Forex Project BGGNFNGHM

SESHADRIPURAM FIRST GRADE COLLEGE
PROJECT REPORT
SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIRQMENTS OF
BACHELOR OF BUSINESS MANAGEMENT MANAGEMENT DEGREE
COURSE OF BANGALORE UNIVERSITY.
Title of the Project

A STUDY ON TRADING IN FOREIGN EXCHANGE
MARKET
Submitted By
Hemanth.N.S
BCU Registration No.:-B1928647
UNDER THE GUIDANCE OF
PROFESSOR.SHIVAKUMAR.C (M.COM)

No.26, Yelahanka New Town, Bangalore-560054
Ph.: 080-22955369
A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 1

CERTIFICATE BY THE GUIDE
Certifies that this dissertation is based on an original project

study conducted by Mr.HEMANTH.N.S under my guidance. He has
attended the required guidance sessions held. This project report has
not formed a basis for the award of any other Degree/Diploma of any
University or Institution.
Date: Signature of the guide

Pro.SHIVAKUMAR.C (M.COM)
Place: BANGALORE

ACKNOWLEDGEMENT
As a student of commerce, I have gone through a vast amount

of literature and materials available on the topic “A STUDY
ON FOREIGN EXCHANGE MARKET” I fell indebted to
several authors and researchers who helped me a lot
in understanding various issues relating to my topic.
Many thanks and gratitude to SHIVAKUMAR.C
respectable guide for the project. The guidelines laid
down by him are very instrumental towards the
successful completion of these project. I felt
motivated and exceedingly encouraged under his
supervision.
He guided me to a wide range of resources that
became a catalyst in the project development.
In addition, I sincerely thank my friends circle & my
family for providing their support in the successful
completion of the project.
Hemanth.N.S
BBA-3rd Year
YELAHANKA
DECLARATION
I HEMANTH.NS hereby, declare that the project work titled “A

STUDY ON TRADING IN FOREIGN EXCHANGE MARKET” is an
independent study carried out by me during my major concurrent
project. I also hereby declare that this report is not being
submitted to any organization and the data will be held
confidential.
DATE: HEMANTH.NS
(B1928647)
PLACE: BANGALORE

INDEX
CHAPTER CONTENTS PAGE.NO
1 INTRODUCTION 5-34
2 RESEARCH DESIGN 35-40
3 DATA ANALYSIS AND 41-77

INTERPRETATION
4 FINDINGS, SUGGESTION AND 78-81

CONCLUSION
5 BIBILOGRAPHY 82-83

CHAPTER-1
INTRODUCTION TO FOREIGN
EXCHANGE MARKET

INTRODUCTION
The foreign exchange market (Forex, FX, or currency

market) is a global decentralized or over-the-counter
(OTC) market for the trading of currencies. This market
determines foreign exchange rates for every currency. It
includes all aspects of buying, selling and exchanging
currencies at current or determined prices. In terms of trading
volume, it is by far the largest market in the world, followed by
the credit market.
The main participants in this market are the larger international
banks. Financial centres 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: US$1 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 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 for
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.
As such, it has been referred to as the market closest to the
ideal of perfect competition, notwithstanding currency
intervention by central banks.
According to the Bank for International Settlements, the
preliminary global results from the 2019 Triennial Central Bank
Survey of Foreign Exchange and OTC Derivatives Markets
Activity show that trading in foreign exchange markets
averaged $6.6 trillion per day in April 2019. This is up from $5.1
trillion in April 2016. Measured by value, foreign exchange
swaps were traded more than any other instrument in April
2019, at $3.2 trillion per day, followed by spot trading at $2
trillion.
The $6.6 trillion break-down is as follows:
 $2 trillion in spot transactions

 $1 trillion in outright forwards

 $3.2 trillion in foreign exchange swaps

 $108 billion currency swaps
 $294 billion in options and other products
MEANING
Foreign Exchange (forex or FX) is the trading of one currency

for another. For example, one can swap the U.S. dollar for
the euro. ... Rather, the forex market is an electronic network
of banks, brokers, institutions, and individual traders (mostly
trading through brokers or banks).
DEFINITION
The foreign exchange market is over a counter (OTC) global

marketplace that determines the exchange rate for currencies
around the world. This foreign exchange market is also known
as Forex, FX, or even the currency market. The participants
engaged in this market are able to buy, sell, exchange, and
speculate on the currencies.
These foreign exchange markets are consisting of banks, forex
dealers, commercial companies, central banks, investment
management firms, hedge funds, retail forex dealers, and
investors.
HISTORY
Ancient

Currency trading and exchange first occurred in ancient

times. Money-changers (people helping others to change
money and also taking a commission or charging a fee) were
living in the Holy Land in the times of the Talmudic writings
(Biblical times). These people (sometimes called "kollybistẻs")
used city stalls, and at feast times the Temple's Court of the
Gentiles instead. Money-changers were also the silversmiths
and/or goldsmiths of more recent ancient times.
During the 4th century AD, the Byzantine government kept a
monopoly on the exchange of currency.
Papyri PCZ I 59021 (c.259/8 BC), shows the occurrences of
exchange of coinage in Ancient Egypt.
Currency and exchange were important elements of trade in
the ancient world, enabling people to buy and sell items like
food, pottery, and raw materials. If a Greek coin held more gold
than an Egyptian coin due to its size or content, then a
merchant could barter fewer Greek gold coins for more
Egyptian ones, or for more material goods. This is why, at
some point in their history, most world currencies in circulation
today had a value fixed to a specific quantity of a recognized
standard like silver and gold.
Medieval and later
During the 15th century, the Medici family were required to
open banks at foreign locations in order to exchange currencies
to act on behalf of textile merchants. To facilitate trade, the
bank created the nostro (from Italian, this translates to "ours")
account book which contained two columned entries showing
amounts of foreign and local currencies; information pertaining
to the keeping of an account with a foreign bank. During the
17th (or 18th) century, Amsterdam maintained an active Forex
market. In 1704, foreign exchange took place between agents
acting in the interests of the Kingdom of England and
the County of Holland.
Early modern

