1. MBA faculty, University of Nicosia, Nicosia, Republic of Cyprus
AUTOMATED TRADING SYSTEMS
AND MANUAL TRADING IN
FOREIGN EXCHANGE MARKET
BY
GYUZEL ZARIEVA
“This thesis was submitted in partial fulfillment of the requirements for the Masters of
Business Administration (MBA) degree at the University of Nicosia, School of Business,
Nicosia, Cyprus, May/2013”
University of Nicosia
46 Makedonitissas Avenue
P.O.Box 24005
1700 Nicosia
Cyprus
Date: May/2013

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3. iii
A Master’s Thesis
in
BUSINESS ADMINISTRATION
by
GYUZEL ZARIEVA
“Submitted in partial fulfilment of the requirements for the Masters of Business
Administration (MBA) degree at the University of Nicosia”
Approved by: Date of Approval:
……………………………… ………………………
(name)
(position)
……………………………… ………………………
(name)
(position)
……………………………… ………………………
(name)
(position)

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Declaration
I hereby declare that I am the author of this thesis and it is a presentation of my original
research work. The thesis presented was undertaken under the supervision of Dr. Svetlana
Sapuric who contributed to its comprehensiveness, form and validity. No part of the document
has been previously been submitted for a degree or any other qualification at any university or
other institution. I further declare that this work was completed wholly while the author was a
candidate on the MBA degree program at the University of Nicosia, Cyprus.
Signed: _____________________________ Date: _________________
Name: Gyuzel Zarieva

5. v
Acknowledgements
I would like to express my gratitude to my supervisor, Dr. Svetlana Sapuric, whose
expertise, understanding, and patience, added considerably to my graduate experience.
With her support and great efforts to explain things clearly and simply, she provided
encouragement, sound advice and valuable ideas at all levels of the research project. I
would also like to thank the other members of The University of Nicosia School of
Business for the sound knowledge in business administration they have granted to me.
I would like to acknowledge Mr Wael Alkel, programmer and foreign exchange specialist,
for his encouragement and editing assistance. Very special thanks to my family who have
supported me endlessly throughout my study.

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Abstract
The main aim of the research is to review the effectiveness of Automated Trading, using
technological edge to boost trading performance in the financial markets – Foreign
Exchange markets harmonized in Cyprus, and put a spot light on real life applications of
Automated Trading methods and the effects it has on investors, and markets in foreign
exchange trading. The research will contain all aspects of Automated Trading comparing
to Manual Trading, taking into the deep research of history, definition, risk management
and psychology of financial trading.

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Table of Contents
Declaration iv
Acknowledgements v
Abstract vi
Table of Contents vii
List of Figures ix
List of Appendices x
Chapter 1. Introduction 1
1.1 Motivation and significance of research 1
1.2 Aims, objectives and scope of research 1
1.3 Design, methodology and approach of research 1
Chapter 2. Literature Review 3
2.1 History of foreign exchange 3
2.2 Foreign exchange industry in Cyprus 5
2.2.1 MiFID 5
2.2.2 Authorisation, regulation and passporting 5
2.2.3 CySEC and ESMA 6
2.3 Defining Automated Trading 8
2.3.1 History of Automated Trading 8
2.3.2 Types of Automated Trading 9
2.3.3 Advantages and disadvantages of Automated Trading 10
2.3.4 Effects of Automated Trading on financial markets 13
2.3.5 Alternative to Automated Trading: social trading 13
2.4 Psychology of Trading 15
2.4.1 Risk Management 18
2.5 Robot Development 19
2.5.1 Advanced Linear Regression 19
2.5.2 Programming 21
2.5.3 Strategy Tester report 22
Chapter 3. Data and Methodology 25
3.1 Research approach 25
3.2 The Data and Analysis Methodology 26
3.2.1 Comparative analysis of traders’ survey 26
3.2.2 Expert survey 26
3.3 Strengths and Limitations 27
3.3.1 Comparative analysis of traders’ survey 27
3.3.2 Experts Interview 29
Chapter 4. Findings 30
4.1 Quantitative analysis 30
4.1.1 Ethnographical and geographical analysis 30
4.1.2 Foreign Exchange trading history analysis 32
4.1.3 Psychology of Foreign Exchange traders 37
4.1.4 Foreign Exchange traders detailed analysis of trading 41
4.1.5 Foreign Exchange trading tools effectiveness analysis 47
4.2 Qualitative analysis 49
4.2.1 Trading Methodology 49
4.2.2 Indicators and Programming 49
4.2.3 Correlation of Trading 50
4.2.4 Psychology of Trading 50

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4.2.5 Effective strategy: myth or not 51
Chapter 5. Conclusions 52
References 54
Appendices 56

9. ix
List of Figures
Table 1 13
Table 2 22
Table 3 24
Table 4 30
Table 5 30
Table 6 31
Table 7 32
Table 8 33
Table 9 34
Table 10 34
Table 11 35
Table 12 35
Table 13 36
Table 14 36
Table 15 37
Table 16 38
Table 17 38
Table 18 39
Table 19 40
Table 20 40
Table 21 41
Table 22 42
Table 23 42
Table 24 43
Table 25 43
Table 26 44
Table 27 44
Table 28 45
Table 29 45
Table 30 46
Table 31 46
Table 32 47
Table 33 47
Table 34 48
Table 35 48

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List of Appendices
Appendix A: Questionnaire survey 56
Appendix B: Interview questions 59

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Chapter 1: Introduction
1.1 Motivation and significance of research
As technology advanced the world entered the age of computing and the internet, the world of
financial trading changed substantially. Markets that were once available only through pit
traders and brokers were all of the sudden available to anyone anywhere via the internet.
Trades that took hours to settle in exchanges are now done within seconds at the push of a
button. However speed and manner of execution are not the only thing that evolved due to
technology but so did trading. Advanced computer programming made it possible to create
tools that utilise technical analysis theories to automatically identify trading opportunities as
well as programming different trading algorithms to trade in an automated fashion absent of
disabling human emotions and work hours limitations. Today automated trading is
responsible for most transactions on the foreign exchange market with many in the financial
sphere questioning the effects of such form of trading on the currency market stability.
1.2 Aims, objectives and scope of research
This research aims at outlining the importance and effectiveness of automated trading by
evaluating the overall trading activity in the retail foreign exchange market and the role of
auto trading in overcoming the many challenges it poses. To do that the research will Review
the main problems and errors that lead Foreign Exchange traders and investors to use
Automated Trading instead of manual trading especially trader’s psychology and its effects on
trading performance and investment returns, in addition to development of a an actual trading
robot to demonstrate the practical use of automated trading in foreign exchange trading.
The research will also review the regulatory adaptations and stand on the subject of using
different automated trading practices specifically under the harmonized MiFID directive,
taking the Cyprus Securities and Exchange Commission as an example.
1.3 Design / methodology / approach
The research will define a theoretical frame work upon which appropriate related literature
will be reviewed in combination with intense research of real life applications on the
subject. The research will offer a neutral detailed prospective of Automated Trading in the

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Foreign Exchange market and allow an accurate decision by investors or traders to whether
adopt Automated Trading partially or fully into their trading activities on the Foreign
Exchange market.
Steps:
 History Foreign Exchange
 Foreign Exchange industry in Cyprus
 Current Foreign Exchange market conditions
 Introduction to Automated Trading
 Traders psychology
 Robot Development – strategy, research, development, analysis
 Explanation of a strategy used in robot, source code, documentation and 6 month back
test results.

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Chapter 2. Literature Review
2.1 History of Foreign Exchange
The creation of the gold standard monetary system in 1875 was by far the most significant
of all events in the history of the Foreign Exchange trading market. As different
governments started to issue their own currencies and attach an amount of their currency to
be equal to an ounce of gold the changing price of gold between two currencies became the
first standardized means of currency exchange in history.
During the First World War imposed the end of the gold monetary system due to the lack
of physical gold in the central banks of most major European states to exchange for all the
currencies especially with all of these governments printing off what gold they had to fund
large military projects and objectives. The gold standard was used again before WWII,
while it was dropped again upon the start of the Second World War.
In 1944 the Bretton Woods System was implemented in the United States in order to
regulate the price of the US dollar and led to the establishment of fixed exchange rates that
resulted in most central banks using the US dollar as the primary reserve currency to back
the prices of their currencies instead of gold. While using Bretton Woods’s system US
dollar was the only currency that is backed by gold while being used to back other
currencies. In 1971 the U.S. government decided to end Bretton Woods System and ended
the US dollar gold backing and instated a floating currency price.
With the end of Bretton Woods system was the beginning of a global currency exchange
market with floating foreign exchange rates in 1976. This was the unofficial birth of the
Foreign Exchange market, although it did become widely electronically traded in the 90s
and reached a peak in volume with the establishment of ECNs (electronic communication
network) and the rising popularity of the internet. (A. Van Dormael,1978)
Until recently the Foreign Exchange market was only available to major investment banks
and other institutional clients while the trading volume and required funds have made the
Foreign Exchange market not so ideal for retail investors. In the recent year the Foreign
Exchange industry have witnessed a revolution in trading conditions and style with new

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trading techniques that allows lucrative investment opportunities for retail traders and
investors.
The Foreign Exchange market is an extremely high liquidity (1 Trillion Liquidity) market
with rapid volatility that presents investors and traders who utilize leverage to increase
their trading margin and place bigger trades. (Robert C. Miner, 2008)
Unlike other financial markets, this huge market size and high number of participants
makes speculation the main drive for all market prices while taking into consideration the
infinite technical and fundamental factors that can have a major effect on price change
direction.
Trading on Foreign Exchange markets involves substantial risks, including possible
complete loss of principal investment as well as other losses and is not suitable for
everyone. You are the best judge as to whether Foreign Exchange trading is appropriate for
you regarding your financial situation, investment experience, risk tolerance, personality
and other factors.
The best way to clarify the advantages of the Foreign Exchange market in comparison with
other financial markets such as shares, bonds, futures and spot commodities is through a
real example. In 1929 on what is known on Wall Street as black Friday, the stock market
collapsed, causing many people and businesses from around the world to go broke. This
also happened when the high tech bubble burst. The fear of a market crash is a concern that
constantly dwells in the minds of investors and traders effecting investor confidence and
trading volumes. (J. Brooks, 1969)
In the online Foreign Exchange trading market, there is no way for the market to crash
because when traders are trading a certain currency, they are at the same time counter
trading another currency. When some currencies' price falls, others' price rise.
So this is the most important advantage of Foreign Exchange day trading. Unlike other
markets, where in some cases all traders lose money, with Foreign Exchange trading there
are always traders that make a profit, at any given time regardless of market price
directions. Opportunities of profit present themselves whether market is going up or down.

