SUMMER PROJECT REPORT ON

TECHNICAL ANALYSIS IN FOREIGN EXCHANGE

WITH REFERENCE TO

(SPAN CAPLEASE PVT. LTD.)

BY

Vaghela Ajay .
SUBMITTED TO: C.K.SHAH VIJAPURWALA INSTITUTE OF MANAGEMENT, VADODARA.

ACKNOWLEDGEMENT
It is almost inevitable to incur indebtedness to all who generously helped by sharing their invaluable time and rich experience with me, without which this project would have never been accomplished. With regards to my project with Span Caplease Pvt. Ltd., I would like to thank each & every one who offered help, guidelines & support whenever required. No task can be achieved alone, particularly while attempting to finish a project of such magnitude. It took many very special people to facilitate it and sup3port it. Hence, I would like to acknowledge all of their valuable support and convey our humble gratitude to them. I would like to acknowledge my sincere gratitude to my mentor Miss Neha & the director Mr. Kaushal Shah for sharing their valuable ideas, constructive criticism and motivation, which were the guiding, light during the entire tenure of this work. In our efforts we would not forget the contribution of our institute CKSVIM. I express a deep gratitude to my institute for the valuable support, guidance and encouragement during the summer internship.

PREFACE
Summer training is an integral part of the MBA programme. The main objective of the Summer Training is to work in the organization and gain the valuable knowledge of management skills that will be useful in the future career building. The purpose is to study how an organization functions and how to apply our theoretical knowledge in the professional life. As a practical point of view for training We have selected Span Caplease Pvt. Ltd. which is one of the leading brokerage house in Gujarat. It helps to get better understanding of stock market. Now a days, share market business is on expansion path. Most of the people are investing in the share market, even a people who are illiterate also investing in a share market. This repot contain using of technical analysis in the trading of foreign exchange. This report helps to people to know various terms and various way of calculating brokerage. We hope this report helps to people understand clearly regarding stock exchange.

EXECUTIVE SUMMARY
The summer internship at SPAN CAPLEASE undertaken by us has given us an exposure into the investment scenario in India. The project that we were involved with while working at SPAN CAPLEASE includes advisory services i.e. educating the existing and potential investors about stock market as an alternative source to investment. This involves catering to the queries of the investors about the concept of stock market, the various options that an investor can invest his money into, funds management of investors. Analyzing the investors behavior includes understanding the concerns a person has towards Stock Market, his stages in life and wealth cycle, the effect of the investments made by the peer groups, effect of the profession he/she is in, education qualification, importance of tax benefits, the most preferred saving tool etc. and this all is analyzed with the help of a schedule prepared. This project helps us to understand foreign exchange trading with the use of the various tools of technical analysis. The technical analysis is more helpful to take right decision regarding buying & selling of any currency. Thus, the foreign exchange traders can get the advantage of accurate decision-making.

INDEX
NO. 1. Industry Overview A brief history of stock exchange 2. Online trading process Company Profile Introduction to Span Caplease About Span Caplease Management Team Spans logo Spans vision Spans mission
Organization Structure

Particulars

Page No. 7 10 12 13 14 16 17 18 19 20 21 23 24 25 25

Products of Span Caplease Investment advisory services Commodity Benefits at Span 3. Depository Participant Service Technical analysis Introduction Importance 4 important points of view Types of charts Methods of TA
Patterns

26 27 27 28 40 48 56
5

4.

History of foreign exchange

5. 6. 7. 8.

Introduction to foreign exchange How the Currencies are traded? Conclusion Bibliography

59 62 71 72

A BRIEF HISTORY OF STOCK EXCHANGES:Do you know that the world's foremost market place New York Stock Exchange (NYSE), started its trading under a tree (now known as 68 Wall Street) over 200 years ago? Similarly, India's premier stock exchange Bombay Stock Exchange (BSE) can also trace back its origin to as far as 125 years when it started as a voluntary non-profit making association. You hear about it any time it reaches a new high or a new low, and you also hear about it daily in statements like 'The BSE Sensitive Index rose 5% today'. Obviously, stocks and stock markets are important. Stocks of public limited companies are bought and sold at a stock exchange. But what really are stock exchanges? Known also as News on the stock market appears in different media every day. The stock market or bourse, a stock exchange is an organized market place for securities (like stocks, bonds, options) featured by the centralization of supply and demand for the transaction of orders by member brokers, for institutional and individual investors. The exchange makes buying and selling easy. For example, you don't have to actually go to a stock exchange, say, BSE - you can contact a broker, who does business with the BSE, and he or she will buy or sell your stock on your behalf. All stock exchanges perform similar functions

With respect to the listing, trading, and clearing of securities, differing only in their administrative machinery for handling these functions. Most stock exchanges are auction markets, in which prices are determined by competitive bidding. Trading may occur on a continuous auction basis, may involve brokers buying from and selling to dealers. In certain types of stock or it may be conducted through specialists dealing in a particular stock. But where did it all start? The need for stock exchanges developed out of early trading activities in agricultural and other commodities. During the middle Ages, traders found it easier to use credit that required supporting documentation of drafts, notes and bills of exchange. The history of the earliest stock exchange, the French stock exchange, may be traced back to 12th century when transactions occurred in commercial bills of exchange. The first stock exchange in India, Bombay Stock Exchange was established in 1875 as 'The Native Share and Stockbrokers Association' and has evolved over the years into its present status as the premier stock exchange in the country. It may be noted that BSE is the oldest stock exchange in Asia, even older than the Tokyo Stock Exchange, which was founded in 1878. The country's second stock exchange was established in Ahmedabad in 1894, followed by the Calcutta Stock Exchange (CSE). CSE can also trace its origin back to 19th century. From a get together under a 'Neem Tree' way back in the 1830s, the CSE was formally established in May 1908. India's other major stock exchange National Stock Exchange (NSE), promoted by leading financial institutions, and was established in April 1993. Over the years, several stock exchanges have been established in the major cities of India. There are now 23 recognized stock exchanges Mumbai (BSE, NSE and OTC), Calcutta, Delhi, Chennai, Ahmedabad, Bangalore,
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Bhubaneswar, Coimbatore, Guwahati, Hyderabad, Jaipur, Kochi, Kanpur,

Ludhiana, Mangalore, Patna, Pune, Rajkot, Vadodara, Indore and Meerut. Today, most of the global stock exchanges have become highly Efficient, computerized organizations. Computerized networks also made it possible to connect to each other and have fostered the growth of an open, global securities market. Realizing there is untapped market of investors who want to be able to execute their own trades when it suits them, brokers have taken their trading rooms to the Internet. Known as online brokers, they allow you to buy and sell shares via Internet.

