Currency trading simulation Research Paper Example | Topics and Well Written Essays - 750 words

Currency trading simulation - Research Paper Example OANDA reflects the market ideal market condition which may not be true conditions. The pie charts in the OANDA which shows real time changes in the currency pair using moving averages. The user can study the market and develop their trading strategy which will determine when to buy and when to sell at a profit. Generally, when the spot crosses under the moving average,a sell signal appears because the technical analysis shows that the price will drop. A buy signal appeard when the spot crosses over the moving average because the price will raise. Market volatility tends to indicate rate reversal hence an important factor to be considered. I used two moving average on the same pie charts, the faster moving average is based on 25 days of data while the slower moving average is calculated from 10 days of data. A buy signal appears when the faster moving average crosses above the slow moving average, and a sell signal appears when the faster moving average crosses below the slower moving average (OANDA Tutorial). My initial trading plan was to use reversal point by waiting for the fast moving average crossing above the slower moving average, then buy 50 currency units and hold the for a while to see if the market price will go up or not. My initial didn’t work out because the prices didn’t rise, thus I couldn’t get a profit. I decided to diversify my portfolio to maximize my returns and minimize my risk in the money market. The moving average, however, had little movement and thus I was not able to able to buy and sell at a profit. Changing my strategies to diversification of portfolio worked out because none of the moving averages crossed each other. Market volatility also didn’t work out so I decided to diversify my points. My strategies yielded returns, but I didn’t maximize it. The market fluctuates every second and making decisions is very