Alex. Brown & Sons traded foreign currencies around 1850 and
was a leading currency trader in the USA. In 1880, J.M. do
Espírito Santo de Silva (Banco Espírito Santo) applied for and
was given permission to engage in a foreign exchange trading
business.
The year 1880 is considered by at least one source to be the
beginning of modern foreign exchange: the gold
standard began in that year.
Prior to the First World War, there was a much more limited
control of international trade. Motivated by the onset of war,
countries abandoned the gold standard monetary system.
Modern to post-modern
From 1899 to 1913, holdings of countries' foreign exchange
increased at an annual rate of 10.8%, while holdings of gold
increased at an annual rate of 6.3% between 1903 and 1913.
At the end of 1913, nearly half of the world's foreign exchange
was conducted using the pound sterling. The number of foreign
banks operating within the boundaries of London increased
from 3 in 1860, to 71 in 1913. In 1902, there were just two
London foreign exchange brokers. At the start of the 20th
century, trades in currencies was most active in Paris, New
York City and Berlin; Britain remained largely uninvolved until
1914. Between 1919 and 1922, the number of foreign
exchange brokers in London increased to 17; and in 1924,
there were 40 firms operating for the purposes of exchange.
During the 1920s, the Kleinwort family were known as the
leaders of the foreign exchange market, while Japheth,
Montagu & Co. and Seligman still warrant recognition as
significant FX traders. The trade in London began to resemble
its modern manifestation. By 1928, Forex trade was integral to
the financial functioning of the city. Continental exchange
controls, plus other factors in Europe and Latin America,
hampered any attempt at wholesale prosperity from trade for
those of 1930s London.

After World War II

In 1944, the Bretton Woods Accord was signed, allowing
currencies to fluctuate within a range of ±1% from the
currency's par exchange rate. In Japan, the Foreign Exchange
Bank Law was introduced in 1954. As a result, the Bank of
Tokyo became a centre of foreign exchange by September
1954. Between 1954 and 1959, Japanese law was changed to
allow foreign exchange dealings in many more Western
currencies.
U.S. President, Richard Nixon is credited with ending the
Bretton Woods Accord and fixed rates of exchange, eventually
resulting in a free-floating currency system. After the Accord
ended in 1971, the Smithsonian Agreement allowed rates to
fluctuate by up to ±2%. In 1961–62, the volume of foreign
operations by the U.S. Federal Reserve was relatively
low. Those involved in controlling exchange rates found the
boundaries of the Agreement were not realistic and so ceased
this in March 1973, when sometime afterward none of the
major currencies were maintained with a capacity for
conversion to gold, organizations relied instead on reserves of
currency. From 1970 to 1973, the volume of trading in the
market increased three-fold. At some time (according
to Gandolfo during February–March 1973) some of the markets
were "split", and a two-tier currency market was subsequently
introduced, with dual currency rates. This was abolished in
March 1974.
Reuters introduced computer monitors during June 1973,
replacing the telephones and telex used previously for trading
quotes.
Markets close
Due to the ultimate ineffectiveness of the Bretton Woods
Accord and the European Joint Float, the forex markets were
forced to close sometime during 1972 and March 1973. The
largest purchase of US dollars in the history of 1976 was when
the West German government achieved an almost 3 billion
dollar acquisition (a figure is given as 2.75 billion in total by The

Statesman: Volume 18 1974). This event indicated the
impossibility of balancing of exchange rates by the measures of
control used at the time, and the monetary system and the
foreign exchange markets in West Germany and other
countries within Europe closed for two weeks (during February
and, or, March 1973. Giersch, Paqué, & Schmieding state
closed after purchase of "7.5 million Demarks" Brawley states
"... Exchange markets had to be closed. When they re-opened
... March 1 “that is a large purchase occurred after the close).
After 1973
In developed nations, state control of foreign exchange trading
ended in 1973 when complete floating and relatively free
market conditions of modern times began. Other sources claim
that the first time a currency pair was traded by U.S. retail
customers was during 1982, with additional currency pairs
becoming available by the next year.
On 1 January 1981, as part of changes beginning during 1978,
the People's Bank of China allowed certain domestic
"enterprises" to participate in foreign exchange trading.
Sometime during 1981, the South Korean government
ended Forex controls and allowed free trade to occur for the
first time. During 1988, the country's government accepted the
IMF quota for international trade.
Intervention by European banks (especially the Bundesbank)
influenced the Forex market on 27 February 1985. The greatest
proportion of all trades worldwide during 1987 were within the
United Kingdom (slightly over one quarter). The United States
had the second highest involvement in trading.
During 1991, Iran changed international agreements with some
countries from oil-barter to foreign exchange.
MARKET SIZE AND LIQIDITY

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. According to the 2019 Triennial
Central Bank Survey, coordinated by the Bank for International
Settlements, average daily turnover was $6.6 trillion in April
2019 (compared to $1.9 trillion in 2004). Of this $6.6 trillion, $2
trillion was spot transactions and $4.6 trillion was traded in
outright forwards, swaps, and other derivatives.
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. In April 2019, trading in the United
Kingdom accounted for 43.1% of the total, making it by far the
most important center for foreign exchange trading in the world.
Owing 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. Trading in the United
States accounted for 16.5%, Singapore and Hong
Kong account for 7.6% and Japan accounted for
4.5%.Turnover of exchange-traded foreign exchange futures
and options was growing rapidly in 2004-2013, reaching $145
billion in April 2013 (double the turnover recorded in April
2007). As of April 2019, 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).
Main foreign exchange market turnover, 1988–2007, measured in billions of USD.

TYPES OF FOREIGN EXCHANGE MARKET
The foreign exchange market, also known as the forex market,

is a global marketplace for trading in currencies. It is a
decentralised market that allows you to buy and sell foreign
exchange. The market is an over-the-counter market and
the foreign exchange rates will be dictated by it. It involves the
buying, selling and exchanging of currencies at the market rate.
With regard to trade rate, forex is the largest in the world. Let
us take a look at different types of foreign exchange markets.
1. The Spot Market

In the spot market, transactions involving currency pairs take
place. It happens seamlessly and quickly. The transactions
require instant payment at the prevailing exchange rate which
is also known as the spot rate. The traders in the spot market
are not exposed to the uncertainty of the market, which can
lead to an increase or decline in the price between the
agreement and trade.
2. Futures Market
The transactions in the futures market require future payment
and distribution at a previously agreed upon exchange rate
which is known as the future rate. The transaction or
agreement is more formal in nature which ensures that the
terms of the transaction are set in stone and cannot be altered.
Traders who conduct the majority of the transactions enjoy a
consistent return on the assets. Regular traders prefer a future
market transaction.
3. Forward Market

