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money management of USD20k

  • #1
  • First Post: Edited 9:44pm Sep 28, 2007 9:40pm | Edited 9:44pm
I have come out with a CARRY TRADE plan of TRY/JPY


where i trade
EUR/JPY---LONG(100,000unit)
EUR/TRY--SHORT (100,000unit)

exposure===
short----------JPY-----16,186,300yen=====140,926.90USD
long-----------TRY-----173,723Lira=======145,136.85USD
Nil-------------USD-----0===============0





in OANDA, this would require around USD8500 margin ,
interest ==USD60++/day
gain==60/20000===0.3%/day
1year gain ==0.3x365===109%




since all JPY pair are very volatile...
i'm wondering, can my USD20K last me for a year while surviving all the SWING in the mean time ? available margin left==USD11K++


i'm considering pumping in around USD2000 to try 10% 1st ...

any comment or advice from expert ?
Pls include critism (don;t worry, i can take it), i might miss out something that is very critical from the view of expert/professionals....

thanks..
  • #2
  • Sep 28, 2007 9:52pm Sep 28, 2007 9:52pm
Quoting paogeh
I have come out with a CARRY TRADE plan of TRY/JPY


where i trade
EUR/JPY---LONG(100,000unit)
EUR/TRY--SHORT (100,000unit)

exposure===
short----------JPY-----16,186,300yen=====140,926.90USD
long-----------TRY-----173,723Lira=======145,136.85USD
Nil-------------USD-----0===============0





in OANDA, this would require around USD8500 margin ,
interest ==USD60++/day
gain==60/20000===0.3%/day
1year gain ==0.3x365===109%




since all JPY pair are very volatile...
i'm wondering, can my USD20K last me for a year while surviving all the SWING in the mean time ? available margin left==USD11K++


i'm considering pumping in around USD2000 to try 10% 1st ...

any comment or advice from expert ?
Pls include critism (don;t worry, i can take it), i might miss out something that is very critical from the view of expert/professionals....

thanks..

Looks as if you have NO money management. what is your risk/reward? all you lot sizes are the same....VERY, VERY BAD. size needs to be base on $ risk.
  • #3
  • Sep 28, 2007 10:53pm Sep 28, 2007 10:53pm
Lol. have you even looked at the charts? Just look back to July - August and see what happened:

Your long EUR/JPY would have been in a loss of $13659 and the short EUR/TRY would have been in a loss of $9339.

Total loss = $22998.

Your account will basically be wiped out any time there is risk aversion and carry trade dumping. Also, you forget that ECB is not going to hike euro rates anymore, and BoJ might hike their rates. Carry trades really don't look good anymore.

Why do you want to make measly interest when you can make 1000s of pips every time carry trades unwind? This is the same mentality (of earning interest) that has caused hedge funds with millions of $ to go bankrupt.
  • #4
  • Sep 28, 2007 11:13pm Sep 28, 2007 11:13pm
Quoting VishalJ
Lol. have you even looked at the charts? Just look back to July - August and see what happened:

Your long EUR/JPY would have been in a loss of $13659 and the short EUR/TRY would have been in a loss of $9339.

Total loss = $22998.

Your account will basically be wiped out any time there is risk aversion and carry trade dumping. Also, you forget that ECB is not going to hike euro rates anymore, and BoJ might hike their rates. Carry trades really don't look good anymore.

Why do you want to make measly interest when you can make 1000s of pips every time carry trades unwind? This is the same mentality (of earning interest) that has caused hedge funds with millions of $ to go bankrupt.
yep...nice reality check. i was going to say something along the same lines.

