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Cash & Carry

  • #141
  • Oct 20, 2005 9:08pm Oct 20, 2005 9:08pm
ES: Sounds good if it can be done. Minimal loss of interest plus a TP. but the average UPL range and the plus to minus swing time must be determined. How can 1 hour be guaranteed?
SJ
  • #142
  • Oct 20, 2005 11:20pm Oct 20, 2005 11:20pm
Quoting ElectricSavant
There can be times when we go for 1/2% of Balance TP's and other times where we go for 1% TP's...this can be a very profitable version of Cash & Carry, I believe...
As it has been up to now this is just a once a day system....I never dreamed a hedged basket could be traded in the way I am suggesting, and with a bonus of interest to boot!

Michael B.
As I pointed out in earlier posts, a vanilla Eur-Usd neutral "33" can generate 3-5% "profit to margin" in less than half a day. Yestrday I sold a 2 day basket for +$55, went straight back in and am + $12 currently. The baskets I initiated back on the 4th & 18th are averaging $20 growth - 1.5%/day on margin + interest. But this really needs vigourous testing over ranging market conditions whether it be dynamically weighted on the fly or static. As they say, one swallow doesn't make a spring.
  • #143
  • Oct 21, 2005 1:15am Oct 21, 2005 1:15am
If your looking at trading the "33" as one instrument (as I am) look for the mkts that are in acceleration phase when you TP. I look at my top 5. Now on re-entry weight up on the top 5, leaving room to re-weight the "anti" currencies if tide turns. This can mean creating "synthetics".
  • #144
  • Oct 21, 2005 12:33pm Oct 21, 2005 12:33pm
es: can u explain your re-weighting algorithm after a TP? What are u basing it on?
SJ
  • #145
  • Oct 21, 2005 1:41pm Oct 21, 2005 1:41pm
Thanks ES, Can u explain the pros/cons of what u have seen so far of Cash and Carry vs Cash and Carry Diverse 33? I am trading both in a demo but less than 2 weeks so it is too early to tell for me.
SJ
  • #146
  • Oct 21, 2005 2:49pm Oct 21, 2005 2:49pm
Thanks ES, this is helpful. What I am still trying to understand is re-weighting based on TP. Isn't this directional trading and not tradevesting?
SJ
  • #147
  • Oct 23, 2005 12:50pm Oct 23, 2005 12:50pm
Beachie or ES: For diverse 33, I am curious to understand how JPY shorts are neutralized? I don't know enough about correlations and commodity relationships.
SJ
  • #148
  • Oct 23, 2005 1:04pm Oct 23, 2005 1:04pm
Fascinating ES. So JPY shorts are intended to increase interest yield but possibly at the expense of UPL because there is no offsetting if JPY goes on a bull run. Is there any way that JPY exposure is mitigated in diverse 33 since there is quite a significant short position in JPY?
SJ
  • #149
  • Oct 25, 2005 6:52am Oct 25, 2005 6:52am
ES: I am not convinced yet that cash and carry has a much lower yield and less take profit opportunities than diverse 33. Cash and Carry seems to be holding its own with nice returns, though I have seen it go to -17 % in UPL for me. Too early to tell how Diverse compares. Needs more time.
SJ
  • #150
  • Edited 8:58am Oct 25, 2005 8:57am | Edited 8:58am
Just thinking back to an earlier post by Beachie concerning 3-5% daily return on certain pairs, perhaps there is some "middle ground" between the 10 and 33 pair system?

Perhaps one could achieve a strong enough balance with minimal draw down and significant daily profit without having to hold nearly every currency pair in their basket?

The goal here is a system the works, but that's not overly difficult to maintain/adjust.

I've no idea what the sacrifices are by eliminating some of the pairs. Also, concern arises over the possibility of one or more of the really exotics taking a nosedive.

At any rate, both show promise, and I'm eager to hear more and watch the kinks get worked out of both systems.