The third type of foreign exchange market is the forward market

where deals are similar to future market transactions. In this
case, the parties will negotiate the terms of the transactions
and the terms agreed-upon can be negotiated and altered as
per the needs of the concerned parties. The forward market
has higher flexibility as compared to the futures market.
4. Swap Market
When there is a simultaneous borrowing and lending of two

types of currencies between two investors, it is known as a
swap transaction. Here, one investor borrows a currency and in
turn, pays in the form of a second currency to the second
investor. The transaction is done to pay off their obligations
without having to deal with a foreign exchange risk.
5. Option Market
In the options market, the currency of exchange from one
denomination to the other is agreed upon by the investor at a
specific rate and on a specific date. The investor has a right to
convert the currency on a future date but there is no obligation
to do so.
FUNCTIONS OF FOREIGN EXCHANGE

MARKET

1. Transfer Function:
The basic function of the foreign exchange market is to
facilitate the conversion of one currency into another, i.e., to
accomplish transfers of purchasing power between two
countries. This transfer of purchasing power is effected through
a variety of credit instruments, such as telegraphic transfers,
bank draft and foreign bills.
In performing the transfer function, the foreign exchange

market carries out payments internationally by clearing debts in
both directions simultaneously, analogous to domestic
clearings.
2. Credit Function:
Another function of the foreign exchange market is to provide
credit, both national and international, to promote foreign trade.
Obviously, when foreign bills of exchange are used in

international payments, a credit for about 3 months, till their

maturity, is required.
3. Hedging Function:
A third function of the foreign exchange market is to hedge
foreign exchange risks. Hedging means the avoidance of a
foreign exchange risk. In a free exchange market when
exchange rate, i. e., the price of one currency in terms of
another currency, change, there may be a gain or loss to the
party concerned. Under this condition, a person or a firm
undertakes a great exchange risk if there are huge amounts of
net claims or net liabilities which are to be met in foreign
money.
Exchange risk as such should be avoided or reduced. For this

the exchange market provides facilities for hedging anticipated
or actual claims or liabilities through forward contracts in
exchange. A forward contract which is normally for three
months is a contract to buy or sell foreign exchange against
another currency at some fixed date in the future at a price
agreed upon now.
No money passes at the time of the contract. But the contract

makes it possible to ignore any likely changes in exchange
rate. The existence of a forward market thus makes it possible
to hedge an exchange position.

FEATURES OF FOREIGN EXCHANGE

MARKET
High Liquidity
The foreign exchange market is the most liquid financial market
in the world. It involves the trading of various currencies across
the globe. All traders in this market are free to buy or sell
currencies anytime as per their choice. They are free to
exchange currencies without prices of currencies being traded
getting affected. Currencies prices remain the same both at the
time of order placed and executed thereby enabling to earn the
expected prices.
Market Transparency
Trader in the foreign exchange market has full access to all
market data and information. They can easily monitor different
countries’ currencies price fluctuations through real-time
portfolio and account tracking without the need of a broker. All
this information helps in making better trading decisions and
control over investments.

Dynamic Market
The foreign exchange market is a dynamic market. In these
markets, currency values change every second and hour.
These values changes in accordance with changing forces of
demand and supply which also helps in determining the
exchange rates. Due to its fast-changing character, this market
is termed as the perfect market to trade.
Operates 24 Hours
Foreign exchange markets function 24 hours a day. It provides
a platform where currencies can be traded anytime by traders.
It provides a convenient time to all necessary adjustments
when and wherever needed.
Lower Trading Cost
The forex market has a very low trading cost. In these markets,
there are no commissions like in case of any other investments.
Any difference between buying and selling prices of currencies
is the only cost of trading in the forex market. As there are low
costs then the possibility of incurring losses is also minimum
thereby making it possible for small investors to make good
profit from trading.
Dollar Most Widely Traded
The dollar is the most dominant currency in the foreign
exchange market. This currency is paired with every country’s
currency being traded in the forex market. In a major proportion
of transactions every day, the dollar is one of the two
currencies being traded.
PARTICIPANTS OF FOREIGN EXCHANGE

MARKET

Unlike a stock market, the foreign exchange market is divided

into levels of access. At the top is the interbank foreign
exchange market, which is made up of the largest commercial
banks and securities dealers. Within the interbank market,
spreads, which are the difference between the bid and ask
prices, are razor sharp and not known to players outside the
inner circle. The difference between the bid and ask prices
widens (for example from 0 to 1 pip to 1–2 pips for currencies
such as the EUR) as you go down the levels of access. This is
due to volume. If a trader can guarantee large numbers of
transactions for large amounts, they can demand a smaller
difference between the bid and ask price, which is referred to
as a better spread. The levels of access that make up the
foreign exchange market are determined by the size of the
"line" (the amount of money with which they are trading). The
top-tier interbank market accounts for 51% of all
transactions.[61] From there, smaller banks, followed by large
multi-national corporations (which need to hedge risk and pay
employees in different countries), large hedge funds, and even
some of the retail market makers. According to Galati and
Melvin, “Pension funds, insurance companies, mutual funds,
and other institutional investors have played an increasingly
important role in financial markets in general, and in FX
markets in particular, since the early 2000s.” (2004) In addition,

he notes, “Hedge funds have grown markedly over the 2001–
2004 period in terms of both number and overall size”. Central
banks also participate in the foreign exchange market to align
currencies to their economic needs.
Commercial companies
An important part of the foreign exchange market comes from
the financial activities of companies seeking foreign exchange
to pay for goods or services. Commercial companies often
trade fairly small amounts compared to those of banks or
speculators, and their trades often have a little short-term
impact on market rates. Nevertheless, trade flows are an
important factor in the long-term direction of a currency's
exchange rate. Some multinational corporations (MNCs) can
have an unpredictable impact when very large positions are
covered due to exposures that are not widely known by other
market participants.
Central banks
National central banks play an important role in the foreign
exchange markets. They try to control the money
supply, inflation, and/or interest rates and often have official or
unofficial target rates for their currencies. They can use their
often substantial foreign exchange reserves to stabilize the
market. Nevertheless, the effectiveness of central bank
"stabilizing speculation" is doubtful because central banks do
not go bankrupt if they make large losses as other traders
would. There is also no convincing evidence that they actually
make a profit from trading.
Foreign exchange fixing
Foreign exchange 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
the behavior of their currency. Fixing exchange rates reflect the

