or bear.

H. Breakout:

If the current low is lower than previous low or the current high is greater than the previous
high, it will be the breakout pattern. Lower breakdown indicates the downtrend. The higher
breakdown indicates the uptrend. When there are small candle appears for long time, then
breakdown will happen.

4.3.5 INDICATORS

A. Pivot point

Forex traders use pivot points to identify support and resistance levels. A pivot point and its
support/resistance levels at which the direction of price can change. Pivot points are referred
as “PP”. The pivot point and support and resistance levels are calculated by using the last
trading price of open, high, low and close.
Pivot points give the strong support and resistance. The low, high, closing and opening price
of previous candle can be taken.

PP = (L+H+O+C)/4 or PP = (L+H+O)/S

Pivot Point (PP) = Average of (Open price+ high price+ low price + close price).

Table 4.3.5 pivot point

Particulars USDCAD

Open price 110.766

High price 111.365

Low price 110.133

Close price 111.086

Pivot Points 110.8375

 When the price of an asset is trading above the pivot point, it shows the day is bullish
or positive.
 When the price of an asset is trading below the pivot point, it shows the day is bearish
or negative.
 The indicator includes four additional levels: S1, S2, R1, and R2. These are support
and resistance.
 Support and resistance one and two used to confirm the trend. For example, if the
price is falling and moves below S1, it helps to confirm the downtrend.
 Figure 4.3.5.a Pivot Point

B.REVERSAL AND RETRACEMENT

Retracements are temporary reversals that take place within a larger trend. When the
price moves up, it makes a new high, and when it drops, it come back before reaching the
previous low. There are higher highs and higher lows. While that is occurring, the trend is up.
It is only once an uptrend makes a lower low and lower high that the trend is called as
reversal.

C.FIBBONACCI RETRACEMENT

Fibonacci retracement levels use horizontal lines to indicate where support and resistance
levels are. Each level is with a percentage. The percentage is how much of a prior move the
price which has retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 61.8% and
78.6%.50% is also used in Fibonacci.

This type of retracement denotes four different zones. The major zone is to be 100% of
retracement; 60% is minor zone; 59% - 23% is strong level and 22%-10% is secondary zone.
If a trader wants to buy, they watch for the price at a Fibonacci level and then they can buy.
 Figure 4.3.5.b Fibonacci retracemrent

D.RELATIVE STRENGTH INDEX (RSI)

Relative strength index is an indicator which indicates whether buy or sell decisions
in market. RSI was developed by J. Welles Wilder.

There are four zones:

 Below 30 is oversold condition – if the candles hit 30 and reversed to uptrend then it
can be bought. If price is in oversold, price will reach up
 50 to 30 zone - sellers strength is more which means it is advisable to hold
 70 to 50 zone –buyers strength is more which means it is advisable to hold
 100 to 70 as overbought zone – if the trend crosses 100 and reversed to downtrend
then it can be sold. If price is in overbought, price will reach down.

E.BOLLINGER BANDS

The Bollinger band was developed by John Bollinger. It has three bands like
upper, middle and lower bands.
Upper band:

If the trend touches the upper band then the trend is going to be downtrend. It is advisable to
sell.

Lower band:

If the trend touches the lower band then the trend is going to be an uptrend. It is advisable to
buy the currency.

Middle band:

If the trend is in middle band it is advisable to hold thecurrency. There is no need to buy or
sell the currency.

F. MOVING AVERAGE

Moving average will determine the average price of the next candle. There are
three moving averages (6, 12, 24), (5, 15) and (8, 12).These are only mostly used averages.
(6, 12, 24) means (hour4, day1, hour1) and (5, 15) denotes (hour4, hour1). The most accurate
indicator is moving average. (5, 15) can be used for the better prediction,

There are two types of moving average: simple and exponential.

Simple will give the average of recently closed values of n candlestick. If the price is less
than moving average then it is advisable to sell. In exponential, the weights will be given to
the prices. More weight will be given for recent price. If fundamental gives any wrong news
then, moving average will give losses. EMA is more accurate than SMA.

G. AVERAGE DIRECTIONAL MOVEMENT INDEX

This index represents the strength of the market. If the ADX is more than 50,
the market is very much stronger that there is no consolidation, which further indicates that
the market is fluctuating. If ADX indicates 40 to 30 then the strength of the market is weak. If
it is less than 20 then the market will be in consolidation.

There are two other indicator +DMI and –DMI.

If +DMI > - DMI then it is bullish.

If – DMI > + DMI then it is bearish.

DMI means Directional Movement Index.