Great Work!

Cet.
  • #151
  • Oct 25, 2005 9:46am Oct 25, 2005 9:46am
Electric,


My dear Friend,

Do you work for a FX company or any other companies that would benefit from your post here ???

"As safe as houses"
  • #152
  • Oct 25, 2005 9:47am Oct 25, 2005 9:47am
Hello ES and all,

I'm not even close to an expert and haven't got a demo account running Cash n Carry yet either.. but have a couple of thoughts. (which I hope are not nonsensical)

Would it work to split initial capital in multiple baskets... with each basket entering the market at differents times. I'm thinking that might open up more TP oportunities as well as reduce risk.

I don't fully understand the implications of entering/exiting at bad spread moments on cash n carry yet.. but it sounds like a large factor(?)

Has anyone analysed the Oanda spread history data to work out a set of optimal times for this? and is it worth the effort if not?

Brad
  • #153
  • Oct 25, 2005 9:50am Oct 25, 2005 9:50am
Quoting ElectricSavant
Why is it that TradeVestor's do not trust the hedge?

Michael B.
I imagine the T part in that DO trust the hedge.. you might be hoping for more base knowkedge than many have when it comes to the V people possibly.
  • #154
  • Oct 25, 2005 12:06pm Oct 25, 2005 12:06pm
Trying to do some more research via google on positive carry forex and positive interest carry forex and was amazed at the search results returned.

Heh ... Michael, you sure do get around the forums!

Amazing that there isn't more discussion about it out there. Perhaps it is a relatively obscure system. All the better!

Cet.
  • #155
  • Oct 25, 2005 12:12pm Oct 25, 2005 12:12pm
Cash and Carry trades deliver results

In a recent FX report, HSBC touted the merits of "cash and carry" currency trading, in which forex traders hold currencies that yield the highest interest rates, without concerning themselves too much with relative changes in exchange rates. Most practitioners of fundamental analysis would probably be skeptical of such a strategy, as the theory of interest rate parity dictates that the value of a nation's currency and its benchmark interest rate move in opposite directions, in order to guarantee investors on both sides a similar return. However, HSBC uses the Brazilian Real to exemplify the appreciation of a nation's currency that often follows an increase in interest rates. The Business Online Reports:


The Brazilian real has appreciated around 18% against the dollar this year and an investor would additionally have gained 15% in carry. This overall 30% return could have been further sweetened through near-free financing by borrowing in yen and Swiss Franc.

Cash and carry – this year’s most lucrative currency trading bet


By : Allister HeathOctober 16, 2005
http://www.thebusinessonline.com/NCM...rrency_230.jpg

ANYBODY who put all their money in Brazilian real at the beginning of this year would now be sitting on a tidy gain. As is often the case in the currency markets, the simplest strategies are often the best. The most lucrative trades this year have been to buy high yielding currencies and to earn the “carry”, especially in emerging markets.

As HSBC’s currency team, led by Mark Austin, the bank’s Global Head of FX Research, points out in a report out this weekend, the Brazilian real has appreciated around 18% against the dollar this year and an investor would additionally have gained 15% in carry. This overall 30% return could have been further sweetened through near-free financing by borrowing in yen and Swiss Franc.

Carry trades may be the oldest trick in the forex traders’ book but pumping money into the highest yielding emerging markets isn’t. The trend started three years ago, but has increased dramatically in popularity this year.

The remarkable thing about carry trades is how often they work. Over time, the cumulative interest rate differentials outweigh the adverse moves in spot forex prices. The problem is that every so often, “draw-down periods” occur: periods of intense adjustments in the value of currencies, sparked by a crisis or a renewed concern about structural issues such as the current account deficit.

When this happens, the markets’ focus moves away from interest rate differential and carry trades and concentrates instead on totally different issues. Previously boring “funding” currencies (those in which traders borrow the money they normally seek to invest in higher yielding monies) start to do well. Investors pull out of the high yielders; the low yielders rally further; more investors follow suit and a snowball effect occurs, fuelled by leverage and excessive positioning.

