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Arbitrage with no-interest broker

  • #121
  • Dec 26, 2006 4:36am Dec 26, 2006 4:36am
Quoting spiderforex
tdion...Great...Preciselly what the doc. ordered.

Carry trade should be looked into an yearly trade prospect than daily or monthly.

JP morgan et all have 2 trillion dollars on carry trade..the whole world economy is run on carry trade.

Japan is the sole provider of global liquidity.

Its a very very serious subject when interest rate hike comes for YEN than its for dollar.

Even, with a 0.25 points increase, the market will shake up..but as seen earlier this year, the market comes back to normal.

So, if you want to carry trade forget about the hedge..you are wasting your money there looking at zero interest hedge..just put that money "Bravelly" in the interest trade and Pyramid it. the risk will be for first six months..but with the extra interest and compounding you get ..you would very well cover up the 1000 PIPS dooms day buffer scenario easily for the next six months and after.

The whole world will tumble if Japanese decides to increase the interest rate to say 2 or 3 percent, they would do so eventually but very very slowlly in two or three years time....by this..the caryy trade will adjust to the shake up.

Japan is an export oriented economy..they will never commit a harikari..by increasing the rates substantialy...they would do it very very slow...incase the inflation heeats up..but they would ensure that the carry trade does not get efected.

The chance of losing a carry trade is very less compare to the daily loss we suffer intraday

i agree with you!
  • #122
  • Apr 12, 2007 5:52pm Apr 12, 2007 5:52pm
its been 3 months since i do this "Holy Grail" and i am very impressed ith my results!! hehe
  • #123
  • Apr 12, 2007 7:22pm Apr 12, 2007 7:22pm
I would be interested in those results. Also, how did you handle the 1600 pip tank at the end of february.
  • #124
  • Apr 12, 2007 9:02pm Apr 12, 2007 9:02pm
I would also love to know how you went through these last 3 months, especially with JPY going crazy.

Also what your brokers were like and if you heard anything from them while employing this strategy..
  • #125
  • Apr 12, 2007 10:17pm Apr 12, 2007 10:17pm
Quoting titikokatiting
i agree with you!

What do u mean by "Piramid it" ?
  • #126
  • Apr 12, 2007 10:18pm Apr 12, 2007 10:18pm
Quoting spiderforex
tdion...Great...Preciselly what the doc. ordered.

Carry trade should be looked into an yearly trade prospect than daily or monthly.

JP morgan et all have 2 trillion dollars on carry trade..the whole world economy is run on carry trade.

Japan is the sole provider of global liquidity.

Its a very very serious subject when interest rate hike comes for YEN than its for dollar.

Even, with a 0.25 points increase, the market will shake up..but as seen earlier this year, the market comes back to normal.

So, if you want to carry trade forget about the hedge..you are wasting your money there looking at zero interest hedge..just put that money "Bravelly" in the interest trade and Pyramid it. the risk will be for first six months..but with the extra interest and compounding you get ..you would very well cover up the 1000 PIPS dooms day buffer scenario easily for the next six months and after.

The whole world will tumble if Japanese decides to increase the interest rate to say 2 or 3 percent, they would do so eventually but very very slowlly in two or three years time....by this..the caryy trade will adjust to the shake up.

Japan is an export oriented economy..they will never commit a harikari..by increasing the rates substantialy...they would do it very very slow...incase the inflation heeats up..but they would ensure that the carry trade does not get efected.

The chance of losing a carry trade is very less compare to the daily loss we suffer intraday

What do you mean by "Pyramid it" ?
  • #127
  • Apr 16, 2007 10:57pm Apr 16, 2007 10:57pm
Quoting ch33z3
I would be interested in those results. Also, how did you handle the 1600 pip tank at the end of february.
split your lot to 10(mini), then you can tank 16.000 pip, or split it to 100 (micro) so you can tank 160.000 pip. get ready to watch 100 more open position.
  • #128
  • May 30, 2007 8:28pm May 30, 2007 8:28pm
anyone has an update regarding this technic? has anyone tried it?=)
  • #129
  • May 31, 2007 8:43am May 31, 2007 8:43am
Unfortunatly,SaxoBank does not allow a combined FX/FUTURES account for US residents. So we must fund 2 accounts to do this.

I think the way to hedge a carry trade is with futures, but you are pretty much limited to U/J, U/C or perhaps the E/U. (which I'm not going to include in my thoughts below )
That's because the futures are liquid in these pairs and the FX interest is worthwhile.

While the spread will converge to the price of the FX pair as the future nears experation, there's no telling which will move more towards that point.

Also the Future point value is $12.50 while the FX is $8.50+-. (except for the E/U which is $10.00)

In addition you must buy the U/J or U/C FX as well as the futures.
So the only way to control your position drawdown is by modifying the size of the FX position.( or you can buy mini FUT as well )

As an example, if the U/J to JY spread is tight you would expect the FX to go down so you might keep a one to one position.

