How to hedge Carry trade GBP/YEN?

I would like to carry trade the GBP/YEN.
But was wondering how can I hedge the GBP/YEN and at same time to reduce the risk of a drawdown.

Thus keeping my profit/loss even, while gaining interests everyday.


Thank you.

gaining interest is good, if the pairs had perfect correlation. Usually if you enter wrong, you will be negative on both positions, and even though you are in positive interest, interest is so small, you can just cross it out, with respect to the loss. The most difficult is the entry on the hedge, but using mechanical rules, entry is based on ratio of instrument1 divided by instrument2.

check my forum on hedging the hedge, it might help. I'm trying to minimize risk, and drawdown.

http://forexfactory.com/showthread.php?t=53919

Statistical Arbitrage, Market Correlations & GBPJPY vs S&P 500, hedging!

check the thread

http://forexfactory.com/news.php?do=news&id=59687

I dont really hedge G/J but i had a sure win profit. so far it works for 2 mths..

it goes like this.. nov9, i bought 100 units at 238. As we all know, price had been keeping falling. for very 100 pips it goes against me, i add another 100unit. to date, the lowest pt was 220. so i had added position for 28 times.. although now i had unrealised profit, i had been collecting interest everyday. current price is 228, i close about 8 sets of 7 set of my 100 unit. n had realised profit.. unrealised profit is still a large portion but i had been gaining interest. what do you all think? btw, i'm trading very very small because of my capital... but i had already done my calculation which is even if G/J fall below 200, i'm still able to withstand it.

hello, nice to see you're over here too..........oanda has a thread over at novice traders section - i doubled my a/c the past year.

it's about carry trade and look out for don qijote's posts.

you might find aud/jpy more attractive as with the same margin used as gbp/jpy, you get more swap.

what i do is to always place limit orders above market price when there's a unwind, like above the previous day's high just above a round number........so you have a chance to buy when price start to move up.

you will get whipsawed a few times but better than buy and price go down further...........once in profit put stoploss for the whole position just under a support that is below your average price.

you then keep moving SL up if price continue to go up so if unwind again you make some money and get another chance to buy low again.

for more risk and profit, keep adding units as price go up but remember to move SL up for all units bought.

thanks

just hope i'm not wrong with what i'm doing.......

Its a good Idea, but seems no one heres knows that much about Options, I also thought about this exact concept, it seems your rolls will pay all the premiums. so the potential is only to the upside.