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2.2. Foreign Exchange industry in Cyprus
When preparing Automated Trading system, there are certain regulatory concerns in order
to have a system complaint with the imposed guidelines for automated trading systems
under the regulating authority of securities and exchange in brokers and fund’s
jurisdictions.
2.2.1 MiFID
The Markets in Financial Instruments Directive is a European Union law that provides
harmonized regulation for investment services across the 30 European Union member
states of the European Economic Area (the 27 Member States of the European Union plus
Iceland, Norway and Liechtenstein). The main objectives of the Directive are to increase
investor protection and funds safety in investment services while battling fraud and money
laundering. MiFID is the main base for the European Commission's Financial Services
Action Plan whose 42 measures that cause significant impact on how EU financial service
markets operate.
2.2.2 Authorization, Regulation and Passporting
Firms covered by MiFID (Directive 2004/39/EC) will be authorized and regulated in their
“home state” (broadly, the country in which they have their registered office, jurisdiction).
For this research a Cyprus regulatory environment will be focused on. Once a firm has
been authorized, it will be able to use the MiFID passport to provide services to customers
in other EU member states. These services will be regulated by the member state in their
“home state” (in this case CYSEC) (whereas currently under ISD, a service is regulated by
the member state in which the service takes place).
The focus of the research of the thesis is on basic regulatory guidelines imposed by the
Cyprus Securities and Exchange Commission Cyprus. It is a well-known regulatory for
many Foreign exchange brokers and investment funds. CYSEC operates under MiFID
directive which harmonizes the financial regulatory law and anti-money laundering laws
all around the EU.

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2.2.3 CYSEC and ESMA
The Cyprus Securities and Exchange Commission (CYSEC) was established in accordance
with section 5 of the Cyprus Securities and Exchange Commission (Establishment and
Responsibilities) Law of 2001 as a public corporate body owned by the government of the
republic of Cyprus. The organization was established to regulate all financial trading
activities in accordance with MiFID and other local and EU financial laws.
According to CYSEC official website the responsibilities of CYSEC as a governmental EU
financial regulating authority fully independent from the Central Bank of Cyprus are:
“1. To supervise and control the operation of the Stock Exchange and the transactions
carried out in the Stock Exchange.
2. To supervise and control the issuers of securities listed on the Stock Exchange, the
Licensed Investment Services Companies as well as the Collective Investment Schemes.
3. To carry out inspections over companies, the securities of which are listed on the Stock
Exchange, over brokers and brokerage firms, investment consultants, mutual fund
management companies.
4. To request and collect information necessary for the exercise of its responsibilities, to
demand in writing the provision of information from all natural or legal persons or
organizations that are considered to be in a position to provide such information.
5. To grant operation licenses to investment firms, including investment consultants,
brokerage firms and brokers.
6. To recall these operation licenses for special reasons, as it is more specifically
determined in Regulations that are published in accordance with the Law of Establishment
of the Cyprus Securities and Exchange Commission.
7. To impose administrative sanctions and disciplinary penalties to brokers, brokerage
firms, investment consultants as well as to in any other legal or natural person whom fall
under the provisions of the Stock Market legislation.”

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CYSEC’s stand on automated trading is fully derived from the guidelines published by the
European Securities and Markets Authority (ESMA).
ESMA is an independent EU Authority that Manages safeguarding the stability of the
European Union's financial system by ensuring the transparency, efficiency and orderly
functioning of securities markets, as well as enhancing investor protection. In particular,
ESMA fosters supervisory convergence both amongst securities regulators, and across
financial sectors by working closely with the other European Supervisory Authorities
competent in the field of banking (EBA), and insurance and occupational pensions
(EIOPA). ESMA guidelines for trading will foster convergence in supervisory practices
regarding automated trading across the Union and help in providing a level-playing-field to
investors.

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2.3 Defining Automated Trading
All who are trading in Foreign Exchange, sooner or later turn their attention to Automated
Trading. Why is this happening?
Probably the main reasons for this are:
1. Occasionally to earn a lot and quickly with the help of Automated Trading.
2. Lack of time on manual trading – everyone knows that it is impossible for the single
human being to be on trades 24/5.
3. The absence of the human factor in trading with Automated Trader tools.
The reasons can be continued.
In general the main question remains - is it possible with the help of Automated Trading
constantly and consistently earn? Some of traders would agree and someone disagree.
Automated Trading - is trading in Foreign Exchange, executed by Expert Advisors, Robots
or scripts carried out in automatic or semiautomatic mode.
Originally Automated Trading conceived to a computer program with the strategy through
the trading platform which could trade around the day on a strictly pre-programmed
algorithm.
Other source – Investopedia - says that Automated Trading is a trading strategy where buy
and sell orders are placed automatically based on an underlying system or program. The
buy or sell orders are sent out to be executed in the market when a certain set of criteria is
met.
2.3.1 History of Automated Trading
Although there is a huge division from Foreign Exchange trading and Stock Exchange
trading, it is fair enough to say that automated trading roots and ideas begin from Stock
exchanges with the invention of Electronic Communication Network at 1960s. “The
securities industry officially adopted the new technology on December 20, 1966 when the
New York Stock Exchange (NYSE) automated quote data and the transmission of trade

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information from the trading floor. The securities industry would never be the same.”
(Meryl Bae)
Foreign Exchange Automated Trading originates at the emergence of online retail trading,
since about 1999 when internet-based companies created retail Foreign Exchange
platforms that provide a quick way for individuals to buy and sell on the Foreign Exchange
spot market. It is important to tell that the biggest influence made by MetaQuotes
establishment at 2000, the company, created such programmed platforms for Foreign
Exchange trading such as Meta Trader 4 and then Meta Trader 5.
There are two major types of Foreign Exchange Automated Trading:
Fully automated or robotic Foreign Exchange trading: This is very similar to algorithmic
trading or black-box trading, where a computer algorithm decides on aspects of the order
such as the timing, price or quantity and initiates the order automatically. Users can only
interfere by tweaking the technical parameters of the program; all other control is handed
over to the program.
Signal-based Foreign Exchange Automated Trading: This Automated Trading mode is
based on manually executing orders generated by a trading system. For example a typical
approach is to use a service where traders all over the world making their strategies
available to anyone interested in the form of signals. Traders may choose to manually
execute any of these signals in their own broker accounts.
2.3.2 Types of Automated Trading:
A Foreign Exchange Robot is a piece of automated Foreign Exchange trading software that
automates trading decisions. The most popular robots for retail traders are built around the
platform. These robots run on platform as “expert advisers” and they can do anything from
giving to traders a signal to place a trade, to placing and managing the trade for you
automatically.
An Expert Advisor is a piece of software written specifically for the platform. An Expert
Advisor can just advise traders which trades to make or can be programmed to
automatically execute the trades on a live account. Expert Advisors are very flexible pieces

20. 10
of software that can take any information into account that is available on the platform.
They are written in their own proprietary programming language.
Due to the fact that most of robots and advisers designed to work one for Meta Trading 4
and now 5 platforms, the language called MetaQuotes Language Version 4 or 5
respectively.
A Script is a Meta Trader file that only runs once and not repeating. Script is perfect for
one time task, as example, to calculate the volume of trades done at one day or to close 20
opened trades with stop loss. Sometimes expert advisors aren’t what the trader needs from
his platform. In many situations scripts can help in trading and analysis by automatizing
some processes and making the trader’s life much easier.
Other tools for the effective trading but which are not programmed to interfere into trading
but mostly go help for manual trading are Indicators. Why do we include it to automated
trading is simply because it is automated programs, which analyze the trends which
difficult to make manually. An Indicator is a series of data points used to predict
movements in currencies using technical analysis. There are hundreds of different
indicators, but most popular are Elliot Wave, Fibonacci, Stochastic Oscillator, Relative
Strength Index, Moving Average Convergence Divergence, Gunn chart, Bollinger bands
which are obviously programs of different technical analysis developed by scientists.
2.3.3 Advantages and disadvantages of Automated Trading:
Automated trading systems offer investors and regulators enormous benefits, but they also
have their downsides. After all, it is not realistic to say there is a trading system that
automatically made money all the time without any interference in the robot settings,
parameters or fine tuning of trading strategies.
There are many ways to trade automatically but some traders still prefer to trade manually
rather than using scripts and Expert advisers. Different methods of trade has own pros and
cons.
The positive factors for Automated Trading are the following:

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 Non-stop trading in a regime of 24/5. This is a major factor. 24/5 regime of profitable
trading - is the goal of all programming in MQL4. It is no secret that many traders do
not trade for a full day, but only at certain time, by virtue of their employment. That’s
why this kind of traders go to the automated or semi-automated trading, when a person
trades with written scripts (i.e., a cycle written program which is executed only one
time, so he is a program, not the process). When you start this process (trading with
Expert advisor), trade can take place without the participation of traders around the
day.
 Working without stress overload which is traders’ psychology. It is also one of the
main advantages of trading. The trading itself is associated with large stress pressure,
as associated with large monetary risks. Only few traders can comply with pressure to
trade in the Foreign Exchange, and therefore they have a major stable profit. To avoid
these overstress, traders are using Automated Trading to trade on the Foreign Exchange
so they are having their stress management.
 The increase in speed of trading. Trading robot can simultaneously track hundreds of
quotes and analyze them, and depending on the analysis to make an order. Physically
trader never be able to review so fast the quotes and make calculations, therefore
because of volume calculations even without a profitable Automated Trading strategy,
the trader will be forced to seek more simple strategy.
 The flexibility of the trading mechanism. If trader is familiar with the language MQL4,
then if he has the source code of another Expert Advisor/Robot/Script, this the same
code can be improved, so that the Automated Trading will be more profitable and more
informative, e.g. up to the notification of the transactions of a trader to E-mail, SMS or
Skype. It is very convenient if trader even at a distance will be in control of their
Expert Advisor/Robot/Script.
The negative aspects for Automated Trading are the following:
 Time spent on learning the language MQL4 or MQL5. If trader really wants to
program in MQL4 he cannot leave this con sign. But time spent will pay off. It is
necessary for the trader-programmer to know not only the language MQL4 or MQL5
but also to know how to deal with the editing program MetaEditor and also to learn
how to test Expert Advisors, scripts and indicators and will be an excellent knowledge
of the platform itself as MetaTrader, which will undoubtedly turn into to a positive