Online Trading is a service offered on the Internet for purchase and sale of shares. In the real world, you place orders on your stockbroker either verbally (personally or telephonically) or in a written form (fax). In Online Trading, you will access a stockbroker's website through your internet-enabled PC and place orders through the broker's internet-based trading engine. These orders are routed to the Stock Exchange without manual intervention and executed thereon in a matter of a few seconds. There are 2 types of online trading service: discount brokers and full service online broker. Discount online brokers allow you to trade via Internet at reduced rates. Some provide quality research, other dont. Full service online brokerage is linked to existing brokerages. These brokers allow their clients to place online orders with the option of talking/ chatting to brokers if advice is needed. Brokerage rates here are higher. Indiainfoline.com, span caplease, ICICIDirect.Com, IndiaBulls.Com, AngelBroking.com, HDFCSecurities.Com is some of the online broking sites in India.

ONLINE TRADING PROCESS:The various transactions involved in online trading can be shown from the point of view of the

Client Broker Stock Exchange.

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Online trading process

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COMPANY PROFILE
INTRODUCTION AND HISTORY:SPAN CAPLEASE is the retail broking Firm, an organization with more than eight decades of trust & credibility in the stock market. It is India's leading retail financial Services Company. While our size and strong balance sheet allow us to provide you with varied products and services at very attractive prices, our over Client Relationship Managers are dedicated to serving your unique needs. SPAN CAPLEASE is lead by a highly regarded management team that has invested into a world class Infrastructure that provides our clients with real-time service & 24/7 access to all information and products. Our flagship SPAN CAPLEASE Professional Network offers realtime prices, detailed data and news, intelligent analytics, and electronic trading capabilities, right at your fingertips. This powerful technology complemented by our knowledgeable and customer focused Relationship Managers. We are creating a world of Smart Investor.

SPAN CAPLEASE offers a full range of financial services and products

ranging from Equities to Derivatives enhance your wealth and hence, achieve your financial goals. SPAN CAPLEASE Client Relationship Managers are available to you to help with your financial planning and investment needs. To provide the highest possible quality of service, SPAN CAPLEASE Broking provides full access to all our products and services through multi-channels.

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INTRODUCTION TO SPAN
In a shot span of 12 years since inception, the SPAN Group has emerged as one of the top five retail stock broking houses in India, having membership of BSE, NSE and the two leading Commodity Exchanges in the country i.e. NCDEX & MCX. span is also registered as a Depository Participant with CDSL. The group is promoted by Mr. ANIL SHAH, who started this business as a sub-broker in 1987 with a team of 3. Today the SPAN CAPLEASE group is managed by a team of 35 direct employees and has a nationwide network comprising of Regional hubs, and sub brokers & business associates. SPAN CAPLEASE is 100% focused on retail stock broking business unlike any other larger national broking house. The group currently services more than thousand retail clients. SPAN CAPLEASE habitually generates value added features without the cost burden being passed on to the clients as they strongly believe that better understanding of clients needs and wants is their top priority. Their e-broking facility is one such effort, which gives the client a platform to access state of the art trading facility at the click of a button. SPAN CAPLEASE has always strived for delivering customer delight and developing strong long term bonds with its clients as well as channel partners. SPAN CAPLEASE thrives on a vision to introduce new and innovative products and services constantly. Moreover, SPAN CAPLEASE has been among the pioneers to introduce the latest technological innovations and integrate them efficiently within its business.

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About the SPAN

SPAN CAPLEASE tryst with excellence in customer relations began more than 12 years ago. SPAN Group has emerged as one of the top retail broking houses in Gujarat and incorporated in 1998. Today, SPAN has emerged as a premium Indian stock-broking and wealth management house, with an absolute focus on retail business and a commitment to provide "Real Value for Money" to all its clients. It has memberships on BSE, NSE and the leading commodity exchanges in India NCDEX & MCX. Span is also registered as a depository participant with CDSL. SPAN Group Companies Span Caplease pvt ltd Member on the BSE and Depository

Participant with CDSL Membership on the NSE Cash and Futures & Options Segment & Member on the NCDEX & MCX
Member on the BSE

Span Caplease pvt ltd SPAN Commodities

Derivatives Pvt Ltd Span Caplease pvt ltd

Incorporated

: 1998 :2004 : 2005

BSE Membership NSE membership Member of NCDEX and MCX

Depository Participants with CDSL

SPANs presence:14

 Nation- wide network of regional hubs Presence cities Thousand+ sub brokers & business associates Thousand+ clients

Management
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S.No 1. 2. 3. 4. .

Name Mr. Anil shah Mr. Kaushal shah Miss.Neha Mr. Ravi

Designation & Department Founder Chairman & Managing Director Director Span Technical Trading (Marketing) Sales and Marketing

SPAN LOGO
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SPAN VISION
17

18

Spans Mission
At SPAN we exists to provide

Service Excellence Personal Touch Always Accessible New Ideas

19

OUR ORGANIZATIONAL STRUCTURE

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Products of SPAN Broking 1. Online Trading 2. Commodities 3. DP Services 4. PMS (Portfolio Management Services) 5. Insurance 6. IPO Advisory 7. Mutual Fund 8. Personal loans 9. Quality assurance Online- Trading Specially designed for the net savvy traders and investors who prefer operating from their home or office through the internet. The investor can access state of the art Technology with three different e-broking products and voila trading on BSE, NSE, F & O, MCX and NCDEX. SPAN DIET

Application based product for Traders.

Application based ideal for traders. Multiple exchanges on single screen Online fund transfer facility User friendly & simple navigation BSC, NSC, F&O, MCX & NCDEX
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SPAN ANYWHERE

Application based product for Traders with Charts.

Application-based platform for day traders Intra-day/historical charts with various indicators Online fund transfer facility BSC, NSC, Cash & Derivatives SPAN TRADE

Browser based product for Active Investors.

Browser based for investor No installation required Advantage of mobility Trading as simple as internet surfing BSC, NSC, F&O, MCX & NCDEX SPAN INVESTOR User-friendly browser for investors Easy online trading platform Works in proxy and firewall system set up Integrated Back office: Access account information anytime, Streaming quotes Refresh static rates when required Multiple exchanges on single screen
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anywhere

Online fund transfer facility

Investment Advisory Services

To derive optimum returns from equity as an asset class requires professional guidance and advice. Professional assistance will always be beneficial in wealth creation. Investment decisions without expert advice would be like treating ailment without the help of a doctor.

