The Best Carry trade Pairs?

Well, ditto my last comment to you again. Yes, we know that there is a difference in the lot amount; once again we're not idiots here.

Do the math. That difference does not even come close to accounting for the difference in swap rates paid on the two pairs, which is what prompted my question and this thread in the first place. From my original thread starter: "But here's what I discovered: when I held a GY position of $80K overnight, I was paid $47.28 the next day. Pretty cool. Then, thinking I had really found a cool thing and wanted to max it out, I held a NZD/JPY position also $80K overnight, but was only paid $8.20 the next day."


You might consider that you actually know less than you think you do before making such comments...

Most brokers I've used pay triple interest on Wednesday. Could must have been the case for your Gbp/Jpy trade. Then the Nzd/Jpy was paid normal interest on Thursday.

You must had that LONG GY over a Wednesday when Swap is paid x3.

Normally, swaps are as follows:
1Lot GBPJPY pays about $24.00 to $26.00
1Lot NZDJPY pays about $16.50 to $17.00

So, GBPJPY vs NZDJPY? It seems very obvious right? yet I personally I'll still put my money on NZDJPY anytime than GBPJPY.

How much money/equity/margin did you use to hold a 1Lot GBPJPY position? You would use about $1950 USD margin (current market rate) for that position. How much was used instead with a 1Lot NZDJPY? You would use only $780 USD margin (at current rate).

Based on this, you actually used LESS THAN HALF of what you used on GBPJPY to get more than ONE HALF in swap!

ie, if I used the same amount of MARGIN/EQUITY to hold these two positions, then I will be comparing: 1LOT GBPJPY vs 2.5Lot NZDJPY!
Now, I will be receiving, $41.50 ~ $42.50 vs just $26 with a GBPJPY!

NZDJPY is the KING in Swaps!
Of course ZARJPY and TRYJPY is better too but they have HUGE spread!

Ah, I see...thank you Burger King. I checked my statements, and yes, I did hold the GY position on a Wednesday (1/2/08).

I appreciate the explanation as it wasn't too clear to me before, but making a lot more sense now.

As for margin required to hold GY vs. NZD/JPY, I'm not too concerned about that as I'll probably only hold very small positions initially to see if I can end up profitable doing this as a strategy. But anytime margin might become an issue like on larger positions, I can see the benefit of using NZD/JPY instead of GY; less volatile too...

Thanks again...

If you're looking to hold a carry trade, be careful that your stomach can take it as once you're in it for a good while you can come up -300 pips and still have an overall positive profit on the trade. The trick is getting there.

As for why swap is paid up triple on Wednesdays: Banks use a two day delay period in settling financial transactions. IE: I deposit a check from another bank at my bank on Monday, it's not really truly cleared until Wednesday. Most of the time they will front you the money on smaller amounts, or more regular amounts (paychecks), but anomalous transactions will require the waiting period. Now, why is it triple on Wednesdays? Because the bank has to still settle up Saturday and Sunday's transactions. So they roll it together with Monday's transactions and push it through on Wednesday. Gaining a swap payment on Thursday is really the swap from Tuesday. Sounds weird, but it's true.

One trick is to take a pair like USD/JPY and go long right around 4:55pm EST and then just set your take profit at breakeven. We're not after the pips gained, just the swap paid. I've done this a few times on Wednesdays to gain a quick extra bump in equity. Turned around and had a check mailed to my house the next day for spending money for the weekend. Nothing glamorous, but an extra $70 in your pocket is a good thing.

Hi :-)

New member here, and I happened upon this thread via Google. I'm curious about what you all are thinking about carry trades right now? It seems like the carry trade got alot of mileage in 06, 07, and I think 08 with the GBP/JPY, but was that a passing fad? Has something happened that makes it no longer a profitable strategy?

If it is still viable, perhaps someone can answer a couple questions for me please? First, what prevents you from opening a trade at 4:55 PM every day and closing it just a short while later at (hopefully) break-even in order to profit the interest without the daily (and long term) risk of being in the currency round the clock? Also, I was under the impression that all brokers just paid the going interest rate for the given currency, but your thread is making me think this is not the case. I am brand new to this, so I don't want to get burned by not realizing all the lovely ways that brokers can use to stick it to you.

Are there pairs that look good to anyone right now for long term prospects on a carry trade? Can you go both long or short depending on the pair and achieve the same results, as long as the interest is in your favor?

Thanks in advance for any assistance. Hopefully we can pick up a little more discussion about carry trades because I'm pretty interested in this. Seems like a lower risk way to get more regular (and down to earth) results out of forex.


pax

Along with NZD/JPY, you can also try USD/TRY and BRL/USD

Choosing the best currency pair for carry trade is a three-step process:

1. Find the maximum difference between interest rates. In this case, it’s calculated as follows: USD(2.50%) – CHF(-0.75%) = 3.25%. Accordingly, the best potential pair (we don’t necessarily have to choose it) is USD/CHF.
2. Determine a trade direction by the following principle: we should buy a currency with a higher interest rate for other currency with a lower interest rate. Accordingly, we need to buy USD/CHF. Note that it’s the other way around for GBP/USD.
3. Next, we need to look at the chart, read the news and the forecasts for this pair, and identify the trend. If the trend doesn’t coincide with a trade direction, we consider the next potential pair.

To find the best carry trade pairs, differentiate high yielding pairs (with higher interest rate spreads) from low yielding pairs (with low interest rate spreads) and match them to form a pair.
NZD/JPY and AUD/JPY are my favorites.

An effective carry trade strategy doesn’t only involve looking at the current interest rates but it’s also important to predict the future direction of interest rates.
I think carry trades are best for medium or long term trades because it doesn’t yield good rewards in the short time frame.