Study onAnalysis of

Trading in Gold MarketHarvest Futures Consultants

India Pvt. Ltd.

Submitted byAAYUSH KUMAR

Registration No:13010121218

Under the Guidance of Prof. NATARAJA N.S.

In partial fulfillment of the Course- Industry Internship Programme- IIP

in Semester II of the Master of Business Administration (Batch of 2013)

Bangalore

Master of Business Administration

Industry Internship Programme (IIP)

Declaration

This is to declare that the Report titled “Analysis of Trading in Gold Market” has been made for the partial fulfillment of the Course: Industry Internship Programme (IIP) in Semester II by me at Harvest Futures Consultants Pvt. Ltd. under the guidance of Prof. Nataraja N.S.

I confirm that this Report truly represents my work undertaken as a part of my Industry Internship Programme (IIP). This work is not a replication of work done previously by any other person. I also confirm that the contents of the report and the views contained therein have been discussed and deliberated with the faculty guide.

Signature of the Student :

Name of the Student (in Capital Letters) : AAYUSH KUMAR

Registration No : 13010121218

Master of Business Administration

Certificate

This is to certify that Mr. AAYUSH KUMAR Regn. No. 13010121218 has

completed the report titled ‘Analysis of Trading in Gold Market’ under

my guidance for the partial fulfillment of the Course: Industry

Internship Programme (IIP) in Semester II of the Master of Business

Administration.

Signature of Faculty Guide:

Name of the Faculty Guide: Prof. Nataraja N.S.

TABLE OF CONTENTS-

Declaration Certificate

1.Executive Summary 12. Introduction

2.1. Industry overview 2.1.1. Foreign Exchange Market 2.1.2. Foreign Exchange Market in India

2.1.3. Gold Market 2.1.4. Gold Market: Indian Scenario 2.1.5. Gold Market: Global Scenario2.2. Company Overview 2.2.1. Company’s Vision and Mission 2.2.2. Corporate Information 2.2.3. Organizational Structure 2.2.4. SWOT Analysis

3. Project Profile 3.1. Objectives of the study 3.2. Research Methodology 3.2.1. Sources of data collection 3.2.2. Type of research 3.2.3. Limitations of the study 3.2.4. Fundamental Analysis 3.2.5. Technical Analysis4. Observations and Analysis5. Findings6. Recommendations7. Conclusions 7.1. Learning Outcome8. References

LIST OF CHARTS-

2.2.3.1. Organizational Structure3.2.5.1. Example of a bar chart3.2.5.2. Example of a line chart

3.2.5.3. Example of a candlestick chart3.2.5.4. Example of candlesticks3.2.5.5. Illustration of moving average3.2.5.6. Illustration of RSI3.2.5.7. Illustration of MACD3.2.5.8. Illustration of Fibonacci Retracements3.2.5.9. Illustration of Bollinger Bands3.2.5.10. Illustration of Stochastic Oscillator 4.1. Analyzing the six technical tools on 14/4/2014 4.2. Analyzing the six technical tools on 15/4/2014 4.3. Analyzing the six technical tools on 16/4/2014 4.4. Analyzing the six technical tools on 17/4/2014 4.5. Analyzing the six technical tools on 21/4/2014 4.6. Analyzing the six technical tools on 22/4/2014 4.7. Analyzing the six technical tools on 23/4/2014 4.8. Analyzing the six technical tools on 24/4/2014 4.9. Analyzing the six technical tools on 25/4/2014 4.10. Analyzing the six technical tools on 26/4/2014

LIST OF TABLES-

1. EXECUTIVE SUMMARY:

The work which we were being assigned to work upon was to trade in the foreign exchange market. We were trading in commodities (gold and silver) and currencies (usd, jpy, aud, euro and gbp). We were trained to understand and implement Technical as well as Fundamental analysis which would help us to take a call on when to enter the market and when to leave it. We were being taught to take a ‘sell’ call when the market was bearish and take a ‘buy’ call when the market was bullish. We were also taught as to how to read the candle stick charts and assess the trends in markets. The Fundamental analysis included all the news that could affect the movement of market upwards or downwards. For this purpose we were advised to refer to several websites such as forexfactoey, bloomberg, etc. The Technical analysis comprised of use of various tools to understand the movement of market in any direction. These tools provided us a method of evaluating currencies and commodities by analyzing the statistics generated by market activities, such as past volumes and prices. Technical analysis uses charts and other tools to identify patterns that can suggest future actuvity. Although these fundamentals and technicals does not guarantee perfect accuracy yet a careful and precise use of these can help to assess whether to take a ‘buy’ or ‘sell’ call so that we could maximize our profits.

At a later stage, during the course of our internship we were asked to do the marketing of the produt by doing warm as well as cold calls and attract investors to invest in our company and we would be trading on behalf of them (investors could also trade themselves if they wanted to) and book profits for them which in turn would fetch commission for us as well as the firm.

CHAPTER - 2INTRODUCTION

2. INTRODUCTION:

2.1. INDUSTRY OVERVIEW -

The Foreign Exchange Market (FOREX or currency market) is a global, decentralized financial market for trading currencies. Financial centre in the world functions as anchors of trading between a wide range of different types of buyers and sellers around the clock with accept of weekends. The foreign exchange market determines the relative values of different currencies. Currency trading is the trading of different currencies of the world in forex exchange market (forex). The forex market was established in 1971with the abolishment of fixed currency exchanges. The forex is made up of about 5000 trading institutions such as international banks, central government banks (such as Federal Reserve), commercial companies and brokers for all types of foreign currency exchange. There is no centralized location or place of forex. The major trading centres are located in New York, Tokyo, London, Hong-Kong, Singapore, Paris and Frankfurt, and all trading is done by telephone and or over the internet. The Forex market is used for simultaneous buying and selling currencies across the world. The buying and selling activity is executed in pairs, for example the Euro and the US dollar (EUR/USD) or the British pound and Japanese yen (GBP/JPY).

The forex market is the world’s largest financial trade market. It is approximately generating revenue of $5.4 Trillion per day and it is expected that the volume are estimated to triple that of stocks and other future market combined in the near future. The Forex market includes spot trading as well as the derivative trading tools: futures, forwards, options and swaps. The spot market is most commonly used in Forex because spot trading allows financial instruments to be traded at their current market price. Settlement of Forex spot transaction usually occurs within two business days.

Any currency backed by an existing nation to be traded. The trading volumes of the major currencies are the US Dollar (USD), the Euro (EUR), the Japanese Yen (JPY), the British Pound Sterling (GBP), the Swiss Franc (CHF), the Canadian Dollar (CAD), and the Australian Dollar (AUD). The remaining currencies are referred as minors.

The Currencies of the countries that are lesser know are called as exotics. They are as opportunity to trade in these exotic currencies but these currencies require a detailed research before investigating with them. The most actively traded exotics are the New Zealand Dollar (NZD), the South Africa rand (ZAR), the Singapore Dollar (SGD), the Chinese Yuan (CNY), the Brazilian real (BRR) and South Korean won (KRW).

There are two main groups that trade currencies. 5% of daily volumes are from companies and government and this is primarily hedging activity. The other 95% consists of investors trading for profits or speculation. Nowadays importers and exporters, international portfolio managers, multinational corporations, speculators, day traders and long term holders and hedge funds all use the Forex market.

The Continuous fluctuations of Dollar, the gradual decline in global equity markets and declining world interest rates, have forced investors to look for newer opportunities. This has led to many national economies becoming interconnected with one another. The resulting fluctuations in exchange rates have created a huge international market for Forex. This has created opportunities for existing and new profit potentials.

Each nation’s government has mechanism in place to control its supply of currency. In the currency market the National or the Central banks play a crucial role. The Central banks which are influential can lower and raise interest rates to control their nation’s money supply. By lowering interest rates, a central bank makes it easier to borrow more money, this stimulating economic growth and consumption. The market appreciates to lower interest rates and depreciate to rising interest rates.

2.1.1. Foreign Exchange Market:

The Foreign exchange market is divided into various groups. Bank markets are on the top of the list like large commercial banks and security dealers. Within the Inter – Bank Market, the Spreads differ between the Bid and Ask Prices. The difference between Bid and Ask prices broadens (For Example 0 to 1pip to 1to 2pips and so on for a currency such as EURO) going down the levels to access. This

depends upon the volume, for suppose a trader promises huge number of transactions for large amounts, which are too called to better, spread.The ranges of access that make up foreign exchange market are determined by the size of the line. The 53% of all major transactions are from the top group of inter-bank market, and then it’s followed by smaller banks followed by multi-national corporations, huge hedge funds, and even some of retail FX markets makers. The central banks participate in the foreign exchange market so that they can align the currency according to the need of their economic need.

CENTRAL BANKS

National central banks play an important role in the foreign exchange markets. They try to control the money supply, inflation, interest rates and often have official or unofficial target rates for their currencies. They can use their often substantial foreign exchange reserves to stabilize the market. Nevertheless, the effectiveness of central bank "stabilizing speculation" is doubtful because central banks do not go bankrupt if they make large losses, like other traders would, and there is no convincing evidence that they do make a profit trading.