The graphic illustrates this by showing the trade weighted dollar against implied future interest rate differentials. It shows the two big draw-down periods that operated outside the standard rules of interest rate differentials. The first square on the chart shows the period after the Dubai G7 meeting and the second during and after the US election. During both periods, interest rates either remained constant or went up, but the greenback tanked; what mattered were structural shifts, not carry trades.

All of this remains relevant for the greenback as well as the other big currencies. When the markets begin to pay attention to America’s structural deficits again, the greenback is likely to suffer a dramatic draw-down and the yen, euro and Swiss Franc will gain ground.

Carry trades are also the most likely explanation for the yen’s decline. The re-election of Prime Minister Junichiro Koizumi and the performance of bond yields and equities point to a stronger yen; and signs that Japan’s monetary policy could start to be tightened should all suggest a lower dollar-yen. The only explanation for the yen’s performance must be a combination of carry trades with short memories.

The Japanese are buying short-term money market instruments in the US for yield on an unhedged basis, according to the HSBC report. But while this could continue for a long time, it will eventually end with a nasty bump, as ever.
  • #156
  • Oct 25, 2005 7:51pm Oct 25, 2005 7:51pm
i have never posted here but i have certainly watched. i want to encourage you es not to give up on your dream. you are an exceptional person. we are similar in age and in the time we have been trading. what i find interesting is the number of people that have emailed me from around the world requesting i trade thier accounts for them based on what? a stupid chart thread with some interesting price action setups that are not part of your everyday trading themes or ideas. i have had a couple with 20 million or more actually want the info on where to send the money. no questions about my trading history or anything. i turned them down of course because i dont want that kind of responsibility. you on the other hand do. i think the main reason it has not happened yet is due to the difficulty in understanding what you do. i think the key to getting where you want to be is to not give up. keep doing what your doing. keep posting on the productivity of your account over time. it will happen and you are in the right place for the exposure. i think you are a kind and decent guy and if your idea has merit your dream will happen with time. dont give up. jim
  • #157
  • Oct 25, 2005 8:34pm Oct 25, 2005 8:34pm
Couldn't have said it better!
  • #158
  • Oct 25, 2005 11:09pm Oct 25, 2005 11:09pm
Quoting ElectricSavant
Problem solved.... I have a commitment for managing money, so If I am permitted by the investor, I will continue posting. The investor decides that, as I am now his.

There is really not much of a reason to object, but some accredited investor's forbid posting the system results publically. However I would never post their results publically, just mine...Yes, I do trade exactly the same entries and exits that I do on their accounts.

And naturally names and numbers about their account would never be divulged and security would be maintained to protect the "Rights of Privacy and the legal due diligence that I must follow. Even though this is the Wild West of Forex and unregualted, I plan on running my book to CFTC and NFA standards.

James, this post you made and considering the source, means very much to me. I have great respect for you and your methods. I will print your post, as I keep a three ring binder for certain posts, that I use to inspire me, when I am down.

Michael B.

P.S. Now that I have reached my goal of one managed account, it is back to the business of trading. Assuming all goes well, as soon as I get flat in Standard Cash & Carry, I will start trading Diverse 33 too. I plan on splitting my funds half and half in each system and starting my first Journal in the new Journal's Forum.