4.4 STRATEGIES IN FOREX

A. TREND LINE

A trend line is the basic tool in the technical toolbox. A trend line is a line which connecting
two or more lows or two or more highs. These lines may be horizontal, vertical or diagonal.
The lines are used to project the future. The trend lines are the lines which explain the trend
of the currency. These trend lines can act as support and resistance lines.

B .Price action strategy

Trend line, pin bar and engulfing patterns are used to confirm the trader’s buy, sell
or hold level.

 Trend line – If the candle is near support then buy. If the candle is near resistance
then sell. Draw the trend line which connecting two or more lows or two or more
highs. This will act as a support and resistances.
Pin bar – If there is an candle and an inverted candle (both of same size) occurred
then it is called the pin bar The Pin Bar is a Price Action that can be formed on any
timeframe in the market.. This gives the signal about the trend reversal.
 Engulfing – If there is any engulfing at the trend line then it will be a signal for
buy/sell which depends on that engulfing pattern.

It is the right opportunity to buy/sell accordingly when all the three occurs.

C. Indicator strategy

The Moving average is the best indicator strategy in price action. If the lower moving average
crosses all other averages of the particular number of candlesticks in an uptrend, then it is
advisable to buy and if the lower moving average crosses all other averages of the
candlesticks in a down trend, then it is advisable to sell. This moving average should be
closer to candlestick. If it is not closer then there will be a reversal. When the moving average
is moving away from candlestick, trader will take the right decision to close the trade.

4.5 PLACING NEW ORDER - FOREX

There are two ways to place an order. They are market execution and Pending order.

I. Market execution

In market execution the orders can be placed exactly on the current market price. Market
execution also enables to set take profit, stop loss and volume. This kind of details should be
mentioned in market execution orders otherwise order does not be placed.

II. Pending order

The order can be placed at the current price in which the trader wants to buy or sell. The
orders can be placed automatically at the price which he/she wants to buy or sell. If the trend
hits the exact price then execution will automatically happen. Take profit and stop loss also
can be mentioned.

There are four kinds of pending order - buy limit, sell limit, buy stop and sell stop.

A. Buy limit

In buy limit, the price of the order which the trader wants to buy can be mentioned with stop
loss and take profit.

The conditions are

 When the current market price hits the support

 When there is an uptrend from support
 Sometimes the trend will decrease then buy limit can be made
B. Sell limit

In sell limit, the price in which the order should be sold can be mentioned along
with stop loss and take profit.
The conditions are

 When the current market price hits the resistance

 When there is an downtrend from resistance
 Sometimes the trend will increase then sell limit can be made
C. Buy stop

Buy stop is used to reduce the losses.

The conditions are

 When the current market price breaks the resistance in uptrend

 When it hits the resistance, then buy stop can be made
D. Sell stop

Sell stop is also used to reduce the losses.

The conditions are

 When the current market price breaks the support in downtrend

 When it hits the support, then sell stop can be made

4.6 STRATEGIES AND INDICATOR FOR INDIAN MARKET

A. BULLISH STRATEGY

This strategy is only for the traders who are trading between 9.15am to
9.30am. This will be working for 60 seconds. It is not used to hold the stock. The target
should be 0.7%. The following conditions have to be verified.

 It should be 30 points more than previous day

 It should form a new high
 It should have a dip after making a high retracement

Profits will be given when there is a buy in new high trend.

B. Bearish Strategy

This strategy is also only for traders who are trading between 9.15 AM to 9.30
AM. This will also be working for 60 seconds and it is not used to hold the stock.The target
should be 0.7%. The following conditions have to be verified.

 It should be 30 points less than previous day

 It should form a new low
 It should have a dip after making a low retracement

Profits will be done when there is a sell in new low trend.

C. Reversal strategy

This is for traders who trade in afternoon. When there are more buyers, selling
is advisable and when there are more sellers, buying is advisable. When there are no sellers or
buyers, it is advisable not to enter into the trading.

D. Indicator – Moving average

The moving average indicator is the best indicator for Indian market. (6, 12, 24) can be used
for analysis.
 CHAPTER V: TECHNICAL ANALYSIS OF USDCAD

USDCAD currency (US dollar Vs Canadian dollar)

The study was conducted using of the daily data of month May and June. The data and has
been analysed using technical analysis indicators.
1. Relative Strength Index (RSI)
2. Bollinger Bands
3. Average directional movement Index (ADX)
4. Moving Average

Daily price of USDCAD currency from May 1st to June 30:

Table 5.1 Daily price of USDCAD

opening closing
Date price price
1.5.19 1.33909 1.34354
2.5.19 1.34352 1.34717
3.5.19 1.34715 1.34192
6.5.19 1.34553 1.34551
7.5.19 1.34239 1.347
8.5.19 1.34702 1.34741
9.5.19 1.34745 1.34666
10.5.19 1.34665 1.34127
13.5.19 1.34176 1.34801
14.5.19 1.34801 1.3462
15.5.19 1.34606 1.34371
16.5.19 1.34371 1.34589
17.5.19 1.3459 1.34642
20.5.19 1.34489 1.34264
21.5.19 1.34266 1.34033
22.5.19 1.34034 1.34346
23.5.19 1.34349 1.34722
24.5.19 1.34721 1.34398
27.5.19 1.34384 1.344
28.5.19 1.34401 1.34899
29.5.19 1.34899 1.35127
30.5.19 1.35119 1.34989
31.5.19 1.3499 1.35138
 3.6.19 1.3523 1.3436
4.6.19 1.3439 1.3392
5.6.19 1.3395 1.3415
6.6.19 1.3413 1.3363
7.6.19 1.3359 1.3268
10.6.19 1.3248 1.3267
11.6.19 1.3269 1.3281
12.6.19 1.3284 1.3343
13.6.19 1.3343 1.3326
14.6.19 1.3326 1.3413
17.6.19 1.3407 1.3413
18.6.19 1.3413 1.3377
19.6.19 1.3377 1.328
20.6.19 1.3281 1.3191
21.6.19 1.3189 1.3223
24.6.19 1.322 1.3179
25.6.19 1.3181 1.3169
26.6.19 1.3167 1.3127
27.6.19 1.3126 1.3095
28.6.19 1.3095 1.3092

1. RELATIVE STRENGTH INDEX (RSI)

Figure 5.1 RSI in meta trader 5

The RSI measures the ratio of up-moves to down-moves and normalize the calculation so that
index is expressed in a range of 0-100.

If the RSI is greater than 70 or more, then the instrument is assumed to be overbought (a
situation in which prices have risen more than market expectations).

An RSI of 30 or less is taken as a signal that the instrument may be oversold (a situation in
which prices have fallen more than the market expectations).

If RSI is between 70 and 50, this implies that buyer’s strength is more. So it is advisable to
hold. And also when RSI is between 50 and 30 – this implies that seller’s strength is more – it
is advisable to hold.

INTERPRETATION

USDCAD as per RSI,

May: In the month of May, the daily data shows that RSI is between in the range of 50 to 60, there is
a consolidation which means there is no uptrend and downtrend.

June: In the month of June, Initially RSI value dropped from 50’s range to 30’s range.
Gradual ups and downs are happened in the middle days of the month. In the last days, RSI
value goes to less than 30 which is an oversold condition.

From the analysis of USDCAD, the traders must wait to enter the trading in the month of
May which has full of consolidation period. Traders could hold their trading also in the
month of June except the last some days. And finally traders are suggested that they could
have bought their currencies at the end of the month (27th June and 28th June) which is
oversold condition.
 2. BOLLINGER BANDS

Figure 5.2 Bollinger band in meta trader 5

Bollinger is an indicator which has three bands like upper, middle and lower bands.

If the trend touches the upper band then the trend is going to get reverse as a downtrend.
Here it is advisable to sell. If the trend touches the lower band then the trend is going to get
reverse as an uptrend. It is advisable to buy the stock. If the candle is in middle band it is
advisable to hold the stock.

INTERPRETATION

USDCAD as per Bollinger bands,

May: In the month of May, candle sticks do not touch any bands in which they lies between
upper band and middle band. At the end of the month, trend touches the upper band which
means it is going to get reverse as a downtrend.
June: Initially downtrend is happened because of hitting the upper band. Then trend hits the
lower band then trend is going to get reverse as uptrend. Then in the middle of the month, it
does not touch the upper band. Downtrend will be continued throughout the month.

From the analysis using Bollinger band,

At the end of the month of May, trend touches the upper band at the price of 1.351739. In this
point traders could have been sold the currency which gives more profit to the sellers.
Otherwise trend will go to downwards. It will give the huge loss for traders. In the first week
of June, traders could have been bought the currency of USDCAD.

But as Jun 17, without hitting the upper band, trend is happened by hitting only middle band.
In this time, traders must hold their currency for the correct entry.

Either Bollinger band or RSI is not a correct analyses indicator to find a correct entry levels.
Combined analysis of RSI and Bollinger band is a perfect technical analysis in forex market.

COMBINED ANALYSIS OF RSI AND BOLLINGER BAND:

Figure 5.3 Bollinger band with RSI in meta trader 5

 From the combined analysis of RSI and Bollinger band, as June 28th RSI value is lesser
than 30 and also candles touch the lower band of three Bollinger bands. In this point
which satisfies both the indicators, so it is the right time to buy for all the traders.