good to see you over here bro
  • #5
  • Sep 28, 2007 11:37pm Sep 28, 2007 11:37pm
add carry bit by bit, add when the swap is accumulated big enough, that way your drawdown is limited, use the rest of the margin for short timer

any strategy are good only when they win, even with 3 pip a day in gbp/jpy which will accumulated over 1000 pips swap a year, it is dangerous to just enter blindly.
  • #6
  • Edited 1:29am Sep 29, 2007 1:27am | Edited 1:29am
wow !
really thanks a lot for the positive comments + feedback


the purpose of this CARRY TRADE is TRY/JPY
so it's not really have much impact on how EUR moving ,
since EUR/JPY, EUR/TRY would nulify EUR

even if JPY hike the interest, TRY==17.5% , there;s still enough to earn, may be a bit less ,


this model is build on the MUTUAL FUND concept,
where there is enough capital , we'll buy ,(of course, i'll wait for the pairs to drop 1st)
the gain/profit is the daily interest not the pip ....
this strategy is for long term not for short or medium term .


ya, thanks for reminding me of the potential loss, i knew ...
i used to do that till i lose miserably , blast 3 live accounts, many endless miserable nights.
that;s why i decided to come out with this , no looking at chart everday, just probabaly once a week ..

since there are not many brokers offer TRY/JPY ,
so i'm using SAXOBANK of TRY/JPY chart, it seems that the LARGEST swing this year within 2 week ===1200+ pips ....they dun have pass years data /..
(i dun like their platform of carry trade , which they open/close ur trade everday.....)
or anyone got better chart ?

really appreacite all the feedback + comments
  • #7
  • Sep 29, 2007 5:49am Sep 29, 2007 5:49am
I like the idea of TRY/JPY because of the nice interest differentials. One idea for you that may substantially lower your risk. TRY/JPY and NZD/JPY are very closely correlated, much much closer than eur/jpy and try/jpy. Even during a major carry unwinding a TRY/JPY NZD/JPY hedge has only had small losses historically. If you use the right position sizes it is essentially a NZD/TRY trade. Saxo do this pair I think.. If you bring up a chart, you will see how the swings are much much smaller than the yen pairs and still nice interest.
  • #8
  • Sep 29, 2007 8:59am Sep 29, 2007 8:59am
Quoting peterM
I like the idea of TRY/JPY because of the nice interest differentials. One idea for you that may substantially lower your risk. TRY/JPY and NZD/JPY are very closely correlated, much much closer than eur/jpy and try/jpy. Even during a major carry unwinding a TRY/JPY NZD/JPY hedge has only had small losses historically. If you use the right position sizes it is essentially a NZD/TRY trade. Saxo do this pair I think.. If you bring up a chart, you will see how the swings are much much smaller than the yen pairs and still nice interest.

NZD/TRY will reduce the SWAP tremendously ...
also SAXO, somehow i feel their platform doesn;t support CARRY TRADE, since the agent told me that our position will be opend and close everday ...

u doing this pair now ?
  • #9
  • Sep 29, 2007 10:25am Sep 29, 2007 10:25am
Quoting paogeh
NZD/TRY will reduce the SWAP tremendously ...
also SAXO, somehow i feel their platform doesn;t support CARRY TRADE, since the agent told me that our position will be opend and close everday ...

u doing this pair now ?
ya, you do lose some swap.. but the risk is far far lower.. One major carry unwind won't kill ya. Saxo can be used for carry trades.. they do open/close each day, they just adjust the entry to allow for the swap, the end result is the same as a standard retail broker with a "Swap" column. I have tried NZD/TRY on demo, but not live yet..
  • #10
  • Sep 29, 2007 1:27pm Sep 29, 2007 1:27pm
Quoting peterM
ya, you do lose some swap.. but the risk is far far lower.. One major carry unwind won't kill ya. Saxo can be used for carry trades.. they do open/close each day, they just adjust the entry to allow for the swap, the end result is the same as a standard retail broker with a "Swap" column. I have tried NZD/TRY on demo, but not live yet..


