MPE707 International Banking and Finance - Assessment Task 1 – Individual Assignment

Description

The assignment comprises of two parts: Part A involves speculation with virtual money on a real internet trading website. Part B includes a written report that involves a discussion of what drove the recent (in the months leading to July/August 2024) developments of the exchange rates relevant to your transactions (Component 1) and the student’s own decisions and experience of the trading game (Component 2).

Specific Requirements

• Internet foreign exchange trading game (10 points)

The Unit Team will provide each student with a free demo account with easyMarkets, an online foreign exchange trading firm. The url for easyMarkets is https://www.easymarkets.com/au/. You will have access to many of the features on the website that actual traders receive, including real- time quotes, news and a variety of charts (though some features that are licensed from third parties are not available on demo accounts).

Each student will be given an account on this website with AUD 50,000 virtual money. The goal of the exercise is simple: to make as much money as possible. easyMarkets provides access to foreign exchange spot markets and forward markets in order for you to perform your speculative activities. The website has a ‘Learn Centre’ tab, which contains information on the basics of forex trading.

Please take the time to understand how the trading platform works before commencing your trading activities.

All students will receive an email (from the Unit Team) that contains a username and password for an account on easyMarkets at the beginning of Week 4, 29 July 2024. On receiving this, please do not change the settings (i.e. please do not change the email and password on the account).

Please do not provide or add any information of personal nature to the account.

It is highly recommended that you do not start trading straight away; rather, it would be very useful to spend some time reviewing the features on easyMarkets. The foreign exchange market reacts very rapidly to news, so it is important that you do make it a point to spend a few minutes every day keeping track of how economic variables impact the forex market. Also, it is recommended that you start working on Component 1 of Part B before you start trading: Conducting an analysis of recent changes in exchange rates would improve your awareness of exchange rate movements and hence would be useful for the trading exercises.

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Please note that your account will not be replenished if your funds run out; this is to ensure that you manage risk while trading.

Disclaimer: Deakin University is not responsible for the content that appears on easyMarkets. The use of easyMarkets in this unit is for educational purposes only. easyMarkets is one of many firms providing services for transacting in the foreign exchange market, and students who wish to invest in the foreign exchange market are advised to research the market thoroughly to find a suitable firm for their purpose. Successful speculation in this assignment does not guarantee success in actual speculative trading.

Please note:

• The demo accounts function in exactly the same way as a normal account, so if your funds run low you may receive a default message from easyMarkets reminding you that your account needs to be replenished. As demo account holder, you do not have to, and should not, provide any information of a personal nature to easyMarkets. So, if you do receive any such message, please ignore
• Please do not switch to live account as this is not relevant for the
• Before completing your assignment and turning it in, please ensure that all open positions (trades) are closed. If a position remains open after the due date (12 September 2024), it will be closed at any time by the unit team during the marking process, and any losses will be counted toward your final account balance (while any profits will not be counted).

Assessment:

The speculative component of this assignment is marked out of 10. Grades are based on performance in trading, that is, the amount of money (denominated in AUD, which is automatically calculated by the platform) in the account when the assignment is submitted.

There is a hurdle requirement to pass this component of the assignment: you must undertake at least 12 transactions (or trades) by the due date of the assignment (12 September 2024) using the demo account provided to you by the Unit Team. For the purpose of this assignment, a transaction is defined as entering into an open position and eventually closing it before submitting the assignment. So, for example, if you bought AUD 100,000 (against USD) on 26 August 2024 and closed this position on 29 August 2024, you would have completed one transaction. Any student who undertakes between 1 and 11 transactions by the assignment due date using the demo account provided by the unit team will receive a score of 3.5 out of 10. Any student who does not conduct any transaction by the assignment due date will receive 0 out of 10. In order to calculate the scores, accounts will be ranked on performance. The distribution of scores for those who satisfy the hurdle requirement (having completed 12 or more transactions) is shown in the table below.

