Political Reasons: A lot of trading in Japanese Yen was executed by me due the expectation of rise in the exchange rate out of the recent Free Trade Agreement (FTA) which was signed between Australia and Japan, A rise in currency exchange rate was stipulated, and received a blended return i.e. neither high gains nor huge losses.
Political policies help in modeling the overall economy and also help in fuelling confidence in foreign investors, to invest foreign currency and thus make a positive impact on the currency.
Other Reasons: I also experienced a mixed return in my exchange by putting stop losses while trading in New Zealand Dollar and Euro’s. This is significantly due to several other reasons responsible for the fluctuations in the foreign exchange rates like public debt, terms of trade and current account deficit etc.
Out of our virtual trading in the FOREX market, we have been able to understand the major factors driving this market and reasons for the gain or losses experienced. I, begin with a fund capital of AUD 50,000 am ultimately squaring up at a slight loss, which may be due to a probable number of reasons which are mentioned as follows:
(1) Proper Trading Plan: A viable trading plan is required for making sure that one does not ends up falling prey of the volatile fluctuations in the market. Since this was the first exposure to the practical approach of the foreign exchange market thus risk was maximum. This can be clearly said that the slight loss experienced by me could be due to a weak trading plan. A thorough study of the market and planning where, how much and why to invest could have certainly been fruitful.
(2) Money Management : Money management is a very crucial aspect of Foreign exchange market, practices such as stop loss, hedging are of a great help in this market and I can certainly say that these really helped me to curtail the state of negative returns and mitigate the quantum as well.
The demo training module of foreign exchange market is of a great help and has certainly helped in understanding the techniques of functioning of foreign exchange market.