Carry Grid

Hi all,

in this thread I want to document something totally simple. I'll do some carry trading which means going long in a currency with high interest and short in one currency with low interest to collect some nice rollovers. To participate from range periods I'll use a grid which means to set stop buy orders above the current price with a spacing of 20 pips and a tp of 25 pips. This grid will be reloaded from time to time. I trade AUD/JPY only for the moment.

The most difficult part are carry trade unwinds which come with stock market crashes. That doesn't happen too often but when it comes it's usually fast and deep. To protect my account I'll use ultra low leverage plus some kind of hedging if it goes too deep.

I've started with a tiny $1,000 account:

http://www.xaron.net/dl/fx/2010/carr...unt_010610.png

And that's how it looks like:

http://www.xaron.net/dl/fx/2010/carry/audjpy_010610.png

Link to MyFxBook: http://www.myfxbook.com/members/Xaron/carry-grid/34000

Hi Xaron,

I have very much enjoyed your posts for quite some time.

In my experience, it is simply not worth trying to get returns from high swap rates. Currency moves can wipe out any advantage in the blink of an eye. I have watched as AUD/JPY lost over 600 pips in a matter of a few hours when panic selling started in mid March 2008.

With interest rates as they were then, a 1 lot position (100k) was earning about $18 per day. The 600 pip move on this size position would have lost around $6000 - that's nearly a whole year of earning swap at $18 per day wiped out in just a few hours.

My advice... stick to the price movements for profit! Just ignore swap. Trade short term, because long term trends are too uncertain at the moment. The long term picture painted by "fundamentals" can turn on a dime, sentiment and emotions rule the price action. Look at AUDUSD... long term uptrend from 2001 to 2008 was snapped by 60% in just a few months. Confidence about the commodity "boom" returned for 2 years but confidence has been shaken again. Price action in May and June looks spookily like the big red candles in August/September of 2008. Does any of this price action bear any relation to reality? Who knows! It changes from minute to minute.

My strategy is capturing 20-30 pips in positions that are open for (hopefully!) a few hours at the most. My stop loss is 20 pips. If price action is strong I sometimes get up to 100 pips. I only trade a couple of times a day after the London open when price action is best. So far so good, but it has been a journey of 6 steps forward and 5 steps back.

I wish you good luck, you've been trying for long enough!

Small update: Currently there are 4 danglers:

http://www.xaron.net/dl/fx/2010/carr...unt_090610.png

Actually this isn't a real carry approach as the interest payments are rather small compared to the P&L.

I just closed out the two danglers at 0.79 for a very small loss and want to wait a bit now. I expect some dip to the lows again. No need to risk too much. If we make it clearly above 0.79 I will reinitiate my grid.

http://www.xaron.net/dl/fx/2010/carr...unt_140610.png

Small update:

http://www.xaron.net/dl/fx/2010/carr...unt_210710.png

Time for another update:

http://www.xaron.net/dl/fx/2010/carr...unt_090910.png

The account develops rather well, I've added some pairs.

You can follow it here as well:
http://www.myfxbook.com/members/Xaron/carry-grid/34000