6 Basket Hedge: Large Swap | Forex Factory

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6 Basket Hedge: Large Swap

  • #1
  • First Post: Jun 16, 2007 9:21pm Jun 16, 2007 9:21pm
Greetings,

Another forum had a post about the following hedge, the poster stated that he was currently earning $80.00 per day on swap and had been doing so for 9 months.

Can anyone tell me what pair the following is based on? You know, like long Eur/Usd Usd/Chf is based on Eur/Chf? Here is the hedge, what pair are we exposed to here?

Buy Gbp/Jpy
Buy Usd/Jpy
Buy Aus/Jpy
Buy Usd/Cad
Buy Eur/Jpy
Sell Eur/Aud

I've been entering 1 mini lot every day and did very well last week. Approximately 2%. But I'd like to know what currency I'm really trading.

Any thoughts?
  • #2
  • Jun 16, 2007 10:37pm Jun 16, 2007 10:37pm
Mike,

Would you mind posting the thread where you got the information, so that we can read further about it?

Thanks.
  • #3
  • Jun 17, 2007 1:23am Jun 17, 2007 1:23am
Right now, if the japan crosses start unwinding you'd get hit really badly because you're not hedged. Also, i don't see a hedge for gbp too.
  • #4
  • Jun 17, 2007 3:09am Jun 17, 2007 3:09am
I think i missed something so i edit my post...

As Jody said... I think when things go wrong for Yen the strategy will go very bad.. Seems that the strategy is based on Carry trades and it is going good because carries is going well, but when it unwind..... Better be carefull.

Best whishes.
No Brain, no Gain.
  • #5
  • Jun 17, 2007 6:45am Jun 17, 2007 6:45am
Quoting tdion
Mike,

Would you mind posting the thread where you got the information, so that we can read further about it?

Thanks.
Yes, it is here: http://www.goldenmoneytree.com/. But I think the site is either down temporarily or is gone altoghther at this point, not sure which.
  • #6
  • Jun 17, 2007 6:46am Jun 17, 2007 6:46am
OK thank you all for your input.
  • #7
  • Jun 17, 2007 6:48am Jun 17, 2007 6:48am
I think you have miss-understood what a hedge carry basket is.

It's a basket of currencies pairs that seeks to annul each other's volatility, fishing profits exclusively from the interest rates differentials between the different currencies of the basket.

In your basket, you're overexposed to the JPY. Basically, you haven't "hedged" the JPY with any other counter-action to minimize any potential JPY-strength.
  • #8
  • Jun 17, 2007 6:52am Jun 17, 2007 6:52am
Um, no, I haven't misunderstood anything, because I haven't understood anything . (see my original post)

This makes sense, thank you for the explanation.

By the way, how is your demo going with the purchase one lot, then when market drops 100 pips, purchase another lot strategy going?

Quoting WTB
I think you have miss-understood what a hedge carry basket is.

It's a basket of currencies pairs that seeks to annul each other's volatility, fishing profits exclusively from the interest rates differentials between the different currencies of the basket.

In your basket, you're overexposed to the JPY. Basically, you haven't "hedged" the JPY with any other counter-action to minimize any potential JPY-strength.
  • #9
  • Edited 11:20am Jun 17, 2007 11:01am | Edited 11:20am
Quoting mikejody
Um, no, I haven't misunderstood anything, because I haven't understood anything . (see my original post)

This makes sense, thank you for the explanation.

By the way, how is your demo going with the purchase one lot, then when market drops 100 pips, purchase another lot strategy going?
MikeJody,

The way I test the validity of a carry basket is I use a daily chart and plot a vertical line, green for long and red for short on 02.22.07. The reason I pick this date is G/J had a +1600 pip drop and if you were also trading other JPY pairs they also dropped with G/J. Give it at try. Open a D1 chart for all six pairs and plot the vertical line on the specified date and you will see how this carry basket would have performed on a retracement form G/J.

The best carry basket that I can see right now is here: http://www.forexfactory.com/showthread.php?t=24673

TimeFreedom
  • #10
  • Jun 17, 2007 1:05pm Jun 17, 2007 1:05pm
Mike,

This is obviously just a short Yen play with a couple of extraneous pairs thrown in there for diversification.

You have to take this into context, you will do very well as long as the Yen remains weak in relation to the majors.

For the past 9 months, the short yen play has been a pretty safe bet. That's due to many factors including the desire to continue the carry trade.

Basically, this basket is trading with the current trend. If there is ever a significant reversal in that trend, you'll experience your drawdown.

Quoting mikejody
Greetings,

Another forum had a post about the following hedge, the poster stated that he was currently earning $80.00 per day on swap and had been doing so for 9 months.

Can anyone tell me what pair the following is based on? You know, like long Eur/Usd Usd/Chf is based on Eur/Chf? Here is the hedge, what pair are we exposed to here?

Buy Gbp/Jpy
Buy Usd/Jpy
Buy Aus/Jpy
Buy Usd/Cad
Buy Eur/Jpy
Sell Eur/Aud

I've been entering 1 mini lot every day and did very well last week. Approximately 2%. But I'd like to know what currency I'm really trading.

Any thoughts?
  • #11
  • Last Post: Jun 17, 2007 1:21pm Jun 17, 2007 1:21pm
Thank you mrmikal, I appreciate your help in understanding this.

Quoting mrmikal
Mike,

This is obviously just a short Yen play with a couple of extraneous pairs thrown in there for diversification.

You have to take this into context, you will do very well as long as the Yen remains weak in relation to the majors.

For the past 9 months, the short yen play has been a pretty safe bet. That's due to many factors including the desire to continue the carry trade.

Basically, this basket is trading with the current trend. If there is ever a significant reversal in that trend, you'll experience your drawdown.
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