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factor when trader wants at one point quickly close the transaction by using the
keyboard shortcuts. Therefore, this negative will be very doubtful in this context.
 Poorly thought strategy. This is really big trouble of any trader-programmer. Badly
programmed without knowledge of Automatic Trading system will necessarily lead to
an automatic programmed leakage of a deposit. To avoid this, trader needs quite a
long time to test Expert Advisor/Robot/Script on the platform then try to trade on
microlots and minilots and only after the successful trading to move into the real
account. Therefore that is another con.
 Wasting time on the writing of Expert Advisor/Robot/Script. This is very important
disadvantage, if you it is professional trader and he obviously knows that time is
money. But some traders are using the programmers’ services, and in this connection
there is one more negative aspect.
 Black Box. So called “Black Box” program was compiled on terminal MetaTrader
(these files are having extensions .ex5 or .ex4). These files are different from usual
.mq5 and .mq4 by .ex5 and .ex4 so they have no source code, which you can read, fix,
or repair algorithm if traders specify in the time of trade, that the Expert
Advisor/Robot/Script doesn’t work on the planned strategy.
 Following advantages and disadvantages are common in the practise of Automatic
Trading so we will see on the research paper if it will be confirmed.

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Table 1 Comparison of Manual Trading and Automated Trading
Manual Trading Automated Trading
Vulnerable to human error Yes No
Vulnerable to emotions
and stress
Yes No
Able to detect
fundamental market
movements
Yes No
Average number of trades
possible to place per
minute
5 100,000
High Frequency Trading No Yes
Parameters processed Up to 100 Unlimited
Monitoring efficiency Low High
Execution speed Low High
Ability to adapt to new
market conditions
High Low
Trading hours 6 to 10 hours aday 24 hours a day
Risk Management Adjustable Algorithmic
Percentage of trading
Volumes
10% 90%

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2.3.4 Effects of Automated Trading on the financial markets
The fast-growing practice of high-frequency trading, in which traders place vast flurries of
securities trades, is speeding up execution times for all investors, making it cheaper to buy
or sell and posing no risk to small investors is under extensive research for claims that
regulators make regarding negative effects this form of automated trading has on the
markets.
Forms of automated trading such as algorithmic and high-frequency trading in volatile
markets are often blamed for causing additional volatility that could lead to market crashes
an example of market crashes that experts often argue that it is caused by automated high
frequency trading the famous May 6, 2010 Flash Crash in the stock markets. This issue
remains to be confirmed.
2.3.5 Alternative to Automated Trading – the Social Trading
The social trading systems wary of robots and automated trading systems. They are usually
not cheap. No robot can outwit the human mind fully using technical and especially
fundamental analysis, many companies or brokers present traders with the opportunity to
replace the robotic automated trading system with one based on human made trading
decision. Beginning or inexperienced traders can have real live expert traders trading for
them. All traders have to do is find profitable traders whose style suits their own, decide on
the part of the portfolio of account they want to dedicate on copying them.
Unlike Foreign Exchange fully automated trading tools such as Expert advisors, robots and
scripts, the copy trading enables the trader to retain full control and transparency over the
account. Trader can change the parameters of a copied trade, close a trade the once they
find not attractive or even stop copying an expert trader. With all the power of expert
trading skill and control over own funds, copy trading is powerful alternative.

25. 15
2.4 Psychology of Trading
Psychology of Trading is an area of scientific knowledge, which studies the characteristics
and patterns of occurrence, changes in formation and development the mental processes
(feeling, perception, memory, thought, imagination), mental states (tension, motivation,
frustration, emotions, feelings), and mental properties (orientation, abilities, inclinations,
character, temperament) of the trader. Trading Psychology having lot’s of similarities with
Social Psychology.
Roots of the psychology of trading taken from general and parts of psychology, and first
scientist in the area of Trading Psychology starts from the before WWI times with a classic
works of G.S.Celden (“Psychology of stock market”, first edition 1912). It started
development when the stock-exchanges where booming after WWII , but the as scientific
area was started developing only at 1980’s and continued to 1990’s and established at
2000’s with the overdevelopment in financial markets, where risks became higher and
higher with every year, so it is also lead to Recession of 2007-2008 and following World
Crisis.
At 1980ies first scientific works of Mark Douglas (The Disciplined Trader & Trading In
The Zone), 1990s by Alexander Elder (“Trading for a Living: Psychology, Trading
Tactics, Money Management”, 1992), Ari Kiev ("Trading to Win: The Psychology of
Mastering the Markets (Wiley Trading)", 1998) and 2000s Jack D. Schwager with “Market
Wizard” series followed after his technical analysis works and many more. In the end of
2000’s and beginning of 2010’s the science of Psychology of Trading broaden to
Psychology Coaching by Brett N. Steenbarger ("The Daily Trading Coach: 101 Lessons
for Becoming Your Own Trading Psychologist (Wiley Trading)", 2009) and different
techniques (“The Psychology of Trading: Tools and Techniques for Minding the Markets”,
2002) which probably became highly recommended by the high performance and booming
of Asian markets last decades who use traditional methods of coaching and training such
as meditation, as example. Psychologist Mihaly Csikzentmihalyi did the groundbreaking
work on this in his 1990 book “Flow: The Psychology Of Optimal Experience:.
Elements of Social Psychology can be the behaviour of trader due to the mood of social
crowd, which is perfectly explained in such classical scientific works such as “The crowd:
study of popular mind” by Gustave le Bon and other works of behaviour of masses such as

26. 16
“The art of contrary thinking” of Humpfrey B. Neill (1954, University of Nebraska Press
for Caxton Press).
Other scientists who has learned Psychology of Trading in depth are David N. Dreman
(Psychology and the Stock Market: Investment Strategy Beyond Random Walk” published
1977), John Bogle (The Little Book of Common Sense Investing: The Only Way to
Guarantee Your Fair Share of Stock Market Returns) and many more.
Trading is a job that requires the ability to analyze and make inferences, which require
endurance, patience, on the one hand, quick response and willingness to take risks on the
other, a lesson for those who are even slightly versed in psychology, from all of this
depends largely on your success or failure in Foreign Exchange trading. Even if trader
decides to go to the Automated Trading system it does not relieve him from the emotional
stress when trader makes trading decisions.
The primary factor underlying the decision-making novice trader - it is an emotion, and the
two main ones - fear and greed.
Fear and greed are the whole market. Fear and greed are manifest in the fact that they
cause market prices to go increasing trend and decreasing trend. The question arises in the
minds of new traders – “Who controls the prices?” Brokers? Market-makers? Company?
Mathematical models and computer algorithms? Most of the traders think that this is the
market-makers dictate price because they are physically created and rule the market. They
determine the purchase price and selling at the market, so that means that they are
essentially forming the price. Does it really traders trade at a price specified by the market
maker? In fact, it is not. They only determine the price of supply and demand, based on
several factors - mainly the end of supply and demand of market participants, but those
who really controls the price – it is traders, even though they don’t realised that in the
begin.
It is the traders with their emotions, are the ones who make the price movement up and
down. The main emotion that causes people to buy - it is greed, and emotion, forcing
people to sell - it is fear.
Why anyone would enter to long position (in the Foreign Exchange means buying)? For
one reason only - because they think the price for the currency pair will rise, and it will be

27. 17
worth more than they paid for them. The reason for that is greed - the desire to make
profits. Why would someone enter to short position (in the Foreign Exchange means
buying? Because they think that the price is likely to go decrease for that pair and their
investments may be worth less in future than they paid for them. Valid fear - fear about
losing money.
Each time a transaction have closed in the market the buyer (in Foreign Exchange is
“bull”) and the seller (“bear”) they are both in a different sides of the transaction. The
buyer thinks the price increases and the seller thinks the price will fall or at least remain at
current levels. Maybe seller does not have any prejudice and simply fixes some profit from
the upward movement. However, one trader demonstrates the greed, and the other - fear.
By that we might tell that every transaction in the market carried out with the elements of
fear and greed and committed as a result of a decision by human, it means that trade in the
market is a combination of constant emotions of buyers and sellers experiencing greed and
fear at the same time as pushing prices up and down.
Considering of some models that have occurred in the past, and often have a certain
extension, it has a high probability to appear in the same way in the future. This is because
the same people behind the purchases and sales, as it were before. For example, Elliott
Waves Principle, by its form, is also a graphical representation of human emotions - greed
and fear. Looking at the movement of the waves, you can see where people were greedy,
and when they were afraid.
According to trading psychologists such as Sinan Korey: “[…] we bring in a whole bundle
of emotions: fear, greed, hope, ecstasy, hopelessness, determination, anger, acceptance and
more.” (S.Korey, 2008)
Foreign Exchange traders often believe that if trades are done with less emotion, the more
successful the trading itself. It is believed that emotions interfere with the right decision.
But the feeling of anxiety of losing money, hope and belief in luck, joy from profits,
frustration on trades and joy again at success - all these feelings always accompanies
trading.
The release of emotion is not only the reinforcement of joy, but having negative aspects as
well and analysis of emotions gives a valuable flow of information. We focus on that data,

28. 18
acting under the influence of this information. Analysis of the reaction to see other people's
emotions gives us the ability to control same emotions, and therefore - actions.
There are many different ways how to control emotions which described by hundreds of
scientific books and articles.
As a summary we can conclude some of them:
 Change the emotions by changing the concentration of the object of emotion. As
example – trader shall think of not losing investment, but gaining profits.
 To change believes will help change the emotion.
 Change emotions by the change of physical feeling of body – somatic change. In that
case is necessary to make sport activities, meditation, change of voice, movements and
so on.
The common technique can be used in the case of management of psychology of trader is
autogenic training, which appeared in 1932. It was considered and founded by German
psychiatrist Johannes Heinrich Schultz - author of the book “Autogenic training - focused
on self-relaxation”. Even though he wasn’t pioneer of techniques, some similarities of
methods to control of emotions started earlier Russian physiologists such as Tarkhanov and
Bekhterev about of researches of functions of organism.
The autogenic training recommends in the most of anger, stress and anxiety (dear) diseases
and concludes many practises, such as meditation, yoga, physical activities, breathe
techniques and special self-induced hypnotic exercises.
2.4.1 Risk Management
Risk management is the identification, assessment, and prioritization of risks followed by
coordinated and economical application of resources to minimize, monitor, and control the
probability and/or impact of unfortunate events (Hubbard, Douglas (2009) or to maximize
the realization of opportunities (Mihir Dash, Narendra Babu, Mahesh Kodagi ,
Vivekanand B.Y., 2008)
Risk management is also defined in ISO 31000 as the effect of uncertainty on objectives,
whether positive or negative.

