Trading & Financial Market Analysis

A self-reflective study (Circa 3000 words) on your development as a trader and financial market analyst. A review of the level of your technical skills at the beginning of the course, how these skills developed through the 9 weeks, examples of positive and negative experiences that facilitated the progression of your skills and finally how you intend to utilise what you have learnt in a professional environment going forwards.

Section A: Goals

                    
Complete all sections

                    
Use bullet points for question 1 and a suggested word count of 300 to 400 words for question 2.

1.                 
Summarise the specific learning goals or personal development goals you set yourself at the commencement of your Diploma in Trading & Financial Market Analysis.

     
1. To improve my financial knowledge;

     
2. To develop an appreciation for risk management in terms of live trading in regard to trading limits;

     
3. To enhance my live market trading ability.

2.                 
Summarise the extent to which you have achieved your goals, providing a brief summary of your journey of progression with examples where appropriate. If appropriate specify where goals were not achieved and/or where goals were altered as a result.

1. My financial knowledge of financial instruments has been drastically increased. The main asset classes I learned about were:

-> Equity markets (mainly US & European) e.g. S&P 500 – it’s composition in regard to companies, how energy companies have a large share of it, so when events involving such firms occur means a correlated move in the S&P like oil refineries going offline in the US due to Hurricane Irma – facts & figures here. When cash open is.

• Briefly talk about the FTSE 100, DAX, DOW JONES & NASDAQ in terms of their make-up. E.g. how many companies in each, correlation to specific assets or currencies/currency pairs. When each market opens.

-> Commodities. Mainly Gold (safe haven – quick note on this) WTI Crude Oil and, to some extent, Copper & Gasoline. Talk about their volatility (e.g. oil’s volatility increases at 2pm as that is the traditional time the ‘pit’ would open – this is carried through to today’s trading physiology) when data is released and how this can affect markets. How certain currencies are affected by news in commodity markets e.g. Canadian dollar affected by WTI Crude Oil news & why? – because much of their economy is configured of oil production. Same with iron ore and the Australian dollar.

-> Currencies/Forex markets. The main currency pairs I traded were GBP/USD (CABLE), EURO/USD, JPY/USD, CA6 (Canadian dollar) and DA6 (Aussie dollar). How some like JPY (Japanese yen) is a safe haven for risk off environments.

-> Fixed Income. 10 year US Treasury bonds. Was not able to trade Bund or UK guilts. Talk about their stability in price, and how they too, are safe havens – why? Lowest risk of default – practically a ‘risk-free rate’.

2. My risk management appreciation improved greatly. In stage 2 of the programme, as traders, we were given risk limits – limits we were not allowed to break during a days trading. This consisted of not being allowed to lose more than $350 on a singular trade, or $700 on a single product for the day. If this happened, we were not able to trade that product for the rest of the day. I broke some risk limits off the back of some news, like Canada central bank hiking rates – I went long aggressively (at the peak of the candle stick) and broke my limit. This also happened with various ECB meetings and the last Non-Farm Payrolls in the US in mid Sep. I have however learned from this, and in the last week only broke my limit once.

3. My general trading performance improved considerably too. To begin with, I started trading erratically and irrationally; I would sometimes counter-trend, or not know what data was being released or not have a fundamental or technical reason as to why I would trade. I would find it difficult to hold trades for longer than periods of a few minutes, and thus my order display would look like a Christmas tree. After evaluating my trading strategies and techniques with my session leader Saif Ali he helped me establish some targets, like holding my trades for longer than 15 minutes, not trading when the markets are quiet and to look for specific technical levels for a good entry – like a classic long on an upward trending product at the pivot after it had retraced.

I realise this is very long winded and so would appreciate a more concise, technically accurate, and better worded summary…as close to 400 words as possible.

Section B: Demonstrate how you have met the learning outcomes

                    
Complete all sections

                    
Use bullet points with the first one setting the example and then clearly demonstrate the learning

                    
Although each question has a suggested word count of 300, feel free to go to 400 if required

                    
Total word count for Section A and B should be a maximum of 3000.

1.                 
Financial market analysis can be divided into the two broad categories of ‘Fundamental Analysis’ and ‘Technical Analysis’. Briefly compare your knowledge on these fields at the start of the Diploma relative to how you understand these areas of analysis better now.

To begin with, at the start of the Diploma, my knowledge of both fundamental and technical analysis was minimal. I had a general idea of what they were through my BSc, but when it came to intraday trading I wasn’t too sure. Please talk here about by the end I understood a lot more of what they were and use examples. Like get into a trade if you have one fundamental reason for it e.g. going long on Oil if OPEC decided to restrict the supply of oil…I.e. due to economic data announcements/terrorist threats / bombs etc. Or getting into a trade if you have at least a few technical levels – e.g. a product that looks as though there is going to be a classic long/short at either S2, S1, pivot, R1 or R2 and it coincides with a key technical level e.g. the high of the previous day/week/month/quarter/year. Please separate the two ‘fundamental analysis’ and ‘technical analysis’ when taking about them.

