FUTURES MARKET TRADING GAME ASSIGNMENT

FUTURES AND OPTIONS (FIN645)

TRADING FINAL REPORT

GROUPMEMBERS:

NO NAME STUDENTID

1 AINOLMASTURA BINTI HATAMAH 2019843112

2 HALIZAWATI BINTI JAAFAR 2019654064

3 MUHAMMAD AL HAFIZ BIN ISMAIL 2019198419

4 ELI SYAHIRAH BINTI AZIMAN 2019692438

5 NOR SYAHIRAH BINTI MOHD JUSAK 2018682832

SUBMITTEDTO:

MISS AMIRAH HAZIMAH BINTI BORHANORDIN

SUBMISSIONDATE:

30TH JUNE 2022

 TABLE OF CONTENT

NO CONTENT PAGE

1.0 INTRODUCTION

2.0 LIST OF THE INSTRUMENTS OR

COMMODITIES TRADED

3.0 RESEARCH READINGS AND PRIZE

ANALYZATION

4.0 FACTOR DETERMINATION OF PRICE

5.0 PROFIT OR LOSS

6.0 MOST PROFITABLE AND MOST

UNPROFITABLE TRADES

7.0 STRENGTHS AND WEAKNESSES

8.0 IMPROVEMENT STRATEGY IN FUTURE

9.0 CONCLUSION

10.0 REFERENCES

11.0 APPENDICES

1.0 INTRODUCTION
 As is well known, a trader must know when to exit the market before entering it. Solid trading
strategies and an effective money management plan are basically two conditions for being
consistently profitable in the market, regardless of what kind of financial instruments a trader trade.
In general, considering traders' own expectations, expectations, interests, and personality is an
important part of developing a strategy because traders can experiment with various trading
strategies to find efficient strategies that suit their objectives, expectations, and personality.
Choosing a current effective strategy to become a good trading strategy is usually smarter and faster
for certain traders. In this assignment, we must write a detailed report on our trading game, including
our strengths and weaknesses, profitable and unprofitable instruments, suggestions for
improvement, and much more.
Even if a trading strategy contains extremely short-term elements, such as minute-to-minute
day trading, it should be long-term in nature. Elements of a trading strategy should include the
market, time frame, asset type, amount to put, and whether to put a lump sum or in regular
additions. Once a trader has established their trading rules, it is critical that they be followed. They
can try to change their strategy and related rules later on. A trader should not expect all trades to be
successful, and a trader's success using one strategy will not reflect the success of another trader.
In the market, there are numerous trading strategies available. For example, a news trading
strategy or fundamental analysis that includes both before and after news reports in which traders
trade based on news and market expectations as traders can find trading opportunities by looking at
the news. Every day, there are numerous news events and economic releases that may provide
trading opportunities. Traders can also use technical analysis. It calculates an instrument's future
price by using the past price. As a result, traders can buy an instrument if they believe the market
will rise or if the instrument is oversold.
Otherwise, they can sell an instrument if they believe the price will fall or become overbought.
Day trading or intraday trading is ideal for traders who prefer to trade actively throughout the day.
Intra-day traders profit from price fluctuations between the market's open and close times. Choosing
a trading strategy does not have to be difficult, and traders do not have to stick to just one. The main
thing to remember is that the best traders can adapt and adjust their trading strategies.

2.0 LIST OF THE INSTRUMENTS OR COMMODITIES TRADED

 Crude Palm Oil Futures (FCPO)
FCPO is a crude palm oil futures contract traded on the Bursa Malaysia Derivatives
exchange that has been providing market participants with a global price index in the Crude
Palm Oil Market since 1980. It is a legally binding agreement to buy or sell at a fixed price at
a future date. FCPO is standardised for 25 metric tonnes per contract with a RM1 per metric
tonne minimum price fluctuation. The FCPO agreement focuses on physical distribution. As a
result, before the futures contract expires, the holder assumes the obligation to purchase the
agreed-upon quantity of crude palm oil. (Yong, 2018)
We chose FCPO because it is flexible; the futures market allows us to sell in the
physical market when there is little demand and allows us to buy when supply is scarce and
there is little selling interest in the physical market (RHB, 2021). FCPO can also help market
hedgers and speculators manage price risk. For example, the oil-related industry would
hedge the FCPO against unfavorable price fluctuations in the physical market in order to
monitor their product cost and profit margin. While acting as market speculators, we gain
control of exposure to crude palm oil price fluctuations and receive the spread.