29. 19
The vocabulary of risk management is defined in ISO Guide 73, "Risk management.
Vocabulary."
In ideal risk management, a prioritization process is followed whereby the risks with the
greatest loss (or impact) and the greatest probability of occurring are handled first, and
risks with lower probability of occurrence and lower loss are handled in descending order.
When traders trade without money management rules, they are in fact gambling.
They don’t look at the long-term return on your investment in order to make stable profit.
Instead they dream for that easy and fast money – “jackpot”.
Risk (and money) management rules not only protecting traders you but they can make
them very profitable in the long run (M.R.Wickens, P.N.Smith, 2001)

30. 20
2. 5 Robot Development
Automated Trading is often used by traders and investment funds to overcome possibility
of human error and use the technological trading edge it offers by utilizing it to realize
higher profits in highly volatile markets that presents opportunities of rapid gain over a
short period of time.
I have researched to excellent trading strategies with proven theoretical profitability and
made sure that these strategies are not possible to apply with merely human based manual
trading.
The trading robots where based on advanced Linear Regression and advanced moving
averages. All parameters and settings are adjustable from within a CYSEC complaint
trading Platform (MetaTrader 4 from MetaQuotes).
The robots were coded in MQL 4 language targeting specifically EUR/JPY (Euro vs
Japanese Yen) and in the coding a security 6 month expiry license that only I can renew in
the executable version to protect the trading strategies developed from possible software
piracy.
Once the robots were ready, they were put to 90% accuracy back test for the period of 6
month to determine profitability, risk, draw down and expected returns. The Results were
simply shocking. Although robots had high drawdowns which required quite large liquidity
during high market volatility (due central bank reports, NFP or other fundamental factors
having major effects on the forex market), it was able to accumulate fairly large amounts
of investment returns. Making both robots leaders in the high yield high risk investments
category and could operate an entire portfolio if tuned for other forex pairs and other
investment instruments (may be applied with stocks or commodities to reduce risk for less
risk tolerant investors).
2.5.1 Advanced Linear Regression
Linear Regression is a statistical technique in Foreign Exchange trading that highly
depends on comparison with historical market data. It uses the least squares method to
draw a straight line from scattered data points. By taking these points in a dynamic manner
on each price bar, a line similar to a moving average is drawn however this line would

31. 21
react much faster than moving averages to price change, giving traders a great edge in
determining the trend direction. This method is calculated according to the equation
Y=a+b*X trend-line by minimizing the sum of squares of vertical deviations between
Close value and Price value of the drawn trend line during specific time frame. (a) Close
Value and (b) Price are hard to calculate using the human brain and this way software is
always needed to perform this task.
The Linear Regression Line indicator was developed to statistically help determine where a
market’s price might be in the near future using current and past price history. Some users
believe that when prices rise above or fall below the linear regression line; they are
overextended and will begin to move back towards the line. It may therefore be used to
suggest that a retracement in a directional price action may occur.
If prices trend upwards, linear regression attempts to statistically calculate what the upward
bias of the price may be relative to the current price. If prices trends downwards, it will
attempt to statistically calculate the downward bias of the price.
Advanced Linear regression strategies depend on drawing more than one LR lines to create
an LR channel which in combination with other technical analysis techniques such as
Elliot Wave (which was used in the attached sample auto trading system) can perform
excellent results within acceptable investment management norms but can never be
operated in any manual trading technique and required to be coded as an Auto Trading
system. (J. Brusuelas, T. J. Marta, 2009)
2.5.2 Programming
The Programmer I have chosen to code my two strategies into two robots is M.Wael Alkel,
Diploma in Computer science from Intercollege Limassol and a Bachelor student of
Computer Science at University of Nicosia. 6 Years of experience in the Foreign Exchange
industry. During his career in various Cyprus investment firms he coded hundreds of MQL
4 Robots.
Mr. Alkel took exact instruction regarding chart patterns that corresponds with the
strategies developed by me over the period of two weeks and supervised unbiased
scientific grade experimental environment during back testing for the period of 6 month.

32. 22
The Robot would calculate angels based on LR channels and applies Linear Regression
algorithm to pick entry and exist levels depending on predicted market price movement
direction. Robot will use basic technical analyses practices such as the use of trailing stops
to preserve earned investments and to use stop loss and take profit levels. In addition the
robot examines chart parameters and analyses LR angels and starts sending the broker
pending orders on certain levels with specific take profit and stops loss for entry and exist
levels.
MQL4 is a C-like language, which a fast and efficient high function language in the world
of financial trading. It offers so much flexibility that allows to strictly verifying all
parameters of the Foreign Exchange robot. This allows programmers to automate almost
any trading strategy no matter how complicated it is and utilize the high processing power
of computers to make large amount of processes not possible for trader’s human brain in a
manner efficient enough to trade in small time frames. As far as its speed features are
concerned, MQL4 outperforms all specialized for trading strategies for the Foreign
Exchange market programming languages and comes right after powerful high level
programming languages as Java and C++. This combination of wide functionality and high
performance has made MQL4 my first choice for coding advanced Linear Regression.
The programming environment is designed to create Foreign Exchange robots. These
programs allow full automation of the analytical and trading processes making the robot
trade 24/5 at high frequency without requiring rest or supervision. Simple 100% automated
trading.
Table 2

33. 23
2.5. 3 Robot Back Test for 6 month: Strategy Tester Report
Advanced Linear Regression
MetaQuotes - Demo (Build 432)
Symbol: EURJPY (Euro vs Japanese Yen)
Period 1 Hour (H1) 2012.01.02 00:00 - 2012.07.10 23:00 (2011.12.31 - 2012.07.11)
Model Every tick (the most precise method based on all available least timeframes)
Parameters
Deviation=20; Fixed_Lot=0.5; Reinvestment_Step=1; Consequentiall_Entries=11;
Entry_by_Limit_Orders=true; Distance_to_Pending_Order=100; Stop_Loss=500;
Take_Profit=3800; Close_by_changing_SL_TP=true; Close_Take_Profit=700;
Close_Stop_Loss=100; Close_if_Opposite_Entry_Signal=false; Enable_Break_Even=true;
Break_Even_Level=1300; Break_Even_Profit=800; Enable_Trailing_Stop=true;
Trailing_Stop_Start_Level=1900; Trailing_Stop_Distance=1700; Trailing_Stop_Step=50;
Linear_Regression_Period=19; Trend_Angle_Threshold=29.5;
Bars in test 3577, Ticks modelled 8211564, Modelling quality 91.03%
Mismatched charts errors 0
Initial deposit 1000.00
Total net profit 18260.36, Gross profit 28665.18, Gross loss - 10404.82
Profit factor 2.75, Expected payoff 202.89
Absolute drawdown 35.96, Maximal drawdown 3870.75 (18.57%), Relative drawdown
44.63% (1964.97)
Total trades 90, Short positions (won %) 38 (42.11%), Long positions (won %) 52
(36.54%)
Profit trades (% of total) 35 (38.89%), Loss trades (% of total) 55 (61.11%)

34. 24
Largest profit trade 2390.92, loss trade -331.71
Average profit trade 819.01 loss trade -189.18
Maximum consecutive wins (profit in money) 4 (3650.94), consecutive losses (loss in
money) 8 (-1126.24)
Maximal consecutive profit (count of wins) 3674.10 (3), consecutive loss (count of losses)
-1705.83 (7)
Average consecutive wins2, consecutive losses 3
Table 3
Initial Deposit $1000
Net Profit: $18,260.36
Profit Factor: %1826
Chart Time Frame: 1 Hour
Currency Pair: EURJPY
Test Period: 2011.12.31 - 2012.07.11
Due to the fact that source code is too long to insert it to paper together with the analysis, I
decided include them into 2 appendices. Please, see additional Appendix 1 and Appendix 2
for the Source code of Robot and Analysis of trading on demo account for 6 month
respectively.