Expert Advice: Their expert investment advisors are based at various

branches across India to provide assistance in designing and monitoring portfolios.

Timely Entry & Exit: Their advisors will regularly monitor

customers investments and guide customers to book timely profits. They will also guide them in adopting switching techniques from one stock to another during various market conditions.

De-Risking Portfolio: A diversified portfolio of stocks is always

better than concentration in a single stock. Based on their research, they diversify the portfolio in growth oriented sectors and stocks to minimize the risk and optimize the returns.

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Commodities
A commodity is a basic good representing a monetary value. Commodities are most often used as inputs in the production of other goods or services. With the advent of new online exchange, commodities can now be traded in futures markets. When they are traded on an exchange, Commodities must also meet specified minimum standards known as basic grade.

Types of Commodities
Precious Metals Base Metals Energy Pulses Spices Others

: Gold and Silver : Copper, Zinc , Steel and Aluminum : Crude Oil, Brent Crude and Natural Gas : Chana , Urad and Tur : Black Pepper, Jeera, Turmeric , Red Chili : Guar Complex, Soy Complex, Wheat and Sugar

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Benefits at SPAN Three different online products tailored for traders & investors. Single Screen customized market-watch for MCX / NCDEX with BSE / NSE. Streaming Quotes and real time Rates. Intra-day trading calls. Research on 25 Agro Commodities, Precious and Base Metals, Energy products and Polymers. An array of daily, weekly and special research reports. Highly skilled analysts with professional industry experience. Active relationship management desk. Seminars, workshops and investment camps for investors Depositary Participant Services SPAN CAPLEASE is a DP services provider though CDSL. We offer depository services to create a seamless transaction platform to execute trades through SPAN group of companies and settle these transactions through Span Depository services. Wide branch coverage Personalized/attentive services of trained a dedicated staff Centralized billing & accounting Daily statement of transaction & holdings statement on e-mail No charges for extra transaction statement & holdings statement
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TECHNICAL ANALYSIS

INTRODUCTION Technical analysis has long been used in traditional markets like the stock market. Technical analysis methods rely on price history in order to predict the future. There are numerous methods used in the predicting, but the bottom line is that they always rely on price movements of the past. Technical analysis takes a few different forms and many methods of use. One method of technical analysis is the use of technical indicators. A technical indicator is a graphical representation of the price action that is usually displayed along the bottom of the screen. One famous example is a technical indicator called MACD. You can see an example of the MACD in use in the first forex trade tutorial. There are also other methods for using technical analysis. You can use trend lines, or measure support and resistance. Both methods rely on looking at the chart and reviewing recent history. Is the price following a pattern? Is it moving in a range? No matter what price is doing, it usually falls into one of those two categories. If the price is moving in a pattern and in one direction, you can use trend lines to analyze where the price should go. If the price seems to be bouncing back and forth in a range, you can use support and resistance lines to make note of where the price should change direction. Technical analysis can be great, but like other trading methods, it isnt perfect. Trading decisions are always up to the discretion of the trader making them. There are some great technical tools and indicators that are widely available for use. With so many traders using similar tools, even having slightly different interpretations, technical analysis can become a self fulfilling prophecy. If many traders are seeing the same price area as a buying point, the price could bounce as everyone makes similar moves. The question always remains how lasting those moves will be and that is where personal discretion comes in. How technical analysis applies can be different for each trader. Every trader has their own interpretation of where they see trends and support. They also have
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their own ideas on setting up their indicators. These differences are called having your own trading system. You can take 10 different traders and you will probably get 10 different systems that give different signals. These differences are what make a market work. Technical analysis is very useful in forex trading. It makes up only one portion of what you need to know when trading, but it is a very important thing to learn. Understanding technical analysis will give the charts some meaning when you look at them and help you understand why certain price movements occurred.

THE IMPORTANCE OF TECHNICAL ANALYSIS Traders have a second tool to use in trading. Technical analysis, which has become extremely popular in the last two decades, consists of using charts, trend lines, support and resistance levels, technical indicators, and pattern identification to study the market's behavior. Traders use these technical factors to identify buying and selling opportunities. Over long historical periods, currency behavior has produced trends and patterns that are identifiable.

4 IMPORTANT POINTS OF VIEW PRICE: Changes in price reflect changes in investor psychology and demand for and supply of securities. TIME: The degree of movement in prices is a function of time. VOLUME: The intensity of the price changes is reflected in the volume of transaction that accompanies the change. BREADTH: Market breadth studies the extent to which price changes have taken place number of stocks in comparison with direction of market trend.

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TYPES OF CHARTS Line charts: Line charts are simple graphs drawn by plotting the closing points of the instruments for given time frame and connecting the points thus plotted over a period of time. We can draw line chart using high, low and open prices but charts drawn with the help of closing price are most commonly used. Below is the example of line chart

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Bar charts: Bar chart is providing more information about prices movement during selected time frame than line chart. In order to draw a line chart, days high, open, low and closing price are considered. To plot a stocks price movement, the high and low reached on a said time (1-min, 3-min, and 10-min, daily, weekly) is marked and connected by a vertical line. On the left side of vertical line opening price is indicated by a small horizontal tick and on the right side of the line closing price indicated by a small horizontal tick so final picture of bar looks like given below.

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Candle stick charts: The construction of candle stick chart is mostly same like bar chart. A price chart that displays the high, low, open and close for a security each day over a specified period of time on a single stick. On a single stick top is indicated as high of the day, bottom of the stick is indicated as low of the day. However the terminology used is quite different from the bar chart. A single day market has given close higher than open than color of the body will be green. And if close lower than open than the color of the body will be red. Below given is the example of the candle stick chart.

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31

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Bar Compared to Candlestick Charts Below is an example of the same price data conveyed in a standard bar chart and a candlestick chart. Notice how the candlestick chart appears 3dimensional, as price data almost jumps out at you.

( 3a )

( 3b ) The long, dark, filled-in real bodies represent a weak (bearish) close ( 3a ), while a long open, light-colored real body represents a strong (bullish) close ( 3b ). It is important to note that Japanese candlestick analysts traditionally view the open and closing prices as the most critical of the day. At a glance, notice how much easier it is with candlesticks to determine if the closing price was higher or lower than the opening price.

