Is it possible to try a synthetic Hedge

I have following currency pairs with Positive Swap and negative swap.Is there a possiblity to create a multiple currency pair with synthetic Hedge. Looking for some ideas:

Following Currencies have POSITIVE swap:

Sell GBP AUD

Buy audcad, aud jpy, audusd ,nzdchf, nzdjpy, nzdusd

Rest of the currency pairs have negative Swap

Idea behind is to profit from positive swap and not worry about the direction. No Stop Loss is needed since they are all hedged.

I assume you are referring to rollover when you say swap. In that case, i don't think you can profit from such strategy nowadays (it might exists in the old days) because it would mean arbitrage and such obvious arbitrage should be captured and fixed since fx has already been around for so long. There is usually quite a significant spread in the rollover so that it is impossible for you to make a profit by creating synthetic hedge. (or the banks will be giving out free money in another sense, they pay more to borrow money than to lend)

May Be.

I have tried synthetic hedge with buying gbpusd,usdchf,eurjpy
and selling gbpchf chf jpy and eurchf. Every time they have gone into positive pips. Some times 20-30pips but some other times only about 10 pips.This is in spite of total negative swap on all these currency pairs if I have to hold them for few days.

I like this idea because there are no stupid indicators and No stop loss which are the main problem with forex trading.

Hence I feel if we can come up with synthetic hedging using above currency pairs with Positive swap it should really help in case if we have to hold them for more days.

One can download swap rates from this link:

http://www.ibfx.com/Trade/Swap-Rates

Another great link on this subject:

http://fxtrade.oanda.com/community/f...;f=15;t=002002

Yes, i understand your idea. But i do not think it is possible to create a synthetic hedge that will yeild a net positive roll over. The reason is as follows:

Say you have a pair called A-B that you are trying to called a hedge for. The ideas is to buy A-B and sell B-A. If we do hedge it directly, then we would have gain in roller in one way but lose in rollover in another. And 100% of the time the loss is higher than gain (the bank must lend out at a higher rate than what they pay to borrow, is just the fudamental). So you then try to synthetically create the same hedge by introducing another currency called "C". So what have:

Buy A-B
Sell A-C
Buy B-C

Assume A is the one with the highest interest rate, B and C are above the same then:
Buy A-B = positive roll (x amount)
Sell A-C = negative roll (y amount)
buy B-C = Nil (relatively small since both have same interest)

in this case, y will be must higher than x, so you have a net loss

Assume A is the one with highest interest rate, B is second highest, C is the lowest, then:

c
in this case, y will still be significantly larger than the sum of x-z. You can pick any pair and i'm pretty sure you will find this pattern. It all comes down to how much bank pays to borrow and how much they charge to lend. Lending rate is always greater than borrowing rate in order for the bank to make a living. So it is impossible to benefit from rollover by creating a synthetic hedge.

mathematically speaking:

Interest rate of A is a
interest rate of B is b
interest rate of C is c

the rollover can be view as a simple interest rate differential which if you buy A/B, then your roll over would simply be a-b. Keeping that in mind, let's reacll our previous example

Buy A-B = a-b
Sell A-C = c-a
Buy B-C = b-c

and when you add it all up, you get (a-b)+(c-a)+(b-c) = 0 (this will be the ideal case). However, keep in mind that banks always charge a premium on that. So that's where the extra cost kicks in and that extra cost will always be a cost, it will never be a benefit to us. Just like when we buy currency from the bank, the buy rate is always a little higher than the market rate, the sell rate is always a little low than the market rate. Same applies to roll over. (sorry i might be repeating myself in a few points but lazy to review my previous statements. I was never good in writing)

You are probably right.

Maybe this one:

- Buy GBP/JPY = +0,1

- Sell: x-/NZD = + 5,33


Thijs

ES Trader, you might find this old thread interesting. The pairs/rates/etc have all changed, but you can see discussion of the ideas in depth.

http://www.forexfactory.com/showthread.php?t=24673