From the October 01, 2009 issue of Futures Magazine • Subscribe!

Learning to trade: It's academic


The experiential learning skills being taught in this class go beyond forex trading methods (both fundamental and technical), but also cover the skills involved in the running of a small fund: front, middle and back office skills coupled with trading teamwork. If the process runs properly, the use of simulation money will be irrelevant to the learning experience.

Each class will have approximately 25 members. Because there are six four-hour candlesticks, the class is split into seven teams of three to four members each. Six of the teams are responsible for data collection, trade initiation and trade exit; the seventh team supervises the other six execution teams and performs back-office functions such as trade documentation, profit and loss reporting and data analysis for risk management and preparation of investor reports. The Hanley Group Derivatives Trading Center is the hypothetical owner of the portfolio, and the student teams furnish the center with daily and monthly profit/loss reports.

Operationally, each student stays on one team for one week, and then assignments are rolled forward: the executing 3 a.m. team becomes the executing 7 a.m. team, and the executing 11 p.m. team becomes the management team. Each of the executing teams is responsible for one of the day’s four-hour candlesticks.

At the close of its candlestick, the specified executing team inputs that candlestick’s data into the spreadsheet model. Based on the continuously updated girth threshold (as monitored by the professor and overseen by the management team), the model then indicates one of three options to the executing team: close the current trade, enter a new trade or take no action.

In the event of no action, the student running the model updates the model and e-mails it to all members of his team and to the subsequent executing team in the candlestick time frame. In the event that trade entry or exit is indicated, the executing student immediately notifies another member of his team, who independently enters the data to confirm the action. After confirmation, the first student takes the indicated action and e-mails the updated model to his and the subsequent executing team.

It is obvious from the chart in “Rolling forward” that the executing 3 a.m. team may bear the most executing operational risk due to the time of the candlestick close and the sleep cycle of most students. Further, the forex market trades continuously from Sunday late afternoon until Friday late afternoon, so there is no market close during which to discover and to correct errors through the week.

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