real value of equilibrium in the market. Banks, dealers, and

traders use fixing rates as a market trend indicator.
The mere expectation or rumor of a central bank foreign
exchange intervention might be enough to stabilize the
currency. However, aggressive intervention might be used
several times each year in countries with a dirty float currency
regime. Central banks do not always achieve their objectives.
The combined resources of the market can easily overwhelm
any central bank. Several scenarios of this nature were seen in
the 1992–93 European Exchange Rate Mechanism collapse,
and in more recent times in Asia.
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 exposures with the aim of generating
profits as well as limiting risk. While the number of this type of
specialist firms is quite small, many have a large value
of assets under management and can, therefore, generate
large trades.
Retail foreign exchange traders
Main article: Retail foreign exchange trading
Individual retail speculative traders constitute a growing
segment of this market. Currently, they participate indirectly
through brokers or banks. Retail brokers, while largely
controlled and regulated in the US by the Commodity Futures
Trading Commission and National Futures Association, have
previously been subjected to periodic foreign exchange

fraud.[64][65] To deal with the issue, in 2010 the NFA required its
members that deal in the Forex markets to register as such
(i.e., Forex CTA instead of a CTA). Those NFA members that
would traditionally be subject to minimum net capital
requirements, FCMs and IBs, are subject to greater minimum
net capital requirements if they deal in Forex. A number of the
foreign exchange brokers operate from the UK under Financial
Services Authority regulations where foreign exchange trading
using margin is part of the wider over-the-counter derivatives
trading industry that includes contracts for
difference 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
as 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
principals in the transaction versus the retail customer, and
quote a 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 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. The volume of transactions done through

Foreign Exchange Companies in India amounts to about US$2

billion per day This does not compete favorably with any well
developed foreign exchange market of international repute, but
with the entry of online Foreign Exchange Companies the
market is steadily growing. Around 25% of currency
transfers/payments in India are made via non-bank Foreign
Exchange Companies. Most of these companies use the USP
of better exchange rates than the banks. They are regulated
by FEDAI and any transaction in foreign Exchange is governed
by the Foreign Exchange Management Act, 1999 (FEMA).
Money transfer/remittance companies and bureaux de
change
Money transfer companies/remittance companies perform high-
volume low-value transfers generally by economic migrants
back to their home country. In 2007, the Aite Group estimated
that there were $369 billion of remittances (an increase of 8%
on the previous year). The four largest foreign markets
(India, China, Mexico, and the Philippines) receive $95 billion.
The largest and best-known provider is Western Union with
345,000 agents globally, followed by UAE Exchange. Bureaux
de change or currency transfer companies provide low-value
foreign exchange services for travelers. These are typically
located at airports and stations or at tourist locations and allow
physical notes to be exchanged from one currency to another.
They access foreign exchange markets via banks or non-bank
foreign exchange companies.
Top 10 currency traders [60]

% of overall volume, June 2020
Rank Name Market share
1 JP Morgan 10.78 %

2 UBS 8.13 %
3 XTX Markets 7.58 %
4 Deutsche Bank 7.38 %
5 Citi 5.50 %
6 HSBC 5.33 %
7 Jump Trading 5.23 %
8 Goldman Sachs 4.62 %
9 State Street Corporation 4.61 %
10 Bank of America Merrill Lynch 4.50 %
ADVANTAGES OF FOREIGN EXCHANGE

MARKET
The biggest financial market in the world is the biggest market
because it provides some advantages to its participants. Some
of the major advantages offered are as follows:

1. Flexibility
Forex exchange markets provide traders with a lot of

flexibility. This is because there is no restriction on the
amount of money that can be used for trading. Also, there
is almost no regulation of the markets. This combined with
the fact that the market operates on a 24 by 7 basis
creates a very flexible scenario for traders. People with
regular jobs can also indulge in Forex trading on the
weekends or in the nights. However, they cannot do the
same if they are trading in the stock or bond markets or
their own countries! It is for this reason that Forex trading
is the trading of choice for part time traders since it
provides a flexible schedule with least interference in their
full time jobs.
Transparency: The Forex market is huge in size and
operates across several time zones! Despite this,

information regarding Forex markets is easily available.

Also, no country or Central Bank has the ability to single
handedly corner the market or rig prices for an extended
period of time. Short term advantages may occur to some
entities because of the time lag in passing information.
However, this advantage cannot be sustained over time.
The size of the Forex market also makes it fair and
efficient!
2. Trading Options
Forex markets provide traders with a wide variety of

trading options. Traders can trade in hundreds of currency
pairs. They also have the choice of entering into spot
trade or they could enter into a future agreement. Futures
agreements are also available in different sizes and with
different maturities to meet the needs of the Forex traders.
Therefore, Forex market provides an option for every
budget and every investor with a different appetite for risk
taking.
Also, one needs to take into account the fact that Forex
markets have a massive trading volume. More trading
occurs in the Forex market than anywhere else in the
world. It is for this reason that Forex provides unmatched
liquidity to its traders who can enter and exit the market in
a matter of seconds any time they feel like!
3. Transaction Costs
Forex market provides an environment with low

transaction costs as compared to other markets. When
compared on a percentage point basis, the transaction
costs of trading in Forex are extremely low as compared to
trading in other markets. This is primarily because Forex
market is largely operated by dealers who provide a two
way quote after reserving a spread for themselves to

cover the risks. Pure play brokerage is very low in Forex

markets.
4. Leverage
Forex markets provide the most leverage amongst all

financial asset markets. The arrangements in the Forex
markets provide investors to lever their original investment
by as many as 20 to 30 times and trade in the market!
This magnifies both profits and gains. Therefore, even
though the movements in the Forex market are usually
small, traders end up gaining or losing a significant
amount of money thanks to leverage!
DISADVANTAGES OF FOREIGN
EXCHANGE MARKET
It would be a biased evaluation of the Forex markets if attention
was paid only to the advantages while ignoring the
disadvantages. Therefore, in the interest of full disclosure,
some of the disadvantages have been listed below:

1. Counterparty Risks
Forex market is an international market. Therefore,

regulation of the Forex market is a difficult issue because
it pertains to the sovereignty of the currencies of many
countries. This creates a scenario wherein the Forex
market is largely unregulated. Therefore, there is no
centralized exchange which guarantees the risk free
execution of trades. Therefore, when investors or traders
enter into trades, they also have to be cognizant of the
default risk that they are facing i.e. the risk that the
counterparty may not have the intention or the ability to
honor the contracts. Forex trading therefore involves
careful assessment of counterparty risks as well as
creation of plans to mitigate them.
2. Leverage Risks
Forex markets provide the maximum leverage. The word

leverage automatically implies risk and a gearing ratio of

20 to 30 times implies a lot of risk! Given the fact that

there are no limits to the amount of movement that could
happen in the Forex market in a given day, it is possible
that a person may lose all of their investment in a matter
of minutes if they placed highly leveraged bets. Novice
investors are more prone to making such mistakes
because they do not understand the amount of risk that
leverage brings along!
3. Operational Risks
Forex trading operations are difficult to manage

operationally. This is because the Forex market works all
the time whereas humans do not! Therefore, traders have
to resort to algorithms to protect the value of their
investments when they are away. Alternatively,
multinational firms have trading desks spread all across
the world. However, that can only be done if trading is
conducted on a very large scale.
Therefore, if a person does not have the capital or the
know how to manage their positions when they are away,
Forex markets could cause a significant loss of value in
the nights or on weekends.
TRADING CHARACTERISTICS
There is no unified or centrally cleared market for the majority

of trades, and there is very little cross-border regulation. Due to
the over-the-counter (OTC) nature of currency markets, there
are rather a number of interconnected marketplaces, where
different currencies instruments are traded. This implies that
there is not a single exchange rate but rather a number of
different rates (prices), depending on what bank or market
maker is trading, and where it is. In practice, the rates are quite
close due to arbitrage. Due to London's dominance in the

market, a particular currency's quoted price is usually the
London market price. Major trading exchanges
include Electronic Broking Services (EBS) and Thomson
Reuters Dealing, while major banks also offer trading systems.
A joint venture of the Chicago Mercantile Exchange
and Reuters, called Fxmarketspace opened in 2007 and
aspired but failed to the role of a central
market clearing mechanism.
The main trading centers are London and New York City,
though Tokyo, Hong Kong, and Singapore are all important
centers as well. Banks throughout the world participate.
Currency trading happens continuously throughout the day; as
the Asian trading session ends, the European session begins,
followed by the North American session and then back to the
Asian session.
Fluctuations in exchange rates are usually caused by actual
monetary flows as well as by expectations of changes in
monetary flows. These are caused by changes in gross
domestic product (GDP) growth, inflation (purchasing power
parity theory), interest rates (interest rate parity, Domestic
Fisher effect, International Fisher effect), budget and trade
deficits or surpluses, large cross-border M&A deals and other
macroeconomic conditions. Major news is released publicly,
often on scheduled dates, so many people have access to the
same news at the same time. However, large banks have an
important advantage; they can see their customers' order flow.
SPECULATION
Controversy about currency speculators and their effect on
currency devaluations and national economies recurs regularly.
Economists, such as Milton Friedman, have argued that
speculators ultimately are a stabilizing influence on the market,

and that stabilizing speculation performs the important

function of providing a market for hedgers and transferring risk
from those people who don't wish to bear it, to those who do.
Other economists, such as Joseph Stiglitz, consider this
argument to be based more on politics and a free market
philosophy than on economics. Large hedge funds and other
well capitalized "position traders" are the main professional
speculators. According to some economists, individual traders
could act as "noise traders" and have a more destabilizing role
than larger and better informed actors.
Currency speculation is considered a highly suspect activity in
many countries. While investment in traditional financial
instruments like bonds or stocks often is considered to
contribute positively to economic growth by providing capital,
currency speculation does not; according to this view, it is
simply gambling that often interferes with economic policy. For
example, in 1992, currency speculation forced Sweden's
central bank, the Riksbank, to raise interest rates for a few days
to 500% per annum, and later to devalue the krona. Mahathir
Mohamad, one of the former Prime Ministers of Malaysia, is
one well-known proponent of this view. He blamed the
devaluation of the Malaysian ringgit in 1997 on George
Soros and other speculators.
Gregory Millman reports on an opposing view, comparing
speculators to "vigilantes" who simply help "enforce"
international agreements and anticipate the effects of basic
economic "laws" in order to profit.[83] In this view, countries may
develop unsustainable economic bubbles or otherwise
mishandle their national economies, and foreign exchange
speculators made the inevitable collapse happen sooner. A
relatively quick collapse might even be preferable to continued
economic mishandling, followed by an eventual, larger,
collapse. Mahathir Mohamad and other critics of speculation
are viewed as trying to deflect the blame from themselves for
having caused the unsustainable economic conditions.

RISK AVERSION
The MSCI World Index of Equities fell while the US dollar index rose
Risk aversion is a kind of trading behaviour exhibited by the

foreign exchange market when a potentially adverse event
happens that 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
(see Fig.1). This happened despite the strong focus of the crisis
in the US.

CHAPTER-2
RESEARCH DESIGN

TITLE OF THE STUDY:

“A STUDY ON TRADING IN FOREIGN
EXCHANGE MARKET’’
STATEMENT OF PROBLEM:
 The dynamics of foreign currency markets and deals are

quite intriguing. To start with, the markets are volatile and
risky. Yet, they also present interesting risk-return
paradoxes. Ironically, dealers in the markets seem to
embrace these features.
 Foreign exchange market is a network for the trading of
foreign currencies, including interactions of the traders
and regulations of how, where and when they close deals.
It is an arrangement for the buying, selling, and redeeming
of obligations in foreign currency trading.
OBJECTIVES OF THE STUDY:
 To give a brief idea about the benefits available from

trading in foreign exchange market.
 To give an idea of the types of foreign exchange market.
 Observe the trading process of foreign exchange market.
 Observe the risks of trading in foreign exchange market.
 To give an idea about regulation of foreign exchange
market.

SCOPE OF THE STUDY:
The main of the study is to find out the traders awareness

towards trading in foreign exchange market. This study helps in
finding how customers are getting to know about trading, the
risk in trading and the opinion of the traders towards trading in
foreign exchange market.
LIMITATIONS OF THE STUDY:
 The study was limited for only 30 traders due to pandemic

time.
 The study was held through google forms, there was less
time in interactions to the traders.
 There was limited time for the study due to lock downs.
 Risk of losing money.
 Lack of awareness amongst traders.
RESEARCH DESIGN:
 The research design of this study is descriptive research.
The descriptive research studies are those studies which
are concerned with describing the characteristics of an
individual customer, or a group of customers. The study is
concerned with specific predictions, with the narration of
facts and characteristics concerning individual, group or
situation are all examples of descriptive research studies.