FOREIGN EXCHANGE FIXING

Foreign exchange fixing is the daily monetary exchange rate fixed by the national bank of each country. The idea is that central banks use the fixing time and exchange rate to evaluate behaviour of their currency. Fixing exchange rates reflects the real value of equilibrium in the market. Banks, dealers and traders use fixing rates as a trend indicator.

The mere expectation or rumour of a central bank foreign exchange intervention might be enough to stabilize a currency, but aggressive intervention might be used several times each year in countries with a dirty float currency regime. Central banks do not always achieve their objectives. The combined resources of the market can easily overwhelm any central bank.Several scenarios of this nature were seen in the 1992–93 European Exchange Rate Mechanism collapse and in more recent times in Asia.

HEDGE FUNDS AS SPECULATORS

About 70% to 90% of the foreign exchange transactions are speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular Currency. Hedge funds have gained a reputation for aggressive currency speculation since 1996. They control billions of dollars of equity and may borrow billions more, and thus may overwhelm intervention by central banks to support almost any currency, if the economic fundamentals are in the hedge funds' favour.

INVESTMENT MANAGEMENT FIRMS

Investment management firms (who typically manage large accounts on behalf of customers such as pension funds and endowments) use the foreign exchange market to facilitate transactions in foreign securities. For example, an investment manager bearing an international equity portfolio needs to purchase and sell several pairs of foreign currencies to pay for foreign securities purchases. Some investment management firms also have more speculative specialist currency overlay operations, which manage clients' currency exposures with the aim of generating profits as well as limiting risk. While the number of this type of specialist firms is quite small, many have a large value of assets under management and, hence, can generate large trades.

COMMERCIAL COMPANIES

An important part of this market comes from the financial activities of companies seeking foreign exchange to pay for goods or services. Commercial companies often trade fairly small amounts compared to those of banks or speculators, and their trades often have little short term impact on market rates. Nevertheless, trade flows are an important factor in the long-term direction of a currency's exchange rate. Some multinational companies can have an unpredictable impact when very large positions are covered due to exposures that are not widely known by other market participants.

NON-BANKING FOREIGN EXCHANGE COMPANIES

Non-bank foreign exchange companies offer currency exchange and international payments to private individuals and companies. These are also known as foreign exchange brokers but are distinct in that they do not offer speculative trading but rather currency exchange with payments (i.e., there is usually a physical delivery of currency to a bank account).It is estimated that in the UK, 14% of currency transfers/payments are made via Foreign Exchange Companies. These companies' selling point is usually that they will offer better exchange rates or cheaper payments than the customer's bank. These companies differ from Money Transfer/Remittance Companies in that they generally offer higher-value services.

MONEY TRANSFER/REMITTANCE COMPANIES AND BUREAUX DE CHANGE

Money transfer companies/remittance companies perform high-volume low-value transfers generally by economic migrants back to their home country. In 2007, the Alite Group estimated that there were $369 billion of remittances (an increase of 8% on the previous year). The four largest markets (India, China, Mexico and the Philippines) receive $95 billion. The largest and best known provider is Western Union with 345,000 agents globally followed by UAE Exchange Bureaux de change or currency transfer companies provide low value foreign exchange services for travellers. These are typically located at airports and stations or at tourist locations and allow physical notes to be exchanged from one currency to another. They access the foreign exchange markets via banks or non-bank foreign exchange companies.

2.1.2. F oreign Exchange Markets in India

The foreign exchange market has grown drastically in trading volumes since the liberalization. The exchange rate to the Indian economy has gained a greater importance than ever before. The government has adopted a flexible exchange rate regime, in practice the rupee is one of the most efficient trackers of the US Dollar. Apprehensions of capital driven flow currency crisis have held Indian back from capital account convertibility though the debate continues. The rupee‘s deviations from covered interest parity exhibit relatively long lived savings. An

inevitable side-effect of the Indian exchange rate policy has been the ballooning of the foreign exchange.

The routines used to examine currencies and commodities and settle on speculation choices fall into two extremely general classifications: Fundamental Analysis and and Technical Analysis. Major analysis includes examining the attributes of an organization so as to understand it’s current market value. Technical Analysis takes a totally distinctive methodology; it couldn't care less one bit about the 'worth" of an organization or an item. Technical Analysts are just intrigued by the price changes in the Market.

Regardless of all the extravagant and outlandish apparatuses it utilizes, Technical Analysis simply studies supply and demand in a Market trying to figure out what trend, or pattern, will proceed later on. As such, Technical Analyst endeavors to comprehend the feelings in the Market by considering the Market itself, instead of its components. On the off chance that you comprehend the profits and constraints of Technical Analysis, it can provide for you another set or abilities that will empower you to be a finer investor or trader.

Technical Analysis is a strategy for assessing securities by examining the detail summed up by Market movement, for example, past volumes and price. Technical Analysis does not endeavor to measure a security's inherent worth, yet rather utilizes Charts and different instruments to recognize designs that can recommend future action.

In the same way that there are numerous financing styles on the Fundamentals side, there are additionally numerous diverse sorts of Technical investors. Some depend on Chart pattern; others utilize technical indicators and oscillators, and most utilize some mixture of the two. Regardless, Technical Analysts select utilization of historic prices and volume information which is the thing that differentiates them from their Fundamental Analysts. Dissimilar to Fundamental Analysts, Technical Analysts couldn't care less whether a stock is undervalued – the main thing that matters is a security's past trade data and what knowledge this data can give about where the general market may move later on.

2.1.3. Gold Market

Gold is a unique asset based on few basic characteristics. First, it is primarily a monetary asset, and partly a commodity. As much as two thirds of gold’s total accumulated holdings relate to “store of value” considerations. Holdings in this category include the central bank reserves, private investments, and high-cartage jewellery bought primarily in developing countries as a vehicle for savings. Thus, gold is primarily a monetary asset. Less than one third of gold’s total accumulated holdings can be considered a commodity, the jewellery bought in Western markets for adornment, and gold used in industry.

2.1.4. Gold Market: Indian Scenario: Gold is valued in India as a savings and investment vehicle and is the second preferred investment behind bank deposits. India is the world’s largest consumer of gold in jewellery (much of which is purchased as investment). The hoarding tendency is well ingrained in Indian society, not least because inheritance laws in the middle of the twentieth century lent a great desirability to anonymity. Indian people are renowned for saving for the future and the financial savings ratio is strong, with a ratio of financial assets-to-GDP of 93%. Gold’s circulates within the system and roughly 30% of gold jewellery fabrication is from recycled pieces. India is typically also the largest purchaser of coins and bars for investment (>80tpa), although last year it had to concede first place to Japan in the wake of the heavy buying in the first quarter due to fears for the stability of the Japanese banking system. In 1998-2001 inclusive, annual Indian demand for gold in jewellery exceeded 600 tons; in 2002, however, due to rising and volatile prices and a poor monsoon season, this dropped back to 490 tons, and coin and bar demand dropped to 67 tons. Indian jewellery off take is sensitive to price increases and even more so to volatility, although this decline in tonnage since 1998 is also due in part to increasing competition from white and brown goods and alternative investment vehicles, but is also a reflection of the increase in price. The Indian bride’s “Streedhan”, the wealth she takes with her when she marries and which remains hers, is still gold, however (thus giving gold an important role in the “empowerment” of women in India).

The distinction between gold and commodities is important. Gold has maintained its value in after-inflation terms over the long run, while commodities have declined. Some analysts like to think of gold as a “currency without a country’. It is an internationally recognized asset that is not dependent upon any government’s promise to pay. This is an important feature when comparing gold to conventional diversifiers like T-bills or bonds, which unlike gold, do have counter-party risk.

2.1.5. Gold Market: Global Scenario

Today's gold market is a round-the-world, round-the-clock business, played out largely on dealers' trading screens. The core of the business, however, remains in the key markets of London, as the great clearing house, New York as the home of futures trading, Zurich as physical turntable, Istanbul, Dubai, Singapore and Hong Kong as doorways to important consuming regions and Tokyo where the Commodity Exchange (TOCOM) sets the mood of Japan. Even Paris still has a small market, a reminder of the days when the French were great hoarders, while Mumbai has increasing importance under India's liberalized gold regime that permits official imports through local markets.

2.2. COMPANY OVERVIEW:

Harvest Futures Consultants India Pvt Ltd

It is a subsidiary company of PT Harvest International Futures of Jakarta, Indonesia, and Harvest International Consortiums Ltd, Hong Kong with 51 % shareholder .HIF-India, is one of the pioneers in India, since 2009, providing information and training on global financial markets, specializing in Gold trading. HIF-India has their registered Head Office in Bangalore, with branches in Chennai (Mylapore), Chennai (Nandanam) , Hyderabad (Banjara Hills 2), Pune (Hadapsar), Mumbai (Andheri West), Ahmedabad (Satellite), Dubai.

Harvest Group was founded to provide the best possible currency trading, Indices, CFD and stock trading experience for online trade. Harvest Group is backed by a large financial group of companies with over US$ 16 Billion in asset under management. Harvest Group takes pride in its stringent control as far as its business infrastructure goes. Utilizing its subsidiary companies or strategic Alliances of Harvest International Consortiums Ltd in Hong Kong and PT Harvest International Futures in Indonesia and Harvest Futures Consultants India Pvt Ltd in India , provide paramount global financial advice network to its clients.