If the spread was wide, ( this is a best case senario ) you could add a half position to the FX to bring it up to the $12.50 mark to maximize the P/L there.

This is of course subjective and obviously speculative, but what isn't in this game.
The idea being to limit any loss from the position so as to gain as much as possible from the swaps.

You can hold the FX position indefinatly but you would roll the FUT every
2 1/2 to 3 months to stay liquid with the FUT position.
This cost is minimal.

One other option is to close both positions should a "substancial" profit develop prior to expiry.

Anyway I thought this was an interesting thread so here's my 2 cents.
  • #130
  • Jun 2, 2007 8:31am Jun 2, 2007 8:31am
Pyramid it.... add new positions as the price moves in your favor.

Example:
+1 lot long 1.3500
+1 lot long 1.3600
+1 lot long 1.3700
etc.

You run the risk of getting stopped out when the price retraces beyond 50%.

On the other hand, there are those situations where a pyramid would have put a person into early retirement. Example: GBP/JPY from 2000 to the present. There where times that a pyramid could have been started with as low as $1000, and be worth hundreds of $1000s today. Who would have known.
  • #131
  • Jun 2, 2007 1:52pm Jun 2, 2007 1:52pm
crown forex has no swaps
  • #132
  • Jun 2, 2007 2:07pm Jun 2, 2007 2:07pm
why care about a short ? just go long !
  • #133
  • Aug 30, 2007 3:51pm Aug 30, 2007 3:51pm
Hi Everyone! Sorry I haven't been back here. I thought I'd update this.

Well so far, I'm still surviving in forex. This is because of this strategy. Even with volatility and the crazyness of the currencies I sill come out alive. First of all, it's hedged so even when the mother of all trends gbp/jpy plummets, the most I stand to lose sra the spreads I pay for entering my positions again and the prior spread if the currency pair closed out before it had a chance to earn swaps. That's it. No wiping out my capital or anything.

I've found out also you can earn 3-7% a month with this method. 7% if it's really stable with very little volatility.

I've also researched basket carry trading. As far as I'm concerned with forex market being unpredictable, correlations are unpredictable also. They can betray you. But they can also make you win bigger amounts. If your risk appetite is larger, then go fot it, but keep in mind to never stop monitoring the correlation, and plan ahead. Have a plan B in case something goes out of whack.

A lot of brokers actually offer swap free accounts. You just have to ask. Some people pretend to be Islam. North finance is alright. So far I haven't had any problems with them. But look around and ask around.

Also, I have never been stopped because the swap free broker found out what I was doing. They won't know unless you tell them. and do some small trades on the side to keep 'em happy.

NFA is raising fund requirement for brokers to $5M. So small time brokers might not make it and merge with larger ones.

Here are my rtings for the currencies with regards to volatility with number 1 being the most volatile:
1) GBP/JPY
2)GBP/CHF
3)USD/JPY
4)AUD/JPY
Please note that this was my findings last year and I haven't updated it.

It's actually a great system because there are no drawdowns ecept if the broker takes your money or disappears on you. so one of the most important considerations here is the trustworthyness of the broker rather than the swap rates they offer.

happy hedging!
  • #134
  • Aug 31, 2007 4:13am Aug 31, 2007 4:13am
Hi, so you actually trade your plan? Long USDJPY in one account with interest and short it in another a/c without interest? How many lots did u trade? How much is the investment on the trades in percentage of ur total account balance? Ever got margin call? Thank you~

Quoting titikokatiting
Hi Everyone! Sorry I haven't been back here. I thought I'd update this.

Well so far, I'm still surviving in forex. This is because of this strategy. Even with volatility and the crazyness of the currencies I sill come out alive. First of all, it's hedged so even when the mother of all trends gbp/jpy plummets, the most I stand to lose sra the spreads I pay for entering my positions again and the prior spread if the currency pair closed out before it had a chance to earn swaps. That's it. No wiping out my capital or anything.

I've found out also you can earn 3-7% a month with this method. 7% if it's really stable with very little volatility.

I've also researched basket carry trading. As far as I'm concerned with forex market being unpredictable, correlations are unpredictable also. They can betray you. But they can also make you win bigger amounts. If your risk appetite is larger, then go fot it, but keep in mind to never stop monitoring the correlation, and plan ahead. Have a plan B in case something goes out of whack.

A lot of brokers actually offer swap free accounts. You just have to ask. Some people pretend to be Islam. North finance is alright. So far I haven't had any problems with them. But look around and ask around.

Also, I have never been stopped because the swap free broker found out what I was doing. They won't know unless you tell them. and do some small trades on the side to keep 'em happy.

NFA is raising fund requirement for brokers to $5M. So small time brokers might not make it and merge with larger ones.