FEATURES OF RESEARCH DESIGN

a) Relevant to what is required
b) Reproducible in nature
c) Controlled movement of the research procedure
d) According to plan
e) Logical
f) Systematic in nature
g) According to the rules and the assumption should not be

based on the false bases or judgements.
h) Empirical and replicable in nature
2.6 SAMPLING DESIGN:

 The sampling is 30 of the population. Since the population
from which a sample is to be drawn does not constitute a
homogeneous group, simple random sampling technique
is been applied.
2.7 DATA COLLECTION METHOD:

 PRIMARY DATA:
The primary data are those which are collected afresh and for
the first time, and thus happen to be an original in character,
and from google form sample is collected.

 SECONDARY DATA:
Secondary data are those data which have already been

collected by someone else and which have already been
passed through the statistical process. The secondary data are
collected through the internet, books, journals, and magazines.
2.8 RESEARCH PLAN

• DATA SOURCE: Primary data and Secondary data
• RESEARCH APPROACH: Surveys
• RESEARCH INSTRUMENTS: Questionnaire
• METHOD OF CONTACT: personal and direct
• SAMPLE SIZE: 30 Respondents.
2.9RESEARCH TECHNIQUE:
The researcher has used the following items to test the

hypothesis.
STATISTICAL TOOLS:
Percentage Analysis
PERCENTAGE = No. of Respondents *100

Total no. of Respondents

CHAPTER SCHEME
CHAPTER 1:
INTRODUCTION this chapter includes the theoretical
background of the study in detail. It consists of all the details
about the foreign exchange market
CHAPERT 2:
RESEARCH DESIGN This includes a brief information about
the subject background, Title of the study, Objectives of the
study, Statement of the problem, Limitations of the study,
Overview of the study, Scope of the study, Methodology of the
study.
CHAPTER 3:
DATA ANALYSIS AND INTERPRETATION This chapter
consists of compilation of data analysis by the way of statistical
technique of the study. Data has been analysed and has been
interpreted through pie charts.
CHAPTER 4:
FINDINGS, SUGGESTIONS AND CONCLUSION this chapter
consist of the summary of the findings based on data collected
through the investors and the conclusions and suggestions
which possibly help the awareness of risk in foreign exchange
market.
CHAPTER 5:
BIBLIOGRAPHY
This chapter consists of a list of references made from
textbooks, journals, newspaper, magazines, internet and
websites.

CHAPTER-3
DATA ANALYSIS AND
ITERPRETATION

The results of the analysis are presented in the following

sections.
AGE OF THE RESPONDENT

TABLE 3.1
Sl.No Age No of % of
respondents respondents
1 10-20 0 0%
2 20-30 26 86.7%
3 30-40 04 13.3%
4 Above 40 0 0%
Total 30 100%
ANALYSIS:
From the above table shows the age of the respondents, 0
respondents age is 10-20, 26 respondents age is 20-30, 04
respondent age is 30-40 and 0 respondents are above 40.

Pie chat 3.1
INTERPRETATION:
From the above chart it shows that 0% of the respondents
belong to the age group of 10-20, 86.7% of them belong to age
group of 20-30 and 13.3% of them belongs to age group of 30-
40 and 0 are belong to Above 40.

GENDER
TABLE 3.2
Sl.No Gender Respondents % of

respondents
1 Male 29 96.7%
2 Female 01 0.033%
Total 30 1oo%
ANALYSIS:
From the above table shows the gender of the respondents 29
respondents are male and 01 are female.

Pie chat 3.2
INTERPRETATION:
From the above chart shows that 96.7% are male respondents
and 0.033% are female.

OCCUPATION
TABLE 3.3
Sl.No Occupation Respondents % of

respondents
1 Student 20 66.7%
2 Employee 06 20%
3 Business 04 13.3%
Total 30 100%
ANALYSIS:
From the above table shows the occupation of the respondents,
20 respondents are students, 06 respondents are employee
and 04 respondent businessman.

Pie chart 3.3
INTERPRETATION:
From the above chart it shows that 66.7%of the respondents
are students, 20% are employee and 13.3% are businessmen.

Do you have any idea about foreign exchange

market?
TABLE 3.4
Sl.No Opinion Respondents % of

respondents
1 Yes 11 36.7%
2 No 19 63.3%
Total 30 100%
ANALYSIS:
From the above table shows that 11 respondents have idea
about foreign exchange market and 19 respondents does not
have any idea.

Pie chart 3.4
INTERPRETATION:
From the above chart it shows that that 36.7% respondents
have idea about foreign exchange market and 63.3%
respondents does not have any idea.

What is your annual income?
TABLE 3.5

respondents
1 Below100000 18 60%
2 100000- 10 33.3%
200000
3 300000- 2 6.7%
400000
4 Above5000000 0 0%
Total 30 100%
ANALYSIS:
From the above table shows that 18 respondents annual

income is below 1000000, 10 respondents annual income is
100000-200000 and 2 respondents annual income is 300000-
400000.

Pie chart 3.5
INTERPRETATION:
From the above chart it shows that 60% respondents annual
income is below 1000000, 33.3% respondents annual income
is 100000-200000 and 6.7% respondents annual income is
300000-400000.

Which are the primary sources of your

knowledge about foreign exchange market?
TABLE 3.6

respondents
1 Television 3 10%
2 Internet 16 53.3%
3 Newspaper 4 13.3%
4 Friends 7 23.3%
Total 30 100%
ANALYSIS:
From the above table shows that the primary sources of
respondents about foreign exchange market in this 3 people
have opted television, 16 have opted internet, 4 have opted
newspapers and 7 have opted friends.

Pie chart 3.6
INTERPRETATION:
From the above chart it shows that the primary sources of
respondents about foreign exchange market in this 10% people
have opted television, 53.3% have opted internet, 13.3% have
opted newspapers and 23.3% have opted friends.

Have you ever traded in foreign exchange

market?
TABLE 3.7

respondents
1 Yes 9 30%
2 No 21 70%
Total 30 100%
ANALYSIS:
From the above table shows that 9 respondents have traded in
foreign exchange market and 21 people have not traded.

Pie chart 3.7
INTERPRETATION:
From the above chart it shows that 30% respondents have
traded in foreign exchange market and 70% respondents have
not traded.

Which of the following best describes your trading

style?
TABLE 3.8

respondents
1 Scalper 5 17.2%
2 Day Trader 14 44.8%
3 Swing 7 24.1%
Trader
4 Position 4 13.8%
Trader
Total 30 100%
ANALYSIS:
From the above table shows that which of the opinions

describes respondents trading style, in this 5 respondents have
opted scalper, 14 had opted day trader, 7 had opted swing
trader and 4 have opted position trader.