Harvest provides the latest range of trading technology, featuring the powerful, MT4(Meta Trading 4) Station for individual traders and multi account platforms for asset managers, PDA and Smartphone solutions for trading on the movie.

HFC- India , is one of the pioneers in India, providing information and trading on global financial markets, specializing in Foreign Currency Trading , or more specifically on Online Spot Interbank Currency Trading. The registered head office is in Bangalore.

RBI, through the provisions in the Master Circular No. 05/2009-10 dated July1 under clause A-13 Liberalized Remittance Scheme have granted permission to resident individuals to freely remit upto USD200,000 per calendar years for acquiring and hold immovable property or shares or any other asset outside India without prior approval from the reserve bank.However, currently the resident Indians cannot trade in currency pairs not involving the Indian Rupee, (like the USD/GBP) with any scheduled bank or such other agency falling under the regulatory purview of the Reserve Bank of IndiaTherefore to trade in such currency pairs, one will have to transact Foreign Exchange trades outside India.

Harvest International Consortiums Group

The HIC Group is a leading global financial services firm providing investment banking, securities and investment management services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. Founded in 2003, the firm is headquartered in Hongkong and maintains offices in Hong Kong, Taiwan, Indonesia, China, India, Vietnam, Singapore, Malaysia, Laos, Brunei and Dubai.Building on a tradition of innovation and performance, the Group is one of the fastest growing private financial services providers in the North America and Asia Pacific regions offering a broad array of innovative financial products.HIC Group, established in 2003 and headquartered in Hongkong, now has worldwide operations across 8 countries including Hong Kong, China, Taiwan, Indonesia, Malaysia, India, Vietnam, Brunei and Dubai. HIC employs over 1,300 finance specialist to serve their clients globally. We offer the full range of financial services which includes Capital Asset Management, Futures & Options, Bullion Trading and Unit Trusts Funds. HIC Group has also made significant investments in non financial services including real estate, cosmetic jewelry and designer watches.

Bomillion-HIC, a joint venture with Bomillion Investment Ltd, is one of the “hundred corporations entering Guangxi” and is a significant player in the strategic planning and development of the “China – ASEAN Youth Industrial Park”. The total project area is over 4,000 acres of land, and the 1st phase of project is called “ASEAN Gateway International Business Center”. Bomillion-HIC

will be investing around US$200M (million) for the 1st phase of project. Turning the area into an ultra modern facility with the following amenities including a Business Center, Luxurious Villas, an ASEAN Youth Conference Center, an ASEAN Exhibition Center, Shopping Mall, 5 Star Resort & Spa Center etc. This project is expected to provide a significant economic stimulus to the local economy.

Harvest Group was founded to provide the best possible Currency Trading, metal, indices and stock trading experience for online trade. Harvest group is backed by large financial group of companies with over US $16 billion in assets under management.

Harvest Group takes pride in its stringent management control as far as its business infrastructure goes. Utilizing its subsidiary companies or strategic Alliances of Harvest International Consortiums (HIC) in Hong Kong and Harvest Futures consultants India Pvt. LTD (HFC) in India to provide paramount global financial advice network to our clients.

Harvest Group has built a strong team in the area of marketing in order to provide clients professional financial services as well as customer support from senior management, seasonal financial consultants, and state of art trading platform as well as professional customer service team.Harvest Group is dedicated in providing our clients the fastest, best possible financial services.We offer the latest range of trading technology, featuring the powerful MT4 (Meta Trading 4)station for individual traders and multi account platforms for asset managers, and PDA and Smartphone solutions for trading on the move.

PT. Harvest International Futures (HIF)

HIC, a group company of HIC,is a registered member of the Indonesia Regulatory Agency

Further HIF is also registered with :- BAPPEBTI- Member of Indonesian Derivatives Clearing House- Member of Jakarta Futures Exchange

- Member of the Commodity Trading Board- With sanctions obtained for Overseas Transactions, HIF can now offer our clients a broader spectrum of trading and investment opportunities.

Regulatory Body

2.2.1. Company’s Mission and Vision:

MISSIONTo give the most credible advice to individual investors on potential investment opportunities in Future Exchange, balancing risk and profitability.To educate the investing public on Futures Exchange and provide the complete understanding so that they may exploit the maximum benefits.To engage with all the stakeholders and help create an organized Futures Exchange that is credible and transparent while promoting healthy and fair competition.

VISIONTo become the most credible Futures Broker globally with the widest portfolio of financial products that the serve the clients globally, investing and transacting in Futures Exchange, especially with major commodity products and Foreign Exchange.

2.2.2. CORPORATE INFORMATION:

DATE OF INCORPORATION : 18th November 2009

REGD.OFF : Harvest Futures Consultants India Pvt. Ltd #17 "Park View", Curve Road, Tasker Town, Bangalore - 560051, Karnataka, India.

BUSINESS ACTIVITIES : Advisory, Consultancy, Analysis, CFD Futures Contract Transactions Currency Trading Stock trading Index Trading/ CFD Trading Commodity Bullion

EXECUTIVE DIRECTOR : Mr. Richard Tai Swee Keong (Malaysia)

BUSINESS DIRECTOR : Mr. Rajendran Pillai (Singapore)

COMPLIANCE DIRECTOR : Mr. Abdul Wahab (India)BUSINESS DEVELOPMENT DIRECTOR : Mr. Naveen Kumar H.M (India)

ADVOCATE : Chambers of Jayashri Murali

AUDITOR : C.P Ethirajan

COMPANY SECRETARY : S.P Nagarajan

2.2.3. ORGANIZATIONAL STRUCTURE:

2.2.3.1.: Flow Chart of Organization Structure

Senior Management

Buisness Development

DirectorAssociate Director Managing Director

Senior Mangement

Branch Manager

Portfolio Manager

Asistant Portfolio Manager

Business Consultant

Channel Partner

2.2.4. SWOT ANALYSIS:

STRENGTHS The Harvest is a member of various exchanges and has registered licenses

to run the business.

o Member of Indonesia Regulatory Agency

o Member of Jakarta Futures Exchange

o Member of Indonesian Derivatives Clearing House

o Member of Commodity Trading Board

o Approval letter of Alternate Trading system

Harvest is physically present with infrastructure and trained professionals.

The exposure is very high when compared to other brokerage firms.

Brokerage charge is less when compared to the other firms.

The client is trained and educated on the Technical and Fundamental analysis of the market.

The client is given 24 hours withdrawal facility where in he can any time withdraw his money any time.

The client does not have any restriction on the operation of the account.

WEAKNESS The initial margin investment in Harvest is very high when compared to

other brokerage firms and the minimum investment is 10,000USD.

The scope to reach urban and rural markets is very less.

Small trader cannot enter the market as the risk is more, there for more investment is required to sustain in the market.

Most of the customers cannot directly approach the traders they have to go through the relationship manager in the broking firm.

Higher targets for the financial advisors.

Many competitors sell the same product with difference in brokerage and returns.

OPPORTUNITIES As many number of Clint’s are not able to enter due to lack of access to the

internet facilities, by the improvement of internet access more number of clients can enter the trading market.

More competition can increase the volume of transactions.

Government has to make favourable policies to attract more number of traders to enter forex trading market.

Further improve the online trading experience by fine tuning the trading platform, and improving the trading platform.

Continually enhance customer experience by delivering better service standards.

THREATS There are many other companies which provide less brokerage.

Entry of many other private companies with equally strong experience and financial strength of foreign partners is making the competition difficult.

A strict regulation by central banks is limiting traders from the entry into this market.

CHAPTER – 3PROJECT PROFILE

3.1. OBJECTIVES OF THE STUDY:

TO ANALYSE THE PERFORMANCE OF VARIOUS TECHNICAL TOOLS AND INDICATORS

TO ANALYSE WHICH TECHNICAL INDICATOR IS MOST CONSISTENT IN PREDICTING RIGHT MARKET MOVEMENT IN GOLD (COMMODITY)

T0 ANALYSE THE PREDICTION ACCURACY LEVEL BY USING ONLY THE BEST PERFORMING INDICATOR IN ABSENCE OF OTHER NON PERFORMING INDICATORS

TO IDENTIFY WHICH INDICATOR IS BEST SUITED FOR BULLION GOLD MARKET

3.2. RESEARCH METHODOLOGY :

The present study is conducted to provide information to the company and its traders regarding the performance of various technical tools and the most reliable tool/indicator for the bullion market commodity (gold).

Sample size :-50 days analysis for a bullion market commodity i.e. gold.

