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Warning to Carry Traders (Perfect Hedge)

  • #21
  • Feb 21, 2006 10:53pm Feb 21, 2006 10:53pm
I ran into Kathy Lien and Boris Schlossberg (sp?) of dailyfx.com and FXCM this weekend at an invesment seminar. I was trying to get Kathy's take on longterm success of carry trading using correlated pairs. They both, of their own accord, warned me to stay away from operations arbitrage as they called it - e.g. long AUDJPY on oanda and short AUDJPY in an interest free account at FXCM. They told me that FXCM looks for accounts that lay dormant with no trades for a month or more and will shut these accounts down. It may have been an idle threat -- but certainly FXCM is not oblivious to "operations arbitrage".
  • #22
  • Feb 22, 2006 11:24am Feb 22, 2006 11:24am
Well then, it looks like considering a PICS system at Oanda may be the best choice after all.

Question is, can a decent Positive Interest Carry basket be setup that will stand the test of time and generate decent returns?

Seems the Chaffcombe discussion at Oanda faded away, so I'm not sure if his basket up and died or what.

Any thoughts from anyone? Bueller? Bueller?
  • #23
  • Feb 23, 2006 2:09am Feb 23, 2006 2:09am
I have read in one e-book that carry trading works best if you will add technical analisis to this. For example you should open positions for pairs that have a decent interest rate and price is above 200EMA. I've tested it and it works well for 3 ema's - 50 MA, 100MA and 200MA.
  • #24
  • Feb 23, 2006 1:03pm Feb 23, 2006 1:03pm
Everyone,

99% of all forex eventually goes through about 5 banks. Where do you think all these "spot" forex houses clear their trades, do their accounting, and swap your trades for their gain?

Do they keep track of everything? Are you kidding?

One piece of news most of you missed, and that I posted a while ago, was that Duetsche Bank, in 2005, refused on their platform [or broke the trade with the other side] $ 1 TRILLION worth of business they deemed to be of "a manipulative nature" regarding arbitrage or finding glitches in their platform software.

They are not going to let you get something for nothing. If they did, every $ Billion + hedge fund in the world would be doing it.
vegas
  • #25
  • Feb 23, 2006 4:07pm Feb 23, 2006 4:07pm
Quoting vegas
Everyone,

99% of all forex eventually goes through about 5 banks. Where do you think all these "spot" forex houses clear their trades, do their accounting, and swap your trades for their gain?

Do they keep track of everything? Are you kidding?

One piece of news most of you missed, and that I posted a while ago, was that Duetsche Bank, in 2005, refused on their platform [or broke the trade with the other side] $ 1 TRILLION worth of business they deemed to be of "a manipulative nature" regarding arbitrage or finding glitches in their platform software.

They are not going to let you get something for nothing. If they did, every $ Billion + hedge fund in the world would be doing it.

That's what I said in an earlier post....They make the rules, and they won't allow anyone to make use of any glitches in those rules to grab some profits out of their pockets...You play by the rules, make a profit, it's yours', else, you lose...


Thanks,

Nader
  • #26
  • Feb 23, 2006 6:52pm Feb 23, 2006 6:52pm
Quoting malagiri
I ran into Kathy Lien and Boris Schlossberg (sp?) of dailyfx.com and FXCM this weekend at an invesment seminar. ...They told me that FXCM looks for accounts that lay dormant with no trades for a month or more and will shut these accounts down. It may have been an idle threat -- but certainly FXCM is not oblivious to "operations arbitrage".
if anyone is not convinced that carry trading is a plausable way to make money, here is your proof.
Relax and be happy.
  • #27
  • Feb 23, 2006 7:09pm Feb 23, 2006 7:09pm
Quoting narafa
You play by the rules, make a profit, it's yours', else, you lose...
Just noticed this thread. A very good point Nader made here.
  • #28
  • Feb 23, 2006 8:29pm Feb 23, 2006 8:29pm
Quoting merlin
if anyone is not convinced that carry trading is a plausable way to make money, here is your proof.
Merlin, let me clarify -- I think they only meant the non-interest accounts at FXCM are watched for inactivity. I think that the regular interest accounts are not closed because of inactivity.
  • #29
  • Feb 23, 2006 8:47pm Feb 23, 2006 8:47pm
Quoting narafa
They make the rules, and they won't allow anyone to make use of any glitches in those rules to grab some profits out of their pockets...You play by the rules, make a profit, it's yours', else, you lose...

Most of these Forex Brokers/MM's, IMO, are also a bunch of hypocritical scumbags, also. They don't say anything about the blatant stop running and price manipulation (yes here I go again bringing up the manipulation thing), that goes on. And when I talk about manip. I'm refering to the short term time frame. But if a trader happens to find a way to exploit one of their weaknesses or flaws in their system, then that's a differenet story and they want to hang the trader for trying to use it. That really ticks me off.