P.P.S. Send that managed money my way, James..I can trade 100 million no problem really...there is no problem with Cash & Carry and Retail spot Forex...The responsibility is my dream.
my office is covered with messages and inspirational quotes. when i get down i tend to feel a bit siily and selfish. 90 percent of the population of this planet makes less in a year than i make in 2 to 4 weeks. its all relative i suppose. i often wonder what it would be like to live just trying to keep your family from starving in a grinding 24 hour a day struggle. i have spent much time in mexico over the past 30 years. i actually lived on a beach outside of manzanillio for nearly three months when i was 19. i was a free spirit in those days and took no worry over what tomorrow held or was bringing. it was a great time in my life. i worried my mother sick. during my times in mexico it was very common to see a family of 10 to 15 living in a one room house with a dirt floor. they always seemed like the happiest people in the world. fijitrader has some amazing similar stories. if i remember correctly he spent 3 years in the jungles of maui. saw no outside news for the entire time. maybe he will see this and tell the story. if i am physicly able when my kids are grown and if my wife will let me i dream of going back to that beach and doing it again before i die. i am so thankful for all that i have and the ability to take care of my family.
  • #159
  • Oct 25, 2005 11:59pm Oct 25, 2005 11:59pm
Quoting ElectricSavant
Yes James,

Thanks for the reminder...

Those folks have no windows, dirt floors (I caught the mother sweeping it!) and water is only on Thursdays from the tank..

I spent the night with a family in their home when I was younger near Rosarita Beach. They were so happy..They would not know what to do with a microwave or carpeting....We get angry when the campground laundromat is not functioning...lol. By the way we had marvelous tortilla's and beans for breakfast. They had 13 kids!

I get down for the strangest reasons. It's not money, I have some...It's frustrations that I seem to battle with repeatedly. As a Trader you may understand that we are not emotionless, its how we deal with and manage them as I know you know, James.

Thanks again for your kind and thoughtful words...

Michael B.
i get down most of the time due to a lack of confidence in myself. strange because i have been the self starter entraprenure type my whole life. i never have understood it. i constantly challenge myself with bigger and harder to reach goals. i get there and wonder how i did it. then start doubting if i can sustain it or reach further. probably a recipe for an early grave but its just the way i am wired. when i was starting out building my contracting business my wife and i lived in a single wide trailer. i had not two nickels to rub together. her family would ask her what was wrong with me. hes just a dreamer they would say, why doesnt he just go get a job like everyone else. then when i started making a six figure income and was able to do what i wanted when i wanted to do it they were jealous. they would say things like what does he do all day just sit at home or play golf. i think what i have been through is why i enjoy helping new traders. a part of me thinks they are like me and want something better. they have proven that by just getting this far. thats why i am excited about the pf.
  • #160
  • Oct 26, 2005 12:35am Oct 26, 2005 12:35am
Quoting james16
my office is covered with messages and inspirational quotes. when i get down i tend to feel a bit siily and selfish. 90 percent of the population of this planet makes less in a year than i make in 2 to 4 weeks. its all relative i suppose. i often wonder what it would be like to live just trying to keep your family from starving in a grinding 24 hour a day struggle. i have spent much time in mexico over the past 30 years. i actually lived on a beach outside of manzanillio for nearly three months when i was 19. i was a free spirit in those days and took no worry over what tomorrow held or was bringing. it was a great time in my life. i worried my mother sick. during my times in mexico it was very common to see a family of 10 to 15 living in a one room house with a dirt floor. they always seemed like the happiest people in the world. fijitrader has some amazing similar stories. if i remember correctly he spent 3 years in the jungles of maui. saw no outside news for the entire time. maybe he will see this and tell the story. if i am physicly able when my kids are grown and if my wife will let me i dream of going back to that beach and doing it again before i die. i am so thankful for all that i have and the ability to take care of my family.
I think that is part of what makes you such a great guy Jim. You know how fortunate you are compared to so many others in the world. I know what a world of good your stint in Mexico did for you. I had a similar experience when I was 17. I worked as a volunteer, sponsored by the Smithsonian, on the Las Perlas islands off the Pacific coast of Panama. We initially brought in medical supplies, but later we laid a series of bouys to mark a channel where supply ships could reach the native islanders. It was like being in a National Geographic special. The natives were so very poor that it made me feel guilty for having so much. I've never forgotten that experience.
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