Type:- Systematic random sample ( data was collected from may 1st to june 10th )

Tools used for analysis:-1. MS excel 2.meta trader 4

Data Collection Approach:-

PRIMARY DATA:- This research is majory based on primary data where the data was being noted for each day which includes the open ,high, low ,close and the data was analysed with the help of various technical tools namely moving average,relative strength index,stochastic oscillator,fibonacci series,bollinger bands &Moving average convergence and divergence with the help of these tools the analysis was made whether the indicator is giving the buy call or sell call based on this observation the data was collected if the indication given by the indicator resulted in the positive market movement then the obsevation entered would be one if the indication given by the indicator is wrong then the observation entered would be 0 as a result we would end up with the performance of the indicator in giving the rite indication .these data is collected from the trading platform provided by the company ie meta trader 4

3.2.1. Sources of Data collection:

1.PRIMARY DATA: Collected manually by personal obsevation and analysis which was also

verified by experienced traders

2.SECONDARY DATA:- Secondary data was collected from company and from different websites Data was also taken from various text books, journals, magazines, news

papers.

3.2.2. Type of Research:-

Based on the objectives of the study, the exploratory research method is used. Exploratory research is conducted since wedont know which indicator is most reliable and which indicator works best on which commodity.The conclusions are arrived at from the collected data.statistical tools were used to analyse the data .

3.2.3. Limitations of the study :

The sample size of observation was limited to 50 days which might not be reprsenting the performance of the indicator in long term.

The results are analysed based on individual and experienced trader but the interpretation of each trader need not be same it may differ from person to person.

Traders interpretation of the indicator may be biased since the trading stratergy differs from each trader.

Major limitation for most technical analysis methods is the fact that there are so many people using the basic technical analysis methods already, and the number is increasing every day, making it harder for a single trader to make money on the market with the methods.

Because of these methods are so widely spread and there is so much money riding on the methods, some also claim that technical analysis has become self-fulfilling prophecy, as people trend to enter the market and put their stops on the same places, increasing the volatility towards the technical analysis method being correct.

Technical analysis systems usually do not take into account correlation between different markets. If you are analyzing several markets and they all give similar signals, they may have close correlations, meaning that the risk profile for each is very similar, and that the prices of the assets move in close steps with each other.

3.2.4. FUNDAMENTAL ANALYSIS:

Introduction to Fundamental Analysis

Fundamental analysis is a process of looking at a business at the basic or fundamental financial level. The primary assumption of fundamental analysis is that the all the factors are not discounted in the current market price. There is something called the intrinsic value of the currency which is its true value. Fundamental analysis also assumes that the market will reach its true intrinsic value in the long term and hence the market value and the intrinsic value will reach equilibrium. Hence if the market value at present is lower than its intrinsic value, then it is good time to invest and vice versa.

The steps involved in fundamental analysis are:

1. Macroeconomic analysis, which involves considering currencies, commodities and indices.2. Industry sector analysis, which involves the analysis of companies that are a part of the sector.3. Situational analysis of a company.4. Financial analysis of the company.5. Valuation6. Reading of news and Articles related to the Market

3.2.5. TECHNICAL ANALYSIS:

Introduction to Technical Analysis

Technical analysis is the study of market action, primarily through the use of charts, for the purpose of forecasting future price trends. For technical analysts, the term market action includes three sources of information. They are price, volume and open interest. Open interest is used only in futures and options.

There are three premises on which technical analysis is based. They are

1) Market action discounts everything - Anything and everything that affects the price is actually reflected in the price of that market. Hence a technical analyst will only study the price action and not the reasons behind the change in the price.

2) Prices move in trends - There are three types of trends. They are uptrend, downtrend and sideways trend. The assumption of technical analysis is that a trend in motion is more likely to continue than reverse or a trend in motion will continue in the same direction until it reverses.

3) History repeats itself - The meaning of the phrase history repeats itself is that the key to understanding the future lies in the study of the past, or that the future is just a repetition of the past.

Usually the following tools & instruments are used to do the technical analysis:

Price FieldsTechnical analysis is based almost entirely on the analysis of price and volume. The fields which define a security's price and volume are explained below.

Open - This is the price of the first trade for the period (e.g., the first trade of the day). When analyzing daily data, the Open is especially important as it is the consensus price after all interested parties were able to "sleep on it."

High - This is the highest price that the security traded during the period. It is the point at which there were more sellers than buyers (i.e., there are always sellers willing to sell at higher prices, but the High represents the highest price buyers were willing to pay).

Low - This is the lowest price that the security traded during the period. It is the point at which there were more buyers than sellers (i.e., there are always buyers willing to buy at lower prices, but the Low represents the lowest price sellers were willing to accept).

Close - This is the last price that the security traded during the period. Due to its availability, the Close is the most often used price for analysis. The relationship between the Open (the first price) and theClose (the last price) are considered significant by most technicians. This relationship is emphasized in candlestick charts.

Volume - This is the number of shares (or contracts) that were traded during the period. The relationship between prices and volume (e.g., increasing prices accompanied with increasing volume) is important.

Open Interest - This is the total number of outstanding contracts (i.e., those that have not been exercised, closed, or expired) of a future or option. Open interest is often used as an indicator.

Bid - This is the price a market maker is willing to pay for a security (i.e., the price you will receive if you sell).

Ask - This is the price a market maker is willing to accept (i.e., the price you will pay to buy the security).

Chart Styles:

Price in a chart can be displayed in following styles:1. Bar Chart.2. Line Chart.3. Candlestick Chart.

1). Bar Charts:The highs and lows of a commodity are plotted in a diagram and the points are joined with vertical lines (bars). A small horizontal tick to the left denotes the opening level while a small horizontal tick to the right represents the closing price of each interval.

Chart 3.2.5.1: Example of a bar chart

2). Line Chart:It gives the detailed information about every aspect. The commodity prices for each time period are plotted in a diagram and the points are joined. Prices on the y-axis and time on the x-axis.The line chart chooses for example the closing price of consecutive time periods, but can also work with daily, official fixings.

Chart 3.2.5.2: Example of a line chart

3). Candlestick ChartAlthough candlestick charts are nearly identical to typical Western bar charts, there is one important distinction: candlestick charts are far more dramatic in their presentation. Instead of the standard high-to-low vertical lines accompanied by horizontal ticks that identify the day's open and close, candlestick charts employ two-dimensional bodies to depict the open-to-close trading range and upper and lower stems (or shadows) to mark the day's high and low. A candlestick is black if the closing price is lower than the opening price. A candlestick is white if the closing price is higher than the opening price.

Chart 3.2.5.3: Example of a Candlestick chart

Chart 3.2.5.4: Example of Candlestick

Candlestick Patterns

Bullish Patterns

1. Long white (empty) line. This is a bullish line. It occurs when prices open near the low and close significantly higher near the period's high.

2. Hammer. This is a bullish line if it occurs after a significant downtrend. If the line occurs after a significant up-trend, it is called a Hanging Man. A Hammer is identified by a small real body (i.e., a small range between the open and closing prices) and a long lower shadow (i.e., the low is significantly lower than the open, high, and close). The body can be empty or filled-in.

3. Piercing line. This is a bullish pattern and the opposite of a dark cloud cover. The first line is a long black line and the second line is a long white line. The second line opens lower than the first line's low, but it closes more than halfway above the first line's real body.

4. Bullish engulfing lines. This pattern is strongly bullish if it occurs after a significant downtrend (i.e., it acts as a reversal pattern). It occurs when a small bearish (filled-in) line is engulfed by a large bullish (empty) line.

5. Morning star. This is a bullish pattern signifying a potential bottom. The "star" indicates a possible reversal and the bullish (empty) line confirms this. The star can be empty or filled-in.

6. Bullish doji star. A "star" indicates a reversal and a doji indicates indecision. Thus, this pattern usually indicates a reversal following an indecisive period. You should wait for a confirmation (e.g., as in the morning star, above) before trading a doji star. The first line can be empty or filled in.

Bearish Patterns:

4. Dark cloud cover. This is a bearish pattern. The pattern is more significant if the second line's body is below the center of the previous line's body (as illustrated).

1. Long black (filled-in) line. This is a bearish line. It occurs when prices open near the high and close significantly lower near the period's low.

2. Hanging Man. These lines are bearish if they occur after a significant uptrend. If this pattern occurs after a significant downtrend, it is called a Hammer. They are identified by small real bodies (i.e., a small range between the open and closing prices) and a long lower shadow (i.e., the low was significantly lower than the open, high, and close). The bodies can be empty or filled-in.

5. Bearish engulfing lines. This pattern is strongly bearish if it occurs after a significant uptrend (i.e., it acts as a reversal pattern). It occurs when a small bullish (empty) line is engulfed by a large bearish (filled-in) line.

6. Evening star. This is a bearish pattern signifying a potential top. The "star" indicates a possible reversal and the bearish (filled-in) line confirms this. The star can be empty or filled in.

7. Doji star. A star indicates a reversal and a doji indicates indecision. Thus, this pattern usually indicates a reversal following an indecisive period. You should wait for a confirmation (e.g., as in the evening star illustration) before trading a doji star.

Reversal Patterns:

8. Shooting star. This pattern suggests a minor reversal when it appears after a rally. The star's body must appear near the low price and the line should have a long upper shadow.

1. Long-legged doji. This line often signifies a turning point. It occurs when the open and close are the same, and the range between the high and low is relatively large.

2. Dragon-fly doji. This line also signifies a turning point. It occur when the open and close are the same, and the low is significantly lower than the open, high, and closing prices.

3. Gravestone doji. This line also signifies a turning point. It occurs when the open, close, and low are the same, and the high is significantly higher than the open, low, and closing prices.

