Forex Investment Aspect
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FOREX INVESTMENT ASPECT Thesis By Vyacheslav Tsoy Submitted in Partial fulfillment Of the Requirements for the degree of Bachelor of Science In Business Administration State University of New York Empire State College 2016 Reader: David Starr-Glass ACKNOWLEDGEMENT First and foremost, I would like to express warm thanks to my ESC mentor Mr. David Starr- Glass for the continuous support of my thesis study and research, for his patience, enthusiasm, and immense knowledge. His guidance helped me in all the time of research and writing of this thesis. I could not have imagined having a better advisor and mentor for my thesis study. I am glad that I had an opportunity to work on my thesis with such a clever, wise, knowledgeable man, author of a numerous amount of published works. Owing to the experience and knowledge of my mentor, the thesis looks as it does now, many thanks to you Mr.Starglass for navigating me into the right path and helped me not only in structuring my work, but also to stick to the plan, providing useful suggestions and where to place emphasis, all of that was probably the most difficult task in writing my work, and you have tremendously helped in that. Thanks to the authors whose books and articles I have used for writing this work, their products really helped me to form a sound point of view and come to certain conclusions I want to thank my professors at UNYP (Prague, Czech Republik), OmSU (Omsk, Russian Federation) and FHWS (Wurzburg, Germany) for that knowledge that they provided me with, for their patience and understanding. An addition to that, I want to thank my friends in UNYP, and in Omsk (Russia) for the stimulating discussions, for the sleepless nights then we were working together before deadlines, and for all the fun we have had in our students years. And I would like to thank my parents Igor Tsoy and Svetlana Tsoy, for providing me with an excellent opportunity in the first place and supporting me spiritually throughout my life, my sincere thanks also goes to other members of my family: Gennady Tsoy, Tatiana Tsoy, Lilia Speranskaya for their support. Last but not the least, I also want to thank my younger brother Leonid Tsoy, for his love and amusing childish motivation quotes that have numerous times helped me to accomplish my work today. TABLE OF CONTENT: ABSTRACT ............................................................................................................................... 4 1. The Location of the Forex Market in the System of International Finance Markets. ............ 7 1.1 The understanding and history of introduction of the Forex market. .............................. 7 1.2 Forex foreign exchange market importance in the global economy and its distinct characteristics. ................................................................................................................ 11 2. The analysis of the functioning of the retail segment of the Forex market in Russia and abroad .................................................................................................................................. 20 2.1 Features of the international Forex market products ..................................................... 21 2.2 Status of the Forex market products in Russia............................................................... 32 2.3 Characteristics of the risks of investing in the Forex market......................................... 39 3. The implementation of trading strategies and controlling of resources on the Forex market ................................................................................................................................. 50 3.1 Fundamental and technical analysis of currency markets .............................................. 50 3.2 Methods of Investment Management in the Forex market ............................................ 59 3.3 Implementation of the author's trade strategy in the Forex market ............................... 67 CONCLUSION ........................................................................................................................ 78 Bibliography ............................................................................................................................ 82 APPENDIX 1 – DIFFERENCES OF FOREX FROM FUTURES CURRENCY MARKET ....................................................................................................... 87 APPENDIX 2 - MAJOR BROKERS OF RUSSIAN FOREX MARKET .............................. 89 APPENDIX 3 - CHANGES IN REGULATION OF FOREX MARKET IN RUSSIA .......... 89 APPENDIX 4 - TYPES OF INVESTMENT RISKS BY FORMS OF MANIFESTATIONS ..................................................................................... 91 APPENDIX 5 - KEY FACTORS OF FUNDAMENTAL ANALYLYSIS............................. 94 APPENDIX 6 - SCHEMES OF ORGANIZATION OF FOREX-DEALING IN RUSSIA .... 95 ABSTRACT Mankind has long experienced a need for a universal means of payment, by means of which it would be possible to obtain all possible goods and services. Over time, we have moved from barter, bimetallism, monometallism to paper money. But none of that existed in the history of mankind currencies could become universal to every corner of the Earth. But with the development of the world economy, the global monetary system changed, in adjustment to the economy. However, in the presence of its own currency, members of the international community will always be in need of the exchange of currencies between themselves. In 1971, a significant event occurred in the history of the world economy. On August the 15th, the US President Richard Nixon announced the end of free conversion of US dollars into gold. Subsequently, the Jamaican currency system was formed. As a result, stable under the gold standard currencies of developed countries have started to float freely under the influence of supply and demand forces. Currencies have become a full-fledged product with a free pricing relative to each other. Particularly, for this reason, appeared the interbank market with exchange rates at free market prices, or "Foreign Exchange Market", abbreviated as Forex. Undergoing reforms, organization and optimization, as well as increasing the volume of the operations, the Forex market has become not only a market where there is an exchange of currencies but a necessary tool for banks, companies and nations for operations in other countries. As well as, for hedging purposes, currency regulation and speculation. Notably, the speculations in the Forex market are a possible target for investment, with a perspective to profit. The relevance of this topic emphasizes that the former Soviet Union's space there is a persistently high interest in investing in the Forex market. In Russia, there is a successful functioning of a large number of brokers, dealing and training centers, aimed at attracting customer funds on the currency market. It is worth mentioning, that investments in commodity markets for our country are a relatively new phenomenon, in contrast to the developed countries of the West. Also, in our view, the relative ease of entry into the market could cause additional suspicions of possible investors and create a field for illegal operations. In the name itself, the Forex market in the daily use of Russian dialogue is more synonymous with the words of deception and fraud. At the same time, companies and the free traders brought serious means to ensure confidence into potential investors. Therefore, there is a great interest in the study of the mechanisms of profit from investments in the Forex market. 4 Elaboration of this theme in the literature is extremely low, due to the fact that in comparison with the stock and commodity markets, the Forex market is still rather young. It includes a number of features that distinguish it from other markets. At the same time itself investing in the Forex market is not practically approached by the Russian scientific literature. At the same time, investments in securities and derivative financial instruments to Russian citizens are still an unusual way to generate income. The aim of this study is to analyze the Forex market conditions in Russia as well as abroad, and the development of investment strategy for the retail investor in the Forex market, including analysis of the input methods on the market, the study of trading strategies, and finally risk analysis when investing. An important objective is also to further improve the author's own trading strategy and the evaluation of the financial and scientific results. From the established goal the following tasks are to be approached: • explore the concept and history of the origins of the Forex market • explore the market value in the world economy and the differences of the market from the analogous markets; • review the legal framework and practical aspects of forex dealing abroad; • explore the Forex market in Russia; • Develop proposals for improving the Forex market in the Russian Federation; • an analysis of possible risks; • analyze the way of investment and management tools; • consider the possibility of fundamental and technical analysis of trading in the Forex market; • Consider ways to manage investments in a given market; • improve own trading strategies based on the technical analysis; • evaluate the results of own trading strategy. As a working hypothesis that suggests the Forex market is a profitable and competitive market of investment, and that its market products in Russia allow obtaining a good return