DislikedSomeone said Freedom Rocks is a failure....why ??? I personally don't use it but I see the concept behind it...let's forget GBP and JPY (too risky even though the carry can be higher, same thing AUD and NZD) and talk about EUR USD CHF which is what Bruno is interested in.
Obviously you would buy both....somebody mentioned selling but how would you get interest if you sold both ?
Buy EURUSD...long of EUR short of USD
Buy USDCHF...long of USD short of CHF
In substance you are long of EURCHF but "hedged" because the correlation between the two is around -0.95 (with -1 being a perfect correlation, tick for tick, one goes up the other goes down).
???Ignored
to understand the basic mechanism of currency trading you have to know that all you do, when "Buying" and "Selling", is to create dept and loan in equivalent size on the two sides of your balance sheet at your bank.
"Buying" EURUSD means, you are getting 100 K in EUR from your bank (i.e. a loan is accounted as an asset to your favour; a PLUS) and you are taking a dept ("Selling") of equivalent size in USD (a dept, a MINUS). The interest for having the loan as a plus on your account is netted with the interest paid for the dept as a minus on your account. As these two figures of dept and loan are equivalent, your margin is only a fractional portion of these sums you move, in order to serve as security for currency rate fluctuations. This is the reason, why you do not have to put the USD-Equivalent of 100.000 EUR of your own money on the table for buying one Lot EUR/USD (i.e Buying 100K EUR against selling the same amount represented in USD). You are receiving a dept from your broker or bank in that size in order to buy.
If a currency has a higer interest level, the net interest will be booked into your account (i.e. USD/CHF), if the ratio is negative, it will be taken away from your equity. ... This is the meaning of long (you have something) and short (you do not have it).
If you do combined transactions i.e. Buy EUR/USD and Buy USD/CHF you are eventually Buying (Getting, Having) EUR and Selling (owing, Not Having) USD. The same with Buing USD/CHF.
Therefore you have to look at your balance of the combined transactions to see what you have or do not have at the end of your transactions. This effective balance defines your currency risk as well as your interest earnings or payings. (See my earlier post)
Greetings
t.
always expect the unexpected!