Common Candlestick Terminology

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The following is a list of some individual candlestick terms. It is important to realize that many formations occur within the context of prior candlesticks. What follows is merely a definition of terms, not formations.

The Black Candlestick -- when the close is lower than the open.

The White Candlestick -- when the close is higher than the open.

The Shaven Head -- a candlestick with no upper shadow.

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The Shaven Bottom -- a candlestick with no lower shadow.

Spinning Tops -- candlesticks with small real bodies, and when appearing within a sideways choppy market, they represent equilibrium between the bulls and the bears. They can be either white or black.

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Doji Lines -- have no real body, but instead have a horizontal line. This represents when the Open and Close are the same or very close. The length of the shadow can vary.

Candlestick Reversal Patterns Just as many traders look to bar charts for double tops and bottoms, head-andshoulders, and technical indicators for reversal signals, so too can candlestick formations be looked upon for the same purpose. A reversal does not always mean that the current uptrend/downtrend will reverse direction, but merely that the current direction may end. The market may then decide to drift sideways. Candlestick reversal patterns must be viewed within the context of prior activity to be effective. In fact, identical candlesticks may have different meanings depending on where they occur within the context of prior trends and formations.

Hammer -- a candlestick with a long lower shadow and small real body. The shadow should be at least twice the length of the real body, and there should be no or very little upper shadow. The body may be either black or white, but the key is that this candlestick must occur within the context

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of a downtrend to be considered a hammer. The market may be "hammering" out a bottom.

Hanging Man -- identical in appearance to the hammer, but appears within the context of an uptrend.

Engulfing Patterns -- Bullish -- when a white, real body totally covers, "engulfs" the prior day's real body. The market should be in a definable trend, not chopping around sideways. The shadows of the prior candlestick do not need to be engulfed.

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Bearish -- when a black, real body totally covers, "engulfs" the prior day's real body. The market should be in a definable trend, not chopping around sideways. The shadows of the prior candlestick do not need to be engulfed.

Dark-Cloud Cover(bearish) -- a top reversal formation where the first day of the pattern consists of a strong white, real body. The second day's price opens above the top of the upper shadow of the prior candlestick, but the close is at or near the low of the day, and well into the prior white, real body.

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Piercing Pattern (bullish) -- opposite of the dark-cloud cover. Occurs within a downtrend. The first candlestick having a black, real body, and the second has a long, white, real body. The white day opens sharply lower, under the low of the prior black day. Then, prices close above the 50% point of the prior day's black real body.

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METHOD OF TECHNICAL ANALYSIS

There are 22 methods of technical analysis and from them one of them is RETRACEMENT LEVEL (MONTHLY) There are 3 types of retracement levels available in the market and they are Down Trend Retracement Level: is the level till what level the price will pull back is called retracement level. Up Trend Retrenchment Level: is the level till how much it will correct the price of the particular share. There are levels of retracement and they are 38.2% 50% 61.8% The above given numbers are Fibonacci numbers. As per the Fibonacci retracement numbers market will remain in same trend till market give close below this three levels. Lets take an example to understand it clearly.

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RETRACEMENT LEVEL (DAILY): In relative strength indices we are combining here RSI price indicator. POSITIVE DIVERGENCE: means when price is making lower bottoms and relative strength indices indicator is making higher bottom at the same time, this type of resource formation is called positive divergence. NEGATIVE DIVERGENCE: means when price is making higher bottoms and relative strength indices indicator is making lower bottoms at the same time, this type of resource formation is called negative divergence. Now let understand this chart by taking a live example of the USD/INR.

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And the chart explains above the price chart of USD/INR. This chart is making lower bottom and RSI indicator is making higher bottom. This indicator says that downside risk in USD/INR is limited. And the underline can rise from this level. We have seen above the example of the technical analysis and its one of the technique i.e. retracement levels for monthly as well as daily charts.

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MOVING AVERAGE The moving average (MA) method is one of the most widely used methods of technical analysis. It includes different versions and levels of sophistication. As distinct from a diagrammatic technical analysis, the MA method is easy to quantify and apply in investment decision-making or empirical tests. Methods of technical analysis that are based on diagrammatic analysis methods are subjective and hence difficult to apply or examine empirically. The MA method in contrast enables the construction of a computerized algorithm for the application of the method, and the indications of buy or sells signals. A moving average is an average of observations from several consecutive time periods. To compute a moving average sequence, we compute successive averages of a given number of consecutive observations. The objective underlying the MA method is to smooth out seasonal variation in the data. This technical analysis method is intended to provide a decision rule concerning the appropriate investment position. The method involves a comparison of the most recent market price or index with the long MA of the price or index vector. If the current price is higher than the long MA, a long investment position should be adopted, and conversely, if the current price is lower than the MA, a short position should be adopted. In another variant of the method, the current price or index can be replaced with a short MA, so that the use of the method involves the comparison of the short MA with the long one. Most chart patterns show a lot of variation in price movement. This can make it difficult for traders to get an idea of a security's overall trend. One simple method traders use to combat this is to apply moving averages. A moving average is the average price of a security over a set amount of time. By plotting a security's average price, the price movement is smoothed out. Once the dayto-day fluctuations are removed, traders are better able to identify the true trend and increase the probability that it will work in their favor.

Types of Moving Averages There are a number of different types of moving averages that vary in the way they are calculated, but how each average is interpreted remains the same. The calculations only differ in regards to the weighting that they place on the price data, shifting from equal weighting of each price point to more weight being placed on recent data. The three most common types of moving averages are simple, linear and exponential.
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Simple Moving Average (SMA) This is the most common method used to calculate the moving average of prices. It simply takes the sum of all of the past closing prices over the time period and divides the result by the number of prices used in the calculation. For example, in a 10-day moving average, the last 10 closing prices are added together and then divided by 10. As you can see in Figure 1, a trader is able to make the average less responsive to changing prices by increasing the number of periods used in the calculation. Increasing the number of time periods in the calculation is one of the best ways to gauge the strength of the long-term trend and the likelihood that it will reverse.

Figure 1 Many individuals argue that the usefulness of this type of average is limited because each point in the data series has the same impact on the result regardless of where it occurs in the sequence. The critics argue that the most recent data is more important and, therefore, it should also have a higher weighting. This type of criticism has been one of the main factors leading to the invention of other forms of moving averages. Linear Weighted Average This moving average indicator is the least common out of the three and is used to address the problem of the equal weighting. The linear weighted moving average is calculated by taking the sum of all the closing prices over a certain time period and multiplying them by the position of the data point and then dividing by the sum of the number of periods. For example, in a five-day linear weighted average, today's closing price is multiplied by five; yesterday's by four and so on until the first day in the period range is reached. These numbers are then added together and divided by the sum of the multipliers.

