I currently trade some exotic pairs for their interest rate yield, should I get any capital gains from a trade that's a bonus.
Am I crazy? No I just realized that in this markets volatility I haven't come across an EA or strategy that works for me (since I have a full time job right now as well)
What does that mean? I buy/sell FX pairs in only one direction (the one that has positive yield). Generally carry trading is not seen as too sexy, this is slower than even the millipede strategy -- however over the course of 6 months it has (for me anyway) returned 10.5% return without me losing any sleep at night and I'm looking to do about 20% return for the year without too much trouble.
For example:
Current interest rate of USDTRY on the sell side is 5% you can find current interest rates here.
Having said that on OANDA (the broker I currently use) is offering 5.25% for the borrow rate. This makes carry trading the USDTRY Forex pair extremely interesting at this time - using the right leverage of course.
You can see how much interest is gained daily using this currency interest rate calculator here.
So OANDA currenty offers $0.13 per day for every 1000 units short. My actually trading strategy in order to open these positions is based on levels of consolidation over time and fib etc.. Nothing too fancy. The point of it is to maximize my open positions in order to get as much yield per day as possible without major drawdowns (so I use leverage sparingly).
10% to 20% return doesn't seem like much, but it takes little effort, no EA's that bust up your account or crazy technical analysis (and believe me i've been there with all the indicaters and what not.
Risks: The main risk here is massive capital depreciation given soverign risk especially with exotic EURO based FX pairs like USDHUF that can have dramatic swings in price due to changes in interest rate yield or USDZAR etc... that would essentially nullify returns through interest rate yield.
Having said that if leverage is used sparingly the risk of large negative moves can be mitigated to some degree.
Also given that nearly all of the major yield generating currencies like USDZAR, USDHUF, USDTRY and USDINR are correlated to some degree there is also very little mitigation of risk when diversifying over large time spans.
The final drawback of this strategy is that a lot of capital in your account is required to get a decent actual dollar return but does a great job on a percentage return basis.
Anyone else carry trading? Willing to keep the discussion going??
Am I crazy? No I just realized that in this markets volatility I haven't come across an EA or strategy that works for me (since I have a full time job right now as well)
What does that mean? I buy/sell FX pairs in only one direction (the one that has positive yield). Generally carry trading is not seen as too sexy, this is slower than even the millipede strategy -- however over the course of 6 months it has (for me anyway) returned 10.5% return without me losing any sleep at night and I'm looking to do about 20% return for the year without too much trouble.
For example:
Current interest rate of USDTRY on the sell side is 5% you can find current interest rates here.
Having said that on OANDA (the broker I currently use) is offering 5.25% for the borrow rate. This makes carry trading the USDTRY Forex pair extremely interesting at this time - using the right leverage of course.
You can see how much interest is gained daily using this currency interest rate calculator here.
So OANDA currenty offers $0.13 per day for every 1000 units short. My actually trading strategy in order to open these positions is based on levels of consolidation over time and fib etc.. Nothing too fancy. The point of it is to maximize my open positions in order to get as much yield per day as possible without major drawdowns (so I use leverage sparingly).
10% to 20% return doesn't seem like much, but it takes little effort, no EA's that bust up your account or crazy technical analysis (and believe me i've been there with all the indicaters and what not.
Risks: The main risk here is massive capital depreciation given soverign risk especially with exotic EURO based FX pairs like USDHUF that can have dramatic swings in price due to changes in interest rate yield or USDZAR etc... that would essentially nullify returns through interest rate yield.
Having said that if leverage is used sparingly the risk of large negative moves can be mitigated to some degree.
Also given that nearly all of the major yield generating currencies like USDZAR, USDHUF, USDTRY and USDINR are correlated to some degree there is also very little mitigation of risk when diversifying over large time spans.
The final drawback of this strategy is that a lot of capital in your account is required to get a decent actual dollar return but does a great job on a percentage return basis.
Anyone else carry trading? Willing to keep the discussion going??