4. Star. Stars indicate reversals. A star is a line with a small real body that occurs after a line with a much larger real body, where the real bodies do not overlap. The shadows may overlap.

5. Doji star. A star indicates a reversal and a doji indicates indecision. Thus, this pattern usually indicates a reversal following an indecisive period. You should wait for a confirmation (e.g., as in the evening star illustration) before trading a doji star.

Neutral Patterns

1. Spinning tops. These are neutral lines. They occur when the distance between the high and low, and the distance between the open and close, are relatively small.

2. Doji. This line implies indecision. The security opened and closed at the same price. These lines can appear in several different patterns. Double doji lines (two adjacent doji lines) imply that a forceful move will follow a breakout from the current indecision.

3. Harami ("pregnant" in English). This pattern indicates a decrease in momentum. It occurs when a line with a small body falls within the area of a larger body. In this example, a bullish (empty) line with a long body is followed by a weak bearish (filled in) line. This implies a decrease in the bullish momentum.

Key Technical Indicators:

There are several indicators that are used in technical analysis. But I have chosen to highlight the following indicators as I have used some of these further in the project.

1. Moving average2. Relative Strength Index (RSI)3. Moving average Convergence Divergence (MACD)4. Fibonacci levels5. Bollinger Bands6. Stochastic Oscillator

1) Moving average - The moving average essentially a trend following indicator or a lagging indicator as it is formed after the price movement occurs. Its purpose is to identify or signal that a new trend has begun or that an old trend has ended or reversed. Its purpose is to track the progress of the trend

White candle (shown in picture): Bearish candlePurple candle (shown in picture): Bullish candle

4. Harami cross. This pattern also indicates a decrease in momentum. The pattern is similar to a harami, except the second line is a doji (signifying indecision).

Chart 3.2.5.5: Illustration of Moving Average

-------- 25-day moving average -------- 10-day moving average

There are three types of moving averages that are used by technical analysts. They are

a) Simple moving average - It is calculated by taking the average of the previous 10 or 15 closing prices. The weights given to each day is the same i.e. in a 10 day simple moving average, the weight given for the 10th day closing price is the same as the weight given for the 1st day closing price. The disadvantage of the simple moving average is that it reacts slower to the price movement when compared to an exponential moving average.

b) Linearly weighted moving average - In this type of moving average weights are given in a linear proportion to each day’s closing price i.e. the 10th day closing price is multiplied with 10, the 9th day with 9, and so on. The greater weight is given to the most recent closing.

c) Exponential moving average - The exponential moving average assigns greater weight to more recent data and it includes in its calculation all of the data in the

life of the instrument. The advantage of using exponential moving averages is that it reacts quicker to the price movement than a simple moving average.

Analyzing moving averages - There are two ways to analyze moving averages. They are as follows:

a) Single moving average and price - A single moving average is used to generate buy and sell signals. When the price line moves above the moving average, a buy signal is generated. Conversely, when the price line moves below the moving average, a sell signal is generated.

b) Double crossover method - In this case two moving averages are used. One is a shorter moving average and the other a longer moving average. When the shorter moving average crosses above the longer moving average, a buy signal is generated. Conversely, when the shorter moving average crosses below the longer moving average, a sell signal is generated.

2) Relative Strength Index (RSI) – A high RSI, above 70 indicates an overbought or weakening bull market. Conversely, a low RSI, below 30, indicates an oversold market or dying bear market. While you can use Relative Strength Index as overbought and oversold indicators, it works best when a failure swing occurs between the RSI and market prices. For example, the market makes new highs after a bull market setback but RSI failed to exceed its previous highs.Selling when the RSI is above 70 and buying when the RSI is below 30 can be an expensive trading system. A move to those levels is a signal that market conditions are ripe for a market top to bottom. It does not indicate a top or a bottom.

The formula used for calculating RSI is:

RSI=100-100/1+RSRS=Average of x days’ up close/ Average of x days’ down close

Chart 3.2.5.6: Illustration of RSI

Analyzing Relative Strength Index - RSI is plotted on a vertical scale of 0 to 100. Movements above 70 are considered overbought while an oversold condition would be move under 30. Because of shifting that takes place in bull and bear market, the 80 level usually becomes overbought level in bull market and the 20 level the oversold level in bear market.

3) Moving Average Convergence Divergence (MACD) - MACD is comprised of two sets of line. One is called the faster line and the other the slower line. The faster line is the difference between two exponential moving averages (usually 12 and 26). It is also called the MACD line. The slower line is usually a 9 day exponential moving average of the MACD line. It is also called the signal line. The buy and sell signals are based on the crossovers between the two lines. Hence it is very similar to the double crossover method of moving averages.

Chart 3.2.5.7: Illustration of MACD

Analyzing MACD - When the MACD line (faster line) crosses above the signal line (slower line), a buy signal is generated. Conversely, when the MACD line crosses below the signal line, a sell signal is generated. Another way of interpretation using MACD is by comparing it with the zero line to indicate overbought or oversold conditions. An overbought condition is when the lines are well above the zero line and hence indicating a sell signal. An oversold condition is when the lines are well below the zero line and hence indicating a buy signal.

4) Fibonacci levels - Fibonacci lines utilize special ratios that naturally occur in nature to help predict points of support or resistance. Fibonacci numbers are 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, etc. The sequence occurs by adding the previous two numbers (i.e. 1+1=2, 2+3=5) The main ratio used is .618, this is found by dividing one Fibonacci number into the next in sequence Fibonacci number (55/89=0.618). The logic most often used by Fibonacci based traders is that since Fibonacci numbers occur in nature and the stock, futures, and currency markets are creations of nature - humans. Therefore, the Fibonacci sequence should apply to the financial markets.

Chart 3.2.5.8: Illustration of Fibonacci Retracement

Fibonacci retracements - Arguably the most heavily used Fibonacci tool is the Fibonacci Retracement. To calculate the Fibonacci Retracement levels, a significant low to a significant high should be found. From there, prices should retrace the initial difference (low to high or high to low) by a ratio of the Fibonacci sequence, generally the 23.6%, 38.2%, 50%, 61.8%, or the 76.4% retracement

4) Bollinger Bands - Commodities are some of the most speculative and volatile markets to trade. For this reason, Bollinger Bands shine in their ability to predict trends and show relative tops and bottoms in the commodities markets. Bollinger bands are a kind of trading envelope. They are lines plotted at an interval around a moving average. Bollinger Bands consists of a moving average and two standard deviations charted as one line above and one line below the moving average. The line above is two standard deviations added to the moving average. The line below is two standard deviations subtracted from the moving average. Traders generally use this to determine overbought and oversold conditions, to confirm

divergence between prices and indicators, and to project price targets. The wider the bands are, the greater the volatility is. The narrower the bands are, the lesser the volatility is. The moving average is calculated on the close.

Chart 3.2.5.9: Illustration of Bollinger Bands

Analysis – The middle band is a measure of the intermediate-term trend, usually a moving average, which serves as a base for upper band and lower band. The interval between the upper and lower bands and the middle band is determined by volatility, typically standard deviation of the same data that were used for the average. Technically, prices are relatively high when above the upper band and relatively low when below the lower band. However, relatively high should not be regarded as bearish or as a sell signal. Likewise, relatively low should not be considered bullish or as a buy signal. Prices are high or low for a reason. As with other indicators, Bollinger Bands are not meant to be used as a stand alone tool. Chartists should combine Bollinger Bands with basic trend analysis and other indicators for confirmation.

In the above chart, if we see clearly, initially the middle band act as a support and the upper band acts as a resistance. The last bearish candle has cut the middle band from the top which clearly indicates that it is a ‘sell’ call and now the middle band acts as a resistance and the lower band acts as a support.

5) Stochastic Oscillator - The Stochastic Oscillator Technical Indicator compares where a commodity’s price closed relative to its price range over a given time period. The Stochastic Oscillator is displayed as two lines. The main line or the green line is called %K. The second line or red line, called %D, is a moving average of %K. The %K line is usually displayed as a solid line and the %D line is usually displayed as a dotted line. There are several ways to interpret a Stochastic Oscillator. Three popular methods include:

Buy when the Oscillator (either %K or %D) falls below a specific level (for example, 20) and then rises above that level. Sell when the Oscillator rises above a specific level (for example, 80) and then falls below that level.

Buy when the %K line rises above the %D line and sell when the %K line falls below the %D line.

Look for divergences. For instance: where prices are making a series of new highs and the Stochastic Oscillator is failing to surpass its previous highs.

Chart 3.2.5.10: Illustration of Stochastic Oscillator

Analysis - Buy when the Oscillator (either %K or %D) falls below a specific level (for example, 20) and then rises above that level. Sell when the Oscillator rises above a specific level (for example, 80) and then falls below that level.Buy when the %K line rises above the %D line and sell when the %K line falls below the %D line. Look for divergences. For instance: where prices are making a series of new highs and the Stochastic Oscillator is failing to surpass its previous highs.As we see in the above figure, both the %k curve and %D curve are cutting the 20 line from bottom, it is a strong ‘buy’ signal.