3. AVERAGE DIRECTIONAL MOVEMENT INDEX

Figure 5.4 ADX in meta trader 5

Average directional Movement Index (ADX) is used to identify the strength of the market.

If the ADX is more than 50, the market is very much stronger that there is no consolidation,
which further indicates that the market is fluctuating.

If it indicates 40 to 30 then the strength of the market is less strong when compared to more
than the value of 50.

If it is less than 30, the market will be weak and in consolidation. There are two other
indicator +DL and –DL. If +DL > - DL then it is bullish. If – DL > + DL then it is bearish.
INTERPRETATION

USDCAD as per ADX,

May: In the month of May, the value of ADX will be less than 30 for all entire month. It
denotes that consolidation can be happened. Traders could not enter into the market.

June: The value of ADX is less than 30 up to June 20 which means consolidation happens.
Then the value of ADX is slightly increased and reached more than 40 which denote that the
market will be going to be strong.

From the analysis of month May and June, traders could wait until the market gets strong.
After June 20, it is the correct time to entry for getting good profit. Before days also trading
gives some profit. But it is not better than that strong market entry.

4. MOVING AVERAGE
Figure 5.5 moving average in meta trader 5

There are two types of moving average: simple and exponential.

Simple Moving Average will give the average of recently closed values of n candlestick.
(‘n’ can be specified by the trader). If the price is less than moving average then it is
advisable to sell in which the trend will go to downwards. If the price is higher than moving
average then it is advisable to buy in which the trend will go to upwards.
In exponential moving average, the weights will be given to the prices. More weight will be
allocated for recent price. EMA is more accurate than SMA. If fundamental gives the wrong
news then, moving average will not give profit.

INTERPRETATION

USDCAD as per Moving average,

May: In the month of May, the price is lesser than the moving average on May 20, so that
there is a small downtrend happened. And the price is greater than moving average on May
23, so there is a small uptrend happened.

June: In the month of June, Initially the price is lesser than moving average, so that the large
downtrend can be happened around ten days. Uptrend also happened in the middle of the
month. Finally the month ended with downtrend.

Figure 5.6 Two moving averages in meta trader 5

Another strategy is to apply two moving averages to a chart: one longer and one shorter.
When the shorter-term MA crosses above the longer-term MA, it's a buy signal, as it
indicates that the trend is shifting up.

When the shorter-term MA crosses below the longer-term MA, it's a sell signal, as it indicates
that the trend is shifting down.

In this chart, (5, 15) moving average has been plotted. Red colour denotes short term of 5.
Yellow denotes long term of 15.

INTERPRETATION

USDCAD as per two moving average,

In the beginning of month June, the shorter-term MA crosses below the longer-term MA
which means the trend is shifting down. In the middle month, there will be small uptrend
which means the shorter Ma crosses above the longer MA. Almost downtrend will be
happened for entire month.

From the analysis, traders could sell the currency when the price is lesser than the moving
average and buy the currency when the price is higher than moving average.

When the short MA crosses below the longer MA, trader could have sold the currency and
the short MA crosses above the longer MA, buy the currency.
 CHAPTER VI: CONCLUSION

6.1 CONCLUSION

Forex exchanging has advanced a lot in the previous fifteen years it turned out to be to a great
extent an online based activity when contrasted with financial exchange and product
advertise. Here the most brief up and coming business sector developments can be
distinguished by utilizing a portion of the specialized investigation techniques with markers
like RSI, Bollinger band, ADX and Moving normal. Forex can be exchanged whenever on
the grounds that it is a 24-hour worldwide market so timing assumes a critical job in forex.
Be that as it may, stock and product market can be exchanged distinctly during the business
hours. Forex cash exchanging is a huge sea and surfing on it needs loads of examination and
experience which can't be got in a brief timeframe.

6.2 RECOMMENDATION

The fundamental and technical analyses are both important for an investment.
For day to day investment and for better returns, investors should be trained with more
knowledge on technical indicators. An investor must be rational and must have strategies to
make more profits. Traders must use all the indicators when enter into the currency market.
Anyone of the indicator is not that much effective trading which does not give more profits.

6.3 SCOPE FOR FURTHER RESEARCH

My work in the future is to analyse the candlestick patterns which will be formed in forex
market by using technical analysis indicators and start trading with full confidence by using
the real account which can be opened during my summer internship.
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https://www.investing.com/currencies/usd-cad-chart

http://www.livecharts.co.uk/ForexCharts/usdcad.php

https://www.fxstreet.com/rates-charts/usdcad