International Finance Trade Game

Overview

From September 4, 2013 through November 13, 2013 I participated in an OANDA currency simulation game to enhance my knowledge on international currencies through currency trading. As an individual I started out with $100,000 US dollars, and I traded over $75,000 with more than five different foreign currencies. Also, during the simulation I made over 12 round-way transactions. This report is going to explain the currency concepts I learned over this simulation, my major transactions during the game, and information on the international financial market through this time period.

Currency Concepts

Before the currency trading began Professor Tang taught about the foreign exchange market. I learned how foreign exchange is an exchange of one currency to another currency, and we need foreign exchange for five major reasons. The five reasons consist of international traveling, international business, international investment and speculation, international financing, and cross-border activities. The foreign exchange market, like I participated in, is usually undertaken in over-the-counter markets, and is the largest financial market in the world with over $3.98 trillion USD turnover a day. This game taught me about why/how individuals participate in currency trading.

In order to exchange the different currencies, I had to learn the quotations for them. A foreign exchange quotation is a statement of willingness to buy/sell at an announced rate. There is either a direct or indirect quotation. A direct quote is a home currency price of a unit of foreign currency, and an indirect quote is a foreign currency price of a unit of home currency. The price of one currency expressed in terms of another currency is the foreign exchange rate. I had to understand the difference between the bid and ask price of the foreign exchange rate. The bid price is the price of one currency at which the dealer will buy another currency, and the ask price is the...