CHAPTER – 4OBSERVATIONS AND ANALYSIS

What we have done here is we have done the analysis of gold based on the technical indicators and found out for 50 days as to which technical analysis tool or the combination of tools is most accurate in providing us with right calls(sell or buy).

Date: 14/04/2014

Chart 4.1 : Analyzing the six technical tools 1

Technical analysis for the prediction of future price with the help of

Moving average:- The moving average is represented by dark blue line and red line on the main candle stick window. The blue line is a fast moving average and the red line is a slow moving average where if the fast moving average crosses the slow moving average it shows the change in the trends. In this case we have slow moving average on top and fast moving average is approaching slow moving

average from the bottom which shows that the bull trend is not yet over it will continue for few more daysInterpretation from this indicator:- trend will continue buy signal

Relative strength index:- This indicator is used to find the over bough and oversold region in this particular date ie on 14th April we can see that neither the indicator is in over bought or over sold region which only indicates that the indicator is just above 50 which indicates that it has just entered over sold regionInterpretation from this indicator:- buy signal

Stochastic oscillator:-The stochastic levels are just approaching 50 levels which indicates that it is about to reach over bought region Interpretation from this indicator:- buy signal

Fibonacci levels:- The day candle started with the fibo levels of 38.2 the next fibo level is 50 but it did not break that resistance which indicates that the price may fall Interpretation from the tool:-sell signal

Bollinger bands:- The candle formation is above the middle Bollinger band which suggest that trend is going to continue and the bull trend will continue for next day.Interpretation from the indicator:-buy signal

Moving average convergence and divergence:- This indicator is making lower trough approaching from the bottom which means that the present trend will continueInterpretation from the indicator:- buy signal

Table 4.1. Comparing all 6 technical indicators on 14/04/2014Moving average Relative

strength indexStochastic oscillator

Fibonacci levels Bollinger bands

MACD

BUY BUY BUY SELL BUY BUY

Overall prediction :- BUY

15 /4/2014 candle reading O:-1305 H:-1306 L:-12890 C:- 129614/4/2014 candle reading O:- 1326 H:-1328 L:- 1286 C:-1302

Indicator which gave right prediction :- Fibonacci levels

Date: 15/04/2014

Chart 4.2. : Analyzing the six technical tools 2

Moving average:- The past trend is seen continuing which does not give a clear picture of which side the market may go from here the fast moving average is seen approaching the slow moving average Interpretation:- neutral

Relative strength index:- RSI remains in the same level which does not make any significant movement Interpretation:- Neutral

Stochastic oscillator: - There has been a substantial change in the indicator reading the stock has left the over bought region and it is proceeding towards normal it is proceeding towards 50. Interpretation:-sell

Fibonacci levels:- The candle was not able to break the 50 level resistance mark instead it broke the lower 38 level as well as 32 level which indicates that the markets would go downInterpretation: - strong sell

Bollinger bands:- The candle has closed below the middle Bollinger bands which indicates that the markets are expected to go downInterpretation:-sell

Moving average convergence and divergence:- This indicator is pointing towards reaching the equilibrium as a result we cannot find a clear picture of where the markets are heading Interpretation:- Neutral

Moving average

Relative strength index

Stochastic oscillator

Fibonacci levels Bollinger bands

MACD

NEUTRAL NEUTRAL SELL SELL SELL NEUTRAL

Table 4.2. Comparing all 6 technical indicators on 15/04/2014

Overall prediction:-sell

16/4/2014 candle reading :- O:-1302 H:-1306 L:-1293 C:-1302

Indicators which gave right predictions:- stochastic oscillatorFibonacci levelsBollinger bands

Date: 16/04/2014

Chart 4.3. : Analyzing the six technical tools 3

Moving average:- The Fast moving average which is represented by the blue line which was about to cross the slow moving average which is represented by the red line was not able to cross the line which gives the indication that the bear power is more in the market Interpretation:-strong sell

Relative strength index:- The rsi reading is just below 50 which gives the indication that the present market trend is bearInterpretation:-sell

Stochastic oscillator:-The indicator is approaching the 50 mark and pointing downwards which gives a clear picture that the market is going downInterpretation:- sell

Fibonacci levels:-The candle close in between the 23 and 0 mark which shows that is is still in the lover region and it may approach 0Interpretation :-sell

Bollinger bands:-The day candle has closed below the center band of the Bollinger band this indicates the bear trend is not over Interpretation:-sell

MACD:-MACD is approaching the normal level which this doesn’t give a clear picture to where the market is heading Interpretation:-neutral

Table 4.3. Comparing all 6 technical indicators on 16/04/2014Moving average Relative strength

indexStochastic oscillator

Fibonacci levels Bollinger

bands

MACD

SELL SELL SELL SELL SELL NEUTRAL

Overall prediction :- SELL

Candle reading for next day:- O:-1301 H:-1304 L:-1293 C:- 1294

Indicators which gave right predictions-MOVING AVERAGE

RELATIVE STRENGTH INDEXSTOCHASTIC OSCILLATORFIBONACCI LEVELSBOLLINGER BANDS

Date: 17/04/2014

Chart 4.4. : Analyzing the six technical tools 4

Moving average:- here the fast moving average which is represented by blue line in the main window is approaching the fast moving average which is represented by red line considering the fact that the closing candle was a bearish candle and the fast moving average pointing towards up this does not give a clear picture where the market is headingInterpretation:-neutral signal

Relative strength index:-The RSI reading is just below the 50 level which indicates that the seller strength is more when compared with that of the buyers strength

this does not indicate a major sellers strength but it indicates that the Sellers strength existsInterpretation:- SELL

Stochastic oscillator :- The stochastic level are clearly below 50 levels which indicates that the market has just entered over sold region and the sellers are more when compared with that of buyers this means that the market is in bearish trendsInterpretation:-SELL

Fibonacci level :- The major support is 1278 where the market tested this on 1st and 2nd of april but it could not break that support level which means that 1278 is a major support and the days close is 1294 this means that the market may go further go to this level and from there we can expect some corrections Interpretation :-SELL

Bollinger bands:-there has been no significant changes in the readings of the Bollinger bands they are in the same levels and the days close is below the middle Bollinger bandInterpretation:-SELL

MACD:-There has been significant changes in the MACD reading since the last reading was approaching normality but in today’s readings it is making a small vick in the MACD window which indicates that it is going to be a bearish trend.Interpretation:- SELL

Table 4.4. Comparing all 6 technical indicators on 17/04/2014Moving average Relative strength

indexStochastic oscillator

Fibonacci levels

Bollinger

bands

MACD

NEUTRAL SELL SELL SELL SELL SELL

Overall prediction:- SELL

Candle reading for next day:-O:-1294 H:-1301 L:-1281 C:-1289

Indicators which gave the right prediction:-

RELATIVE STRENGTH INDEXSTOCHASTIC OSCILLATORFIBONACCI LEVELSBOLLINGER BANDSMOVING AVERAGE CONVERGENCE AND DIVERGENCE

Date: 21/04/2014

Chart4.5. : Analyzing the six technical tools 5

Moving average:-In this case we can see that both the slow moving average and the fast moving average are approaching together to meet and we can also observe that both the fast moving average as well as slow moving average are pointing downwards which means that this indicates that the market is going to go down keeping in mind that the major support is not yet brokenInterpretation:-SELL

Relative strength index:- RSI is in between the 50 and 30 levels which indicates that this a bearish trend where the market is going to go down since the sellers power in the market is more than that of the buyers and this trend is expected to continue since there are no correctionsInterpretation:- SELL

Stochastic oscillator:-There has been a substantial change in the levels the indicator is pointing steeply downwards which means that the market is still in the oversold region and this also indicates that the present bearish trend is going to continueInterpretation:-SELL

Fibonacci levels:- the present day candle has closed between the 0 and 23 level which means that the market has tested the support level and it could not break that support level which does not give a clear picture of what would be the next market direction.Interpretation:-Neutral

Bollinger bands:-The market is still playing below the middle band of the Bollinger band which means that the market trends have not changed and this indicates that the present trend may continue since the close is below the middle Bollinger bandInterpretation:- SELL

MACD:- There has been a substantial change in the readings of the indicator we can see that the slight longer Vick has been created when compared with that of the last day’s vick which means that the bearish trend is becoming much more prominentInterpretation:-SELL

Table 4.5. Comparing all 6 technical indicators on 21/04/2014Moving average Relative

strength indexStochastic oscillator

Fibonacci levels

Bollinger

bands

MACD

SELL SELL SELL NEUTRAL SELL SELL

Overall prediction: SELL

Next day candle reading:- O:- 1289 H:-1292 L:-1276 C:- 1283

Indicators which gave right predictions:-MOVING AVERAGE RELATIVE STRENGTH INDEXSTOCHASTIC OSCILLATORBOLLINGER BANDMACD

Date: 22/04/2014

Chart 4.6. : Analyzing the six technical tools 6

Moving average:- The slow moving average and the fast moving average are both in the same level and they are pointing horizontally and which does not give any

clear direction of the market movement but keeping the fact that the market is in potential support level if it breaks the support than the prices are expected to go further down if not then it’s the time where the trend may change it will the bull trendInterpretation :-NEUTRAL