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Exponential Moving Average (EMA) This moving average calculation uses a smoothing factor to place a higher weight on recent data points and is regarded as much more efficient than the linear weighted average. Having an understanding of the calculation is not generally required for most traders because most charting packages do the calculation for you. The most important thing to remember about the exponential moving average is that it is more responsive to new information relative to the simple moving average. This responsiveness is one of the key factors of why this is the moving average of choice among many technical traders. As you can see in Figure 2, a 15-period EMA raises and falls faster than a 15-period SMA. This slight difference doesnt seem like much, but it is an important factor to be aware of since it can affect returns.

Figure 2

Major Uses of Moving Averages Moving averages are used to identify current trends and trend reversals as well as to set up support and resistance levels. Moving averages can be used to quickly identify whether a security is moving in an uptrend or a downtrend depending on the direction of the moving average. As you can see in Figure 3, when a moving average is heading upward and the price is above it, the security is in an uptrend. Conversely, a downward sloping moving average with the price below can be used to signal a downtrend.

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Figure 3 Another method of determining momentum is to look at the order of a pair of moving averages. When a short-term average is above a longer-term average, the trend is up. On the other hand, a long-term average above a shorter-term average signals a downward movement in the trend. Moving average trend reversals are formed in two main ways: when the price moves through a moving average and when it moves through moving average crossovers. The first common signal is when the price moves through an important moving average. For example, when the price of a security that was in an uptrend falls below a 50-period moving average, like in Figure 4, it is a sign that the uptrend may be reversing.

Figure 4 The other signal of a trend reversal is when one moving average crosses through another. For example, as you can see in Figure 5, if the 15-day moving average crosses above the 50-day moving average, it is a positive sign that the price will start to increase.
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Figure 5 If the periods used in the calculation are relatively short, for example 15 and 35, this could signal a short-term trend reversal. On the other hand, when two averages with relatively long time frames cross over (50 and 200, for example), this is used to suggest a long-term shift in trend. Another major way moving averages are used is to identify support and resistance levels. It is not uncommon to see a stock that has been falling stop its decline and reverse direction once it hits the support of a major moving average. A move through a major moving average is often used as a signal by technical traders that the trend is reversing. For example, if the price breaks through the 200-day moving average in a downward direction, it is a signal that the uptrend is reversing.

Figure 6 Moving averages are a powerful tool for analyzing the trend in a security. They provide useful support and resistance points and are very easy to use. The most common time frames that are used when creating moving averages are the 200day, 100-day, 50-day, 20-day and 10-day. The 200-day average is thought to be a good measure of a trading year, a 100-day average of a half a year, a 50-day average of a quarter of a year, a 20-day average of a month and 10-day average of two weeks.
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Moving averages help technical traders smooth out some of the noise that is found in day-to-day price movements, giving traders a clearer view of the price trend. PATTERNS: HEAD AND SHOULDERS The Head and Shoulders formation is one of the most reliable and well known of all the major reversal patterns. It is also one of the most popular formations that have been studied thousands of time by analysts. On the Technical analysis chart, when a price trend is in the process of reversal either from a bullish or bearish trend, a characteristic pattern takes shape and is recognized as reversal formation.

Formations

Head and Shoulders Top

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Head and Shoulders Bottom

Head and Shoulders Top

Head and Shoulders formation consists of a left shoulder, a head, and a right shoulder and a line drawn as the neckline. The left shoulder is formed at the end of an extensive move during which volume is noticeably high. After the peak of the left shoulder is formed, there is a subsequent reaction and prices slide down up to a certain extent which generally occurs on low volume. The prices rally up to form the head with normal or heavy volume and subsequent reaction downward is accompanied with lesser volume. The right shoulder is formed when prices move up again but remain below the central peak called the Head and fall down nearly equal to the first valley between the left shoulder and the head or at least below the peak of the left shoulder. Volume is lesser in the right shoulder formation compared to the left shoulder and the head formation. A neckline is drawn across the bottoms of the left shoulder, the head and the right shoulder. When prices break through this neckline and keep on falling after forming the right shoulder, it is the ultimate confirmation of the completion of the Head and Shoulders Top formation. It is quite possible that prices pull back to touch the neckline before continuing their declining trend.

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 Head and Shoulders Bottom

This formation is simply the inverse of a Head and Shoulders Top and often indicates a change in the trend and the sentiment. The formation is upside down in which volume pattern is different than a Head and Shoulder Top. Prices move up from first low with increase volume up to a level to complete the left shoulder formation and then falls down to a new low. It follows by a recovery move that is marked by somewhat more volume than seen before to complete the head formation. A corrective reaction on low volume occurs to start formation of the right shoulder and then a sharp move up that must be on quite heavy volume breaks though the neckline. Another difference between the Head and Shoulders Top and Bottom is that the Top Formations are completed in a few weeks, whereas a Major Bottom (Left, right shoulder or the head) usually takes a longer, and as observed, may prolong for a period of several months or sometimes more than a year. TRIANGLE

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When price fluctuation stay in a trading range and that trading range becomes progressively smaller with the passage of time triangle formation occurs. Identifying triangle patterns allows for trading opportunity during formation and after a breakout from the pattern. A triangle could signal reversal or continuation of the trend but not very reliable formation. The Normal triangle looks like. Symmetrical Triangle:-

Descending Triangle

Ascending Triangle

These types of triangles usually have price movement from one end of the triangle to the other and if the breakout occurs then the target price is equal to the difference of the two points at the base of the Triangle and this target is normally achieved at the point where the two lines of the Triangle meet in terms oftime.

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Relative Strength Index(RSI) RSI indicates overbought &oversold conditions. When the value of RSI is above 70,then it indicates overbought. Here the stock price is undervalued, so it gives selling signal. When the value of RSI is below 30, then it indicates oversold . the stock price is overvalued, so it gives buying signal.