35. 25
Chapter 3. Data and Methodology
Through the use of literature available we have outlined a framework of trading in foreign
exchange and different strategies of trading. This study will ask the question if there is any
“Holy Graal” that traders are looking to fulfil – “Is it possible to create the profitable
performance in foreign exchange markets and what are the terms of such trading? What is
most efficient of trading styles – automotive or manual trading for most of the investors?”.
Answering this question will enable the research to draw conclusions and identify areas of
improvement in our strategy of automated trading.
3.1 Research approach
There are two philosophies available for the research - positivism and interpretivism. For
this particular study positivism supports the purpose of the research. Followers of this
philosophy work with the observable reality and they work independently meaning neither
they influence the subject of the research nor subject influences them as well. It focuses on
well-structured methodology which will lead to statistical analysis. This study will collect
all data independently without anyone interfering and analyse it to draw conclusions.
Accordingly, the main objective of this study is to find out the best strategy for the trading.
The future performance of financial instrument can be hardly forecasted based on the
analysis of its historical data due to the high volatility of foreign exchange markets.
It is necessary to take into account that technical approach will be relevant to the past and
the applicability of the results in the future may be quite controversial. Moreover, modern
markets often are driven rather by emotions and expectations of participants than
fundamentals. Based on this provision, for more objective results of the study the human
factor should be considered too. This can be done through a survey of traders, market
experts and participants who are directly involved in the foreign exchange trading, who
might possibly present analysis of financial data and investment management. In addition,
this type of study can provide not only quantitative data but also qualitative information.
Unfortunately, study of the existing literature review materials (researches, articles,
numerous number of everyday reports) on this topic cannot provide assessment of the
prospects of efficient trading, and to answer to the raised questions of relation between
trading, psychology and profitable strategies. Therefore, in order to obtain the most
objective results, this paper will aim to consolidate a set of both primary and secondary

36. 26
information obtained in the course of the literature review, quantitative comparative
analysis of traders data and qualitative information obtained through the interview survey
of experts who are not just simple traders, but traders over 10-15 years experience with
numerous experience in building foreign exchange markets as we know them up on the
date.
3.2 The Data and Analysis Methodology
3.2.1 Comparative analysis of traders’ survey
An expert questionnaire is typically used in cases where the considered problem is not
widely known due to its specificity. This type of study is usually carried out by means of
the survey, but the respondents in this case are industry experts and in our case they are
traders. These are people who are well aware of research subject because of their
professional activities. It applies to the subject of the present study, as the use the
subtraction of knowledge of trading style and strategy requires a specific expertise from
the investing respondents.
The main objective of the survey is to obtain an expert opinion on the developing the
profitable strategy of trading in foreign exchange prospects of investing in the near future.
In more detail, it will try to clarify related issues, such as what factors may particularly
affect the investment features, what analysis and style of trading prevails in the relationship
between the most-profitable trading strategies, whether psychology of trading is important
issue, and others. Eventually, the results of the survey research will be considered along
with other findings when drawing up the conclusions of the present study.
For the research purposes will be carried out a survey in the form of the in-depth
questionnaire, a quantitative research technique that involves empirical investigation of
social phenomena via statistical and computational SPSS techniques.
The survey is carried out by gathering of data of 100 respondents carried out online via
posting the interviews in the diversified number of forums, web-sites, blogs, social
networks. The estimated time of filling out the questionnaire takes approximately 20-30
minutes each. The time frame of collection of data is more than 6 months, starting at end of
2012 and until May 2013. The data gathered have been inserted to SPSS 20. It took several
month in order to find people and collect the data as it was planned. The main point was
about diversification due to the fact of trading volumes from top trading countries such as
UK, US, Hong Kong, Japan, Singapore, Germany and taking into consideration the ratio of

37. 27
countries involved into the foreign exchange markets plus with the number of population
of the specified areas. I have concluded that the best way is going to be breaking the map
into 10 main areas of trading where have concentrated most numbers of traders. According
to that, I have gathered the number of surveys from each area.
Each survey has total of 46 questions, amongst which 6 questions are non-numerical open-
ended so they won’t be included into analysis. (see Appendix). The questions are mostly
regarding trading strategies, preferences and results in a manner to address different issues
related to the subject of the research.
3.2.2 Expert interviews
An expert interview is used due to the fact that quantitative interview might not be enough
to result the answer whether is possible to create profitable strategy in foreign exchange
markets. This type of study is usually carried out by means of the interview, but the
respondents in this case are the industry experts with over 10 years of experience – and
they are top-managers of foreign exchange companies managers, industry trading analysts
with a huge knowledge of the market from all sides and other people who are not just well
aware of research subject but because of their professional activities they are building this
market themselves. This applies to the subject of the present study as it requires a specific
expertise from the respondents.
The main objective of the survey is to obtain an expert opinion on the question of the
building of best suitable strategy from the investors and trading side. In more detail, it will
try to clarify a number of related issues, for instance, what factors may particularly affect
the investment decisions, what trends will prevail in trading and others. Eventually, the
results of the survey research will be considered along with other findings when drawing
up the conclusions of the present study.
For the research purposes will be carried out the interview survey, a qualitative research
technique that involves conducting intensive individual interviews with a small number of
respondents to explore their prospective on a particular idea. (Boyce & Neale, 2006).
The interviewing will be carried out by Skype telephony, the estimated time of the call –
approximately 20-30 minutes each. For each interview it will be taken the notes. Each
interview will follow a certain guide; consisting open-ended questions (see Appendix). The

38. 28
questions are phrased in a manner to address different issues related to the subject of the
research.
3.3 Strengths and Limitations
3.3.1 Comparative analysis of traders’ survey
The questionnaire survey of traders has represented several advantages, providing they
give the broad results for building the analysis with big number of information.
However, there are a few limitations, which should be considered:
 first of all it was quite hard to decide what method of the survey collection shall I
use and when exactly I will find the number of traders, how shall I divide my
attention and to get the responses from over the world because I wanted to get
diversified portfolio of answers of international traders;
 second it is the difficult to find out such a huge number of responses, because it’s
quite hard to find traders who accept the spread of their trading secrets and
strategies; no one wants to share the knowledge of trading, the information, their
tactics. Additionally to that, traders are covering themselves due to the fact of being
annoyed with the number of sales people from thousands of brokers who are
getting in contact with traders in order to persuade them start having services with
particular broker;
 third is time limits, due to the abovementioned limitation it took a long time to get
the proper adequate traders opinions and to collect them into the database;
 the traders are really diversified meaning they are diversified with all the subjects
starting from age, experience and results, so it is quite difficult to find a trading
expert, who will provide meaningful information, and have time for the filling
questionnaire;
 the research is able to reach the aims but it has unavoidable limitations as language
limitations of specified areas such as African, Asian and Arabic regions.
Furthermore, it was even harder to find traders from Latin America who are trading
(it’s the region with least number of traders) and know English.

39. 29
3.3.2 Experts Interview
The interviewing of experts has one obvious advantage over other questionnaires of
various traders, providing detailed qualitative information. However, there are a few
limitations, which should be considered:
 the interview responses may be biased to some extent to the fact that his own believes
and experiences above the others so his knowledge are most corrected; similarly, a
respondent may by biased by the current policy of his organization where he works;
 it is quite difficult to find a qualified expert, who will provide meaningful information,
and have time for the interview due to the fact that their time is so important literally
golden;
 because of small sample sizes it may be difficult to make any generalization about the
results which might be sometimes confusing;
 this interview technique requires appropriately trained interviewing skills, in order to
obtain the required information.

40. 30
Chapter 4. Findings
4.1 Quantitative analysis
This chapter of thesis presents and examines in detail the results from quantitative survey,
outlined in the previous chapter of the research. Namely, it will provide a comparative
analysis of the financial performance of all the traders and determines their style or
techniques of trading as most successful. Three financial indicators are taken for
consideration: profitability and correlation.
4.1.1 Ethnographic and geographic analysis
Following type of analysis shows us distribution of the geographical factor, gender, age
and education of the traders.
Table 4
Age VS Education
Education Total
Secondary College Undergraduate Postgraduate
Age
Less than 18 10 0 0 0 10
18-24 2 11 9 20 42
25-29 8 11 12 8 39
30 and older 0 0 8 1 9
Total 20 22 29 29 100
Table 5
Gender VS Country
Country Total
Eastern
Europe
(Russia,
Ukraine,
etc)
UK US North
and East
Asia (inc
China,
Japan)
South
Asia (inc
India,
Pakistan)
SouthEast
Asia (inc
Malaysia,
Indonesia)
Arabic
countri
es
Africa Rest of
world (inc
Latin
America
Australia,
New
Zealand)
Gender
Male 18 10 10 10 10 6 10 10 9 93
Fem
ale
2 0 0 0 0 4 0 0 1 7
Total 20 10 10 10 10 10 10 10 10 100

41. 31
It is well-known that most of the traders are male gender and unfortunately it is less female
traders around the world due to the overstressed situation and actually spending too many
hours of trading. There been no separate research on the subject, but it is familiar that it is
quite low percentage of traders amongst female and the successful ones even less.
As we can see from distribution most of the female traders in our research are from South
East Asia and Eastern European countries. Meanwhile other countries in the researching
sample has no female but it’s not necessarily mean that there are no traders in there.
Table 6
Country VS Education
Education Total
Secondary College Undergraduate Postgraduate
Country
Eastern Europe (Russia,
Ukraine, etc)
0 0 10 10 20
UK 0 7 2 1 10
US 10 0 0 0 10
North and East Asia (inc
China, Japan)
0 2 0 8 10
South Asia (inc India,
Pakistan)
8 2 0 0 10
SouthEast Asia (inc
Malaysia, Indonesia)
0 2 8 0 10
Arabic countries 0 0 0 10 10
Africa 2 8 0 0 10
Rest of world (inc Latin
America and Australia, New
Zealand)
0 1 9 0 10
Total 20 22 29 29 100
Country and education clearly show the level of education of traders from particular
countries. Particularly, we see that number of traders in US only with secondary degree,
which can be resulted only with the fact that the category of traders I found in the web
maybe not very professional and only beginners and they also belong to the group of
young students especially because of the expensive education US citizens cannot afford to
attend colleges and they leave it until they collect funds. We also see trend of young
traders from South Asia. Eastern Europeans and Arabic traders are mostly with higher

42. 32
education which is dictated with the overall affordable education in each country – in West
Europe is free education and in Arabic countries people are granted to get good education.
Other countries are having traders with different level of education. UK and African
countries are having few college graduates and other educated traders and in the rest of the
world are different.
4.1.2 Foreign Exchange trading historical analysis
In order to understand the experience of our traders, let’s see how long generally they are
trading. Our surveyors overall trading in foreign exchange in medium terms of 2-4 years
but in financial world some of them trade more than 5 years, which means they started to
trade in foreign exchange later on.
The exact time period figures are in the table below:
Table 7
Country VS How long in the financial markets?
How long in the financial markets? Total
1-2 years 2-4 years 5 and more
Country
Eastern Europe (Russia,
Ukraine, etc)
8 8 4 20
UK 2 0 8 10
US 4 0 6 10
North and East Asia (inc China,
Japan)
0 6 4 10
South Asia (inc India, Pakistan) 4 4 2 10
SouthEast Asia (inc Malaysia,
Indonesia)
4 4 2 10
Arabic countries 0 4 6 10
Africa 0 4 6 10
rest of world (inc Latin America
and Australia, New Zealand)
6 3 1 10
Total 28 33 39 100

43. 33
Table 8
Country VS How long in the foreign exchange markets?
How long in the foreign exchange markets? Total
1-2 year 2-4 years 5 and more
Country
Eastern Europe (Russia,
Ukraine, etc)
2 14 4 20
UK 0 5 5 10
US 4 6 0 10
North and East Asia (inc China,
Japan)
4 6 0 10
South Asia (inc India, Pakistan) 4 4 2 10
SouthEast Asia (inc Malaysia,
Indonesia)
0 10 0 10
Arabic countries 0 6 4 10
Africa 0 6 4 10
rest of world (inc Latin America
and Australia, New Zealand)
6 4 0 10
Total 20 61 19 100
Once we know how long in the particular markets our traders for, it is important to understand
their preferences in trading.
In our table we can see that new traders are do not take the trade on energies, which might say
that probably new traders don’t know this part of market very well, mostly medium term
traders do trade on that and also professional traders are not trading on this. Most popular
instrument is spot currencies especially on the medium-terms traders. Less popular
instruments are precious metals and CFDs, of which comes conclusion that our traders prefer
liquid and risky traders, because metals and CFDs are for risk adverse traders. Currency
futures are also very popular, especially on the segment of professional traders.