• FTSE Bursa Malaysia KLCI Futures (FKLI)

FKLI is a Ringgit Malaysia ('MYR') denominated FTSE Bursa Malaysia Kuala Lumpur
Composite Index (FBM KLCI) futures contract traded on Bursa Malaysia Derivatives that
provides exposure to the underlying FBM KLCI constituents. Both institutional and retail
investors use it on a regular basis in their trading portfolios. FBM KLCI multiplied by MYR50
equals FKLI contract size (Malaysia, 2021)
We traded FKLI because it has global access. FKLI is traded electronically on
a multinational electronic exchange platform called CME GLOBEX®. Accessing CME
GLOBEX® is simple, and it allows us and experienced traders around the world to trade all
Bursa Malaysia derivatives. The FKLI will then be sold by an insurance firm or fund manager
with an equity portfolio as a hedge to protect itself from a possible fall in the valuation of the
equity portfolio. In order to achieve leveraged exposure resulting from market fluctuations in
the underlying FBM KLCI index, we may use the FKLI. Finally, the ability to short sell, as
demonstrated by FKLI trading, encourages us to sell first and buy later in order to close our
trading positions.

• GOLD Futures (FGLD)

 FGLD is a small-sized gold futures contract in Malaysian Ringgit ("RM") listed on the
Bursa Malaysia Derivatives, providing market participants with exposure to foreign gold
price fluctuations at a lower entry rate. The FGLD agreement's pricing in local currency
reduces the need for Malaysian members to purchase foreign currency, thereby avoiding
exposure to currency volatility. Each FGLD contract is equal to 100 grammes of gold
bullion. The small size is intended to provide convenience for everyone, but also
versatility for those who want greater visibility. The small scale provides affordability for
the retail player who requires less visibility. For the industrial customer who requires
greater visibility, the transaction can be exchanged in multiple lots at once. (Malaysia, Gold
Futures (FGLD), 2021)
We may still benefit from falling rates in the derivatives market. In anticipation of a
price decline, we can short-sell FGLD and then buy it back at a lower price later. This
feature distinguishes itself from other investment instruments because it encourages us to
take advantage of all price patterns, even when gold is in a bearish trend. Another feature
of BMD Gold Futures is the ability to use leverage. When used correctly, leverage is an
effective mechanism that allows investors to manage an asset that is more expensive
than their original investment, significantly increasing the return on investment.

3.0 RESEARCH READINGS AND PRIZE ANALYZATION

 The purpose of research reading is to comprehend or derive meaning from a written text. It
aids us in determining what the research tells us about the active process of meaning construction
and how good readers consciously employ understanding strategies. Before we begin or continue
with a trading transaction, we conduct some research and reading. Halizawati binti Jaafar and
Ainol Mastura is in charge of research reading.

Some of our research readings come from websites like The Edge Market, Bernama, StarBiz,
freemalaysiatoday (FMT), and Malay mail, which are constantly updated with information about
market futures. We used news because it has the potential to influence the price of our trading
instruments. We can usually go to websites to find current information or news about the market,
industry, economy, and political situation that affects commodities or the economy. These
websites are extremely helpful and beneficial to us when deciding on a trade within a specific
timeframe. We can be prepared for price movement before entering the market by knowing
whether the market is in an uptrend (bullish) or a downtrend (bearish).

Aside from research reading, our group also did some prize analysis, whether through
technical analysis or otherwise. Technical analysis is a trading discipline that is used to evaluate
investments and identify trading opportunities by analyzing statistical trends derived from trading
activities such as price movements and volume. Muhammad Al-Hafiz, Eli Syahirah, and Nor
Syahirah are three of the members who contributed to our price analysis.