Relative strength index:- RSI is moving in a region of below 50 levels which means that the trend had not yet reversed and the market is following the same trend and this shows that the market will follow the same trendInterpretation:-SELL

Stochastic oscillator:-This indicator clearly shows that the market is in over sold region and the levels are below 30 which indicates that it is in peak oversold regionInterpretation:-SELL

Fibonacci levels :-The candle formation is between the 23 level and 0 level which means that the market is in the lowest levels and it is the 0 level is the major support level which means that we need to wait for the next candle to close to get a clear picture of where the market is headingInterpretation :-NEUTRAL

Bollinger bands:-Bollinger bands have not changed significantly and it remains in the same level no trend change is indicated and the candle has close below the middle Bollinger band which indicates bearish trendInterpretation:-SELL

MACD:-There has been a small increment in the Vick made by the market which indicates that the market trend will continue again the market is testing the major support level so this indicates that we should wait for the next candle to close to get a clear pictureInterpretation:-NEUTRAL

Table 4.6. Comparing all 6 technical indicators on 22/04/2014Moving average Relative

strength indexStochastic oscillator

Fibonacci levels

Bollinger MACD

bands

NEUTRAL SELL SELL NEUTRAL SELL NEUTRAL

Overall prediction:- NEUTRAL(strong support level)

Next day candle reading:- O:- 1283 H:-1288 L:-1280 C:-1283Indicators which gave right predictions:-MOVING AVERAGEFIBBONACI LEVELMACD

Date: 23/04/2014

Chart 4.7. : Analyzing the six technical tools 7

SUPPORT:- 1278RESISTANCE:-1327

Moving average :- we can see that the fast moving average which is indicated by the blue line is crossing the slow moving average which is indicated by the red line which means that the trend is changing and the markets were not able to break the major support level ie 1278 whci also indicates the end of bear trend and this indicates the beginning of bull trendInterpretation :- BUY

Relative strength index:- RSI is moving in a rage below 50 which is still indicating that the market is in over sold region or the market is of sells strength where the sellers strength is more when compared with that of the buyersInterpretation:-SELL

Stochastic oscillator:-stochastic oscillator is still in the same region that is over sold region which indicates that the bearish trend is not yet complete Interpretation:-SELL

Fibonacci levels:-The candle formation is still the lover 23 and 0 level this indicates that the market is not moving in any direction but this also indicates that the market was not able to break a major support level which indicates that there might be a possible change in trendInterpretation:-BUY

Bollinger bands:-The market way too low far from the middle Bollinger band which indicates that the market is still in bearish trend Interpretation:-SELL

MACD:- This indicator shows a substantial change in the trend since the average which is shown by the red line is crossing the green Vick instead of crossing the Vick from below This shows that the new trend had startedInterpretation:- BUY

Table 4.7. Comparing all 6 technical indicators on 23/04/2014Moving average Relative

strength indexStochastic oscillator

Fibonacci levels

Bollinger MACD

bands

BUY SELL SELL BUY SELL BUY

Overall prediction:- BUY

Next day candle reading:- O:- 1283 H:-1298 L:- 1268 C:-1293

Indicators which gave right predictions-MOVING AVERAGEFIBONACCI LEVELSMOVING AVERAGE CONVERGENCE AND DIVERGENCE

Date: 24/04/2014

Chart 4.8. : Analyzing the six technical tools 8

Moving average:-The fast moving average which is represented by the blue line has clearly crossed the fast moving average which is represented by the red line which is indicative of the change in trendsInterpretation:-BUY

Relative strength index:- There has been a substantial change in the readings of the RSI Indicator where the indicator was pointing downwards has changed its direction which indicatedsthat the trend has changed and it is approaching 50 level mark which shows the beginning of the buyers power in the market over that of the sellers powerInterpretation:-BUY

Stochastic oscillator:-The stock level has also changed its path it was pointing downwards and it was playing in the over sold region ie below 30 level mark now even stock has changed its path and it is approaching 50 level mark from the 30 level mark which means that the it is the end of bearish trend and the new trend is going to startInterpretation:-BUY

Fibonacci level:-markets did test the 0 level of the Fibonacci levels which is also a major support level but it could not break that support level and the close was above that level which indicates that there is a clear change in trends and the market is now in bull trendInterpretation:-BUY

Bollinger bands:- markets made a spike to the middle band of the Bollinger bands but it was not able to break that resistance level and it came back and close at 1293 a few pips below the resistance of the middle Bollinger bandInterpretation:-BUY

MACD :-The moving average line which is represented by the red line has clearly crossed the

Vick made by the markets which clearly indicates that the BULL market has begunInterpretation:-BUY

Table 4.8. Comparing all 6 technical indicators on 24/04/2014

Moving average Relative strength index

Stochastic oscillator

Fibonacci levels

Bollinger

bands

MACD

BUY BUY BUY BUY BUY BUY

Overall prediction:- BUY

Next day candle reading:- O:-1293 H:-1304 L:-1290 C:-1302

Indicators which gave right prediction:-ALL

Date: 25/04/2014

Chart 4.9. : Analyzing the six technical tools 9

Moving average:-The fast moving average which is represented by the blue line and the slow moving average which is represented by the red line are both going together at the same value which means that the value of both 25 days average and that of the 10 day average are both same which gives a oscillating trend we cannot be sure of which side the market is going to go nowInterpretation:-Neutral

Relative strength index:- RSI is approaching the 50 level mark from the below which means that the buyers power is more in the market when compared with that of the sellers this means that there are more no of buyers in the market than that of that of the sellers 50 mark is the equilibrium level where both sells and buyers are in equal no have same no of ordersInterpretation:- BUY

Stochastic oscillator:-stock is making a vertical spike which means that the over sold trend is going to get over and it marks the beginning of the new bull trendInterpretation:-BUY

Fibonacci level:-Fibonacci levels remain unchanged since the markets have nether made new lows or new high but the markets have tested the upper 23 level of the Fibonacci levels which means that the market was not able to break that level which means that there is quite a chance for the trend to change its path and to enter into a bearish trendInterpretation:-NEUTRAL

Bollinger bands:-markets have broken the middle level band of the Bollinger bands and have also close above the middle level Bollinger this means that the present trend will continueInterpretation:-BUY

MACD:- The MACD level has changed substantially where the indicator has slightly changed its course and made a dip which means that the trend has reversedInterpretation:-NEUTRAL

Table 4.9. Comparing all 6 technical indicators on 25/04/2014Moving average Relative

strength indexStochastic oscillator

Fibonacci levels

Bollinger

bands

MACD

NEUTRAL BUY BUY NEUTRAL BUY NEUTRAL

Overall prediction:- NEUTRAL

Next day candle reading:- O:- 1302 H:- 1306 L:- 1291 C:-1296Indicators which gave right predictions:-MOVING AVERAGEFIBONACCI LEVELSMOVING AVERAGE CONVERGENCE AND DIVERGENCE

Date: 26/04/2014

Chart 4.10. : Analyzing the six technical tools 10

Moving average:- The fast moving average which is represented by the blue line has crossed the slow moving average and it is pointing downwards which means that the market has changed its path and it is going to be a bearish trendInterpretation:-SELL

Relative strength index:-RSI has also changed its path till last day it was seen approaching the 50 level mark from the bottom which is indicative of the bull trend but today we can see that it has changed its path pointing towards bottom which is indicative of bearish trendsInterpretation:-SELL

Stochastic oscillator:-This indicator has not changed substantially the levels are seen approaching from the bottom towards 50 which means that the both sellers and buyers are equally strong and it does not give a clear picture to which direction the market is going to moveInterpretation:-NEUTRAL

Fibonacci levels:-Markets tested the 23 level of Fibonacci levels but they were not able to break the resistance of 23 level in the Fibonacci level and the markets closed way below the 23 level of Fibonacci levels so we can say that the trend has changed from the bull to bearishInterpretation:-SELL

Bollinger bands:-Markets were playing whole day around the middle level of Bollinger bands which does not give a clear picture of where the markets are going to head since the candle started below the middle level of Bollinger bands and close above the middle level of Bollinger bandInterpretation:-NEUTRAL

MACD:-There had not been any substantial change in the direction of MACD moving average and the intersection of the MACD line with the Market Vick so this does not give a clear picture of where the markets are headingInterpretation:-NEUTRAL

Table 4.10. Comparing all 6 technical indicators on 26/04/2014Moving average Relative

strength indexStochastic oscillator

Fibonacci levels

Bollinger

bands

MACD

SELL SELL NEUTRAL SELL NEUTRAL NEUTRAL

Overall prediction:- NEUTRAL

Next day candle reading:- O:- 1295 H:- 1301 L:- 1286 C:-1295

Indicators which gave right predictions:-MOVING AVERAGERELATIVE STRENGTH INDEXFIBONACCI LEVELS