44. 34
Table 9
How long in the foreign exchange markets? VS What instruments do you often trade?
What instruments do you often trade? Total
Spot
Currencies
Currency
futures
Precious
metals
CFDs Energie
s
All of the
above and
some others
How long in the
foreign exchange
markets?
1-2 years 6 8 2 4 0 0 20
2-4 years 22 6 0 1 26 6 61
5 and more 3 16 0 0 0 0 19
Total 31 30 2 5 26 6 100
Also it is important to see what kind of preference on the currency pairs our traders have. 38%
of survey traders trade the classic pairs which are the major market of currency traders and
takes the 70% of all market. 33% of traders are indifferent on the pairs and 29% chose exotic
pairs. It is also the important part the distribution of the preferences on the experience. Exotic
pairs are never chosen amongst new traders – they concentrate mainly on classic and just
small numbers are choosing exotic and classic at same time. Also it is seen that exotic pairs
are mostly traded by professionals who trade most on exotic and half of them both exotic and
classic pairs.
Table 10
How long in the foreign exchange markets? VS Which forex pairs are you mainly trading?
Which forex pairs are you mainly trading? Total
Classic/Major
pairs
Exotic pairs Indifferent
How long in the foreign
exchange markets?
Less than 1 year 18 0 2 20
2-4 years 20 19 22 61
5 and more 0 10 9 19
Total 38 29 33 100
The profitability of trading is one of the main subjects of the research so it is one of the most
important aspects shall be covered during research and the results are interesting: most of the
traders have average of monthly profits between 10 and 50% and the distribution is even less
– most traders have 10-25% of profits earned. There is also smallest number of traders who
earn 50-100% of profits, twice more number of traders earn more than 100% especially less
on the professional traders. Which might takes us to conclusion that professional traders due
to the choosing risk adverse strategy they earn less.

45. 35
Table 11
How long in the foreign exchange markets? VS What is % of average monthly profits do you earn?
What is % of average monthly profits do you earn? Total
less than
10%
10-25% 25-50% 50-100% more than
100%
How long in the foreign
exchange markets?
Less than 1 year 4 2 6 0 8 20
2-4 years 8 27 8 10 8 61
5 and more 0 5 10 0 4 19
Total 12 34 24 10 20 100
Next part of the study done by the factors of profitability – what strategy mainly uses
profitable traders.
Most of the traders – 41% - in the sample had opened and made deposits from 100 to 1000
USD (which calls mini accounts), after them we have the micro account holders up to 100
USD – 32% and 7% even less than 10 USD. Also there are 5% of traders opened advanced
accounts which are from 10,000 to 100,000 USD and professional traders with more than
100,000 only 2%. These professional traders have 25-50% returns and advanced up to 50% as
well. We see that they don’t make enormous amounts of profits. More than 100% profits per
month made by account holders of 100 USD and up to 1000 USD, more risky, because
usually leverage on that accounts are higher.
Table 12
What is % of average monthly profits do you earn? VS What was the maximum deposit have you made?
What was the maximum deposit have you made? Total
up to 10
USD
up to 100
USD
100-1000
USD
1000-
10000
USD
10000-
100000
USD
More than
100000
What is % of
average monthly
profits do you
earn?
less than
10%
2 0 8 0 2 0 12
10-25% 1 10 19 3 1 0 34
25-50% 0 10 6 4 2 2 24
50-100% 0 4 2 4 0 0 10
more than
100%
4 8 6 2 0 0 20
Total 7 32 41 13 5 2 100

46. 36
What strategies take the traders and what analysis they use on trading are the next outcomes
of the research.
From the table below 50% of the traders take both fundamental and technical analysis, 34%
only technical analysis and only 16% only fundamental. Also there is 2 outcomes such as no
fundamental analysis made by the less profitable traders and on the ones who has profits of
50-100% traders are concentrated just on the type of analysis and not both.
Table 13
What is % of average monthly profits do you earn? VS What analysis do you use?
What analysis do you use? Total
Technical Fundamental Both
What is % of average monthly
profits do you earn?
less than 10% 10 0 2 12
10-25% 8 2 24 34
25-50% 6 4 14 24
50-100% 6 4 0 10
more than 100% 4 6 10 20
Total 34 16 50 100
Next table shows important moment of creating of own traders strategy or not following
someone’s strategy. Most of the traders – 36% created their own strategy, 30% didn’t create
own, also to this number might be added 21% of traders who don’t follow any strategy. And
only 13% follow someone without creating own. Which say that more than half of traders
they don’t follow any others strategy and not created their own yet.
Table 14
What is % of average monthly profits do you earn? VS Do you have developed your own trading strategy?
Do you have developed your own trading strategy? Total
Yes No I don't follow
any strategy
I follow
other
traders
strategy
What is % of average
monthly profits do you
earn?
less than 10% 10 2 0 0 12
10-25% 8 6 15 5 34
25-50% 8 8 4 4 24
50-100% 6 4 0 0 10
more than 100% 4 10 2 4 20
Total 36 30 21 13 100

47. 37
Following this above research it is important to understand the psychology of trading.
4.1.3 Psychology of Foreign Exchange traders
The question of psychology is controversial in the trading and in the markets. There is also the
behavioural questions of stress and if effectiveness and profitability are suffering by it. Still
we have not sure answer whether it is always less effective to trade by intuition. Professional
traders have different opinion on that.
The table below answers to the question of the intuition – 55% of traders in survey use it once
trading and 45% not using it.
Table 15
What is % of average monthly profits do you earn? VS Do you use your intuition?
Do you use your intuition? Total
Yes No
What is % of average monthly
profits do you earn?
less than 10% 4 8 12
10-25% 15 19 34
25-50% 12 12 24
50-100% 8 2 10
more than 100% 16 4 20
Total 55 45 100
Also the psychology of traders usually show how do they feel secured by brokers – if they
withdraw the profits or use them for enlarging of the trading capital. Most of traders 39% they
don’t withdraw, 34% withdraw sometimes. 20% often withdraw and rare is only 7%. Most of
the ones who earn 100% and not withdrawing the funds or sometimes and 50-100% profit
earners also either not withdrawing or sometimes. Often withdrawing are the ones who trade
medium profit.

48. 38
Table 16
What is % of average monthly profits do you earn? VS Do you withdraw all your profits or use it to
enlarge your trading capital?
Do you withdraw all your profits or use it to
enlarge your trading capital?
Total
No Yes,
sometimes
Yes, rare Yes, often
What is % of
average monthly
profits do you
earn?
less than 10% 2 8 2 0 12
10-25% 11 10 1 12 34
25-50% 6 6 4 8 24
50-100% 8 2 0 0 10
more than
100%
12 8 0 0 20
Total 39 34 7 20 100
It is very important to analyze why the traders choose to trade in foreign exchange, what are
the purpose of their trade, to understand more of their behaviour and their style of trading.
Majority of traders are choosing the foreign exchange trading not as investment of hedging
risks (20%) or as profession of daily trading (33%) but mainly for speculation purpose 47% so
by this not serious way of trading for most traders they won’t pay serious attention for gain of
information, for the strategies and analysis.
Table 17
What is % of average monthly profits do you earn? VS What is the purpose of your trading?
What is the purpose of your trading? Total
Speculation Hedging risk Day trading
What is % of average
monthly profits do you earn?
less than 10% 8 2 2 12
10-25% 11 12 11 34
25-50% 8 2 14 24
50-100% 10 0 0 10
more than 100% 10 4 6 20
Total 47 20 33 100

49. 39
Understanding of the risks involved at the high liquid markets is one of the key factors of the
traders to make proper careful analysis so it is important for brokers to deliver information
even though not all traders fully understand it – 97% of all traders understand it and 3% no.
Table 18
What is % of average monthly profits do you earn? VS Do you generally understand that foreign
exchange markets trading has high risks?
Count
Do you generally understand that fx
trading is highly risky?
Total
Yes No
What is % of average monthly
profits do you earn?
less than 10% 12 0 12
10-25% 31 3 34
25-50% 24 0 24
50-100% 10 0 10
more than 100% 20 0 20
Total 97 3 100
What is also important and is a big sign for the society, investors and authorities – almost half
(47%) of traders think that brokers utilize fraudulent activities to increase their profits from
market making. Generally speaking it means that investors don’t trust to the brokers and they
think that broker trade against them by not taking their transactions to the global market, so
they basically execute orders on behalf of the client within the company by it’s own risk
managers. This is controversial and hot topic in the markets, but very difficult, almost
impossible to proof because no evidences left. Overall system also has own disadvantages,
even though trading in real time.