Here are my rtings for the currencies with regards to volatility with number 1 being the most volatile:
1) GBP/JPY
2)GBP/CHF
3)USD/JPY
4)AUD/JPY
Please note that this was my findings last year and I haven't updated it.

It's actually a great system because there are no drawdowns ecept if the broker takes your money or disappears on you. so one of the most important considerations here is the trustworthyness of the broker rather than the swap rates they offer.

happy hedging!
make some money, have some fun, leave some footprints
  • #135
  • Sep 3, 2007 11:30am Sep 3, 2007 11:30am
has anyone been using this strategy successfully ? If so, which brokers are most tolerate of this ?
  • #136
  • Sep 3, 2007 12:21pm Sep 3, 2007 12:21pm
hi, yes i've been actively trading my plan.
i started out with $10,000. split it between the two brokers. so $5,000 each.
i entered 2 lots in the beginning. that is my maximum risk tolerance. with 2 lots I can withstand approximately 350 pips drop or rise at 100:1 leverage. It earns around 7.3% per month, but this doesn't include delays in transfer and if i have to exit because of margin calls and/or extreme volatility.
I don't experience margin calls because i enter pre-calculated stop-losses and take profits. I do this in stages at different prices. you can also enter in stages, it takes longer but extends your volatility tolerance.
on average, earnings can be from 3%-7% per month.

my problem is not the system, it's the broker.
so far, i've had a couple of broker problems.
one was UGM shutdown, but they gave all money back.
now my problem is with <one><world><forex> who made mistakes on swaps and are holding customers' money. or maybe i'm just unlucky with brokers.
  • #137
  • Sep 3, 2007 12:38pm Sep 3, 2007 12:38pm
thanks for the reply. Which pair are you using ? I have also tried this strategy with good results, I had enough room for a 1000 pip swing on each side using GBP/JPY.
  • #138
  • Sep 3, 2007 2:57pm Sep 3, 2007 2:57pm
Very good strategy titikokatiting!
How are brokers realize what is going on? I mean how do
they differ people trading this startegy from people who
are simply going short with GBP/JPY?
Because all the non-swap broker sees is that you are
going short on GBP/JPY! Am I right?

Anyway the best pair for this purpose is EURGBP I guess with
virtually no volatility at all! (a maximum of 200 pip/month, with a decent
swap of around 5$ / standard lot)
  • #139
  • Sep 3, 2007 4:52pm Sep 3, 2007 4:52pm
Quoting titikokatiting
my problem is not the system, it's the broker.
so far, i've had a couple of broker problems.
one was UGM shutdown, but they gave all money back.
now my problem is with <one><world><forex> who made mistakes on swaps and are holding customers' money. or maybe i'm just unlucky with brokers.
I agree with you on this point. In Japan, Japanese forex investors and traders are also frazzling their nerves away choosing the better forex brokers.

The attachment is the customers' position(sales and purchase chart) on the Gaitame.com(the largest Japanese forex broker) at the end of July. Bule is short position and red is long position.
When sharp fall of August, many Japanese brokers did server down. Many Japanese investors and traders couldn't login and couldn't seem to close positions...
Peace and Happiness through Prosperity (by Konosuke Matsushita)
  • #140
  • Sep 4, 2007 4:00am Sep 4, 2007 4:00am
Quoting Fumafuma
I agree with you on this point. In Japan, Japanese forex investors and traders are also frazzling their nerves away choosing the better forex brokers.

The attachment is the customers' position(sales and purchase chart) on the Gaitame.com(the largest Japanese forex broker) at the end of July. Bule is short position and red is long position.
When sharp fall of August, many Japanese brokers did server down. Many Japanese investors and traders couldn't login and couldn't seem to close positions...
yes, server down will be the main problem, and the integrity of a broker. i realized brokers may even do a "server down" on purpose, so to lessen the occurence of this i always have stoplosses and take profits.
stoploss and take profit saved me from oblivion with this last drop in the markets. also you may want to write down your positions so if necessary you can give your broker instructions over the phone. the key here is finding a very honest and trustworthy broker. their swaps might be 1 or 2 dollars lower but better that than lose your whole account.

but on the luckier side of things, let's take this past month's drop (or what others call the "ghost month", especially in chinese feng shui because it seems during august most people take a break, they don't want to trade and lie low on business)
say broker1 is interest paying, and broker2 is interest free.
you bought 1 lot gbp/jpy on broker 1 at 250.00 and you sold 1 lot gbp/jpy on broker2. in case your stoplosses and take profits at say 247.00 weren't triggered on both brokers, you would get a margin call on broker1, and gbp/jpy kept going down, down, down on broker2 then you would suddenly have a tremendous amount of money on broker2. BUT in case it suddenly corrects (we know how unpredictable currencies can be) and goes back to 248.00 for example, then you would've lost some money also.

this doesn't happen very often, but when it does, we better be prepared and it's better to have a dependable broker.
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