Thanks for the reply + feedback .


the reason i dun like SAXO:

1. they only have STANDARD lot for TRY/JPY
2. the adjust entry for SWAP, till now i dun see any different, what i felt of opening/closing everday is giving them SPREAD to earn. and if let's say i buy at price X.XXX , after a positive or negative swing back to X.XXX. i dun get any swap, at the mean time i face the risk of margin call + SAXO earned daily SPREAD.



for NZD/TRY,
since NZD interest rate==8%
compare to JPY==0.5%

the diiferential interest rate of
NZD/TRY ===17.5-8==9.5%
TRY/JPY === 17.5-0.5=17%

THE daily swap is effectively reduce by 50% !!!

ya, the negative swing. i know , just pump in more capital to survive the swing or either setup STOP-LOSS.
  • #11
  • Sep 29, 2007 4:06pm Sep 29, 2007 4:06pm
Yeah, the swap is reduced quite a bit, in a trade off for considerably lower risk. The Yen pairs have a lot of correlation to the global stock markets, and investors are very uncertain at the moment with the credit crunch issues... If the stock markets crash, TRY/JPY probably will too.. where NZD/TRY would should fair a lot better...

I dont like the idea of adding capital for a negative swing, it sounds like you would be using a lot of leverage.. it might work out very well and get you good returns, but you always run the risk of price not returning and having to permanently realize a huge loss, but you gotta do what u feel is right for you.. I am more conservative and risk adverse than many traders here.

Just my 2 cents.
  • #12
  • Sep 30, 2007 2:48am Sep 30, 2007 2:48am
Quoting nhallmark
yep...nice reality check. i was going to say something along the same lines.

good to see you over here bro
Hey.. good to see my rainbow scalping mate Haha.. as always, you had to have a SJ quote ;-)

To the OP, EUR/JPY and EUR/TRY don't nullify each other, lol. Yeah, in theory - you go long eur/jpy and you go short eur/try.. but not in reality.

If you want them to nullify each other, you need the pairs to move in the same direction.. so eur/jpy and eur/try need to go either upward or downward in a specified time frame. Here, what's happening is they are moving in opposite directions. So you will make nice profits if carry trades are on.. and completely be doomed in the event of a meltdown.

Instead of 100,000 lots.. I advise you to try out with 10,000 units first.

Also, what do you know of the TRY? Any political unrest and that currency could crash. If anyone is gutsy enough to get in a carry trade I would only recommend AUd/JPY .. and that also, is high right now.
  • #13
  • Sep 30, 2007 4:22am Sep 30, 2007 4:22am
Quoting peterM
Yeah, the swap is reduced quite a bit, in a trade off for considerably lower risk. The Yen pairs have a lot of correlation to the global stock markets, and investors are very uncertain at the moment with the credit crunch issues... If the stock markets crash, TRY/JPY probably will too.. where NZD/TRY would should fair a lot better...

I dont like the idea of adding capital for a negative swing, it sounds like you would be using a lot of leverage.. it might work out very well and get you good returns, but you always run the risk of price not returning and having to permanently realize a huge loss, but you gotta do what u feel is right for you.. I am more conservative and risk adverse than many traders here.

Just my 2 cents.
actually
this is quite relative+subjective ,

alot of ppl use GBPJPY to earn swap everday ......
some of them use stop-loss or heavy/large capital to survive to negative swing , example 2000pips of negative swing .


now ,
case1. if we use alot of capital to survive the negative to earn the high return swap, the drawback is large capital, but goood return.

case2. if we use smaller capital to earn lower swap with lower volatille,
the drawback is smaller return, but account will fluctuate less.


from case1 & 2 ,
i believe u're case2 person, while i'm a case1 person.


for long term CARRY TRADE, i would actually prefer case1.


since all the JPY pairs are very volatile ,and the trend most of the time for XXX/JPY is bullish most of the time. even with unwinding of JPY, the dropped 1000----2000 PIPS is still sustainble using the case1 scenario.

and after the unwind , the pair usually will bonuce back uptrend again,
then we can enter again during bottom. so in the long run case1 is still much better .