50. 40
Table 19
What is % of average monthly profits do you earn? VS Do you think that brokers utilize fraudulent
activities to increase their profits from market making?
Do you think that brokers utilize
fraudulent activities to increase their
profits from market making?
Total
Yes No
What is % of average monthly
profits do you earn?
less than 10% 12 0 12
10-25% 11 23 34
25-50% 10 14 24
50-100% 6 4 10
more than 100% 8 12 20
Total 47 53 100
Another surprising result of the research of the fact, that 66% of the responding traders are
assured that foreign exchange market resemble gambling more than financial trading which
is brings out lots of disputes that trading in foreign exchange markets shall be executed by
properly mannered education and analysis, it is less speculative and intuitional. In other
words most traders still never believe to that and put equation between gambling and
trading.
Table 20
What is % of average monthly profits do you earn? VS Do you agree with the common accusation that
the forex market resemble gambling more than financial trading?
Do you agree with the common
accusation that the forex market
resemble gambling more than financial
trading?
Total
Yes No
What is % of average monthly
profits do you earn?
less than 10% 10 2 12
10-25% 24 10 34
25-50% 12 12 24
50-100% 10 0 10
more than 100% 10 10 20
Total 66 34 100

51. 41
The number of the traders who ever failed the trading and leaked their funds so they
liquidated the accounts are 25% and 75% never liquidated or just had no chance yet.
Proportion of the liquidated account holders is less within more profitable traders.
Table 21
What is % of average monthly profits do you earn? VS Have you faced the situations when you have
liquidated account?
Have you faced the situations when
you have liquidated account?
Total
Yes No
What is % of average monthly
profits do you earn?
less than 10% 8 4 12
10-25% 9 25 34
25-50% 6 18 24
50-100% 0 10 10
more than 100% 2 18 20
Total 25 75 100
4.1.4 Foreign Exchange trading detailed analysis of trading
The section of trading preferences and styles of the traders described on the research of the
survey done. The outcomes are not unpredictable and surprising, but mostly general.
Below it’s analysed in details.
Majority of traders use different tools on their trading, such as indicators are chosen by 36%
of all traders, 27% are using expert advisors and 26% using the robots programmed by own
programmers. 6% of all traders prefer to use all of automated trading tools and only 5% never
trade with any of the tools, even though most of them make highest profits in their sample (4
traders out of 5 make 100% of profit and more, which is very effective).

52. 42
Table 22
What is % of average monthly profits do you earn? VS What are the major tools that you use for
trading?
What are the major tools that you use for trading? Total
Indicator
s
EAs Other
robots
All
above
None
above
What is % of average
monthly profits do you
earn?
less than 10% 10 0 2 0 0 12
10-25% 12 17 2 2 1 34
25-50% 12 4 8 0 0 24
50-100% 0 0 6 4 0 10
more than
100%
2 6 8 0 4 20
Total 36 27 26 6 5 100
The other measure of the risk trading is the percentage of equity traded by traders. Why it is
important is because sometimes traders trade on margin and have margin call or sometimes
might overtrade with most of the equity and liquidate the account. The table represents that
most 49% of traders use from 25% to 50% of liquidity of the account, which is quite general
and normal, as 19% traders use up to 10% of equity, 14% of risk averse traders trade 10-25%
of equity and over 50% of equity used by 18% of traders.
Table 23
What is % of average monthly profits do you earn? VS What is the maximum % of amount of the
total equity you use in trading?
What is the maximum % of mound of the total equity
you use in trading?
Total
Up to 10% 10-25% 25-50% more than
50%
What is % of average
monthly profits do you
earn?
less than 10% 0 0 2 10 12
10-25% 15 2 11 6 34
25-50% 4 12 8 0 24
50-100% 0 0 10 0 10
more than
100%
0 0 18 2 20
Total 19 14 49 18 100
The leverage in foreign exchange is the leverage by which you trade and less leverage has
trader – less risks on trading. We see that majority – 34% of traders prefer smallest leverage

53. 43
1:10. 29% prefer leverage of up to 1:100. Only 9% need medium to high leverage and high
leverage of 1:500 and more prefer to have 28% of traders.
Table 24
What is % of average monthly profits do you earn? VS What is your favourite leverage are you trading
with?
What is your favourite leverage are you trading with? Total
1:10 and
less
up to
1:100
1:100 to
1:400
1:500 and
more
What is % of average
monthly profits do you
earn?
less than 10% 10 0 0 2 12
10-25% 6 17 3 8 34
25-50% 14 2 0 8 24
50-100% 0 4 4 2 10
more than
100%
4 6 2 8 20
Total 34 29 9 28 100
Scalping is popular strategy of trading but on the sample of research 59% of traders non-
scalpers and 41% like scalping. Amongst some brokers scalping is prohibited due to the fact
that scalping strategy makes losses for the brokers, very risky and for the traders as well, who
might easily liquidate account.
Table 25
What is % of average monthly profits do you earn? VS Are you scalping?
Are you scalping? Total
Yes No
What is % of average monthly profits
do you earn?
less than 10% 10 2 12
10-25% 11 23 34
25-50% 4 20 24
50-100% 8 2 10
more than 100% 8 12 20
Total 41 59 100
Hedging is another popular strategy (copying the order but on a different position – buy
USDJPY and sell USDJPY) of traders and it used to be very common back to few years ago,
but nowadays it was said by many traders that by this strategy traders are neither winning

54. 44
neither loosing. The only difference in the end if swaps added to the overnight orders, which
doesn’t play any roles on Islamic (swap free) accounts.
Table 26
What is % of average monthly profits do you earn? VS Do you hedging?
Do you hedging? Total
Yes No
What is % of average monthly profits
do you earn?
less than 10% 6 6 12
10-25% 18 16 34
25-50% 18 6 24
50-100% 4 6 10
more than 100% 4 16 20
Total 50 50 100
Other issue of traders is the regulator of brokerage companies. Some brokers in the countries
with unregulated markets might attract the investors by very good conditions of trading, but
it’s always risky to open account, nevertheless, some small numbers of traders such as 4%
have accounts in such companies. 37% prefers to have accounts in the brokers of the
regulated markets. Cyprus until the moment had also big number of the foreign exchange
shares until recent days for the last years until the critical moment with the banks. This issue
will be explained more. 59% of traders prefer regulated by other not such big regulators,
maybe in their own country of the origin which is understandable due to the psychology.
Table 27
What is % of average monthly profits do you earn? VS Brokers from which jurisdictions do you prefer?
Brokers from which jurisdictions do you prefer? Total
Regulated in
US, EU,
Australia NZ
Regulated
(other
jurisdictions)
Unregulated
What is % of average
monthly profits do you earn?
less than 10% 2 10 0 12
10-25% 9 25 0 34
25-50% 12 12 0 24
50-100% 6 4 0 10
more than 100% 8 8 4 20
Total 37 59 4 100

55. 45
Some traders (42%) used or using PAMM system accounts where they basically don’t need to
put efforts and spend time on trading. Majority of traders 53% never used it and 5% are
managing own PAMM account.
Table 28
What is % of average monthly profits do you earn? VS Do you use PAMM system/have you ever used it?
Do you use PAMM system? Total
Yes No Managing own
PAMM account
What is % of average monthly
profits do you earn?
less than 10% 2 10 0 12
10-25% 18 15 1 34
25-50% 8 12 4 24
50-100% 6 4 0 10
more than 100% 8 12 0 20
Total 42 53 5 100
Very similar results on the social trading aspect – 43% tried social trading and 57% never did
so.
Table 29
What is % of average monthly profits do you earn? VS Do you use any of social trading tools/have you
tried it?
Do you use any of social trading tools? Total
Yes No
What is % of average monthly
profits do you earn?
less than 10% 2 10 12
10-25% 9 25 34
25-50% 8 16 24
50-100% 10 0 10
more than 100% 14 6 20
Total 43 57 100
Brokers are important to choose are the key important thing within investing, and 61% of
traders are choosing STP brokers, 20% are ECN (especially the ones who scalp) and 19%
indifferent and chose market maker (mainly the ones who has small deposited accounts).

56. 46
Table 30
What is % of average monthly profits do you earn? VS Which brokerage scheme suites your style of trading
best?
Which brokerage scheme suites your style of trading
best?
Total
STP ECN market maker
What is % of average
monthly profits do you earn?
less than 10% 10 2 0 12
10-25% 27 2 5 34
25-50% 8 10 6 24
50-100% 8 0 2 10
more than 100% 8 6 6 20
Total 61 20 19 100
It is empirical to understand if the researches determine the trading style that they prefer and
use. Previously was explained few tables on the tools usage, social trading and PAMM which
are automated or semi manual trading, so it is good to see if traders understand that some
techniques they use make their trading semi-manual or automated From the table it is known
that 41% of traders think that they have manual trading (only 5% of traders not using any
tools, and 36% using indicators – so traders with indicators consider themselves as manual
traders). 27% they are sure that they use automated trading and they use robots – the numbers
of equal. Semi manual are using Expert Advisors or mixed tools.
Table 31
What is % of average monthly profits do you earn? VS Do you use automated, semi manual or manual
trading?
Do you use automated, semi manual or manual
trading?
Total
Automated Semi manual Manual
What is % of average
monthly profits do you earn?
less than 10% 6 2 4 12
10-25% 5 18 11 34
25-50% 8 6 10 24
50-100% 0 4 6 10
more than 100% 8 2 10 20
Total 27 32 41 100

57. 47
4.1.5 Foreign Exchange trading tools effectiveness analysis
There are few moments that traders have to tell their opinion on and they are all concerning
the tools used on trading. The level of satisfaction on tools is essential on research so it brings
the subjective opinion of how effective is one tool on another.
As its seen from previous part of research, most popular tools are indicators and after that EAs
and robots. How helpful traders find each?
Indicators major helpful agreed traders 42%, strongly agree 20% (majority) and disagree
24%, strongly disagreed 14% (minor opinion).
Table 32
What is % of average monthly profits do you earn? VS Indicators are major helpful tool in trading
Indicators are major helpful tool in trading Total
Strongly
disagree
Disagree Agree Strongly agree
What is % of average
monthly profits do you
earn?
less than 10% 2 0 2 8 12
10-25% 8 4 18 4 34
25-50% 2 4 12 6 24
50-100% 0 6 4 0 10
more than 100% 2 10 6 2 20
Total 14 24 42 20 100
Expert Advisors are known as semi-robotic tool and how effective find them traders?
EAs major helpful disagreed traders 50%, strongly disagreed 16% (majority) and agree 22%,
strongly agreed 12% (minor opinion).
Table 33
What is % of average monthly profits do you earn? VS EAs are helpful
EAs are helpful Total
Strongly
disagree
Disagree Agree Strongly agree
What is % of average
monthly profits do you
earn?
less than 10% 0 10 0 2 12
10-25% 6 14 11 3 34
25-50% 2 13 7 2 24
50-100% 4 5 0 1 10
more than 100% 4 8 4 4 20
Total 16 50 22 12 100