Importance of Neckline The drawn neckline of the pattern represents a support level, and assumption cannot be taken that the Head and Shoulder formation is completed unless it is broken and such breakthrough may happen to be on more volume or may not be. The breakthrough should not be observed carelessly. A serious situation can occur if such a break is more than three to four percent. When a stock drifts through the neckline on small volume, there may be a wave up, although it is not certain, but it is observed, the rally normally does not cross the general level of the Neckline and before selling pressure increases, the steep decline occurs and prices tumble with greater volume. Characteristics

Most of the time Head and Shoulders are not perfectly shaped. This formation is slightly tilted upward or downward. One shoulder may appear to droop. On many chart patterns, any one of the two shoulders may appear broader than the other which is caused by the time involved in the formation of the valleys. The neckline may not be perfectly horizontal; it may be ascending or descending. If the neckline is ascending then the only qualification of the formation lies in the fact that the lowest point of the right shoulder must be noticeably lower than the peak of the right shoulder.

Usage as a tool Head and Shoulders is an extremely useful tool after its confirmation to estimate and measure the minimum probable extent of the subsequent move from the neckline. To find the distance of subsequent move, measure the distance from the peak of the head to the neckline. Then measure the same distance down from the neckline to the point where prices penetrate the neckline after the completion of the right shoulder. This gives the minimum objective of how far prices can decline after the completion of this top formation. In case, if the price advance preceding the Head and Shoulders top is not long, the subsequent price fall after its completion may be small as well.

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Example of daily intraday trading by using parameters of technical analysis:

Analysis of the chart: This is the chart of daily intraday trading at 21st June,2010. In this chart, we have used three studies which include: moving average, RSI & volume. The blue line shows 5days MA & the green line shows 21days MA. At the bottom of the chart the blue line shows the RSI value. Moving Average Time 10:19 11:55 12:22 13:31 14:25 15:10 Price 185.5 187.2 187.3 188.5 188.3 188.1 Buy/Sell Buy Sell Buy Sell Buy Sell Profit/Loss 1.7 1.2 (0.2)
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RSI Time 11:13 12:45 12:55 15:22 Volume The volume study indicates that if we will take buy/sell decision, then the study shows whether the volume supporting or not. Value 71.55 70.27 80 26.38 Buy/sell Sell Sell Sell buy

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FOREIGN EXCHANGE History

FOREX, an acronym for Foreign Exchange, is the largest financial market in the world. With an estimated $1.5 trillion in currencies traded daily, Forex provides income to millions of traders and large banks worldwide. The market is so large in volume that it would take the New York Stock Exchange, with a daily average of under $20 billion, almost three months to reach the amount traded in one day on the Foreign Exchange Market. Forex, unlike other financial markets, is not tied to an actual stock exchange. Forex is an over-the-counter (OTC) or off-exchange market. The central government has wide powers to control transactions in foreign exchange. Until 1992 all foreign investments and the repatriation of foreign capital required prior approval of the government. The Foreign-Exchange Regulation Act, which governs foreign investment, rarely allowed foreign majority holdings. However, a new foreign investment policy announced in July 1991 prescribed automatic approval for foreign investments in thirtyfour industries designated high priority, up to an equity limit of 51 percent. Initially the government required that a company's automatic approval must rely on matching exports and dividend repatriation, but in May 1992 this requirement was lifted, except for low-priority sectors. In 1994 foreign and nonresident Indian investors were allowed to repatriate not only their profits but also their capital. Indian exporters are also free to use their export earnings as they see fit. However, transfer of capital abroad by Indian nationals is only permitted in special circumstances, such as emigration. Foreign exchange is automatically made available for imports for which import licenses are issued. Because foreign-exchange transactions are so tightly controlled, Indian authorities are able to manage the exchange rate, and from 1975 to 1992 the rupee was tied to a trade-weighted basket of currencies. In February 1992,
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the government began moves to make the rupee convertible, and in March 1993 a single floating exchange rate was implemented. In July 1995, Rs31.81 was worth US$1, compared with Rs7.86 in 1980, Rs12.37 in 1985, and Rs17.50 in 1990.

PURPOSE The foreign exchange market is the mechanism by which currencies are valued relative to one another, and exchanged. An individual or institution buys one currency and sells another in a simultaneous transaction. Currency trading always occurs in pairs where one currency is sold for another and is represented in the following notation: EUR/USD or CHF/YEN. The exchange rate is determined through the interaction of market forces dealing with supply and demand. Foreign Exchange Traders generate profits, or losses, by speculating whether a currency will rise or fall in value in comparison to another currency. A trader would buy the currency which is anticipated to gain in value, or sell the currency which is anticipated to lose value against another currency. The value of a currency, in the simplest explanation, is a reflection of the condition of that country's economy with respect to other major economies. The Forex market does not rely on any one particular economy. Whether or not an economy is flourishing or falling into a recession, a trader can earn money by either buying or selling the currency. Reactive trading is the buying or selling of currencies in response to economic or political events, while speculative trading is based on a trader anticipating events.

BACKGROUND Historically, Forex has been dominated by inter-world investment and commercial banks, money portfolio managers, money brokers, large corporations, and very few private traders. Lately this trend has changed. With the advances in internet technology, plus the industry's unique leveraging options, more and more individual traders are getting involved in the market for the purposes of speculation. While other reasons for participating in the market include facilitating commercial transactions (whether it is an international corporation converting its profits, or hedging
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against future price drops), speculation for profit has become the most popular motive for Forex trading for both big and small participants.

8 MAJOR CURRENCIES Whereas there are thousands of securities on the stock market, in the FOREX market there are 112 currencies from them below given are currencies are highly traded: The U.S. Dollar ($), European Currency Unit (), Japanese Yen (), British Pound Sterling (), Swiss Franc (SF), Canadian Dollar (Can$)

And to a lesser extent, the Australian and New Zealand Dollars.

These major currencies are most often traded because they represent countries with esteemed central banks, stable governments, and relatively low inflation rates. Currencies are also always traded in pairs (i.e. USD/JPY or Dollar/Yen) at floating exchange rates.

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INTRODUCTION
If there was only one currency in the world, there would not have been any need for foreign exchange market, foreign exchange rates or foreign exchange. But in a world of many national currencies, the foreign exchange market plays the crucial role of providing the requisite machinery for making payments across borders, transferring funds and purchasing power from one currency to another, and determining the exchange rate. The fundamental changes in foreign exchange, or FX, market began to take form in 1970s along with the increasing internationalization of financial transactions and the change of many economies into floating exchange rate system from fixed rate system. Over years, these changes have transformed the foreign exchange market into the worlds biggest and most dynamic market. The daily turnover of global FX market currently amounts to many trillions of dollars ($1 trillion = $1000 billion). In majority of these transactions, the U.S. dollar is on the one side. Most FX market trades involve buying and selling bank deposits denominated in different currencies. The major instruments used in the FX markets are spot, outright forwards, FX swaps, currency options, currency swaps, currency futures and exchange traded options. Four key concepts are important in understanding the basics of the working of this extremely complex market.