Pie chart 3.8
INTERPRETATION:
From the above chart it shows that which of the opinions
describes respondents trading style, in this 17.2% respondents
have opted scalper, 44.8% had opted day trader, 24.1% had
opted swing trader and 13.8% have opted position trader.

Which time frame do you trade?
TABLE 3.9

respondents
1 1 minute 2 6.9%
2 15 minute 1 3.5%
3 30 minute 6 20.7%
4 1 hour 5 17.2%
5 Daily 16 51.7%
Total 30 100%
ANALYSIS:
From the above table shows that on which time frame does the
respondents would trade, in this 2 respondents had opted 1
minute, 1 respondent had opted 15 minute, 6 respondents had
opted 30 minute, 5 respondents have opted 1 hour and 16
respondents have opted daily.

Pie chart 3.9
INTERPRETATION:
From the above chart it shows that on which time frame does
the respondents would trade, in this 6.9% respondents had
opted 1 minute, 3.5% respondent had opted 15 minute, 20.7%
respondents had opted 30 minute, 17.2% respondents have
opted 1 hour and 51.7% respondents have opted daily.

What currencies do you mainly trade?
TABLE 3.10

respondents
1 EURUSD 5 17.9%
2 USDJPY 3 10.7%
3 GBPUSD 5 17.9%
4 USDCAD 17 53.6%
Total 30 100%
ANALYSIS:
From the above table shows that which type of currency does
the respondents trade, in this 5 respondents had opted
EURUSD, 3 respondents had opted USDJPY, 5 had opted
GBPUSD and 17 had opted USDCAD.

Pie chart 3.10
INTERPRETATION:
From the above chart it shows that which type of currency does
the respondents trade, in this 17.9% respondents had opted
EURUSD, 10.7% respondents had opted USDJPY, 17.9% had
opted GBPUSD and 53.6% had opted USDCAD.

Are you looking to improve your trading results?
TABLE 3.11

respondents
1 Yes 21 69%
2 No 9 31%
Total 30 100%
ANALYSIS:
From the above table shows that 21 respondents are looking to
improve their trading results and 9 are not looking to improve
their trading results.

Pie chart 3.11
INTERPRETATION:
From the above chart it shows that 69% respondents are
looking to improve their trading results and 31% are not looking
to improve their trading results.

How do you came to know about foreign

exchange market?
TABLE 3.12

respondents
1 Advertisement 7 24.1%
2 Banks 5 13.8%
3 Financial 0 0
Advisors
4 Friends 18 62.1%
Total 30 100%
ANALYSIS:
From the above table shows that how does the respondents
came to know about foreign exchange market, in this 7
respondents had opted from advertisement, 5 had opted from
banks and 18 had opted from friends.

Pie chart 3.12
INTERPRETATION:
From the above chart it shows that how does the respondents
came to know about foreign exchange market, in this 24.1%
respondents had opted from advertisement, 13.8% had opted
from banks and 62.1% had opted from friends.

How do you rate the risks associated with

trading in foreign exchange market?
TABLE 3.13

respondents
1 Low 18 58.6%
2 Moderate 10 34.5%
3 High 2 6.9%
Total 30 100%
ANALYSIS:
From the above table shows that ratings given by the
respondents about risks associated with trading in foreign
exchange market, in this 18 respondents had rated low, 10 had
rated moderate and 2 had rated high.

Pie chart 3.13
INTERPRETATION:
From the above chart it shows that ratings given by the
respondents about risks associated with trading in foreign
exchange market, in this 58.6% respondents had rated low,
34.5% had rated moderate and 6.9% had rated high.

What do you think which risks usually affects

trading in foreign exchange market?
TABLE 3.14

respondents
1 Exchange 8 27.6%
rate risk
2 Country risk 11 37.9%
3 Liquidity risk 7 24.1%
4 Transactional 4 10.3%
risk
Total 30 100%
ANALYSIS:
From the above table shows that which risks usually affects
trading in foreign exchange market for respondents, in this 8
respondents had opted exchange rate risk, 11 had opted
country risk, 7 had opted liquidity risk and 4 had opted
transactional risk.

Pie chart 3.14
INTERPRETATION:
From the above chart it shows that which risks usually affects
trading in foreign exchange market for respondents, in this
27.6% respondents had opted exchange rate risk, 37.9% had
opted country risk, 24.1% had opted liquidity risk and 10.3%
had opted transactional risk.

What differentiates currency trade from other

types of trading?
TABLE 3.15

respondents
1 Its liquidity 8 27.6%
2 The risks 14 48.3%
3 The rewards 5 17.2%
4 The 3 6.9%
liabilities
Total 30 100%
ANALYSIS:
From the above table shows that what differentiates currency
trade from other types of trading according to respondents, in
this 8 respondents had opted its liquidity, 14 had opted the
risks, 5 had opted the rewards and 3 had opted the liabilities.

Pie chart 3.15
INTERPRETATION:
From the above chart it shows that what differentiates currency
trade from other types of trading according to respondents, in
this 27.6% respondents had opted its liquidity, 48.3% had opted
the risks, 17.2% had opted the rewards and 6.9% had opted
the liabilities.

In which type of foreign exchange market

would you like to invest?
TABLE 3.16

respondents
1 Future 17 55.2%
market
2 Forward 9 31%
market
3 Swap 3 10.3%
market
4 Option 1 3.5%
market
Total 30 100%
ANALYSIS:
From the above table shows that in which type of foreign
exchange market does the respondents like to trade, in this 17
respondents had opted its future market, 9 had opted the
forward market, 3 had opted the swap market and 1 had opted
the option market.

Pie chart 3.16
INTERPRETATION:
From the above chart it shows that that in which type of foreign
exchange market does the respondents like to trade, in this
55.2% respondents had opted its future market, 31% had opted
the forward market, 10.3% had opted the swap market and
3.5% had opted the option market.

What is the transaction cost in foreign

exchange market?
TABLE 3.17

respondents
1 Low 21 69%
2 Moderate 5 17.2%
3 High 4 13.8%
Total 30 100%
ANALYSIS:
From the above table shows that the transaction cost in foreign
exchange market according to the respondents, in this 21
respondents had opted low, 5 had opted moderate and 4 had
opted high.