58. 48
Controversial robotic automated strategy preferences shall be considered most careful, due to
no supporting facts of effectiveness.
Robots major helpful on short term disagreed traders 44%, strongly disagreed 22% (majority)
and agree 28%, strongly agreed 6% (minor opinion). Interesting fact that 100% agreed ones
have the most profitable results in trading – monthly profits on more than 100%.
Table 34
What is % of average monthly profits do you earn? VS Robots are helpful in a short term
Robots are helpful in a short term Total
Strongly
disagree
Disagree Agree Strongly agree
What is % of average
monthly profits do you
earn?
less than 10% 2 2 8 0 12
10-25% 10 18 6 0 34
25-50% 2 18 4 0 24
50-100% 4 2 4 0 10
more than 100% 4 4 6 6 20
Total 22 44 28 6 100
Even more number of agreed traders in fact of non-effectiveness of robotic trading in long
term.
Robots fail in a long term disagreed traders 14%, strongly disagreed 5% (minority) and agreed
46%, strongly agreed 35% (majority opinion).
Table 35
What is % of average monthly profits do you earn? VS Robots fail in a long term
Robots fail in a long term Total
Strongly
disagree
Disagree Agree Strongly agree
What is % of average
monthly profits do you
earn?
less than 10% 0 0 8 4 12
10-25% 1 6 20 7 34
25-50% 4 2 4 14 24
50-100% 0 0 2 8 10
more than 100% 0 6 12 2 20
Total 5 14 46 35 100

59. 49
4.2 Qualitative analysis
This section will present presents and examines in detail the results of the second part of
research – qualitative experts’ survey. 10 experts on foreign exchange investments were
interviewed during the survey. The 5 questions were open-ended and anticipated detailed
response (see Appendix) and they were designed to provide a broad estimate on the main
objectives of this study.
4.2.1 Trading methodology
The first question was aimed to focus the experts’ attention on the best methodology to use
for trading: technical analysis, fundamental analysis, and/or sentiment analysis in a
decision making for trades. Synchronously experts agreed that mixed strategy involved
technical and fundamental at same time must be implemented, rather only one particular.
Sentiment analysis is not taken into deep consideration, experts hap opinion don not rely
on that and take deep look, though for successful trading it also need to be paid the
attention. For the successful and profitable trading need to take careful attention and made
deep analyses of market.
4.2.2 Indicators and programming
This question on is there best economic indicators (source of information) or technical
indicators in the market that might be the best to rely on experts had difficulties with
univocal answer. Generally they are agreed that some tools are helpful to identify trends
but the programming universal robot to make best profitable programming for trading isn’t
possible by majority of experts. Even though numbers of programmers and their robots are
way too big it’s not necessarily means that this robot will make only profitable deals and
never fail. Furthermore, there are no good robots created in the market for the normal
consumers. In the foreign exchange market traders trading with each other, so one trader
can simply create and sell robot to another, but that robot may trade against consumer-
trader.
The foreign exchange market is very liquid, risky and involves fast activities, at this market
traders are trying their best to create own unique robots. If the robot successful no trader
ever sold its out for any money, because he can win much more on daily trading for a long
term, rather then on selling the robot.

60. 50
4.2.3 Correlations in trading
Industry experts have agreed on the question of the correlation between certain pairs in
foreign exchange market, so once trader can predict movement direction trend for one
pair, it is applies the same movement on other pair. Mainly correlated pairs mentioned
included Canadian Dollar and the price of Crude Oil, Australian Dollar and the price of
Gold, the price of EURJPY and various indices as DJ30 or SP500, EURUSD and
EURJPY. Most of experts agreed that almost all pairs are somehow correlated, negatively
or positively which shown on daily trades.
Because currencies are priced in pairs, no single pair trades completely independent of the
others. Once traders aware of these correlations and how they change, they can use them
control overall portfolio's exposure.
The reason for the interdependence of currency pairs simple: traders are trading the British
pound against the Japanese yen (GBP/JPY pair), so they actually trading a derivative of the
GBP/USD and USD/JPY pairs; therefore, GBP/JPY must be somewhat correlated to one if
not both of these other currency pairs. However, the interdependence among currencies
stems from more than the simple fact that they are in pairs. While some currency pairs will
move in tandem, other currency pairs may move in opposite directions, which is in essence
the result of more complex forces.
Nevertheless, trading occurred in the real time so when correlated pairs are moving on one
or other direction, it is obvious that the same time correlated pairs moving on the correlated
direction so even if traders aware of correlation, there is no time to put efforts into buying
or selling short or long on the other pair.
4.2.4 Psychology and intuition
Controversial theme of the psychology of trading and using the intuition surprisingly took
interesting responds on the experts survey. The question of “How important is feel or
intuition and psychology of trading?” took an interesting observations of the experts.
Generally beyond of doubts experts where saying that reasonable controlled portion of
emotions is essential on trading.
Main outcome of all responds is that intuition is important to stay connected to emotional
intelligence and can be able to prevent those events that are not predictable mathematically
and that is a skill that is developed by the trader after many years of experiences.

61. 51
What important to be said by experts is that no fears and other negative emotions shall
interrupt the trades. Once trader feels the panic and starts loosing the strategy he planned
he is out of the market. It is important to understand where the tiny borders between
emotions and logic. A decreased emotion to the lowest levels is the key factor for clearly
view what will be the outcome.
4.2.5 Effective strategy is myth or not?
The last question was favourite of the all questions for the experts, it is quite common
question overall by the traders. It calls “Is there way to find “Holy Graal?” of traders”
which means possibility to create best effective and profitable strategy for trading. “Holy
Graal” is defined by traders as best strategy to trade. This question remains open since the
day of foreign exchange market started and still very actual up to the date, especially with
the new interactive system of the trading over last decade.
Experts have assured that there is no best strategy to implement. There are general
knowledge obtained, tools to be used, trading mechanisms to be seen and analyzed, but no
universal general strategy to be implemented over trading. Strategies can be million, there
are successful ones, but they never work on long term. There are trends can be predicted,
prices mathematically calculated and algorithms written down to trade automatically using
robots but no proven strategy or robot successful on long term.
Foreign exchange market is very liquid, volatile and risky, therefore, almost non-
predictable for long-term. Experts are agreed if there is successful strategy to be created
the one who implemented this strategy probably becomes one of the wealthiest traders and
will change the market and its condition because it is revolutionary.

62. 52
Chapter 5. Conclusions
This paper aimed to analyze foreign exchange markets one of the key markets of the financial
environment, deeply it’s been analyzed the automatic and manual trading roles, psychology of
trading and trading strategy to implement for the successful trading. For this purpose, there
were carried out two types of research. The quantitative approach, conducted through the
comparative analysis of survey research data of 100 foreign exchange international traders of
different level professionalism of market but with the different backgrounds. There is been
hypothesis outcome for the robotic automatic trading to be best way to trade in terms of
profitability, law risks and the fact that there is no psychology involved. The second part of
the study in the form of an interview of market experts has provided number of qualitative
information about the following analysed topic of foreign exchange strategy and psychology
of traders.
The combination of outcomes from both analyses makes it possible to draw a set of
conclusions on the fact of the current strategies of changing global financial world is volatile
as the foreign exchange market and the style of trading implemented recently.
The last years it is clearly seen the decline of the volumes of foreign exchange markets, no
matter that professionals trying to keep it at the same level. Market became global, expanded
and once was booming over period of time and when recession of 2007-2008 started in US
volumes were unchanged, but the crisis of 2009-2011 over many countries made changes –
the market haven’t collapsed, because it is liquid but also suffered on volumes – many banks,
funds and big market players were taking funds out of the liquid market to add be able to
survive in critical times. Obviously, it made the volumes of the market smaller, even though
it’s difficult to prove it. High volatility have changed and decreased a bit, even though risks
remained due to the liquid trading. If during crisis the volatility was enormous, for the last
few years its stabilized, which might be not satisfactory for the risky traders, who were
making huge profits (and losses too) at years 2007-2011. The traders mood also changed as
the psychology – now traders are trading easy and with much more logics, but it is way too
long to create the unique profitable strategy.
Quantitative analyses make the clear vision of the average traders behaviour, psychology and
preferences in trading. Following the analyses it is important to pay attention for some
essential outcomes of the research. The traders are developing either strategy to lower the
risks to the minimum or they are speculating and prefer risky trading to earn more, but they

63. 53
also loose more. More deep analysis of each survey taken proofs this hypothesis. Some
traders have confusion about the semi automated trading style they use, therefore, they use
some tool or tools but identify themselves as manual traders. The last important outcome have
drawled which concluding quantitative analyses is the fact that traders in reality negatively
thinking of robots and they don’t trust too much for programmed EAs neither on long or short
terms, believing they fail the trading.
The qualitative analysis gave deeper understanding of some outcomes on quantitative
research. According to the experts, there are correlations in trading to pay attention on, so the
indicators and may predict most of movements to the very short period of time frame. Robots
can be built on many strategies, but robots may have to have some limitations due to no
human interruptions. Psychology of traders is still debatable topic but there is general drawled
outcome that controlled human emotions with logics and intuition rather helpful and won’t
damage overall trading. There are no clear ways to build the best profitable strategy, but ones
it’s possible it will change the market. Moreover, the secrecy and information of professional
traders and their unique strategy and robots are main point of the experts interview, that even
if there are successful strategies, the world will probably never will get the access to those
information.
The present research has several meaningful limitations that need to be taken into account
when considering its findings. First of all, significant part of the study refers to the human
observation data – both surveys and interviews, it is not historical data of the instruments
(which is very complex and not possible to cover), which cannot guarantee the total correct
decision or outcome and any similar performance in the future. Also, the human opinion is
based purely on their subjective knowledge and expertise and, therefore, represents only
conjecture about the future state of affairs. Moreover, the opinion of the interviewed experts
may be biased and the surveyed professionals sometimes not correct.

64. 54
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