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Spot exchange rate: Spot rates are the rates at which different currencies are traded for immediate exchange. Forward exchange rate: This is the rate at which foreign currency dealers are willing to commit to buying or selling a currency in the future. This gives information about the view of market participants on whether the currency appreciates or depreciates in future. Appreciation: The rise in the value of one currency relative to another is called appreciation. When the currency of your country appreciates relative to another country, your countrys goods prices rise abroad and foreign goods prices decline in your country. This will benefit domestic consumers who buy foreign goods, but makes domestic businesses less competitive. Depreciation: A decline in the value of one currency relative to another is called depreciation. When the currency of your country depreciates relative to another country, your countrys goods prices decline abroad and foreign goods prices rise in your country. This will benefit domestic businesses, but will affect domestic consumers who buy foreign goods. The market exchange rate between two currencies is determined by the interaction of the official and private participants in the foreign exchange rate market. The official participants include the central banks and other monetary agencies of the government. The private participants include banks, other financial institutions, corporate and individuals. An important concept that drives the forces of supply and demand in the FX market is the Law of One Price. It says that the price of an identical good will be the same throughout the world, regardless of which country produces it. Based on this, we can determine the exchange rate between currencies. For example, if the price of steel produced in the U.S. is $100 per ton and steel produced in India is Rs. 5,000 per ton, the exchange rate between dollar and rupee would be Rs.50/$1. The factors affecting the exchange rates in the long run include relative price levels in each country, preferences for domestic vs. foreign goods, productivity and government controls. The buying and selling of currency by the policy makers to control the supply and demand in the FX market influence exchange rates in countries like India.

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FX market in India
As in the rest of the world, in India too, foreign exchange market is the largest financial market in existence. The phenomenon that has dramatically changed Indias foreign exchange market was liberalization of economy started during early 90s. In 1993, central government replaced the prevailing fixed exchange rate system with a less regulated market driven arrangement. Even though this cannot be called as a fully floating exchange rate system like the U.S., in the Indian scenario it is working well. In the current system, the Reserve Bank of India and its affiliates intervene in the market whenever they decide it is necessary. The major participants in Indian FX market are the buyers, sellers, market mediators and the authorities. Besides the countrys commercial capital Mumbai, centers for foreign exchange transactions in India include Kolkata, New Delhi, Chennai, Bangalore, Pondicherry and Cochin. The FX market in India is regulated by The Foreign Exchange Management Act, 1999 or FEMA, which replaced the old Foreign Exchange Regulation Act, 1947. Now, the regulators have introduced several innovations to promote the growth of FX market in India. The introduction of currency futures in India in 2009 was such as step. This has given the FX market participants in India a new kind of financial instrument, which is available in developed markets. Although no one expects the transformation of India to a fully market driven floating foreign exchange system any time soon, there are many possibilities for further loosening of controls. The permission for the introduction of new FX derivatives following the path of currency futures is also expected.

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HOW CURRENCIES ARE TRADED?

The Foreign exchange market is a nonstop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events. The participants in the currency exchange markets have traditionally been the central and commercial banks, corporations, institutional investors, and hedge funds managers. In 2002, Bank of America alone made a $530 Million profit in Forex trading as stated on their annual statement under "Global Investment Income". In 1986, Caterpillar made a 100 Million profit in Forex trading and would have actually had an operating loss for the year on their normal business if it were not for that profit from Forex. In 2003, half of Daimler Chryslers 2Q operating profit was from currency trades, making more money on foreign exchange than by selling cars. Due to its popularity and the potential for very lucrative returns on investment, many private investors have also migrated into this fast growing arena. Some of the major reasons why private investors are attracted to currency exchange market and short-term Forex trading are: * The Forex market is open for business around the clock. Nonstop 24 hours a-day 7 days a-week access to global Forex dealers is at the disposal of the trader. * The Forex market is the biggest market in the world. It is an enormous liquid market, with a daily turnover of more than 2.5 trillion dollars, making it easy to trade most currencies around the clock.
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* The Forex markets can be very volatile due to the interdependencies of the world economy on current events. As such, the Forex market offers opportunities for huge profit potentials that are derived from volatilities of world currency prices. * The Forex Market contains inherent standard instruments for controlling risk exposure. * An investor has the ability to profit in both a rising and falling market. * The investor can maintain leveraged trading with relatively low margin requirements. * The Forex trader has many options for zero commission trading. Just like in any other market, the goal of the investor in Forex trading is to make profits from price movements. In Forex trading, an investor makes money by trading foreign currencies and the trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Jan 15th, 2004 was 1.0757. This number is also referred to as a "Forex rate" or just "rate" for short. If the investor had bought 1000 Euros on that date, he would have paid 1075.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 Euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.90 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a "risk-free" investment. One example of a risk- free investment is longterm U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation. The whole premise behind trading currencies is that, the investor trades only when he expects the currency that he is buying to increase in value relative to the currency he is selling. If the currency he is buying does increase in value, he must sell back the other currency in order to lock in a profit. An open position is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to

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close the position. However, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency. Most of the remaining percentage of the forex market belongs to hedging (managing business exposures to various currencies) and other activities. Forex trades (trading onboard internet platforms) are non-delivery trades, i.e., currencies are not physically traded, but rather there are currency contracts which are agreed upon and performed. Both parties to such contracts (the trader and the trading platform) undertake to fulfill their obligations: one side undertakes to sell the amount specified, and the other undertakes to buy it. As mentioned, over 70% of the market activity is for speculative purposes, so there is no intention on either side to actually perform the contract (i.e., the physical delivery of the currencies). Thus, the contract ends by offsetting it against an opposite position, resulting in the profit and loss of the parties involved. An example of a trading platform is the Easy-Forex Trading Platform. A free video lesson in trading the forex market using Market Club charting analysis can be downloaded from the ino.com website. Spreads Spreads are the difference between Buy and Sell ( or BID and ASK). In other words, this is the difference between the market maker's selling price (to its clients) and the price the market maker buys it from its clients. If an investor buys a currency and immediately sells it ( and thus there is no change in the rate of exchange), the investor will lose money. The reason for this is the spread. At any given moment, the amount that will be received in the counter currency when selling a unit of base currency will be lower than the amount of counter currency which is required to purchase a unit of base currency. For example, the EUR/USD bid/ask currency rates at your bank may be 1.2015/1.3015, representing a spread of 1000 pips (percentage in points; one pip=.0001). Such a rate is much higher that the bid/ask currency rates that online Forex investors commonly encounter, such as 1.2015/1.2020, with a spread of 5 pips. In General, smaller spreads are better for Forex investors since they require a smaller movement in exchange rates in order to profit from a trade.