We concentrated on price analysis because we had learned how to use various technical
tools to capture an idea or price for a specific instrument the previous semester. Furthermore, we
used some other indicators that may assist us in trading and analyzing price movement, such as
MACD, Relative Strength Index (RSI), Rate of Change (ROC), and many more.

We did aim for the best time to complete the transaction because it is critical for us to know
when the best time is to buy or sell in the future market. For example, we buy FCPO near the
closing time because the futures price is usually low, and then we decide to sell the futures in the
morning of the next day because the price of FCPO is higher at that time, which can give us a
large profit, and new transactions begin as the price is frequently set higher day by day.

4.0 FACTOR DETERMINATION OF PRICE

 We chose a volatile instrument to ensure that the commodities we trade maximize profit. As
volatility rises, so do our chances of profit. High volatility instruments are also risky. We assessed
volatility by looking at traded volume. This volume indicates whether the demand for this
instrument is high or low. Following our research on the instrument on the Bursa Malaysia, we
discovered that only two instruments are extremely volatile, namely the Crude Palm Oil (FCPO)
and the Kuala Lumpur Index of Futures (FKLI). Because of their high volatility, these two
commodities were our first choice for trading.

Aside from that, we monitor the price action on the Trading view website using technical
analysis. This price action refers to the movement of the instrument used to forecast whether the
price will rise or fall. We can't figure out Futures Gold's price action. As a result, we will trade gold
less frequently in the future. As a result, we make an assumption. We will take a very long
position if we believe the price will rise, and a short position if we believe the price will fall.

Finally, the catalyst is one of the factors that drives high volatility prices of financial
instruments or commodities. If there is a negative sentiment, the price is expected to fall; if there
is a positive sentiment, the price is expected to rise. This will be very beneficial to us in terms of
profit maximization.

5.0 PROFIT OR LOSS

The table below shows our overall trading performance after the trading game concludes on June
15, 2022:

Profit / Loss
Investor’s Name Total Game Value (Rm)
(Rm)

1. Halizawati binti Jaafar

2. Ainol Mastura binti Hatamah 1,084,850.00 84,850.00

3. Muhammad Al Hafiz bin Ismail

4. Eli Syahirah binti Aziman 1,034,850.00 34,850.00

5. Nor Syahirah binti Mohd Jusak

Total Profit
 4.0 STRENGTHS AND WEAKNESSES

We discovered our strengths and weaknesses throughout the trading process. Our organization
has a few strengths that help us in the futures trading process. The first strength is having a
certain objective in mind. From the beginning to the finish of the trading activity, our group has a
clear purpose and mindset: to make a large profit. We were better equipped to attain our aims
since we had a clear target in mind. These strategies are critical in avoiding all the uncertainty
that may occur in the market since we are all prepared for the results. The second aspect of our
group's expertise is that we do research and studies on the futures market as well. Before
engaging in any trades, it is crucial to have a thorough understanding of the market. We studied
the trends and patterns of futures markets before becoming involved in the trade.
When finishing this assignment, we discovered that we had a few weaknesses. We have a
limited number of losses due to this weakness, and there is an entry where we can make more
money, but the money we make is lower due to our incompetence. We would like to eliminate all
our mistakes if we get another chance to play this game in the future so that we can maximize
our earnings. Our first error in this trading simulator game was failing to stick to our trading
plan. There are a few entries when we finalize the trading plan before placing a trade, but the
reality is that we don't follow it. Traders on the Bursa Malaysia exchange frequently make
blunders like this one. Given that our emotional interests are implicated, it would be difficult for
us to monitor common mistakes as they are made. When our portfolios breach our cut-loss
threshold, we frequently maintain them in place in the vain hope that they will recover and turn
profitable in the future.
Making an entry without using any trading method is the second flaw we have. This weakness
is the biggest mistake a trader can make in the stock markets, foreign currency markets, futures
markets, and other types of financial instruments since, without a trading strategy, positioning in
all these instruments is identical to gambling. We have a very slim chance of making money with
this device. Without a trading plan, we would never know when to cut our losses, where to profit
from our admittance, or whether we should hold onto our position. The first thing we would like
to change or get over in the future is this error.
11.0 APPENDIX

ELI SYAHIRAH BINTI AZIMAN