Free Essay. Investment Approach and the Trades Performed

The investment was started up with a sum of $ 150,000 in cash, in which all the team members had to contribute in equal proportions to buy common stocks in Amazon Inc. No amount was borrowed from any external party since the equity in our account was below the minimum requirement and could help us much. Since the interest is charged weekly on the negative balance cash balances at a yearly rate of approximately 6 to 7 percent, and also credited at an annual rate of 2% weekly on positive cash balances. Our interest is calculated daily for a week, indicating daily interest to be equal to cash.

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Investment Approach

Taking part in the stock exchange game obliged our team to take the role of an Investor and had to choose positions in different types of investment vehicles ultimately. In the team's venture to invest, the assistance of an analyst was sorted where necessary and provided referrals to reputable investment firms that offered packages (Wood, O'Hare & Andrews, 1992).

In practice of this stock exchange game, the roles are designated among the individuals within the team and firms. As an investor, the team provided part of the critical analysis needed for effective decisions (Ratnasingham, 2006). The investment decision was made by an endowment fund, and pension funds and charged with operating in the interest of those members will end up being the beneficiary of the undertaken investments.

The staff of the organizations often provided much of the analysis required for the effective decision. The Vanguard Group provided the analytic services for the team as an investor. Nevertheless, a clear distinction of the various functions of the investor, investment, and Analyst was formulated. Overall, we applied a multi-level approach to investing, in which the investor stayed at the top level and assisted by the investment firms in the second position and the securities of Amazon Inc. at lower levels.

The multi-level approach to investing was found among the individuals within our investing team. The investing team members tended to utilize shares of mutual funds in the US and the UK's unit trusts, which later held securities of individual firms. At some point, some of the major institutional investors, such as pensions fund, were considered to assist in managing the accounts which were provided by the investment management firm.

The firms could also make use of the various types of derivative securities that were provided by the exchanges and investment banking firms, reflecting on the performance of different sectors of capital markets.

Our Macro-Investment Analysis is mostly conducted by a financial advisor who is compensated via commissions attained from the investment firm for the sales made. Most of the investment brokers at our disposal often serve the same duty on a fee or based on the assets that are managed via the use of wrap account or for commissions depending on the undertaken investment throughout the semester. Moreover, the macro-investment analysis is basically performed by the Chicago Partners, which one of the critical investments is consulting firms. The firm would charge fees that are entirely independent of the specific investment conducted

Nonetheless, most of the strategies described in this report were initially initiated by consulting firms for investors with a relatively more comprehensive range of investments to justify the costs linked with complicated analytic approaches and a more comprehensive collection of data and analysis. However, the amassing of considerable databases advances in the level of know-how, and decreases in communication and computational costs are initiating such processes to be economically accessible to our team as the investor.

The individual team members are given relatively more control over the investment of funds formulated to cover certain expenses such as retirement; therefore, the expertise of the Analyst is widely applied.

Basically, the investment had been directed to investors who tend to plan to create portfolios of the securities of firms that are traditional. Nonetheless, such investors are currently becoming infamous as most of the activities are undertaken by investment firms, which aim at providing components that the investment found useful.

As the ultimate investor, we focused on getting an effective combination of the components in our disposal, and not building on general portfolio security by security.

This specific stock exchange game is designed to assist students in attaining analytic skills. Again, the investment firm needs to familiarize itself with the content to be able to develop products that meet the demands of the investor. For emphasis, we will often capitalize on Investor, Analyst, and Investment Firm when used in the senses described above.

The Trading Strategy and the Analysis

We analyzed the stocks based on our fundamentals, such as the revenues at our disposal, firm trends, or valuation. However, some of the fundamental elements were never reflected in the market price and thus made it relatively challenging to predict the stocks. The fundamentals were useful in seeking to predict the movements of the price by assessing historical data, especially volume and price. This helped as an investor to traverse the gap between market price and intrinsic value by purchasing strategies such as behavioral economics and statistical analysis.

Furthermore, the technical analysis tended to assist in the provision of instructions based on the relevant past information. In the strategy selected, both fundamental and technical analyses were employed. Being that we are a short-term trader, we used a top-down approach.

As a day trader, our firm used simple trendlines, which helped to provide a speed of price, indicate a direction, and predict patterns at the time of price contraction. Volume indicators seemed to be employed as well to arrive at decisions. Our technical analysts used trends in price action as opposed to looking at the history of business performance.

Using the trendline, the technical Analyst determined the current direction in the available market prices. Identification of the end was a significant step. In creating the trendline, the Analyst had two points on the price chart. In the analysis, a daily chart was used as opposed to timeframes. The trends were majorly used since they can be applied to assist in identifying patterns irrespective of the period interval applied.

Our firm was trading at $ 40 shifted to $ 45 in two days and to $ 50 on the third day. Therefore the Analyst had plotted on three points from $ 40, and $ 45moving to $ 50, which showed an upward trend. Moreover, the drawn trendline indicated a positive slope and thus confirmed the direction to buy based on the trend. Due to the positivity of the slope, the direction was never sold. We had to chart the price data typically.

The trade was basically made on the stock that was listed on the New York Stock Exchange that had traded within the past seven days. The shares traded on such exchanges were priced within the markets, but the current value was calculated using the Canadian exchange prices that were adjusted using the current rate for the USD equivalent.

The closing price tended to be the last price traded as the transactions are priced at market daily closing prices. The firm relied on the newspaper and quote facilities of SMG to identify the prices, and the real-time transactions seemed to be priced at the market price during the entry. Moreover, the transactions that were incorporated with a restricted price were never held past the original attempt to price the transaction.

Trading

The various advancements in technologies, availability of lower commission rates, and the emergence of online brokerage firms enhanced our firm to use of multiple systems and tools, heightening complexity and relatively challenging to interpret and follow on the market prices. We employed artificial intelligence to sell and stock positions in a short duration and often hold a position in less than a trading day. During the trading, we focused on the existing trends aiming to attain a small gain before the end of the trends. The bulk trade tends to take place via financial institutions' programmed systems to assist in analyzing the price trends and thus placing of orders as scalping was employed.

The decision was made on a free emotional situation as the entry to the trade was done based on specific criteria. Our firm had the ideology that the firm that trades frequently tends to attain more profits with trading returns ranging from over 60 % to 350%; therefore, our firm indulged in a more regular transaction. Nonetheless, automated trading has been considered to minimize the liquidity of the market, and this may result in various crashes. For instance, the firm fell more than 100 points at the market opening as the halting was being made to stabilize the markets. The fact that our firm had the lesser financial capability to copy the trading movements of the more significant institutions, the firm sorted to day trading as a more favorable strategy in the stock market.

The firm settled on day trading because of its enticement of day trading companies, some of which are industries that are unregulated to profit from sales of guidance and automated trading software to the clients.

The day trading engaged many trades every day, expecting minimum profits per trade and applying the margin from the brokerage firm. The firm was not a pattern day trader due to limited securities purchased in a day.