Just my 2cent worth opinion.
  • #14
  • Sep 30, 2007 5:17am Sep 30, 2007 5:17am
Quoting paogeh
from case1 & 2 ,
i believe u're case2 person, while i'm a case1 person. .
Yes, this sounds to be the case... Thats fair enough.. we have different levels of risk tolerance. Good luck with your carry trading :-)
  • #15
  • Sep 30, 2007 6:22am Sep 30, 2007 6:22am
Quoting paogeh
I have come out with a CARRY TRADE plan of TRY/JPY


where i trade
EUR/JPY---LONG(100,000unit)
EUR/TRY--SHORT (100,000unit)

exposure===
short----------JPY-----16,186,300yen=====140,926.90USD
long-----------TRY-----173,723Lira=======145,136.85USD
Nil-------------USD-----0===============0





in OANDA, this would require around USD8500 margin ,
interest ==USD60++/day
gain==60/20000===0.3%/day
1year gain ==0.3x365===109%




since all JPY pair are very volatile...
i'm wondering, can my USD20K last me for a year while surviving all the SWING in the mean time ? available margin left==USD11K++


i'm considering pumping in around USD2000 to try 10% 1st ...

any comment or advice from expert ?
Pls include critism (don;t worry, i can take it), i might miss out something that is very critical from the view of expert/professionals....

thanks..

hey, fellow Oanda user.........go to Oanda forum under novice trader section and look for this thread - i doubled my a/c the past year.........

it's about carry trade and they can best advise you..........

yup, if you had carried out your plan in July, you'll be gone !
  • #16
  • Sep 30, 2007 6:28am Sep 30, 2007 6:28am
Quoting findcount
hey, fellow Oanda user.........go to Oanda forum under novice trader section and look for this thread - i doubled my a/c the past year.........

it's about carry trade and they can best advise you..........

yup, if you had carried out your plan in July, you'll be gone !

i;m not really an OANDA user to be exact ,
i'm IBFX user, but after blown my 3 live account there , i decided to quit
and become CARRY TRADERS and start to consider OANDA,

yes, i'll go there and find out .

thanks alot for sharing .


i know July is a bad month, i blasted my last LIVE account in IBFX , thanks to the US Subprime issue and my bad $$$ management ....

and now is actually a very dangerous time since the SUBPRIME issue not solved yet,
and XXX/JPY could unwind even further ...
  • #17
  • Sep 30, 2007 7:00am Sep 30, 2007 7:00am
i was looking at carry trade too but realized even if you hedge it, you need a lot of money to make a good income and even then if you close out for profit and re-enter at new price a big meltdown will eventually erase all gains.

also pay attention to 'don qijote' at that thread......i think page 46 where he share his method.
  • #18
  • Sep 30, 2007 10:24am Sep 30, 2007 10:24am
Quoting findcount
i was looking at carry trade too but realized even if you hedge it, you need a lot of money to make a good income and even then if you close out for profit and re-enter at new price a big meltdown will eventually erase all gains.

also pay attention to 'don qijote' at that thread......i think page 46 where he share his method.
i know hedging is like "insurance" ,
but hedging also eat into big chunk of the meagre swap everday ...

that;s why i prefer the CASE1 scenario ....
more capital to survive the negative swing ....

i haven;t check out the OANDA forum,
will do later..

thanks...
  • #19
  • Sep 30, 2007 1:22pm Sep 30, 2007 1:22pm
I guess it depends how you hedge it.. there are many different ways to hedge the carry trades. Some traders even use a non swap paying broker to cover the short side. This might annoy the broker though. I doubt you would ever find a non swap broker that would let you short TRY though.
  • #20
  • Oct 1, 2007 6:43am Oct 1, 2007 6:43am
Quoting peterM
I guess it depends how you hedge it.. there are many different ways to hedge the carry trades. Some traders even use a non swap paying broker to cover the short side. This might annoy the broker though. I doubt you would ever find a non swap broker that would let you short TRY though.
well, there are few brokers who offered no swap for GBPJPY

I believe there might be some Japanese brokers who offered ......too bad i can;t read Japanese (most of TRYJPY are in Japanese)
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