Pie chart 3.17
INTERPRETATION:
From the above chart it shows that the transaction cost in
foreign exchange market according to the respondents, in this
69% respondents had opted low, 17.2% had opted moderate
and 13.8% had opted high.

Does foreign exchange market provide wide

variety of trading options?
TABLE 3.18

respondents
1 Yes 23 75.9%
2 No 7 24.1%
Total 30 100%
ANALYSIS:
From the above table shows that does the foreign exchange
market provide wide variety of trading options, in this 23
respondents had opted yes and 7 had opted no.

Pie chart 3.18
INTERPRETATION:
From the above chart it shows that does the foreign exchange
market provide wide variety of trading options, in this 75.9%
respondents had opted yes and 24.1% had opted no.

CHAPTER-4
FINDINGS, SUGGESTIONS AND
CONCLUSION

FINDINGS
 Forex exchange markets provide traders with a lot of
flexibility. This is because there is no restriction on the
amount of money that can be used for trading.
 Forex markets provide traders with a wide variety of
trading options. Traders can trade in hundreds of currency
pairs.
 Forex market provides an environment with low
transaction costs as compared to other markets.
 Forex markets provide the most leverage amongst all
financial asset markets.
 Regulation of the Forex market is a difficult issue because
it pertains to the sovereignty of the currencies of many
countries.
 Forex trading operations are difficult to manage
operationally. This is because the Forex market works all
the time whereas humans do not! Therefore, traders have
to resort to algorithms to protect the value of their
investments when they are away.
SUGGESTIONS
 Forex trading is a risky as well as a beneficial venture.

This is because in this trade, you can make a lot of cash
within a very short duration. On the other hand, you can
make huge losses within a short duration. You can reduce
the chances of making losses by improving the tactics to
use in the trade. The first tactic that will help in this trade is
use of charts. It is recommended that you should look at
the charts of the past events in this trade. This will help

you in making predictions and give direction on the likely

changes. There are some trends in the charts that can
repeat themselves.
 Another tactic that you can use in forex trade is using
online tools. You can use a site to sell and buy currencies.
There are different websites that you can choose from to
make your trades. It is important that you should go for
reputable sites where you can start trading. You do not
want to be frustrated by using websites that are
undertaking malicious activities. Therefore, one should
research about the foreign exchange website before
investing your trade there.
 Another point about winning more trades is keeping your
emotions in check. If you trade differently every time you
open a position then you will be inconsistent with your
International Journal of Pure and Applied Mathematics
Special Issue 3618 winning trades. Decide your strategy
and then trade it. Plan your trade and then trade your
plan!
 Something which works for me is to think of each trade in
pip or point value. So, instead of thinking of how much
money you will gain or lose, look at it in a different way.
How many pips will you gain or risk with your stop loss.
Consequently, money is taken out of the equation together
with the associated emotions.
 If you are trading a live account, then you would have
come a long way in developing your Forex trading
strategies and you will be able to benefit from your hard
work. Keeping your emotions in check will allow you a
clear mind to take those trades and make your profit.

CONCLUSION
Forex markets, which are also known as currency markets, are the
most active trading futures markets both in terms of volume and
amount of money. With a daily volume of over $2 trillion, trading
Forex is done mostly between central banks, commercial banks and
large companies. Forex markets are unique because then aren't
traded at futures exchanges; they are traded directly between
investors in such trading centres as London, New York and Tokyo.
Forex currency trading for beginners can seem very different from
the stock market. Forex markets have different regulations and
terminology but the same overall principles apply. Successful trading
is hard work! Forex in particular paves the way for many traders to
think they’ve found the Land of Easy Money, but it is exactly the
opposite. Forex is the market with the biggest rewards, but it is also
the toughest market to crack. Compounding the problem is the fact
that there are not many well-made, honestly offered tools or
services in the market to aid the International Journal of Pure and
Applied Mathematics Special Issue 3619 average trader.
Understanding the major components of a trading plan is a
prerequisite for successful trading.

CHAPTER-5
BIBILOGRAPHY

Bibliography
www.investopedia.com
www.wikipedia.org
www.icicidirect.com
***

Forex Project BGGNFNGHM

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Forex Project BGGNFNGHM

Uploaded by

Copyright:

Available Formats

SESHADRIPURAM FIRST GRADE COLLEGE

Title of the Project

SESHADRIPURAM FIRST GRADE COLLEGE

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 1

CERTIFICATE BY THE GUIDE

Certifies that this dissertation is based on an original project

Date: Signature of the guide

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 2

As a student of commerce, I have gone through a vast amount

SESHADRIPURAM FIRST GRADE COLLEGE

I HEMANTH.NS hereby, declare that the project work titled “A

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 4

CHAPTER CONTENTS PAGE.NO

2 RESEARCH DESIGN 35-40

3 DATA ANALYSIS AND 41-77

4 FINDINGS, SUGGESTION AND 78-81

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 5

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 6

The foreign exchange market (Forex, FX, or currency

of trading between a wide range of multiple types of buyers and

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 8

commercial and financial relations among the world's major

 its huge trading volume, representing the largest asset class

 $2 trillion in spot transactions

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 9

 $3.2 trillion in foreign exchange swaps

Foreign Exchange (forex or FX) is the trading of one currency

The foreign exchange market is over a counter (OTC) global

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 10

Currency trading and exchange first occurred in ancient

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 11

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 12

After World War II

dollar acquisition (a figure is given as 2.75 billion in total by The

MARKET SIZE AND LIQIDITY

The foreign exchange market is the most liquid financial market

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 15

exchanges. All these developed countries already have fully

Main foreign exchange market turnover, 1988–2007, measured in billions of USD.

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 16

TYPES OF FOREIGN EXCHANGE MARKET

The foreign exchange market, also known as the forex market,

1. The Spot Market

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 17

The third type of foreign exchange market is the forward market

When there is a simultaneous borrowing and lending of two

FUNCTIONS OF FOREIGN EXCHANGE

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 18

In performing the transfer function, the foreign exchange

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 19

international payments, a credit for about 3 months, till their

Exchange risk as such should be avoided or reduced. For this

No money passes at the time of the contract. But the contract

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 20

FEATURES OF FOREIGN EXCHANGE

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 21

PARTICIPANTS OF FOREIGN EXCHANGE

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 22

Unlike a stock market, the foreign exchange market is divided

markets in particular, since the early 2000s.” (2004) In addition,

A STUDY ON TRADING IN FOREIGN EXCHANGE MARKET 24

real value of equilibrium in the market. Banks, dealers, and