The Analysis of Forex Trading

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The analysis of the reports reveals the gains and losses we made during the forex trades. The forex trades occurred at spot rate with the trade occurring mainly between the Euro and the US dollar. As an organisation, we were trading mostly with $20,000,000 and converting it to the Euro or the GBP. The trade between the Euro and the US dollar was more profitable compared to the deal between the US and the GBP.

Organizations that position themselves effectively take advantage of the fluctuations in forex prices to sell or buy and realise forex gains. As a result, our organisation has been keen on predicting the costs of the dollar, the pound and even the Euro. As a result, the organisation has been very proactive in using the predicted rates to get into forward contracts with forex bureaus and even other companies which we trade with to take advantage of the price differentials. Hence, during the three-month trading session, there were strategies that we employed with the intention of beating the market during the deal. One of the strategies that we applied was the scalping strategy.

            As the trading unit, we were very keen to note the slight differences in the prices to use them to our advantage. For example, between trade 16 and trade 19, the EUR was trading at 0.8648 against the GBP, and on business 19, the EUR was trading at 0.8945. Hence, during that period we were able to make a profit of 0.0297 for every EUR. The other strategy that we used was the momentum trading strategy. Through the plan, we managed to identify strong price moves to take advantage of the price differentials. Moreover, we were aware that through the transaction we were able to make a lot of profit gain. For example, while trading the EUR to the dollar, we were able to make a profit of $338,747 at the end of the trade. As a result, the strategies worked mainly due to the amount of profit that we were able to make. Hence, we were able to go long on the dollar, and at the end of the three-month period, we managed to realise the total profit of $491,191.

Transaction between the same currency

While trading we rarely engaged in trades that involved the same transaction. However, there are few instances where we traded by buying the same currency. Between trade 17 and 18, we traded in the same currency and sold off $10,000. As a result, from the trade, we were able to make a loss of -0.003 for every transaction. As a result, it would have been more prudent if we held off the trade.

Forex trading Strategy

As an organisation, we have set ourselves to ensure that we take advantage of the foreign exchange gains. As a result, we have provided that there is a dedicated team of people who will be monitoring the trades to ensure that we get the maximum out of forex. Moreover, we have also provided that we utilise all the strategies which such as engaging in forward and futures contracts so that we mitigate against any form of risk exposure that may contribute to us generating losses as we trade.

Justification behind the trade

The secondary objective of the organisation is to make a profit of $500,000 over the next three months. As a result, we have decided to buy the EUR and sell the dollar. Currently, the dollar was trading at a better price compared to the one that we bought it with. As a result, we have decided to sell the $231,000,000 and decided to purchase an additional EUR worth 100,000,000. We intend that we forecast that over the three months, the value of the EUR will increase by a margin of 1.286 hence we will be able to realise that profit gain over the next course of the months.

Recommendations to the senior manager

The senior manager should support our recommendation of selling the dollar and buying the Euro. We have predicted that the value of the dollar will; depreciate over the next three months. As a result, if we hold on to the dollar for longer, we will lose about 0.684 per transaction. One of the common mistakes that we made during the trading session was the reverse trading. During the three months of the trading session, we decided to go against the trend such that when most of the traders were buying we decided to sell and vice versa. As a result, we were able to make losses of about $50,000. Hence going forward, even with the next three months of trading we will avoid any instances of reverse trading.

August 18, 2023




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