2.                 
Give a short example of your ability in each category defined in Section B part 1 above by picking a financial market and carrying out both a fundamental and technical analysis process on it. Your fundamental analysis should involve a discussion on the macro factors currently influencing price movement. Your technical analysis process should use at least 2 charts of different time frames along with the use of at least three technical analysis tools.

Possible examples here could be any of the ones I mentioned section A question 2. Examples should be in a time frame starting from the start of August to now. Examples could include oil prices over the past 2 months with mention of OPEC agreements and oil refineries going offline due to hurricane Irma. Gold/JPY/t-notes as a safe haven during North Korea nuclear weapon testing – for example Trump tweeting ‘fury and fury’ and how the market reacted. How then the market priced in this uncertainty and so such safe havens were less affected when more testing phases occurred. How the EURO/USD and GBP/USD reacted off the back of the FOMC’s decision as to what will happen with quantitative easing in America, when Janet Yellen spoke. How did these markets react?

Please contact me if you need me to provide these charts.

3.                 
Draw up a conclusion from your analysis in part 2 by recommending a trading strategy for that market going forwards. This should include a directional bias based on your evaluation of the macro environment. This should be followed by defining an entry price for the trade, profit targets and a suggested price for a stop loss order based on your technical analysis.

Again. Either I can provide charts here or if not, a clear and well labelled charts of all specified instructions.

4.                 
Certain financial markets have a relationship where they display a relatively consistent correlation in their price movement. Give an example of two correlated assets and explain their typical relationship. Then explain how sometimes the correlation can break down or even reverse and describe the market conditions that might lead to such a scenario.

Please use the financial markets I have provided and the assets. Possibilities could include the S&P and Nasdaq and Dow Jones. Or CABLE and the FTSE 100, or WTI Crude Oil and Canadian dollar. Etc. This reason why it couldn’t have happened might be because of particular data announcements that will carry more weighing in regard to how the price movement will be. Or certain meetings e.g. the FED, Bank of England or ECB (the main central banks) and how in anticipation of particular data that otherwise will have affected the price in certain financial markets, didn’t due to upcoming scheduled meetings.

Or please choose any financial markets mentioned as your discretion.

5.                 
Give an example of a situation where you experienced a scenario where a financial market did not behave in accordance to traditional market theory and explain your understanding as to why this happened.

Please use a situation from above that has been explained and go into why this has happened.

6.                 
Reflect on your personal journey from a performance psychology perspective. Give an example of a behavioural challenge you met during the training programme and how you learnt to manage your psychology to overcome this challenge.

After taking the HONEY AND MUMFORD LEARNING STYLES to evaluate what type of trader I am, I learned I was an aggressive trader which can sometimes the downfall of a trader and the detriment to many. An aggressive trader tends to act first and consider the consequences afterwards.

I had a problem with overtrading too, hence why sometimes my order display would look like a Christmas tree. I needed to learn to sit on my hands in quiet markets and wait for the perfect entry. Please try to work in bits of the following paragraph. Overtrading: Overtrading can be attributed to greed in that the desire to make money encourages taking trades that are outside of the adopted methodology. Impulsive trading is often the result, with the trader ignoring pre-set rules in favour of chasing profit or making up for losses.

Aggressive risk taking: In order to make more money and satisfy greed, a trader may adopt risk parameters that exceed available resources. Taking abnormally large positions and engaging in reckless money management practices are common issues associated with greed.

Following on from above, I would sometimes adopt too big of a stop loss in order to make more money; I was trading my p/l, not the market which I should have done. However, by the end I did adopt this approach and I booked profit where the market allowed and where I knew was acceptable. This meant I came away with some money and not a large loss.

Inability to define profit and loss: Profit and loss are key elements of money management that must be defined before each trade is taken. Greed makes this difficult, because the profit targets are often unreasonable and the realisation of a loss delays the instant gratification that a winning trade provides. The result is the tendency to exhibit indecision when taking profits, and reluctance in exiting losing trades.

The influence that greed and euphoria have upon a trader’s psyche can be substantial and harmful to a healthy trading mind-set. The task of managing these issues must be honestly addressed in order to overcome the challenges they pose to profitability.

I did, however, overcome most of these. I still need to work on not getting carried away with a trade and also learning to not trade during quiet periods.

7.                 
Referring to Kolb’s learning cycle, explain with examples how you implemented the process of better self-awareness and continuous development in order to progress and how you intend to apply this process and your new knowledge in your future career.

 

Kolb’s Learning Cycle is a well-known theory which argues we learn from our experiences of life, even on an everyday basis. It also treats reflection as an integral part of such learning. According to Kolb (1984), the process of learning follows a pattern or cycle consisting of four stages, one of which involves what Kolb refers to as ‘reflective observation’. The stages are illustrated and summarised below:

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