4.1.GOLD INDICATOR ANALYSIS FOR 50 DAYS-

0 – Wrong Signal 1 – Right Signal

Table 4.1.1. Comparing all 6 technical indicators S.No moving

averagerelative strrength index

stochastic oscillator

fibonacci levels

bollinger bands

MACD sum of all right prediction

>=3

1 0 0 0 0 0 0 0 02 1 0 1 0 0 1 3 13 0 0 1 0 0 0 1 04 0 0 0 0 0 0 0 05 0 0 1 0 0 1 2 06 0 1 1 1 1 1 5 17 0 0 1 1 1 1 4 18 1 0 1 0 1 1 4 19 1 0 1 0 1 1 4 110 0 0 0 0 0 0 0 011 0 1 1 1 1 0 4 112 0 0 1 1 1 0 3 113 0 1 1 1 1 0 4 114 0 1 1 1 1 0 4 1

15 1 0 0 0 0 1 2 016 1 0 0 1 1 0 3 117 0 1 1 1 1 0 4 118 1 0 0 0 0 0 1 019 0 1 0 1 0 0 2 020 1 0 0 1 1 1 4 121 1 0 0 1 1 1 4 122 0 0 1 1 0 0 2 023 0 1 1 1 0 1 4 124 0 0 0 0 0 0 0 025 0 0 0 1 1 0 2 026 0 1 1 1 1 0 4 127 0 0 1 1 1 0 3 128 0 0 0 1 0 1 2 029 0 0 0 0 0 0 0 030 0 0 0 1 0 1 2 031 0 0 0 1 1 0 2 032 0 0 0 1 0 0 1 033 0 0 0 1 0 1 2 034 0 0 0 0 0 1 1 035 0 0 0 0 0 0 0 036 0 0 0 0 0 0 0 037 0 0 0 0 0 0 0 038 0 0 0 0 0 0 0 039 0 0 1 0 0 0 1 040 1 1 1 1 1 1 6 141 1 1 1 1 1 1 6 142 1 1 1 1 1 1 6 143 1 1 1 1 1 1 6 144 0 0 0 1 0 0 1 045 1 1 1 1 1 1 6 146 0 0 0 1 1 0 2 047 0 0 0 0 0 0 0 048 0 0 0 0 0 0 0 049 1 0 1 1 1 0 4 150 1 1 1 1 1 0 5 1

15 14 24 30 24 19 126 23

4.2. ANALYSIS:

Among the following indicators the indicators are ranked from 1 to 6 based on the number of times they have helped analyze the rite movement in the market

1. Fibonacci level2. Stochastic oscillator & Bollinger band3. Moving average convergence and divergence5. Moving average6. Relative strength index

Based on the above analysis we can conclude that the technical parameter of Fibonacci level is a better technical tool to be considered in building a trading strategy since it has better rate of predicting the market movement when compared to other technical analysis used in the trading system of trading gold.

OVERALL PERFORMANCE OF THE TECHNICAL ANAYSIS FOR GOLD COMMODITY:

Out of 50 days this system of technical analysis was able to give right prediction for 23 days ie with the combination of 3 or more than 3 indicators giving the same prediction for the market movement which turned to be profitable

By using the top three predictors ie Fibonacci levels and stochastic oscillator and Bollinger bands and Appling the majority rule among these three tools we can increase our accuracy level by 27 right predictions out of 50 days sample

The total number of right predictions made by all the indicators are 126 out of 300 possible outcomes which gives a probability of 0.42 % accuracy

By using only the 3 technical tool we get 79 right predictions out of 150 ie 0.526%We can increase our prediction accuracy by 0.53-0.42= 0.11 % ie by 11 %

4.2.1.: Table using the 3 most reliable indicator

fibonacci levels

stochastic oscillator

Bollingerband sum 2 or more indicators giving same indication

0 0 0 0 00 1 0 1 00 1 0 1 00 0 0 0 00 1 0 1 01 1 1 3 11 1 1 3 10 1 1 2 10 1 1 2 10 0 0 0 01 1 1 3 11 1 1 3 11 1 1 3 11 1 1 3 10 0 0 0 01 0 1 2 11 1 1 3 10 0 0 0 01 0 0 1 01 0 1 2 11 0 1 2 11 1 0 2 11 1 0 2 10 0 0 0 01 0 1 2 11 1 1 3 11 1 1 3 11 0 0 1 00 0 0 0 01 0 0 1 01 0 1 2 11 0 0 1 01 0 1 2 10 0 0 0 00 0 0 0 00 0 0 0 00 0 0 0 00 0 0 0 00 1 0 1 01 1 1 3 11 1 1 3 11 1 1 3 1

1 1 1 3 11 0 0 1 01 1 1 3 11 0 1 2 10 0 0 0 00 0 0 0 01 1 1 3 11 1 1 3 1

79 27

CHAPTER – 5FINDINGS

FINDINGS:

The total number of right indications given by all the technical analysis tools for the commodity (gold) are as follows-

The total number of profitable indication given by the combination of indicators using majority rule out of the sample for 50 days were as follows-

GOLD 23

The profitable indication given for gold analysis are ranked in the order in such a way that the highest number of right indication is ranked 1 followed by other indicator in the descending order-

1. Fibonacci level (30) 2. Stochastic oscillator(24) 3. Bollinger band(24) 4. Moving average convergence and divergence(19) 5. Moving average(15) 6. Relative strength index(14)

GOLD 126GOLD 126GOLD

CHAPTER – 6RECOMMENDATIONS

According to the analysis which I have done in the earlier sections of the report I would like to recommend the Company (Harvest Futures Consultants India Pvt. Ltd.) to adopt the following mentioned strategies for trading using Technical Analysis tools.

In a trading system we can see that instead of using all the indicators we should make sure that we use only the best performing indicator from the finding we can derive that by using all the indicator we reduce our probability of finding the rite market movement but if we use only those best performing indicators for the commodity then we are increasing the probability of finding the right market movement.

List of best performing indicators for the commodity and the difference in probability caused by using only these best performing indicator instead of all the tools in technical analysis system.

ALL INDICATORS BEST INDICATORS

LIST OF INDICATORS 1 Fibonacci level (30)2 Stochastic oscillator & Bollinger band(24)4 Moving average convergence and divergence(19)5 Moving average(15)6 Relative strength index(14)

1 Fibonacci level (30)2 Stochastic oscillator & Bollinger band(24)

PROBABILITY OF PREDICTING RIGHT MARKET MOVEMENT

23/50=0.46 27/50 = 0.54

We can increase the probability of finding the right market direction by using only best indicators instead of all to an extent of 0.54-0.46= 0.08% or 8%

CHAPTER – 7CONCLUSION

Capital market is already matured and reached at high level, every investor interested to invest but not in Bullion (gold &silver) Market due to lack of awareness. As per Data analysis most of the investors do not have much idea of Gold Market, they are required to be given awareness training and knowledge with the help of workshops and seminars, as investors are willing to know more about Gold Market i.e. 61% of the respondents are willing to invest in the market. Looking back from 2014, the past year is still under the impact of the crisis. Followed by the U.S. debt crisis, the European sovereign debt crisis prolongs the way of recovery. Due to fear of downgrading of government debt of certain European states and the negative return of stock markets, investing in gold, naturally, becomes popular again.Thus to conclude, after the research done, the technical analysis do play a major role in analysing the market and to know its direction and yet Fundamental analysis do have their own benefits. It is wise to go with both Fundamental analysis and Technical analysis while trading as they both complement each other. It also found that when any important financial news in announced its wise not to trade at that time as the market may/ will mislead the traders which may lead to a wrong trade.Internationally trading in Gold has given the investors very safe and very fruitful option. Today people who earlier feared from entering the market are investing in Gold as it is the safest asset and also its price is less fluctuating. Gold Market has developed vastly since it was started. Recently gold prices touched the height of Rs.30000/- per 10gm which astonished everybody. The reason may be any but today people willing to invest in Gold rather than stock.

7.1. LEARNING OUTCOME :

The internship at Harvest Futures Consultancy India Pvt Ltd. provided an insight into the corporate work culture during the course of work; learning took place in the area of day trading using technical indicators & pattern.I have learnt;

Analysing the movement of gold market.

To apply various basic technical analysis techniques to identify trends and turning points.

Determine buy and sell signals using support and resistance.

Stress management i.e. ability to work under pressure.

Time management i.e. value of time.

Taking strict stop loss in trading.

Avoid worthless rumours.

I also learnt the importance of acquiring as well as retaining customers which play an important role in the growth of the company.

Under the guidance of my industry guide who had given me lot of support and helped in many ways to gain knowledge and skills and he had given me the freedom to explore the trading platform and learn new things which can be used in the trading. He has also given me good support and also given good exposure to the organization culture and environment.

This learning will profoundly help in the professional career in which I am about to embark.

References:

Books

Technical analysis of the financial markets, Murphy, John J, pg 195-213, pg 239 -255

Technical analysis from A to Z, Achelis, Steven

Candlestick charting explained, Morris, Greg L, pg 19-141

Websites

http://www.hinduonnet.com/archives.htm

http://www.abrahammaslow.com/m_motivation/Hierarchy_of_Needs.asp

http://www.investopedia.com/terms/p/price-earningsratio.asp

http://stockcharts.com/

http://www.candlecharts.com/

http://www.sebi.com/

http://www.moneycontrol.com/

http://www.nseindia.com/

http://www.bseindia.com/

http://dbie.rbi.org.in/

http://www.hifindia.net/