JohnFX
  • #30
  • Feb 24, 2006 2:18am Feb 24, 2006 2:18am
Quoting JohnFX
Most of these Forex Brokers/MM's, IMO, are also a bunch of hypocritical scumbags, also. They don't say anything about the blatant stop running and price manipulation (yes here I go again bringing up the manipulation thing), that goes on. And when I talk about manip. I'm refering to the short term time frame. But if a trader happens to find a way to exploit one of their weaknesses or flaws in their system, then that's a differenet story and they want to hang the trader for trying to use it. That really ticks me off.

JohnFX
Well, you can consider this one of the rules Avoid the trap by long term trading instead....


Thanks,

Nader
  • #31
  • Feb 24, 2006 12:34pm Feb 24, 2006 12:34pm
Quoting merlin
if anyone is not convinced that carry trading is a plausable way to make money, here is your proof.
Merlin,

Would that include a PICS, where one balanced various pairs in order to keep the general swing within acceptable limits and profit daily from the interest?

Would that breakdown eventually, or could it be maintained?

Please advise!

Cet.
  • #32
  • Feb 24, 2006 2:15pm Feb 24, 2006 2:15pm
Quoting malagiri
Merlin, let me clarify -- I think they only meant the non-interest accounts at FXCM are watched for inactivity. I think that the regular interest accounts are not closed because of inactivity.
I think that depends on broker. Some brokers will charge you a commision if you dont trade 10 lots a month.
  • #33
  • Feb 27, 2006 6:58am Feb 27, 2006 6:58am
Hi folks, I've added a piece on the carry trade on my fundies journal thread that may be of interest. Lets see if I can get the link right.
"Always bet on black"
  • #34
  • May 28, 2007 2:20pm May 28, 2007 2:20pm
crown forex swap free
Quoting tomecki
I have read in one e-book that carry trading works best if you will add technical analisis to this. For example you should open positions for pairs that have a decent interest rate and price is above 200EMA. I've tested it and it works well for 3 ema's - 50 MA, 100MA and 200MA.
....
  • #35
  • May 28, 2007 3:29pm May 28, 2007 3:29pm
Sometimes I get confused...

Plenty of threads talk about "super exotic" ways of doing money in forex as if those were the only chances to profit in the capital markets.

Here is one about opening in 2 borkers.. then exchanging i dont know what a hell... and living purely of the interest rate tricking it.

Wouldn't be easier to buy cheap and sell expensive? Isn't that the real benefit of the capital markets?

iiivb
  • #36
  • May 28, 2007 3:42pm May 28, 2007 3:42pm
oh , just hedge it with your equity, it is saver
  • #37
  • May 28, 2007 3:50pm May 28, 2007 3:50pm
Quoting Razzle
Will brokers withdraw non interest bearing accounts? I doubt it.Let’s just think about how a broker manages their risk exposure. The broker will always attempt to achieve a neutral position. They’ll bucket any trades they can and when they see a significant imbalance they’ll hedge their position.OK let’s assume that the whole retail spot forex trading community try this little interest arbitrage trick. Instead of 50% of FXCM’s customers being long, and 50% being short everyone’s taking long trades as perfect hedges against interest bearing shorts at OandaWhat can FXCM do in this situation, they are forced to take a hedge short, and of course they earn interest, which they get to keep.So they get the spread, they get to earn and retain the interest. They also get to play with your real money whilst you play with virtual money inside the bucket shop. Added to which a sizable percentage of new traders will totally fail to manage positions correctly, or possess insufficient funds to trade the method safely. Why wouldn’t a broker want this type of business?
If you are long, this essentially puts them short if they hold the other side of the trade. So they have to go long to hedge, to offset their short.

Or, you can look at it as, once so many longs were taken against them, they would pass along some or all of the long positions to a bank so that they were not holding the opposite side of those trades.

On their long positions, the broker will pay interest. They lose money, that's why they will not allow it.

Also, anyone I've heard of that did this had to lie to one broker and say they were Muslim in order not to be charged interest.

I think if you lie for money that would be fraud. Check with your attorney because I am not one and cannot give you legal advice.
  • #38
  • Dec 10, 2007 8:59pm Dec 10, 2007 8:59pm
interesting strategy.
Taking Life One Pip At A Time I officially have my own opinion.
  • #39
  • Last Post: Sep 11, 2008 2:36pm Sep 11, 2008 2:36pm
This is possible only if you have a liquidity provider on the middle, I mean, if there is someone compounding your liquidity.
The market can stay irrational, longer than you can stay solvent.
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