You will realise as you commence trading that the foreign exchange market is extremely volatile. Trading in this market is, therefore, a very risky proposition. The purpose of this trading game is not to make you a forex trader (though some of you may find that you have a talent for it). Rather, it is meant to provide you with insights into the functioning of the foreign exchange market, which is best achieved by participating in it.

• Report (30 points) 2,500 words max

The word limit for the report is 2,500 words (excluding executive summary, tables, figures, footnote, appendix and references). The report requires:

-          A completed coversheet using the template provided in the Assignment folder

• An executive summary (half page)

-          Component 1

• Component 2

-          An appendix

Coversheet (excluded from the word count)

The report must start with a cover sheet (using the template posted on CloudDeakin). On the cover sheet, please provide the information as requested (your last name, first name, and student ID; username and password for your trading account; the final account balance and the number of transactions undertaken for each instrument; the currencies traded; and the word count). Your assignment will only be graded when all information required in the cover sheet are provided.

Executive summary (excluded from the word count)

Immediately after the cover sheet, please provide a half-page executive summary. The executive summary should show a brief discussion of your overall strategy, the financial instruments you have used, the number of transactions and currencies you have traded, and justify the total losses/profits on your account and whether or not you have undertaken any risk management activities.

Component 1 (500 words recommended): Trading Environment (included in the word count)

Component 1: Overview of the Trading Environment

The purpose of Component 1 is to give an overview of the trading environment (i.e., macroeconomic conditions), illustrated for the key chosen currency trading pair that you intend to trade. Specifically, please focus on the main movements (and reasons behind them) in the months leading up to July or August 2024 (depending on when you start trading) of this exchange rate pair. In doing so, please provide a graph of the chosen exchange rate for the reference period you would like to cover and discuss major movements of the exchange rates, linking them to major specific news and events. For example, if you discuss the AUD/USD pair, please graph the exchange rate during the period you choose to discuss (e.g., July/August) and discuss trends and at least one specific key change (either up or down) and the reasons underlying these movements.

Please focus on the fundamentals of the market and provide references/citations to any sources of information you have gathered in the process.

Component 2 (2,000 words recommended): In-depth Analysis of Transactions (included in the word count)

Present an in-depth analysis of your transactions/trading performance.

In the analysis of Component 2, make sure you provide the reasons why you have chosen those currencies, and your plan/expectation for/from the trading activities. You do not need to explain every transaction; this would be virtually impossible given the word limit. Rather, your report should attempt to show how you have employed the understanding of the trading environment and theoretical tools studied in the unit in practical currency trading contexts. It should also highlight any research you have conducted on the foreign exchange market and the manner in which you have approached your trading activity, using specific transactions as examples. Finally, please discuss the use of risk management tools available on the easyMarkets platform during the trading period. Please note that any news items or documents (both printed and online) that helped you make your decisions should be carefully referenced and cited in the report.

Please make sure you have carefully considered the marking rubrics during the trading game as well as report writing; marks for the report will be linked closely to these marking criteria.

Appendix (excluded from the word count)

In an Appendix to the report, please include closed position information. To obtain these statements please follow the instructions:

1. In the main trading window of the easyMarkets platform after you have logged in, near the bottom right corner you will see two buttons: “Open” and “Closed”.
2. Choose the option “Closed”.
3. Then, to the left of it you can see the transaction toggles (headings) for: EasyTrade, Day Trading, Forward Deals, Pending Orders, and See Select “See All”
4. Set the date from when you received your account up to now, and show/download all of your closed positions in PDF/Excel. You will then need to add or append them to the report before

Please note Appendix instructions might be updated during the trimester, in which case you will be communicated by the Unit Team via CloudDeakin.

Please note that even if you lose money while speculating, it is quite possible for you to do well in this component of the assignment if you can provide a clear and logical account of your strategy, and possibly some insight into why it led to losses. Similarly, students that make money must also substantiate their strategy in the report in order to do well in the assignment.