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Price, Quotes and Indications The price of a currency (in terms of the counter currency), is called "Quote". There are two kinds of quotes in the Forex market: The Direct Quote: the price for 1 US dollar in terms of the other currency, e.g. - Japanese Yen, Canadian dollar, etc. The Indirect Quote: the price of 1 unit of a currency in terms of US dollars, e.g. - British pound, euro. The market maker provides the investor with a quote. The quote is the price the market maker will honor when the deal is executed. This is unlike an "indication" by the market maker, which informs the trader about the market price level, but is not the final rate for a deal. Cross rates - any quote which is not against the US dollar is called "cross". For instance, GBP/JPY is a cross rate, since it is calculated via the US dollar. Here is how the GBP/JPY rate is calculated: GBP/USD = 1.7464 USD/JPY = 112.29 Therefore: GBP/JPY = 112.29 X 1.7464 = 196.10 The Exchange Rate Because currencies are traded in pairs and exchanged one against the other when traded, the rate at which they are exchanged is called the exchange rate. The majority of the currencies are traded against the US dollar (USD). The four next-most traded currencies are the euro (EUR), the Japanese yen (JPY), the British pound sterling (GBP) and the Swiss franc (CHF). These five currencies make up the majority of the market and are called the major currencies or "the Majors". Some sources also include the Australian dollar (AUD) within the group of major currencies. The first currency in the exchange pair is referred to as the base currency and the second currency as the counter or quote currency. The counter or quote currency is thus the numerator in the ratio, and the base currency is the denominator. The value of the base currency (denominator) is always 1.
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Therefore, the exchange rate tells a buyer how much of the counter or quote currency must be paid to obtain one unit of the base currency. The exchange rate also tells a seller how much is received in the counter or quote currency when selling one unit of the base currency. For example, an exchange rate for EUR/USD of 1.2083 specifies to the buyer of Euros that 1.2083 USD must be paid to obtain 1 euro. At any given point, time and place, if an investor buys any currency and immediately sells it - and no change in the exchange rate has occurred - the investor will lose money. The reason for this is that the bid price, which represents how much will be received in the counter or quote currency when selling one unit of the base currency, is always lower than the ask price, which represents how much must be paid in the counter or quote currency when buying one unit of the base currency. For instance, the EUR/USD bid/ask currency rates at your bank may be 1.2015/1.3015, representing a spread of 1000 pips (also called points, one pip = 0.0001), which is very high in comparison to the bid/ask currency rates that online Forex investors commonly encounter, such as 1.2015/1.2020, with a spread of 5 pips. In general, smaller spreads are better for Forex investors since even they require a smaller movement in exchange rates in order to profit from a trade.

Margin Banks and/or online trading providers need collateral to ensure that the investor can pay in case of a loss. The collateral is called the margin and is also known as minimum security in Forex markets. In practice, it is a deposit to the trader's account that is intended to cover any currency trading losses in the future. Margin enables private investors to trade in markets that have high minimum units of trading by allowing traders to hold a much larger position than their account value. Margin trading also enhances the rate of profit, but has the tendency to inflate rates of loss, on top of systemic risk. Leveraged Financing The ratio of investment to actual value is called "leverage". Leveraged financing, i.e., the use of credit, such as a trade purchased on a margin, is very common in Forex. Using a $1000 to buy a Forex contract with a $100,000 value is "leveraging" at a 1:100 ratio. The invested amount of
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$1000 is all that is under risk in order to achieve the gain of $100,000. The loan/leveraged in the margined account is collateralized by an investor's initial deposit. As a result, this may result in being able to control $100,000 for as little as $1,000.

Five ways private investors can trade in Forex directly or indirectly: * The spot market * Forwards and futures * Options * Contracts for difference * Spread betting Spot transaction A spot transaction is a direct exchange of one currency for another. The spot rate is the current market price, otherwise known as the benchmark price. Spot transactions do not require immediate settlement, or on-the-spot payment. The settlement date, or "value date," is the second business day after the "deal date" (or "trade date") on which the transaction is agreed to by the two traders. The two-day period provides time to confirm the agreement and arrange the clearing and necessary debiting and crediting of bank accounts in various international locations. Risks Although Forex trading can lead to very profitable results, there are risks involved: exchange rate risks, interest rate risks, credit risks, and country risks. About 80% of all currency transactions last a period of seven days or less, and over 40% of forex trades will last no more than two days. Given the extremely short lifespan of the typical trade, technical indicators heavily influence entry, exit and order placement decisions.

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FOREIGN EXCHANGE CHARTS:

Here we have used only simple moving average study. The three lines of MV are used which are:5days,21days &50days. We have to consider two lines for making the decision regarding buying or selling of currency. Whenever the two lines cross it gives buying/selling signal. There are various charts of foreign exchange trading which are given below: EUR/USD:

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JPY/INR:

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GBP/INR:

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CONCLUSION
In this study I have examined the ability of technical rules namely, the bull and double bottom pattern, to increase the probability of winning in the foreign exchange market relative to the theoretical probability. The latter was computed on the basis of efficient hypothesis, implying among other things, that foreign exchange rate follow a simple random walk. In the course of my analysis I tested five strategies for the worlds eight major currencies pair on the data set covering thirty days, which allow me to formulate two stylized fact that simultaneously demonstrate the technical analysis potential for profitability, and the difficulty of its practical application. The bull and the double bottom technical analysis rule increase on average the probability of winning compared to what is stipulated by the efficient market hypothesis. It is hardly possible to indicate strategy in terms of trading rule and a combination of stop loss and stop limit values, which would consistently result in positive profits in the case of all currency pairs. The two stylized fact above help explain the persistent popularity of technical analysis rules among popular traders on one hand and the lack of sure fire trading strategies on the other hand. Indeed while technical analysis appears to be increasing the probability of winning, the lack of systematic pattern in the winning strategies parameters and underlying technical trading rules makes it difficult, if not possible, to use technical analysis for reaping consistent positive returns.

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BIBLIOGRAPHY

WEBSITES:

www.spancaplease.com www.tradersedge.com www.sebi.gov.in www.yahoofinance.com www.nseindia.com www.bseindia.com

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